Slide 1: Italian Infrastructure Day
‘‘Italian Infrastructure Day’’ Milan, 6 September 2018
Slide 2: Agenda
ACEA Group Agenda THE ACEA GROUP TODAY MARKET SCENARIO AND TRENDS NEW BUSINESS PLAN 2018-2022 STRATEGY AND CONSOLIDATED TARGETS MAIN OPERATING SEGMENTS STRATEGIC OPPORTUNITIES CLOSING REMARKS APPENDIX 2
Slide 3: A market LEADING multiutility
ACEA Group THE ACEA GROUP TODAY A market LEADING multiutility FOOTPRINT EBITDA 2017 MARKET POSITION IN ITALY 2017 Water Energy Infrastructure WATER Commercial and Trading No. 1 • 9m customers Environment • RAB €1.3bn Other ELECTRICITY DISTRIBUTION No. 2 • 1.6m PODs • RAB €1.9bn €840M PUBLIC LIGHTING
Slide 4: Segment trends expected in the coming years in the Group's core businesses
ACEA Group MARKET SCENARIO AND TRENDS SEGMENT TRENDS expected in the coming years in the Group’s core businesses • Strong regulatory and government drive to ensure WATER - greater industrial development - new investment to cut gap in infrastructure and plant and boost network resilience • Consolidat
Slide 5: The Group's new strategic pillars
ACEA Group STRATEGY AND CONSOLIDATED TARGETS The Group’s new strategic PILLARS Business Plan 2018-2022 Technology, Industrial Local focus and Operational Innovation growth Sustainability Efficiency and Quality Capex of €3bn 15 pp reduction in water leaks €400m+ in investment Capex and Opex linked to
Slide 6: Strong and sustainable growth
ACEA Group STRATEGY AND CONSOLIDATED TARGETS Strong and sustainable GROWTH Pre-tax 2020 2022 ROIC >10% >10% EBITDA growth with CAGR +5.9% RAB up 25% by 2022 Growth in Net Profit* 4.1 3.8 1,108 1,002 3.2 840 832 181 282 332 €bn €m 2017 2017 2020 2022 2017 2020 2022 actual guidance guidance CAPEX of €
Slide 7: EBITDA growth based on solid business rationale
ACEA Group STRATEGY AND CONSOLIDATED TARGETS EBITDA growth based on solid business rationale CAGR 5.9 % CAGR 6.4% CAGR 5.1% 1,108 22 37 11 32 13 22 1,002 4 66 103 17 46 840 52,0 158 832 109 -31 65 64 78 78 374 386 333 325 €m 446 471 350 346 2017 2017 Tariff Quality Organic New Plants Cost End of 202
Slide 8: More than €3bn of investment
ACEA Group STRATEGY AND CONSOLIDATED TARGETS More than €3bn of INVESTMENT STRATEGIC LEVERS GROUP’S INVESTMENT €bn Capex Remix 3.1 3.1 Other 0.1 Commercial 0.1 Unregulated Environment 0.2 15% Energy Infrastructure 1.1 Focus on Regulated 85% Infrastructure 1.6 Water Capex Operating Regulated/ Segment
Slide 9: Over €400m to be invested in innovation
ACEA Group STRATEGY AND CONSOLIDATED TARGETS Over €400m to be invested in INNOVATION GROWTH LEVERS SCOPE OF APPLICAZION Smart & Resilient Grid INFRASTRUCTURE Security and efficiency Smart Meters (electricity and water) Over €400m Automation and Robotics PEOPLE for Welfare of innovative personnel ind
Slide 10: The new sustainability plan
ACEA Group STRATEGY AND CONSOLIDATED TARGETS The new SUSTAINABILITY plan Cuts in CO2 ACEA Group’s (Reduced losses, Purchase of Green >200 ktons Sustainability Energy, Recovery of Biogas) Plan 2018-2022 >15 with targets Reduction in Water Leaks pp associated with investment of Green Energy 500 approx
Slide 11: Growing dividends, pay-out above 50%
ACEA Group STRATEGY AND CONSOLIDATED TARGETS Growing DIVIDENDS, Pay-out above 50%, €0.7bn payable over the plan Growing Dividends Pay-out above 50% €0.7bn payable over the plan Dividend per Share 0.62 0.63 0.50 0.45 0.42 €/share 2013 2014 2015 2016 2017 2020 2020 2022 2022 11
Slide 12: Financial strategy aims to cut cost of debt
