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Edp — Energias de Portugal — Investor Presentation (September 2016)

46 slides from Edp's investor presentation, September 2016

  1. Slide 1: Investor Presentation September 2016

    <3 Investor Presentation September 2016 Dow Jones Sustainability Indices In Collaboration with RabecoSAM

  2. Slide 2: 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

  3. Slide 3: 1H16 Results: Key Highlights

    1H16 RESULTS: KEY HIGHLIGHTS 2

  4. Slide 4: 1H16 key highlights

    Recurring EBITDA +15% to €2,006m including 4% negative impact from ForEx Recurring net profit +20% to €517m Net profit -20% to €472m (non recurring gain on Pecém in 1H15) €1.2bn Tariff Deficit Sales in 1H16 Regulatory receivables down 34% in 1H16 to €1.6bn Operating costs flat YoY, despite 8% avg. c

  5. Slide 5: Strong improvement on recurring EBITDA in all major business areas

    Weight on Recurring Recurring EBITDA EBITDA YoY change  Favourable hydro conditions in 1H16 vs. 1H15 and successful energy management strategy 31% Generation +28%  Focus on retail/SMEs customers: +300k (+5%) electricity & gas contracts in 1H16 & Supply  Generation portfolio: commissioning of new

  6. Slide 6: Opex IV efficiency programme fully on track

    Weight on Opex Business area Indicator YoY Change Main drivers  1H16 inflation: Portugal +0.6%; Spain: -0.6% 58% Iberia Total Opex: -2%  Savings on external supplies (O&M, IT back-office)  Natural headcount reduction (-1% YoY)  Total Opex: +9% (no forex impact) 25% EDPR Core Opex/MW: -4%  Avg.

  7. Slide 7: Reinforcement of capital structure and improvement of credit profile

    Asset Management Liability Management  Tariff deficit sales:  Avg. cost of debt repayments in 1H16: 5.4% EDP level  €1.2bn in 1H16  Avg. cost of debt issues in 1H16: 2.4%  €0.8bn in Jul-16  Aug-16: Long 7Y €1bn bond at 1.125%  New investments focused in US wind PPAs  Disposals to minorities

  8. Slide 8: Strategic pillars: 1H16 delivery

    1  Recurrent EBITDA growth YoY +15% Focused Growth  Installed capacity growth YoY (wind & hydro) +5% 2 Continue Financial  Net debt change vs. Dec-15 -5% Deleveraging  Adjusted Net Debt/EBITDA 3.8x 3  Weight of wind & hydro in electricity production 75% Keep Low Risk Profile  % EBITDA Regulate

  9. Slide 9: Updated 2016 guidance

    Previous guidance New Guidance Main drivers Better performance Generation & Supply Iberia EBITDA >€3.6bn ~€3.75bn Forex: stronger BRL vs. EUR 2016 Operating costs Net Profit EBITDA ~€900m ~€950m 2016 Financial results: lower interest costs but negative one-offs EDP Brasil capital increase Net Debt ~

  10. Slide 10: EDP Business and 2016-20 Targets

    EDP BUSINESS AND 2016-20 TARGETS 9

  11. Slide 11: EDP business overview by region

    Wind & Solar Power 29% of EBITDA (12% North America; 7% Portugal; 6% Spain; 4% Other) Listed subsidiary: EDP Renováveis (EDP has 77.5%) IPO in Jun-08 Wind & Solar Power: 9.3GW A worldwide renewable market leader Portugal Spain EDP Brasil 36% of EBITDA 13% of EBITDA 22% of EBITDA Privatisation in 199

  12. Slide 12: EDP Shareholder Structure

    EDP Shareholder Structure (August 18th, 2016)  Dec-11: CTG won the privatisation of a 21.35% stake in EDP (@€3.45/share: 50% above market price at the date) FREE FLOAT, CHINA THREE GORGES, 21.3% 34.6%  CTG represented by 5 members in the General and Supervisory Board out of 21 members (majority CA

  13. Slide 13: EDPR installed capacity and revenue models

    Offshore wind project Canada under development UK Other Europe: 30 Long Term PPAs or market price + green Belgium certificates - - US - 71 1% Poland - 4,203 45% France 468 5% - Offshore wind project -  ~90% LT under development PPAs/Hedged 364 4% Romania  ~10% Merchant price 24 Portugal Spain Ital

  14. Slide 14: EDP Brasil: Geographical footprint

    EDP Brasil: Geographical footprint (1) Hydro Power Plant Thermal power plant Distribution Concession Area Electricity Generation: +11%(2) capacity increase until 2017 C. Caldeirão 219MW (50%) Jari 373MW (50%) (2016; PPA start in 2017) Avg. Price: R$121/MWh Avg. Price: R$102/MWh  Total Installed Cap

