Redes Energeticas Nacionais Sa · EURONEXT:RENE
Redes Energeticas Nacionais Sa — REN - Redes Energéticas Nacionais — Investor Day (May 2018)
43 slides from Redes Energeticas Nacionais Sa's investor day presentation, May 4, 2018
Slide 1: REN Capital Markets Day, Lisbon, May 2018
LISBO REN >< MAY 4 CAPITAL 201x VIA RIC CIS DAY
Slide 2: Agenda for today
AGENDA FOR TODAY 10h30 A successful journey RODRIGO COSTA Strategic guidelines CHIEF EXECUTIVE OFFICER Operational excellence JOÃO FARIA CONCEIÇÃO Core business consolidation CHIEF OPERATIONS OFFICER Disciplined growth Solid financials GONÇALO MORAIS SOARES CHIEF FINANCIAL OFFICER Robust business pl
Slide 3: 2014 vs Today
2014 Today A domestic-only player Focused on domestic but with international presence (Electrogas, Chile) A transmission-only player With a distribution business (Portgás) Sub investment grade ratings Investment grade ratings Solid shareholder base Solid base with higher liquidity after €250 Mn capi
Slide 4: A successful journey: grid investments 2014-2018
A SUCCESSFUL JOURNEY Grid investments: electricity and natural gas 2014 2018 Underground gas storage Electrogas Portgás 4
Slide 5: Supporting Portugal's energy policy and backbone
A SUCCESSFUL JOURNEY Supporting Portugal’s energy policy and backbone Substations ~€560 Mn CAPEX V. Nova Lines in 2015-17 Famalicão (new) Carregado V. Minho- Pedralva (new) 86% fulfilled efficiency criteria (upgrade) Alcochete (new) Lavos- Rio Maior (upgrade) 0.22 min/year average interruption time1
Slide 6: Delivering on growth
A SUCCESSFUL JOURNEY Delivering on growth 2015 Underground gas storage, becoming the only player in Portugal €70 Mn 2017 First international investment with 42.5% of Electrogas €169 Mn 2017 Expansion to distribution network with Portgás €530 Mn 6
Slide 7: Disciplined debt management and strong credit profile
A SUCCESSFUL JOURNEY Marked by highly disciplined debt management , resulting in a strong credit profile Financial costs (€ Mn) Investment grade since 2015 73 131 1st Portuguese 2014 2017 company 7
Slide 8: Robust financial performance
A SUCCESSFUL JOURNEY With a robust financial performance EBITDA (€ Mn) 505 487 152 138 Special levy +26 +25 (CESE) (€ Mn) 113 126 Net income (€ Mn) 2014 2017 8
Slide 9: Delivering value to the shareholders
A SUCCESSFUL JOURNEY Delivering value to the shareholders Dividend 6.5% 4.1% 4.1% 5.3% 4.0% yield (2017) 31.3% Total 24.5% shareholder 16.2% return 10.9% (Jan 2015-Jan 2018) 6.6% STOXX Europe EURO STOXX Peer group PSI-20 600 Utilities Utilities (TSOs)1 1 National Grid, REE, Elia, Terna, Fluxys, SNAM
Slide 10: Enabling a renewable future
A SUCCESSFUL JOURNEY Enabling a renewable future 2016 4 consecutive days 100% renewable 2018 Two 70-hour periods 100% renewable Production in March exceeded consumption of mainland Portugal 10 10
Slide 11: Best-in-class corporate governance and stable shareholder base
A SUCCESSFUL JOURNEY With best-in-class corporate governance and a stable shareholder base1 Several special committees in place 25.0% Other investors 38.5% Remuneration Corporate Nomination governance and Appraisal Independence of supervisory bodies 12.0% 0.6% 2.1% 6.7% Audit Statutory 4.8% 5.3% 5.0
Slide 12: Unparalleled relevance on the national scene
UNPARALLELED RELEVANCE ON THE NATIONAL SCENE Responsible for high-quality energy transmission and distribution >€3.0 Bn invested Top quartile in Total tax Consistent Top quartile in in energy quality of service contribution reduction in sustainability infrastructure and efficiency of ~€750 Mn weight
Slide 13: Strategic guidelines
STRATEGIC GUIDELINES Operational excellence and Disciplined core business growth consolidation Solid financials Evolution of Digital path ENABLERS skills and culture 13
Slide 14: Strategic guidelines
STRATEGIC GUIDELINES Operational excellence and Disciplined core business growth consolidation Solid financials Evolution of Digital path ENABLERS skills and culture 14
Slide 15: Enablers: digital path and evolution of skills and culture