ACEA Group STRATEGY AND CONSOLIDATED TARGETS Financial strategy aims to cut cost of debt Stable outlook Stable outlook Net Debt (NFP) Situation at 31 Dec. 2017 NFP/EBITDA Ratio Average Maturity ~5.3 yrs 3.2 Average cost of debt ~2.6% 3.0 €bn 2.5 €bn February 2018 – successful placing of Euro 1 b
Slide 13: Water
WATER Key Targets for the Segment 13
Slide 14: 15 pp cut in water loss
ACEA Group WATER INFRASTRUCTURE DRIVE and efficiency improvements Key initiatives included in Plan 15 pp cut in Water loss • Extraordinary plan to upgrade network, reduce leaks and manage water emergency • Rationalisation of small treatment plants and development/expansion of large plants • Rollout
Slide 15: Water: EBITDA up 36% and investment of €1.6bn
ACEA Group WATER EBITDA UP 36% and INVESTMENT of €1.6bn CAGR: 6.4% CAGR: 8.8% CAGR: 2.8% in €m 19 1 5 471 79 9 13 446 EBITDA 350 346 2017 2017 Tariff Commercial Cost 2020 2020 Tariff Organic Cost 2022 2022 actual guidance increase quality efficiencies increase growth efficiencies rewards CUMULATIVE
Slide 16: Energy Infrastructure
ENERGY INFRASTRUCTURE Key Targets for the Segment 16
Slide 17: Becoming an advanced DSO to increase network resilience
ACEA Group ENERGY INFRASTRUCTURE Becoming an advanced DSO to increase network resilience and enable new services Key initiatives included in Plan To boost resilience and drive electrification • LV network upgrade to: - Increase network resilience 1m 2G - Increase capacity to enable Smart Meters elec
Slide 18: Energy Infrastructure: EBITDA up 20% and investment of €1.1bn
ACEA Group ENERGY INFRASTRUCTURE EBITDA UP 20% AND INVESTMENT OF €1.1BN CAGR: 3.5% CAGR: 4.8% CAGR: 1.6% in €m 374 3 1 6 386 25 8 11 5 3 EBITDA 333 325 2017 2017 Tariff Quality Organic Cost 2020 2020 Tariff Quality Organic Cost 2022 2022 actual guidance increase rewards gorwth efficiencies increase
Slide 19: Commercial and Trading
COMMERCIAL AND TRADING Key Targets for the Segment 19
Slide 20: Marketing drive and leading role in consolidation
ACEA Group COMMERCIAL AND TRADING MARKETING DRIVE and leading role in CONSOLIDATION within the sector Key initiatives included in Plan 33% growth in Number of Customers • Marketing drive through Digital and Cross Selling channels to play a leading role in consolidation 1,9 1.9 (following the phase-o
Slide 21: EBITDA to double by 2022
ACEA Group COMMERCIAL AND TRADING EBITDA to double by 2022 through increase in customer base and performance improvements CAGR: 14.9% CAGR: 11.3% CAGR: 20.4% in €m 158 10 39 EBITDA 22 8 109 78 79 2017 2017 Organic Cost 2020 2020 Organic Cost 2022 2022 actual guidance gorwth efficiencies growth effic
Slide 22: Environment
ENVIRONMENT Key Targets for the Segment 22
Slide 23: 70% growth in waste treated by end of Plan
ACEA Group ENVIRONMENT 70% growth in waste treated by end of Plan Key initiatives included in Plan 70% growth in waste treated Boost to waste treatment activities in keeping with circular 1.7 1,7 economy goals, "closing the loop" 1 Optimal return In millions of tons on resources 1,0 1.1 Reduction Re
Slide 24: Expiry of CIP6 offset by new initiatives and selective acquisitions
ACEA Group ENVIRONMENT Expiry of CIP6 offset by new initiatives and selective acquisitions in €m CAGR: 0.6% CAGR: -6.7% CAGR: 12.7% 12 1 7 EBITDA 6 66 65 64 3 52 5 -31 End of CIP6 incentive (S. Vittore Plant) 2017 2017 Organic New Development End of 2020 2020 Organic New Aquisitions 2022 2022 actual
