A 4.0 sustainable growth Business Plan

Transcription

1 A 4.0 sustainable growth Business Plan

2 Index Annex Hera Performance Overview of Hera Group Forecast 2017 Ebitda Last 5 years performance Strategic evolution Scenario Business plan: targets to 2021 Capital allocation plan Ebitda target by value drivers Internal growth drivers Efficiencies Gas distribution tenders Top line growth External growth drivers Industrial Development Strategic framework by ASA 2021 Ebitda target by ASA Networks Waste Energy CSV 2021 Financial targets Closing remarks Dividend policy Closing remarks Ebitda Track record BP main assumptions Ebit target Financial Debt Two pillars model track record More sustainability ahead Waste business Water business Gas business Electricity business RAB Disclaimer

3 Hera Performance Business Plan to 2021

4 Who and what Business positioning waste 1 water 2 gas dist. 3 energy sales Mtons Waste treated 3.6 Mln Citizens served 1.7 Mln Point of delivery 2.3 Mln Clients Among largest sector players 01

5 Where we stand: forecast 2017 Ebitda Forecast 2017 Ebitda plan: 2Y execution m +6.9% +18 ~ % (10) A'16 Incentives Int. Growth M&A F'17^ 2Y Avg. Plan* Outperf. A'16-F'17 Forecast better than budget Increase / Decrease vs plan E 16-E 20 * 2Y of planned Ebitda growth target assuming a linear distribution of the expected growth (196 m x 40% of plan years = 78 m ) ^ Best estimate at the time 02

6 Last 5Y growth outperforming our business plan Business plan Ebitda target +289 m +7.5% CAGR Actual Ebitda results +318 m +8.2% CAGR ~ (0) (18) DEBT/EBITDA 2.9x DEBT/EBITDA (54) 2.6x A'12 Negatives Internal growth Gas tenders M&A E'17 A'12 Negatives* Internal growth Gas tenders M&A F'17^ Increase / Decrease vs plan E 13-E 17 ^ Best estimate at the time * Includes WACC review happened in Jan for -25m Org. growth and M&A offset external events 03

7 Last 5 years focused on building up premises Consistent strategy anticipates emerging patterns (year of inclusion among strategic pillars) Pillars of our financial discipline CSV FINANCIAL Financial soundness: Debt/Ebitda 3x DPS related to cash flows Enhancement of cash EPS and cash flows DISCIPLINE Asset allocation to best value added projects Accretive M&A Reduction of minorities to strengthen net earnings & governance Key to face future scenarios 04

8 Scenario A high concentration of opportunities 05

9 Business plan: targets to 2021 Business Plan to 2021

10 3500,0 3000,0 2500,0 2000,0 1500,0 1000,0 500,0 0,0 Our capital allocation: 2.9 b in plan 5 years capex plan by destination (B ) Allocable capex Discretional capex b Development Debt / Ebitda <3.2x ~2.9x ~ Mandatory capex b Maintenance Maintenance Organic Development Gas tenders on key targets M&A Total Leverage Additional &&& opportunities +62% increase vs capex of last 5 years 06

11 2021 Ebitda target Plan to m +4.4% Cagr = 1,135 1, (27) A'16 Incentives & Other^ Int. Growth M&A E'21 Old Plan '20 Balanced growth contribution 07 Increase / Decrease vs Old plan to 2020 ^ Includes November 2016 one off related to France nuclear production shortage

12 Internal Growth: +138 m 2021 Internal Growth target by levers Efficiencies Gas Tenders Top Line Growth Internal Growth Wide range of levers to grow organically 08

13 Internal Growth: +138 m (1) Efficiency track record Efficiencies by business +23 Corporate 20% Energy 16% m Networks 32% Waste 32% Last 5Y Cost cutting '17-'21 Innovation '17-'21 10Y Achievement ~5% reduction of addressable costs 09

14 Internal Growth: +138 m (2) Ebitda contribution from gas tenders Point of delivery in reference ATEMs by market share (Mln, Hera mkt sh.) +29 1,7 0,03 1,7 75% E'17 E'18 E'19 E'20 E'21 Total >50% <50% Total Avg. RAB on target ATEMs 16 tenders concentrated in 3 years of Plan 10

