Italgas Spa · MIL:IG
Italgas Spa — Investor Day (June 2021)
59 slides from Italgas Spa's investor day presentation, Jun 15, 2021
Slide 1: Strategic Plan 2021-27: Empowering Our Future
STRATEGIC PLAN 2021-27 EMPOWERING OUR FUTURE Rome 15.06.2021
Slide 2: Agenda
AGENDA 1 SCENARIO 4 NEW OPPORTUNITIES SMART GAS 2 5 FINANCIALS NETWORKS 3 ESCO 6 APPENDIX
Slide 3: Scenario
SCENARIO 3
Slide 4: Energy Transition
ENERGY TRANSITION OUR FUTURE “While we continue to battle the pandemic, we must also focus on our long-term challenges: this is why the Green Deal, as a growth strategy, remains our compass throughout the recovery” F. Timmermans “I want Europe to become the EU Commission, Executive VP first climate
Slide 5: Energy Transition: Key Milestones
ENERGY TRANSITION EU committed to a carbon neutral economy by 2050 KEY MILESTONES both politically and economically 2021 PNRR Funds for Green Transition and 2050 Digitization Net zero-emissions economy 2015 Dec-19 Jan-20 Oct-20 Nov-20 Jan-21 2030 Mid-term targets EMISSIONS PARIS COP21 PNIEC 2030 RED
Slide 6: Energy Transition at the Core of EU Policies
ENERGY TRANSITION CO2 emissions cut vs 1990 Energy Efficiency vs 1990 AT THE CORE 65% OF EU POLICIES 100% 32,5% 55% 1 2030 2050 2030 2050 The EU is preparing a package of initiatives to reduce Ongoing revision of the European Energy CO2. A general revision of gas market legislation is Efficiency Dir
Slide 7: Italian PNRR
ITALIAN PNRR RESOURCES Energy transition is a tool to support economic recovery AVAILABLE Italian PNRR to make new resources available Digitisation, Innovation, Green Revolution and Competitiveness, Culture, Ecological Transition, ~€191bn* €40.3bn €59.5bn FUNDS of which: of which: > Transition 4.0 €
Slide 8: Implications for Gas Sector of EU Actions
IMPLICATIONS FOR GAS SECTOR OF EU ACTIONS ENERGY TRANSITION Gas to account for 20% of 2050 Green gases production should rapidly European energy consumption increase to meet decarbonization target Gas mix to include green hydrogen Gas infrastructures should be able to (33%) and biomethane/ blue mana
Slide 9: Gas Demand Expectations Reaffirmed
GAS DEMAND EXPECTATIONS REAFFIRMED Gas to provide the needed energy supply flexibility EU Gas demand – ENTSOG high demand cases analysis 35 Gas demand to become 30 more dependent from 25 RES performance at 20 peaks 15 10 Cold spells coupled with TWh / day 5 low RES to require high 0 0 gas peaking ca
Slide 10: Gas Networks: Key Role in Energy Transition
GAS NETWORKS KEY ROLE IN ENERGY Enable a cost-effective decarbonisation, balancing TRANSITION short-term and long-term needs of energy markets ALREADY DEVELOPED, ~2mln km of pipelines STABLE AND WIDE-SPREAD INFRASTRUCTURE 2,000 gas DSOs and 45 gas TSOs NATURAL GAS ACCELERATOR IN THE DEVELOPMENT OF B
Slide 11: Biomethane: The Closer Viable Green Option in Europe
2020-30 BIOMETHANE Biomethane accounts for 5% of EU gas demand, THE CLOSER It is the most significant green gas source VIABLE GREEN but still below its potential OPTION IN EUROPE CAPACITY KEEPS AND PROSPECTS ARE ALSO STRONG IN ITALY GROWING • Over 30 operative biomethane injection points on the Ital
Slide 12: Hydrogen Momentum Building
2030-40 HYDROGEN More than 200 projects for >$80bn announced globally MOMENTUM BUILDING Europe leads globally, with 55% of world projects or 126 out of 228 EU leading the race also on the legislative side Production costs could fall quicker than anticipated but Giga scale Green hydrogen is not expec
Slide 13: Green Hydrogen: Cost Issues to Be Addressed