  15. Slide 15: 2016-20 strategic targets

    1  Net Investments: avg. €1.4bn/year 2016-20 EBITDA Focused Growth +3%  LT Contracted Renewables(1): +3.9GW 2016-20 CAGR 2015(2)-20 2 Continue Financial  FFO/Net Debt: ~24% by 2020 Net Debt/EBITDA ~3.0x Deleveraging  Avg. cost of debt: 4.2% by 2020 2020 % EBITDA 3 Keep Low Risk  Renewables: ~76

  16. Slide 16: EBITDA Growth 2015-20

    EBITDA Growth 2015-20(1) (%) CAGR CAGR ex-Forex Avg. capacity +8% CAGR in 2015-20 additions EDPR 3% with long term PPAs or feed-in tariffs, mostly in US 3.6 8% 37% EBITDA in local currency +4% CAGR, eroded by EDPR 30% EDP Brasil conservative assumption on EUR/BRL 13% 4% EDP Brasil 16% 0% Slight impr

  17. Slide 17: EBITDA breakdown by geography and segment 2015-2020E

    EBITDA breakdown by geography and by segment 2015-2020E (%) LT Contracted 14% Generation & 12% 25% 17% 28% 28% 6% Supply Iberia 16% Rest of 6% 3% Europe 16% 15% EDPR 30% 19% 18% 37% EDP Brasil 16% 13% 46% 44% Regulated 26% 22% Networks Iberia (1) (1) 2015 2020E 2015 2020E Weight of regulated and LT

  18. Slide 18: Net investments of €1.4bn per year 2016E-20E

    Net Investments(1): 2016E-20E Breakdown of accumulated Net Investments(1): 2016E-20E (€bn) (% of € bn) 1.7 1.6 Regulated Brazil 1.2 Networks 8% 1.1 Net Expansion 1.0 Investments 30% 0.6 Iberia 84% 22% 54% LT Contracted Regulated & 0.6 0.6 0.6 Maintenance Renewables LT Contracted 16% Avg. Avg. Avg. L

  19. Slide 19: 1.3GW of wind PPAs signed since Jan-14

    Capacity under construction EDPR PPA contracts signed/awarded between Jan-14 and Jul-16 (Jun-16) (%) USA Mexico Brazil Canada Hydro in Portugal:  +1,019MW to be commissioned in 2H16/1Q17  Pumping and ancillary services as key profitability drivers 9% 12% Hydro in Brazil (PPA prices inflation updat

  20. Slide 20: EDPR strategy under PTC scheme phase-down

    Production Tax Credits scheme phase-down EDPR strategy under “safe-harbour conditions” to maximizing projects returns Capacity additions (GW) Project Name MW State CoD Start of construction… …end of construction Secured under negotiation/identified Hidalgo 250 Texas 2016 2016 2017 2018 2019 2020 202

  21. Slide 21: Residual asset life vs. Net Debt/EBITDA of European utilities

    Average Residual Useful Life of EDP’s Generation – 2020E European Utilities: 2017E Net Debt/EBITDA vs. Residual Asset Life(2) by Technology(1) Hydro CCGT Wind & Solar Coal with DeNOx Nuclear 7.0 Net Debt / EBITDA 2017E (x) 6.0 (33%) 30 TERNA 5.0 RWE 2005(2) (13%) 22 SRG 21 Avg. Residual Life A2A IBE

  22. Slide 22: Reduction of CO2 emissions by more than 30% by 2020

    EDP Group installed capacity by technology(1) Specific CO2 emissions (GW) (ton CO2/MWh) (2) Hydro Wind CCGT Other +137% +20% -55% -31% 29.9 0.60 24.9 11% 14% 12% 0.40 15% 12.6 44% 0.27 39% 76% 40% 71% 12% 6% 48% 32% 32% 42% 2005 2015 2020E 2005 2015 2020E % LT 54% 68% 63% Contracted(3) Reduction of

  23. Slide 23: Improved geographical diversification and risk profile

    EBITDA breakdown by business profile: 2005-2020E (%) Liberalized Regulated & LT Contracted Net Debt/EBITDA(1) EDP risk profile 2020: 4.5 4.1 4.0 3.0 3.1  75% weight of regulated/long term contracted 18% 12% 12% 25% EBITDA compares well vs. European Integrated 47% Utilities’ peer group  25% merchan

  24. Slide 24: Opex IV cost savings 2016-20E

    OPEX IV Annual Cost Savings 2016-20E(1) OPEX IV Efficiency Programme Breakdown of cost saving target (€m) (%) By Business Unit By Category 200 Iberia EDPR Brazil HR O&M Client Services & MKT IT & Other 130 80 2016E 2018E 2020E OPEX/Gross profit to decrease from 27% in 2015 to 26% by 2020 Target accu

