Business Plan. Rome, November 2015

Transcription

1 Business Plan Rome, November 2015

2 Agenda Acea Group Business Plan Business Plan Appendix Opening remarks 3 Acea today Business Plan highlights Project Acea Acea Group 8 Environment 16 Energy 20 Water 23 Grids 26 Corporate 29 Process of consolidation in Local Utilities sector 31 Key takeaways 33 9M2015 results 36 1H2015 results results 47 Water regulatory framework Electricity Distribution regulatory framework Main assumptions 51 2

3 Opening remarks ACEA Group Growth in regulated activities Growth acceleration in Environment business area Digital & Technological transformation (Project Acea 2.0) Cost reductions and continuous improvements in service quality Strategy focused on consolidating financial strength Sustainable dividend policy 3

4 Acea today: an integrated Multi-Utility A leading player in the Italian market ACEA Group ENVIRONMENT Acea treated over 770,000 tons of waste in In the same year, the waste-toenergy plants produced about 250 GWh of electrical energy. Acea is committed to investing in waste-to-energy and organic waste treatment products with the aim of using waste to produce energy, biogas and compost, thereby benefitting the environment. The geographical and operational footprint of companies in the Environment business area is concentrated in the three regions in central Italy: Umbria, Lazio and Tuscany. WATER In 2014, the water service division sold 540 million m 3 of potable water to nearly 9 million customers. Acea is the leading operator in Italy, managing Integrated Water Systems in the province of Rome and other parts of Lazio, Tuscany, Umbria and Campania. Acea is at the leading edge in engineering, procurement, construction and management of integrated water services, as well as carrying out multiple and daily laboratory analyses, thanks to the expertise in network management acquired in over a century. Acea has also been active for many years in Latin American countries, providing water management services. Acea Shareholder Structure 2.02% 12.48% 18.64% 15.86% 51.00% City of Rome Caltagirone Group Suez Environnement Company SA (held through Ondeo Italia) Norges Bank Other Source: CONSOB (November 2015) ENERGY Acea is one of the main Italian energy players, with about 11 TWh of electricity sold in 2014 to about 1.5 million customers. Acea trades a similar amount of electricity for the benefit of its customers and for the internal consumption of the companies in the Group. To support its customers operations, Acea has its own call centre. Moreover, Acea owns and operates 7 hydroelectric power plants (122 MW) and 3 thermo/cogen plants (243 MW). GRIDS Acea is one of the leading operators in Italy, distributing over 10 TWh of energy in the city of Rome (1.6 million meters). Acea is promoting the field application of the smart grid and e- mobility through the implementation of highly innovative pilot projects, qualified by the AEEGSI. Acea manages public lighting and floodlighting with over 217,000 lighting points distributed over an area of 1,500 km 2. Acea is also engaged in several energy efficiency projects. 4

5 Business Plan highlights ACEA Group Strengths and competitive advantages Asset Manager with growth potential in regulated sectors Financial strength Leadership, management know-how and technical expertise Loyal and Large customer base Well-known brand Strategic priorities Digital Transformation (Project Acea 2.0) to enhance efficiency Development of regulated businesses Strong growth in Environment business area Continuous improvement in the financial structure Well-positioned to capture opportunities Excellent relationships with the Regulator Additional opportunities SIGNIFICANT AND COSTANT GROWTH IN (not OPERATING included in Business PROFIT Plan) DESPITE M&A A NEGATIVE opportunities MACROECONOMIC ENVIRONMENT The Italian Government aims to encourage consolidation in the utilities sector Incentives for public shareholders to divest from local utilities 5

6 Acea 2.0 ACEA Group Acea is revolutionising the way we work and provide our services through a largescale adoption of digital technologies, involving: ~8,000,000 CUSTOMERS ~140,000 KM of NETWORK ~7,000 EMPLOYEES ~831 PLANTS To meet the need to ensure data integrity, consistency and quality, ACEA has chosen SAP solutions (from the global leader in data management systems for utilities). New Customer Relationship Management platform Work Force Management solution for managing the workforce on the ground using mobile technology New platform offering: improved performance of solutions, direct and realtime access to data, without the need for intermediate layers, and the option of using new applications New single ERP platform (purchasing, accounting, etc.) 6

7 Acea 2.0 ACEA Group Customers Multi-Channel WEB Call Center Counter App Social ACEA ATO2 SAP CRM INTEGRATED Processes REAL-TIME Operation TARGET Metering and Billing WorkForce Management SAP IS-U SAP WFM Other Water Companies ACEA Distribuzione Operation ACEA Public Lighting ACEA Energia 7

