Erg S.p.a. · MIL:ERG
Erg — Investor Day (May 2024)
55 slides from Erg's investor day presentation, May 16, 2024
Slide 1: 1Q 2024 Results & 2024-2026 Business Plan - Capital Market Day
1Q 2024 RESULTS & 2024-2026 BUSINESS PLAN CAPITAL MARKET DAY 16 May 2024
Slide 2: Disclaimer
DISCLAIMER This document contains certain forward-looking information that is subject to a number of factors that may influence the accuracy of the statements and the projections upon which the statements are based. There can be non assurance that the projections or forecasts will ultimately prove t
Slide 3: Agenda
AGENDA ❑ Welcome and Agenda - Emanuela Delucchi, Chief ESG, IR & Comm. ❑ 1Q 2024 Results Highlights - Paolo Merli, CEO ❑ 1Q 2024 Results Review - Michele Pedemonte, CFO: - Business Environment - Production & EBITDA - Investments - Key Financials ❑ 2021-2023: Delivery on our Strategy - Alessandro Gar
Slide 4: 1Q 2024 Results Highlights
1Q 2024 RESULTS HIGHLIGHTS Paolo Merli - CEO
Slide 5: Highlights: Key Figures
HIGHLIGHTS: KEY FIGURES(1) EBITDA(2) (€ mn) CAPEX (€ mn) 164 165 EBITDA including 154 US contribution in 1Q 2024 would be €177mn EBITDA Margin International 66 Italy Corporate 1Q 2023 1Q 2024 1Q 2023 1Q 2024 Net Profit(3) (€ mn) NFP(4) (€ mn) 78 78 1,445 1,500 1Q 2023 1Q 2024 31/12/2023 31/03/2024 A
Slide 6: 1Q 2024 Results Review
1Q 2024 RESULTS REVIEW Michele Pedemonte - CFO
Slide 7: Business Environment
BUSINESS ENVIRONMENT All-in Wind Prices(1) (€/MWh) All-in Solar Prices(1) (€/MWh) Italy France Germany Poland Romania Bulgaria UK(2) Spain Sweden (1) Prices net of clawback measures (2) UK prices net of balancing revenues 7
Slide 8: A Snapshot of 1Q 2024 Results: Production
A SNAPSHOT OF 1Q 2024 RESULTS: PRODUCTION Energy Production (GWh): 1Q 2024 1Q 2023 Δ Italy 875 784 91 France 391 396 (5) 1Q 2024 1Q 2023 Germany 202 203 (1) 7% 5% East Europe 233 230 3 UK & Nordics 166 132 34 1,947 Wind 1,780 Spain 80 35 45 GWh Solar GWh Total Energy Production 1,947 1,780 168 93% 9
Slide 9: A Snapshot of 1Q 2024 Results: EBITDA
A SNAPSHOT OF 1Q 2024 RESULTS: EBITDA Adjusted EBITDA (€ mn): 1Q 2024 1Q 2023 Δ Italy 101 83 18 1Q 2024(1) 1Q 2023(1) France 22 27 (5) 10% 10% Germany 13 28 (15) East Europe 18 19 (1) €165 Wind €164 UK & Nordics 15 8 7 mn Solar mn Spain 2 4 (2) 90% 90% Corporate (5) (5) 0 (1) Total Adjusted EBITDA 1
Slide 10: Investments
INVESTMENTS 154 Sweden M&A: France 84(1) UK Italy 66 Corporate 1Q 2023 1Q 2024 A mix of M&A and Organic (mainly Repowering) 10 (1) M&A CAPEX related to the closing (on January 29, 2024) of the Wind & Solar acquisitions in France
Slide 11: Key Financials
Key Financials Teleborsa: distribution and commercial use strictly proh EMARI SDIR
Slide 12: Adjusted P&L
ADJUSTED P&L 4Q 2023 Euro millions 1Q 2024 1Q 2023 (1) 159 Adjusted EBITDA 165 164 (56) Amortization and depreciation (1) (59) (58) 103 Adjusted EBIT 105 106 (1) (2) Net financial income (expenses) (2) (5) (0) Net income (loss) from equity investments 0 (0) 101 Adjusted Results before taxes 103 101
Slide 13: 1Q 2024 Cash Flow Statement
