Ence Energia Y Celulosa Sa · BME:ENC
Ence Energia Y Celulosa Sa — Investor Day (March 2022)
49 slides from Ence Energia Y Celulosa Sa's investor day presentation, Mar 17, 2022
Slide 1: Capital Markets Day
Capital Markets Day 17 March 2022 Global ESG score: 91/100
Slide 2: Disclaimer
Disclaimer The information contained in this presentation has been prepared by Ence Energía y Celulosa, S.A. (hereinafter, "Ence"). This presentation includes data relating to future forecasts. Any data included in this presentation which differ from other data based on historical information, inclu
Slide 3: Today's Presenters
Today’s Presenters Ignacio de Colmenares Alfredo Avello Chairman & CEO CFO and Chief Forestry Officer Ence Energía y Celulosa Ence Energía y Celulosa • Ignacio has had a long professional career in the steel, energy and pulp industry. Before joining Ence in December 2010, in 1996 he joined TYCSA as
Slide 4: Today's Presenters
Today’s Presenters Jordi Aguiló Marc Gómez CEO of the Pulp business CEO of the Energy business • Jordi was CEO of the ENCE Energy Business after successfully developed it and consolidated the operations during 6 years until 2018 when he was appointed • Marc joined Ence group from ABB Spain, a compan
Slide 5: Index
Index 1. Strategic Vision 2. Sustainable Forestry Management 3. Pulp Business 4. Renewable Energy Business 5. Financial Outlook 6. Closing Remarks 5
Slide 6: Strategic Vision
1. Strategic Vision Ignacio Colmenares CEO Ence Energía y Celulosa 6
Slide 7: Vision and Purpose
Vision “To be leaders in the sustainable use of natural resources to produce special pulp and renewable energy in competitive bio- factories and plants integrated into their environment” Purpose “……to contribute to the development of society through the sustainable and responsible use of the natural
Slide 8: Most sustainable company in our industry
Most sustainable company in our industry According to Sustainalytics Safe & eco- Climate action Community Sustainable Corporate efficient operations engagement agroforestry Governance ✓ 39% reduction in the ✓ -9% Scope 1 GHG ✓ 45k beneficiaries of Group’s Injury frequency Emissions (vs 2020) communi
Slide 9: Pulp & Renewable Energy
Pulp & Renewable Energy Two independent and complementary businesses Pulp Business Renewable Energy Business 67%1 33%1 Navia Europe’s leading eucalyptus pulp EBITDA EBITDA Largest biomass operator in Spain with producer with 1.2 Mn tons (6% 266 MW of Renewable Energy installed market share) of insta
Slide 10: Pulp competitive advantages
Pulp competitive advantages Low cost pulp producer vs. Northern European countries Hardwood pulp (BHKP) Softwood pulp (BSKP) Most hardwood pulp Substitutive Most softwood pulp Source from eucalyptus wood materials from pine & spruce wood Best suited for products Best suited for higher with high smoo
Slide 11: Pulp competitive advantages
Pulp competitive advantages Differentiated products aimed at softwood pulp and plastic substitution ✓ Aimed to replace softwood pulp ✓ Targeted for demanding customers in terms of sustainability Certified life cycle analysis + ✓ ✓ First unbleached short-fiber cellulose on the market ✓ Minimization o
Slide 12: Pulp competitive advantages: just in time service
Pulp competitive advantages Just in time service with 5-7 days delivery vs. 40 days from LatAm Just in time service (5-7 days delivery vs. 40 days for LatAm deliveries) Lower logistics costs vs LatAm Proximity offers protection against rising transport costs Contributes to reduce CO2 emissions by so
Slide 13: Our strategy is to enhance Navia pulp bio-mill
Our strategy is to enhance Navia pulp bio-mill… Navia Excelente Project Differentiated Diversification Decarbonization Products into Fluff Improvement of the eco-efficiency and flexibility of To diversify Navia product range into Fluff pulp Promotion of the circular bio-economy through the Navia to
