Acea S.p.A. · MIL:ACE
Acea — FY2016 Earnings Presentation
59 slides from Acea's earnings presentation, April 2017
Slide 1: 2016 Results and 2016-2020 Business Plan
2016 Results 2016-2020 Business Plan April 2017
Slide 2: Agenda
ACEA Group Agenda 2016-2020 Business Plan highlights Business Plan: Key Takeaways Closing remarks Acea Group: 2015-2019 Business Plan
Slide 3: Acea Group
ACEA Group Acea Group Environment Energy Water Grids Corporate 3
Slide 4: Low risk profile
Low risk profile ACEA Group From unregulated 2016 data businesses 20% 2016 From regulated EBITDA businesses €896m 80% 6% 14% 40% of Group 40% of Group of Group of Group EBITDA EBITDA EBITDA EBITDA ENVIRONMENT ENERGY WATER GRIDS One of the main Italian One of the leading operators in Number 6 Italian
Slide 5: Long-term shareholder value through returns and growth
Long-term shareholder value through returns and growth ACEA Group EBITDA CAGR +9.9% Net profit CAGR +22.7% (€m) 896.3 (€m) 717.7 732.0 675.4 262.3 142.0 162.5 175.0 2013 2014 2015 2016 2013 2014 2015 2016 Net Debt/EBITDA CAPEX (€m) 2013 2014 2015 2016 3.3x 2.9x 2.7x 2.4x 530.7 DPS CAGR +13.9 % (€) 4
Slide 6: Strategic Pillars
Strategic Pillars ACEA Group Maintaining our strategic pillars….. Balanced risk profile Organic growth 74% of EBITDA from regulated businesses at Focus on regulated businesses the end of the Plan New regulatory framework for electricity 80% of investment in regulated businesses distribution
Slide 7: Acea 2.0 – digital and technological transformation
Acea 2.0 – digital and technological transformation ACEA Group New corporate culture open to change Acea is revolutionising the way it goes about its business, making sizeable investments in Water digital technologies Grids Energy (sales) Energy (production) Environment ~8,000,000 ~831 ~140,000 KM ~
Slide 8: Acea 2.0 Operation
Acea 2.0 ACEA Group Customers ACEA ATO2 WEB Call Center Walk-in office App Social ARETI (ex ACEA SAP CRM INTEGRATED Processes Distribuzione) ACEA Public Lighting REAL-TIME Operation ACEA ATO5 Publiacqua Metering and Billing WorkForce Management Acque SAP WFM Acquedotto del Fiora SA
Slide 9: Acea Group
ACEA Group Acea Group Acea Group: 2016-2020 Business Plan 9
Slide 10: Key highlights
ACEA Group Key highlights CONSOLIDATED TRACK RECORD OF EXCEEDING PREVIOUSLY ANNOUNCED TARGETS 2015 2016 2020 Plan EBITDA (€m) 732 896* 890 EBITDA CAGR 2015-2020: +4.0% NET PROFIT before non-controlling interests (€m) 182 273 276 2020 Pre-tax ROIC: ~12% NET DEBT (€m) 2,010 2,127 2,252 NET DEBT/EBITDA
Slide 11: 2016-2020 Business Plan: EBITDA growth by business area
ACEA Group 2016-2020 Business Plan EBITDA: growth by business area Holding €m Roll-in Acea 2.0 CAGR: +4.0% Insourcing of activities Redundancy plan Corporate rationalisation 21 Optimisation of real estate 69 3 91 Environment 277 Completion of San Vittore plant 138 57 30 2020 Revamping
Slide 12: Acceleration of efficiencies identified
2016-2020 Business Plan ACEA Group Acceleration of efficiencies identified -100% Energy Launch of Acea2.0: Redesign of complaints ~ €6m 5.5 process 0 Process costs in €m 2015 2020 -18% Grids ~ Digitalisation of network € per POD €11m 25.6 Work Force Management 21.1 Efficiency-sensitive Singl
Slide 13: Capex optimization
Capex optimization ACEA Group Renewal and maintenance of grids, plants, IT systems and development of projects already authorised in Environment segment €2.4bn Plan 2016-2020 Capex €2.4bn 530.7 43% Water 428.9 80% 197.9 156.2 20% 37% Grids 230.4 204.4 Unregulated Regulated 55.3 30.6 25.9 34.0 11.8 1
Slide 14: Strong financial structure
Strong financial structure ACEA Group 2016 financial highlights 31 Dec 2015 30 Sept 2016 31 Dec 2016 Change Change (€m) (a) (b) (c) (c-a) (c-b) NET DEBT 2,010.1 2,138.7 2,126.9 116.8 (11.8) Medium/Long-term 2,657.0 2,626.7 2,769.4 112.4 142.7 Short-term (646.9) (488.0) (642.5) 4.4 (154.5) NET DEBT/
Slide 15: Environment
ACEA Group Environment Acea Group: 2016-2020 Business Plan 15
