ACEA Group Strategy and Targets 16 May 2019 - Placing of Euro 500 million bond under Financial strategy the EMTN Programm, 9 years, fixed rate 1.75%. July 2019 – EMTN programme ceiling increased to €4bn 29 January 2020 - Placing of Euro 500 million bond under the EMTN Programm, 9 years, fixed rate 0.50%. Highlights Net Financial Position €B NFP/EBITDA Improved working Working Capital capital absorption (~€30M/year) Rating BBB+ Baa2 2.8x 3.0x 2.9x Stable outlook Stable outlook 2.8x Debt • Situation at 30 June 2020 NFP • Average maturity 5.85 yrs • Average cost of debt 1.82% 15 MIL 190401 - Piano Industriale 201 ...
ACEA Group 2019-2022 Business Plan Key Assumptions Assumptions 2019 2020 2021 2022 Exchange $/€ 1.17 1.18 1.18 1.18 Brent $/Bbl 76.71 71.67 68.61 67.41 PUN €/MWh 65.97 60.62 55.10 56.09 EU-ETS €/ tons CO2 21.33 19.74 17.67 17.85 CIP6 €/MWh 237.20 16
ACEA GROUP Potential UPSIDE (not included in Business Plan targets) TITOLO CAPITOLO TITOLO PRESENTAZIONE / Luogo e data
ACEA Group Strategic Opportunities Potential initiatives to be implemented EBITDA (€M) Investments (€M) Growth in the gas distribution Gas 35-110 5-20 market with selected Distribution acquisition and ATEM tenders ESCO acquisitions and Smart Energy cogeneration / trigeneration 50-70 5-10 Efficiency pilots and thermal coat installations Plant development acceleration also evaluating strategic M&A Waste 40-60 200-350 partnership according the market consolidation New clients acquisition Clients 60-90 consistent with current market 8-12 Acquisition consolidation trends Additional growth in the PV Growth in market through alternative ~70 ~10 models (e.g., partnership with Renewables investors without society control) Water Sector Consolidation of water 60-150 30-90 operators in Central Italy (e.g., Consolidation Tuscany, Umbria) 100-200 ( €M) 18
ACEA Group Strategic Opportunities €0.2B potential upside 2022 Strategic Initiatives Full Potential EBITDA Target €B 19
ACEA GROUP Sustainability TITOLO CAPITOLO TITOLO PRESENTAZIONE / Luogo e data
ACEA Group Strategy and Targets Sustainability growth Standard Ethics has upgraded the outlook for Acea from ‘‘Stable’’ to Additional €400M sustainability- ‘‘ Positive ’’. (July 2020). Acea is a member of the SE European linked capex bring our Sustainability Multi-Utilities Index. effort to €1.7B overall CO 2 Reduction >200 (Reduced losses, Purchase of kton Green Energy, Biogas Recovery) +€100M +€200M +€100M Peschiera& PV Development / Recovering materials and energy in +70% Marcio development M&A circular a Circular Economy perspective economy United Nations 500 Green Energy Sustainable Development Goals (SDGs) GWh for internal use within the Group Power Grid Risk index reduction -10% due to resiliency increase Safety inspections of maintenance +50% contractors 21
Water Business Plan 2019-2022 Regulatory framework
ACEA Group Water Business Line Key Actions 500k+ smart water meter and projects for water network districtization Focus on preservation of water , with development of a dedicated structure Development Rationalization of 35+ small purification facilities of a Smart 90% investments on T echnical Quality Water Supply securitization, by doubling Peschiera (100M€ already included in 2019 - ’22 Plan) Company for a Gori full consolidation (1.4M clients served) sustainable Acquisition of Pescara Gas (62k PDR) to usage of water, enter in gas distribution business Procedure completed for renewal of concession for improving the Peschiera-Le Capore water main, due to expire in September 2031 (July 2019) service quality Acquedotto del Fiora full consolidation (over 402K clients served; October 2019) and efficiency Agreement signed for the acquisition of 51% stake in the company Alto Sangro Distribuzione Gas (34k PDR; March 2020) 23 MIL 190401 - Piano Industriale 201 ...
ACEA Group Water Business Line Key Financials CAGR 8.0% €M CAGR 10.1% CAGR 5.9% EBITDA Pescara Gas Including Gori on a y early basis (+45M€) Old Plan ATO2, ATO5, Gori €B €B INVESTMENTS RAB 24
Water: regulation ACEA Group REGULATORY CHANGES IN 2019 TARIFF REGIME FOR THIRD REGULATORY PERIOD (2020-2023) ARERA Resolution 580 of 27 December 2019 ARERA has approved the tariff regime for the third regulatory period (MTI-3), confirming its four-year duration and the biennial review. Apart from retention of the general approach used for MTI-2 relating to the structure of the revenue cap, the following should be noted: the limits on annual growth of the tariff multiplier linked to classification in the matrix of regulatory frameworks have been reduced (the change regards all frameworks; for example, the maximum limit on framework V has been cut from 8% under MTI-2 to 6.2% under MTI-3); the WACC has declined from the previous 5.31% to 5.24% and a distinction has been introduced for the cost of debt for “ordinary” fixed assets in progress (namely those not relating to strategic initiatives), for which the WACC is lower and decreasing over the 4 years covered by the tariff regime; from 2020, classification of the useful lives of assets is to be revised (confirming the use of financial depreciation) to reconnect the infrastructure to the pertinent activity of the integrated water service and identify a match between the category of asset and quality targets; the criteria for assessing the rate of delivery of planned investment have been established, with potential for additional penalties in the event of underinvestment and failure to meet technical or contractually required quality targets; the proportion of late payment costs recognised for operators in Central Italy (from 3.8% to 3%) and in Northern Italy (from 2.1% to 2%) has been cut; with the aim of promoting operational efficiency, the regulator has introduced a variable portion to be curtailed from allowed non-controllable costs, graduated on the basis of the gap between per-capita opex incurred by the operator and the level of per-capita cost estimated using a specific econometric function adopted by the regulator (in cases of major improvements in operational efficiency, the curtailment may be eliminated); an increase in the expected inflation rate applied in calculating the tariff multiplier and the WACC (up from 1.5% to 1.7%) and the inflation rates applied in revising opex and capex have also been revised; as a measure designed to improve environmental and energy sustainability , the regulator has introduced an incentive to reduce consumption in the definition of allowed energy costs and a specific incentive for innovative activities that meet efficiency and energy and/or environmental rationalisation targets (such as, for example, the recovery of energy and raw materials or the reuse of water for agricultural/industrial purposes); under determinate conditions (primarily achievement of the M5 technical quality target for the disposal of sludge in landfill), the regulator has allowed an additional cost for the disposal of wastewater sludge in view of the difficulties experienced by operators since 2018. 25
ACEA Group Water Real pre-tax WACC Calculation of real pre-tax WACC REGULATORY CHANGES WACC FOR WATER SECTOR MTI-2 MTI-2 MTI-3 Since 2020, in addition to changes Res. 580/219 Res. 664/2015 Res. 918/2017 to certain parameters, a distinction 2020-2023 2016-2017 2018-2019 has been introduced between the fixed assets entered into cost of debt allowed for ordinary Ordinary work service + work in progress on in progress work in progress, namely work in strategic works progress not linked to strategic works. Kd+T (WACC) 5.39% 5.31% 5.24% 3.92%(*) The cost of debt relating to Kd (cost of debt) 3.65% 3.80% 3.73% 2.76% ordinary work in progress also Km 2.1% 2.2% 2.2% 2.1% decrease on a linear basis in the 4 alpha 1.6% 1.6% 1.6% 0.6% years in which they are recognised in the tariff. T (tax expense) 1.74% 1.51% 1.50% 1.16% RAI 6.32% 6.28% 6.26% 4.83% Parameters CS (d) 50% 50% 50% 80% CnS (e) 50% 50% 50% 20% d/e 1 1 1 4 ɼf real (real risk- free rate) 0.5% 0.5% 0.5% 0.5% WRP (water utility risk premium) 1.5% 1.7% 1.7% 1.7% Kd real (including DRP-Debt risk premium) 2.84% 2.84% 2.77% 2.77% β levered 0.80 0.80 0.79 0.79 ERP (equity risk premium) 4.0% 4.0% 4.0% 4.0% tc (tax shield) 27.5% 24.0% 24.0% 24.0% T 34.2% 31.9% 31.9% 31.9% rpi (inflation rate) 1.5% 1.5% 1.7% 1.7% (*) Whilst awaiting publication of the ARERA tool for calculating WACC for the ordinary work in progress set out in the table, the impact of the d/e ratio has been assumed to be 4 when calculating both the cost of debt and tax expense. 26
ACEA Group Water: regulation TARIFF REGIME FOR THE THIRD REGULATORY PERIOD (2020-2023) Delibera ARERA 580/2019 WACC: 5.24% (previously 5.3%) WACC on fixed assets in progress: 3.92% Increase in inflation rate (from 1.5% to 1.7%) The limits on annual growth of the tariff multiplier linked to classification in the matrix of regulatory frameworks have been reduced Reduction in standard coverage for late payments in Central Italy from 3.8% to 3% EXPIRY OF CONCESSIONS ATO2 Lazio Centrale (Acea ATO2) 2032 ATO5 Frosinone (Acea ATO5) 2033 ATO3 Regione Campania (Gori) 2032 ATO4 Alto Valdarno (Nuove Acque) 2027 ATO2 Basso Valdarno (Acque) 2031* ATO3 Medio Valdarno (Publiacqua) 2024** ATO6 Ombrone (Acquedotto del Fiora) 2031* Municipality of Lucca (Geal) 2025 ATO1 Perugia (Umbra Acque) 2027 ATI4 Umbria (Umbriadue Servizi Idrici) 2032 * Extension of the concession approved by the concession authority at the time of the biennial review 2018-2019 (also approved by ARERA). ** Extension of the concession approved by the concession authority at the time of the biennial review 2018-2019, yet to be approved by ARERA. 27