Slide 25: Strategic Opportunities
STRATEGIC OPPORTUNITIES Potential UPSIDE to Business Plan 25
Slide 26: Potential strategic initiatives in the first three years of plan
ACEA Group STRATEGIC OPPORTUNITIES Potential STRATEGIC INITIATIVES that could be implemented in the FIRST THREE YEARS OF PLAN EBITDA WHEN FULLY CAPEX/ OPPORTUNITY STATE OF PLAY IMPLEMENTED ACQUISITION COST Talks with local authorities are in €m €m WATER CONSOLIDATION progress with a view to developi
Slide 27: Potential upside in 2020 of between €100m and €300m
ACEA Group STRATEGIC OPPORTUNITIES Potential UPSIDE in 2020 of between €100m and €300m OPPORTUNITY POTENTIAL UPSIDE FOR EBITDA IN 2020 in €m WATER CONSOLIDATION ~300 1,300 OF WATER SERVICE in areas MAX in which already present (Tuscany, Campania, Lazio) ~100 1,100 MIN 1,002 BASE Entry into GAS DISTR
Slide 28: The ACEA group's new strategic path
ACEA Group CLOSING REMARKS The ACEA group’s NEW STRATEGIC PATH Organic growth 6% CAGR for EBITDA from 2017 to 2022 €3bn in CAPEX focusing on INFRASTRUCTURE Performance IMPROVEMENT to drive growth with like-for- like workforce and maximise efficiencies, guaranteeing quality and reliability DPS Growin
Slide 29: Appendix
ACEA Group APPENDIX
Slide 30: Main assumptions
ACEA Group STRATEGY AND CONSOLIDATED TARGETS Main assumptions Main assumptions 2018 2019 2020 2021 2022 Exchange $/€ 1.14 1.18 1.20 1.10 1.00 Brent $/Bbl 50.00 52.00 53.00 51.64 52.59 PUN €/MWh 48.79 51.42 52.63 55.19 56.72 EU-ETS €/tons CO2 8.19 10.81 13.43 16.05 18.67 CIP6 €/MWh 218.63 218.64 30
Slide 31: H1 2018 Results
ACEA Group TITOLO H1 2018 Results CAPITOLO TITOLO PRESENTAZIONE / Luogo e data
Slide 32: H1 2018 financial highlights
H1 2018 financial highlights ACEA Group H1 2018 H1 2017 % INCREASED EBITDA GUIDANCE FOR 2018 (€m) change (a) (b) (a/b) Initial guidance Consolidated revenue 1,454.3 1,372.5 +6.0% +3% (€865m) EBITDA +5% (€882m) EBITDA 449.9 414.1 +8.6% 2017 INCREASED EBIT 250.7 194.9 +28.6%* €840m Updated guidance Gr
Slide 33: EBITDA
EBITDA ACEA Group 1% 2% EBITDA from 25% Water 7% non-regulated Energy Infrastructure 9% businesses Commercial and Trading EBITDA H1 2018 Environment 42% Overseas EBITDA from Engineering and Services 39% regulated 75% businesses Average Group EBITDA (€m) workforce 18.6 3.5 0.4 0.6 449.9 H1 2018 H1 20
Slide 34: EBITDA and quantitative data: Water
EBITDA and quantitative data ACEA Group H1 2018 financial highlights EBITDA GROWTH KEY HIGHLIGHTS Acea ATO2: +€6.7m (quality bonus €15.7m) Increased collections at ATO2 and ATO5 due Water Acea ATO5: +€4.0m to improved collection strategy EBITDA main drivers Companies consolidated using equity meth
Slide 35: EBITDA and quantitative data: Energy Infrastructure
EBITDA and quantitative data ACEA Group H1 2018 financial highlights EBITDA GROWTH KEY HIGHLIGHTS Distribution up €19.3m Energy Generation +€3.3m - increased hydroelectric and thermoelectric production (completion of Over 120 km of fibre infrastructure installed Infrastructure Tor di Valle plant)
Slide 36: EBITDA and quantitative data: Commercial and Trading
EBITDA and quantitative data ACEA Group H1 2018 financial highlights KEY HIGHLIGHTS Commercial and Trading EBITDA GROWTH Decline in enhanced protection market customer base partially offset by growth EBITDA main drivers in free market Reduced inbound calls (-37%) reflecting improved customer exp
Slide 37: EBITDA and quantitative data: Environment