8 Business Plan Acea Group 8

9 Key highlights ACEA Group Plan EBITDA ( m) NET PROFIT before non-controlling interests ( m) NET DEBT ( m) 2,089 2,251 NET DEBT/EBITDA 2.9x 2.6x INVESTED CAPITAL ( bn) Pre-tax ROIC: 12% EBITDA breakdown by Business Area EBITDA from Regulated Activities Environment Energy Water % 1% 8% 15% % 13% 14% EBITDA from Unregulated Businesses % EBITDA from Unregulated Businesses 27% 2019 Grids Corporate 41% 42% 76% EBITDA from Regulated Businesses 73% EBITDA from Regulated Businesses 9 9

10 Solid EBITDA growth ACEA Group Organic Growth ( m) Corporate EBITDA Environment Energy Water Grids 2019 EBITDA Completion of 3rd line at San Vittore WTE plant (110,000 tons) Consolidation /development of composting plants (456,000 tons) Consolidation in Lazio region via revamp of WTE plants (220,000 tons) Acea 2.0 Billing Improved customer mix Improved unpaid ratio Increased investment (up 25% on previous Plan) Acea 2.0 WFM (greater efficiency and improved quality of services) Acea 2.0 WFM (greater efficiency and improved quality of services) Smart Grids Modernisation and expansion of public lighting network Total efficiencies over the period of the Plan: 70m from 2019: 30m on a recurring basis Acea 2.0, WFM, digital networks, single contracts, insourcing 10

11 Cost efficiencies ACEA Group Energy Project Acea 2.0 Management of complains -100% Process costs in m -16% Grids Digitalisation of network Work Force Management Procurement consolidation per POD Efficiency-sensitive costs Water Digitalisation of network Work Force Management Procurement consolidation -23% per inhabitant Efficiency-sensitive costs % Holding Standardisation of Acea 2.0 processes Insourcing Staff cost savings Total efficiencies over the period of the Plan: 70m from 2019: 30m on a recurring basis 11

12 Profitability of regulated businesses ACEA Group The Business Plan has been drawn up on the basis of the current approach to determining the cost of capital when setting tariffs. We have assumed in line with the approach adopted in mature regulatory systems an extension of the period used as the basis for calculating the Risk Free Rate (BTP Y10) and RPI (inflation) to 10 years. The resulting cost of capital has been held flat throughout the life of the Plan. RAB The RAB used in setting the tariff for year n corresponds to the value of fixed assets in year n-2 (defined as the historical cost of the firm s assets revalued using deflators for the period) less accumulated depreciation revalued using deflators for the period. RAB - WATER RAB ELECTRICITY DISTRIBUTION 1,467 ( m) 1,462 ( m) 1.5 ( bn) 0.6 ( bn) RAB: Companies consolidated using equity method 379 ( m) 433 ( m) RAB: ATO2 Lazio Centrale and ATO5 Frosinone 1,054 ( m) 1,075 ( m) 1.4 ( bn) 2013 audited 2014 audited 2019 estimated 2013 audited 2014 audited 2019 estimated The rate of RAB growth in the Water sector is high, as in the early years the level of capex is by nature higher than the value of allowed depreciation. In the Electricity sector, the RAB is more mature and the ratio capex/depreciation is 1 12

13 Capex ACEA Group Capex programme to support organic growth in regulated assets Selected investment in Environment business area Increased investment in regulated sectors, assuming reasonable sustainability of the cost of debt allowed by the regulator and a stable new tariff regime Projects previously approved in the Environment business area by business area (%) Corporate 3% Energy 6% Environment 10% Grids 34% 2.3bn Water 47% Regulated/Unregulated (%) 19% 2.3bn Unregulated Regulated 81% 13

