Edp S.a. · EURONEXT:EDP
Edp — Energias de Portugal — Investor Presentation (February 2018)
45 slides from Edp's investor presentation, February 2018
Slide 1: Investor Presentation February 2018
<3 Investor Presentation February 2018 Dow Jones Sustainability Indices In Collaboration with RabecoSAM
Slide 2: 2017 one of the driest years in Iberia over the last decades
Hydro Production: Hydro Coefficient in Portugal Hydro reservoirs in Iberia: Dec-17 (Deviation vs. avg. hydro year) (%, historical average 1999-2016) Historical avg. Storage Portugal Spain +33% 50% 54% 44% 47% 39% 26% -66% -53% Dec-16 Dec-17 Dec-16 Dec-17 -83% 4Q16 4Q17 2016 2017 1.4TWh 4.8TWh 2017 o
Slide 3: Upgrade by S&P: investment grade with stable outlook by 3 agencies
Net Interest Cost Marginal Cost of Debt (€ million) (%) Weight on Consolidated net debt -13% -51% 584 1.3% 511 EUR EDP 5Y 0.6% Bond Yield 65% Dec-16 Dec-17 9M16 9M17 Avg. Cost EDP 5Y -18% of Debt (%) 4.5 -40bp 4.1 USD 3.7%(1) 3.0% Bond Yield 25% Dec-16 Dec-17 Last update LT credit rating Outlook S&P
Slide 4: €5.5bn available liquidity covers refinancing needs beyond 2019
Financial liquidity as of Oct-17(1) EDP consolidated debt maturity profile as of Sep-17 (€bn) (€bn) EDP S.A., EDP Finance B.V. and Other EDP Brasil Cash & Equivalents: €1.4bn Avg. Debt Maturity: 4.7Y 5.8 Available Credit Lines: €4.1bn 3.5 Revolving Credit Facility maturing on Oct-22(1) €3.3bn 2.7 Ot
Slide 5: Recurring EBITDA €3.5-3.6bn
Previous Guidance New Guidance Key highlights Recurring ▪ Generation & supply Iberia in 2H17 marked by: ~€3.6bn €3.5-3.6bn 1) Weaker than expected hydro volumes EBITDA 2) Increase of electricity pool prices (Nuclear France, coal) 3) Higher regulatory costs Recurring ≥€919m €850-900m Net Profit(1) ▪
Slide 6: Clear regulatory framework for 2018-20
Regulated Revenues: 2018E Return on RAB in H&M Voltage: Methodology for 2018-20(2) (€m) (%; bp) Each 2.5% chg. in avg. 10Y PT bond 1,062 RoR yield, implies 1% chg. in RoR ▪ Avg. RoR ~5.85% Cost of capital(1) (6% Low Voltage; 5.75% H&MV) 9.75% Accepted ▪ Fully based on IFRS depreciation(1) ▪ End of P
Slide 7: 2018 earnings consensus penalised by regulatory and fiscal developments
2018E Framework ▪ Clawback rate set at 4.75€/MWh Generation taxes ~€70m ▪ New tax on coal consumption ▪ Methodology to be reassessed by ERSE ▪ 33.8% tariff discount supported by conventional power generators Social tariff ~€70m ▪ ~800k clients in 2018E Extraordinary energy ▪ 0.85% on net fixed asset
Slide 8: Targeting to double outperformance vs. OPEX IV target
Annual cost savings: 2018E Additional Cost Savings Key Drivers: (€m) 180 ▪ On the wave of successful previous programmes Zero Base in EDP Brasil and generation in Portugal Doubling of outperformance Budgeting 25 ▪ Launch of new Zero Base Budget across divisions vs. Opex IV savings target O&M ▪ Optim
Slide 9: US tax reform: tax rate reduction from 35% to 21%
Asset Base New Projects Tax rate reduction from 35% to 21% PTC/ITC phase-out schemes were kept unchanged which seems to enjoy solid bipartisan support P&L annual tax Reduction in annual tax Approved full 100% expense of capex as option provision provision ($15m - $30m) vs. typical 5-year MACRS sched
Slide 10: EDP Shareholder Structure
EDP Shareholder Structure (January 11th, 2018) FREE FLOAT; 34.7% ▪ AGM announced for April, 5th with management’s CHINA THREE GORGES (China); 23.3% reelection for 2018-2020 proposed by 39% of share capital CAPITAL GROUP (US); 12.0% ▪ Two tier model: Executive Board of Directors (EBD) and Masaveu 56%
Slide 11: Additional financial flexibility from lower EDPR tender acceptance
Net investments(1) 2017E: geographical breakdown (€bn) 0.5(3) 0.6(2) -2.1 -0.5 0.3 -1.2 New hydro and Sale of gas ~0.6GW of Acquisition of wind with PPA; distribution and renewables with Sale of gas assets; 5.1% stake in Regulated 49% in some PPA/FiT EDPR networks wind farms Additional financial fle