EBITDA and quantitative data ACEA Group H1 2018 financial highlights EBITDA SLIGHTLY UP WTE growth due to increase in inputs, gate fees and energy price KEY HIGHLIGHTS Acea Ambiente: +€1.5m Environment Iseco: +€0.2m Re-start of Aprilia and Sabaudia plants Consents obtained for Orvieto landfill E
Slide 38: EBITDA and quantitative data: Overseas, Engineering and Services, Holding
EBITDA and quantitative data ACEA Group H1 2018 financial highlights Overseas Engineering and Services (€m) H1 2018 H1 2017 (€m) H1 2018 H1 2017 EBITDA 7.3 6.7 EBITDA 7.5 8.8 Capex 2.2 2.5 Capex 0.5 0.4 H1 2018 H1 2017 Change H1 2018 H1 2017 Change (a) (b) (a-b) (a) (b) (a-b) Average workforce 606 5
Slide 39: EBIT and net profit
EBIT and net profit ACEA Group EBIT (€m) NET PROFIT (€m) 250.7 194.9 142.7 103.5 H1 2017 H1 2018 H1 2017 H1 2018 TAX RATE 32.9% 30.8% H1 H1 % (€m) change 2018 2017 Increased depreciation, partly due to increased Depreciation 161.8 152.5 +6.1% investment in IT assets with shorter useful lives. Reduce
Slide 40: Capex
Capex ACEA Group CAPEX (€m) 34.6 0.4 0.1 0.1 282.0 252.2 (2.4) (0.3) (2.7) 1H2017 Water Energy Commercial Environment Overseas Engineering Holding H1 2018 Infrastructure and Trading and Services Capex 156 106 5 9 2 1 3 H1 2018 €m • Repair and • Work on the grid • Reduced • Work on Terni and widening
Slide 41: Focus on cash flow (1/2)
Focus on cash flow (1/2) ACEA Group H1 2018 H1 2017 Diff. ( (€m) A B A-B EBITDA 450 414 36 Change in working capital (82) (209) 127 CAPEX (282) (252) (31) FREE CASH FLOW 85 (47) 132 Net finance income/(costs) (42) (31) (12) Change in provisions (39) (54) 15 Dividends (134) (132) (2) Other (19) (11)
Slide 42: Focus on cash flow (2/2)
Focus on cash flow (2/2) ACEA Group Q2 2018 CASH GENERATED: €20M INFLOW FROM WORKING CAPITAL H1 2018 LTM CASH GENERATED: €11M CASH INFLOW FROM WORKING CAPITAL Increase in working capital needs in H1 2018 entirely due to trade payables as a result of seasonal factors Change in working capital in
Slide 43: Net debt
ACEA Group Net debt 30 June 2018 31 Dec 2017 30 June 2017 Change Change (€m) (a) (b) (c) (a-b) (a-c) Net debt 2,570.3 2,421.5 2,401.4 148.8 168.9 Medium/Long-term 3,359.7 2,706.6 2,804.3 653.1 555.4 Short-term (789.4) (285.1) (402.9) (504.3) (386.5) February 2018 – successful issue of bonds as part
Slide 44: Q1 2018 Results
ACEA Group TITOLO Q1 2018 Results CAPITOLO TITOLO PRESENTAZIONE / Luogo e data
Slide 45: Q1 2018 financial highlights
Q1 2018 financial highlights ACEA Group (€m) Q1 2018 Q1 2017 % change (a) (b) (a/b) Consolidated revenue 745.5 725.6 +2.7% EBITDA 229.2 214.4 +6.9% EBIT 127.4 117.2 +8.7% Group net profit/(loss) 77.4 65.7 +17.8% Capex 133.0 126.4 +5.2% (€m) 31 March 2018 31 Dec 2017 31 March 2017 % Change % Change (
Slide 46: 2017 Results
ACEA Group TITOLO 2017 Results CAPITOLO TITOLO PRESENTAZIONE / Luogo e data
Slide 47: Low risk profile
Low risk profile ACEA Group From non-regulated businesses 25% EBITDA From regulated 2017 businesses €840M 75% 42% 40% 9% 7% 2% of Group of Group of Group of Group of Group EBITDA EBITDA EBITDA EBITDA EBITDA Water Energy Infrastruc. Comm. & Trading Environment Overseas Leading operator in No. two ope
Slide 48: 2017 financial highlights
2017 financial highlights ACEA Group 2017 2016 % Change 2017* 2016* % Change (€m) adjusted adjusted a b a/b c d c/d Consolidated revenue 2,797.0 2,832.4 -1.2% 2,797.0 2,720.9 +2.8% EBITDA 840.0 896.3 -6.3% 840.0 784.8 +7.0% EBIT 359.9 525.9 -31.6% 406.2 414.4 -2.0% Group net profit/(loss) 180.7 262.
