Endesa S.a. · BME:ELE
Endesa — Investor Day (November 2017)
65 slides from Endesa's investor day presentation, Nov 22, 2017
Slide 1: Endesa 2018-2020 Strategic Plan Update
Endesa 2018-2020 Strategic Plan Update 22/11/2017
Slide 2: Agenda
1. Endesa’s Outstanding Position 2. Context in Europe and Spain 3. Strategic Plan Update 4. Key Financial Indicators 5. Final remarks 2
Slide 3: 1. Endesa's Outstanding Position
1. Endesa’s Outstanding Position 2. Context in Europe and Spain 3. Strategic Plan Update 4. Key Financial Indicators 5. Final remarks 3
Slide 4: A portfolio of strategic assets
Endesa’s outstanding position A portfolio of strategic assets Employees, # Thousands Clients LPM(1) Clients, # Million 10.5 LM1 5.5 +22% 9.7 4.5 -8% clients 2014 2017e 2014 2017e Free market Free Installed capacity, GW Renewables’ sales Power sales(2), TWh market capacity Renewables’ 1.7 sales 82 87
Slide 5: Profits and TSR in the European energy sector
Endesa’s outstanding position Profits and TSR in the European energy sector European power sector profits (EBIT) evolution 2008-2015 2008-2015 TSR of top-20 players in the EU, % 100 ~-30% Q1 33 -43 72 7 3 5 Q2 -23 Q3 -52 2008 Traditional Renewa- Transmission Retail & 2015 Q4 -74 generation bles & So
Slide 6: Endesa's financial strength
Endesa’s outstanding position Endesa’s financial strength 2017 target achieved EBITDA, €bn Net Income, €bn TSR, €/sh +10% +56% 3.1 3.4 1.4 +69% 0.9 22.8(2) 2014 2017e 2014 2017e 13.5(1) Cash cost, €bn Net-debt-to-EBITDA -13% 3.0 2.6 1.8x <2.0x 2014 2017e 2014 2017e 2014 2017e Endesa has significantl
Slide 7: A sustainable strategy
Endesa’s outstanding position A sustainable strategy Endesa’s contribution Main achievements in 2017 100% Energy mix decarbonization by 2050 2017 Renewable auction awarded by 879 MW ~ 1,400 €mn(1) to lead the energy ~300 €mn invested in 2017e future through digitalization New e-solutions business li
Slide 8: 2. Context in Europe and Spain
1. Endesa’s Outstanding Position 2. Context in Europe and Spain 3. Strategic Plan Update 4. Key Financial Indicators 5. Final remarks 8
Slide 9: Macro trends for the power sector in the future
Context in Europe and Spain Macro trends for the power sector in the future Energy-specific drivers Other significant drivers Penetration of renewables Volatility in commodity prices EU targets forcing changes in energy mix Forced by climate change, geopolitical conditions, and uncertainty around re
Slide 10: Energy transition: decarbonization of the economy
Context in Europe and Spain Energy transition: decarbonization of the economy GHG emission reduction targets Emission targets for Spain according to EU policies Carbon neutrality commitment 452 MtCO2 equiv. COP 21 between 2050 and 2100 383 ETS(4) 217 80-95% 2013-20 Climate Change Package: 297 17
Slide 11: EU targets and Spanish outlook
Context in Europe and Spain EU targets and Spanish outlook Final energy consumption in Spain, Mtoe EU objectives assessment for Spain 2015-2030 86 350 345 81 80 CAGR 275 ETS 155 138 Obj.2030 25% GHG 112 Electricity 25% 1.9% emissions, Non 297 33% 195 207 9% Mt CO2 ETS 163 Renewable 7% 9% 1.7% 2015 2
Slide 12: Spanish generation mix 2015-30
Context in Europe and Spain Spanish generation mix 2015 - 2030 Capacity mix evolution, GW Generation mix evolution, TWh Reserve Renewa- margin 1.4 1.2 1.1 bles 36%(3) 43% 63% (mainland) (incl. hydro), Spain(1) 146 % +1.7% p.a. +2.2% p.a. 347 3 8 268 268 106 108 5 6 Oher(2) 2 2 76 184 61 82 Wind&Sola
Slide 13: Implications of the EU targets for Spain
Context in Europe and Spain Implications of the EU targets for Spain Spain accomplishment should be based on the following pillars… … that would translate into specific policies Electrification An environmental tax reform to correct the current bias against electricity Renewables A boost to the
Slide 14: Profit growth in the Spanish power market 2015-2025