1Q 2024 CASH FLOW STATEMENT (€ mn) 37 1,500 1,445 (165) 154 30 Net Debt(1) Adj. CAPEX & Net working capital, Net Debt(1) BuyBack 31/12/2023 EBITDA(2) Acquisitions Taxes & Others 31/03/2024 (1) They do not include IFRS 16 liability, respectively for €172mn as at 31.12.23, and €179mn as at 31.3.24 (2)
Slide 14: 2021-2023: Delivery on Our Strategy
2021-2023: DELIVERY ON OUR STRATEGY Alessandro Garrone - EVP
Slide 15: Completion of Our Energy Transition
COMPLETION OF OUR ENERGY TRANSITION Wind & Solar Installed Capacity (GW) CCGT divestment crucial for ‘Net Zero’ Target Carbon Index % [g CO2 e/KWh] (Scope 1+2+3) ERG Net Zero 3.3 Scope 1 and 2 STRONG 100% (Δ vs Base year) 2.1 90% EXECUTION (-10%) 12% (-88%) // 2020 2022 2023 2020 2023 (Base year) As
Slide 16: Group's Structure and Best-in-Class Governance Model
GROUP'S STRUCTURE AND BEST-IN-CLASS GOVERNANCE MODEL A new Shareholders' structure(1) ERG’s Governance Model SQ Renewables S.p.A. SHAREHOLDERS’ MEETING San Quirico S.p.A. IFM Investors SQ Renewables S.p.A. 34% Treasury shares 35% 49% Free Float 65% BOARD OF DIRECTORS BOARD OF STATUTORY AUDITORS 51%
Slide 17: Significant Execution Over 2021-2023
SIGNIFICANT EXECUTION OVER 2021-2023 Solar Wind 174 3,266 56 92 526 2,944 Over the same period delivery on the strategy 309 2,418 to dispose of more than 2,109 1,000MW of Conventional Assets Creag Solar 2020 2021 2022 Riabhach Net RPW(1) M&A(2) 2023 Delivery on our growth strategy with a mix of orga
Slide 18: Top Tier ESG Recognition
TOP TIER ESG RECOGNITION Advanced = Advanced A =A A+ AAA = AAA Negligible risk 100 = B+ = Low = 79 A 65 Robust B C High Weak D D- CCC Severe risk 0 Rating Scale ERG Rating Sector Average Rating ERG best-in-class in ESG: 28th worldwide and 1st in Italy in the Corporate Knights Global 100 18
Slide 19: 2024-2026 Business Plan: Value over Volume
2024-2026 BUSINESS PLAN: VALUE OVER VOLUME Paolo Merli - CEO
Slide 20: The Starting Point
Si) SESE eS eee The starting Point
Slide 21: ERG as of Today: A Solid and International Platform
ERG AS OF TODAY: A SOLID AND INTERNATIONAL PLATFORM Sweden: Installed Capacity (MW) ERG geographical Presence (MW) 62MW Wind 17% Solar 3,674 U.K.: 249MW 83% Iowa: 224.4MW Illinois: 92.4MW Germany: 42% 49% 9% 327MW 11% 20% 29% 1,543 1,815 317 Poland: 142MW 89% 80% 71% Romania: 70MW Pipeline (MW) 3% 4
Slide 22: A Fully Secured Growth in the Short Term
A FULLY SECURED GROWTH IN THE SHORT TERM ~100 ~ 4,000 317 ~ 3,900 41 Storage 110 Solar 47 Wind 73 In operation ~3,300 In final phase of construction Closing expected by 1H 2024 France Expected Expected 2023 Falcon(1) Roccapalumba Net RPW (2) construction(3) Pinnacle FY 2024 Secured(4) FY 2025 A secu
Slide 23: Building Up a Larger and Well Diversified Portfolio in Europe
BUILDING UP A LARGER AND WELL DIVERSIFIED PORTFOLIO IN EUROPE Mineo-Militello-Vizzini Reinsdorf (RPW) ✓ Mineo-Militello-Vizzini (RPW)(1) 101MW to be, Salemi-Castelvetrano (RPW) 76MW to be, Bourgogne 1 32MW 51MW Δ vs as-is 50MW Δ vs as-is COD: 2Q 2024 COD: 4Q 2024 COD: 4Q 2024 Producibility: 2,300 he
Slide 24: A Platform of PPA with Tier 1 Off-Takers to Stabilize Revenues