14 Debt Structure & Liquidity Analysis Long term debt life and a solid liquidity position ACEA Group Debt Composition ( m) FY 14 9M 15 Current Rating M/L T financial debt 3, , Bond 1, ,890.9 STANDARD &POOR S FitchRatings MOODY S - M/L T borrowings 1, (M/L T financial assets) (34.3) (35.9) M/L T Net Debt 3, ,656.0 BBB- Stable Outlook BBB+ Stable Outlook Baa2 Stable Outlook ST financial debt Other ST financial liabilities (Cash) (1,018.0) (595.8) (Other ST financial assets) (61.5) (26.9) ST Net Debt (917.3) (525.2) Net Debt 2, ,130.8 FY 14 1,318 m Liquidity Buffer (cash + undrawn comm. credit lines) 9M m Liquidity Buffer (cash + undrawn comm. credit lines) Net Debt ( m) ( m) 30 Sep Dec (a) 30 Sep (b) Change (b-a) 2, x 2, ,251 Medium/Long-term 2, , ,656.0 (350.4) Short-term (501.4) (917.3) (525.2) x 2.6x Net Debt/EBITDA Net Debt 2, , , MAINTENANCE OF A SOLID FINANCIAL STRUCTURE OVER THE LIFE OF THE PLAN, WHICH COMBINED WITH THE EFFICIENCY IMPROVEMENTS ACHIEVED WILL ENABLE TO FINANCE THE BUSINESS PLAN FROM OUR OWN RESOURCES (INCLUDING THE ONGOING PAYMENT OF DIVIDENDS) Dividend Policy Payout ratio of 50%-60% with a floor of 0.40 DPS per annum up to

15 Debt maturities, average cost & structure Long term debt maturities and a safe fix/floating mix m BOND 600 m BEI 50 m BOND 500 m TOTAL BOND 600 m BOND AFLAC 161 m Debt structure (maturity and interest rates at 30 September 2015) > 71% Fixed rate > Average overall cost 3.3% > Average term to maturity 7.1 years 3% 97% From 2017 onwards 29% 71% Floating Rate Fixed Rate 15

16 Business Plan Environment 16

17 Strong growth in Environment Environment Aim is to become the number 3 in Italy. Volumes of waste treated ( 000 tons) GROWTH TARGETS 4,136 No. 3 OPERATOR IN ITALY by volume of waste treated (1,811 Ktons/year) of which 75% in the Lazio region 2,594 Waste to energy: 600 GWh/year 1, data (equivalent to annual consumption of approx. 200,000 households) Hera A2A Iren LGH Acea ACSM Growth and strategy Completion of initiatives already approved Consolidation/expansion of composting plants Consolidation in Lazio region with repowering of WTE plants 17

18 Shortfall in waste treatment capacity in Lazio Environment LAZIO Capacity (t/a) URBAN WASTE PRODUCED 3,269,398 3,361,907 Recycled waste (%) 37% 53% Unrecycled waste 2,059,721 1,580,097 Mechanical-biological treatment capacity 2,067,000 2,747,000 Δ mechanical-biological treatment capacity 7,279 1,166,903 RDF produced 617, ,029 WTE capacity 360, ,000 Δ WTE capacity -257,916 55,971 Organic waste 532, ,715 Composting capacity 255, ,000 Δ Composting capacity -277, ,715 In view of the lack of plants in the Lazio region and the expected trend in recycled waste, we estimate that the capacity shortfall will remain substantially unchanged over the life of the Plan In this context, Acea s aim is to consolidate/expand its presence in the Environment sector ACEA PLANTS WTE and composting plants 2014 Installed capacity (Mwe) 2014 Capacity (t/a) 2019 Installed capacity (Mwe) 2019 Capacity (t/a) WTE plants , ,000 - of which Lazio plants (San Vittore del Lazio and Ep Sistemi) , ,000 Composting plants 220, ,847 - of which Lazio plants 188, ,213 18

19 Targets and results Environment EBITDA ( m) Net Debt ( m) Volume of waste treated ( 000 tons) CAPEX: 235m 1, Invested Capital: 320m 2019 pre-tax ROIC: 23%

20 Business Plan Energy 20

21 Energy Sector Energy Growth in Energy Sales Operational efficiency and improved customer mix / Focus on improvements to the billing process Project Acea 2.0 Upgrade of the information systems that support the metering, billing and credit management processes by using the SAP ISU Free Market Improved customer mix Enhanced Protection market Discussions underway with the AEEGSI regarding the tariff review. In December 2014, the AEEGSI revised the tariff for 2014, applying a partial increase (Resolutions 136/2014 and 670/2014) Development of energy efficiency Data quality Clean up the data to be transferred to the new system and use a single database. CRM Design and creation of a CRM platform, accompanied by the simplification and digitalisation of processes. Particular attention to be paid to web and mobile services, increasing remote interaction with customers. Metering and billing Unified management of meter readings, using a common algorithm to compute estimated energy consumption and a single billing platform. Counter services Enhancement of the ability to handle and resolve face-to-face customer requests, by remapping front-end processes and exploiting the potential of the new CRM platform. Short position in electricity production 7 Hydroelectric power plants: 122 Mw 3 Thermo/cogen. plants: 243 Mw Completion of plant upgrade programme 21

