AcquisitionAcquisition of Centro Ecologico of Ravennaof Centro Ecologico of Ravenna

Conference call held on 6th July 2004

2

Executive Summary

The Deal Strategic Framework

The Acquisition

Asset Acquired

Financial Overview

Capex

Synergy Potentials and Future Capex Options

Conclusions

IndexIndex

3

TOPICS HIGHLIGHTS

• Strategy

• The Deal

• Price

• Assets and Capex

• Economics

• Further value creation

• Closing

• Reach a leading position in industrial waste treatment business. Asset rationalisation and organic growth potentials are possible thanks to the leading edge technology, the remarkable size and location of Centro Ecologico

• 100% acquisition of a NewCo specially established to sell Centro EcologicoStrategy. Assets will be valued at Hera’s acquisition price, optimising fiscal impact and financial leverage.

• 48,9 million euro (cash consideration). Implicit Ev/Ebitda 2004 of 5,4x. The deal could be financed through already existing “stand by” credit lines (cost euribor + 0,5% insured variable rates).

• Newly revamped plants: estimated capex of 2,6 million in 5 years (‘04-’08)

• Synergies of about 0,2 mln €/year and avoid capex of about 7,5 mln€• Options: further capex in 2007-2009 with a NPV of about 4 mln€ (‘09-’17)

• Approx. end of September

Highlights (mln euro) 2000 2001 2002 2003 E2004

Turnover 24.5 22.1 25.9 23.4 25.2Ebitda 10.7 7.8 12.8 6.9 9.0Margin% 43.7% 35,4% 49,4% 29,7% 35,6%Ebit 6.0 3.1 7.8 1.6 3.9

•

Executive SummaryExecutive Summary

4

Expansion in the Special Waste Treatment Business, through the increase of complementary technologies (thermo-combustion and biological treatments)

Strengthen the WTE becoming the third best player in Italy (after EDF-Fenice and Ecodeco) in the industrial waste treatment business with a 6% market share.

Acquisition of a nation wide perspective to serve national and international clients (including ENI) reaching a tight integration with the petrol-chemical district of Ravenna

The Plants (recently built or newly revamped) are of a remarkable capacity which is sufficient to create cost optimisation (synergies) and Organic growth potentials

Opportunities to rationalise operating plant sites throughout Ravenna area, concentrating new capex in the new site and leveraging on existing infrastructures.

The Deal Strategic FrameworkThe Deal Strategic Framework

5

The deal regards the acquisition of 100% of a NewCo into which the Centro Ecologico will be merged

The NewCo will include only assets with no financial debt. The main asset is a WTE plant for Special (solid and liquid) waste.

The net book value of NewCo will equal the consideration paid Hera

The consideration of 48.9 mln € will be in cash (5,4x Ev/Ebitda E2004)

Timing:

5th July The sale-purchase agreement has been signed

July-September Environmental audit and anti-trust authorisation

September end CLOSING

The The AcquisitionAcquisition

6

PLANTS

F3F3 WTE plant

F2F2 thermo-treatment of chlorinated gas

FISFIS thermo-treatment of non chlorinated gas

TAPTAP water (from process) treatment

TAB TAB water (“white”) treatment

ESSESS drying plant of mud

LABLAB analysis centreRevamping in progress

POLO CHIMICODI RAVENNAPOLO CHIMICO

DI RAVENNAPOLO CHIMICO

DI RAVENNAPOLO CHIMICO

DI RAVENNA

F3F3TERZI

Special wastedangerous w.

gas

FISFIS F2F2

Mud

ENERGIAIN RETE

CIP 6

ENERGIAIN RETE

CIP 6

LARALARAESS

Special wastedangerous w

TABTAB TAPTAP

Liquidwaste

and water

TERZIINCL. ENI

FIS

ESS

F2

LAB

F3POLO CHIMICO

DI RAVENNAPOLO CHIMICO

DI RAVENNAPOLO CHIMICO

DI RAVENNAPOLO CHIMICO

DI RAVENNA

F3F3TERZI

FISFIS F2F2

ENERGIAIN RETE

CIP 6

ENERGIAIN RETE

CIP 6

LARALARAESS

i i

TABTAB TAPTAP

TERZIINCL. ENI

FIS

ESS

F2

LAB

F3POLO CHIMICO

DI RAVENNAPOLO CHIMICO

DI RAVENNAPOLO CHIMICO

DI RAVENNAPOLO CHIMICO

DI RAVENNA

F3F3TERZI

FISFIS F2F2

ENERGIAIN RETE

CIP 6

ENERGY

CIP 6

LARALARAESSTABTAB TAPTAP

Customer (ENI)

FIS

ESS

F2

LAB

F3

Year

F3 40.000 t/year of special / dangerous waste 1997FIS 4.700 Kg/h non chlorinated gas 2002F2 2.000 Kg/h chlorinated gas 2002 revampingTAB “White water” -TAP 1.200 m3/h water waste of process -EES 16.000 t/year of mud dried -

Capacity

Asset AcquiredAsset Acquired

7

Highlights (mln euro) 2000 2001 2002 2003 E2004

Turnover 24.5 22.1 25.9 23.4 25.2Ebitda 10.7 7.8 12.8 6.9 9.0Margin% 43.7% 35,4% 49,4% 29,7% 35,6%

Ebit 6.0 3.1 7.8 1.6 3.9

Commercial relationship with onsite customers are regulated by 8 year contracts

The WTE plant produce electricity sold to the national grid at incentive tariff scheme CIP6 expiring the second half of year 2007 (3.0 mln € average contribution over last years). Following minor capex the plant might obtain authorisation to sell green certificates once cip6 will expire.

