Delivering value, delivering commitments. January 2017

Transcription

1 Delivering value, delivering commitments January 2017

2 Disclaimer The information contained in this presentation has been prepared by Ence Energía y Celulosa, S.A. (hereinafter, "Ence"). This presentation includes data relating to future forecasts. Any data included in this presentation which differ from other data based on historical information, including, in a merely expository manner, those which refer to the financial situation of Ence, its business strategy, estimated investments, management plans, and objectives related to future operations, as well as those which include the words "anticipate", "believe", "estimate", "consider", "expect" and other similar expressions, are data related to future situations and therefore have various inherent risks, both known and unknown, and possess an element of uncertainty, which can lead to the situation and results both of Ence and its sector differing significantly from those expressly or implicitly noted in said data relating to future forecasts. The aforementioned data relating to future forecasts are based on numerous assumptions regarding the current and future business strategy of Ence and the environment in which it expects to be situated in the future. There is a series of important factors which could cause the situation and results of Ence to differ significantly from what is expounded in the data relating to future forecasts, including fluctuation in the price of wood pulp or wood, seasonal variations in business, regulatory changes to the electricity sector, fluctuation in exchange rates, financial risks, strikes or other kinds of action carried out by the employees of Ence, competition and environmental risks, as well as any other factors described in the document. The data relating to future forecasts solely refer to the date of this presentation without Ence being under any obligation to update or revise any of said data, any of the expectations of Ence, any modification to the conditions or circumstances on which the related data are based, or any other information or data included in this presentation. The information contained in this document has not been verified by independent experts and, therefore, Ence neither implicitly nor explicitly gives any guarantee on the impartiality, precision, completeness or accuracy of the information, opinions and statements expressed herein. This document does not constitute an offer or invitation to acquire or subscribe to shares, in accordance with the provisions of Law 24/1998, of 28 July, on the Securities Market and its regulations. Furthermore, this document does not constitute a purchase, sale or swap offer, nor a request for a purchase, sale or swap offer for securities, or a request for any vote or approval in any other jurisdiction. 2

3 Ence at a glance A hidden value Leading European hardwood pulp (BHKP) producer with close to 1 Mn tons of installed capacity and largest Spanish renewable energy generator with agroforestry biomass High demand growth fuelled by tissue consumption mega-trend Strong competitive position in Europe Highly efficient facilities focused on cash cost reduction Just in time service and de-commoditized offering Powerful cash flow generation: c.70 Mn Recurrent Free Cash Flow expected for 2016 Solid balance sheet and strong liquidity: 1.5 Net Debt / EBITDA and 255 Mn cash available at 30 September 2016 Clear Strategic Plan already on track Supportive shareholder base and proven management: Successful business turnaround delivered in

4 Supportive shareholder base With a strong entrepreneurial track record Shareholding structure (31/12/2016) Board of directors 26.7% 53.4% Retos Operativos XXI, S.L. Asúa Inversiones S.L. 6.2% Alcor Holding, S.A. Fuente Salada S.L. 2.2% 5.6% 5.9% Treasury Stock Free float Independent & External Directors CEO & Vice Chairman Juan Luis Arregui (Retos Operativos XXI), Chairman of the Board, founder of Gamesa and former Vice Chairman of Iberdrola 4

5 Pulp & Energy Two complementary and isolated businesses Eucalyptus pulp production 2015 EBITDA breakdown Biomass energy generation 170 Mn 31 Mn Leading European producer with c. 1 Mn tons of installed capacity Cyclical business largely dependent on USD based global pulp prices Based on Ence`s wood supply management expertise Strong operating know how and efficient facilities with c.60 years experience Maximum leverage policy 2.5x Net Debt / EBITDA, long term capital market financing and high liquidity 84% 16% Pontevedra Facilities Location Huelva Navia Mérida Ciudad Real Jaen Largest operator in Spain with 143 MW of installed capacity Regulated business with high visibility and attractive returns Based on Ence`s agroforestry biomass supply management expertise Strong operating know how and efficient facilities with c.20 years experience Maximum leverage policy 5.0x Net Debt / EBITDA, non recourse bank project financing and sufficient liquidity Taylor made management policy per business and ring fenced financing 5

6 Chemical Market Pulp industry Accounts for only 14% of total paper grade pulp consumption 412 Mn Tons Total Paper Grade Pulp consumption Source: RISI Jan 2016 Recycled: 242 Mnt Mechanical: 30 Mnt Virgin: 170 Mnt Chemical: 140 Mnt Integrated: 82 Mnt Market: 58 Mnt Pulp Source Pulp Processing Integrated vs. Market Pulp Chemical Market Pulp industry Softwood and other: 27 Mnt 31 Mnt Hardwood Pulp Type Ence is the leading European hardwood pulp producer with c. 1 Mn tons of installed capacity, competing in the global Chemical Market Pulp industry 6