ACEA Group Water: regulation Resolution 547/2019 – REVISED CONTRACTUALLY REQUIRED QUALITY AND NEW INCENTIVE SYSTEM In Resolution 547 of mid-December 2019, ARERA took action with regard to two important aspects: Regulation of contractually required quality and new incentive system the new rules are applicable from 1 January 2020, whilst the obligation to make adjustments to the way in which information and data concerning performance is registered comes into effect from 1 July 2020; the safeguards provided for in Resolution 655/2015 are extended to uncontracted persons who request the provision of services prior to entering into a supply contract; the reporting requirement is extended to include operators serving less than 50,000 inhabitants; specific changes have been introduced to take into account developments relating to the tariff structure and regulatory changes regarding metering and billing; New incentive mechanism : ARERA has introduced a new national incentive mechanism (rewards/penalties), based on the construction of 2 macro-indicators, obtained on the basis of 42 of the 43 simple indicators provided for in the Regulations on contractually required quality for the integrated water service (28 specific standards, which are already subject to penalties if not met, and 14 general standards). The macro-indicators ( MC1 “Start -up and termination of the contractual relationship ” and MC2 “Management of the contractual relationship and accessibility to the service”) are computed as the average of the pertinent basic indicators (expressed in terms of percentage compliance with the standard), weighted by the number of services provided by the operator for each type of basic indicator. The first year of application will be 2020 based on 2018 data, whilst in 2021 the data used will be based on the results for the previous year. In quantifying the rewards and penalties, any recognised OpexQC will be taken into account. The proposed incentive mechanism is similar to the one for technical quality for later stages of assessment (basic and excellence) and starting point (maintenance or improvement). Two-year statute of limitations (Law 205 of 27 December 2017) The regulator has introduced measures resulting from new legislation included in the 2018 Budget Law. This has placed time limits on the right of operators to amounts due (from “domestic users”, “micro businesses” and “self -employed professionals”) and, in the water supply sector, is applicable to bills falling due after 1 January 2020. Subsequent determinations will set out further criteria designed to better define cases in which responsibility for the delay in billing can be ascribed (if only on a presumptive basis) to the end user of the water service. The 2020 Budget Law has also recently dealt with the subject of a two-year statute of limitations. 28
ACEA Group Water: regulation Resolution 917/2017 – TECHNICAL QUALITY ARERA Resolution 917/2017 supplemented the mechanism introduced at the end of 2015 designed to promote contractually required quality with new regulations governing the technical quality of the integrated water service. In the latter case, the regulator adopted a graduated approach from 1 January 2018 and selective application of the regulations through mechanisms providing ex ante and ex post flexibility. The new regulations set minimum technical quality standards and targets for the integrated water service through the introduction of specific standards designed to guarantee the services provided to each end user, and granting the right to compensation if the standards or targets are not met. The regulations have also introduced overall standards describing the technical conditions under which the service must be provided and that are linked to an incentive mechanism based on rewards and penalties. The Resolution also provides for specific requirements as a necessary condition of qualifying for the incentives associated with the overall standards. Application of the system of indicators forming the basis of technical quality – and the start of monitoring of the underlying data – was scheduled to begin from 1 January 2018. Obligations governing the recording and storage of data, according to the procedures provided for in the Resolution, came into effect from 1 January 2019, whilst initial quantification of the rewards/penalties will take place in 2020 based on the results reported for 2018 and 2019 which, as announced by the regulator, must be reported by 30 March 2020 (closure of the process of gathering data, with the related validation by concession authorities, has however been scheduled for 17 April 2020). The rewards are not subject to any cap on tariff increases. Provisions must be made in 2020 for any penalties imposed with regard to the first two years of application (2018-2019). The cost of the incentives will be covered from 2018 by an equalisation component at national level (UI2), which will primarily aim to promote quality and will be paid into the specific fund set up by the CSEA (the Fund for Energy and Environmental Services) to finance incentives relating to water services. In addition, from 2020, a further method of covering the cost will take the form of a specific amount to be deducted from allowed costs, determined on the basis of the level of operational efficiency and to be paid by operators into the same fund set up by the CSEA, covered by an equalisation component. The Concession Authority may submit a reasoned proposal to recognise an additional tariff component (Opex QT ) , within the limits established in the resolution, for the years 2018 and 2019 (and for the subsequent four-year period covered by MTI-3). The difference in each year between recognised Opex QT and the expenses effectively incurred in order to meet the technical quality standards can, in any event, be recovered (only if to end users’ advantage). Unlike the similar component relating to contractually required quality (Opex QC ), recognition does not entail exclusion from the above incentive mechanism. 29
ACEA Group Water: regulation ARERA RESOLUTION 235/2020 «Adoption of urgent measures for the integrated water service, in response to the Covid-19 emergency» Deferral of deadlines for meeting tariff and technical quality requirements. Recognition in allowed costs of 0.6% of turnover to cover late payments caused by restrictions linked to the spread of Covid-19 Assessment of quality performance based on cumulative data for the two-year period 2020-2021 Amendment of cost recognition criteria (on a forecast basis, with any gaps to be made up through back- billing) linked to the Covid-19 emergency Selective measures for financial sustainability of concessions during the emergency (advance payments to be applied for to CSEA – Cassa Servizi Energetici e Ambientali only for concessions where tariffs are approved by 30 September 2020) Increase in returns on WIP (Work In Progress): 3.73% in the first two years of the regulatory cycle and 2.77% in the subsequent years (previously 3.58%, 3.31%, 3.04% and 2.77%) 30
ACEA Group Water: regulation RAB – Business Plan 2019-2022 The RAB taken into account when determining the tariff for year n corresponds to the value of fixed assets in year n-2 (based on the historical cost of the entity’s WATER assets revalued using deflators for the period) less accumulated depreciation revalued using deflators for the period. (€m) 2018 2020 2022 Plan Plan ATO2 1,327 1,589 1,928 ATO5 127 149 153 Gori 206 254 296 RAB ATO2+ATO5 1,660 1,992 2,377 Under the regulatory framework, the RAB does not include goodwill recognised in the companies’ statutory financial statements. 31
ACEA Group Water Acea’s investments in water companies in Lazio, Umbria, Campania and Tuscany LAZIO UMBRIA CAMPANIA ATO1 Perugia ATO 2 Central Lazio ATI 4 Umbria ATO3 Regione Campania ATO 5 Frosinone includes municipalities in the includes municipalities in the (concession expires 2032) includes 32 municipalities in the (concession expires 2033) provinces of Naples and Salerno province of Perugia province of Terni (concession expires 2032) (concession expires 2027) (concession expires 2032) Ato 2 (Acea 96%) provides Ato 5 (Acea 98%) provides Umbra Acque (Acea 40%) Sarnese Vesuviano (Acea Acea owns 100% of TWS, the integrated water service the integrated water service in which in turn holds 64% of 99%) controls 37% of Gori. in Rome and in another 111 Frosinone and in another 86 Other investors in Gori are Umbriadue Servizi Idrici , Ente d’Ambito Sarnese municipalities in the municipalities in the which provides the integrated surrounding province. surrounding province. Vesuviano and ASM Azienda water service in ATI4 Umbria Speciale. TUSCANY ATO4 Alto Valdarno ATO6 Ombrone ATO2 Basso Valdarno ATO3 Medio Valdarno Municipality of Lucca includes municipalities in the includes municipalities in the includes municipalities in the includes municipalities in the Integrated water service provinces of Florence, Arezzo, provinces of Pisa, Lucca, provinces of Arezzo and Siena provinces of Siena and Grosseto Municipality of Lucca Prato and Pistoia Florence, Pistoia and Siena (concession expires 2027) (concession expires 2031*) (concession expires 2025) (concession expires 2024**) (concession expires 2031*) Intesa Aretina (Acea 35%) Ombrone (Acea 99.5%) Acque Blu Arno Basso Acque Blu Fiorentine Acea holds 48% of GEAL , controls 46% of Nuove (Acea 77%) controls 45% of controls 40% of (Acea 75%) controlls 40% of which provides the integrated Acque, with remaining 54% Acquedotto del Fiora. Acque. Other investors in Publiacqua. water service in the controlled by municipalities, Acque are Publiservizi, Other investors in Other shareholders of municipality of Lucca. The the Provincial Authority and Acquedotto del Fiora are Cerbaie and GEA. Publiacqua are Consiag and remaining interest is held by others. Municipality of Grosseto, the Municipality of Florence. Lucca Holding (Municipality of Municipality of Siena and Lucca). other Municipalities. * Extension of the concession approved by the concession authority at the time of the biennial review 2018-2019 (also approved by ARERA). ** Extension of the concession approved by the concession authority at the time of the biennial review 2018-2019, yet to be approved by ARERA. 32
Energy Infrastructure Business Plan 2019-2022 Regulatory framework
ACEA Group Energy Infrastructure Key Actions 600k smart meters roll-out start 100+ M€ for Resiliency for electricity supply Main actor of the continuity vs Authority guidelines energy transition 150MW PV between grid parity and M&A on the secondary market with projects Remote control extension on 60% of the LV/MV enabling the secondary stations decarbonization Installation of over 600km of optical fiber at the of the system service of the existing infrastructure Renovation/expansion activities on the LV/MV network for over 2,500km Acquisition of photovoltaic plants with total capacity of approximately 45 MWp (H2 2019- H1 2020) Development of primary market projects, 40 MWp already authorised out of a pipeline of over 400 MWp 34 MIL 190401 - Piano Industriale 201 ...
ACEA Group Energy Infrastructure Key Financials CAGR 5.1% €M CAGR 6.3% CAGR 3.9% EBITDA Old Plan Distribution €B €B Metering INVESTMENTS RAB 35
ACEA Group Energy Infrastructure EBITDA Breakdown 2018 2019 2020 2022 Plan Plan ENERGY INFRASTRUCTURE 360 392 407 440 Distribution (Areti) €m 317 345 352 363 Production €m 49 45 52 73 (Acea Produzione+Ecogena) €m Public Lighting -5 2 3 4 36