2030-40 GREEN HYDROGEN Green hydrogen expected to become competitive COST ISSUES But this will require ~ 10 years for prices to fall TO BE ADDRESSED Green hydrogen production costs LCOE (€/MWh) 180 TODAY 2030-40 120 ~ 95 60 ~ 65 ~ 35 0 2020 2025 2030 2035 2040 2045 2050 Electrolysers costs Electroly
Slide 14: Gas DSOs: New Challenges and Opportunities
GAS DSOs DSOs need to adapt their strategies NEW CHALLENGES Networks upgrade necessary to distribute new gases, AND OPPORTUNITIES to support energy efficiency and cut methane emissions Prominent role in circular economy thanks to proximity to end customers and distributed production units of green g
Slide 15: Smart Gas Networks
SMART GAS NETWORKS 15
Slide 16: Networks: A Tangible Change in Paradigm
NETWORKS Upgrade and repurposing combined with digitization to A TANGIBLE CHANGE allow distribution/injection of green gases as well as IN PARADIGM reduce costs, increase efficiency and reliability Digital sub-networks Central Control Room Network digital Smart Segmentation endpoints Metering valves
Slide 17: Digitization: Capex and Assets Numbers
DIGITIZATION CAPEX Step-up ASSETS NUMBERS in digitization deployment ~€1.4bn ~7,100 ~7,700 ~7,700 CAPEX ~3,900 DIGITAL ~1,600 GRFs 2020 2021 2022 2023 2027 # of installed devices Smart meters replacement plan near completion ~8.4 ~10,400 ~8.1 ~7.9 ~8.0 ~5,000 ~7.4 ~3,600 SMART NETWORK ~800 ~2,200 ME
Slide 18: Digitization: Cornerstone of Our Capex Plan
DIGITIZATION CORNERSTONE OF Digitization to benefit the gas distribution OUR CAPEX PLAN system in several ways Strict Safer Consumption Efficiency emission Green gases operations data gains control Safer More accurate and Efficiency Crucial for Enabler for operations updated gains both on reaching E
Slide 19: Digitization: IoT, Big Data and Digital for Smart Networks
DIGITIZATION IoT, BIG DATA AND DIGITAL FOR GAS ONGOING INITIATIVES SMART NETWORKS Multiple gases blending Data & Simulation Information Network balancing for exchange leaks identification Interventions prioritization Pressure Smart gas networks Assets level optimization enable an evolution in IoT-iz
Slide 20: R&D: Leverage on Distinctive Capabilities
R&D LEVERAGE ON Pursue technical innovation DISTINCTIVE Targeting several research projects CAPABILITIES towards the future of the network ~€40mn CAPEX ITALGAS LAB P2G PROJECT REVAMPING DESIGN NEW Other 0,3 ITALGAS SMART INNOVATION cm METER projects 20 D R& 20
Slide 21: Hydrogen: Italgas H2 P2G Project
2030-40 HYDROGEN H2 P2G project aimed at testing the entire green hydrogen value ITALGAS H2 chain, including implications on equipment PROJECT Shortlisted by MISE as eligible for European funds (IPCEI) Hot water Cooking Heating Network H2 FOR RESIDENTIAL injection and blending Industrial Heat EE RES
Slide 22: R&D: Design New Digital Smart Meters
R&D DESIGN NEW DIGITAL Development of a new hydrogen ready smart meter to SMART METERS improve performance, guarantee security and benefit from standardisation 0,3 cm SECURITY INNOVATION Security by design Sustainability + + Long-lasting battery + Modular Design + Remote Control + + Connectivity + +
Slide 23: Network, Repurposing & Upgrade
NETWORK, REPURPOSING & Network spending, well balanced between repurposing UPGRADE and extensions ~€3.4bn CAPEX Repurposing Extensions Maintenance Sardinia Technical and upgrade and new of existing new grids Innovation and grids network energy efficiency 23
Slide 24: Network Development to Reach New Customers
