Pennon Group Plc · LSE:PNN
Pennon — Investor Presentation (January 2018)
23 slides from Pennon's investor presentation, Jan 29, 2018
Slide 1: Waste Market Round Table Discussion
Waste Market Round Table Discussion 29 January 2018 © Pennon Group plc 2017
Slide 2: Viridor Team
Viridor Team Chris Loughlin Susan Davy Phil Piddington Paul Ringham Chief Executive Officer Chief Financial Officer Managing Director Commercial Director Keith Trower Paul Brown Chris Jonas Managing Director - VRM Managing Director - Recycling Managing Director – Major Contracts 2 Round Table Discus
Slide 3: Agenda
Agenda Overview Recycling Strategy & Market Trends Landfill Strategy & Market Trends Residual Waste Market & ERF portfolio Lunch Discussion 3 Round Table Discussion January 2018 © Pennon Group plc 2017
Slide 4: Overview: Giving resources new life
Overview Giving resources new life A market leader well-positioned today and for the future Viridor growth to 2020 and beyond - Differentiated from water peers ERF ‘growth kicker’ ERFs earnings enhancing for Pennon Delivering for customers, employees and shareholders 4 Round Table Discussion January
Slide 5: At the forefront of the resource sector in the UK
Overview At the forefront of the resource sector in the UK • Portfolio of twelve Energy Recovery Facilities • 380,000 equivalent homes powered by energy produced by our portfolio • 650 150 local authority and major corporate clients Waste collection 12 vehicles ERFs • 32,000 customers across the UK
Slide 6: Waste volumes and Adjusted EBITDA 2016/17
Overview Waste volumes and Adjusted EBITDA 2016/17 Contracts, Collections and Other Energy Recovery Facilities 2.2 mT Recycling Recycling 7.6mT £198.5m 3.7 mT Total Waste Adjusted inputs Landfill and EBITDA Landfill Gas Energy Recovery Facilities Landfill 1.7 mT 6 Round Table Discussion January 2018
Slide 7: Viridor Half Year 2017/18 Financial Highlights
Overview Viridor Half Year 2017/18 Financial Highlights H1 2017/18 H1 2016/17 (1) Change Underlying £m £m A ERFs Revenue(2) 407.0 397.9 +2.3% - ERF availability >90%(5) for H1 2017/18 - Expect H2 weighting EBITDA 66.6 63.3 +5.2% ERFs A 51.7 50.5 +2.4% B Optimising landfill Landfill B 3.3 3.2 +3.1% -
Slide 8: Waste sector - continued opportunities for Viridor
Overview Waste sector - continued opportunities for Viridor 2018 Resources & Developing new Waste Strategy markets for recyclate (DEFRA) (UK & export) Landfill - ongoing UK residual waste market feature of UK waste dynamics favourable - ERF market, retaining demand exceeding dynamic approach capacit
Slide 9: Recycling Strategy & Market Trends
2016/17 2016/17 Waste inputs Adjusted EBITDA Recycling Strategy & Market Trends © Pennon Group plc 2017
Slide 10: Viridor's recycling market activity
Recycling Strategy & Market Trends Viridor’s recycling market activity Rest of World Paper Glass China Commodity Active volumes markets Europe UK Plastics & Metal & Polymers WEEE All Viridor metals and glass stay in the UK - no plastics have been exported to China as of March 2017 10 Round Table Dis
Slide 11: A challenging environment, 'self-help' in place, market developing
Recycling Strategy & Market Trends A challenging environment, ‘self-help’ in place, market developing Market dynamics Viridor ‘self-help’ activities • Public pressure is growing - ‘Blue Planet’ effect • Optimisation of contracts and asset base • Recycling rates have stalled in the UK o c.65% of cont
Slide 12: Changes in the Chinese market – 'Operation Sword'
Recycling Strategy & Market Trends Changes in the Chinese market – ‘Operation Sword’ Market dynamics Viridor ‘self-help’ plan • New quality requirements from China for paper and Plastic plastic • Anticipated market change in advance, no plastic sold • Expectations of lower volumes to China for paper
Slide 13: Plastics and Polymers: Viridor's Circular Economy Developments
Recycling Strategy & Market Trends Plastics and Polymers Viridor’s Circular Economy Developments • Manufacturer interest in securing Households Kerbside longer-term supplies Collection • Innovation has facilitated consistent, odour-free, high quality Bottle product needed for premium Manufacturing c
Slide 14: Landfill Strategy & Market Trends
2016/17 2016/17 Waste inputs Adjusted EBITDA Landfill Strategy & Market Trends © Pennon Group plc 2017
Slide 15: Ongoing feature of UK waste market
Landfill Strategy & Market Trends Ongoing feature of UK waste market Market dynamics How Viridor is positioned • Landfill tax successful in diversion to energy • Dynamic strategy, retaining flexibility recovery/recycling o Well-located sites in areas of scarcity • Recycling rates have stalled – cont
Slide 16: Residual Waste Market & ERF Portfolio
2016/17 2016/17 Waste inputs Adjusted EBITDA Residual Waste Market & ERF Portfolio © Pennon Group plc 2017
Slide 17: UK Combustible Residual Waste Market
Residual Waste Market & ERF Portfolio Demand exceeding capacity into short, medium and long-term Favourable waste market dynamics confirmed • Further UK waste treatment capacity is essential to service longer term demand • Conservative assumptions taking into account higher recycling over time and f
Slide 18: ERF capacity projections
Residual Waste Market & ERF Portfolio ERF capacity projections Market consensus - capacity gap 2030 Residual Waste Capacity “Gap” (excl. RDF Export) • ESA commissioned review of Residual Waste Market – reports by 2030 projected tonnage of residual waste likely to be 22-27 Mt • Consistency in baselin
Slide 19: RDF exports expected to level off as Europe reaches capacity
Residual Waste Market & ERF Portfolio RDF exports expected to level off as Europe reaches capacity Moving average against the monthly Changing market dynamics tonnage exported 400,000 • Less favourable FX rate post-EU Referendum 350,000 making exports more expensive 300,000 250,000 • More opportunit
Slide 20: ERFs Delivering on our investments
Residual Waste Market & ERF Portfolio ERFs Delivering on our investments Resilient infrastructure model with contracted revenues • Revenue Mix: c.70% gate fees (read across from landfill tax), c.25% power price, c.5% recovered metals • Technology: Viridor uses long-established, well-proven technolog
Slide 21: Delivering the next growth stage, significant earnings step up
Residual Waste Market & ERF Portfolio Delivering the next growth stage, significant earnings step up Glasgow – final commissioning Beddington – final commissioning Dunbar – early stage commissioning Avonmouth – progressing well 21 Round Table Discussion January 2018 © Pennon Group plc 2017
Slide 22: Overview: Giving resources new life
Overview Giving resources new life A market leader well-positioned today and for the future Viridor growth to 2020 and beyond - Differentiated from water peers ERF ‘growth kicker’ ERFs earnings enhancing for Pennon Delivering for customers, employees and shareholders 22 Round Table Discussion Januar
Slide 23: Q&A
Q&A © Pennon Group plc 2017