ACEA Group Electricity Distribution: regulation ARERA RESOLUTION: - 568/2019 tariffs for electricity distribution ( TIT ) and metering ( TIME ) revised for the sub-period 2020-2023 - 646/2015 "Quality of electricity distribution and metering services and output-based regulation" ( TIQE ) amended and supplemented by RESOLUTION 566/2019/R/eel for the sub-period 2020-2023 - 534/2019 Initiatives designed to boost the resilience of electricity distribution networks, Areti plan for 2019-2021. - 467/2019 experimental regulation for the upgrade of aging plumbing risers in buildings - 306/2019 Revision for the three-year period 2020-2022 of the recognition of 2G smart metering costs - 583/2015 TIWACC supplemented by resolutions 639/2018/R/com and 570/2019/R/gas REGULATORY PERIOD: EIGHT YEARS 2016-2023 divided into two sub-periods, each lasting four years: 2016-2019 2020-2023 REGULATORY PERIOD WACC: SIX YEARS 2016-2021 WACC for 2016-2018 5.6% WACC for 2019-2021 5.9% Areti’s concession expires in 2030 WACC FOR OTHER ACTIVITIES ELECTRICITY TRANSMISSION Electricity transmission WACC for 2019-2021 : 5.6% GAS NETWORKS Gas transport WACC for 2019: 5.7% WACC for 2020-2021: 5.7% Gas distrib WACC for 2019: 6.3% } WACC for 2020-2021: 6.3% Gas metering WACC for 2019: 6.8% Gas storage WACC for 2019: 6.7% WACC for 2020-2021: 6.7% 37
ACEA Group Electricity distribution: regulation REGULATORY CHANGES IN 2019 ARERA Resolution 568/2019 on the tariff review The main changes introduced by Resolution 568 regard: a) the recognition of opex in the sub-period 2020-2023, based on opex for 2018 and providing for the symmetrical allocation, between the operator and end users, of productivity improvements in the first sub-period (2016-2019); b) the sharing of net revenue generated by the use of electricity infrastructure for purposes other than those related to the electricity service; c) creation of a mechanism for recognising credit losses, in exceptional situations of late payment, relating to the portion linked to distribution tariffs, but postponing definition of the mechanism until a later resolution; d) the possibility of obtaining, on request and as a one-off, an increase in the ROIC provided for in the TITs for 2008- 2011 and 2012-2015 (for the first period in art. 11 and, for the later period, in art. 12, respectively); e) extension of the subsidies provided for changes in capacity requested by domestic customers, with definition in 2020 of the operational procedures for an equalisation mechanism relating to the subsidies provided in the period 2017-2019; In particular , the mechanism in point c) will enable Areti to also recover the portion of credit losses relating to distribution tariffs. By April 2020, ARERA is to define a mechanism that is expected to be the same as the one set out in Resolution 50/2018 for the recovery of stranded costs already paid to the CSEA and GSE but not collected from users of the transport service. 38
ACEA Group Electricity distribution: regulation REGULATORY CHANGES IN 2019 ARERA Resolution 566/2019 on output-based regulation At the end of 2019, ARERA, following various consultation documents, issued Resolution 566/2019/R/eel on the output-based regulation of distribution and metering services and Resolution 568/2019/R/eel on revision of the regulations regarding the tariffs for transmission, distribution and metering services, both coming into effect for the regulatory sub-period 2020-2023. Overall, ARERA has retained the same approach for both the first and second sub-periods. The main changes introduced by Resolution 566 regard: the possibility to delay achievement of continuity targets, but only limited to areas with the worst levels of • continuity; the introduction of special incentives for critical areas of the country; • establishment of a mechanism for experimental regulation in order to drive improvements in service quality; • the introduction of records showing the number of meters replaced due to a malfunctioning display; • from 2021, the publication of comparative records for voltage dips; • a cap on the reward for each intervention designed to improve grid resilience, limiting the reward to no more than • the actual cost of the work carried out. 39
ACEA Group Electricity distribution: regulation REGULATORY CHANGES IN 2019 In addition, the following are relevant to 2019: Resilience of electricity grids • Upgrade of plumbing risers • 2G smart meters • 1. Resilience of electricity grids Following two consultations, the regulator issued Resolution 668/2018/R/eel, establishing initiatives regarding grid resilience. To this end, it introduced incentives for work designed to increase the grid’s ability to withstand the impact of weather events. Areti submitted its resilience plan for 2019-2021 to ARERA in order to be included, from 2019, in the related incentive scheme, which includes a series of rewards and penalties. In Resolution 534/19 , ARERA introduced a system of rewards and/or penalties relating to implementation of Areti’s resilience plan for 2019-2021. The plan will covers approximately 230 interventions, concentrated primarily in 2020, with the aim of mitigating heatwave risk (most of the interventions) and flood risk (residual). Upgrade of plumbing risers In Resolution 467/2019/R/eel, the regulator began experimenting with regulation of the upgrade of aging plumbing risers in buildings, with effect from 1 January 2020 and for a three-year period. The regulation aims to: a) conduct a national census of aging plumbing risers; b) encourage condominiums to upgrade their plumbing risers; c) ensure greater access to withdrawals of electricity; d) gain experience for use in subsequently drawing up a stable regulatory framework. 40
ACEA Group Electricity distribution: regulation REGULATORY CHANGES IN 2019 2G smart meters In Resolution 306/2019, ARERA updated, for the three-year period 2020-2022, the directives regarding recognition of the costs relating to 2G (second-generation) smart metering systems used in the metering of LV electricity, and the provisions regarding their rollout. In September 2019, Areti submitted to the regulator a request for recognition of this type of investment, and presented its plan to the public in October 2019. The process of consulting on Areti’s 2G smart meters plan, provided for in Resolution 306, came to an end in November . In 2020, the regulator is due to publish a resolution approving the costs involved in Areti’s 2G smart metering systems. The plan envisages the replacement of 2.3 million meters by 2034, at an overall cost of €546 million, including capex of €318.9 million . 41
Energy Infrastructure ACEA Group WACC Electricity end gas Distribution WACC ELECTRICITY DISTRIBUTION 2016-2018 2019-2021 WACC GAS DISTRIBUTION 2016-2018 2019 2020-2021 654/2015 - All.D 639/2018 654/2015 - All.D 639/2018 570/2019 Wacc real Wacc real 5.9% 6.3% 5.6% 6.1% 6.3% pre-tax pre-tax Ke real Ke real 4.9% 5.7% 5.0% 5.8% 5.8% 16-17 16-17 Factor Ke 84.8% 72.5% Factor Ke 95.3% 80.6% 80.6% Kd real Kd real 2.0% 2.4% 2.0% 2.4% 2.4% 16-17 16-17 Factor Kd 0.49 0.55 Factor Kd 0.41 0.49 0.49 F 0.5% 0.5% F 0.5% 0.5% 0.5% Ke real Ke real 4.9% 5.7% 5.0% 5.8% 5.8% 16-17 16-17 RF nominal 0.79% 0.64% RF nominal 0.79% 0.64% 0.64% isr 16-17 1.39% 1.62% isr 16-17 1.39% 1.62% 1.62% RFR real 0.5% 0.5% RFR real 0.5% 0.5% 0.5% b asset b asset 0.39 0.39 0.44 0.44 0.44 b levered b levered 0.61 0.68 0.63 0.71 0.71 tc 16-17 27.50% 24.00% tc 16-17 27.50% 24.00% 24.00% T corrected for inflation 34.40% 31.0% T correction for inflation 34.4% 31.0% 31.0% d (g) d (g) 44% 50% 37.5% 44% 44% e (1-g) e (1-g) 56% 50% 62.5% 56% 56% d/e 0.80 1.00 d/e 0.60 0.80 0.80 TMR 6.0% 6.0% TMR 6.0% 6.0% 6.0% ERP 5.5% 5.5% ERP 5.5% 5.5% 5.5% CRP p 1.00% 1.39% CRP p 1.00% 1.39% 1.40% Kd real Kd real 2.00% 2.39% 2.00% 2.39% 2.40% 16-17 16-17 CRP p 1.00% 1.39% CRP p 1.00% 1.39% 1.40% DRP 0.50% 0.50% DRP 0.50% 0.50% 0.50% F 0.50% 0.46% F 0.54% 0.49% 0.49% ia 1.50% 1.70% ia 1.50% 1.70% 1.70% 33.8% 27.5% 36.7% 29.5% 29.5% 42
ACEA Group Electricity Distribution: regulation ARERA RESOLUTION 248/2020 “Urgent measures linked to the Covid-19 pandemic: procedure for recovering amounts not paid to distributors by electricity transmission and natural gas distribution users and general system costs not already paid to the CSEA and GSE” In response to the COVID emergency, in Resolution 60/2020 (revised) ARERA introduced a moratorium on efforts to recover unpaid bills payable by households and small businesses. As a result, Resolution 116/2020 (revised) allows users to make part payment of bills for electricity transmission and gas distribution falling due in April, May and June 2020 and permits distributors to make part payment of amounts covering general system costs to the CSEA and GSE. In Resolution 248/2020, ARERA has set out the procedure for paying previously unpaid amounts, and specifically: users of electricity transmission and natural gas distribution services can make a lump-sum payment by September 2020 or pay in instalments (three monthly instalments, the first falling due in September); electricity distributors are required to pay the CSEA and GSE, by the 15th day after collection, general system costs until they have paid the full total billed for general system costs during the period; natural gas distributors are required to pay the CSEA, within 60 days of the end of each two-month period in which collection takes place, general system costs until they have paid the full total billed for general system costs during the period. 43
ACEA Group Energy Infrastructure RAB - 2019-2022 Industrial Plan The RAB (after impact of regulatory accounting), taken into account when determining the tariff for year n, corresponds to the value of fixed assets in year n (based ELECTRICITY DISTRIBUTION on the historical cost of the entity’s assets revalued using deflators for the period) less accumulated depreciation, calculated to year n, revalued using deflators for the period. (€m) 2018 2020 2022 Plan Plan RAB ARETI 2,085 2,281 2,432 Under the regulatory framework, the RAB does not include goodwill recognised in the companies’ statutory financial statements. 44
Commercial and Trading Business Plan 2019-2022 Regulatory framework
ACEA Group Commercial and Trading Key Initiatives Strong commercial boost (3x vs. 2018) supported Growth of retail by a new offering model Increase of share of pull commercial channels (e.g. portfolio, Shop, Branch and Digital) up to 50% improvement of Strengthening of digital channels (10% on total acquisitions) service quality Operational excellence on key processes and reduction of 20% on CtS and 15% on CtC and exploitation of energy Launch of new Value Added Services (e.g. smart meters, insurance, thermal systems) transition Entrance in the flexibility market (T erna auction opportunity for UVAM assigned to T or di Valle plant for 10 MW) Signed with ERG two Power Purchase Agreements (PPA) concerning the supply of renewable energy totalling 1.5 TWh during the period 2020-2022 (October 2019) 46 MIL 190401 - Piano Industriale 201 ...