NETWORK DEVELOPMENT TO ALLOW GAS TO TORINO, VALLE D’AOSTA, BELLUNO REACH NEW LOREM IPSUM DOLOR SIT AMET Lorem ipspum CUSTOMERS t Lorem ipsum dolor sit ame Network development of won tenders ~€1bn SARDEGNA CAPEX New fully digital native network 900km built starting from 2018 out of 1,100km of new gri
Slide 25: Tenders: The Timeline
TENDERS THE TIMELINE Opportunity for investment and digital transformation, but timing subject to political decisions 2024 peak year in terms of expected awarded tenders ~€2.2bn CAPEX 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2017-23 Plan 2018-24 Plan 2019-25 Plan 2020-26 Plan 2021-27 P
Slide 26: ESCO
ESCO 26
Slide 27: ESCO: Strong Energy Savings Market Outlook
ESCO STRONG ENERGY Outlook for the Italian energy efficiency market is very strong SAVINGS MARKET OUTLOOK Efficiency in residential buildings is core to achieve EU targets Highly fragmented market Residential sector accounts for Target of energy savings by 2030 per ~35% of the 2030 target sector* (T
Slide 28: ESCO: From New Opportunity to Reality
ESCO FROM NEW OPPORTUNITY Delivering on announced strategy TO REALITY NOW 1 COMPANY INTERNAL EFFORT • Seaside and Toscana Energia Green • Support Italgas energy transition, providing services within completed the merger the Group • High potential thanks to • Key asset for tenders complementary busin
Slide 29: ESCO: Growing EBITDA Contribution
ESCO REVENUES FROM NEW OPPORTUNITY TO REALITY Growing EBITDA contribution >€700mn TOTAL CUMULATED POTENTIAL* ~€100mn CAPEX* M&A: CERESA (14/06/21) Titolo del grafico 45.000 Improving EBITDA ~40mn 35,0% • Operates in buildings energy efficiency with 40.000 30,0% a focus on heat management 35.000 25,0
Slide 30: New Opportunities
NEW OPPORTUNITIES 30
Slide 31: Potential Growth Outside Italy: Greece
POTENTIAL Italgas has been shortlisted for DEPA privatization in GROWTH Greece OUTSIDE ITALY Offer due date July 15, closing expected before year end MONITORING OPPORTUNITIES EDA Thess DEPA FITS WITH INVESTMENT CRITERIA 1 infrastructure assets • Comparable sovereign risk • Ability to exercise an ind
Slide 32: Water: Confirming Targets
WATER CONFIRMING Total water distribution market in Italy 27bcm, TARGETS of which 20% for civil uses Distribution and sale ~9.5 Water used for domestic use Integrated water services system (SII)* bcm Purification Digital Transport Distribution metering ~5.2 Water supplied to end customers and sale b
Slide 33: Water: Best Practices Applied to Water Networks
WATER CONFIRMING Best practices in gas network management TARGETS applied to water networks REVENUES >€250mn CUMULATED POTENTIAL ADVANTAGES 2021-27 ★ Deep understanding of the regulation and knowledge of the business ★ Expertise in managing pipeline networks ITALGAS ACQUA ★ Opportunity to digitise n
Slide 34: NewCo ICT: Accelerator of Innovation
NEWCO ICT ACCELERATOR OF Competence centre for the entire group, INNOVATION unlocking value of proprietary solutions in the market ~100 RESOURCES ASSETS €100mn NEWCO ICT Rationalisation of all ADVANTAGES ICT activities previously run by different group entities into a ü Agile vehicle NewCo fully own
Slide 35: NewCo ICT: Internal and External Opportunities
NEWCO ICT INTERNAL AND EXTERNAL Potential to sell technological solutions developed OPPORTUNITIES and tested by Italgas to third Parties DESIGNED FOR ITALGAS OFFERED TO THIRD PARTIES Innovate Run and improve Go to market • Test and learn • Roll-out at scale to capture Productization of selected solu