ENABLERS Digital path Evolution of skills and culture Further effort on digital Diversity, Development integration across the company and Collaboration Asset management: Condition assessment and predictive Cross-functional teams to further promote collaboration, analytics based on extended monitorin
Slide 16: Strategic guidelines
STRATEGIC GUIDELINES Operational excellence and Disciplined core business growth consolidation Solid financials Evolution of Digital path ENABLERS skills and culture 16
Slide 17: Operational excellence
OPERATIONAL EXCELLENCE Leverage REN’s DNA of INNOVATION Experience Service level Consolidate managing systems above average of PORTGÁS with high penetration European Invest of renewables >€500 Mn in the network in Portugal TSOs1 until 2021 Maintain Support REGULATORY and top-industry ENERGY POLICY a
Slide 18: Operational excellence: electricity TSOs benchmark
OPERATIONAL EXCELLENCE Electricity TSOs Electricity Line costs/km Average Leverage REN’s DNA of INNOVATION Consolidate PORTGÁS Invest Substation costs/circuit end >€500 Mn in the network in Portugal until 2021 Maintain Support Average focus on REGULATORY and EFFICIENCY ENERGY POLICY agenda Performan
Slide 19: Operational excellence: natural gas benchmark
OPERATIONAL EXCELLENCE International peers Natural gas OPEX/complexity factor Average Leverage REN’s DNA of INNOVATION Consolidate PORTGÁS First quartile Invest >€500 Mn in the network LNG terminal costs/complexity factor in Portugal until 2021 Maintain Support focus on REGULATORY and Average EFFICI
Slide 20: Core business consolidation
CORE BUSINESS CONSOLIDATION <6%1 <10%1 ELECTRICITY GAS Limited weight on consumer tariff Leverage REN’s DNA of INNOVATION Achieved regulatory efficiency targets Consolidate 86% CAPEX 4% ~€20 Mn Support PORTGÁS within efficiency efficiency per year in incentives per year targets OPEX for end-of-life
Slide 21: Domestic organic CAPEX
CORE BUSINESS CONSOLIDATION Domestic organic CAPEX (€ Mn) ~190 120-145 ~90-110 ~40 Replacement Leverage Invest REN’s DNA of INNOVATION >€500 Mn ~50-70 Expansion in the network ~10 Consolidate PORTGÁS ~20-25 in Portugal until 2021 2015-17 2018-21 Electricity Gas transmission Gas distribution yearly a
Slide 22: Core business consolidation: potential projects
CORE BUSINESS CONSOLIDATION Ponte de Lima- Famalicão (line) Vieira do Minho- R. Pena-Feira axis (line and substation) Natural gas underground storage (compression upgrade) Fundão- Falagueira axis (line and Leverage Falagueira-Estremoz- substation) Invest REN’s DNA of INNOVATION Divor-Pegões axis (li
Slide 23: Portgás: efficient gas distribution company
CORE BUSINESS CONSOLIDATION Other gas distribution companies in Portugal 2nd largest gas distribution company in Portugal (km) PORTGÁS Most efficient gas distribution company in Portugal OPEX/km Consolidate Leverage PORTGÁS PORTGÁS REN’s DNA of INNOVATION OPEX/connection point PORTGÁS SOURCE: ERSE 2
Slide 24: Portgás RAB growth and penetration potential
CORE BUSINESS CONSOLIDATION Increased REN’s RAB in 11% €460 Mn 2016 2017 Consistent with regulatory framework Growth potential from lower penetration (penetration rate) 44% 37% Consolidate Leverage 30% 26% 26% 25% 21% 21% PORTGÁS REN’s DNA of INNOVATION 19% 10% 9% LISBOAGÁS SETGÁS PAXGÁS PORTGÁS LUS
Slide 25: Innovation
CORE BUSINESS CONSOLIDATION Direct impact Partnership on operations, e.g., solar with State Grid photovoltaic forecasting tool for R&D Leverage Recognition Proprietary tools EV charging REN’s DNA of of the scientific developed, ongoing INNOVATION community including in technological (publications an
Slide 26: Strategic guidelines
STRATEGIC GUIDELINES Operational excellence and Disciplined core business growth consolidation Solid financials Evolution of Digital path ENABLERS skills and culture 26
Slide 27: Disciplined growth: inorganic investments
DISCIPLINED GROWTH Inorganic investments (€ Mn) 769 Invest up to 4Q 2017: 100% of EDP Gás (Portgás) 530 Up to €400 Mn 400 until 2021 in additional growth 1Q 2017: 42.5% stake in Electrogas 169 opportunities 2015: underground gas storage 70 2015-17 2018-21 27
