BUSINESS PLAN TO 2022

Transcription

1 BUSINESS PLAN TO 2022 The strategic approach of the BP is consistent with the Group's mission and confirms the focus on innovation, agility, growth, efficiency and excellence, to create shared value for the benefit of all our stakeholders ANALYST PRESENTATION

2 Forecast 2018 Ebitda vs business plans target Forecast 2018 Ebitda +35 m +3.9% Cagr 985 ~1,020 Ebitda in line with BP targets +210 m +4.7% Cagr ~1, m 5Y growth 1, A'17 Growth F'18 (56) EPS +10% CAGR Outperform BP avg Ebitda growth target EPS +1% CAGR +16 m A'13 Unexp. Negatives Internal growth Gas tenders M&A F'18 BP '14-'18 Expectation BP '17-'21 Outperformance A'17-F'18 Debt/Ebitda 2.54x Debt/Ebitda 2.8x Well executed tackling discontinuities 01

3 EBITDA GROWTH since Group s establishment Drivers & Targets to 2022 Well balanced business mix along with a coherent and risk adverse strategy, underpins a fast, uninterrupted and resilient growth. A solid base to create value for all our main stakeholders. 5.x

4 At a glance Hera investment proposition and 2022 targets Business mix 55% regulated Shareholders return +16% DPS Resilient value creation Organic Growth +120m growth Financial soundness +260m capex 2.9x Debt/Ebitda Merger & Acquisition +80m growth Confirming our risk adverse and resilient equity story 02

5 Business mix: proven resiliency Business mix The mix guarantees internal hedging ENERGY Negligible power gen. WASTE Leader in a short market (M, $/barrel) Ebitda breakdown Commodity price volatility: full hedged NETWORKS Fully regulated Inflated returns Regulated Liberalized GDP negligibile impact (Ebitda M, % change) ~1, GDP '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 'F18 Spread: full protection of regulated activities (M, bps) Hera supply Ebitda Hera networks Ebitda Brent Spread Btp-Bund '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Fully hedging for appropriate enterprise risk management 03

6 Upcoming discontinuities into the core businesses Organic Growth Ranking of Italian gas distributors Maggior Tutela client liberalization (Mln clients, % share) Hera market share in reference territory (Mln point of delivery, Hera market share) 36m 36m 59% 48% In mid 2020 available to Free market >0.5 new customers HERA P2 6% 4.8% P4 3% P5 3% P6 2% P7 2% ~17m Current custome ~38mln customers ers Free mkt shares Other 27% % 41% % 19.0 Incumbent 50% >50% <50% Total Avg. RAB in target ATEMs 2017 Expected Mid '20 Growth opportunities in both Network and Energy business 04

7 Organic Growth: main industry specific drivers Organic Growth Waste MKT drivers Energy MKT : Client expansion (Kg, %) Waste treatment capacity/inhabitant* Treatment price increase 0 (% of customers increase in 5Y) Hera, +22% Multi-Utility 6 Multi-Utility 5 Utility 1 Utility 2 Utility 7 Utility 4 S DK A D F I '14 '15 '16 '17 '18 * Source: Il Sole 24 Ore 17/11/2018 Maintaining past growth drivers (CAGR %) RAB increase +3.9% +4.2% W. treatment vol. +7.0% +4.0% Energy clients +7.4% +5.5% 6.1% 5.6% '13 '14 '15 '16 '17 Network driver: Wacc interim review 6.3% 6.3% 5.9% 5.9% 5.3% 5.3% 5.6% '18 E'19 E'20 E'21 E'22 Gas Electricity Water Favourable scenario to expand in all main sectors 05

8 Waste Energy Multiutility M&A: market fragmentation M&A Merger & Acquisitions 38 deals underpinned ~50% of Hera s growth Municipalities shareholders Share Cash payment Hera multiples multiple 14 companies potentials A'02 M&A Synergies Org. Growth A'17 Private Cash Market multiples ~1.5 clients Multi-utility Energy Waste shareholders payment multiple potentials Private Cash Market multiples 400 companies Sis ASC 25% shareholders payment multiple potentials Leveraging upon strong platform 06

9 Expanding regulated infrastructures Financial soundness Organic Growth Capex plan evolution (B ) Development Maintenance A new cycle of infrastructure developments (B ) Renew/Develop assets Consolidate platform New expansion of assets BP to '18 BP to '19 BP to '20 BP to '21 BP to '22 Development projects (B ) 21 Debt/Ebitda 2.9x 22 Debt/Ebitda 2.9x '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 Depreciation Capex & Inv m avg capex m avg capex Org. Devel. Gas tenders M&A Devel. capex liberalized regulated 68% 76% Maintaining financial soundness 07

10 Ebitda target to 2022 Resilient growth Ebitda drivers +200 m +3.8% Cagr Stand alone Ebitda targets (M, Ebitda targets excluding M&A) ,185 (10) Internal growth A'17 Negatives Org. Growth Gas Tenders M&A E' Old Plan New Plan A credible step up vs. last business plan 08