Context in Europe and Spain Profit growth in the Spanish power market 2015-2025 Profit growth in Spain power markets EBIT contribution, % Underlying drivers 2015 Profit 100 (EBIT) Traditional Preserve conventional technologies through the transition period to deliver 10% generation firm capacity t
Slide 15: 3. Strategic Plan Update
1. Endesa’s Outstanding Position 2. Context in Europe and Spain 3. Strategic Plan Update 4. Key Financial Indicators 5. Final remarks 15
Slide 16: Updated strategic vision to reinforce leading position in Iberia
Strategic Plan Update Endesa updated strategic vision to reinforce our leading position in Iberia Customer focus Smart grids Generation mix Maximized customer Smart networks and Decarbonization and value and leadership best-in-class security of supply with e-Solutions operations Digitalization Effic
Slide 17: Guidelines for customer focus
Strategic Plan Update Strategic guidelines for customer focus Customer focus Smart grids Generation mix Consolidate power and gas businesses in Maximize customer Increase asset Spain while Decarbonization of growing in Portugal and France value through value through smart generation mix and Sust
Slide 18: Endesa power & gas position
Strategic Plan Update Endesa power & gas position Sales to final customers, TWh Customers, #mn +4 TWh -0.1 mn Power 105 109 11.0 10.9 5.8 6.9 Market share 5.2 4.0 ~35% Spain RM(2) Spain LM(2) +4 TWh +0.1 mn Gas 71(1) 75(1) 1.6 1.7 Market share ~17% 2017e 2020 2017e 2020 Endesa will maintain its lead
Slide 19: Endesa power and gas margins
Strategic Plan Update Endesa power and gas margins Endesa’s power retail margin(1), €/MWh Endesa’s gas retail margin(2), €/MWh ~1.2x X ~2.9x X ~24 2.0 >20 Average integrated margin 0.7 Supply Margin ~7 >7 2017e 2020 2017e 2020 Margins are expected to show sustainable growth in the next years (1) Pow
Slide 20: Commercial transformation: value-based management and digitalization
Strategic Plan Update Endesa commercial transformation: Value-based Management and Digitalization Key initiatives Targets -7% ▪ Enhance customer segmentation CtS(1), 53 14 39 13 Customer ▪ Optimize advisory products €/customer value-based management ▪ Elaborate new data-driven pricing model ▪ Focus
Slide 21: New business line: e-Solutions
Strategic Plan Update Endesa new business line: e-Solutions, from asset-based to service-based From power and gas provider… …to Energy as a Service provider Assets as business base Managing third parties assets A new energy ecosystem ▪ Service-based POWER PLANT POWER PLANT ▪ Economies of scale on de
Slide 22: e-Solutions delivery
Strategic Plan Update e-Solutions delivery The new e-Solutions division is placing Endesa as an early mover Main KPIs Gross margin from e-Solutions, €bn ▪ Maximize potential of current Projects, products and evolve portfolio k#/year 2017e ~0.1 2017e 2020 towards platform-based flexibility e-Industri
Slide 23: e-solutions to be Client
Strategic Plan Update e-solutions to be Client e-Mobility Distributed Generation and Storage Integral Solutions: advice, installation and maintenance Investment based on Energy-as-a-Service customer savings Provider Early movers in battery storage market, leveraged on DEN capabilities Quick Fa
Slide 24: Guidelines for smart grids
Strategic Plan Update Strategic guidelines for smart grids Client-focus Generation mix Smart grids Maximize client ▪ Priority on the digitalization Decarbonization of Increase value asset through of generation the grid mix and value through powersmart ensurance of distinctive grid investments and ▪
Slide 25: Investments in Networks
Strategic Plan Update Investments in Networks Planned Capex, 2017-2020, €bn Smart meters’ 0.8 2.0 investments nearly completed by 2018 0.1 1.2 0.2 0.5 0.1 0.3 Smart meters Grid Losses Grid Commercial Total Grid Total automatization reduction modernization & Technical Digitalization upgrade and other
Slide 26: RAB investments for future sustainability