A PLATFORM OF PPA WITH TIER 1 OFF-TAKERS TO STABILIZE REVENUES Country & Asset Type Plants & Capacity Price Structure Tenor / Start Date Counterparty Volume Evishagaran / Craiggore 6 years ~250GWh/Y Greenfield Fixed Price tot. 70MW Jan ’22 Pay as Produced Asset Based Bois Bigot, Bois de l’Arche/Thet
Slide 25: Efficient Cost Structure Based on Internalised Model
ERG HAS AN ALREADY EFFICIENT COST STRUCTURE BASED ON INTERNALISED MODEL Cost levels(1) (Wind Peers example, 2022) ERG’s industrial approach Opex k€/MW 45 ➢ Proactive Wind O&M approach to select case by case the best option: • 50% of the fleet with internalised O&M • 5% hybrid O&M 20 • 45% externalis
Slide 26: Business Environment Outlook
Business Environment Outlook
Slide 27: EU & US Are Still Growing Market for Renewables
EU & US ARE STILL GROWING MARKET FOR RENEWABLES Cumulative RES Capacity in Europe (GW, 2018-2028F) Cumulative RES Capacity in US (GW, 2018-2028F) ~890 +13% p.a. ~790 ~700 +13% p.a. ~600 ~620 +13% p.a. ~540 65% ~530 64% Solar ~470 ~470 62% Wind ~415 ~410 60% +15% p.a. ~360 ~360 64% 66% ~320 58% ~320
Slide 28: Volatility in Natural Gas and Electricity Prices
VOLATILITY IN NATURAL GAS AND ELECTRICITY PRICES Electricity prices – 2024 daily fwd prices evolution (€/MWh) Volatility remains high even in FWD expectations and main providers scenario (€/MWh) FWD Oct/Nov '23 115 - 150€/MWh FWD Feb/Mar ‘24 60 - 95€/MWh 2024 2025 2026 Italy France Germany Price ran
Slide 29: Higher Capital Intensity and Cost of Capital
IN A CONTEXT OF HIGHER CAPITAL INTENSITY AND COST OF CAPITAL... Context ERG's ability to react Avg. Solar & Wind Capex in Italy (€mn/MW, 2019-2023) ~60% Onshore Wind • A selective and flexible investment approach Solar Higher capital • Targeting a 200-400bps return over WACC intensity • Framework ag
Slide 30: Regulatory Framework in Evolution
REGULATORY FRAMEWORK IN EVOLUTION CFDs & PPAs Repowering Storage Grids ERG’s Policy • Solid CFDs support schemes in • Dedicated schemes/auctions • Support mechanisms • Increase investments Asks / What place or expected soon in ERG core • Relaxation of tip height limits • Bespoke regulatory framework
Slide 31: Strategy & Targets
Strategy & Targets
Slide 32: ERG's 2024-2026 Plan: Value over Volume
ERG’S 2024-2026 PLAN: VALUE OVER VOLUME ERG’S new targets to 2026 Ca. 4.5GW (+1.2GW) installed Capacity in 2026 (> 5.0GW in 2028) pursued via Selective growth a cherry-picking approach from our Pipeline and/or M&A Investments/EBITDA CAPEX: €1.2bn 2024-2026; EBITDA: €600-€650mn @2026 Route to market
Slide 33: BP 2024-2026: MW & CAPEX
BP 2024-2026: MW & CAPEX Capacity (GW) CAPEX (€ bn) ~2.0 >5.0 US ~4.5 Europe ~1.2 Italy 16% 3.3 Secured ~0.6 ~1.2 47% ~0.6 37% // // FY 2023 2024- 2026 Projections 2024 2025- 2024-2026 Projections Actual 2026 @2028 Guidance 2026 Plan 2024 - 2028 A visible growth, with flexibility to accelerate thank
Slide 34: Pursuing Growth with a Value over Volume Approach
PURSUING GROWTH WITH A "VALUE OVER VOLUME" APPROACH Pipeline (MW) Already permitted Technology Layer Flexible Approach 340 340MW Under Construction 350 50MW Greenfield at advanced stage Cherry Picking based on: • Route to mkt secured 750 250MW Repowering • Land secured • Proven technology • CAPEX se
