Acea S.p.a. · MIL:ACE
Acea — Italian Investment Conference 2018
63 slides from Acea's conference presentation, May 17, 2018
Slide 1: Italian Investment Conference 2018
‘‘Italian Investment Conference 2018’’ Unicredit – Kepler Cheuvreux Milan, 17 May 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% 22 37 11 32 1,108 13 22 1,002 4 66 103 17 46 840 832 52,0 158 -31 109 65 64 78 78 386 374 333 325 €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 8 11 5 3 EBITDA 25 333 325 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 economy goals, "closing the loop" 1 Optimal return In millions of tons on resources 1.1 Reduction Reuse 3 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 EBITDA 7 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 WATER CONSOLIDATION Talks with local authorities are in €m €m 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 OF WATER SERVICE in areas MAX in which already present (Tuscany, Campania, Lazio) MIN BASE Entry into GAS DISTRIBUTION business Development
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: 1Q 2018 Results
ACEA Group TITOLO 1Q 2018 Results CAPITOLO TITOLO PRESENTAZIONE / Luogo e data
Slide 32: 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% EBITDA guidance 2018: +3%/+5% on 2017 (€840m) EBIT 127.4 117.2 +8.7% Group net profit/(loss) 77.4 65.7 +17.8% Capex guidance 2018: Capex 133.0 126.4 +5.
Slide 33: EBITDA
EBITDA ACEA Group 1% 1% EBITDA from 24% Water 6% non-regulated Energy Infrastructure 10% businesses Commercial and Trading Q1 2018 EBITDA 41% Environment Overseas EBITDA from Engineering and Services 41% regulated 76% businesses EBITDA (€m) Average Group workforce 11.0 0.3 229.2 214.4 7.9 Q1 2018 Q1
Slide 34: EBITDA and key quantitative data: Water
EBITDA and Key quantitative data ACEA Group Q1 2018 financial highlights EBITDA GROWTH Water Acea ATO2: +€3.8m EBITDA main drivers Companies consolidated using equity method +€3.0m (€m) Q1 2018 Q1 2017 % change Key quantitative data Q1 2018 Q1 2017 (a) (b) (a/b) EBITDA 96.4 88.5 +8.9% of which: Prof
Slide 35: EBITDA and key quantitative data: Energy Infrastructure
EBITDA and Key quantitative data ACEA Group Q1 2018 financial highlights EBITDA GROWTH Energy Distribution +€ 9.0m Infrastructure Generation +€1.2m – increased hydroelectric and thermoelectric production (completion of Tor di Valle plant) EBITDA main drivers Public Lighting: LED plan launched in Jun
Slide 36: EBITDA and key quantitative data: Commercial and Trading
EBITDA and Key quantitative data ACEA Group Q1 2018 financial highlights Commercial and Trading EBITDA STABLE EBITDA main drivers (€m) Q1 2018 Q1 2017 % change Key quantitative data Q1 2018 Q1 2017 (a) (b) (a/b) EBITDA 23.4 23.1 +1.3% Total electricity sold (GWh) 1,593 1,813 Enhanced Protection Mark
Slide 37: EBITDA and key quantitative data: Environment
EBITDA and Key quantitative data ACEA Group Q1 2018 financial highlights EBITDA STABLE Environment Iseco: +€0.3m EBITDA main drivers Aquaser (sludge recovery operations): -€0.7m (€m) Q1 2018 Q1 2017 % change Key quantitative data Q1 2018 Q1 2017 (a) (b) (a/b) Treatment and disposal* EBITDA 14.1 14.6
Slide 38: EBITDA and key quantitative data
EBITDA and Key quantitative data ACEA Group Q1 2018 financial highlights Engineering and Overseas Services Q1 2018 Q1 2017 Q1 2018 Q1 2017 (€m) (€m) (a) (b) (a) (b) EBITDA 3.0 3.3 EBITDA 2.2 4.0 Capex 0.8 0.9 Capex 0.3 0.2 Q1 2018 Q1 2017 Change Q1 2018 Q1 2017 Change (a) (b) (a-b) (a) (b) (a-b) Ave
Slide 39: EBIT and Net Profit
EBIT and Net Profit ACEA Group EBIT (€m) NET PROFIT (€m) 117.2 127.4 Net results up in line 77.4 with EBITDA, after 65.7 related taxation Q1 2017 Q1 2018 Q1 2017 Q1 2018 TAX RATE 30.4% 30.4% (€m) Q1 2018 Q1 2017 % change Increased depreciation, partly due to increased Depreciation 77.5 68.8 +12.6% i
Slide 40: Cash flow
Cash flow ACEA Group Q1 Q1 ( (€m) 2018 2017 EBITDA 229 214 Change in working capital (101) (153) CAPEX (133) (126) FREE CASH FLOW (5) (65) Net finance income/(costs) (20) (19) Change in provisions (26) (17) Income tax expense 0 0 Dividends 0 0 Other (9) (7) TOTAL CASH FLOW (60) (108) Q1 2018 Change
Slide 41: Net Debt
ACEA Group Net Debt 31 March 2018 31 Dec 2017 31 March 2017 Change Change (€m) (a) (b) (c) (a-b) (a-c) NET DEBT 2,482.1 2,421.5 2,234.8 60.6 247.3 Medium/Long-term 3,540.2 2,706.6 2,726.8 833.6 813.4 Short-term (1,058.1) (285.1) (492.0) (773.0) (566.1) February 2018 – successful placing of Euro 1 bi
Slide 42: 2017 Results
Gruppo ACEA TITOLO 2017 Results CAPITOLO TITOLO PRESENTAZIONE / Luogo e data
Slide 43: Low risk profile
Low risk profile 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 operator in On
Slide 44: 2017 financial highlights
2017 financial highlights 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) 180.7 262.3 -31.1% 21
Slide 45: EBITDA
EBITDA 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 Average 2016
Slide 46: EBITDA and key quantitative data: Water
EBITDA and Key quantitative data 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) (a/b) EBITD
Slide 47: EBITDA and key quantitative data: Energy Infrastructure
EBITDA and Key quantitative data 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 % change Key
Slide 48: EBITDA and key quantitative data: Commercial and Trading
EBITDA and Key quantitative data 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 activity: lower ma
Slide 49: EBITDA and key quantitative data: Environment
EBITDA and Key quantitative data 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 Industriali and Is
Slide 50: EBIT
EBIT 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 414.4 EBIT
Slide 51: Net profit
Net profit 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 of plant o
Slide 52: Cash flow
Cash flow 2017 2016 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 31 Dec 2017, due to cash inflow from Other (13
Slide 53: Net Debt
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 Adjusted NET
Slide 54: Regulatory framework
ACEA Group Regulatory framework - Water TITOLO - Electricity distribution CAPITOLO TITOLO PRESENTAZIONE / Luogo e data
Slide 55: 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 56: 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 57: 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 58: 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 59: Water: regulation - Resolution 917/2017 Technical quality (1/2)
Water: regulation ACEA Group Resolution 917/2017 – Technical quality (1/2) 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 60: Water: regulation - Resolution 917/2017 Technical quality (2/2)
Water: regulation ACEA Group Resolution 917/2017 – Technical quality (2/2) 1 January 2018 30 April 2018 1 January 2019 2020 Entry into Recognition of state For each operator, and with Announcement of Announcement of Introduction and force of of infrastructure reference to each macro indicator, outco
Slide 61: 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 62: 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 63: 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.