Acea Business Plan 2018-2022 November 2018
ACEA Group Agenda THE ACEA GROUP TODAY MARKET SCENARIO AND TRENDS NEW BUSINESS PLAN 2018-2022 STRATEGY AND CONSOLIDATED TARGETS MAIN OPERATING SEGMENTS STRATEGIC OPPORTUNITIES CLOSING REMARKS APPENDIX 2
ACEA Group THE ACEA GROUP TODAY A market LEADING multiutility FOOTPRINT MARKET POSITION IN ITALY 2017 EBITDA 2017 Water WATER Energy Infrastructure No. 1 Commercial and Trading • 9m customers Environment • RAB €1.3bn Other ELECTRICITY DISTRIBUTION No. 2 • 1.6m PODs • RAB €1.9bn €840M PUBLIC LIGHTING No. 5 • › 224k Lighting Points operated • 80% LED LATAM ~75% regulated SALE OF ELECTRICITY AND GAS SHAREHOLDERS (1) No. 6 • 1.4m customers • ~6.8 TWh of electricity sold 51.0% Roma Capitale 23.3% Suez ENVIRONMENT 5.0% Caltagirone Group No. 6 • ›1m tons of waste treated 20.7% Other • 354 GWh of electricity produced (1) CONSOB data at November 2018 3
ACEA Group MARKET SCENARIO AND TRENDS SEGMENT TRENDS expected in the coming years in the Group’s core businesses • Strong regulatory and government drive to ensure - greater industrial development WATER - 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 " model • 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 ENVIRONMENT • Circular Economy ("Closing the Loop " ) in order to recycle and recover materials • New plant (greenfield and brownfield) to make up the infrastructure gap , above all in the treatment of organic waste (e.g. biodigesters) 4
ACEA Group STRATEGY AND CONSOLIDATED TARGETS The Group’s new strategic PILLARS Business Plan 2018-2022 Technology, Industrial Local focus and Operational Innovation growth Sustainability Efficiency and Quality Capex of €3bn €400m+ in investment Capex and Opex 15 pp reduction in water leaks linked to innovative discipline RAB €4bn projects (-€300m in total) Decarbonisation with drive for (+€0.8bn vs. actual) "electrification" (boosting available capacity from 20% reduction in Smart Grid and 1.9m Customers 3kW to 6kW for all residential users) cost to serve Power & Gas Smart City Closing the loop and 1.7m tons of waste increasing recovery of Generational Improvements to the treated materials (e.g. sludge and turnover for 300+ Customer Journey (+70% vs. actual) composites) FTEs 5
ACEA Group STRATEGY AND CONSOLIDATED TARGETS Strong and sustainable GROWTH Pre-tax 2020 2022 ROIC >10% >10% EBITDA growth with CAGR +5.9% RAB up 25% by 2022 Growth in Net Profit* 4.1 3.8 1,108 3.2 1,002 840 832 332 282 181 €bn €m 2017 2020 2022 2020 2022 2017 2017 guidance actual guidance CAPEX of €3.1bn NET DEBT/EBITDA down to 2.8X 3.0x 2.9x 2.9x 2.8x 0.6 0.6 0.6 0.6 0.6 0.5 0.5 €bn MULTIPLE 2017 2017 2018 2019 2020 2021 2022 2020 2022 2017 2017 actual guidance actual guidance * Net profit after non-controlling interests (minorities) 6
ACEA Group STRATEGY AND CONSOLIDATED TARGETS EBITDA growth based on solid business rationale CAGR 5.9 % CAGR 6.4% CAGR 5.1% 1,108 11 32 22 37 1,002 4 13 22 66 46 103 17 52,0 158 840 832 109 -31 65 64 78 78 386 374 333 325 €m 446 471 350 346 Tariff Quality Organic New Plants Cost End of 2017 2017 2020 Tariff Quality Organic New Plants Cost 2022 Increases Rewards Growth efficiencies incentives Increases Rewards Growth and M&A efficiencies actual guidance (Cip6) Cross-segment initiatives Performance improvements and cost efficiencies + Generational turnover + Tightening up of operations Energy Comm. and Water Environment Other Infrastructure 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 CONSOLIDATED TARGETS More than €3bn of INVESTMENT STRATEGIC LEVERS GROUP’S INVESTMENT €bn Capex Remix 3.1 3.1 Other 0.1 Commercial Unregulated 0.1 Environment 0.2 15% Energy 1.1 Infrastructure Focus on Regulated 85% Infrastructure 1.6 Water Capex Operating Regulated/ Segment Unregulated Discipline 8