Slide 12: Strong visibility in organic growth
2018 2019 2020 Strong visibility 5 transmission lines in Brazil Capex at EDPR R$3.1bn o.w. 95% in 2019-21 ~0.8GW EDPR already secured growth with PPAs/FiT: committed avg. 0.3GW/year Asset Rotations EDPR asset rotations: flexibility on timing (€0.6bn) Other levers Built-Operate-Transfer (majority sta
Slide 13: Growth supported by 1.8 GW of secured projects
EDPR 2016-20 additions breakdown Name MW CoD with visible projects execution By technology Built Capacity additions to date 1,015 2016-17 (MW) Spain Auction projects 93 2018‐19E Portugal Ventinveste & other 232 2018‐19E Solar PV Italian auction 127 2018‐19E Wind 8% RoE Onshore France & Belgium proje
Slide 14: Generation portfolio: low exposure to regulatory/environmental risks
Average Residual Useful Life of EDP’s Generation – 2020E Average Residual Useful Life of EDP’s by Technology(1) Generation Portfolio(1) (Years) Hydro CCGT Wind & Solar Coal with DeNOx Nuclear 48% 24 (33%) 30 (13%) 27 16 (42%) 21 (11%) 9 8 (1%) 0 5 10 15 20 25 30 35 Dec-05 Dec-20 Generation portfolio
Slide 15: Electricity Transmission in Brazil: new projects' key figures
Electricity Transmission in Brazil: New projects’ Key Figures Revenues Discount vs. Discount vs. ▪ Selected projects: Detailed assessment of all risks RAP (BRLm) Aneel RAP closest bidder (access, environmental, geological) L18/2017 205 47% 11% L21/2017 172 35% 4% ▪ Credible contractors: EPC turn-key
Slide 16: Celesc stake acquisition in Brazil
Corporate Structure Multiples associated to combined transactions Step 1: Acquisition of shares from PREVI Step 2: Voluntary Public Offering (R$27/share) Price Agreed R$ 230m Investment up to R$ 429m EV/RAB 0.7x CELESC CELESC EV/EBITDA 3.8x 50.2% 14.5% 65.3% 50.2% 33.1% 18.7% SC GOV EDP OTHERS SC GO
Slide 17: Dividend floor at €0.19/share
EDP dividend policy for 2016-20E (€/share) +3% 0.190 0.185 Dividend yield 2017E(2): ~6.6% (1) 2015 2016 2020 E Dividend floor at €0.19/share Target payout ratio 65-75% (1) Dividend per share paid on May 17th, 2017; (2) Based on a share price of €2.89 as of January 11th, 2017. 16
Slide 18: Annexes
ANNEXES 17
Slide 19: Business overview by segment and geography
Wind & Solar Power 31% of EBITDA (13% North America; 6% Portugal; 6% Spain; 6% Other) Listed subsidiary: EDP Renováveis (EDP has 82.6%) IPO in Jun-08 Wind & Solar Power: 10.1GW A worldwide renewable market leader Portugal Spain EDP Brasil 39% of EBITDA 14% of EBITDA 16% of EBITDA Privatisation in 19
Slide 20: Wind & Solar installed capacity and PPAs
Offshore wind project Canada under development UK Other Europe: 30 Long Term PPAs or regulated price; wind Belgium receive 1 Green Certificate/MWh(2) - - US - 71 1% Poland - 4,831 47% France 418 4% 303 2 Offshore wind projects - ▪ ~86% LT PPAs/Hedged under development 406 4% ▪ ~14% Merchant price Ro
Slide 21: Hydro, nuclear, pumping and coal in Iberia
Hydro and Nuclear Hydro Pumping Coal in Iberia (TWh/year on avg. Hydro year) Annual TWh in avg. hydro year Efficiency vs. Transportation costs Concession end Peers’ plants EDP’s plants 14 12 1 +3x Nuclear 2028 Transp. Costs (€/MWh) 4.7 8 Hydro 13 2047 4 Aboño 2 1.1 Sines 0 31 33 35 37 2018-20 2010-1
Slide 22: Hydro production covered by sales to clients by 2020
EDP Conventional electricity production vs. sales to clients in Iberia (Avg. annual volume, in TWh) Main drivers in 2018-20E Sales to clients/ +1.03x Own production ▪ Integration between generation and supply mitigates wholesale exposure 39 37 Last Resort Supply ▪ Conventional production to be fully
Slide 23: EDP Brasil: geographical footprint