Strategic Plan Update RAB investments for future sustainability RAB, €bn ~11 Higher capex volume devoted ~11 to RAB (~500 €mn) 0.2bn€ of higher total capex vs previous plan. Higher growth investments to support RAB : 67% of total Capex vs. 48% in the previous plan 2017e 2020 Significant investme
Slide 27: Service quality and operational excellence
Strategic Plan Update Service quality and operational excellence OPEX, €/customer Losses(1), % TIEPI, min 45.0 9.1% 67 41.4 8.5% 21% 8% 0.6 pp 53 2017e 2020 2017e 2020 2017e 2020 New investments will also contribute to a better service quality, reducing interruptions and losses while improving effic
Slide 28: Guidelines for generation mix
Strategic Plan Update Strategic guidelines for generation mix Client-focus Smart grids Generation mix ▪ Significant growth in renewables with Maximize client Increase assetattractive returns Decarbonization of value through generation mix while ▪ smart value through Nuclear long-term operation to di
Slide 29: Decarbonization of generation mix
Strategic Plan Update Decarbonization of generation mix -34% -47% -61% -81% -100% 51.3(2) Endesa’s CO2 emissions(1), 33.7 27 <20 MtCO2, % reduction vs. 2005 <10 ~0 2005 2015 2020 2030 2040 2050 100% >78% 54% ~65% Endesa’s CO2 emission- 48% 36% free generation, % 2005 2015 2020 2030 2040 2050 Endesa
Slide 30: Renewable generation
Strategic Plan Update Renewable generation Installed capacity by technology 2017-2020, MW Renewables’ value drivers 7,353 6,388 ▪ Equity IRR of >11% 540 412 Solar 13 399 ▪ Renewables as part of the 1,618 2,158 integrated management Wind strategy ▪ Significant synergies 879 MW already awarded Hydro(1
Slide 31: Traditional generation
Strategic Plan Update Traditional generation Key actions Capex(1) 2017-2020 Nuclear ▪ Long-term, safe and cost-effective operation by continuous ▪ Safety and long term Capacity(4) (GW) improvement of plant safety and efficiency in order to ensure a operation: ~0.4 €bn ~3.3 competitive, emission-free
Slide 32: Non-mainland generation
Strategic Plan Update Non-mainland generation Key actions Capex 2017-2020 Canary ▪ Environmental investments in Gran Canaria and Tenerife (320MW) to ▪ IED investments: Islands guarantee sustainable operations in mid and long term ~0.1 €bn ▪ Closing of 307 MW and 290 MW(1) of new capacity ▪ Investmen
Slide 33: Guidelines for digitalization and efficiency
Strategic Plan Update Strategic guidelines for digitalization and efficiency Client-focus Smart grids Generation mix Maximize client Increase ▪ asset DigitalizationDecarbonization of with first as main objective, value through value through smart already initiatives generation mix and launched disti
Slide 34: Key pillars of the digitalization process
Strategic Plan Update Key pillars of the digitalization process Clients Cloud ▪ 3.7 mn customers with e-billing ▪ All ICT Infrastructure being migrated in 2020 (+76%) to the cloud, implanting pay-per-use models and capturing synergies from ▪ 77% digital interactions in 2020 Group contracts (+12pp) C
Slide 35: Data driven and agile methodologies
Strategic Plan Update Data driven and agile methodologies Data Driven INTERVENTION AREA TECHNOLOGY Quantify data Definition & Data governance Blockchain, Naas, Cloud, IoT, Clients ERP… Cloud Decide Data interpretation, scenarios Advanced analytics, enhanced simulation & decision making virtual reali
Slide 36: Efficiency Plan: cash costs optimization
Strategic Plan Update Efficiency Plan: cash costs optimization Opex(1), €bn Cash costs(4), €bn -15% 2.4 -13% 2019 target (2.7) 2.0 2.0(2) already achieved 3.0 2.6 2.5 2014 2017e 2020 Maintenance capex(3), €bn -9% 0.6 0.6 0.5 2014 2017e 2020 2014 2017e 2020 Efficiency Plan on track: significant cash
Slide 37: Unitary KPIs of the Efficiency Plan per area
Strategic Plan Update Unitary KPIs of the Efficiency Plan per area Opex(1) evolution -3% Generation Unitary cost(2), 49 48 48 k€/MW 2017e 2.0 €bn -21% CPI 0.1 €bn Fixed cost, 46 37 EGPE k€/MW Growth 0.1 €bn -22% Efficiency -0.2 €bn Distribution Unitary cost(2), 53 45 41 €/customer 2020 2.0 €bn (3) -
Slide 38: Focus on people