Slide 14: Defending the legality of Pontevedra concession
… while defending the legality of Pontevedra concession The Supreme Court admits our appeal against the rulings of the National Court Update Materiality Pontevedra pulp mill accounts for: On July 2021, the Spanish National Court has annulled the land concession on which of the Pulp Business average
Slide 15: Largest biomass operator in Spain
Largest biomass operator in Spain with 60 years experience A regulated business which provides stability and visibility to our P&L PUERTOLLANO II CIUDAD REAL Current Power Plants Portfolio 50 MW 50 MW Biomass power plants 266 MW MÉRIDA 20 MW Biomass Pipeline CIUDAD REAL 140 MW HUELVA 50 MW 16 MW HUE
Slide 16: Competitive advantages of Biomass Energy
Competitive advantages of Biomass Energy A manageable renewable technology with room to grow in Spain Biomass is a very abundant Biomass is neutral in carbon resource in Spain. emissions and avoids diffuse We draw upon local agricultural emissions of forest and agricultural and forest by-products, m
Slide 17: Platform for growth
Platform for growth Spain will double its renewable installed capacity by 2030 Spain expected renewable energy to double by 20301 Ence´s pipeline >120,000 MW Biomass: 140 MW x2 Expected Capacity PV: 373 MW 60,000 MW Installed Capacity Early-stage PV pipeline: 300 MW Other growth opportunities 2020 2
Slide 18: Strong track record creating value
Strong track record creating value Through greenfield, M&A and selective asset rotation Greenfield Huelva 41 biomass plant COD Huelva 46 biomass plant COD 41 MW 41 MW Huelva 50 biomass plant COD 50 MW Ciudad Real 50 biomass plant COD Mérida biomass plant COD 50 MW 20 MW 2003 2012 2014 2016 2017 2018
Slide 19: Ence delivers long-term structural growth
Ence delivers long-term structural growth Improving value creation European leader operating in two long-term structural growth industries combined 1 with long-term structural competitive advantages Navia Excelente Strategy adopted to take advantage of current industry 2 megatrends, develop Navia &
Slide 20: Sustainable Forestry Management
Sustainable 2. Forestry Management Alfredo Avello CFO & Chief Forestry Officer Ence Energía y Celulosa 20
Slide 21: Largest private forest manager in Spain
We are the largest private forest manager in Spain And the reference in responsible and sustainable forestry management Northern region 15.000 hectares Our forestry activity • Maintenance of direct and indirect environmental values (biodiversity, soil, air and water quality, etc.) Southern region •
Slide 22: Further growth opportunities
Further growth opportunities Eucalyptus nurseries / R&D / Carbon sink Eucalyptus nurseries R&D Carbon sink ▪ Pioneers in the clonal reproduction of eucalyptus Globulus ▪ Faster growth and higher density of ▪ 3 Eucalyptus nurseries in Spain eucalyptus vs. other wood species ▪ 3rd generation of improv
Slide 23: Pulp business
3. Pulp business Jordi Aguiló CEO of the Pulp Business 23
Slide 24: Global market pulp industry
Global market pulp industry 66 Mn t in 2020 Europe 16 17 China North America 1 7 11 26 9 1 5 16 9 1 Demand Supply 8 13 16 2 5 3 2 Demand Supply Demand Supply Rest of the South America World 24 2 12 Mn t 1 7 4 22 4 1 7 7 Softwood pulp (BSKP) 3 Demand Supply Hardwood pulp (BHKP) Demand Supply Unbleach
Slide 25: 80% of global pulp demand generated by growth segments
80% of global pulp demand generated by growth segments Driven by urban growth, global trade and plastic substitution Iberian hardwood pulp Tissue & Hygiene 36 Mn t1 best suited for Tissue Products 13 Mn t1 Printing & Writing CAGR 2010 – 2020: +3.4%2 CAGR 2010–2020: -4.0% (-16% 2020)2 Tissue demand g