  25. Slide 25: Average cost of debt projections

    Net debt and monthly interest cost by Dec-2015 by currency Avg. cost of debt 2015-20E (%) (%) Net debt Interest Interest weight cost rate trend -30bp -20bp 4.7% EUR 67% 3.4% ~ 4.4% ~ 4.2% USD 24% 4.6% BRL 8% 11.3% 2015 Avg. Avg. 2016E-17E 2018E-20E Average cost of debt projections assuming upward tr

  26. Slide 26: Portugal electricity system regulatory receivables

    Portugal: Electricity System Regulatory Receivables (€bn) 5.3 5.3 5.2 5.3 +0.0 -0.1 +0.1 Other 3.0 3.2 3.0 3.7 EDP 2.3 2.1 2.2 1.6 Dec-14 1H15 Jun-15 2H15 Dec-15 1H16 Jun-16 2016E ERSE Jan-Aug/16 Demand(1) (YoY Chg.) +2.1% 0.0% -0.4% Demand (YoY; %) +1.8%(2) 0.0% 1.13 Pool Price Wind Factor (1.0=avg

  27. Slide 27: Regulatory receivables of the Portuguese electricity system

    Regulatory Receivables of the Portuguese electricity system (€bn) 5.3 5.3 4.9  Steady decline of Portuguese electricity system Owned debt based on gradual increase of net tariff to other 3.0 3.7 3.0 2.7 creditors surplus 1.9  Assumption of securitization deals: avg. €0.8bn/year in 2016-17; avg. €0

  28. Slide 28: Free Cash Flow allocation 2016E-20E

    Free Cash Flow allocation: 2016E-20E average (€bn) Taxes Avg. €0.4bn/year net debt reduction Net Interest 3.9 from organic FCF Maintenance Capex 0.4 Minorities 0.6  Additional avg. €0.4bn/year net WC ex-Reg Receiv. debt reduction from decline on & other 0.6 regulatory receivables 0.4 0.2 CTG deals

  29. Slide 29: EDP dividend policy for 2016-20E

    EDP dividend policy for 2016-20E (€/share) +3% 0.190 0.185 2015 2016E 2020 E Target payout ratio 65-75% Dividend floor to increase by 3% to €0.19/share from 2016 EPS growth to deliver sustainable dividend increases 28

  30. Slide 30: Improvement in credit ratios

    Net Debt/EBITDA(1) FFO/Net Debt(1) (x) (%) Reported Reported (2) 4.0 24% 3.8 21% 17.5% 3.4 3.0 (2) 16.1% 2015 2018E 2020E 2015 2018E 2020E Improvement in credit ratios supported by organic Free Cash Flow growth (1) Adjusted by regulatory receivables. (2) 2015 figures have been adjusted: EBITDA = €3.

  31. Slide 31: Change in net debt: Jun-16 vs. Dec-15

    Change in Net Debt: Jun-16 vs. Dec-15 (€ billion) -€0.9bn 17.4 -0.5 -0.9 +0.7 16.5 -0.1 Regulatory 2.5 +0.1 -0.2 1.6 Receivables 14.9 14.9 Net Debt Free Cash Reg. Adj. Net Dividends ForEx EDP Brasil Net Debt Dec-15 Flow (1) Receivables Expansion paid to EDP Capital Jun-16 & Securitiz. Investments Sh

  32. Slide 32: Consolidated net debt position and debt by instrument

    EDP consolidated net debt position: Jun-16 EDP consolidated debt by instrument: Jun-16 (€ million) (%) Commercial Paper 5% raised at EDP Brasil 16,479 4% Bank loans and capital markets; Bank Loans EDP Brasil 857 Ring-fenced policy essentially ‘non-recourse’ to 27% EDP Renováveis 655 EDP S.A. 69% Bon

  33. Slide 33: €5.6bn of financial liquidity by Jun-16

    (€ million) Sources of liquidity (Jun-16) Maximum Number of Instrument Utilised Available Maturity Amount counterparties Revolving Credit Facility 3,150 21 0 3,150 Jun-2019  Targeting to cover 12-24 months of Revolving Credit Facility 500 16 0 500 Fev-2020 refinancing needs Revolving Credit Facilit

  34. Slide 34: Debt maturity profile as of Jun-16

    EDP consolidated debt maturity profile as of Jun-16 (€ bn) EDP SA & EDP Finance BV Hybrid Bond Other Subsidiaries Commercial Paper 4.0 Avg. debt maturity by Jun-16: 4.8 years(1) 3.5 New debt issues focused on: 3.0 2.5  Bond markets 7-10 years 2.0  Banking loans > 5 years 1.5 1.0 0.5 0.0 2016 2017