Strategic Plan Update Focus on people Local Communities Our people 2015-2017e 2020 Targets 2020 Targets(2) 100% eligible people Appraise performance of Access to affordable and 99% of TP2 appraised 760,000 1,370,000 Talent our people clean energy(1) 93% of TP1 interviewed Attraction & Retention Clim
Slide 39: 4. Key Financial Indicators
1. Endesa’s Outstanding Position 2. Context in Europe and Spain 3. Strategic Plan Update 4. Key Financial Indicators 5. Final remarks 39
Slide 40: Commodity overview and update to latest market consensus
Key Financial Indicators Commodity overview and update to latest market consensus Brent price, $/bbl CO2 price, €/ton 65 60 12 57 9 10 53 7 60 52 55 9 6 8 48 6 New plan 2017 2018 2019 2020 2017 2018 2019 2020 Old plan Coal API2, $/ton TTF, €/MWh 83 17 17 16 16 68 65 62 17 16 14 15 50 52 53 56 2017 2
Slide 41: Power market overview and update to latest market consensus
Key Financial Indicators Power market overview and update to latest market consensus Mainland Spain demand(1), TWh Average daily market price, €/MWh 262 53 259 50 48 256 256 260 46 253 43 47 47 253 45 251 2017 2018 2019 2020 2017 2018 2019 2020 New plan Old plan Spain GDP growth, % Thermal gap, TWh
Slide 42: Endesa's 2017-2020 EBITDA analysis
Key Financial Indicators Endesa’s 2017-2020 EBITDA analysis EBITDA by business, €bn and % Main drivers +11% ▪ Distribution: Higher regulated margins and positive loss 3.7 incentives 3.5 3.4 3.4 ▪ Gx & Sx: Normalization of market conditions, absence of 2018 non-recurring items, improvement of gas and
Slide 43: Comparison of old plan vs. updated plan
Key Financial Indicators Comparison of old plan vs. updated plan EBITDA projections, €bn - Macro context - Macro context - Gas margin - Gas margin and others + Distribution margin + Distribution margin + Non-mainland margin + Supply margin + Supply margin 3.7 3.7 3.5 3.5 3.4 3.4 3.4 2017e 2018 2019
Slide 44: Endesa's 2017-2020 capex analysis
Key Financial Indicators Endesa’s 2017-2020 capex analysis Net Capex by business 2017-2020, €bn Relative 23% 6% 18% 40% 13% +300 €mn weight 0.7 5.0 % 0.4 4.7 2.0 0.3 1.3 2.8 2.1 0.9 0.7 0.1 0.3 0.9 1.1 0.1 0.2 0.1 2.2 2.6 1.0 Mainland Supply EGPE Distribution Non-mainland Total Old Plan generation g
Slide 45: Endesa's 2018-2020 cash flow generation
Key Financial Indicators Endesa’s 2018-2020 cash flow generation EBITDA and Capex(1), €bn 2018-2020 Cash flow generation, €bn EBITDA Capex +11% 3.5 3.7 3.4 1.6 1.7 2.4 6.7 1.3 1.1 5.1 2.7 2018 2019 2020 FFO Maint. FFO after Growth FCF Capex(1) maint. capex(1) Capex Strong cash flow generation is exp
Slide 46: 5. Final remarks
1. Endesa’s Outstanding Position 2. Context in Europe and Spain 3. Strategic Plan Update 4. Key Financial Indicators 5. Final remarks 46
Slide 47: Endesa dividend policy
Final remarks Endesa dividend policy Minimum DPS, €/sh 1.33 1.32 1.33 2017-2020 +75% 1.03 0.62 0.76 100% Pay-out on ordinary net income Interim dividend 0.70 2014 2015 2016 2017e 2018e One of the most attractive dividend policies in the utility sector 47
Slide 48: Closing overview
Final remarks Closing overview CAGR 2017e 2018 2019 2020 2017-2020 EBITDA €bn ~ 3.4 ~ 3.4 ~ 3.5 ~ 3.7 ~ +4% Net Income, €bn ~ 1.4 ~ 1.4 ~ 1.5 ~ 1.6 ~ +6% Minimum DPS(1), 1.32 1.33 €/sh Cummulative 2.7 €bn FCF(2) Endesa holds a strong financial position for a sustainable shareholder profitability (1)
Slide 49: Final remarks
Final remarks 1 Strong resilience and profitability in spite of adverse market conditions 2 First-class asset base in Iberia 3 New opportunities to grow opened by decarbonization 4 Strategic vision and healthy financials to capture additional value 5 Sustainable business model allowing for best-in-c
Slide 50: Annexes agenda
1. Key Financial Indicators 2. Digitalization 3. E-Solutions 4. Sustainability 50
Slide 51: 1. Key Financial Indicators
1. Key Financial Indicators 2. Digitalization 3. E-Solutions 4. Sustainability 51
Slide 52: Endesa's 2017-2020 Net Capex analysis