ACEA Group Commercial and Trading Key Financials CAGR 19.3% €M CAGR 8.2% CAGR 31.4% EBITDA Old Plan Power Mkt | Maggior Tutela CUSTOMER BASE €M Millions Power Mkt | Free INVESTMENTS Gas 47 *Investments include Commissioning Capitalizations IFRS15
ACEA Group Commercial and Trading : regulation END OF ENHANCED PROTECTION MARKET REGISTER OF SELLERS END OF ENHANCED PROTECTION MARKET Law 124/2017 called for the end of the enhanced protection market in the electricity and gas sectors from 1 July 2019. This deadline was extended until 1 July 2020 by the Law converting Law Decree 91/2018 – Law 108 of 21 September 2018. Law Decree 162/2019 (the so-called Milleproroghe legislation) has in turn further delayed the withdrawal of price protections until 1 January 2022 . REGISTER OF SELLERS The annual competition and markets legislation, Law 124 of 2017, which came into force on 29 August 2017, requires the sellers of electricity to be enrolled on a Register of Electricity Sellers, to be created by the Ministry for Economic Development on the proposal of the regulator . In Resolution 762/2017/I/eel, the regulator set out an initial proposal to the Ministry, which, however , has yet to issue the related decree. Law Decree 162/2019 (the so-called Milleproroghe legislation) calls on the Ministry, in consultation with ARERA, to prepare a decree, to be implemented within 90 days, establishing the criteria, procedures and requirements (technical, financial and integrity) for enrolment and continued presence on the Register of Sellers. In serious cases of non- compliance or failure to meet the above requirements, or in situations deemed to be critical with respect to general principles governing the correct functioning of markets and consumer protections, the Ministry may exclude sellers from the Register . 48
ACEA Group Commercial and Trading : regulation TWO-YEAR STATUTE OF LIMITATIONS GENERAL SYSTEM COSTS TWO-YEAR STATUTE OF LIMITATIONS Following the 2018 Budget Law (no. 205/2017), ARERA consulted on a number of occasions with stakeholders on operators’ obligations and on the protection of customers receiving back-bills for periods of more than two years, where customers were not responsible for the delay in billing ( the two-year statute of limitations ). ARERA then adopted resolutions 97, 264 and 569 in 2018, containing regulations to be applied during the subsequent steps. To date, the regulator has established, among other things, that operators have an obligation to inform customers of their right to assert a statute of limitations with a notice in the bill containing the amount due and in the related past due notices. Several operators and associations have requested a review of the latest resolution, no. 569. In Resolution 683/2018/R/com, the regulator, whilst rejecting the above request, has in any event granted operators the right to adopt specific, differentiated approaches to the billing of amounts relating to consumption dating back more than two years. In the same resolution, the regulator has also introduced a requirement for distributors to return any amounts previously paid by sellers, where the distributor is responsible for the delay in billing, by offsetting the amount to be returned against future payments. Definition of the procedures to be followed by sellers when requesting Terna or Snam to review the matching amounts relating to the dispatching or balancing service, where the statute of limitations has been applied due to a failure on the part of the distributor, has been put off until another resolution. The 2020 Budget Law , no. 160 of 27 December 2019, has established that the provisions regarding the two-year statute of limitations are also applicable to customers where failure to record or the erroneous recording of consumption data is the proven responsibility of the customer. General system costs In Consultation Document 52/2018, ARERA proposed a mechanism, for the benefit of sellers, similar to the one for distributors introduced by Resolution 50/2018, under which any general system costs paid but not collected are to be returned. The proposed offset mechanism has yet to be finalised in a related resolution, due to opposition from consumers’ associations, who are against mechanisms based on an approach that merely socialises costs. Following this, ARERA organised a series of working groups with operators and consumers’ associations to look at (i) the new «model for the system» that ARERA intends to adopt in order to establish how general system costs are to be collected, and the process for monitoring billing and the collection of payments; (ii) management of the recovery of general system costs billed from 2016 in the free market and not collected, presenting a mechanism designed to ensure that sellers are compensated and that also takes into account the recovery of overdue amounts that has already taken place through the prices applied in the free market. 49
ACEA Group Commercial and Trading : regulation 2020 BUDGET LAW 2020 BUDGET LAW The 2020 Budget Law, no. 160 of 27 December 2019, has among other things established: 1) an obligation for operators to send customers reminders requesting payment of unpaid bills and notifying them that their power will be cut off with at least forty days notice and by registered mail; 2) that, in the event of the seller failing to comply with the law governing billing (violations of the requirements in relation to metering, back-billing or billing, charges for unjustified expenses or for the cost of consumption, services or goods not due), as verified by the relevant authority or “duly documented in the form of a specific statement presented independently by the customer , including those presented on line”, the seller has no more than 15 days to refund any amounts paid by the customer and to pay a penalty equal to 10% of the contested, undue amount, and in any event no less than € 100. 50
Environment Business Plan 2019-2022 Regulatory framework
ACEA Group Environment Implementation of old Key Actions BP strategic initiatives Doubling of treated waste (2.2 Mton target) with new plant development (e.g., organic fraction, liquid/sludge treatment, multi-material) Acceleration of plant M&A and development in a Circular Economy development aimed at perspective focused on material recovery (200+ kton) Self-sufficiency in sludge treatment with innovative recovering materials and thermal hydrolysis technologies (80 kton) energy in a Circular Bioecologia integration with liquid waste treatment plant (~ 110 kton) Economy perspective Partnership with market operators for the recovery of San Vittore WTE plant ashes in a circular economy perspective Acquisition of 90% of DEMAP , which owns a plastic Inaugurated at Monterotondo Marittimo (Grosseto) one treatment plant with an authorized capacity of 75,000 of the largest composting plants in Central Italy with tons per year (July 2019) an authorized capacity of 70 kton per year (October 2019) EV of 100% of DEMAP: €20m Capex €22m DEMAP’s EBITDA: €3.5m Expected contribution to EBITDA €2.5m Acquisition of 60% of Ferrocart and Cavallari (which owns Acquisition of 60% of Berg, engaged in the treatment 100% of Multigreen) , active in the storage, treatment and of wastewater with an authorized capacity of 143,000 selection of waste with a total authorized capacity of more Tons per year (July 2019) than 145,000 tons per year (April 2020) EV of 100% of Berg: €10m EV of 100% of Ferrocart and Cavallari : ~ €25m Berg’s EBITDA: €1.6m Ferrocart and Cavallari’s EBITDA: ~ €4.5m Acquisition of 70% of Simam, a leading company in the engineering, construction and management of water and waste Environment / Engineering treatment facilities, and in environmental interventions and remediation, with high-tech global services (May 2020) and Services areas EV of 100% Simam : €30m Simam’s EBITDA: ~ € 7.0m 52 MIL 190401 - Piano Industriale 201 ...
ACEA Group Environment Key Financials CAGR 3.9% €M CAGR -9.8% CAGR 19.6% EBITDA Old Pian €B Mton INVESTMENTS VOLUMES 53
ACEA Group Environment: regulation Existing regulations regarding incentives for renewable sources other than photovoltaic ( Min. for Econ. Dev. Decree of 23 June 2016 , which has amended the previous ministerial decree of 6 July 2012) envisages the following forms of incentive: Feed-in tariff , being the total revenue generated from electricity fed into the grid and from the incentive (only for plants with capacity below a set amount, equal to 500 kW); Incentive , being additional revenue linked to electricity fed into the grid, as more fully described in the above decree. The feed-in tariff and the incentive have different purposes: Energy source (wind, biomass, geothermal, hydro, biogas, etc.) and type (e.g. biomass type A, B, C and D) Type of project (new plant, reconstruction, reactivated, repowering, total or partial upgrade) Plant capacity (nominal capacity in MW resulting from the sum of the electric capacity of the alternators, obtained by multiplying the apparent capacity expressed in MVA by the nominal capacity) MD 6 July 2012 Conversion of the right to GCs into an incentive is introduced by art. 19 of the Ministerial Decree (GRIN system ex-GCs) (“MD”) of 6 July 2012. The incentive is added to revenue generated by the electricity fed into the grid, and is equal to: I = k·(180 – Re)·0.78 Factor k is defined by the regulation based on the type of source and intervention (for San Vittore and Terni k = 1.3). The term Re indicates the average sale price for electricity registered and communicated annually by ARERA. MD 6 July 2012 and MD 23 These decrees have established, among other things, the method for computing the incentive and the June 2016 feed-in tariff (the second is valid only if the capacity of the plant is below a specific ceiling) in relation (FER-E system) to the energy source, the type of intervention (namely: new plant, reconstruction, etc.) and the plant’s capacity. 54
ACEA Group Environment: regulation San Vittore del Lazio Lines 2 and 3 entered service in April 2011 and July 2011, respectively. Lines 2 and 3 These currently qualify for an incentive associated with capacity above 23.2 MW; it is supported by the Incentive (GRIN, ex-GC system) regulated by art. 19 of the MD of 6 July 2012 (conversion of GCs into Incentive), the value of which in the current year is based on the average sale price of electricity in the previous year. Estimated value: € 96.37/MWh, based on the portion of the energy qualifying for the incentive (approximately 50% of the electricity fed into the grid). San Vittore del Lazio Line 1 entered service on 1 October 2016. Line 1 The incentive (FER-E system) is determined in accordance with the detailed rules provided by the MD of 6 July 2012. Estimated value: € 43.05/MWh, solely with regard to the portion of the energy qualifying for the incentive (approx. 50% of the electricity fed into the grid, provided that it is type-C biomass). Terni A WTE plant that entered service in December 2012. This currently qualifies for the Incentive (GRIN ex-GC system) regulated by art. 19 of the MD of 6 July 2012 (conversion of GCs into Incentive), the value of which in the current year is based on the average sale price of electricity in the previous year. Estimated value: € 96.37/MWh, based on the portion of the energy qualifying for the incentive (approximately 45% of the electricity fed into the grid). Orvieto The plant has two sections: M1 and M2, which entered service in November 2007 and March 2013, (biogas from landfill) respectively. Section M2 currently qualifies for the Incentive (GRIN ex-GC system), regulated by art. 19 of the MD of 6 July 2012 (conversion of GCs into Incentive), the value of which in the current year is based on the average sale price of electricity in the previous year, reduced by multiplying factor «k», amounting to 0.80 (for M2). Estimated value: k x € 96.37/MWh, based on the electricity sold above the threshold of 6999.4 MWh/year, reduced by a multiplying factor of 0.9 (for M2). Orvieto The plant has two sections: M1 and M2, both of which entered service in November 2015. (biogas from anaerobic digestion) The incentive (FER-E system) is determined in accordance with the detailed rules provided by the MD of 6 July 2012 and consists of a feed-in tariff (all-inclusive P < 1 MW) of € 174.44/MWh, based on the portion of the energy qualifying for the incentive (approximately 45% of the electricity fed into the grid). Aprilia The plant that entered service in December 2019. (biogas from anaerobic digestion) The incentive (FER-E system) is determined in accordance with the detailed rules provided by the MD of 6 July 2012. Estimated value: € 50.60/MWh, with regard to the portion of the energy qualifying for the incentive (approx. 95% of the electricity fed into the grid, provided that it is type-C biomass). Estimated incentives and tariffs 55
