Pennon Group Plc · LSE:PNN
Pennon — Investor Day (January 2019)
33 slides from Pennon's investor day presentation, Jan 30, 2019
Slide 1: Viridor Capital Markets Event
Viridor Capital Markets Event 30 January 2019 DAN – MORE INTERESTING PIC? SOMETHING THAT SHOWS VIRIDOR ERF/RECYCLING? © Pennon Group plc 2019
Slide 2: Disclaimer
Disclaimer For the purposes of the following disclaimers, references to this “document” difficulty in recruitment, retention and development of skills; failure or increased shall mean this presentation pack and shall be deemed to include references cost of capital projects/exposure to contract failu
Slide 3: Programme
Programme 10:00 - 10:45 Main Presentation 10:45 - 11:15 Q&A 11:15 - 12:00 - Investing in our people - Technology and Innovation - Energy Optimisation 12:00 Close © Pennon Group plc 2019
Slide 4: Main Presentation
Main Presentation Overview Government Resources & Waste Strategy Excellent Viridor Track Record Focus on De-risked Infrastructure Model Confidence in Long-term Market Outlook Market Opportunities in Plastics © Pennon Group plc 2019
Slide 5: Overview: Viridor – bringing resources to life
Overview Viridor – bringing resources to life Excellent Viridor track record, successful diversification and growth - leading the way in UK waste Confidence in long-term market outlook Viridor has been re-positioned to focus on de-risked infrastructure model, investment backed by profitable, long-te
Slide 6: Viridor – bringing resources to life: core values
Overview Viridor – bringing resources to life Living our core values: Trusted, Collaborative, Responsible, Progressive Our core values are embedded in our way of operating • Working in long-term partnerships • Delivering outstanding service to customers and communities • Supporting value creation fo
Slide 7: Successful diversification and growth
Overview Viridor – bringing resources to life Successful diversification and growth 7 © Pennon Group plc 2019
Slide 8: Government Resources & Waste Strategy
Government Resources & Waste Strategy DAN CHANGE PIC– SOMETHING THAT RELATES TO GVT? © ©Pennon PennonGroup Groupplc plc 2019
Slide 9: Viridor leading the debate
Government Resources & Waste Strategy Viridor leading the debate 9 © Pennon Group plc 2019
Slide 10: Aligned to Viridor Strategy
Government Resources & Waste Strategy Aligned to Viridor Strategy R&W Strategy Issue Changes to UK waste policy as expected Falling recycling - New packaging recycling targets rates Recyclability of - Incentives for ‘Producer Responsibility’ packaging - Rewarding recyclability and use of recycle
Slide 11: Supports investment in residual waste
Government Resources & Waste Strategy Aligned to Viridor Strategy First comprehensive waste strategy for over a decade Successful Viridor engagement Proposed reforms significant and positive, recycling focus Energy recovery seen as long-term feature of waste market New ERFs to be located close to he
Slide 12: Significant opportunities - plastics recycling reprocessing
Government Resources & Waste Strategy Significant opportunities - plastics recycling reprocessing Plastics in the public consciousness – “Blue Planet effect” Extended Producer Responsibility – important for investment case for new recycling infrastructure • Includes tax on plastic packaging containi
Slide 13: Excellent Viridor Track Record
Excellent Viridor Track Record © Pennon Group plc 2019
Slide 14: Sustainable Viridor EBITDA growth
Excellent Viridor Track Record Leading the way in UK waste • Viridor – growing proportion of Group earnings • Efficient and effective deployment of capital • Investment of £1.5bn in ERF portfolio • Driving for an efficient and effective cost base • Strong sustainable Pennon balance sheet – headroom
Slide 15: 70% of EBITDA from long-term contracts
Excellent Viridor Track Record Leading the way in UK waste (1) (1) EBITDA 2017/18 EBITDA 2013/14 £150.2m £76.3m • EBITDA growing in absolute terms • Focus on long-term, predictable, asset-backed, index-linked returns • Focus on cash generative operations Almost two thirds of Only 2% of EBITDA EBITDA
Slide 16: ERF financial and operational performance
Excellent Viridor Track Record Leading the way in UK waste ERF Financial c.£28m c.60% > 8% Performance EBITDA/plant(1) EBITDA Margin IRR(2) ERF Operational 2.8mt 240MW > 90% Base Base Performance Tonnage(3) Energy(3) Availability ERF current outperformance of 10% (1) Based on a typical large, 300kt
Slide 17: Strong platform for the future
Excellent Viridor Track Record Leading the way in UK waste Avonmouth Dunbar Beddington Glasgow • Portfolio of ERFs, only one left in (IFRIC 12) construction IFRIC 12 Interest Receivable • Differentiated from our water peers – Share of Adjusted earnings growth kicker JV EBITDA EBITDA £167m • Future g