22 Targets and results Energy EBITDA ( m) Net Debt ( m) Number of customers ( 000) Capex: 133m 2019 Invested Capital: 480m 1, , Gas 2019 pre-tax ROIC: 13% Free Market 1, Enhanced Protection Market

23 Business Plan Water 23

24 Leading Water sector consolidation Water Growth through efficiency Long-term concessions CONSOLIDATE LEADERSHIP IN ITALIAN MARKET Project Acea 2.0 Radical transformation, standardisation and integration of all IT systems, obtaining operating cost and process efficiencies. WFM and new billing system started on Sept. 28, 2015 ATO2-Roma (expiry 2032) ATO5 Frosinone (exp. 2032) Other ATOs: ATO3 Firenze (exp. 2021) ATO6 Siena-Grosseto (exp. 2026) ATO2 Pisa (exp. 2021) ATO1 Perugia (exp. 2027) ATO3 Sarnese V. (exp. 2032) Consultation with the AEEGSI for the new tariff from 2016 on Need to foster long-term investment and ensure a stable Regulatory Framework (longer regulatory periods, etc. ) Growth through business combinations Create value through M&A strategy execution Progressive territorial consolidation, extending and standardising operating best practices. (Not included in Business Plan) Drive combination of various operators in Tuscany, Lazio and Umbria 24

25 Targets and Results Water Strong growth track records EBITDA CAGR: +10.1% + 8 companies acquired Net Debt ( m) EBITDA ( m) Tariff revenue in the Plan has been determined in continuity with the Transitional Tariff Regime for and in line with the Financial Plans on basis of which tariffs were approved RAB 0.6 ( bn) Capex: 1,073m of which Lazio region 1,051m (Rome & Province 968m) RAB: Companies consolidated using equity method 379 ( m) 433 ( m) 2019 Pre-tax ROIC: 11% RAB: ATO2 Lazio Centrale and ATO5 Frosinone 1,054 ( m) 1,075 ( m) 1.4 ( bn) 2013 audited 2014 audited 2019 estimated 25

26 Business Plan Grids 26

27 Grids development Grids Growth through efficiency DISTRIBUTION Project Acea 2.0 Improvements to service quality Cost efficiencies WFM to go live in 2016 Modernisation of distribution network ( smart grid approach) PUBLIC LIGHTING Public lighting in Rome Modernise and expand the public lighting network and implement the Roma LED project Replacement of 188,000 lamps with new energy-saving lamps, boosting the average energy efficiency of the system. Consultations with AEEGSI Need to foster long-term investment and ensure a stable Regulatory Framework Growth through expansion Development of energy efficiency projects Evaluation of opportunities in public lighting market LED technology New services for customers (fibre network and superfast broadband) 27

28 Targets and results Grids EBITDA ( m) Net Debt ( m) RAB Capex: 763m of which smart 110m 1,467 ( m) 1,462 ( m) 1.5 ( bn) 2019 pre-tax ROIC: 10% 2013 audited 2014 audited 2019 estimated 28

29 Business Plan Corporate 29

30 Targets and results Corporate Further simplify the corporate structure Facilitate synergies through Project Acea 2.0 Greater operational efficiency - insourcing Capex: 78m 2019 EBITDA: 0m 30

31 Process of consolidation in Local Utilities sector Water GOVERNMENT IS KEEN TO SEE RESTRUCTURING OF PUBLIC UTLILITIES SECTOR 2015 Stability Law aims to encourage consolidation among local utilities by, among other things, excluding capital expenditure by local authorities using the proceeds from the sale of stakes in local utilities from the restrictions set out in the Internal Stability Pact. Local govt. reforms in the process of being approved envisage the introduction of incentives designed to encourage consolidation among local utilities. Acea is ready to take advantage of all opportunities that will arise Leading role in management of water resources in Italy Strong roots in the areas in which we operate 31