ACEA Group Environment: regulation ARERA RESOLUTION 443/2019 Regulatory period 2018-2021, structured in line with the previous tariff regulation (Presidential Decree 158/99), with the introduction of certain elements such as sharing arrangements for revenue from the sale of material and energy derived from waste and the related CONAI revenue. Real pre-tax WACC: 6.3% for the period 2020-2021, with an additional 1% for the 2-year time lag between capex being carried out and its recognition in RAB. Determination of four different regulatory frameworks, limiting the annual rise in the tariff to reflect the quality of service provided and changes in the scope of operations. Cost recognition on the basis of accurate ex post data based on reliable accounting records for the previous two years and no longer on forecasts. Identification of efficient costs and subsequent adjustments for 2018 and 2019 (introduced on a progressive basis and recognisable over no more than 4 years). Whilst awaiting determination of the tariffs for incoming waste (to be determined by 31 December 2020), the charges covering the costs of disposal and treatment and of treatment and recovery are determined on the basis of approved and/or negotiated tariffs. 56
ACEA Group Environment: regulation Tariffs for Acea’s plants Basic tariffs applicable to Acea’s plants Type of plant MD 6 July 2012 MD 23 June 2016 Biogas plant between 0.6 and 1 MW €178/MWh €160/MWh Biogas plant between 1 and 5 MW €125/MWh €112/MWh WTE plants > 5 MW €125/MWh €119/MWh Estimated incentives and tariffs (budget 2020) Plant Ref. Tariff/Incentive Value Expiry Fixed/variable GRIN ex-GC, MD Terni Incentive €96.37/MWh 2028 Variable (SP)* 6 July 2012 GRIN ex-GC, MD San Vittore d. Lines 2 e 3 (P < 23,2) Incentive €96.37/MWh 2026 Variable (SP)* 6 July 2012 FER-E, MD San Vittore d. Linea1 Incentive €43.05/MWh 2036 Variable (ZP)** 6 July 2012 GRIN ex-GC, MD Orvieto Discarica Incentive €77.10/MWh 2026 M2 Variable (SP)* 6 July 2012 FER-E, MD Orvieto Landfill + Composting Feed-in tariff €174.44/MWh 2035 Fixed 6 July 2012 FER-E, MD Orvieto Landfill + Composting Incentive €50.60/MWh 2039 Variable (ZP)** 23 June 2016 * Sale price (previous year) ** Zonal price (current year) 57
ACEA Group Environment: regulation Acea’s plants Overall view of electricity production plants Gross Number of Installed Treatment plant FER e.e. production sets capacity (MW) 2019 (GWh) Terni SSF (pulper) 1 13.6 80.93 Paliano - - - - San Vittore SSF (ex RDF) 3 43.8 276.27 Orvieto (1) biogas 4 3.125 19.79 Monterotondo M. (2) biogas 1 0.834 - Sabaudia (3) - - - - Aprilia (2) biogas 3 3.0 - (1) Biogas plant using waste from landfill, 2 sets with total capacity of 2.127 MW; Biogas plant using anaerobically treated waste, 2 sets with total capacity of 0.998 MW. (2) Production plant to be built as part of expansion; one biogas-fueled set for Monterotondo (834 kW nominal) and 3 biogas-fueled sets for Aprilia (total nominal capacity of approx. 3,000 kW). (3) Plant not expected to produce electricity. 58
ACEA Group Financial results
ACEA Group TITOLO H1 2020 Results CAPITOLO TITOLO PRESENTAZIONE / Luogo e data
ACEA Group Executive summary ACEA Group sees continued growth SIGNIFICANT IMPROVEMENT IN RESULTS DESPITE THE IMPACT OF THE HEALTH EMERGENCY GROWTH IN INVESTMENT IN REGULATED INFRASTRUCTURE CONTINUES EBITDA of € 569m +13% versus H1 2019 (organic growth >8%) EBIT of € 277m +7% versus H1 2019 NET PROFIT of € 144m +1% versus H1 2019 Capex of € 411m +20% versus H1 2019 KEY TRANSACTIONS COMPLETED SINCE THE BEGINNING OF THE YEAR Successful placement of a €500m bond issue , with a term of 9 years and paying interest of 0.50% (January 2020). Signature of an agreement to acquire 51% of «Alto Sangro Distribuzione Gas» (537 km of network, 34,000 redelivery points in the province of l’Aquila ). (March 2020) Acquisition of 60% of «Ferrocart» and «Cavallari» (which owns 100% of Multigreen) – 4 waste storage, treatment and sorting plants, handling 145 thousand tonnes per year (April 2020) Acquisition of 70% of Simam, a leader in the design, construction and operation of liquid waste treatment plants and in the delivery of environmental and remediation projects, offering integrated high-tech solutions (May 2020) Acquisition of photovoltaic plants continues, with total installed capacity amounting to up to 45 MWp. Development of primary market projects, 40 MWp already authorised (H1 2020) out of a pipeline of over 400 MWp Fitch’s confirmation of Acea’s rating of «BBB+» with a «Stable» outlook. (May 2020) Standard Ethics has upgraded the outlook for Acea from ‘‘Stable’’ to ‘‘ Positive ’’. The rating is ‘‘EE - ’’ (July 2020). Acea is a member of the SE European Multi-Utilities index. H1 2020 Results 61
ACEA Group Executive summary HIGH RESILIENCE IMPACT OF ‘‘COVID - 19 EMERGENCY’’ due to major presence in regulated businesses H1 2020 • EBITDA: ALL AREAS OF BUSINESS PROVED RESILIENT TO THE CRISIS. EBITDA from regulated 86% THE GROUP CONTINUES TO SEE STRONG GROWTH DESPITE THE businesses NEGATIVE IMPACT OF THE HEALTH EMERGENCY. EBITDA from non-regulated • NET WORKING CAPITAL : INCREASE OF 14% businesses ~ €60M IN PAYMENT ARREARS ~ €60M IN DEFERRED COLLECTION OF REGULATORY ITEMS TO BE ALMOST ENTIRELY RECOVERED BY THE END OF 2020 SOLID FINANCIAL STRUCTURE LIQUIDITY WILL ENABLE US TO MEET OBLIGATIONS FALLING DUE AND SERVICE DEBT BEYOND 2024 UPDATED GUIDANCE FOR 2020: EBITDA > 8% versus 2019 (€1,042m) RAISED Previous guidance +6%/+8% CAPEX broadly in line with 2019 (€793m) CONFIRMED NET DEBT €3.45 -3.55bn CONFIRMED H1 2020 Results 62
ACEA Group Executive summary “Covid - 19 emergency”: the Acea Group’s response in H1 2020 Use of smart working Guaranteed continuity Ongoing « dialogue» with local arrangements continued and efficiency of all the communities and all the services provided. Group’s stakeholders . Rollout of serological testing for RECOVERY Plan already «Covid-19» for 3,000 employees. launched. Over 1,900 tests carried out. THE EUROPEAN REGULA TORY FRAMEWORK IS EVOLVING: GROWTH OPPORTUNITIES Green Deal - National Energy and Climate Plan - Recovery Fund - ‘‘ Simplifications ’’ Decree Acea confirms its strong commitment to: Utilities will play a central role in the country’s «restart» . The European • Reducing the infrastructure gap, above all in Integrated water cycle, Green Deal will help to relaunch the water sector in Italy energy transition, investment that will be a key driver of the • Improving the quality of the services offered circular economy, economic recovery. networks, smart cities, • Ongoing delivery of digitalisation e-mobility …. • Sustainable development • The energy transition Plan to double the capacity of the Peschiera Acqueduct included in the ‘‘ Simplifications ’’ Decree as a ‘‘ priority project’’ for Italy. H1 2020 Results 63
ACEA Group H1 2020 financial highlights EXCELLENT PERFORMANCE OF REGULATED H1 2020 H1 2019 % change (€m) BUSINESSES (Water, Electricity Distribution) (a) (b) (a/b) ABILITY TO RECOVER OF NON-REGULATED Consolidated revenue 1,622.0 1,553.1 +4.4% ACTIVITIES MOST EXPOSED TO THE CRISIS EBITDA 568.7 502.6 +13.2% CONSOLIDATION OF ACQUEDOTTO DEL EBIT 277.4 260.2 +6.6% FIORA (AdF) CONTRIBUTION FROM NEW ACQUISITIONS 143.8 143.0 +0.6% Group net profit Average Group workforce H1 2020 H1 2019 Change Capex 410.6 342.0 +20.1% 7,909 6,611 +1,298* 30 June 2020 31 Dec 2019 30 June 2019 % change % change (€m) (a) (b) (c) (a/b) (a/c) Net debt 3,527.5 3,062.8 2,842.5 +15.2% +24.1% * The increase in the workforce is primarily due to changes in scope (AdF +402; Acea Perù +437; Environment +172; Simam +132) H1 2020 Results 64 MIL 190401 - Piano Industriale 201 ...
EBITDA ACEA Group Contribution to EBITDA of consolidationof AdF, EBITDA H1 2020 Consorcio Agua Azul and new acquisitions 54% (€m) H1 2020 H1 2019 Water Energy 36% AdF 30.6 ^^2.6 Infrastructure Commercial & 5% Consorcio Agua Azul 5.0 ^^0.6 Trading 5% Environment Pescara Distribuzione Gas 1.1 0.5 2% Overseas Demap 2.0 - 1% Engineering Berg 1.1 - Corporate -3% Ferrocart/Cavallari/Multigreen 1.6 - Simam 1.1 - Photovoltaic 5.7 - TOTAL 48.2 3.7 EBITDA (€m) 5.9** 12.8 568.7 61.4* 502.6 (1.4) (7.3) (5.3) H1 2019 Water Energy Commercial & Environment Overseas Other^ H1 2020 Infrastructure Trading 305.4 206.1 29.8 26.2 13.8 (12.6) EBITDA (€m) * Line-by-line consolidation of AdF ** Line-by-line consolidation of Consorcio Agua Azul, following the increase in the interest to 44% ^ Engineering, Corporate ^^ Contribution from consolidation using the equity method H1 2020 Results 65 MIL 190401 - Piano Industriale 201 ...
EBITDA and quantitative data ACEA Group H1 2020 financial highlights Water Including gas distribution (€m) % change H1 2020 H1 2019 KEY HIGHLIGHTS (a/b) (a) (b) Agreement for Acquisition of 51% of ‘‘Alto Sangro Distribuzione Gas’’ EBITDA 305.4 244.0 +25.2% Acea ATO2 200.8 +13.6% 176.8 EBITDA GROWTH Acea ATO5 15.7 +19.8% 13.1 Application of Tariff Regime for third regulatory Gori 39.5 34.2 +15.5% period 2020-2023 (Arera Resolution 580/2019): AdF 30.6 2.6 n/s EBITDA • effect of investment in growth Equity-accounted water companies 15.8 +3.9% 15.2 main • no award of bonus for commercial quality drivers (€16.8m), offset by recognition of new Other consolidated water 1.9 1.6 +18.8% cost components (including those relating companies to sludge disposal) Pescara Distribuzione Gas 1.1 0.5 n/s Line-by-line consolidation of AdF (from October 2019): +€28.0m Capex 229.2 168.3 +36.2% Acquisition of Pescara Distribuzione Gas (March 2019): +€0.6m H1 2020 Results 66 MIL 190401 - Piano Industriale 201 ...
EBITDA and quantitative data ACEA Group H1 2020 financial highlights Energy Infrastructure KEY HIGHLIGHTS (€m) H1 2020 H1 2019 % change Acquisition of new photovoltaic plants on the (a) (b) (a/b) secondary market, increasing total capacity to ~45 MWp EBITDA 206.1 193.3 +6.6% 40 MWp on primary market already authorised - Distribution 181.3 168.2 +7.8% EBITDA GROWTH - Generation 24.1 25.4 -5.1% Distribution: +€13.1m (primarily due to tariff and - Public Lighting 0.7 -0.3 n/s regulatory effects) Capex 141.3 133.4 +5.9% EBITDA Public Lighting: +€1.0m (new lighting points) main drivers Generation: - €1.3m: Declining volumes and sharp fall in energy market prices, partly due to Covid-19 emergency Fhotovoltaic +€5.7m Total elec tr ic ity Total elec tr ic ity Numbe r of PO Ds distr ibuted ( G W h ) pr oduc ed ( G W h ) ( ‘0 0 0 s ) 4,755 4,256 1,631 1,635 340 321* H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 * of which photovoltaic: 28 GWh H1 2020 Results 67 MIL 190401 - Piano Industriale 201 ...
EBITDA and quantitative data ACEA Group H1 2020 financial highlights Commercial & Trading KEY HIGHLIGHTS Increased customer base on free market Ability to recover from an emergency situation, offsetting impact of enhanced protection market regulation and reduced consumption of business (€m) H1 2020 H1 2019 % change customers (a) (b) (a/b) EBITDA EBITDA 29.8 31.2 -4.5% EBITDA Increased margin on free market: greater main number of mass market customers Capex 17.4 18.5 -5.9% drivers Reduction in margin on enhanced protection market: revised mechanism for compensating for delinquent accounts (ARERA Resolution 100/2020) Reduction in business customers’ consumption in March-June period due to Covid-19 emergency Free market Enhanced protection market N umber of gas Total ener gy sold Total gas sold N u mb er of elec tr ic ity c ustomer s (‘000s) (Mm 3 ) ( G W h ) c ustomer s ( ‘0 0 0 s ) 3,368 1,180 1,160 3,134 1,017 1,136 766 813 198 179 2,351 90 1,998 83 414 347 H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 H1 2020 Results 68 MIL 190401 - Piano Industriale 201 ...
EBITDA and quantitative data ACEA Group H1 2020 financial highlights Environment KEY HIGHLIGHTS H1 2020 (€m) H1 2020 H1 2019 % change Acquisition of 60% of Ferrocart/Cavallari/ (a) (b) (a/b) Multigreen (waste storage, treatment and sorting) EBITDA 26.2 33.5 -21.8% of which: Demap 2.0 - n/s EBITDA Berg 1.1 - n/s Acquisition of Demap (July 2019): +€2.0m EBITDA Ferrocart/Cavallari/ 1.6 - n/s Acquisition of Berg (October 2019): +€1.1m main Multigreen Acquisition of Ferrocart/Cavallari/Multigreen drivers (April 2020): +€1.6m Capex 9.5 10.6 -10.4% Increase in disposal tariffs and volume End of CIP6 incentives from 1 August 2019 (- €18.0m) E ner gy sold ( G W h ) T re atme nt and disposal* ( Kt onne s ) 778 631 173 170 H1 2019 H1 2020 H1 2019 H1 2020 * Includes ash disposed of H1 2020 Results 69 MIL 190401 - Piano Industriale 201 ...