Slide 36: Financials
FINANCIALS 36
Slide 37: Capex Plan 2021-27 Overview
CAPEX PLAN 2021-27 €7.9bn total capex, +5.2% vs 2020-26 OVERVIEW EXPANSION OF GAS DISTRIBUTION PERIMETER(1) DIGITIZATION SARDINIA €0.4 NETWORK CENTRALIZED TENDERS bn M&A & development €1.4bn €3.1bn €0.3bn €0.4bn €2.2bn DIVERSIFIED ACTIVITIES € 5.2 bn related to gas distribution base perimeter Net ca
Slide 38: Capex Plan 2021-27: +58% in 5 Years
CAPEX PLAN 2021-27 Increase in spending related to core assets +58% IN and digitization 5 YEARS +58% in 2021-27 vs 2017-23 € mln 2017-23 2018-24 2019-25 2020-26 2020-27 LS IA NC 38 Digitization* Network** New opportunities Tenders NA FI (*) Including metering (**) Including centralised capex, Sardin
Slide 39: Growth: Superior RAB Growth
GROWTH SUPERIOR RAB GROWTH Growth in RAB and redelivery points driven by organic investments, M&A and tenders RAB Redelivery points(1) 6.3% CAGR 3.9% CAGR 2020-27 2020-27 TENDERS TENDERS ORGANIC ORGANIC 11.9 & M&A & M&A 10.3 9.9 7.6 8.2 7.7 2020 2027 2027 2020 2027 2027 RAB 4.2% CAGR ~35% Market sha
Slide 40: Strong Commitment: New Environmental Targets
STRONG COMMITMENT -30% NEW ENVIRONMENTAL TARGETS SET Scope I and II Gas leaks Vehicles GHG emissions 103t CO2 eq Civil and FY 2020 FY 2027 reduction(1) Industrial Gas Consumption Major step ahead in our commitment to the environment -25% Identified specific initiatives, made possible also by Electri
Slide 41: HRO Strategy to Support Growth
HRO STRATEGY TO SUPPORT 3 pillars HRO based strategy designed to GROWTH sustain people development and industrial growth SUSTAINABILITY & INCLUSION OPERATIONAL EFFICIENCIES ENGAGEMENT & CHANGE Improve business MANAGEMENT sustainability and inclusion Operational efficiencies leveraging on digitizatio
Slide 42: Insourcing of Strategic Activities
INSOURCING OF STRATEGIC Insourcing of core activities previously managed by 3rd Parties ACTIVITIES New activities created by digitization People reskilling and upskilling to empower strategic know-how and deliver excellence ACTIVITIES ALREADY INSOURCED 2021 TO BE INSOURCED OVER PLAN PERIOD Currently
Slide 43: People: Key Targets
PEOPLE KEY TARGETS Gender equality new hires 50% Women in 25% responsibility roles 100 digital d ors sa 50 sustainability m ba s Total hours to 600k hours Employees in welfare >75% 30 inclusivity a training in 2021-27 ... Increase in Smart Office … of which digital Learning & Smart working learning
Slide 44: Financial Strategy: A Key Source of Value Creation
FINANCIAL STRATEGY A KEY SOURCE OF VALUE CREATION Organic Capex OCF Sustainable finance sources Dividends Support capex growth maintaining flexibility § Tenders Preserve Financial § M&A and new Preserve a solid current flexibility opportunities investment grade profile credit rating § Enhance shareh
Slide 45: Financial Strategy: Debt Maturities
FINANCIAL STRATEGY Debt Maturities EIB A KEY SOURCE Bonds OF VALUE 900 600 300 0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 beyond 2033 Limited refinancing needs and 1Q 2021 Gross Debt Structure* ample liquidity buffer Institutional Lenders (EIB) Low exposure to interest rates
Slide 46: Credit Metrics
CREDIT METRICS MOODY’S Baa2 FITCH BBB+ Credit metrics remain within range throughout the plan Net Debt / RAB FFO / Net Debt 80% 20% 70% 15% 60% 10% 50% 5% 40% 0% 2020 2021 2022 2023 2024 2025 2026 2027 2020 2021 2022 2023 2024 2025 2026 2027 LS IA NC 46 NA FI 46
Slide 47: Digitization: A Source of Value Creation