11 5Y infrastructure expansion Business targets to 2022 We addressed the evolution of our activities to enhance the quality and resilience of our services to customers. Targeting to execute the largest infrastructural development ever sustained and the evolution of services to further embrace the key goals for a new (sustainable) delivery model. 3.1b

12 Hera strategic development goals and key priorities The Why : Strategic goals and key priorities inspired by SDGs Efficiency Agility Ecosystem Play a key role in the territorial social-eco system Waste Circularity & decarbonisation Promote efficient use of resources Network Growth Technology Develop Innovative solution (Utility 4.0) Energy Innovation Excellence 09

13 # of clients Waste: development drivers Concrete actions consistent with trends Waste tenders Intelligent w. container Sorted waste collection Pay per use tariff Develop special waste plant for material recovery Collection tenders Biomethane Further penetrate Plastic recycling segments Green diesel Bio-plastic Develop smart urban waste container Digitalization and real time data collection/analytics 57.7% 73.2% '17 F'18 E'19 E'20 E'21 E'22 Commercial expansion: Industrial clients (# of industrial clients) +10% 4, ,100 '17 '22 - Type of polymer Actions Commercial offer: Aliplast wider proposal PET Enlarge procurement Novara plant Focus on specialties LDPE HDPE PP Enlarge extrusion cap. exploiting incoming vol. Develop foreign mkts for recycled mat. Enter this polymer recycling Ongoing evaluation to enter this segment Enabling the adoption of circularity by client 10

14 Waste: targets to 2022 Ebitda drivers Capex (8.0) Development Bio-methane 2 WTEs revamping Landfills expansion Maintenance 417 A'17 Negatives Int. Growth M&A E'22 Well ahead on EU schedules Volume mgmt to reach 8.3 Mtons (Mtons/year, treatment mix %) EU target Urban Waste recycled 65% within 2030 Urban Waste in landfills <10% within 2030 Packaging recycling >65% within 2025 Disposal 10% Treatments 55% Third parties 35% Hera 10Y in advance Already today 5Y in advance A'17 E'22 A'17 E'22 A'17 E'22 Italian structural shortage of capacity will underpin prices 11

15 Networks: development drivers Concrete actions consistent with trends Regenerate water sources Smart city enabler Quality of services Water mgmt for industrial clients Re-use sewage water Sludges for biogas Geothermal partnership D.H. smart solutions Roll- out new generation meters Real time and remote mgmt Capex deployed to improve resiliency Water Gas Electricity D.H. Total Water management projects Demand response & Smart District Heating Water leakages Strengthening leakage detection Smart Districts IoT & Remote control 25% of network length inspected Water mgmt project Promote responsible use of water Water consumption monitoring and optimization Develop water reuse/energy efficiency -10% Group water consumption Plants Networks Substations Real time remote control to be eligible for Terna s flexibility services (UVAM) 9 UVAM systems 10MW Sensors installation Improvement in monitoring operations Real time regulation 1,100 substations replacement 1.8GWh saved in 22 Further value from innovation and resilience 12

16 Networks: targets to 2022 Ebitda drivers Capex (2) Development m tenders 415 m developm. and M&A Maintenance 1,291 A'17 Incentives Org. Growth Gas tenders M&A E'22 RAB growth (B ) (0.01) Gas Water Electricity D.H. E Excellence and investment pay '16 '17 E'22 Commercial quality Technical quality Our safety platform 13

17 Retail customer interests Energy: development drivers Concrete actions on trends Client s demand of Value Added Services (% on total clients interviewed) Enhance customer service VA services & green offering Energy efficiency solutions Nudge customer behaviour (energy & water) Electric mobility Demand side platforms/devices AI on customer mgmt Client s perspectives >25% remote control and smart thermostat >15% Insurance services Hera target: 65,000 VAS contracts to % Consumption monitoring services Last resort markets: last tenders result Default Gas (2019) Salvaguardia Electricity ( ) Electric mobility (n.) Market perspectives Customers target E 22 78% mkt share 70% mkt share >270 Charging columns in ref. territories by Hera Other players > Top and SME customers potential SME 100 Top Smart and sustainable services 14

18 Energy: targets to 2022 Ebitda drivers Customer base (Mln) (40.5) >3 A'17 Org. Growth M&A E'22 A'17 Organic Growth New opportunities E'22 Cost to serve: flat through the Plan ( /Pod) Churn rate: -30% lower than avg market (%) Retail gas supply Retail electricity supply A'17 Inflation Efficiencies E'22 '14 '15 '16 '17 Avg. Italy '14 '15 '16 '17 Hera Remain solid nevertheless resizing of Safeguarded 15