EBIT and net profit ACEA Group EBIT (€m) NET PROFIT ( €m) 277.4 260.2 143.8** 143.0* H1 2019 H1 2020 H1 2019 H1 2020 TAX RATE 30.0% 30.5% * Net profit H1 2019: Recognition of non-recurring item ( €1.5m) relating to Agua Azul Bogotà Presence of CIP6 incentives (Environment segment), ended 1 August 2019 (€13m) ** Net profit H1 2020: Impact of consolidation of AdF and Consorcio Agua Azul fully offset by at the level of net profit by effect of profit attributable to non-controlling interests (€m) H1 2020 H1 2019 % change Depreciation 239.9 200.1 +19.9% Consolidation of AdF (€13.0m) Increased capex, above all in Water segment Write-downs 43.8 36.0 +21.7% Effect of Covid-19 emergency and consolidation of AdF (€0.9m) Provisions 7.5 6.3 +19.0% Consolidation of AdF (€0.7m) T otal 291.2 242.4 +20.1% H1 2020 Results 70 MIL 190401 - Piano Industriale 201 ...
Capex ACEA Group Growth in capex on regulated activities continues Investment in regulated 88% businesses Investment in non- 12% regulated businesses Capex: +20.1% 410.6 7.9 4.7 60.9 (1.1) 342.0 (1.1) (2.7) H1 2019 Water Energy Commercial & Environment Overseas Other* H1 2020 Infrastructure Trading Capex (€m) 229.2 141.3 17.4 9.5 0.9 12.3 • Repair and widening of • Upgrade and expansion of • Customer • San Vittore • Agua de San • Corporate: IT water and sewage grid acquisition plant Pedro: reduced projects pipes investment • ’Resilience’’ plan with • IT systems • Expansion of • Extraordinary work on secondary Orvieto landfill maintenance of water substations and on the MV centres and LV network • Work on treatment plants • Consolidation of AdF (€15.5m) * Engineering, Corporate H1 2020 Results 71 MIL 190401 - Piano Industriale 201 ...
Cash flow ACEA Group Continued focus on reducing working capital H1 2020 H1 2019 EBITDA 569 503 Change in working capital (210) (96) The increase in net working capital in H1 2020 Capex (411) (342) is primarily due: (52) 65 FREE CASH FLOW • seasonal effects Net finance income/(costs) (43) (43) • Covid-19 emergency: Change in provisions (56) (54) payments in arrears at Acea Energia and the water Income tax paid (45) - companies (~€60m) (166) (151) Dividends deferred collection of regulatory items (~€60m) (16) (19) Other (86) (15) M&A - (57) IFRS 16 TOTAL CASH FLOW (464) (274) EBITDA Change in Capex Finance Change in Income M&A Total cash Dividends Other H12020 costs working capital provisions tax paid flow 569 (210) (411) (43) (56) (45) (166) (16) (86) (464) H1 2020 Results 72 MIL 190401 - Piano Industriale 201 ...
ACEA Group Net debt 30 June 2020 31 Dec 2019 30 June 2019 Change Change (€m) (a) (b) (c) (a-b) (a-c) Net debt 3,527.5 3,062.8 2,842.5 464.7 685.0 Medium/long-term 4,095.8 3,523.3 3,431.1 572.5 664.7 Short-term (568.3) (460.5) (588.6) (107.8) 20.3 NET DEBT/ EBITDA LTM 29 January 2020 – Issue of bonds worth 30 June 2020 €500m under EMTN. Bonds have a 9-year term and pay a fixed rate of 0.50% 3.2x Structure of debt (maturity and interest rates at 30 June 2020) 3% 18% Ratings > Fixed rate 82% BBB+ > Average cost 1.82% Stable Outlook 82% > Average term 5.85 years 97% Debt falling due after 2021 Baa2 Floating rate Fixed rate Debt falling due by 2021 Stable Outlook H1 2020 Results 73 MIL 190401 - Piano Industriale 201 ...
ACEA Group Q1 2020 Results TITOLO CAPITOLO TITOLO PRESENTAZIONE / Luogo e data
Executive summary Acea Group Constant growth in the last three years CAPEX (€m) DPS (€) EBITDA (€m) FOCUS ON INFRASTRUCTURE, INNOVATION AND CREATION OF SHAREHOLDER VALUE EFFICIENCY AND COMUNITY ENGAGEMENT SUSTAINABILITY 1,042 933 840 793 0.78 631 0.71 0.63 532 2017 2018 2019 2017 2018 2019 2017 2018 2019 SHARE PRICE AT ALL-TIME HIGH since 27 April 2017 (the date the new Board of Directors took office): +38.6 % between 27 April 2017 and 31 December 2019 In early 2020, the significant market «volatility» caused by the «Covid-19 emergency» has influenced the performance of Acea’s share price, pushing it downwards. At 12 May 2020, the price stood at € 16.41 (+23.4% compared with 27 April 2017). « WATER EMERGENCY » (Q3 2017) effectively dealt with, ensuring continuity of service ( ~2,300 interventions, with large reduction in network leaks) Agreement with Open Fiber (January 2018) for the rollout of an ultrafast broadband communications network in the city of Rome. Evolving business mix: acquisitions in gas, environment and photovoltaic sectors, consolidation of Gori and Acquedotto del Fiora: 51% of Pescara Distribuzione Gas - entry into the gas distribution market (March 2019) 90% of Demap – the owner of a plastic treatment plant (July 2019) Photovoltaic plants with capacity of up to ~29MWp (between July 2019 and early 2020) 60% of Berg – a provider of liquid waste treatment services (October 2019) Consolidation of the water companies, Gori (November 2018) and Acquedotto del Fiora (October 2019) Other acquisitions in early 2020 (51% of Alto Sangro Distribuzione Gas; 60% of Ferrocart and Cavallari; 70% of Simam) Bond issues totalling € 2bn New BUSINESS PLAN 2019-2022 approved (April 2019) bringing forward targets announced to market in November 2017 by over twelve months. Targets in existing Plan: • EBITDA in 2022: € 1,270m (+36% versus 2018) EBITDA (€m) • RAB in 2022: € 4.8bn (+28% versus 2018) • Capex : € 4bn (in the period 2018-2022) • Dividends of € 800m over life of the Plan Q1 2020 Results 75 MIL 190401 - Piano Industriale 201 ...
Executive summary Acea Group “Covid - 19 emergency” : the Acea Group’s response Establishment of a Committee for managing Covid-19 preventive measures Reorganisation of work with expanded use of digital tools and the large-scale adoption of smart working arrangements (with over 85% of staff working from home) Guranteed continuity and efficiency of all the services provided. Ongoing « dialogue» with local communities and all the Group’s stakeholders . Introduction of special insurance cover for the Group’s employees and their families. Special attention paid to employees with underlying health issues. Donations to the health service (the Lazzaro Spallanzani and Agostino Gemelli hospitals). 6,369 hours donated by the Group’s employees to the Lazzaro Spallanzani hospital. Launch of a progessive, phased RECOVERY PLAN . Q1 2020 Results 76 MIL 190401 - Piano Industriale 201 ...
Acea Group Executive summary Continued improvement in results and development of the Group’s businesses THE ACEA GROUP CONTINUED TO DELIVER GROWTH IN THE FIRST QUARTER OF 2020, DRIVEN BY OUR MAJOR INVESTMENT PROGRAMME EBITDA of € 276m +12% versus Q1 2019 EBIT of € 137m +3% versus Q1 2019 Capex of € 190m +26% versus Q1 2019 KEY EVENTS DURING THE FIRST QUARTER OF 2020: • Successful placement of a €500m bond issue , with a term of 9 years and paying interest of 0.50% (January 2020). • Signature of an agreement to acquire 51% of «Alto Sangro Distribuzione Gas» (537 km of network, 34,000 redelivery points in the province of l’Aquila ). The transaction is in line with the gas market growth strategy and strengthens Acea’s presence in the sector in Abruzzo (March 2020). KEY EVENTS AFTER 31 MARCH 2020: • Signature of an agreement for the acquisition of 60% of «Ferrocart» and «Cavallari» (which owns 100% of Multigreen) – 4 waste storage, treatment and sorting plants, handling 145 thousand tonnes per year (April 2020). • Signature of an agreement for the acquisition of 70% of Simam, a leader in the design, construction and operation of liquid waste treatment plants and in the delivery of environmental and remediation projects, offering integrated high- tech solutions (May 2020) Q1 2020 Results 77 MIL 190401 - Piano Industriale 201 ...
Acea Group Covid-19 Initial assessment of potential impact of “Covid - 19 emergency” on Acea Group The impact of the «Covid-19 emergency» on the operating results for the first quarter of 2020 is negligible thanks to the Acea Group’s resilience , reflecting the fact that we primarily operate regulated businesses (contributing approximately 85% of consolidated EBITDA). In the last few days of the first quarter, we saw a slowdown in cash generated by sales, the impact of which will be offset over the coming months. The Group also has significant cash reserves : approximately € 800m at 31 March 2020, in addition to approximately € 600m in new loans and committed credit facilities in the process of being finalised. This liquidity will enable us to meet our obligations and service debt through to 2024 and beyond. In terms of the potential outlook for the impact of the «Covid-19 emergency » on the Acea Group’s financial performance, we do not expect – based on the current situation – that there will be a significant effect on the results for the current year. THE PREVIOUSLY ANNOUNCED GUIDANCE FOR 2020 IS CONFIRMED: (assuming a full return to normal business activity from 1 July 2020) EBITDA +6%/+8% versus 2019 (€1,042m) CAPEX broadly in line with 2019 (€793m) NET DEBT €3.45 -3.55bn Q1 2020 Results 78 MIL 190401 - Piano Industriale 201 ...
Acea Group Q1 2020 financial highlights Contribution to EBITDA of consolidation of Acquedotto del Fiora and new acquisitions Q1 2020 Q1 2019 % change (€m) (€m) Q1 2020 Q1 2019 (a) (b) (a/b) Acquedotto del Fiora 15.1 1.4° Consolidated revenue 833.5 823.3 +1.2% Pescara Distribuzione Gas 0.5 - EBITDA 276.4 247.9 +11.5% Demap 1.2 - EBIT 136.8 132.8 +3.0% Berg 0.6 - 70.6 75.5 -6.5% Group net profit Photovoltaic 2.3 - Capex 190.0 151.2 +25.7% Average Group workforce 31 Mar 2020 31 Dec 2019 31 Mar 2019 % change % change (€m) Q1 2020 Q1 2019 Change (a) (b) (c) (a/b) (a/c) Net debt 3,184.4 3,062.8 2,675.7 +4.0% +19.0% 7,706 6,608 +1,098* Contribution from consolidation of equity-accounted investments ° * The increase in the workforce is primarily due to changes in scope (Acquedotto del Fiora +399; Pescara Distribuzione Gas +13; Acea Perù +499; Consorcio Agua Azul +32; Demap +15; Berg +18 ) Q1 2020 Results 79 MIL 190401 - Piano Industriale 201 ...
EBITDA Acea Group EBITDA Q1 2020 53% Water 37% 85% Energy Infrastructure EBITDA from regulated businesses 6% Commercial & Trading 4% Environment 15% EBITDA from non- 2% Overseas regulated businesses 1% Engineering & Services -3% Corporate EBITDA (€m) 3.4* 0.7 5.9 276.4 23.7^ 247.9 (0.8) (4.4) Q1 2019 Water Energy Commercial & Environment Overseas Other** Q1 2020 Infrastructure Trading EBITDA 145.3 101.4 17.1 12.5 7.2 (7.1) (€m) ^ Line-by-line consolidation of Acquedotto del Fiora * Line-by-line consolidation of Consorzio Agua Azul, following the increase in the interest to 44% ** Engineering & Services, Corporate Q1 2020 Results 80 MIL 190401 - Piano Industriale 201 ...