Slide 18: Confidence in Long-Term Market Outlook
Confidence in Long-Term Market Outlook DAN – MORE INTERESTING PIC? SOMETHING THAT SHOWS WASTE? © Pennon Group plc 2019
Slide 19: UK Waste Market
Confidence in Long-Term Market Outlook Strong drivers across all activities underpin Viridor Strategy Conservative assumptions – based on third party analysis Long-term expectation for strong market supply 90 80 70 60 UK Waste Market, Mt 50 40 30 20 10 0 Recyclable Combustible Other Residual RDF Exp
Slide 20: ERF market fundamentals remain strong
Confidence in Long-Term Market Outlook ERF market fundamentals remain strong Conservative assumptions – based on third party analysis • Combustible residual market - suitable for ERF treatment - remains robust • DEFRA strategy provides a 10Mt range depending on speed of implementation of the Strateg
Slide 21: ERF development potential
Confidence in Long-Term Market Outlook ERF development potential We continue to see under-capacity in the UK residual waste market - though it varies by geography N East Viridor interest in new ERFs determined by availability of attractive long-term contracts in-line with our model N West York Asses
Slide 22: Focus on De-risked Infrastructure Model
Focus on De-risked Infrastructure Model DAN BORING PIC – CHANGE – BUT ERF PHOTO © Pennon Group plc 2019
Slide 23: Successful execution in residual waste transformation
Focus on De-risked Infrastructure Model Successful execution in residual waste transformation 23 © Pennon Group plc 2019
Slide 24: Responsible landfill operator
Focus on De-risked Infrastructure Model Responsible landfill operator There is a long-term capacity gap for residual waste in the UK Demand for landfill solution remains strong into the medium term Today’s landfills are sophisticated – requiring highly engineered and controlled operations We are ope
Slide 25: Reliable landfill gas generation
Focus on De-risked Infrastructure Model Reliable landfill gas generation Landfill gas volumes ahead of recent declining trends Continuing investment in landfill gas • Optimising engine capacity for improved longer term reliable yield • Planned preventative maintenance securing reliable generation Ga
Slide 26: Developing Energy Park opportunities
Focus on De-risked Infrastructure Model Developing Energy Park opportunities ERF fleet offers potential for integrated Energy Parks • Creating further value from ERFs Value to be derived from not using the national grid – creating ‘Energy Parks’ at ERF and landfill sites Energy Parks could provide h
Slide 27: Energy Parks creating value
Focus on De-risked Infrastructure Model Developing energy park opportunities Established connections • Runcorn heat and power off-take to Inovyn (full CHP*) • Private wire electricity from Dunbar landfill to Tarmac cement works • Heat off-take from landfill gas engines and ERF at Beddington into Sut
Slide 28: Market Opportunities in Plastics
Market Opportunities in Plastics © ©Pennon PennonGroup Groupplc plc 2019
Slide 29: Viridor well-positioned in a growing market
Market Opportunities in Plastics Plastics market 38% 75% 12% 3 Further Plastic UK Target Current Viridor reprocessing packaging for recycled market share currently plants packaging recycled identified New Waste and Resource Strategy will increase the amount of packaging for recycling – market size f
Slide 30: Established position in plastics
Market Opportunities in Plastics Plastics Households Bottle Kerbside Manufacturing Collection Plant Plastics Circular Economy Viridor Plastics Viridor Materials Processing Facility Recycling Facility Viridor Plastics Sorting Facility Established position in plastics 30 © Pennon Group plc 2019
Slide 31: Creating options for the future
Creating options for the future Viridor – bringing resources to life Exploring options for: - 3 new ERFs - 3 plastics processing facilities Extending life of 6 strategic landfill sites Building on our success in creating Energy Parks Viridor well-positioned in a growing market 31 © Pennon Group plc
Slide 32: Overview: Viridor – bringing resources to life
Overview Viridor – bringing resources to life Excellent Viridor track record, successful diversification and growth - leading the way in UK waste Confidence in long-term market outlook Viridor has been re-positioned to focus on de-risked infrastructure model, investment backed by profitable, long-te
Slide 33: Q&A
Q&A DAN – MORE INTERESTING PIC? SOMETHING THAT SHOWS VIRIDOR ERF/RECYCLING? © Pennon Group plc 2019