Acea Business Plan 2018-2022 March 2018
ACEA Group Agenda THE ACEA GROUP TODAY MARKET SCENARI O AND TRENDS NEW BUSI NESS PLAN 2 0 1 8 -2 0 2 2 STRATEGY AND CONSOLI DATED TARGETS MAI N OPERATI NG SEGMENTS STRATEGI C OPPORTUNI TI ES CLOSI NG REMARKS ? Q&A ANNEX 2
ACEA Group THE ACEA GROUP TODAY A m arket LEADI NG m ultiutility FOOTPRI NT EBI TDA 2 0 1 7 MARKET POSI TI ON I N I TALY 2 0 1 7 Water W ATER Energy Infrastructure No. 1 Commercial and Trading • 9 m customers Environment • RAB € 1 .3 bn Other ELECTRI CI TY DI STRI BUTI ON No. 2 • 1 .6 m PODs • RAB € 1 .9 bn € 8 4 0 M PUBLI C LI GHTI NG No. 5 • 2 0 0 k Lighting Points operated • 8 0 % LED LATAM ~ 7 5 % regulated SALE OF ELECTRI CI TY AND GAS No. 6 • 1 .4 m customers SHAREHOLDERS ( 1 ) • ~ 6 .8 TW h of electricity sold 5 1 .0 % Rom a Capitale ENVI RONMENT 2 3 .3 % Suez No. 6 5 .0 % Caltagirone Group • › 1 m tons of waste treated 20.7% Other • 3 5 4 GW h of electricity produced (1) CONSOB data at March 2018 3
ACEA Group MARKET SCENARI O AND TRENDS SEGMENT TRENDS expected in the com ing years in the Group’s core businesses • Strong regulatory and governm ent drive to ensure - greater industrial development W ATER - new investment to cut gap in infrastructure and plant and boost network resilience • Consolidation in the industry backed by leading players Key elements of the National Energy Plan 2017 • Decarbonisation by driving electrification and the development ENERGY of an increasingly "distributed " m odel • Increase in energy security to guarantee network flexibility , adequacy and resilience • Technology and innovation to enable the "new downstream", making customers more active and aware (e.g. Demand Response) • Full deregulation of the market and industry consolidation • Circular Econom y ("Closing the Loop " ) in order to recycle and ENVI RONMENT recover materials • New plant (greenfield and brownfield) to m ake up the infrastructure gap , above all in the treatment of organic w aste (e.g. biodigesters) 4
ACEA Group STRATEGY AND CONSOLI DATED TARGETS The Group’s new strategic PI LLARS Business Plan 2 0 1 8 -2 0 2 2 Technology, I ndustrial Local focus and Operational I nnovation grow th Sustainability Efficiency and Quality Capex of € 3 bn € 4 0 0 m + in investment Capex and Opex 1 5 pp reduction in w ater leaks linked to innovative discipline ( -€ 3 0 0 m in total) RAB € 4 bn projects Decarbonisation w ith drive for (+ €0.8bn vs. actual) "electrification" (boosting available capacity from 2 0 % reduction in 1 .9 m Custom ers Sm art Grid and 3kW to 6kW for all residential users) cost to serve Sm art City Power & Gas Closing the loop and 1 .7 m tons of w aste increasing recovery of Generational Improvements to the treated m aterials (e.g. sludge and turnover for 3 0 0 + Custom er Journey (+ 70% vs. actual) composites) FTEs 5
ACEA Group STRATEGY AND CONSOLI DATED TARGETS Strong and sustainable GROW TH 2 0 2 0 2 0 2 2 Pre-tax ROI C > 1 0 % > 1 0 % EBI TDA growth with CAGR + 5 .9 % RAB up 2 5 % by 2022 Growth in Net Profit* 4 .1 3 .8 1 ,1 0 8 3 .2 1 ,0 0 2 8 4 0 8 3 2 332 282 181 €bn €m 2 0 2 0 2 0 2 2 2 0 1 7 2 0 2 0 2 0 2 2 2 0 1 7 2 0 1 7 guidance actual guidance CAPEX NET DEBT/ EBI TDA down to 2 .8 X of € 3 .1 bn 3 .0 x 2 .9 x 2 .9 x 2 .8 x 0 .6 0 .6 0 .6 0 .6 0 .6 0 .5 0 .5 MULTIPLE €bn 2 0 1 7 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 0 2 0 2 2 2 0 1 7 2 0 1 7 actual guidance actual guidance 6 * Net profit after non-controlling interests (minorities)
ACEA Group STRATEGY AND CONSOLI DATED TARGETS EBI TDA grow th based on solid business rationale CAGR 5 .9 % CAGR 6 .4 % CAGR 5 .1 % 1 ,1 0 8 11 32 22 37 4 1 ,0 0 2 66 13 22 46 103 17 52,0 158 8 4 0 8 3 2 109 -31 65 64 78 78 386 374 333 325 €m 471 350 446 346 2 0 1 7 2 0 1 7 Tariff Quality Organic New Plants Cost End of 2 0 2 2 Tariff Quality Organic New Plants Cost 2 0 2 0 actual guidance Increases Rewards Growth efficiencies incentives Increases Rewards Growth and M&A efficiencies (Cip6) Cross-segm ent initiatives Performance improvements and cost efficiencies + Generational turnover + Tightening up of operations Energy Com m . and W ater Environm ent Other I nfrastructure Trading • Tariff increases linked • Tariff increases linked • Growth of Power and • End of CIP6 incentives • Development of to investment to investment Gas customer base overseas services • Expansion of existing (including impact of • Reduction in penalties • Reduction in cost to plants investment incentives) for network losses serve • Development of new • Rewards for plants and M&A Commercial Quality 7