32 Additional initiatives in the Water sector (not included in Business Plan) Water LAZIO TUSCANY UMBRIA EBITDA 2019E* ( m) INHABITANTS (NR) 1,059,000 3,268, ,000 FEASIBILITY Low high SYNERGIES/WFM 2019E High Medium High STRATEGIC INITIATIVES Single operator for Lazio region Synergies with ATO2 Growth and sustainability of investment Synergies from WFM Consolidation and completion of presence in Tuscany Growth and sustainability of investment Synergies from WFM Consolidation and completion of presence in Umbria Growth and sustainability of investment Synergies from WFM Acea is ready to take advantage of these additional initiatives: Leading Italian water company with high degree of industrial expertise, capable of acting as a focal point for consolidation Firm commitment of Management Solid financial structure capable of supporting investment programmes of combined companies CONSOLIDATION PROCESS SUBJECT TO LOCAL AUTHORITIES DECISIONS * Estimated by Acea 32

33 Business Plan: Key Takeaways ACEA Group ACEA GROUP 2019-EBITDA: 864m CAPEX: 2.3bn Environment 2019 EBITDA: 114m CAPEX: 235m 2019 Pre-tax ROIC: 23% Energy 2019 EBITDA: 123m CAPEX: 133m 2019 Pre-tax ROIC: 13% Water 2019 EBITDA: 357m CAPEX: 1,073m 2019 Pre-tax ROIC: 11% Grids 2019 EBITDA: 270m CAPEX: 763m 2019 Pre-tax ROIC: 10% 33

34 Appendix 34

35 Appendix 9M2015 Results 1H2015 Results 2014 Results Water regulatory framework Electricity Distribution regulatory framework Main assumptions Acea Group: Presentation Business Plan 35

36 Financial highlights ( m) 9M2014 9M2015 Change % Consolidated revenues 2, , % EBITDA % EBIT % Group net profit/(loss) % Capex % ( m) 30 Sept 2014 (a) 31 Dec 2014 (b) 30 Sept 2015 (c) Change (c/a) Change (c/b) NET DEBT 2, , , % +2.0% Shareholders Equity 1, , , % +3.4% Invested Capital 3, , , % +2.6% 36

37 EBITDA 35% EBITDA 9M2015 8% 23% 15% EBITDA from Deregulated Business Total number of employees 9M2014 9M2015 Acea Spa Environment Energy Environment Energy Water Grids 42% 77% EBITDA from Regulated Business Water 2,003 1,962 Network 1,378 1,348 Total 4,798 4,709 Figures do not include: - 9M2014 Overseas water operations: 406-9M2015 Overseas water operations: 253 EBITDA m 26 m +5.1% Energy sales margin increase Acea Distribuzione margin increase (efficiency) (1) Efficiency Tariff increase Growth at companies consolidated using the equity method 9M2014 Environment Energy Water Grids Corporate 9M

38 EBITDA and Key quantitative data Environment EBITDA main drivers Aria s plants: increase of volume of electricity sold +2.2 m Aquaser: +1.4 m Kyklos: shutdown of the plant -2.3 m Solemme: decrease of volume -0.3 m ( m) 9M14 9M15 Change % EBITDA % Capex % Key quantitative data 9M14 9M15 Treatment and disposal (/000s of tonnes) WTE electricity sold (GWh) Revamping of SAO plant (Orvieto) has been completed adding new composting plant: Construction of new line 1 WTE plant S. Vittore. On Track on target (startup operation end 2016) Installed capacity 1MW Treatment capacity 60,000 Ton. waste/year Installed capacity 12.5 MWe Treatment capacity 100,000 Ton. RDF/year 38

39 EBITDA and Key quantitative data Energy EBITDA main drivers Electricity sales margin increase m Electricity production margin decrease (fall in energy prices and volumes decrease) -0.8 m ( m) 9M14 9M15 Change % EBITDA % Production % Sales % Key quantitative data 9M14 9M15 Total Electricity production (GWh) Total Electricity sold (GWh) 8,182 7,200 Enhanced Protection Market 2,269 2,283 Free Market 5,913 4,917 Capex % Total Gas sold (Mmc)

40 EBITDA and Key quantitative data Water EBITDA main drivers Efficiency Acea ATO2: tariff increase m Growth at companies consolidated using the equity method +7.3 m Extraordinary items m (including Aguazul Bogotà non-recurring income) ( m) 9M14 9M15 Change % Key quantitative data 9M14 9M15 EBITDA % of which: Profit/(Loss) on investments consolidated under IFRS % Total volumes of water sold (Mmc) Investimenti % EBITDA m % 226 Tariff increase composition 6% 3% 3% 6% 9M14 Revenues increase Efficiency Company consolidated using the equity method Extraordinary items 9M15 Positive impact Negative impact Adjustment VRG 40

