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Explanatory notes on related parties

Management of the services
The Hera Group, through Parent Company Hera Spa, holds concessions of local public services of economic interest (distribution of natural gas via local gas pipelines, integrated water service and waste management services, including sweeping, collection, transport and waste recovery and disposal) in a large amount of its territory of competence and in almost all of the shareholder municipalities (provinces of Modena, Bologna, Ferrara, Forlì-Cesena, Ravenna and Rimini).
The electricity distribution service has been carried out in the Imola district, in the municipality of Modena and in some municipalities of the province of Modena. Other public utilities (including urban heating, heat management and public illumination) are carried out under the free market system or through specific agreements with relevant local bodies. Under specific contractual relationships with local bodies, Hera is required to provide waste processing and disposal services, excluding regulatory activities carried out by the ATO (formerly AATO, now Atesir).
Regional and national legislation assign the responsibilities for appointment, planning and control concerning integrated water and municipal hygiene to the ATOs.
The Hera Group has signed special agreements with the AATOs, determining the implementation of technical planning and local tariffs, in compliance with the aforesaid regional and national laws of reference.

Water sector
The water service managed by Hera in its area of competence is carried out on the basis of agreements entered into with the former AATOs (now Atesir), of varying duration, normally twenty years. The assignment to Hera of management of the integrated water service includes all activities involving the capture, purification, distribution and sale of drinking water for civil and industrial use, and the sewerage and purification service. The agreements also provide for the operator's execution of new network design and construction activities and the building of new plants to be used in managing the service. The management of the service is assigned exclusively to Hera for the different area municipalities involving the obligation of the Municipality not to grant to third parties usage of the subsoil of its property and of the state aqueducts without the prior consent of the company.
The agreements regulate the economic aspects of the contractual relationship, the forms of management of the service, as well as service and quality standards. The unit tariffs are established annually by the ATO Atersir on the basis of economic agreements covering periods of several years, in accordance with law.
The local authorities awarding the concession give the manager the right to use the network and plant for the provision of integrated water supplies (and this may be free of charge). In the majority of the cases concerning the areas managed by Hera, the local authorities have conferred the ownership of networks and plants to special asset companies. At the end of the concession, Hera is obliged to return the goods used to provide the service to the asset companies, or to the municipal authorities.
Any works carried out to upgrade or expand the networks must be compensated at the end of concession with the payment of the residual value of the assets in question. Hera's relationships with users are mainly governed by regulations applicable in the sector, measures laid out by the regional legislator and the agencies for the area. The operator's obligations in terms of service quality and resources, as well as the rights of users, are described in the relevant service charters drawn up by the operator, according to a scheme of reference approved by the AATOs.

Waste management sector
Hera performs the service of municipal waste management. The purpose of agreements with the former AATOs (now Atersir) is the exclusive management of the waste collection, waste transport, road cleaning and waste recovery and disposal, etc. services. The agreements regulate the economic aspects of the contractual relationship, the forms of organisation and management of the service, as well as levels of service quality and quantity. The amount payable to the operator for the services performed is defined annually in accordance with Italian Presidential Decree no. 158/1999, where the tariff is established. For the running of waste treatment plants, the Hera Group must obtain authorisations from the authorities of the Italian provinces.

Management of the networks, plants and equipment
The infrastructure required for the provision of services whose management has been assigned to Hera, including local gas pipelines and aqueduct and sewage systems, are partly owned by Hera and partly owned by third parties (municipalities, asset companies owned by local authorities).
In particular, the asset companies are the owners of assets instrumental in the management of services following the direct contribution of assets by the Municipalities (generally Hera shareholders) or following the assignment to the same of "assets" constituting business units which took place, in almost all cases, at the time of business combinations involving companies in the Emilia-Romagna region with Seabo Spa (then Hera Spa).
In the case of assets owned by Local Entities and asset companies, relations between the service operator and the owners are governed by service assignment agreements or business unit lease contracts, and on a residual basis, industry legislation.
As regards the economic aspect, business unit lease contracts fix the amount due from the operator to the owners for the use of networks and plants. On the basis of these contracts Hera must carry out, at its own expense, ordinary and extraordinary maintenance as well as the expansion of the networks, as provided for in the investment plans agreed with the asset companies and, where relevant, by the area plans defined by the former AATOs.
Upon expiry of the lease contracts, provision is made for the return of the business units to the owner, in a normal state of repair. All works performed by Hera, involving expansion and extraordinary maintenance, will be similarly returned to local authorities in return for the payment to the operator of the corresponding compensation/equalisation, as a general rule, at the net book value or residual industrial value of the associated assets.