Slide 49: EBITDA
EBITDA ACEA Group Ahead of guidance and the Business Plan forecast EBITDA (€m) Change in scope of consolidation versus 2016 2017 EBITDA (€m) 17.1 • Acque Industriali 0.4 • GEAL 1.3 56 7 10 840 • TWS 2.7 785 14 -20 -12 • Aguas de San Pedro 12.6 • Acea Gori Servizi 0.1 Net Debt 31 Dec 2017 (€m) 2.1 Av
Slide 50: EBITDA and key quantitative data: Water
EBITDA and Key quantitative data ACEA Group 2017 financial highlights Acea ATO2: +€15.2m (quality bonus €31m) Acea ATO5: +€2.7m Water Change in scope of consolidation EBITDA main drivers Companies consolidated using equity method -€2.4m (€m) 2017 2016 %Change Key quantitative data 2017 2016 (a) (b)
Slide 51: EBITDA and key quantitative data: Energy Infrastructure
EBITDA and Key quantitative data ACEA Group 2017 financial highlights Energy Distribution +€45.5m (adjusted) Infrastructure Generation +€8.8m (mainly due to increased hydroelectric production) Public Lighting: LED plan launched in June 2016 (+€1.4m) EBITDA main drivers (€m) 2017 2016 2016 % change %
Slide 52: EBITDA and key quantitative data: Commercial and Trading
EBITDA and Key quantitative data ACEA Group 2017 financial highlights Recognition, in Q2 2016, of additional revenue of approximately €10m linked Commercial and to impact of the contract, entered into in March 2016, for the commercialisation of smart meters. Trading EBITDA main drivers Sales activit
Slide 53: EBITDA and key quantitative data: Environment
EBITDA and Key quantitative data ACEA Group 2017 financial highlights Greater quantity of electricity sold by the San Vittore plant (first line in operation from 1 October 2016) Environment Aprilia composting plant fully operational EBITDA main drivers Change in scope of consolidation (Acque Industr
Slide 54: EBIT
EBIT ACEA Group EBIT (€m) EBIT 525.9 Regulatory 111.5 406.2 Adjusted EBIT accounting - Mainly: restored ownership of a property housing a 46.3 car park (€9.5m), reduction in amounts due from GALA (€15.7m) and ATAC (€6.4m), write-down of Environment and Production assets (€12.2m) Adjusted 359.9 EBIT
Slide 55: Net profit
Net profit ACEA Group NET PROFIT (€m) Net Profit 262.3 Positive impact of regulatory 214.5 Adjusted Net Profit accounting and negative impact 51.8 - Mainly: restored ownership of a property housing a of liability management 33.8 car park and reduction in amounts due from GALA and ATAC and write-down
Slide 56: Cash flow
Cash flow 2017 2016 ACEA Group EBITDA 840 896 Delta WC (247) (85) CAPEX (532) (531) FREE CASH FLOW 61 281 Net finance income/(costs) (72) (110) Income tax expense (137) (110) Net debt fell €66m in Q4 2017, Dividends (132) (107) declining from €2,487m to €2,421m at (13) (72) 31 Dec 2017, due to cash
Slide 57: Net Debt
ACEA Group Net Debt Ahead of guidance and beating Business Plan forecast 31 Dec 2017 30 Sep 2017 31 Dec 2016 Change Change (€m) (a) (b) (c) (a-b) (a-c) NET DEBT 2,421.5 2,487.3 2,126.9 (65.8) 294.6 Medium/Long-term 2,706.6 2,475.9 2,743.1 230.7 (36.5) Short-term (285.1) 11.4 (616.2) (296.5) 331.1 Ad
Slide 58: Regulatory framework
ACEA Group Regulatory framework - Water TITOLO - Electricity distribution CAPITOLO TITOLO PRESENTAZIONE / Luogo e data
Slide 59: Water: regulation