Key Financial Indicators Endesa’s 2017-2020 Net Capex analysis Net Capex by business line, €bn 1.7 1.3 0.8 1.1 0.9 0.7 Regulated business 0.7 0.5 0.6 Renewables 0.2 0.1 Liberalized 0.4 0.4 business 0.3 0.3 2017e 2018 2019 2020 Gross Capex, €bn 1.1 1.5 1.9 1.3 52
Slide 53: 2. Digitalization
1. Key Financial Indicators 2. Digitalization 3. E-Solutions 4. Sustainability 53
Slide 54: Digital plan main initiatives
Efficiency through digitalization Digital plan main initiatives Key initiatives Capex 2017-2020 Savings 2017-2020 ▪ Deployment of new IT infrastructure Generation ▪ Integration of digital field services new tools for optimizing workforce management ~40 €mn ~30 €mn ▪ Big Data analytics for predictive
Slide 55: 3. E-Solutions
1. Key Financial Indicators 2. Digitalization 3. E-Solutions 4. Sustainability 55
Slide 56: e-Solutions products
Strategic Plan Update e-Solutions products e-Industries e-Mobility e-City e-Home Consulting, auditing and Maintenance and repair Public charging network Smart lighting monitoring services services Private charging stations Energy infrastructure Artistic lighting Micro-insurances and maintenance Dist
Slide 57: 4. Sustainability
1. Key Financial Indicators 2. Digitalization 3. E-Solutions 4. Sustainability 57
Slide 58: Endesa's Sustainability priorities
Strategic Plan Update – ESG annexes Endesa´s Sustainability priorities Digitalization Customer focus Growth across low carbon technologies and services Assets optimization and innovation Engaging local communities Engaging the people we work with for a data-driven Company for more shared value Susta
Slide 59: Sustainability priorities linked to UN SDGs
Strategic Plan Update - ESG annexes Endesa´s Sustainability priorities linked to UN SDGs 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Growth across low carbon technologies and services Assets optimization Pillars and Innovation Engaging local communities Engaging the people we work with Enablers Custom
Slide 60: Growth across low carbon technologies and services
Strategic Plan Update - ESG annexes Growth across low carbon technologies and services Main actions Main 2020 targets Development of renewable capacity +939 MW of additional renewable capacity Absolute CO2 emissions reduction ~27 Mton (-47% base year 2005) Specific CO2 emissions reduction < 367 gCO2
Slide 61: Assets optimization and innovation
Strategic Plan Update - ESG annexes Assets optimization and innovation Main actions 2020 targets +12.3 mn smart meters installed (LV) ~ 24,000 smart remotes installed (MV) Large scale infrastructure innovation mostly in grid digitization and smart meters 100% technological update (HV) 20% improvemen
Slide 62: Engaging local communities
Strategic Plan Update - ESG annexes Engaging local communities Main actions 2020 targets High-quality, inclusive and fair education 240,000 people1 Access to affordable and clean energy 1,370,000 people 1 Employment and sustainable and inclusive 164,000 people1 economic growth 1. 2015-20 cumulated t
Slide 63: Engaging the people we work with
Strategic Plan Update - ESG annexes Engaging the people we work with Main actions 2020 targets 100% of people1 involved Appraise performance of people we work 99% of people1 appraised with1 93% of people1 interviewed (feedback) Survey corporate climate with a focus on 2020: 100% of people1 involved
Slide 64: Environmental sustainability
Strategic Plan Update - ESG annexes Environmental sustainability Main actions 2020 targets Reduction of SO2 specific emissions -55% by 2020 (vs 2015) // <0,56 g/kwh Reduction of NOx specific emissions -25% by 2020 (vs 2015) // <0,94 g/kwh Reduction of particulates specific emissions -10% by 2020 (vs
Slide 65: Disclaimer
Disclaimer This document contains certain "forward-looking" statements regarding anticipated financial and operating results and statistics and other future events. These statements are not guarantees of future performance and they are subject to material risks, uncertainties, changes and other fact