Energy sector
The duration of licenses for the distribution of natural gas via local gas pipelines, initially set for periods ranging between ten and thirty years by the original agreements stipulated with the municipalities, was revised by Italian decree no. 164/2000 (Letta Decree, implementing Directive 98/30/EC) and by subsequent reforms of the energy market quoted in the part "Regulations" of the report accompanying the financial statements. Hera Spa has longer residual terms than those set out for managing entities that have promoted partial privatisations and mergers. The duration of distribution concessions is unchanged with respect to that foreseen in the company's stock exchange listing.
The agreements associated with the distribution licenses regarding the distribution of natural gas or other similar gases for heating, domestic, handicraft and industry uses, and for other general uses. The gas distribution tariffs are set in accordance with the regulations in force and with the deliberations adopted from time to time by the Italian Authority for Electricity Energy and Gas. The territory in which Hera carries out the gas distribution services consists of "tariff areas" in which a distribution tariff is uniformly applied to the various categories of customers.

In the case of electricity, the purpose of the concessions (30 years in duration and renewable according to current regulations) is energy distribution activity, including, amongst other things, management of the distribution networks and operation of connected plants, ordinary and extraordinary maintenance and programming and identification of development initiatives and measurement. A suspension or expiry of the concession may be ordered by the authority regulating the sector if the concession holder is found to be inadequate or to be in breach of regulations in force, in such a way as to prejudice provision of the electricity distribution service in a serious and far-reaching manner.
The concession holder is obliged to apply the tariffs set by regulations in force and resolutions adopted by the Italian Authority for Electricity and Natural Gas to the consumers. The tariff regulation in force when the Consolidated Half-Year Financial Statements were approved (to which this report is attached) was resolution ARG/elt no. 199/2011 of the Italian Authority for Electricity and Gas and subsequent amendments and additions ("Provisions of the Italian Authority for Electricity and Gas for carrying out electricity transmission, distribution and measurement services for the regulatory period 2012-2015 and provisions regarding the economic conditions regulating the provision of the connection service"), which replaced the previous resolution no. 348/2007 applicable up to 31/12/2011 ("Integrated law of provisions for the supply of electricity transmission, distribution and measurement services for the regulatory period 2008-2011 and provisions regarding the economic conditions regulating the provision of the connection service").

Values shown in the table as at 30.06.12, refer to the related parties hereunder:

Group A. Non-consolidated subsidiaries:

Calorpiù Italia Scarl in liquidation
Consorzio Frullo in liquidation
Q.Thermo Srl
Solhar Alfonsine Srl
Solhar Piangipane Srl
Solhar Ravenna Srl
Solhar Rimini Srl
Sviluppo Ambiente Toscana

Group B. Jointly controlled associated companies:

Adriatica Acque Srl
Aimag Spa
Enomondo Srl
Estense Global Service Soc.Cons.a r.l.
FlameEnergy Trading Gmbh
Ghirlandina Solare Srl
Modena Network Spa
Natura Srl in liquidation
Oikothen Scrl
Refri Srl
Sei Spa
Service Imola Srl
Set Spa
Sgr Servizi Spa
So.Sel Spa
Tamarete Energia Srl

Group C. Related parties with significant influence*:

Municipality of Bologna
Municipality of Cesena
Municipality of Casalecchio
Municipality of Ferrara
Municipality of Forlì
Municipality of Imola
Municipality of Modena
Municipality of Ravenna
Municipality of Rimini
Livia Tellus Governance Spa
HSST - Modena Spa

Group D. Other related parties:

Acosea Impianti Srl
Amir - Assets
Aspes Spa
Azimut - Assets
Calenia Energia Spa
Energia Italiana Spa
Fiorano Patrimonio Srl
Formigine Patrimonio Srl
Galsi Spa
Holding Ferrara Servizi srl
Maranello Patrimonio Srl
Megas Net Spa
Ravenna Holding Spa
Rimini Holding Spa
Romagna Acque Spa
Sassuolo Gestioni Patrimoniali Srl
Serramazzoni Patrimonio Srl
Sis - Assets
SIS Società Intercomunale di Servizi Spa in liquidation
Team - Assets
Unica Reti - Assets
Wimaxer Spa

*As of 1 January 2011, the Municipalities of Cesena, Ferrara, Forlì, Imola, Ravenna and Rimini were also considered related companies with significant influence. The Income Statement tables do not show the associated positions as at 30 June 2011, considering the difficulties related to obtaining said information. However, in view of the ongoing nature of the underlying relations, it is believed said values may reasonably be in line with the same figures as at 30 June 2012. By contrast, the figures as at 31 December 2011 and 31 December 2012 are shown.