Slide 28: Keep growth path in light of market opportunities
DISCIPLINED GROWTH Keep growth path in light of market opportunities and leveraging strong track record Regulated assets/ Attractive Leveraging Pace set to long-term risk-return REN’s maintain contracts profile know-how credit rating 28
Slide 29: Clear focus on Portugal and regulated assets
DISCIPLINED GROWTH Clear focus on Portugal and Regulated Assets while also considering further incremental opportunities/ investments in LatAm Potential upside on domestic CAPEX always the top priority for REN 29
Slide 30: Strategic guidelines
STRATEGIC GUIDELINES Operational excellence and Disciplined core business growth consolidation Solid financials Evolution of Digital path ENABLERS skills and culture 30
Slide 31: Solid financials: debt management strategy
SOLID FINANCIALS Debt management strategy Tools Optimize Protect cost of debt net income Fixed vs. Maturity Liquidity floating rates buffer Allows for flexibility to grow while ensuring performance 31
Slide 32: Debt management: optimize cost of debt
SOLID FINANCIALS Debt management strategy – Optimize cost of debt 5.7% 5.5% 4.7% 4.1% 3.2% 2.5% 2012 2013 2014 2015 2016 2017 >50% reduction in Increase in average Bonds representing 60% with Funding needs cost of debt in maturity from 63% of funding fixed rate in fully covered for 1Q 2018 vs. 2014
Slide 33: Debt management: protect net income
SOLID FINANCIALS Debt management strategy – Protect net income Recurrent net income (€ Mn) Return on RAB (€ Mn) Yield on 10y treasury bonds – Portugal (%) Fixed vs. floating Maturity Duration 2014 2015 2016 2017 REN has been successfully protecting its net income by aligning debt management with its
Slide 34: Robust business plan
ROBUST BUSINESS PLAN 34
Slide 35: Average RAB and domestic organic CAPEX
ROBUST BUSINESS PLAN Average RAB. Historical costs (€ Bn) 3.9 3.5 Portgás: 0.46 3.6-3.7 Expected lower 0.49 Gas: 1.1 domestic organic 1.1 0.9-1.0 CAPEX enables additional investment Electricity: 2.4 2.3 2.2-2.3 capacity 2014 2017 2018-21 Domestic organic CAPEX ~€190 Mn/year €120-145 Mn/year 35
Slide 36: Total asset base will remain stable
ROBUST BUSINESS PLAN 2014 2017 2018-21 3.9 3.5 3.6-3.7 Portgás: 0.46 0.49 Gas: 1.1 1.1 0.9-1.0 Avg. RAB1 (€ Bn) Electricity: 2.4 2.3 2.2-2.3 Total asset base up to will remain stable €400 Mn Holdings 0.12 0.33 0.33 (€ Bn) Total assets (€ Bn) 3.6 4.2 4.2-4.3 1 Historical costs | 2 REE and HCB | 3 REE
Slide 37: Performance going forward will remain strong
ROBUST BUSINESS PLAN ~190 120-145 Domestic organic CAPEX (€ Mn) 484 475-500 Performance EBITDA (€ Mn) going forward will remain strong 114 110-115 Net income (€ Mn) Free Cash Flow before 170-175 inorganic investment ~135 and dividends1 (€ Mn) 2015-17 2018-21 yearly average per year 1 FCF before inor
Slide 38: REN will maintain credit metrics consistent with investment grade
ROBUST BUSINESS PLAN FFO/Net debt 11.7% 11-12% REN will maintain credit metrics 2.8 2.7-2.9 consistent with investment grade rating Net debt (€ Bn) 2017 EOY 2018-21 38
Slide 39: Sustainable dividend policy
SUSTAINABLE DIVIDEND POLICY Dividend (€/share) 0.171 0.171 0.171 0.171 0.171 REN plans to maintain the dividend policy 2013-17 2018 2019 2020 2021 One of the highest High sustainability dividend yields in given REN’s capacity of the industry generating cash flow 39
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Slide 41: Strategic guidelines
STRATEGIC GUIDELINES Operational excellence and Disciplined core business growth consolidation Solid financials Evolution of Digital path ENABLERS skills and culture 41
Slide 42: Closing remarks
CLOSING REMARKS REN is now at an intermediate point of a In 2018-21, REN will keep its focus on delivering path that started in 2015 energy in Portugal, also investing up to €400 Mn in attractive opportunities in line with its DNA 2015-17 cycle was marked by excellence in (skills and risk profile) d
Slide 43: Muito obrigado
MUITO OBRIGADO 43
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