Water: regulation ACEA Group TARIFF REGIME FOR SECOND REGULATORY PERIOD 2016-2019 ARERA Resolution 664/2015 - Water Tariff Regime for the second regulatory period (WTR-2) The tariff regime for the four-year period 2016-2019 (the second regulatory period) is based on a matrix chart with 6 different r
Slide 60: Water: regulation
Water: regulation ACEA Group TARIFF REGIME FOR SECOND REGULATORY PERIOD 2016-2019 ARERA Resolution 918/2017 – Biennial revision of tariff arrangements for integrated water services (2018-2019) Determination 918/2017, approved at the end of December, sets out not only the rules and procedures for the
Slide 61: Water: regulation
Water: regulation ACEA Group TARIFF REGIME FOR SECOND REGULATORY PERIOD 2016-2019 ARERA Resolution 918/2017 – Biennial revision of tariff arrangements for integrated water services( 2018-2019) Technical quality: Review of scheduled works based on the operator’s starting point for technical quali
Slide 62: Water: regulation
Water: regulation ACEA Group SECTOR REGULATION WITH AN IMPACT ON TARIFFS IN THE FOUR-YEAR PERIOD 2016-2019 INTRODUCTION OF THE COMPONENT LINKED TO CONTRACTUALLY REQUIRED QUALITY AEEGSI Resolution 655/2015 established contractually required specific and overall quality standards for the water service
Slide 63: Water: regulation - Technical quality (1/3)
Water: regulation ACEA Group Resolution 917/2017 – Technical quality (1/3) AEEGSI Resolution 917/2017 has supplemented the mechanism introduced at the end of 2015 designed to promote contractually required quality with new regulations governing the technical quality of the integrated water service.
Slide 64: Water: regulation - Technical quality (2/3)
Water: regulation ACEA Group Resolution 917/2017 – Technical quality (2/3) Conditions to be met to qualify PREREQUISITES for INCENTIVE MECHANISMS Indicators associated Availability and reliability of meter readings with incentive mechanism involving Compliance with quality standards for rewards and
Slide 65: Water: regulation - Technical quality (3/3)
Water: regulation ACEA Group Resolution 917/2017 – Technical quality (3/3) 1 January 2018 30 April 2018 1 January 2019 2020 Entry into For each operator, Communication Introduction and force of Recognition of and with reference Announcement of Announcement of of the results of maintenance of RQTI st
Slide 66: Energy Infrastructure: electricity distribution Totex
Energy Infrastructure: electricity distribution Totex ACEA Group CONSULTATION DOCUMENT: 683/2017 With regard to the second sub-period of the regulatory period 2020-2023, the regulator intends to adopt a Totex-based approach, introducing innovative elements into price regulation with respect to the p
Slide 67: Energy Infrastructure: electricity distribution regulation
Energy Infrastructure: electricity distribution regulation ACEA Group REGULATORY PERIOD: 2016-2023 (8 YEARS) ARERA Resolutions: 654/2015 Tariff general framework 583/2015 WACC 646/2015 Quality of electricity distribution and metering service and output based regulation The Regulator has extended the
Slide 68: Disclaimer
ACEA Group Disclaimer THIS PRESENTATION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT REFLECT THE COMPANY’S MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL AND OPERATIONAL PERFORMANCE OF THE COMPANY AND ITS SUBSIDIARIES. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON ACEA S.