EBITDA and quantitative data Acea Group Q1 2020 financial highlights Water Including gas distribution (€m) % change KEY HIGHLIGHTS Q1 2020 Q1 2019 (a/b) Line-by-line consolidation of Acquedotto del (a) (b) Fiora EBITDA 145.3 121.6 +19.5% Acquisition of Pescara Distribuzione Gas Acea ATO2 99.4 89.5 +11.1% Acea ATO5 5.4 6.6 -18.2% EBITDA GROWTH Gori 17.0 17.9 -5.0% Acquedotto del Fiora 15.1 1.4 n/s Application of Tariff Regime for third regulatory period 2020-2023 (Arera Equity-accounted water companies 6.9 5.5 +25.5% Resolution 580/2019): EBITDA Other consolidated water companies 1.0 0.7 +42.9% effect of investment in growth main Pescara Distribuzione Gas 0.5 - n/s drivers recognition of new cost components Capex 104.0 73.1 +42.3% no award of bonus for commercial quality Line-by-ine consolidation of Acquedotto del Fiora (from October 2019): +€13.7m Acquisition of Pescara Distribuzione Gas (March 2019): +€0.5m Q1 2020 Results 81 MIL 190401 - Piano Industriale 201 ...
EBITDA and quantitative data Acea Group Q1 2020 financial highlights Energy Infrastructure (€m) Q1 2020 Q1 2019 % change KEY HIGHLIGHTS (a) (b) (a/b) Acquisition of new photovoltaic plants, increasing EBITDA 101.4 95.5 +6.2% total capacity to ~29 MWp - Distribution 91.0 81.8 +11.2% EBITDA GROWTH - Generation 11.0 14.9 -26.2% Distribution: +€9.2m - Public lighting (0.6) (1.2) n/s Capex 66.2 63.7 +3.9% EBITDA Public lighting: +€0.6m (new lighting points) main drivers Generation: - €3.9m: • Hydroelectric production - €3.0m (sharp reduction in market prices, partly due to the “Covid - 19 emergency”) • photovoltaic +€2.3m • Recognition in Q1 2019 of non-recurring components ~€3m Total elec tr ic ity N umber of c ustomer s Total elec tr ic ity distr ibuted ( G W h ) ( ‘0 0 0 s ) pr oduc ed ( G W h ) 2,454 2,308 1,630 1,636 146 167 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2020 Results 82 MIL 190401 - Piano Industriale 201 ...
EBITDA and quantitative data Acea Group Q1 2020 financial highlights Commercial & Trading KEY HIGHLIGHTS Increased customer base (€m) Q1 2020 Q1 2019 % change (a) (b) (a/b) EBITDA Increased margin on free market: greater EBITDA EBITDA number of mass market customers 17.1 16.4 +4.3% main drivers Capex 9.0 6.1 +47.5% Reduction in margin on enhanced protection market: revised mechanism for compensating for delinquent accounts (ARERA Resolution 100/2020) Reduction in business customers’ consumption in March due to “Covid - 19 emergency” Free market Enhanced protection market N umber of gas N umber of Total gas sold Total ener gy sold c ustomer s (‘000s) ( G W h ) elec tr ic ity c ustomer s ( ‘0 0 0 s ) (Mm 3 ) 1,795 1,646 1,189 1,173 532 599 195 177 775 831 68 64 1,263 1,047 342 414 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2020 Results 83 MIL 190401 - Piano Industriale 201 ...
EBITDA and quantitative data Acea Group Q1 2020 financial highlights Environment KEY HIGHLIGHTS Q1 2020 (€m) Q1 2020 Q1 2019 % change Acquisition of 90% of Demap (plastic treatment) (a) (b) (a/b) Acquisition of 60% of Berg (liquid waste treatment) EBITDA 12.5 16.9 -26.0% of which: Demap 1.2 - n/s EVENTS AFTER 31 MARCH 2020 Berg 0.6 . n/s Agreement for acquisition of 60% of «Ferrocart» and «Cavallari» (waste Capex 3.9 3.1 +25.8% storage, treatment and sorting) EBITDA Acquisition of Demap (July 2019): +€1.2m EBITDA Acquisition of Berg (October 2019): +€0.6m T re atme nt and E lec tr ic ity sold ( G W h ) main disposal* ( Kt onne s ) drivers End of CIP6 incentives from 1 August 2019 (- €6.6m) 384 304 85 87 Q1 2019 Q1 2020 Q1 2019 Q1 2020 * Includes ash disposed of Q1 2020 Results 84 MIL 190401 - Piano Industriale 201 ...
EBIT and net profit Acea Group EBIT (€m) NET PROFIT ( €m) 132.8 136.8 75.5* 70.6** Q1 2019 Q1 2020 Q1 2019 Q1 2020 TAX RATE 29.6% 30.0% * Net profit Q1 2019: Recognition of non-recurring item ( €1.5m ) relating to Agua Azul Bogotà Presence of CIP6 incentives (Environment segment), ended 1 August 2019 (€5m) ** Net profit Q1 2020: Impact of consolidation of Acquedotto del Fiora fully offset by at the level of net profit by effect of profit attributable to non-controlling interests (€m) Q1 2020 Q1 2019 % change Depreciation 117.1 95.2 +23.0% Consolidation of Acquedotto del Fiora (€6.3m) Increased capex Write-downs 19.9 18.6 +7.0% Consolidation of Acquedotto del Fiora (€0.6m) Provisions 2.6 1.4 +85.7% Consolidation of Acquedotto del Fiora (€0.5m ) T otal 139.6 115.2 +21.2% Q1 2020 Results 85 MIL 190401 - Piano Industriale 201 ...
Capex Acea Group Capex growth continues across all areas of business, with focus on regulated activities Investment in regulated 87% businesses Investment in non- 13% regulated businesses Capex: +25.7% 190.0 2.9 0.8 2.4 30.9 2.5 151.2 (0.7) Q1 2019 Water Energy Commercial & Environment Overseas Other* Q1 2020 Infrastructure Trading Capex (€m) 104.0 66.2 9.0 3.9 0.8 6.1 • C ustomer • M onterotondo • A gua de San • C orporate: IT • Repair and widening of • Upgrade and expansion of grid acquisition M arittimo plant P edro: minor projects water and sewage pipes • ’Resilience’’ plan with work investment • Extraordinary maintenance on secondary substations • IT systems • Expansion of and on the M V and LV O rvieto landfill of water centres • C loud licences for network new ‘‘C ustomer • Work on treatment plants • Work on O rte, Sant’A ngelo Relationship • C onsolidation of A dF and Salisano hydroelectric M anagement’’ (€6.7m) plants and T or di V alle and M ontemartini thermoelectric plants * Engineering & Services, Corporate Q1 2020 Results 86 MIL 190401 - Piano Industriale 201 ...
Cash flow Acea Group Continued focus on reducing working capital Q1 2020 Q1 2019 EBITDA 276 248 Change in working capital (146) (88) Capex (190) (151) Net working capital requirements in Q1 2020 due to: FREE CASH FLOW (60) 9 Seasonal effects (also present in Q1 2019) Net finance income/(costs) (22) (20) Change in provisions (23) (22) Delay in collections by Acea Energiaand water companies due to «Covid-19 (4) - Income tax paid emergency» ( ~€40/50m) - - Dividends (7) (8) Other (4) (12) M&A IFRS 16 (2) (55) TOTAL CASH FLOW (122) (108) Finance Income Total cash Change in Other M&A IFRS 16 Change in Capex EBITDA costs tax paid flow provisions Q1 2020 working capital 276 (146) (190) (22) (7) (4) (2) (122) (23) (4) Q1 2020 Results 87 MIL 190401 - Piano Industriale 201 ...
Acea Group Net debt 31 Mar 2020 31 Dec 2019 31 Mar 2019 Change Change (€m) (a) (b) (c) (a-b) (a-c) Net debt 3,184.4 3,062.8 2,675.7 121.6 508.7 Medium/long-term 4,026.5 3,523.3 2,979.6 503.2 1,046.9 Short-term (842.1) (460.5) (303.9) (381.6) (538.2) NET DEBT/ EBITDA LTM NET DEBT/ EQUITY 31 MARCH 2020 31 MARCH 2020 29 January 2020 – Issue of bonds worth €500m under EMTN. Bonds have a 9-year 3.0x 1.4x term and pay a fixed rate of 0.50% Structure of debt Ratings (maturity and interest rates at 31 March 2020) 2% Affirmed on 12 May 2020 19% BBB+ despite the recent downgrading > Fixed rate 81% Stable Outlook of Italy’s sovereign debt rating > Average cost 1.93% 81% > Average term 6.16 years 98% Baa2 Stable Outlook Debt falling due after 2020 Floating rate Fixed rate Debt falling due by 2020 Q1 2020 Results 88 MIL 190401 - Piano Industriale 201 ...
ACEA Group 2019 Results TITOLO CAPITOLO TITOLO PRESENTAZIONE / Luogo e data
Acea Group Performance and delivery Growth, consistency, reliability, sustainability CONSTANT GROWTH SINCE THE NEW BOARD OF DIRECTORS TOOK OFFICE (27 APRIL 2017) 2019: SHARE PRICE AT ALL-TIME HIGH, AS ACEA OUTPERFORMS THE MARKET (FTSE ITALIA ALL SHARE +27.2%) 2019 FROM 27 APRIL 2017 TO 31 DECEMBER 2019 (€) (€) +38.6% +53.5% (Source: Bloomberg) (Source: Bloomberg) BEST EVER RESULTS, BEATING ALL OUR TARGETS EBITDA (€m) DEBT/EBITDA (x) NET WORKING CAPITAL (€m) CAPEX (€m) EFFICIENCY AND SOLID FINANCIAL REDUCED WORKING CAPITAL FOCUS ON INFRASTRUCTURE, COMMUNITY ENGAGEMENT STRUCTURE DEMANDS INNOVATION AND SUSTAINABILITY 1,042 933 840 793 2019 2017 2018 631 532 2.9x 2.9x -16 2.8x -35 -117 2017 2018 2019 2017 2018 2019 2017 2018 2019 2019 Results 90 MIL 190401 - Piano Industriale 201 ...
