TCFD and BoE Conference on Climate Scenarios, Financial Risk and Strategic Planning

Transcription

1 TCFD and BoE Conference on Climate Scenarios, Financial Risk and Strategic Planning Claudio Dicembrino, Head of Macroeconomic & Energy Analysis and Forecasting London October 31, 2017

2 1 Enel current footprint and key prospective highlights 2 3 What does sustainability mean for the Enel Group The use of scenarios in short-medium and long term strategic planning 4 Enel and the TCFD 2

3 1 Enel current footprint and key prospective highlights What does sustainability mean for the Enel Group The use of scenarios in short-medium and long term strategic planning Enel and the TCFD 3

4 Enel current footprint A global and diversified operator 1 40 bn Regulated Asset Base 65 mn distribution end users #1 in Italy, Spain, Chile, Peru #2 in Argentina, Colombia 39 GW renewable capacity 2 Global leadership in renewables 19.2 mn free retail customers #1 in Italy and Spain 47 GW thermal capacity Highly flexible and efficient generation fleet 1. As of 1H Consolidated and managed capacity including 24.9 GW of large hydro 3. Presence with operating assets Countries of presence 3 4

5 Enel current footprint A global and diversified operator 1 North & Central America Italy Iberia Europe 54% 50% 18% 0.8 bn 5% 100% 29% 6.6 bn 43% 15% -2% 18% 10% 3.6 bn 23% 22% 49% 0.8 bn 5% 30% 3% Latin America 2016 Group ordinary EBITDA 46% 39% 3.6 bn 24% 15% Networks Renewables Thermal generation Retail 17% 15.2 bn 47% 26% 10% 1. As of Breakdown excludes -0.1 bn from holding and services 2. Presence with operating assets Countries of presence 2 75% regulated / quasi-regulated 5

6 470,00 450,00 430,00 410,00 390,00 370,00 350,00 40,0 0 35,0 0 30,0 0 25,0 0 20,0 0 15,0 0 10,0 0 5,00-350,00 300,00 250,00 200,00 150,00 100,00 50,0 0-55, 0 50, 0 45, 0 40, 0 35, 0 30, 0 25, 0 20, 0 15, 0 50,0 0 45,0 0 40,0 0 35,0 0 30,0 0 25,0 0 20,0 0 15,0 0 10,0 0 5,00 - Enel current footprint and key prospective highlights Operating targets by business Networks Retail Renewables Thermal generation End users (mn) Smart meters (mn) Free customer base 1 (mn) Managed capacity (GW) Consolidated capacity (GW) Large hydro (GW) Installed capacity 3 (GW) , ,0 18,3 34,0 37,8 1,9 11,0 45,7 6,5 14,2 24,9 25,0 46,8 36,5 2016A 2019E 2016A 2019E 2016A 2019E 2016A 2019E Electricity distributed (TWh) A E Energy sold 2 (TWh) A E Net production 13% 28% 23% 2016A 262 TWh 15% 10% 11% 11% 26% 11% 30% 2019E 230 TWh 46% emission free 56% emission free 7% 15% Hydro Renewables Oil & Gas CCGT Coal Nuclear 1. Includes only power and free gas customers 2. Free market + PPAs 3. Includes nuclear in Iberia 6

7 Enel current footprint and key prospective highlights 2 What does sustainability mean for the Enel Group The use of scenarios in short-medium and long term strategic planning Enel and the TCFD 7

8 strategic plan pillars A sustainable strategy (1/2) Digitalization Industrial pillars Operational efficiency Industrial growth Group simplification Active portfolio management ESG pillars Engaging the local communities Engaging the people we work with Aiming at operating efficiency and innovation Decarbonizing the energy mix Customer focus 8

9 strategic plan pillars A sustainable strategy (2/2) United Nations Sustainable Development Goals (SDGs) Enel commitments to the global SDGs 400,000 people by million people, mainly in Africa, Asia and Latin America by million people by < 350 gco2 /kwheq by Target upgraded from the original 0.5 billion people commitment that was achieved in

10 Enel sustainability footprint ESG market engagement Equity - Shareholding structure 1 Equity - SRI investors geographic breakdown 2 Fixed income Green bond total allocation geographic breakdown 3 46% 79% 22% Institutional Investors 54% of TSO 8% 50% SRI Investors 8% of TSO 34% 2% Investor allocation by region 24% 12% 2% 16% 5% MEF Retail Other Institutional Investors SRI Investors Italy Rest of Europe Rest of the world UK North America Italy UK Rest of Europe Predominance of long-only investors 1. As of December Share capital breakdown. 2. As of December As of January Data curtesy of Crédit Agricole 10

11 1 Enel current footprint and key prospective highlights 2 What does sustainability mean for the Enel Group 3 The use of scenarios in short-medium and long term strategic planning 4 Enel and the TCFD 11

12 How do we use scenario modelling? Pre-closing / budget Industrial Plan Investment Valuation Scenario data Macroeconomics Financials Monthly short term scenario analysis supporting the budget target definition and the monthly performance monitor Medium term forecast supporting the Industrial Plan and the strategy definition Energy 1 year forecast on countries of presence 5 years forecast on countries of presence Long term forecast of the main variables involved in the business development and investment valuation processes 50 years forecast on countries of presence and inestment interest The short/long term analysis and investment decisions are taken through an integrated process of scenarios ensuring the internal consistency for several aims and different time-horizons 12