DIGITIZATION A SOURCE OF VALUE CREATION POTENTIAL BENEFITS* ~€250mn 2019A 2020A 2021 2022 2023 2024 2025 2026 2027 ~ €60mn capex impact ~ €190mn P&L impact ü ICT: cloud adoption and reduction of ü ICT: cloud adoption to drive opex software development requests reduction ü Operation: savings from act
Slide 48: Distribution Costs: Further Efficiencies with Tenders
DISTRIBUTION COSTS Distribution operating expenses without tenders* FURTHER EFFICIENCIES WITH TENDERS Opex 2021 Efficiencies Inflation Redelivery Points Opex 2027 Efficiencies driven by technological innovation and digitization Unit cost per redelivery point** 30,0 Offset X-factor impact 25,0 Withou
Slide 49: Guidance
GUIDANCE 2021 2024 2027 € mn Revenues >1.35bn Revenues ~1.9bn ~2.1bn EBITDA ~1.0bn EBITDA ~1.37bn ~1.6bn EBIT 560-580 EBIT/RAB* ~7.5% ~8.2% Capex 850-900 Consolidated RAB 10.5bn 11.9bn Net Debt ~5bn FFO / RAB 10% 10% with IFRS 16 Leverage ~61% Leverage ~62% ~60% . 49 LS IA NC NA FI * Gas distributio
Slide 50: Dividend Policy Confirmed
DIVIDEND POLICY CONFIRMED Dividend policy allows shareholders to benefit from growth potential 0.256 0.277 Higher between ü DPS equal to 65% payout on Adjusted Net Income ü DPS 2019 +4% per annum FY2019 FY2020 FY2021 FY2022 FY2023 LS Dividend per share (€) IA NC 50 NA FI Illustrative chart
Slide 51: Empowering Our Future
EMPOWERING OUR FUTURE Foster Energy Transition Foster the development, injection and at scale usage of green gases. Smart Gas Networks Network upgrade and repurposing to reduce costs, increase efficiencies and resilience, enable green gases distribution, via digital transformation. Emission reductio
Slide 52: Appendix
APPENDIX 52
Slide 53: Group Structure
GROUP STRUCTURE 50% 45% 100% 100% 50.66% 67.20% 51.85% 32.80% 10% 15.00% 51.85% 42.96% 30.05% 100% 10% 53 Equity accounted 53
Slide 54: Main Numbers
MAIN NUMBERS LOREM IPSUM DOLOR SIT AMET Lorem ipspum Lorem ipsum dolor sit amet OPERATING OF WHICH HIGHLIGHTS AFFILIATES (TOTAL) Network length 73,319 km 1,877 km Municipalities 1,888 61 Redelivery Points 7.750 mn 0.153 mn Market Share(1) 35% 0.1% Subsidiareis Controlled companies 54 54
Slide 55: Italy Gas Demand Expectations Reaffirmed
ITALY GAS DEMAND EXPECTATIONS Networks to accommodate new green gases REAFFIRMED 100 90 86 84 85 85 83 78 78 75 75 73 74 80 80 76 70 71 73 Italian gas demand (Bcm) 68 70 62 74 69 60 62 50 Covid-19 impact 40 30 20 34 30 33 31 31 29 30 31 10 - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 201
Slide 56: Sustainability at the Core of Our Actions
SUSTAINABILITY AT THE CORE OF Committed to performance improvement and ESG OUR ACTIONS culture. New targets set integrating Sustainability Plan pillars ENVIRONMENT SOCIAL GOVERNANCE • Decarbonization of operations and • People empowerment and safety, also • ESG KPIs in top management reduction of en
Slide 57: Biomethane: Connection Requests
2020-30 Connections requests keep raising. Italgas received 38 BIOMETHANE preliminary requests for connections since 2017. THE CLOSER Need to consider “reverse flow ops” VIABLE GREEN OPTION Technical cycle Italy request for connections Production Unit Gas Supply line distribution grid In progress bi
Slide 58: Disclaimer
DISCLAIMER Italgas’s Manager, Giovanni Mercante, in his position as manager responsible for the preparation of financial reports, certifies pursuant to paragraph 2, article 154-bis of the Legislative Decree n. 58/1998, that data and information disclosures herewith set forth correspond to the compan
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