Slide 26: Ence pulp sales: over 1 Mn t
Ence pulp sales: over 1 Mn t Focus on Europe and on growing segments with differentiated products Geographical sales breakdown Breakdown by end product Differentiated products % of pulp sales % of pulp sales % of pulp sales 6% Other 16% Differentiated Europe 94% Tissue 49% 29% Specialty products pap
Slide 27: Ence Advanced growing at a 76% CAGR
Ence Advanced growing at a 76% CAGR with special products 76% CAGR 2019-21 400,000 250,000 155,000 90,000 50,000 2019 2020 2021 2022E 2027E Ence’s special products have almost x3 during the period 2019-21 (76% CAGR) and expected to be at 400,000 in 2027 27
Slide 28: Enhance Navia while defending Pontevedra
Our strategy is to enhance Navia while defending Pontevedra Navia Excelente Project DIFFERENTIATED PRODUCTS FLUFF DECARBONIZATION • Promotion of the circular bio-economy through • Improvement of the eco-efficiency and • To diversify Navia product range into Fluff pulp the use of lignin to replace na
Slide 29: Renewable Energy Business
4. Renewable Energy Business Marc Gómez CEO of the Energy Business 29
Slide 30: Spain will double its renewable installed capacity by 2030
Spain will double its renewable installed capacity by 2030 A unique growth opportunity EU targeted energy from renewable sources by 2030… 32% Spain expected renewable energy to double by 20301 Spain renewable electric energy share MW to rise >20pp by 20301 In % of total MW Technology (MW) 2020 2025E
Slide 31: A regulated business
A regulated business Estimated annual EBITDA of €50 - 70 Mn at the regulated price bands Regulated Revenues (€/MWh) Cash inflows 2021 Energy market price + Return on the operations (Ro) + Regulatory Collar (€ Mn) 350 160 300 140 250 120 136 200 100 65 150 80 71 100 60 71 50 40 0 20 Dec-16 Dec-17 Dec
Slide 32: Biomass pipeline
Biomass pipeline 140 MW PUERTOLLANO II 50 MW ALMERÍA 40 MW Biomass Biomass Biomass Auction calendar 2022-2025 √ Environmental permit Biomass (MW): 120 120 140 2022 2023 2024 2025 CÓRDOBA 50 MW Biomass Auctions Scheme Biomass ▪ 20-year regulatory life ▪ 85% Pay as bid (€/MWh) ▪ 15% Energy market pric
Slide 33: PV pipeline
PV pipeline 373 MW + 300 MW at an early stage Portfolio location Andújar Sale agreement for 373 MW Solar PV asset 100 MW portfolio ▪ €62 Mn sale price for 5 PV assets with combined capacity of 373 MW Huelva ▪ Estimated capital gain of over €50 Mn 10 MW ▪ To be closed between 2022-24 upon RTB status
Slide 34: Further growth opportunities: energy management and storage
Further growth opportunities Energy management / energy storage Energy management Energy storage ▪ Massive deployment of renewable energy into the Spanish ▪ Biomass renewable energy is dispatchable by definition, mix will require storage solutions (2.5 GW by 2030 as per what is a great support for t
Slide 35: Financial Outlook
5. Financial Outlook Alfredo Avello CFO & Chief Forestry Officer Ence Energía y Celulosa 35
Slide 36: Strong financial position
Strong financial position Prudent leverage policy per business Pulp business net debt as of 31 Dec. 2021 (€ Mn) Pulp business debt maturity schedule (€ Mn) For reference €126 Mn of convertible bonds 150 305 ND/EBITDA 2.5x1 3 16 €105 Mn of bilateral loans 8 Average cost of 13 325 €58 Mn of public sec
Slide 37: Average net pulp price 2011-2021 and expected trend 2022-25
Average net pulp price 2011-2021 of US$605/t and expected to continue the trend for the period 2022-25 BHKP Pulp Prices Europe Avg. annual BHKP Price Europe Consensus US$/t as of February 2022, in US$/t Sources: - Annual average FOEX gross price in Europe Source: RISI, Hawkins Wright, Brian McClay -
Slide 38: Stable pool price of 48 €/MWh assumed from 2Q22