7 Hardwood pulp vs. Softwood pulp Eucalyptus pulp is cheaper to produce than softwood pulp Hardwood pulp (BHKP) Softwood pulp (BSKP) Substitutive materials Most hardwood pulp comes from eucalyptus wood Best suited for paper products with high smoothness, opacity and uniformity (i.e. tissue) Iberian Globulus 80% of final paper products allow for different proportions of both pulp types Most softwood pulp comes from pine wood Best suited for paper requiring higher durability and strength (i.e. printing & writing) Nordic Scots pines Forestry yield: m 3 / ha / year Harvesting cycle: years Industrial yield: m 3 / ton of pulp Forestry yield: 2 4 m 3 / ha / year Harvesting cycle: years Industrial yield: m 3 / ton of pulp Low production cost High production cost Eucalyptus only grows under very specific climate conditions, usually in warm subtropical regions. More abundant pines are better adapted to cold climates 7

8 Tight global Chemical Market Pulp supply and demand balance Global demand estimated at 58 Mn tons in 2015 Western Europe North America China 16 Demand Supply Demand Supply Demand Supply South America Rest of the World (Mn Tons) Softwood pulp (BSKP) and other chemical market pulp Hardwood pulp (BHKP) Source: RISI Jan Demand Supply Demand Supply Western Europe and China are net importers of hardwood pulp (BHKP) 8

9 High demand growth for eucalyptus pulp Which is leading global market pulp demand growth Last 10 years total market pulp demand evolution Mn tons + 2.1% CAGR BHKP: + 4.0% CAGR BSKP: + 1.1% CAGR Other : - 4.9% CAGR Source: RISI Last 10 years hardwood pulp demand evolution Mn tons BEKP: + 7.7% CAGR Other BHKP: -0.8% CAGR Source: RISI, Hawkins Wright The more efficient and best suited eucalyptus pulp is gaining market share against other hardwood and softwood pulp, following a demand increase of over 10 Mn tons in the last 10 years 9

10 Fuelled by tissue consumption mega-trend Linked to increasing living standards in developing countries Tissue paper per-capita consumption (kg/year) 15% 85% of world population -3,9% End global paper market demand growth (CAGR ) Newsprint 24-0,6% Specialities P&W 0,8% North Western America Europe 11 Japan Oceania Latam Eastern Europe China ,1 Middle East Other Asia Africa India Packaging 2,8% Tissue 3,3% -4,0% -2,0% 0,0% 2,0% 4,0% Source: RISI Ence 9M16 pulp sales by end paper market Source: RISI 57% of Ence pulp sales are oriented to the fastest growing tissue market, which has increased by c.10 Mn tons in the last 10 years P&W: 9% Specialities: 32% Packaging: 2% Tissue: 57% 10

11 High demand growth requires pulp capacity additions Hardwood pulp demand average growth of 1.4 Mn tons per year Hardwood pulp demand and supply increase ( ) Expected hardwood pulp supply and demand ( ) Mn Tons / Ton Mn Tons 3,0 2,5 2,0 1,5 1,0 0,5 0, , ,3 1,6 1,8 1,3 1,4 1,4 1,4 1,1 0,9 0,9 0, Average ,0 2,5 2,0 1,5 1,0 0,5 0,0 1,6 1,3 1,4 1,4 1,4 1,2 1,3 1,2 0,9 0,7 2016E 2017E 2018E 2019E Average Demand Supply BEKP $/t Demand Supply Source: PPPC Source: Ence estimates Global supply and demand balance should be maintained in the coming years 11

12 New capacity managed by incumbents In a concentrated supply market Softwood pulp (BSKP) global market share Hardwood pulp (BHKP) global market share All other: 40% Georgia Pacific: 8% Weyerhaeuser: 7% All other: 29% Fibria: 18% Sodra: 5% International Paper: 5% Arauco: 7% Metsa: 7% Paper Excellence: 6% Mercer: 6% Ilim: 6% Domtar: 5% Ence: 3% APP and affil.: 4% Cenibra: 5% UPM: 5% El dorado: 5% APRIL: 11% Suzano: 10% CMPC: 7% Arauco: 6% Source: RISI Source: RISI; Hawkins Wright Top 10 softwood pulp producers account for 60% of global BSKP market share Top 10 hardwood pulp producers account for 71% of global BHKP market share 12