13 Main risks with potential impact on Strategic Group targets 1 Stochastic Valuation 2 Deterministic Valuation Relevant Risk for Sustainability Plan Macro & Energy hypothesis (1) Operations & Execution (2) Regulatory Execution Commodity Brent / Gas / Coal Macroeconomic Electricity Demand CPI Interest Rates CO2 Excahange Rates Plant Availability Natural Resources Avaliability Commercial Credit Risk Italy Spain East Europe Latin America United States South Africa Definition of operative efficiency plan Organic growth Plan 3 Impact on Ebitda and Net Income 4 Impact on debt and rating 1. Risks related to the macroeconomic scenario volatility and operations; 2. Risks related to the regulatory and business framework 13

14 The Business Plan is tested across a range of scenarios and shock events The EBITDA risk evaluation Plan (A) Plan (B) 5 percentile Valori di Piano 95 percentile The base case represents the Industrial Plan scenario (Plan A) The alternative case (Plan B) will be tested to check if the higher/lower EBITDA is a consequence higher/lower risk profile Downside The distribution asymmetry implies higher probability of potential upside respect to the base target Upside Level of Ebitda We stress the EBITDA through a range of possible shocks to the baseline assumptions EBITDA % X 1 X 2 EBITDA@Risk vs. Ebitda The analysis outcome shows the share of potential earnings at risk 14

15 Long term scenarios: three alternative frameworks to base our long term strategy Areas Variables Economic growth Low and volatile Three different scenarios Long Freeze Medium Go green Weak return to pre-crisis growth, but with cycles Sustainable long term growth Macro-economy Global imbalance Rising imbalances Current imbalance trend to a LT equilibrium Decreasing imbalances Social acceptance Increasing opposition Public acceptance is an issue in some geographies Significant acceptance A recurring project to set up the Group long term strategy evaluating altervative evolutions on potential state of natures Energy and natural resources Energy and climate policy and regulation Scarcity & geopolitics Role of fossil fuels Role of RES Prices of commodities Governments' role CO2 prices Increasing scarcity and geopolitical tensions Energy mix based on fossil fuels (incl. Coal) More and more, prices experience spikes Lack of a global agreement Low and stagnated prices Scarcity and geopolitical tensions around gas market Energy mix based on on natural gas. RES: mature technologies Increasing prices, with some spikes fo gas Not a global agreement, but some regional mechanisms Medium prices (increasing in the LT) Scarcity and geopolitical tensions is not an issue Sustained development of RES (proven + new developments) Coal price decrease, energy prices increase Global agreement High prices (quick increase) CO2 emissions Increasing emissions Gradual reduction Quick reduction Nuclear Decline. More costs after Fukushima Emerging countries, but once Fukushima crisis is over Potential development in Emerging countries Technology innovation CCS RES Neither policies nor innovation allow it to develop Stagnation in their development Slowdown. Only in the LT in case gas supply is not enough RES in commercial stage will go on. Slowdown in new RES Only if a technology breakthrough appears Great development, with new RES Smart grids, DG & EV No incentives (economic, demand) to foster them Gradual development Quick development 15

16 1 Enel current footprint and key prospective highlights 2 What does sustainability mean for the Enel Group 3 The use of scenarios in short-medium and long term strategic planning 4 The Enel Group and the TCFD 16

17 Climate Change: a project financed by Enel Group Source: «On the traces of glaciers», Fabiano Ventura; Upsala Glacier

18 The climate and weather variables impacting our business Climate Variables Extreme Events Impact on Electric Variables Chile Temperature +0,4% Temperature Hurricane and typhones Sea levels Power consumption Hydro generation (C ) 16,5 16,3 16,0 15,9 16,0 15,8 15,0 16,2 16,2 15,5 16,4 16,1 15,9 16,1 16,7 16,7 Ø 16 Rain Storms Drought Wind generation (mm) Rainfall 2015 Wind Water fall Solar generation Actual Avg 20 years Solar Strong cold / heavy snow Heat waves Power Network Source: Bloomberg

19 The main keystones of the project: areas and topics to be addressed Countries Italy Latam Weather Variables Spain Research end development activities will set average values in each selected country/areas for the following parameters Air and sea temperature Snow, Rain and frost days Wind and irradiation Extreme events Air temperature Sea temperature Annual average temperature Cumulative winter/summer precipitation Annual precipitation Precipitation pattern Days of intense precipitation Frost days Snow coverage Annual evaporation Consecutive dry days Ventilation Irradiation Summer days Frequency of droughts and impacts on hydro availability Frequency and value of extreme rain and snow events Frequency of extreme storm events This project aims to the develop different climate simulations in order to enable Enel to carry out resilience analysis about its assets and its business. 19

20 The main keystones of the project: data, scenarios and duration Timing, scenarios, data and project duration Parameters will be defined as difference related to the average data of the period according to two chosen scenarios Scenario IPCC 8.5 Scenario IPCC 2.6 Time is set from 2020 to 2050 with a yearly frequency. The scenarios will be developed until 2050 Data results resolution will be: 12 x 12 km for Italy and Spain 25 x 25 km for South America Duration 2 years starting from January

21 The whole project workflow o Climate and Energy System models o Scenarios IPCC 8.5 (BAU) & IPCC 2.6 (2 C, COP21) 1. Assess Physical & Transition Risks 2020 to 2050 o E-Distribution o Global Thermal Generation o Holding AFC 2. Define how these risks impact our areas of operation o Global Renewables o Innovation & Sustainability 3. Quantify the impact of climate change on Enel business segments and assets and identify major risks & opportunities Geogr. area Business Lines o Generation assets: existing & new Impact in terms of Δ EBITDA Climatic event o Transmission & Distribution o Consumers 21

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