Slide 16: Environment: Strategies, opportunities and risks
2016-2020 Business Plan Environment Strategies, opportunities and risks (‘000 tons) 2015 2016 2020 • Number 3 operator in Italy in 2020 WTE 354 398 553 • Completion of previously approved initiatives: Mechanical treatment - - 355 Revamping line 1 of San Vittore WTE plant in Lazio Landfill 94 97 13
Slide 17: Environment: Targets and Results
Environment Targets and Results CAGR +9.8% 2020 pre-tax ROIC 15.9% Ebitda (€m) 11 91 113 13 91 57 23 57 57 14 (27) 2015 Cessation CIP6 Like for like basis Development Acea Acquisitions 2020 Plan 2015 2016 2019 Plan 2020 Plan incentives of existing plants Greenfield 2020 Invested Capital: €360m Capex
Slide 18: Energy
ACEA Group Energy Acea Group: 2016-2020 Business Plan 18
Slide 19: Energy: Strategies, opportunities and risks
2016-2020 Business Plan Energy Strategies, opportunities and risks Retail • Moderate growth of customer base, with focus on existing areas of operation • Improved service quality • Acea 2.0: new billing and CRM system • Efficiency of processes and overheads, including via insourcing Production • Pla
Slide 20: Energy: Targets and Results
Targets and Results Energy CAGR +5.0% 2020 pre-tax ROIC: 13.9% Ebitda (€m) 10 6 138 127 138 3 130 8 3 108 108 2015 Like for like Energy efficiency RCV - Tariff Customers and Acea 2.0 2020 Plan 2015 2016 2019 Plan 2020 Plan Production margins - Centralized Credit Risk Management and workflow based ev
Slide 21: Water and Grids RAB
ACEA Group Water and Grids RAB Acea Group: 2016-2020 Business Plan 21
Slide 22: RAB
RAB Grids/Water The RAB (after impact of regulatory accounting), CAGR 2.5% taken into account when determining the tariff for year n, corresponds to the value of fixed assets in year n (based on the historical cost of the entity’s GRIDS assets revalued using deflators for the period) less 1.9 1.9
Slide 23: Water
ACEA Group Water Acea Group: 2016-2020 Business Plan 23
Slide 24: Water: Strategies, opportunities and risks
2016-2020 Business Plan Water Strategies, opportunities and risks • New Regulation: cycle 2016-2019 (quality award) • Acea 2.0 project: radical transformation, standardisation and integration of all IT systems, obtaining operating cost and process efficiencies • Overseas growth (Latin America) ATO
Slide 25: Water: Regulatory Opportunities
2016-2020 Business Plan Water Regulatory Opportunities Introduction of a component linked to quality factor The new MTI-2 tariff method also provides incentive mechanisms for the improvement of the contractual and technical quality of the service, by introducing two different mechanisms of awards/pe
Slide 26: Water: Targets and Results
Targets and Results Water CAGR +4.1% 2020 pre-tax ROIC 11.5% Ebitda (€m) 8 380 380 24 15 370 22 355 311 311 2015 Tariff effect Quality factor Acea 2.0 Overseas 2020 Plan 2015 2016 2019 Plan 2020 Plan development Capex (€m) Net Debt (€m) 1,042 792 653 537 230 204 2015 2016 2016-2020 Plan 2015 2016 20
Slide 27: Grids
ACEA Group Grids Acea Group: 2016-2020 Business Plan 27
Slide 28: Grids: Strategies, opportunities and risks
2016-2020 Business Plan Grids Strategies, opportunities and risks • New Regulation: tariff cycle 2016-2023 • Acea2.0 project: improvement of service quality, cost efficiencies • Modernisation of distribution network • Modernisation of public lighting network (’’Roma LED’’) Opportunities Risks Regula
Slide 29: Grids: Targets and Results
Targets and Results Grids CAGR +1.6% 2020 pre-tax ROIC: 9.3% 356 Ebitda (€m) Regulatory accounting 277 112 269 277 256 14 11 256 (3) (1) 245 2015 Organic growth Public lighting Tariff effect Acea 2.0 2020 Plan 2015 2016 2019 Plan 2020 Plan Capex (€m) Net Debt (€m) 878 900 691 582 198 156 2015 2016 2
Slide 30: Corporate
ACEA Group Corporate Acea Group: 2016-2020 Business Plan 30
Slide 31: Corporate: Targets and results