EDP Brasil: Geographical footprint (1) Hydro Power Plant Thermal power plant Distribution Concession Area Electricity Generation Jari 373MW (50%) C. Caldeirão 219MW (50%) Avg. Price: R$121/MWh Avg. Price: R$102/MWh ▪ Total Installed Capacity in operation: 2.5GW (hydro & coal) End of PPA: 2044 End of
Slide 24: Portugal: electricity system regulatory receivables
Portugal: Electricity System Regulatory Receivables (€bn) Share of total receivables in the system -0.1 -0.4 -0.7 5.2 5.1 4.9 4.7 4.0 Other 73% creditors EDP 2.2 1.0 1.3 27% Dec-15 Dec-16 Sep-17 Dec-17(E) (1) Dec-18(E) (1) Demand(2) (YoY Chg.) +1.1% +0.7% -0.6% +0.7%(3) +1.2% YoY if adjusted for tem
Slide 25: EBITDA by business segment
Weight on Recurring Recurring EBITDA EBITDA YoY change ▪ EBITDA growth driven by US, Mexico, Brazil and 1st farm down in UK offshore 37% EDPR +17% ▪ Production +10%, supported by +8% avg. capacity (mostly US, Mexico) and higher load factor Regulated ▪ Deconsolidation of gas distribution Spain from J
Slide 26: Recurring net profit -4%
Net Profit (€ million) 9M16 9M17 ∆% ∆ Abs. (€ million) % Chg. YoY EBITDA 2.893 3.269 +13% +376 Net Depreciations and +86% 1.100 1.056 -4% -44 Provisions 1,147 EBIT 1.792 2.213 +23% +421 Financial Results & 514 (638) (582) +9% +56 Associated Companies 615 Income Taxes 300 175 -41% -124 Extraordinary
Slide 27: Change in net debt: Sep-17 vs. Dec-16
Change in Net Debt: Sep-17 vs. Dec-16 (€ billion) 15.9 -1.0 +0.7 -1.0 1.0 +0.4 +0.1 15.1 Regulatory Receivables 1.3 Includes portfolio reshuffling: €0.6bn one-off taxes 15.0 Net impact of €1.9bn -€0.5bn ForEx 13.8 Net Debt Organic FCF (1) Dividends EDP Expansion Regulatory Other Net Debt Dec-16 Shar
Slide 28: Sustainability: create economic value
SRI impact area EDP strategic axis Health in the 3Q17 2020/30 Create Economic Value planet|Sustainability Society (accumulated) Achieve 75% of clean capacity by 75% Renewable capacity 74% 2020 Invest 200M€ in innovative Investment in R&D+i 200M€ 72M€* projects by 2020 (aggregate) Surpass 90% of smar
Slide 29: Innovation: five main strategic areas
Identify & develop competitive alternative clean generation to reduce emissions. Cleaner energy • e.g. Demogravi3 (Portugal) R&D: 5 main strategic areas of Development of smart grid infrastructure and applications with client/operations Smarter Grids focus. • e.g. Smart Grid Lab (Brazil)- developed
Slide 30: EDP innovation ecosystem
3 EDP Ventures EDP Starter Corporate venture capital Innovative incubation / looking for opportunities for acceleration concept, equity early stage investments in free, for start-ups operating the cleantech sector. in the energy sector. Free Electrons EDP Open Innovation Global acceleration program
Slide 31: Smart grid technologies in utilities' business model
DSO’s Challenges Inovgrid is EDP’s pivotal project for smart grids ▪ Quality of service Traditional ▪ Operational efficiency Yielding improvements on several levels: ▪ Efficiency consumption, technical losses, fraud detection ▪ Ability to manage distributed generation and EV ▪ Renewables and distrib
Slide 32: Deployment of InovGrid smart metering
2017 - 28% 2020 - 62% Iberia Iberia Deployment of InovGrid Smart Metering Deployment of InovGrid Smart Metering Installed smart meters (thousands) Installed smart meters (thousands) 3,620 thous. # (cumulative) 2,820 thous. # (cumulative) 2,020 1,270 693 610 650 400 504 240 220 302 40 98 2010-13 2014
Slide 33: Digitizing internal operations through smart grid technologies
2 Objective Transform internal processes, systems and the organization in order to materialize the potential of new smart grid technologies. Examples The new Smart Energy Center Operations and Digital Grid supervision Remote management of commercial operations Processes Energy efficiency services an
Slide 34: EDP in Europe's R&D ecosystem