Acea Group Delivery Business Plan and acquisitions NEW BUSINESS PLAN 2019-2022 APPROVED ON 2 APRIL 2019, BRINGING FORWARD TARGETS ANNOUNCED TO THE MARKET IN NOVEMBER 2017 BY MORE THAN TWELVE MONTHS EBITDA (€m) PLAN 2019-2022 1,042 933 972 Targets in existing Plan: 840 916 • EBITDA in 2022: € 1,270m (+36% versus 2018) • RAB in 2022: € 4.8bn (+28% versus 2018) Old PLAN 2018-2022 • Capex : € 4bn (in the period 2018-2022) • Dividends : € 800m over life of the Plan 2017 2018 2019 BUSINESS PLAN CONFIRMS GROWTH IN FUNDAMENTALS ASSOCIATED WITH CONCRETE SUSTAINABILITY GOALS (environmental impact, circular economy, reduced water loss , customer care…..). ACEA WAS CREATED TO BE SUSTAINABLE. ACEA’S CEO WINS TOP UTILITY 2020 AWARD FOR SUSTAINABILITY. AN EVOLVING BUSINESS MIX: ACQUISITIONS IN THE GAS, ENVIRONMENT AND PHOTOVOLTAIC SECTORS AND CONSOLIDATION OF ACQUEDOTTO DEL FIORA MARCH 2019 JULY 2019 OCTOBER 2019 ACQUISITION OF 51% ACQUISITION OF 90% OF AGREEMENTS REACHED FOR ACQUISITION OF 60% AMENDMENT OF ACQUEDOTTO DEL ACQUISITION OF INTEREST IN PESCARA DEMAP, OWNER OF A INTEREST IN BERG, A FIORA’S ARTICLES OF ASSOCIATION DISTRIBUZIONE GAS PLASTIC TREATMENT PHOTOVOLTAIC PLANTS PROVIDER OF LIQUID WASTE AND SHAREHOLDER AGREEMENTS TO COMPLETED PLANT WITH TOTAL CAPACITY OF TREATMENT SERVICES ENABLE THE COMPANY’S APPROXIMATELY 25 MWp CONSOLIDATION BY THE ACEA GROUP 2019 Results 91 MIL 190401 - Piano Industriale 201 ...
2019 financial highlights Acea Group 2019 2018 % change (€m) (a) (b) (a/b) Consolidated revenue 3,186.1 3,028.5 +5.2% EBITDA +12% : well ahead of guidance • Initial guidance : +5%/+6% EBITDA 1,042.3 933.2 +11.7% • Guidance provided in H1 2019: ≥ +7% EBIT 518.1 478.6 +8.3% • Guidance provided in 9M 2019: ≥ +10% 283.7 271.0 +4.7% Group net profit 0.78 0.71 +9.9% Dividend per share (€) Capex 792.8 630.8 +25.7% Net debt : below lower end of guidance 31 Dec 2019 30 Sept 2019 31 Dec 2018 % change % change (€m) (€2.85 -2.95bn). (a) (b) (c) (a/b) (a/c) €2.83bn excluding impact of IFRS 16, M&A and consolidation of Acquedotto del Fiora Net debt 3,062.8 2,960.3 2,568.0 +3.5% +19.3% GUIDANCE 2020: FURTHER GROWTH EXPECTED EBITDA +6%/+8% versus 2019 (€ 1,042m) in line with the CAGR in Business Plan 2019-2022 CAPEX broadly in line with 2019 and the Business Plan 2019-2022 NET DEBT € 3.45-3.55bn 2019 Results 92 MIL 190401 - Piano Industriale 201 ...
EBITDA Acea Group EBITDA 2019 48% Water 81% EBITDA from regulated 37% Energy Infrastructure businesses 7% Commercial & Trading 19% EBITDA from non- 5% Environment regulated businesses 2% Overseas 1% Engineering & Services EBITDA (€m) Contribution to EBITDA from consolidation of Gori, Acquedotto del 1,042.3 31.3 24.3 2.1 72.0 Fiora and new acquisitions (€m) 933.2 (13.6) (7.0) 2019 2018 Gori 68.6 14.7° Acquedotto del Fiora 18.1 4.6°° Pescara Distribuzione Gas 1.7 - Fotovoltaico 3.6 - 2018 Water Energy Commercial & Environment Overseas Other* 2019 Demap 1.8 - Infrastructure Trading Berg 0.5 - EBITDA (€m) 505.0 392.0 69.1 52.0 16.9 7.3 * Engineering & Services, Corporate Includes contribution from consolidation of equity- accounted investments, totalling €3m ° °° Contribution from consolidation of equity-accounted investments 2019 Results 93 MIL 190401 - Piano Industriale 201 ...
EBITDA and quantitative data Acea Group 2019 financial highlights Water Including gas distribution business (€m) 2019 2018 % change KEY HIGHLIGHTS (a) (b) (a/b) October 2019: line-by-line consolidation of EBITDA 505.0 433.0 +16.6% Acquedotto del Fiora March 2019: acquisition of Pescara Distribuzione Acea ATO2 356.1 357.4 -0.4% Gas Acea ATO5 24.4 20.8 +17.3% Gori 68.6 11.7 n/s EBITDA GROWTH Acquedotto del Fiora 18.1 - n/s Line-by-line consolidation of Gori Equity-accounted water companies 36.2 39.9 -9.3% (from November 2018): +€53.9m Other consolidated water companies (0.1) 3.2 n/s Line-by-line consolidation of Acquedotto del Fiora Pescara Distribuzione Gas 1.7 - n/s (from October 2019): +€13.5m Capex 380.1 329.7 +15.3% Acquisition of Pescara Distribuzione Gas (March 2019): +€1.7m EBITDA ATO2: commercial quality bonus +€2.2m main drivers Volumes of w ater Equity-accounted companies: - €3.7m distr ibuted ( M m 3 ) 538 440 2018 2019 2019 Results 94 MIL 190401 - Piano Industriale 201 ...
EBITDA and quantitative data Acea Group 2019 financial highlights Energy Infrastructure (€m) 2019 2018 % change (a) (b) (a/b) KEY HIGHLIGHTS Acquisition of new photovoltaic plants EBITDA 392.0 360.7 +8.7% with total capacity of 28MWp - Distribution 345.4 317.1 +8.9% EBITDA GROWTH - Generation 44.6 49.0 -9.0% of which: Photovoltaic 3.6 - n/s Distribution: +€28.3m - Public Lighting 1.9 (5.4) n/s Public Lighting: +€7.3m (new lighting points EBITDA and cuts to external costs) Capex 287.8 238.3 +20.8% main drivers Generation: - €4.4m: - p hotovoltaic contribution +€3.6m - recognition in 2018 of an extraordinary component of €5m - reduction in volume produced and less price N umber of custome rs Total elec tr ic ity Total elec tr ic ity distr ibuted ( G W h ) pr oduc ed ( G W h ) ( ‘0 0 0 s ) 9,849 9,792 1,641 1,629 550 530 2018 2019 2018 2019 2018 2019 2019 Results 95 MIL 190401 - Piano Industriale 201 ...
EBITDA and quantitative data Acea Group 2019 financial highlights Commercial & Trading KEY HIGHLIGHTS Improvement in sales channels with resulting increase in number of free market customers for electricity (+20.5%) and gas (+11.0%) Improvement in collections (€m) 2019 2018 % change (a) (b) (a/b) EBITDA EBITDA 69.1 -9.2% Increased sales of electricity and gas to 76.1 EBITDA free market customers main Capex 42.5 +72.8% 24.6 Reduced margins essentially due to revised drivers mechanism for compensating for delinquent accounts and to cut in enhanced protection market tariff (RCV component) Enhance… Total ener gy sold ( G W h ) 6,454 N umber of elec tr ic ity 6,055 N umber of gas T otal gas sold ( M m 3 ) c ustomer s c ustomer s (‘ 0 0 0 s ) 2,219 ( ‘0 0 0 s ) 2,370 1,177 1,185 192 173 140 786 128 846 4,235 3,685 331 399 2018 2019 2018 2019 2018 2019 2018 2019 2019 Results 96 MIL 190401 - Piano Industriale 201 ...
EBITDA and quantitative data Acea Group 2019 financial highlights Environment KEY HIGHLIGHTS July 2019: acquisition of Demap (plastics (€m) 2019 2018 % change treatment) (a) (b) (a/b) October 2019: acquisition of Berg (liquid waste treatment) EBITDA 52.0 65.6 -20.7% October 2019: Monterotondo Marittimo Demap 1.8 - n/s composting plant opened Berg 0.5 - n/s EBITDA Capex 51.9 20.0 +159.5% Acquisitions of Demap and Berg (+€2.3m) EBITDA main End of CIP6 incentives from 1 August 2019 drivers (- €16.7m) E lec tr ic ity sold ( G W h ) T re atme nt and disposal* ( Kt onne s ) 1,219 1,120 355 327 2018 2019 2018 2019 * Includes ash disposed of 2019 Results 97 MIL 190401 - Piano Industriale 201 ...
EBIT and net profit Acea Group EBIT (€m) NET PROFIT ( €m) 518.1 478.6 283.7 271.0 Non-recurring components (€m): Non-recurringcomponents (€m): Release of provisions by Gori -44.2 Overvaluation of cancellation of Antitrust fine -16.2 TWS gain -8.9 +10% Antitrust fine +16.2 Release of provisions by Gala adjusted approx. -9 increase 234.1 258.5 2018 2019 2018 2019 TAX RATE 30.4% 28.6% Adjusted net profit DIVIDEND HISTORY (€m) 2019 2018 % change 2017 2018 2019 Consolidation of Gori and Acquedotto del Fiora DPS (€) 0.63 0.71 0.78^ Depreciation 409.6 366.8 +11.7% Increased capex Impact of IFRS 16 Total dividend (€m) 134.2 151.2 166.1 Write-downs 66.8 75.1 -11.1% Dividend yield* 4.7% 5.3% 4.7% Release in 2018 of provisions for Provisions 47.8 12.8 n/s Payout** 74% 56% 59% risks by Gori (€44m) 524.2 454.7 T otal +15.3% * Based on the average price for the year ** Based on consolidated net profit after non-controlling interests ^ The Board of Directors will propose the dividend for 2019 at the Annual General Meeting called for 28 and 29 April 2020, in first and second call, respectively 2019 Results 98 MIL 190401 - Piano Industriale 201 ...
Capex Acea Group Strong capex growth across all areas of business, with focus on regulated activities Investment in 81% regulated businesses Investment in non- 19% regulated businesses Capex (€m) +25.7% 0.4 11.9 792.8 31.9 17.9 49.5 50.4 630.8 2018 Water Energy Commercial & Environment Overseas Other* 2019 Infrastructure Trading Capex 380.1 287.8 42.5 51.9 7.0 23.5 • IT systems • Revamp of • A gua de San • C orporate: IT • Repair and widening of • Upgrade and expansion of M onterotondo P edro: widening projects water and sewage pipes grid • C ustomer M arittimo plant and maintenance • Extraordinary maintenance • ’’Resilience’’ plan with acquisition (opened in of water and work on secondary of water centres O ctober 2019) sewage pipes • C loud licences for substations and on the (Honduras) new ‘‘C ustomer • Work on treatment plants M V and LV network • Expansion of Relationship O rvieto landfill • C onsolidation of Gori • Revamp of M andela M anagement’’ (€44m) hydroelectric plant and of T or di V alle and • C onsolidation of A dF M ontemartini (€11m) thermoelectric plants * Engineering & Services, Corporate 2019 Results 99 MIL 190401 - Piano Industriale 201 ...
Cash flow Acea Group Continued improvement in working capital 2019 2018 EBITDA 1,042 933 Change in working capital (16) (35) Excellent performance of collections with Capex (793) (631) regard to Acea Energia 233 FREE CASH FLOW 267 Working capital demands due to regulatory Net finance income/(costs) (90) (83) impact: €41m Change in provisions (107) (108) Income tax paid (134) (81) Excluding regulatory impact, working capital generated a cash inflow (151) (134) Dividends (12) (35) Other (171) 29 M&A and consolidations (64) - IFRS 16 TOTAL CASH FLOW (495) (146) Finance Change in Change in WC Capex Income Dividends Other Total cash M&A IFRS 16 EBITDA 2019 costs provisions tax paid flow (16) 1,042 (793) (90) (107) (134) 495 (151) (12) (171) (64) 2019 Results 100 MIL 190401 - Piano Industriale 201 ...
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