We have prudently assumed in our projections a stable pool price of 48 €/MWh as from 2Q22 41 MW biomass power plant in Huelva 16 MW biomass power plant in Jaén 16 MW biomass power plant in Ciudad Real 14 MW biomass power plant in Cordoba A pool price in excess of 48 €/MWh will imply additional cash
Slide 39: Implement Navia Excelente and maintain Pontevedra operational
Our core strategy is to implement Navia Excelente and maintain Pontevedra fully operational Pulp production (‘000 t) Cash cost (std. BHKP) (€ Mn) FCF ex new project capex1 (€ Mn) New projects capex2 (€ Mn) 450 1,015 1,020 1,045 1,055 1,055 1,055 405 130 130 135 385 382 382 382 115 110 105 15 110 65
Slide 40: Free cash flow even if Pontevedra closes
Even if we are obliged to close Pontevedra, we would continue to generate substantial free cash flow Pulp production (‘000 t) Cash cost (std. BHKP) (€ Mn) FCF ex new project capex1 (€ Mn) New projects capex2 (€ Mn) 450 1,015 415 930 370 365 365 365 115 110 115 635 660 660 660 70 15 60 55 110 65 55 6
Slide 41: If Pontevedra closes, we will expand Navia production
Moreover, if we are obliged to close Pontevedra, we will further expand Navia production Annual FCF Annual FCF Navia 100 €15m1 Navia 340 €45m1 Build a new swing line at Navia mill with a capacity of Build a new line at Navia mill with a capacity of 100,000 t of 340,000 t of Hardwood Paper Grade Pulp
Slide 42: Closing Remarks
6. Closing Remarks Ignacio Colmenares CEO Ence Energía y Celulosa 42
Slide 43: Russia only represents 3% of the market pulp industry
Russia only represents 3%1 of the market pulp industry Over 60% of their pulp exports to China Market pulp industry Paper industry Wood industry Annual Imports Annual Exports Annual Imports Annual Exports Annual Exports ‘000 t 2021 ‘000 t 2021 2021 ‘000 t 2021 2021 Softwood 8,115 Softwood Pulp 208 1
Slide 44: No direct exposure to the Russian-Ukrainian conflict
Ence has no direct exposure to the Russian-Ukrainian conflict Our pulp bio-mills & renewable energy plants are located in Spain Wood & biomass are locally sourced Chemicals locally sourced or imported from Western Europe Our pulp bio-mills are energy self-sufficient. They cogenerate all the renewabl
Slide 45: New dividend policy
New dividend policy Based on free cash flow and subject to prudent leverage ratios per business Amount based on cash available for x3 Annual payments distribution Ensuring a reference leverage of: 1. First interim dividend agreed at the end of the first semester Net Debt / EBITDA for the Pulp 2. Sec
Slide 46: Closing remarks
Closing remarks Ence… 1 …operates in industries powered by long-term structural growth drivers 2 …enjoys significant competitive advantage in both Pulp & Renewable Energy 3 …adopts NAVIA EXCELENTE Strategy to develop Navia & defend Pontevedra Concession 4 …has multiple value-creation opportunities +
Slide 47: Alternative Performance Measures (APMs) Pg.1
Alternative Performance Measures (APMs) Pg.1 Ence presents its results in accordance with generally accepted accounting principles, specifically IFRS. In addition, its quarterly earnings report provides certain other complementary metrics that are not defined or specified in IFRS and are used by man
Slide 48: Alternative Performance Measures (APMs) Pg.2
Alternative Performance Measures (APMs) Pg.2 Normalised free cash flow provides a proxy for the cash generated by the company's operating activities before collection of proceeds from asset sales; this cash represents the amount available for investments other than maintenance capex, for shareholder
Slide 49: Delivering value, delivering commitments
Global ESG score: 91/100 Delivering value Delivering commitments Investor Relations contact details: Email: ir@ence.es Phone: (+34) 91 337 85 53