ACEA Group STRATEGY AND CONSOLI DATED TARGETS More than € 3 bn of I NVESTMENT STRATEGI C LEVERS GROUP’S I NVESTMENT €bn Capex Rem ix 3 .1 3 .1 Other 0.1 Com m ercial Unregulated 0.1 Environm ent 0 .2 1 5 % Energy 1 .1 I nfrastructure Focus on Regulated 8 5 % I nfrastructure 1 .6 W ater Capex Operating Regulated/ Segm ent Unregulated Discipline 8
ACEA Group STRATEGY AND CONSOLI DATED TARGETS Over € 4 0 0 m to be invested in I NNOVATI ON GROW TH LEVERS SCOPE OF APPLI CAZI ON Sm art & Resilient Grid I NFRASTRUCTURE Security and efficiency Sm art Meters ( electricity and w ater) Over € 4 0 0 m Autom ation and Robotics PEOPLE for Welfare of innovative personnel Advanced sensor industrial technology projects Predictive m odelling CUSTOMERS Customer-centricity Physical security and Cyber-security 9
ACEA Group STRATEGY AND CONSOLI DATED TARGETS The new SUSTAI NABI LI TY plan Cuts in CO 2 > 2 0 0 ACEA Group’s (Reduced losses, Purchase of Green ktons Sustainability Energy, Recovery of Biogas) Plan 2 0 1 8 -2 0 2 2 > 1 5 with targets Reduction in W ater Leaks pp associated with investment of 5 0 0 Green Energy approx. € 1 .3 bn GW h for internal use within the Group United Nations Reduction in Risk Rating for Sustainable Developm ent Goals ( SDGs) -1 0 % electricity grid to boost resilience W aste treated according to + 7 0 % Circular Econom y concept Safety inspections of maintenance + 5 0 % contractors 10
ACEA Group STRATEGY AND CONSOLI DATED TARGETS Grow ing DI VI DENDS, Pay-out above 5 0 % , € 0 .7 bn payable over the plan Growing Dividends Pay-out above 50% €0.7bn payable over the plan Dividend per Share 0.63 0.62 0.50 0.45 0.42 €/ share 2 0 2 0 2 0 2 2 2013 2014 2015 2016 2017 2020 2022 11
ACEA Group STRATEGY AND CONSOLI DATED TARGETS Financial strategy aim s to cut cost of debt Stable outlook Stable outlook Net Debt ( NFP) NFP/ EBI TDA Ratio Situation at 3 1 Dec. 2 0 1 7 Average Maturity ~ 5 .3 yrs 3 .2 3 .0 Average cost of debt ~ 2 .6 % € bn 2 .5 € bn – successful placing February 2018 of Euro 1 billion bonds overall under the EMTN Programme in 2 .4 two tranches: 3 0 0 € m , 5 years, rate 3 m onths Euribor plus 0 .3 7 % 7 0 0 € m , 9 .4 years, fixed rate 1 .5 % 3 .0 x 2 .9 x 2 .9 x NFP/ 2 .8 x EBI TDA RATI O The new ‘‘all-in’’ average cost of debt is 2 .3 % w ith an average term to m aturity of approx. 6 years 2 0 1 7 2 0 1 7 2 0 2 0 2 0 2 2 actual guidance 12
W ATER Key Targets for the Segm ent 13
ACEA Group W ATER I NFRASTRUCTURE DRI VE and efficiency im provem ents Key initiatives included in Plan 1 5 pp cut in W ater loss • Extraordinary plan to upgrade netw ork, reduce leaks and m anage w ater em ergency • Rationalisation of sm all treatm ent plants and development/ expansion of large plants • Rollout of sm art m eters 2017 2018 2019 2020 2021 2 0 2 2 14
ACEA Group W ATER EBI TDA UP 3 6 % and I NVESTMENT of € 1 .6 bn CAGR: 6.4% CAGR: 8.8% CAGR: 2.8% in €m 1 5 4 7 1 19 9 13 4 4 6 79 EBI TDA 350 346 2017 2017 Tariff Commerciale Cost 2020 Tariff Organic Cost 2022 2 0 2 0 2 0 2 2 actual guidance increase quality efficiencies increase growth efficiencies rewards CUMULATI VE DI STRI BUTI ON OVER YEARS Key num bers I NVESTMENT 2 0 1 8 -2 0 2 2 • Over 5 0 0 k Sm art Meters installed • Rem ediation of 8 0 0 + km of water and sewerage netw ork • Expansion of large Treatm ent Plants and retirement of 40+ small plants • Design for developm ent of Peschiera source 2018 2019 2020 2021 2022 • Over 50 water supply projects 15
16 I NFRASTRUCTURE Key Targets for the Segm ent ENERGY
ACEA Group ENERGY I NFRASTRUCTURE Becom ing an advanced DSO to increase netw ork resilience and enable new services To boost resilience and drive Key initiatives included in Plan electrification • LV netw ork upgrade to: 1 m 2 G - I ncrease netw ork resilience Sm art Meters - Increase capacity to enable electrification (customers up from 3KW to 6KW) • Rollout of sm art grid for city of Rome to enable new 3 KW services - Laying of fibre 6 KW - New 2G meters 17
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