  35. Slide 35: EDPR asset rotation strategy

    Net Investments/EBITDA (%) EDPR Asset Rotation Strategy  Net investments 2016-20 include €1.6bn target of Asset Rotation proceeds (~60% already executed/signed in 2016) 55%  Value crystallisation of existing assets 49%  Creating value by reinvesting proceeds at higher IRRs 39% 43% Partnership wit

  36. Slide 36: Annexes

    ANNEXES 35

  37. Slide 37: Generation portfolio in Iberia: EDP versus peers

    EDP versus Peers - Generation portfolio in Iberia Avg. Residual Life of Conventional portfolio – EDP vs. Peers (% of MW) (As of Dec-16E; Years) EDP Peers 23Y 29Y CCGT 27% 36% Hydro 39 Coal 33 18% Nuclear 1% 18% 13 Coal 40% with 8 15% pumping CCGT 26 Hydro 54% 32% 26 Nuclear 12 EDP Peers 8 Iberia Pee

  38. Slide 38: CMEC receivable in EDP balance sheet

    CMEC Receivable in EDP Balance sheet (€ million)  Final adjustment: ~570  Initial CMEC assumed price(1) of €61/MWh in 2017, going up to €70/MWh in 2024  Lower price assumptions supports higher final adjustment  Final receivable due in constant annual payments until 2027 2016 Final Adjustment 201

  39. Slide 39: Conventional production vs. sales to clients in Iberia

    EDP Conventional electricity production vs. sales to clients in Iberia (Avg. annual volume, in TWh) Main drivers in 2016-20E Sales to clients/ Own production +1.93x +1.03x  Until 2017, CMEC mitigates merchant exposure 39 39  Post CMECs, integration between 37 37 Last Resort Supply generation and s

  40. Slide 40: Regulatory framework in Portugal and Spain

    ´ Annual RoRAB in Portugal indexed to 10Y sovereign yield, with a RoRAB cap & floor defined for a 3 year period Regulatory Return on Regulated Highlights period Asset Base Revenues RoR 6.3%(1)  RAB: €3bn Electricity 3 years up €1,222m Floor/Cap: Portugal to Dec-17 (2016)  Accepted cost base update

  41. Slide 41: Sustainability agenda and targets

     Achieve 75% of clean capacity by 2020 Generate  Surpass 90% of smart meters in Iberia by 2030 Economic  Provide energy efficiency products to reduce overall consumption by 1 TWh before 2020(1) Value  Invest €200m in innovative projects by 2020 Manage  Reduce CO2 specific emissions by 75% until

  42. Slide 42: Offshore wind projects: United Kingdom and France

    UNITED KINGDOM FRANCE Le Tréport Moray Firth 500 MW + 500 MW 1.1 GW Iles d’Yeu et de max. Noirmoutier Consent granted for offshore wind development; Partnership with Engie allows de-risking Partnership with CTG (up to 30%) and complementary skills Next step: CfD1 allocation Selected in May-14 for th

  43. Slide 43: Electricity demand and supply in Iberian market

    Electricity Demand and Supply in Iberian Market (1) (TWh) Flat YoY  Electricity demand flat in Spain and -0.3% in 148 148 CCGT 12 -13% 11 Portugal: penalized by weather and slowdown of 15 economic activity Coal 28 -48% 34  Hydro production: +58%, hydro coefficient in Spain Hydro 22 +58% 1.50 in 1H

  44. Slide 44: Adjusted net profit

    Adjusted Net Profit (€ million) Adjustments Recurrent -20% 587 472  Acquisition of remaining 50% 156 stake in Pecém: +132m€  Sale of Gas Murcia: +€85m  Extraordinary energy tax: -€61m +20% 517 431  Sale of Pantanal mini-hydro: +€24m  Sale of Tejo Energia: +€11m  BCP Impairment: -€21m -45  Ext

  45. Slide 45: Bonds outstanding

    Amount Bonds Currency Maturity Coupon Market Price (Bid) Market Yield ISIN Code (million) EDP BV Euro MTN EUR 1,000 26/09/2016 4.750% 100.2 1.5% XS0435879605 EDP BV Euro MTN EUR 750 21/09/2017 5.750% 105.8 0.2% XS0831842645 EDP BV Euro MTN EUR 650 15/04/2019 2.625% 105.2 0.6% XS1057345651 EDP BV Eur

  46. Slide 46: IR Contacts and Next Events

    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.pt Sept 6th: Reverse Roadshow in Madrid (Citigroup) Sept 9th: BPI Iberian Conference (Porto) Link Results &

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