19 Ebitda and more Ebitda by activities m +3.8% Cagr +51 (24) +16 1,185 Cum. cash flows before dev. capex (B ) +4.0 (0.3) (0.2) (2.0) (0.8) Debt/Ebitda ~ 2.2x % Op. CF NWC Provisions Maint. capex Dividends FCF 49% Development capex & other financials (B ) 51% 55% Debt/Ebitda 2.9x Cost of Debt 3.7% stable Lev. A'17 Networks Waste Energy Other E'22 Lev. Org. Devel. M&A Gas tenders Devel. capex Tax rate ~30% stable Confirming financial soundness liberalized regulated 16

20 WHY As there is no Plan(et) B, we have the responsibility for reconnect business with the environment and society to the benefit of present and future generations EBITDA from CSV activities as at 2022 HOW Sustainability connects businesses to the community and the environment evolving toward a more resilient ecosystem WHAT We are planning to increase the Shared Value in the BP period 40 %

21 Concretely acting as a benefit corporation throughout the business UN global goal addressed Creating Shared Value in 2022 (Creation of Shared Value, M ) Territory Innovation & development of territorial socialeco systems Territory HERA CSR Energy Smart use of energy Energy ~470m 40% Group Ebitda Resources Efficient use of resources Resources 75% of Ebitda growth target enhance CSV 17

22 Dividend growth to 2022 Targets to 2022 We confirm our full transparency with the investors, adding visibility on capital allocation and dividend policies, for a complete view of our value creation plans. +16 % 2

23 Closing remarks Comment Dividend per Share ( cent) This business plan is reflecting our usual risk management attitude, aiming at setting reliable and visible targets in line with our track record. +16% Sizable capex, underpin a solid growth and a lower risk profile, developing an asset base to sustain a smarter and technologically intensive Ecosystem Dividend policy: DPS further growth up to 11 c (+16%) in '17 '18 '19 '20 '21 '22 Reliable, visible and sustainable growing perspectives 18

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25 Business Plan main assumptions Main assumptions A 16 A 17 E 22 Brent (Dollar/Barrel) Exchange rate /$ PUN ( /MWh) Inflation (%) (0.1%) 1.2% 1.5% Green certificate biomass plants ( /MWh) Green certificate other plants ( /MWh) White certificates ( /TEP) CO 2 certificates ( /ton) Tax rate (%) 35.1% 29.6% 30.0% Cost of Debt (%) 3.7% 3.7% 3.7% 19

26 Consolidated Group Ebit target Ebit by strategic area A 17 E 22 Other 7 Other 22 Energy 167 Networks 195 Energy m 575 m Networks 264 Waste 89 Waste

27 Financial Debt Gross debt maturities as of 30/09/2018* Interest rate breakdown in 2022 (%) 3, % 2, ,361.1 Rates , % '18 '19 '20 '21 Post Gross Debt Variable Fixed * Excluding short term credit facilities 21

28 Waste business Economics Capex E 18-E 22: 618 m A 17 E 22 EBITDA A'17 E'18 E'19 E'20 E'21 E'22 Ebitda breakdown Highlights A 17 E 22* Waste treated 6,802 8,278 Urban 2,041 2,190 Special 2,526 3,203 by products 2,235 2,885 A'17 Collection Treatment E'22 * Excluding volumes from M&A 22

29 Water business Economics Capex E 18-E 22: 828 m A 17 E 22 EBITDA A'17 E'18 E'19 E'20 E'21 E'22 Volumes sold (Mmc) RAB (B ) * A 17 E 22* RAB* 1,44 1,62 A'17 *Numbers exclude M&A E'22 23

30 Gas business Economics Capex E 18-E 22: 1,339 m A 17 E 22 EBITDA A'17 E'18 E'19 E'20 E'21 E'22 Capex Gas tenders Ebitda breakdown Highlights A 17 E 22* Volume Sales &Trading (Mcm) 5,217 3,462 RAB (B ) 1,09 1,63 A'17 E'22 Gas distribution Gas sales District Heating Heat management *Numbers exclude M&A and third parties RAB 24

31 Electricity business Economics Capex E 18-E 22: 259 m A 17 E 22 EBITDA A'17 E'18 E'19 E'20 E'21 E'22 Ebitda breakdown Highlights A 17 E 22* Volume Sold (TWh) RAB (B ) A'17 E'22 Electricity distribution Electricity sales Power Generation *Numbers exclude M&A 25

32 Disclaimer This presentation contains forward-looking statements regarding future events (which impact the Hera Group s future results) that are based on current expectations, estimates and opinions of management. These forward-looking statements are subject to risks, uncertainties and events that are unpredictable and depend on circumstances that might change in future. As a result, any expectation on Group results and estimates set out in this presentation may differ significantly depending on changes in the unpredictable circumstances on which they are based. Therefore, any forward -looking statement made by or on behalf of the Hera Group refer on the date they are made. The Hera Group shall not undertake to update forward-looking statements to reflect any changes in the Group s expectations or in the events, conditions or circumstances on which any such statements are based. Nevertheless, the Hera Group has a profit warning policy, in accordance with Italian laws, that shall notify the market (under price-sensitive communication rules) regarding any sensible change that might occur in Group expectations on future results. 26