41 EBITDA and Key quantitative data Grids EBITDA main drivers Acea Distribuzione margin increase (efficiency) ( m) 9M14 9M15 Change % EBITDA % Capex % Key quantitative data 9M14 9M15 Total Electricity distributed 7,718 7,959 (GWh) Corporate ( m) 9M14 9M15 Change % EBITDA 1.1 (0.4) % Capex % Acea2.0 capex 9M15: 16.7 m Of which > 14 m related to regulated business (Water and Networks) 41

42 EBIT and Net Profit EBIT m NET PROFIT m 10.3 m 23.8 m TAX RATE 34.6% Elimination of one-off hike in corporation tax IRES ( Robin Hood Tax ) Deductibility for the purposes of IRAP of the cost of staff hired on permanent contracts 9M14 9M15 9M14 9M15 m 9M14 9M15 Change Higher depreciation: % capex growth Depreciation % growth intangible assets resulting from the entry in operation of information technology Write-off % Provision % Write-off decrease mainly in Water and Energy segments Total % 42

43 Cash flow CASH FLOW ANALYSIS ( m) Q15 1H15 9M15 EBITDA Change in net working capital 76 (98) (23) (32) Investment (317) (72) (168) (287) Change in net fixed assets (21) (5) (17) (21) Free Cash Flow Net finance income/(costs) (101) (24) (45) (67) Income tax expense (121) (27) (53) (75) Free Cash Flow (49) Dividends and other (Equity) (74) (2) (86) (90) Profit/(loss) from investments 1 0 (1) (1) Change in Net Financial Position 160 (51) (40) (42) EBITDA 9M Change in net working capital (32) * Investment Change in net fixed assets Free Cash Flow Net finance income/ (costs) Income tax expense Sub-total before dividends and the profit/(loss) from investments Dividends and other (Equity) Profit/ (Loss) from investments Change in Net Financial Position (287) (21) 191 (67) (75) 49 Cash flows Cash generated/used (90) (1) Acea Group 9M2015 Results 43 * Before impairment losses on receivables (42)

44 Net Debt ( m) 30 Sep 2014 (a) 31 Dec (b) 30 Sept 2015 (c) Change (c-a) Change (c-b) NET DEBT 2, , ,130.8 (281.2) 41.7 Medium/Long-term 2, , ,656.0 (257.4) (350.4) Short-term (501.4) (917.3) (525.2) (23.8) NET DEBT/ SHAREHOLDER S EQUITY 31 Dec NET DEBT/ SHAREHOLDER S EQUITY 30 Sept x 1.4x ( m) NET DEBT 31 Dec Sept ( m) NET DEBT 31 Dec Sept , ,412 2, , % +2.0% 9M15 vs 9M14 improvement: = 121 m Debt structure (maturity and interest rates at 30 Sept 2015) Rating > 71% Fixed rate 3% 29% > Average overall cost 3.3% > Average term to maturity 7.1 years 97% 71% From 2017 onwards Floating Rate Fixed Rate BBB- Stable Outlook BBB+ Stable Outlook Baa2 Stable Outlook Acea Group 9M2015 Results 44

45 Project Acea2.0 New application map at ATO2 (go-live 28 Sept 2015) Project ATO2 has enabled us to rationalise and consolidate the application map, eliminating 19 systems/applications SAP IS-U - Billing CreditCare Ato2 Sicol Metering management CoCo Management of water plants in municipal concessions acquired SAP ECC Piteco Evo Treasury SAPL Comparison budget with actual results Hydra Work planning and contract account management Simec Electromechanical maintenance SAP WFM / SAP CRM / DMS Filenet / DCS Streamserve / GIS Esri ArcFlow DMS Custom GiLi Water engineering GeDa Incident management Net@ Confluence CRM GeLa Works management Geocall GePa Asset management 45

46 1H2015 Results ACEA Group ( m) 1H14 1H15 Change % Consolidated revenues 1, , % EBITDA % EBIT % Group net profit/(loss) % Capex % ( m) 30 June 2014 (a) 31 Dec (b) 30 June 2015 (c) Change % (c/a) Change % (c/b) NET DEBT 2, , , % +1.9% Shareholders Equity 1, , , % +1.1% Invested Capital 3, , , % +1.6% Acea Group:1H Results Business Plan 46