ACEA Group STRATEGY AND CONSOLIDATED TARGETS Over €400m to be invested in INNOVATION GROWTH LEVERS SCOPE OF APPLICAZION Smart & Resilient Grid INFRASTRUCTURE Security and efficiency Smart Meters (electricity and water) Over €400m Automation and Robotics PEOPLE for Welfare of innovative personnel Advanced sensor industrial technology projects Predictive modelling CUSTOMERS Customer-centricity Physical security and Cyber-security 9
ACEA Group STRATEGY AND CONSOLIDATED TARGETS The new SUSTAINABILITY plan Cuts in CO 2 ACEA Group’s >200 (Reduced losses, Purchase of Green ktons Sustainability Energy, Recovery of Biogas) Plan 2018-2022 >15 with targets Reduction in Water Leaks pp associated with investment of 500 Green Energy approx. €1.3bn GWh for internal use within the Group United Nations Reduction in Risk Rating for Sustainable Development Goals (SDGs) -10% electricity grid to boost resilience Waste treated according to +70% Circular Economy concept Safety inspections of maintenance +50% contractors 10
ACEA Group STRATEGY AND CONSOLIDATED TARGETS Growing DIVIDENDS, Pay-out above 50%, €0.7bn 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 2020 2022 2013 2014 2015 2016 2017 2020 2022 11
ACEA Group STRATEGY AND CONSOLIDATED TARGETS Financial strategy aims to cut cost of debt Net Debt (NFP) Stable outlook Stable outlook NFP/EBITDA Ratio Situation at 31 Dec. 2017 3.2 Average Maturity ~5.3 yrs 3.0 Average cost of debt ~2.6% €bn 2.5 €bn February 2018 – successful placing of Euro 1 billion bonds overall under the EMTN Programme in 2.4 two tranches: 300 €m, 5 years, rate 3 months Euribor plus 0.37% 3.0x 700 €m, 9.4 years, fixed rate 1.5% 2.9x 2.9x NFP/ 2.8x EBITDA RATIO The ‘‘all-in’’ average cost of debt at 31 March 2018 is 2.27% with an average term to maturity of 5.9 years 2017 2017 2020 2022 actual guidance 12
WATER Key Targets for the Segment 13
ACEA Group WATER INFRASTRUCTURE DRIVE and efficiency improvements Key initiatives included in Plan 15 pp cut in Water loss • Extraordinary plan to upgrade network, reduce leaks and manage water emergency • Rationalisation of small treatment plants and development/expansion of large plants • Rollout of smart meters 2017 2018 2019 2020 2021 2022 14
ACEA Group WATER EBITDA UP 36% and INVESTMENT of €1.6bn CAGR: 6.4% CAGR: 8.8% CAGR: 2.8% in €m 1 5 471 19 9 13 446 79 EBITDA 350 346 2017 2017 Tariff Commercial Cost 2020 Tariff Organic Cost 2022 2020 2022 actual guidance increase quality efficiencies increase growth efficiencies rewards CUMULATIVE DISTRIBUTION OVER YEARS Key numbers INVESTMENT €1.6 bn 2018-2022 • Over 500k Smart Meters installed • Remediation of 800+ km of water and sewerage network • Expansion of large Treatment Plants and retirement of 40+ small plants • Design for development of Peschiera source Total 2018-2022 2018 2019 2020 2021 2022 • Over 50 water supply projects 15
ENERGY INFRASTRUCTURE Key Targets for the Segment 16
ACEA Group ENERGY INFRASTRUCTURE Becoming an advanced DSO to increase network resilience and enable new services To boost resilience and drive Key initiatives included in Plan electrification • LV network upgrade to: 1m 2G - Increase network resilience Smart Meters - Increase capacity to enable electrification (customers up from 3KW to 6KW) • Rollout of smart grid for city of Rome to enable new services 3 KW - Laying of fibre 6 KW - New 2G meters 17
ACEA Group ENERGY INFRASTRUCTURE EBITDA UP 20% AND INVESTMENT OF €1.1BN CAGR: 3.5% CAGR: 4.8% CAGR: 1.6% in €m 6 3 EBITDA 1 374 386 11 5 3 8 25 333 325 2017 2017 Tariff Quality Organic Cost 2020 Tariff Quality Organic Cost 2022 2020 2022 actual guidance increase rewards gorwth efficiencies increase rewards growth efficiencies CUMULATIVE DISTRIBUTION OVER YEARS Key numbers INVESTMENT 2018-2022 €1.1 bn • 1m Smart Meters • 1,500 km of fibre • 2,500 km of upgraded LV/MV • Automation and remote control systems for Secondary Sub- stations, Public Lighting,... Total 2018-2022 2018 2019 2020 2021 2022 18
COMMERCIAL AND TRADING Key Targets for the Segment 19
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