Corporate Targets and results • Further simplify the corporate structure 2016-2020 Capex: €54m • Facilitate synergies through Project Acea 2.0 • Greater operational efficiency - insourcing 2020 EBITDA: ~€3m Acea Group: 2016-2020 Business Plan 31
Slide 32: Recent acquisitions
ACEA Group Recent acquisitions Initiatives already identified, but not included in the targets in Business Plan 2016-2020 FROM VEOLIA GROUP FROM SEVERN TRENT PLC GROUP 100% of Severn Trent Italia 100% of Idrolatina 19,2% of Geal 64% of Umbriadue Servizi Idrici 80% of Iseco (in which Acea already hol
Slide 33: Business Plan: Key Takeaways
Business Plan: Key Takeaways ACEA Group Environment 2020 EBITDA: €91m 2016-2020 CAPEX: €262m 2020 Pre-tax ROIC: 15.9% ACEA GROUP 2016-2020 CAPEX: €2.4bn Energy 2020 EBITDA: €890m 2020 EBITDA: €138m 2016-2020 CAPEX: €159m 2020 Pre-tax ROIC: 13.9% CAGR EBITDA: +4.0% DPS CAGR: 3%-6% Water 2020 NET DEBT
Slide 34: Conclusions
ACEA Group Conclusions Continued efforts in operating efficiency Stable and predictable regulatory framework Significant investment ensuring the Company’s future growth Strong financial position Attractive shareholder returns as main strategic priority Acea Group: 2016-2020 Business Plan 34
Slide 35: Appendix
ACEA Group Appendix Acea Group:Acea 2016-2020 GroupBusiness Presentation Plan 35
Slide 36: Appendix
ACEA Group Appendix 2016 Results 9M 2016 Results Water regulatory framework Electricity Distribution regulatory framework Main assumptions and sensitivity analysis Environmental Sustainability Acea Group:Acea 2016-2020 GroupBusiness Presentation Plan 36
Slide 37: Beating expectations for 2016
Beating expectations for 2016 ACEA Group 2016 financial highlights (€m) 2015 2016* Change % 2016 results: above expectations Consolidated revenue 2,917.3 2,832.4 -2.9% EBITDA 732.0 896.3** +22.4% Strong operating performance EBIT 386.5 525.9 +36.1% Net profit/(loss) 181.5 272.5 +50.1% Cost efficienc
Slide 38: EBITDA target exceeded in 2016
EBITDA target exceeded in 2016 ACEA Group (€m) 2015 Ebitda 2016 Ebitda +22.4% 732.0 100.6 896.3 Regulatory 44.2 111.5 accounting 22.1 356.3 (2.4) (0.2) 244.8 255.7 355.0 310.8 107.9 130.0 57.4 57.2 0.2 -2.2 Corporate Environment Energy Water Grids ENVIRONMENT ENERGY WATER GRIDS -0.3% Main drivers: +
Slide 39: Acea is ahead in digital transformation
Acea is ahead in digital transformation to ACEA Group improve competitiveness, customer loyalty and operational efficiency Project Acea 2.0 Increased productivity Improved quality of service Improved corporate image Greater internal and external control and transparency Increased safety fo
Slide 40: EBITDA and Key quantitative data Environment
EBITDA and Key quantitative data ACEA Group 2016 financial highlights Entry into service of Line 1 of San Vittore plant in Oct 2016 Environment Contribution of Orvieto waste treatment plant EBITDA main drivers Recognition in 2015 of insurance proceeds for the fire at the Paliano plant (€3.2m) (€m) 2
Slide 41: EBITDA and Key quantitative data Energy
EBITDA and Key quantitative data ACEA Group 2016 financial highlights Energy Electricity sales: +€24.3m margin increase EBITDA main drivers Electricity production: -€2.2m (€m) 2015 2016 % change Key quantitative data 2015 2016 EBITDA 107.9 130.0 +20.5% Total Electricity production (GWh) 470 410 Prod
Slide 42: EBITDA and Key quantitative data Water
EBITDA and Key quantitative data ACEA Group 2016 financial highlights Acea ATO2: tariff increase +€43m (quality reward €23m) Efficiency Water Growth at companies consolidated using the equity method +€0.8m EBITDA main drivers Overseas water operations: +€1.4m (€m) 2015 2016 % change Key quantitative
Slide 43: EBITDA and Key quantitative data Grids Corporate
EBITDA and Key quantitative data ACEA Group 2016 financial highlights Operational efficiency and new technologies Grids Impact of accounting for Resolution 654/2015: €111.5m EBITDA main drivers Impact of fifth regulatory cycle (€m) 2015 2016 % change Key quantitative data 2015 2016 EBITDA 255.7 356.