47 2014 Results ACEA Group 2013 (restated*) 2014 % change Consolidated revenue 3, , % Profit/(Loss) on investments consolidated under IFRS % - of which: EBITDA % - of which: Amortisation, depreciation and provisions (71.1) (82.4) +15.9% - of which: Financial income/(expense) 2.0 (9.7) n/s - of which: Income tax expense (22.9) (14.8) -35.4% Variable Margin 1, , % Personnel costs % Operating costs % EBITDA % Amortisation, depreciation and provisions % EBIT % Financial income/(expense) (99.2) (101.1) +1.9% Profit/Loss from equity investments (4.8) 0.5 n/s Profit/(loss) before tax % Income tax expense % Net profit/(loss) % Non-controlling interests % Group net profit/(loss) % Capex % 31 Dec 2013 (restated*) (a) ( m) Dividend per share ( ) % ( m) 30 Sept Dec 2014 (b) Change (b-a) Net Debt 2, , ,089.1 (159.5) Equity 1, , , Invested Capital 3, , ,591.5 (63.9) Acea Group: Results Business Plan * After application of IFRS11. Figure includes FNI water component for 2012 and Figure includes financial income from discounting to present value of amounts payable by Gori to Campania Regional Authority. 47

48 Water regulatory framework General Tariffs: increases to be capped at (i) 5% + inflation or (ii) 7.5% + inflation (in the event of financial depreciation) Regulatory menus: possibility of boosting cash generation based on the ability of the RAB to generate tariffs sufficient to cover the volume of planned capex. Opex Profit Sharing: 50% of the difference in operating costs In the event of expansion of the business and/or the need to increase costs, allowed costs can be increased in the year in which they are incurred Energy costs: min (cost incurred by the operator; average cost for the industry +10%). Capex Financial depreciation: only possible if capex in the period is 50% of RAB FNI: possibility to access the funds in the event of additional financing needs (i.e.: project financing) water tariff Adjustments Water Consultation Document 406 of 31 July Main objectives/forecasts Support for consolidation among operators in the same geographical area. Confirmation of the previous tariff regime (with the introduction of a sharing component, equal to zero in the event of business combinations) and the same form of investment incentives adopted in the first regulatory period ( ). Elimination of the separation between non-controllable and controllable costs, which the market expects will benefit the larger operators. Measurement of efficiency based on the cost per inhabitant and reduction of the clawback for the most efficient operators. Extension of regulatory period from 2 years ( ) to 4 years ( ), followed by definition of the criteria for determining the cost of capital. The Regulator also proposes to bring about progressive convergence, leading to adoption of a uniform approach to the different operators at national level. Post-AEEGSI (from 2012): to be carried out in year n+2 Pre-AEEGSI (until 2011): the cost component is shown in the bill and does not affect the calculation of tariff increases for the purposes of the annual cap; the minimum time for recovery is based on the amount to be back-billed versus annual turnover. Late payments and guarantee deposits Late payments: unpaid ratios over 24 months, as a % of turnover (1.6% North, 3% Centre, 6.5% South) Guarantee deposit: 3 months. Terminal Value To be based on RAB. Acea Group: Presentation Business Plan 48

49 Electricity Distribution regulatory framework Grids Key Points Of The Consultation Paper Dealing With Energy Transmission And Distribution (June 2015): Introduction of real parameters. Introduction of the country risk premium. Proposed dual option for determining the risk-free rate: 1) the yield on 10-year government bonds issued by AA rated European countries (0.5%-1.5%), plus a country risk premium for Italy (0.5%-1.0%); 2) the real risk-free rate, based on pre-2008 yields. Proposed new method for calculating the cost of debt, based on the real cost incurred by companies. Key Points Of The Consultation Papers Dealing With Electricity Transmission, Distribution, And Metering (July, September 2015): The AEEGSI wants to lengthen the regulatory cycle from 6 to 8 years ( ), dividing it into two parts, and The new Totex approach (in line with UK regulation) should be adopted from 2020, meaning that the existing tariff structure should be retained in the first four years ( ) of the regulatory period. Profit margins on electricity transmission are to be linked to volumes (up to 5%-10% of revenue or at least equal to the portion of the tariff covering the extra return on investment, approximately 8% of revenue) and installed capacity (90%-95% of revenue). The Regulator is considering the introduction of a range of options for electricity distributors to choose, including a potential increase in margins linked to acceptance of exposure to volume risk. The Regulator wants to optimise distributors investment decisions and introduce a cost recognition model that will help to drive consolidation in the electricity distribution sector. Acea Group: Presentation Business Plan 49

