What could happen if the yeses to the two questions about water win? The topic concerns Acea in particular, the Roman municipal company, in which the water business accounts for 47% of the enterprise value, against 21% of Hera and 15% of Iren while it is marginal for A2A (only 2% ).
According to Banca Leonardo, the victory of the "yes" could have a light and dark effect: positive as regards the first referendum question, negative as regards the second. The repeal of the law which obliges the public shareholder to fall below 30% could avoid the "paper effect" on the market, caused by the sale of large packages by the majority shareholder, as could happen to Acea, a 51 % by the Municipality of Rome, and by Hera and Iren (based respectively in Bologna and Reggio Emilia), 60% in the hands of local administrations.
On the contrary, the victory of the yeses could have significant negative effects on the remuneration of capital front. The worst scenario, very unlikely for Equita analysts, could materialize with a vacuum in the regulation after the cancellation of the regulation which ensures an adequate return on capital from the tariff. In this case, the impact on Acea's Ebit would be 22%, 17% on Hera and 10% for Iren (1% on A2A). However, it must be said that the referdum establishes the principle whereby the tariff must guarantee the coverage of costs and investments. However, in the case of a public shareholder who has no alternative but to resort to debt, a remuneration equal to zero would mean not even being able to pay the interest on that same debt, with inevitable consequences for investments. Thus, Banca Leonardo expects a reduction in investments of 2011-2013 by 40%. In terms of Ebitda margins, the impact would be negative by 100 basis points, corresponding to an 8% cut on Acea's target price, 4% on Hera's and 3% on Iren's.
In any case, there would be a strong impact on the extra returns which, for example, today allow Acea a Roce of 12-13 per cent against the regulated 7%. Therefore, concludes the note from Equita sim, "we could apply a 10% discount on the valuation of the water part with impacts of 9% for Acea (up by 0,20% to 7,52 euro), 5% for Hera ( -0,57% to 1,559) and 4% for Iren”(1,264, -0,55%).