Slide 35: A Flexible and Selective Approach to Growth
A FLEXIBLE AND SELECTIVE APPROACH TO GROWTH ERG's Key Priority country ERG's country & possible development • Focus on key core countries to consolidate ERG’s presence • Supportive regulatory framework as a key driver • US as a priority with a “learn & grow” approach • Assessing asset rotation oppor
Slide 36: A Learn and Grow Approach in the US
A “LEARN AND GROW” APPROACH IN THE US Transaction Overview Rationale • Strategic partnership (75% ERG's stake) with Apex Clean • First investment in the US renewable market Energy Holdings to manage an operating 317MW Wind & • US to become one of the largest ERG’s market abroad Solar portfolio • Pla
Slide 37: Our Repowering Projects in Europe Are Gaining Visibility
OUR REPOWERING PROJECTS IN EUROPE ARE GAINING VISIBILITY Project MW as is MW to be Delta MW Delta Prod. VIA Decree AU Decree 1 10 20 2x 2x ✓ ✓ N. WTG 2 10 20 2x 3x ✓ ✓ 0.5X 3 50 100 2x 3x ✓ ✓ REPOWERING 4 30 60 2x 3x ✓ ✓ MW 2.0X ÷ 2.5X 5 10 20 2x 3x ✓ ongoing KW 6 30 35 1x 2x ✓ ongoing 7 40 120 3x 4
Slide 38: First Step in Storage and Hybridization
FIRST STEP IN STORAGE AND HYBRIDIZATION TO INCREASE ASSET PTF FLEXIBILITY Leveraging on ERG’s >200MW pipeline in storage >150MW of Hybridization Pipeline in Italy 14,000 Monthly Profile (MWh) • Building a Pipeline >200MW in batteries in Italy, Spain, France and UK 12,000 10,000 Solar • Regulatory fr
Slide 39: Energy Management Expertise to Optimize the Route-to-Market
ENERGY MANAGEMENT EXPERTISE TO OPTIMIZE THE ROUTE-TO-MARKET PRODUCT TREND ERG’S ROUTE TO MARKET STRATEGY CONTRACT FOR In recovery, especially within geo where • Preferred route to market where auctions at sustainable levels are DIFFERENCE value is competitive vs. PPA (UK, DE…) available COMMERCIAL •
Slide 40: Financials & Capital Structure
FINANCIALS & CAPITAL STRUCTURE Michele Pedemonte - CFO
Slide 41: EBITDA Evolution in the Plan Period
EBITDA EVOLUTION IN THE PLAN PERIOD 2023 2024 2026 19% 22% 25% Wind Technological €534 €520-580 €600-650 Solar diversification mn mn mn 81% 78% 4% 15% US 46% 36% 50% Geographical €534 €520-580 €600-650 Europe diversification mn mn 35% mn Italy 54% 60% 17% 15% 17% EBITDA Regulated €534 €520-580 €600-
Slide 42: Bridge EBITDA New Plan 2026 vs Act 2023
BRIDGE EBITDA NEW PLAN 2026 VS ACT 2023 (€ mn) 600-650 ~130 Secured 534 2023 Actual Perimeter Productions Price BP 2026 Strong impact of development partially off-set by lower sales price 42
Slide 43: 640MW Out of Incentives in the BP Period
640MW OUT OF INCENTIVES IN THE BP PERIOD Phasing out of incentives in the period (MW) Revenues Structure: production hedging (TWh) Wind Bulgaria Wind France Spot @ Pzon BL(1) CFD Wind Germany Wind Italy Hedging to close PPA closed 9.3 PPA to close Short Term Hedged 1.9 In 2024-2026 BP = 640MW 7.4 Co
Slide 44: A Solid Financial Structure
A SOLID FINANCIAL STRUCTURE Gross debt at 31/03/2024 Repayment Schedule based on stock as of March 2024 (€ bn) New Sustainability- Corporate Loans Linked Loan signed 7% in 1Q 2024 ~0.7 ~2.2 Green Bonds 19% Project Finance ~€2.2 ~1.8 bn ~0.4 Fully hedged and not exposed to ~0.6 73% market volatility