2 Growing participation in R&D …collaborating to the development …with European peers and a vast …shaping the future of European funded projects… of high value solutions… network of stakeholders… the electric sector! Examples Integration of Smart Cumulative participation in Customers and Buildings E
Slide 35: Revenues from energy services
2016 6,9% revenues from energy services Provider of wider solutions Replacement of conventional primary energy sources Improvement of energy efficiency and load optimization Development of solutions in decentralised renewable generation 34
Slide 36: Electric mobility
2 Objectives to EDP fleet has 6% of EV and hybrids (HEV) 2030 100% EV in company fleet - EDP created an electric mobility offer to address this promising market, that includes energy tariffs, wallbox and edp re:dy. Business solutions to promote electrical - EDP installed 10 fast chargers and expecte
Slide 37: Sustainability: manage climate and environment matters
SRI impact area EDP strategic axis Health in the 2020/30 Manage Climate and 3Q17 planet|Sustainability Society Environment Matters (accumulated) Reduce CO2 specific emissions -75% ** Emissions variation vs 2005 -47% Achieve 100% environment certification 100% - Maximum certified installed 92% (inclu
Slide 38: Commitment to reduce CO2 emissions by 75% by 2030
Aligned with the publically announced decarbonization path (-75% CO2 specific emissions by 2030), EDP also committed to reduce its scope 1 and 2 emissions from electricity production 55% per TWh by 2030, from 2015 levels, as well as to reduce its absolute scope 3 emissions 25% over the same time per
Slide 39: Sustainability: develop our people
SRI impact area EDP strategic axis Health in the 3Q17 2020 Develop our people planet|Sustainability Society accumulated Keep employee engagement level high ≥ 75% Engagement level * 74% Promote diversity increase 27% Female employees 24% Achieve 100% of H&S certification (Including 100% - Certificati
Slide 40: Sustainability: improve trust
SRI impact area EDP strategic axis Health in the 2020 Improve trust 3Q17 planet|Sustainability Society accumulated Achieve >80% of Clients satisfaction and promote >80% Clients/Users satisfaction * 77% energetic inclusion Maintain EDP part of the world's most ethical Yes - Recognition by the Ethisph
Slide 41: Stakeholder engagement
▪ Sense of community through active communication (intranet, corporate TV, bi-annual employee gatherings, Employees ethics ombudsman) ▪ Sense of empowerment through training (EDP University), job mobility and individual development plans Customers ▪ Customers are key: EDP 365 Customer Program, Custo
Slide 42: People targets for 2020
▪ Hire to retire ratio: 2/3 ▪ 90% fulfillment of skills ▪ Employee Engagement > 75% ▪ Employee Enablement > 75% ▪ €0,35M EBITDA/Employee in 2020 vs. €0,29M in 15 ▪ >75% digital 41
Slide 43: Bonds: EDP BV Euro MTN
Amount Bonds Currency Maturity Coupon Market Price (Bid) Market Yield ISIN Code (million) EDP BV Euro MTN EUR 650 15/04/2019 2.625% 103.1 0.0% XS1057345651 EDP BV Euro MTN EUR 300 29/06/2020 4.125% 109.6 0.1% XS0223447227 EDP BV Euro MTN EUR 750 14/09/2020 4.875% 112.3 0.2% XS0970695572 EDP BV Euro
Slide 44: Disclaimer
This document has been prepared by EDP - Energias de Portugal, S.A. (the "Company") solely for use at the presentation to be made on this date and its purpose is merely of informative nature and, as such, it may be amended and supplemented. By attending the meeting where this presentation is made, o
Slide 45: IR Contacts
IR Contacts Miguel Viana, Head of IR Sónia Pimpão João Machado Maria João Matias Sérgio Tavares Noélia Rocha E-mail: ir@edp.pt Phone: +351 210012834 Visit EDP Website Next Events Site: www.edp.com Mar 1st: YE2017 Results Link Results & Presentations: www.edp.com/en/investors/investor-information/res
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