13 Pulp international prices Consumption commodity. Not a capex commodity Pulp price Brent, BHKP and BSKP International Prices (Pix Europe) Pulp price BSKP - Softwood Pulp ($/t) BHKP - Hardwood Pulp ($/t) BHKP - Hardwood Pulp ( /t) Pulp prices spread is already at $155/t, above its long-term average of 90 $/t 13

14 EBITDA Net Income EBITDA Net Income EBITDA Net Income Iberian BHKP is the most competitive pulp produced in Europe Narrowing the gap with Latams and widening it with Nordics BSKP Western Europe Pulp Market: 16 Mn Tons BHKP 9 7 Demand Supply / Ton Estimated delivered cash cost for the European pulp market LATAM (BHKP) 287 IBERIA (BHKP) N.EUR (BHKP) 418 N.EUR (BSKP) MnT / Ton Weighted Average FY 2015 EBITDA and Net Income per Ton Latam Iberia Northern Europe Source: RISI, EPIS, Ence Source: Hawkins Wright (Dec 2016) At current exchange rates: 1,06 $/ 3,4 BRL/$ Source: Fibria Suzano CMPC El Dorado Stora Enso Metsa Sodra Mercer Rottneros Altri Company Average 2015 exchange rates: Real/USD: 3,38 USD/ : 1,11 SEK/ : 9,36 Ence has highly efficient facilities focused on cash cost reduction 14

15 Just in time service and differentiated offering Ence key competitive advantages Just in time service 7 de-commoditized products 50 days / 36 /t High client diversification > 100 customers High White JIT short shipping deliveries (5-7 days) Smaller coastal vessels Tailor made products High Porosity Low Fibre Bundles Premium Pulp High Stability Low Energy Refining TCF + ECF qualities High Softness High Bulk JIT deliveries and de-commoditized products strengthen Ence's positioning among its diversified client base 15

16 Biomass energy generation Stable earnings based on our agroforestry management expertise 2016 In 2016 Ence has operated 3 independent agroforestry biomass power plants in Spain with an expected annual Adj. EBITDA of 30 Mn, covering c. 30% of consolidated fixed costs Huelva 50 Mw Mérida 20 Mw Huelva 41 Mw Return on Investment ( /Mw) Return on Operation ( /Mwh) Pool Pool Pool MW acquired New tariffs expected for 2017 In 2017 the contribution of two new power plants with 32MW of installed capacity acquired in December and the expected tariff increase will boost Adj. EBITDA above 40 Mn Huelva 50 Mw Mérida 20 Mw Huelva 41 Mw C.Real 16 Mw Jaén 16 Mw Return on Investment ( /Mw) Return on Operation ( /Mwh) Pool Pool Pool Olive 90% Pool Biomass 10% 45.6 Olive 95% Pool Biomass 5% 16

17 Solid balance sheet and strong liquidity 1.5x Net Debt / Adjusted EBITDA as of 30 September 2016 Pulp business leverage (9M16) Pulp business gross debt maturity calendar GROSS DEBT: Mn CASH: 75.0 Mn NET DEBT: Mn LEVERAGE: 1.6 X LTM EBITDA: Mn 250 Mn bond (5.375%) 30 Mn bilateral loans (EUR + 2.1%) 20,5 5,5 5,5 3,4 252, > 2020 Energy business leverage (9M16) Energy business gross debt maturity calendar LEVERAGE: 1.2 X 113 Mn project finance (EUR + 3.0% + IRS: 2.8%) GROSS DEBT: Mn CASH: 90.4 Mn NET DEBT: 22.2 Mn LTM EBITDA: 18.3 Mn 54,4 12,8 13,4 13,6 13, > 2020 c.70 Mn Recurrent Free Cash Flow expected for 2016, with an average pulp price of 660 $/t and 1.12 $/ in 4Q16 17

18 Strategic Plan Based on a conservative scenario: $720/t and 1.25 $/ Pulp business Capex: 337 Mn Energy business Capex: 325 Mn EBITDA Net Debt EBITDA Net Debt Expand capacity in existing mills, on a conservative basis, based on local wood availability: + 170,000 t up to 1,110,000 t Become cost leader and remain quality leader across Europe: 30 /t cash cost reduction by 2020 down to 329 /t Develop biomass energy projects where regulatory environment is favorable and electricity prices are structurally high, with project financing and local partnering Installed capacity target: 383 MW Capex implementation schedule conditioned to a maximum leverage policy of 2.5x Net Debt/EBITDA Capex implementation schedule conditioned to a maximum leverage policy 5.0x Net Debt / EBITDA 18

19 Delivering value, delivering commitments THANK YOU