Slide 45: Still Headroom to Create Value
STILL HEADROOM TO CREATE VALUE… Net debt & leverage over BP horizon Net financial position(1) Leverage (NFP/EBITDA) ~1.9 1.75 -1.85 (€ bn) 4.0 1.4 Financial Policy Net Debt/EBITDA 3.3 3.0 2.8 // 2023 2024 2026 // Cost of Gross Debt(3): 1.3% 1.5% // ~1.7% 2023 2024(2) 2026 Euribor 6m(4): 3.7% ~3.5% /
Slide 46: Thanks to Highly Competitive Financing Costs
… THANKS TO HIGHLY COMPETITIVE FINANCING COSTS ERG having a near-term low cost of debt … … that leverages on sustainability also compared to the industry Sustainable Traditional & other ERG Panel of Utilities and Gencos - EU ERG (IG) ~95% ~5% Peer 1 (IG) ~75% ~25% Peer 2 (IG) ~70% ~30% (1) Peer 3 (I
Slide 47: ESG as a Concrete and Substantial Choice
ESG AS A CONCRETE AND SUBSTANTIAL CHOICE Emanuela Delucchi – Chief ESG, IR & Communication
Slide 48: ESG Strategy 2024-2028
ESG STRATEGY 2024-2028 Net Zero • ERG Academy for Next Generation Circular Economy • Sharing Value for the Community E NG A Energy Efficiency ET • Top Tier ESG Recognition N G PLA EM EN Natural Capital preservation • Social Purpose for Solar Revamping T • Sustainability Incentives ERG Academy for ER
Slide 49: ERG Strategy in Planet
ERG STRATEGY IN PLANET CCGT divestment crucial for ‘Net Zero’ Target Towards Zero Waste Carbon Index % [g CO2 e/KWh] (Scope 1+2+3) 2021 2022 2023 2024 2025 2026 2027 2028 100% (Δ vs Base year) 90% -72% (-10%) Zero waste to landfill from Wind Repowering -96% 12% (-88%) 10% 100% 100% 100% (-90%) 1% (-
Slide 50: Social Purpose for Solar Revamping
SOCIAL PURPOSE FOR SOLAR REVAMPING Multi-year project, fully integrated in the ERG’s ESG Plan, which envisages the reuse of PV modules in new plants on behalf of the NGOs with “Social Value Purpose” Circular Economy High Social Impact Stakeholder engagement ✓ To support the energy transition through
Slide 51: Our Path for an Inclusive and Cultural Evolution
OUR PATH FOR AN INCLUSIVE AND CULTURAL EVOLUTION New New 24-26 BP 24-28 BP 2020 2023 2026 2028 Students involved in educational activities Women in workforce 22% 31% ~30% ≥30% 26,000 24,500 23,407 Key Leaders Women 17,000 9% 18% ≥ 20% 20-25% Key Leaders abroad 2023 2023 // 2026 // 2028 7% 22% 20-25%
Slide 52: 2024 Guidance & Conclusions
2024 GUIDANCE & CONCLUSIONS Paolo Merli - CEO
Slide 53: Confirming 2024 Guidance
CONFIRMING 2024 GUIDANCE Adjusted EBITDA (€ mn) CAPEX (€ mn) Adjusted NFP(2) (€ mn) US full year contribution 550-600 520-580(1) 540-600 1,750-1,850 1,500 520(1) 165 154 1Q 2024 2024 2024 1Q 2024 2024 1Q 2024 2024 Actual Guidance Guidance Actual Guidance Actual Guidance Actual Guidance Guidance rang
Slide 54: ERG Is Aiming at Creating Value in a Complex Scenario
ERG IS AIMING AT CREATING VALUE IN A COMPLEX SCENARIO ❑ Targeting 200-400bps over WACC SELECTIVE GROWTH 2024→2026 60% Secured 1.2GW ❑ Visible growth ❑ Solid pipeline underpinning the target ❑ Assessing asset rotation to maximise value QUASI-REGULATED ❑ EBITDA range at €600-650mn BUSINESS MODEL New 2
Slide 55: Inspiring Change to Power the Future
INSPIRING CHANGE TO POWER THE FUTURE