50 Electricity Distribution regulatory framework Grids Key points of the Consultation Paper 509/2015, regarding the criteria for determining and revising the rate of return on capital invested for regulated infrastructure in the electricity and gas sectors (October 2015) The AEEGSI (the Energy, Gas and Water Authority or the Regulator ) has confirmed the approach set out in the previous Consultation Paper (June 2015), inserting into the formula for calculating the return on capital invested - real rather than nominal parameters. The regulatory period will last for six years ( ) with interim reviews, probably every two years. Operators must submit their observations to the Regulator by 20 November this year, with the Final Document expected to be published in early December. 1. The real Risk Free (RF) rate will be based on the return on European government bonds with an AA rating (Germany, France, Belgium, Holland) and its minimum floor will be 0.5%. 2. The Equity Risk Premium (ERP) is calculated on long-term averages, as the difference between long-term real Market Returns (TMR) and the RF (set at 0.5% for ). The ERP would be in a range 4.6% - 5.5%. 3. The Country Risk Premium (CRP) would be between 1% and 1.5% for and will be updated according to the spread between Italian and German government bonds. 4. The real Cost of Debt will be between 1.6% and 1.9% in and is the result of the sum of the RF, corporate risk and the CRP. 5. Leverage (D/E) will not be subject to any changes in The Beta for each business will be in line with the benchmark used by other European players. 7. Inclusion of the new Adjustment Factor F. This is an additional return that the Regulator adds to the WACC formula to reflect the fact that taxes are paid on nominal (and not real) rates. This formula includes a CPI forecast for the next 2 years at 1.7%, based on the ECB s latest forecasts. 8. The Regulator will conduct bi-annual reviews of: (1) the Risk Free Rate, (2) Country Risk Premium (only if there is a more than a 20% deviation) (3) the CPI assumption used to calculate the F factor; (4) Gearing. It is also proposed to review taxation annually, according to the annual Stability Law. Acea Group: Presentation Business Plan 50

51 Main assumptions ACEA Group Main assumptions 2015 FWD 2016 FWD 2017 FWD 2018 FWD 2019 FWD Exchange $/ Brent $/Bbl PUN /MWh Green certificates /MWh Feed-in tariffs /MWh EU-ETS /tons of CO Acea Group: Presentation Business Plan 51

52 Disclaimer THIS PRESENTATION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT REFLECT THE COMPANY S MANAGEMENT S CURRENT VIEWS WHIT RESPECT TO FUTURE EVENTS AND FINANCIAL AND OPERATIONAL PERFORMANCE OF THE COMPANY AND ITS SUBSIDIARIES. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON ACEA S.P.A. S CURRENT EXPECTATIONS AND PROJECTIONS ABOUT FUTURE EVENTS. BECAUSE THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES, ACTUAL FUTURE RESULTS OR PERFORMANCE MAY DIFFER MATERIALLY FROM THOSE EXPRESSED IN OR IMPLIED BY THESE STATEMENTS DUE TO ANY NUMBER OF DIFFERENT FACTORS, MANY OF WHICH ARE BEYOND THE ABILITY OF ACEA S.P.A. TO CONTROL OR ESTIMATE PRECISELY, INCLUDING CHANGES IN THE REGULATORY ENVIRONMENT, FUTURE MARKET DEVELOPMENTS, FLUCTUATIONS IN THE PRICE AND AVAILABILITY OF FUEL AND OTHER RISKS. YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, WHICH ARE MADE ONLY AS OF THE DATE OF THIS PRESENTATION. ACEA S.P.A. DOES NOT UNDERTAKE ANY OBLIGATION TO PUBLICLY RELEASE ANY UPDATES OR REVISIONS TO ANY FORWARD- LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF THIS PRESENTATION. THIS PRESENTATION DOES NOT CONSTITUTE A RECOMMENDATION REGARDING THE SECURITIES OF THE COMPANY. *** PURSUANT TO ART. 154-BIS, PAR. 2, OF THE UNIFIED FINANCIAL ACT OF FEBRUARY 24, 1998, THE EXECUTIVE IN CHARGE OF PREPARING THE CORPORATE ACCOUNTING DOCUMENTS AT ACEA, IOLANDA PAPALINI, DECLARES THAT THE ACCOUNTING INFORMATION CONTAINED HEREIN CORRESPOND TO DOCUMENT RESULTS, BOOKS AND ACCOUNTING RECORDS. Acea Group Presentation 52

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