Pennon Group Plc · LSE:PNN
Pennon — Investor Presentation (October 2011)
20 slides from Pennon's investor presentation, Oct 4, 2011
Slide 1: Waste as a Resource
Waste as a Resource 4 October 2011
Slide 2: Pennon Group Plc – Disclaimers
Pennon Group Plc (“Pennon Group”) – Disclaimers For the purposes of the following disclaimers, references to this "document" shall mean this presentation pack and shall be deemed to include references to the related speeches made by or to be made by the presenters, any questions and answers in relat
Slide 3: Colin Drummond, Executive Director, Pennon Group Plc
Colin Drummond Executive Director, Pennon Group Plc Chief Executive, Viridor Ltd 3
Slide 4: Pennon Group Plc - Overview
Pennon Group Plc - Overview • Pennon Group Plc is a large FTSE 250 which operates and invests in utility infrastructure businesses. The Group is committed to: − sustainable development − enhancing the environment and − providing high quality customer services • We have around £4.1 billion assets and
Slide 5: Viridor - Continuing to Deliver Strong Financial Performance
Viridor - Continuing to Deliver Strong Financial Performance (1) PBIT + JVs (2) PBT (1) Figures after 2009 on an IFRIC 12 basis 5 (2) JVs contributed from 2008
Slide 6: Viridor – Profit Contribution by Segment
Viridor – Profit Contribution by Segment Year ended 31 March 2001 Year ended 31 March 2011 • Business continues successfully to evolve • 46% of profits from recovering value in waste (3) (1) Contribution plus joint ventures (share of PAT and interest) before intangibles and overheads (including pens
Slide 7: Viridor – Overview
Viridor – Overview From Waste to Resource Our strategy is to grow and add value by: • proactively developing new recycling operations to meet ambitious EU/UK targets • successfully exploiting the huge potential in waste-based renewable energy generation • capitalising on our strong position in landf
Slide 8: World Resource Use
World Resource Use • The world is using resource at an unsustainable rate − has used as much in the past 50 years as in all previous history • Well documented emerging shortages − hydrocarbons/oil − water − topsoil (one third of world’s top soil lost in past 100 years) − etc. • Increasing search for
Slide 9: Waste as Resource
Waste as Resource • Recyclate − the world’s low cost commodity • Waste derived renewable energy − the UK’s low cost source of distributed base load renewable energy 9
Slide 10: UK Incentive Schemes
UK Incentive Schemes • Landfill tax to increase by £8 per year from current £56 per tonne to £80 per tonne from 1 April 2014 − enhances long-term economics of recycling and energy recovery • Renewable Obligations Certificates (ROCs) for qualifying energy generation − landfill gas 1(0.25) ROC per MWH
Slide 11: Recyclate is the Low Cost Commodity
Recyclate is the Low Cost Commodity • As long as quality standards can be met, recyclate is much cheaper than virgin materials − paper/card − plastics − glass − metals • Growth of recyclate historically held back by quality issues which have now been addressed via − improved collection methods − hea
Slide 12: Viridor Recycling
Viridor Recycling • Viridor now recycles c. 2m tonnes p.a. compared with 0.1m tonnes in 2000/01 • Viridor largest operator of MRFs in UK − scale, technology and collection economies • Strong international distribution network and accreditations permit high prices • Average profit per tonne in recycl
Slide 13: Viridor 2010/11 Acquisitions
Viridor 2010/11 Acquisitions • Five recycling companies acquired for c.£50m: − Reconomy, £23.8m: 3 MRFs in East Anglia and the South Midlands − Pearsons, £16.0m: MRF and associated facilities in Norfolk − Adapt Recycling, £0.7m: recycling and waste management operator in Bury − Swinnerton, £1.8m: re
Slide 14: Recovering Energy from Waste - 1
Recovering Energy from Waste - 1 • A form of biomass • Two routes − methane gas (landfill gas and anaerobic digestion) − combustion technologies • Waste already accounts for 1.5% of UK electricity − comparable to wind − 1.2% landfill gas − 0.3% combustion • Unlike wind − provides base load power (80
Slide 15: Recovering Energy from Waste - 2
Recovering Energy from Waste - 2 • EU Landfill Directive requires major reduction in amount of waste going to landfill − which will need instead to be used for energy generation − UK government targets imply at least 15m tonnes energy from waste capacity by 2020 compared to 5m tonnes currently − sup
Slide 16: Financing
Financing • UK recycling, waste management and renewable energy infrastructure has to be expanded/upgraded if we are to meet our EU and UK waste management and renewable energy targets − individual councils (and business) have no choice because of ever rising landfill tax − £15bn investment by 2020
Slide 17: Viridor – Renewable Energy
Viridor – Renewable Energy • 137MW operating capacity in 2011 (compared to 28MW in 2001) − LFG (108MW), EfW (27MW), AD (2MW) • Additional 60MW EfW under construction • Four large EfW plants giving a further 1.3m tonnes/125MW achieved planning consent over past year • Target over 300MW total operatio
Slide 18: Current PPP/PFI Projects
Viridor Current PPP/PFI Projects • Oxfordshire PPP – contract signed 2011 − 25 years; £205m capex − EfW; 300kt; 25MW • Exeter – contract agreed 2011 − 25 years; £46m capex − EfW; 60kt; 3MW • Greater Manchester PFI – operational 2009 − 25 years; £640m capex, 1.1m tonnes pa − UK’s largest ever combine
Slide 19: PPP Prospects
Viridor PPP Prospects (1) • Preferred bidder for South Lanarkshire • Provisional preferred bidder for Cheshire • One of last two for Glasgow • One of last two for South London Waste Partnership • One of last two for each of Peterborough EfW and MRF • One of last two for West Lothian • One of last th
Slide 20: Viridor - Summary
Viridor - Summary • Profits have grown 20% pa since year 2000/01 • Exploiting embedded value in waste stream − energy − recyclate/raw materials − 46% of Viridor’s profits now come from recovering value from waste • Very exciting future − huge required expenditure on UK waste infrastructure (£15bn by