Slide 44: Cash flow
Cash flow ACEA Group CASH FLOW ANALYSIS (€m) 2015 2016 EBITDA 732 896 Change in net working capital 98 (16) Investment (429) (531) Free Cash Flow 401 350 Net finance income/(costs) (90) (110) Income tax expense (115) (144) Dividends (96) (107) Other (27) (106) Total Cash Flow 73 (117) EBITDA Change
Slide 45: Strong financial structure
Strong financial structure ACEA Group 2016 financial highlights 31 Dec 2015 30 Sept 2016 31 Dec 2016 Change Change (€m) (a) (b) (c) (c-a) (c-b) NET DEBT 2,010.1 2,138.7 2,126.9 116.8 (11.8) Medium/Long-term 2,657.0 2,626.7 2,769.4 112.4 142.7 Short-term (646.9) (488.0) (642.5) 4.4 (154.5) NET DEBT/
Slide 46: 9M 2016 Results
ACEA Group 9M 2016 Results Acea Group:Acea Group: 9M 2016-2020 2016 Results Business Plan 46
Slide 47: 9M 2016 Results: Financial highlights
ACEA Group 9M 2016 Results Financial highlights (€m) 9M 9M % 2015 2016 change Consolidated revenues 2,167.7 2,047.5 -5.5% EBITDA 530.9 646.1 +21.7% Impact of accounting for Resolution 654/2015: €76.5m EBIT 284.8 378.1 +32.8% Profit/(loss) before tax 216.9 317.0 +46.2% Impact of accounting for Resolu
Slide 48: Regulatory framework
ACEA Group Regulatory framework Acea Group Acea Group: 2016-2020 Presentation Business Plan 48
Slide 49: Water regulatory framework
Water regulatory framework Water REGULATORY PERIOD: 2016-2019 (4 YEARS) AEEGSI Resolution: 664/2015 Water Tariff Regime for the second regulatory period (2016-2019). The applicable regulations are broadly based on a matrix chart with 6 different quadrants relating to: the ratio of required capex to
Slide 50: Water regulatory framework: quality factor
Water regulatory framework Water INTRODUCTION OF A COMPONENT LINKED TO QUALITY FACTOR AEEGSI Resolution 655/2015 deals with the regulation of the contractual quality of integrated water services: the minimum quality standards established by the regulator came into effect from 1 July 2016, becoming f
Slide 51: Energy distribution and transmission regulatory framework
Energy distribution and transmission regulatory framework Grids REGULATION PERIOD: 2016-2023 (8 YEARS) AEEGSI Resolutions: 654/2015 Tariff general frawork - 583/2015 WACC - 646/2015 Quality of service and output based regulation The Regulator has extended the duration of the regulatory period to eig
Slide 52: Main assumptions and sensitivity analysis
ACEA Group Main assumptions and sensitivity analysis Acea Group Acea Group: 2016-2020 Presentation Business Plan 52
Slide 53: Sensitivity analysis on key drivers
ACEA Group Main assumptions 2015 2016 2017 2018 2019 2020 Main assumptions Plan Plan Plan Plan Plan Exchange $/€ 1.110 1.119 1.031 1.082 1.180 1.220 Brent $/Bbl 52.4 53.6 61.8 66.9 69.0 75.0 PUN €/MWh 52.3 47.7 45.8 46.8 47.6 48.6 Green certificates €/MWh 100.1 102.0 104.7 103.9 103.3 102.5 EU-ETS €
Slide 54: Environmental sustainability
ACEA Group Environmental sustainability Acea Group Acea Group: 2016-2020 Presentation Business Plan 54
Slide 55: Evaluation of Acea's sustainability performance
Evaluation of Acea’s sustainability performance ACEA Group Acea is regularly monitored by leading ESG analysts and rating agencies CDP (Carbon Disclosure Project): this international organisation is backed by over 800 international investors (AUM US$100,000). It aims to raise awareness among major c
Slide 56: The Sustainability Plan 2016-2020
ACEA Group The Sustainability Plan 2016-2020: integration with operational processes and SDGs In November 2016, the Board of Directors approved the Group’s new Sustainability Plan, which is consistent with the guidelines for operational processes and with certain UN Sustainable Development Goals (SD
Slide 57: Presence in a leading network
ACEA Group Presence in a leading network Acea participates and plays a proactive role in leading organisations and working groups engaged in developing aspects of corporate social responsibility, building on and testing best practices, in line with the related developments TOP UTILITY assesses the l
Slide 58: Future challenges
Future challenges ACEA Group 2017 Legislative Decree 254/2016 implementing Directive 2014/95/EU on the disclosure of non-financial and diversity information EU DIRECTIVE, CSR AND NON-FINANCIAL REPORTING: SCORES ARE AWARDED ON THE BASIS OF RESEARCH CONDUCTED BY THE UNIVERSITY OF SALENTO AND PUBLISHED
Slide 59: Disclaimer
Disclaimer ACEA Group 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.