The Ebitda of last 4 years has reached up to 50% of turnover (changing in relations to the amount of waste treated and maintenance stop of the plant).

72 people are employed

Financial OverviewFinancial Overview

8Financial overview: Turnover breakdownFinancial overview: Turnover breakdown

977 1.115 3832.360 2.345

1.718 2.123

628

5.383 6.1037.214

7.941

2.706

2.1732.572

2.1802.318

912

2.890 1.152324

985

290

105 565 633

701

259

11.6219.371

12.861 8.194

4.001

0

5.000

10.000

15.000

20.000

25.000

2000 2001 2002 2003 30.04.04

€ ('0

00)

FIS F2 TAP TAB ESS LAB F3

24.532

22.108

25.907

23.377

9.179

Estimated turnover

2004:

25.2 mln

50%

34%

16% 2002

Turnover breakdown by plantTurnover breakdown by plant Turnover breakdown by customerTurnover breakdown by customer

Società insediate Società esterne Vendita e.e.

62%

27%

11%

2003

9

F3 – Energy sold at Cip6 tariff

16.03214.101

22.220

13.944

6.571

19.620

0

5.000

10.000

15.000

20.000

25.000

2000

2001

2002

2003

30.04

.04

2004

P

MW

h

TAP - TAB water treated

6.724 6.792 6.853 6.484

1.924

5.800

10.61711.403

13.43111.791

3.078

11.000

02.0004.0006.0008.000

10.00012.00014.00016.000

2000

2001

2002

2003

30.04

.04

2004

P

mc

('000

)

TAP

TAB

F3 – Waste treated

27.04223.083

28.864

20.951

10.125

28.028

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

2000

2001

2002

2003

30.04

.04

2004

P

Ton

ESS – waste treated

3.050

5.342

1.602

4.641

1.154

4.642

0

1.000

2.000

3.000

4.000

5.000

6.000

2000

2001

2002

2003

30.04

.0420

04P

TOn

Financial Overview: Waste treated and energy producedFinancial Overview: Waste treated and energy produced

10Financial overview: Centro Financial overview: Centro EcologicoEcologico vs. Heravs. Hera

Hera waste management business will benefit from Centro Ecologico higher profitability

Hera waste management business will benefit from Centro Ecologico higher profitability

Highlights (mln €) Centro Ecologico HERA

Turnover 2003 25,2 285,8

Ebitda 2003 6,9 62,3

Margin % 29,7% 21,8%

Special Waste Treated 2003 (t.) 67,900 1,213,000

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Capex in progress

16.4 mln € capex to expand biological treatment capacity are in progress and will be completed within year end. The 86% of capex are charged to captive site customers through 8 years contracts. Those capex are financed by leasing contracts.

Operating Capex (upgrading plants)

2.6 mln € in 5 years

0

200

400

600

800

1.000

1.200

1.400

1.600

1.800

2004 2005 2006 2007 2008

'000 €

Capex

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OPTIONSOPTIONSSYNERGIESSYNERGIES

CTIDA PLANTCTIDA PLANT

NETWORK OF NETWORK OF CUSTOMERCUSTOMER

MUD TREATMENT

REVAMPING OF ELECTRICITY REVAMPING OF ELECTRICITY PRODUCTION FACILITIES PRODUCTION FACILITIES (GREEN CERTIFICATES)(GREEN CERTIFICATES)

EXPANSION OF DRYING PLANTEXPANSION OF DRYING PLANTMUD TREATMENT

Capex avoid: 7,5 mln€Revenues and cost synergies:

ca. 0.2 mln €/yearNPV of 3,0-4,0 mln€

Synergy potential and future Synergy potential and future capexcapex optionsoptions

13

Hera strengthens its market position in a profitable business with high entry barriers (authorisation from authorities and inhabitants consensus)

Hera has plants now located within the petrol-chemical area of Ravenna (Emilia Romagna) serving new clients (including ENI) with long term contracts

Revenues increase (cross selling opportunities) and cost cutting potentials (synergies with existing business) are achievable in future

Commercial agreements are under negotiation to consolidate operations

Further expansion opportunities are available thanks to the acquisition

Consideration of 48.9 mln € imply an EV/Ebitda E2004 multiple of 5,4x

ConclusionsConclusions