15 Internal Growth: +138 m (3) Top line Growth: +33 m Visible drivers underpinning Organic Growth 11

16 External growth drivers: M&A of +107 m M&A target Remarkable market fragmentation M&A E'21 Already executed Other targets Focused on strengthening business position 12

17 Industrial Development Business Plan to 2021

18 Deployment of strategic priorities Resources optimization Smart meter/grid & analytics Beat quality std Digitalization Gas tenders Geo BI New tech. projects (e.g. Bio CH4) Circular models 360 waste mgmt. offering Customer base expansion Cost to serve Value-added services Customer experience Multi-channel approach New customers and energy services Aiming at ambitious targets 13

19 Ebitda growth by business Ebitda growth m +4.4% CAGR % 47% 54% 53% Lev. A'16 Networks Waste Energy Other E'21 Lev. Proportional growth maintaining a balanced portfolio liberalized regulated 14

20 Networks: our approach and targets Unique control room Digitalization of workflows and client interface Proprietary radio network for smart metering On field IT support (3D, Virtual reality, on-line) Smart water mgmt: further leakages reduction and water re-use Energy water supply optimization Circular approach on water mgmt and material mgmt Mobility work and automation Virtual office and dialogue with machines Targeting -5% energy consumptions by 2020 Z.E.D. plants (water treatment) Leverage upon peculiarities and integrate rapidly Moving into upstream of geothermal source (FE). Exploit residual materials for new products/energy production Competitive strengths to stay on top 15

21 Networks: targets 424 Ebitda growth by levers (3) m +5.4% CAGR Ebitda growth by business A2016 Incentives Efficiency Innovation Growth Excellence E2021 A2016 Gas Water Electricity District H. E2021 Gas Water Electricity District Heating Stable and visible returns are a solid platform 16

22 Networks: capex and RAB evolution Capex plan 17-21: 2.0 b % vs old plan 559 Total RAB ~+760 m Electricity RAB ~+30 m Water RAB ~+160 m Gas RAB ~+570 m Gas RAB development through tenders* (B ) ,26 (0.00) (0.06) ,37 1,07 1,53 E2017 E2018 E2019 E2020 E2021 Reconfirmed Lost Acquired Developed Total in 2021 Gas Water Electricity District Heating Property RAB Third parties RAB Strong increase in capex to fund organic growth *Excluding RAB stemming from M&A 17

23 WASTE: our approach and targets Materials flow optimization ACTION Analytics on workforce and trucks mgmt (e.g. Geo.BI) Exploit mkt fragmentation and asset scarcity Enhance plant platform (refurbishm. & developm.) Tenders for w. collection From go for disposal to Global w. mgmt provider to industrial customers Move to new target sectors Contribute to build the new business model Deploy more and more circular approach (recycle, reuse) leading the way in Italy Digitalize waste collection and metering Enhance recycling means and quality Bio-methane plant Fully exploit Aliplast potential & synergies Support other portfolio businesses to cope with circularity 18 Setting the benchmark

24 Waste: targets Ebitda Growth +52 m +4.1% CAGR Capex plan 17-21: 0.6 b * Collection 168 (14) +11% Vs Old plan Treatment 439 A2016 (Incentives) Int. Growth M&A E2021 Balanced growth drivers from existing platform & M&A 19 * Include cash acquisition of Aliplast

25 Waste Treatment: relevance of being «circular» Our circular waste mgmt 21 Special Waste customer base target (n.) Cagr.+8% 3,700 5,400 OFFERING Global waste mgmt services 2016 E treatment volumes (Mtons) , ,3 (0.2) 3,7 2,0 1, Urban W. Special W. E2021 With circularity we anticipate demand evolution 20

26 ENERGY: our approach and targets Cross selling & increase penetration Enhancement of selling channels Maggior Tutela handover Salvaguardia tenders New V.A. services around commodity supply Energy services to P.A. and Industries «Full energy service» provider Optimize cost to serve Robotize processes «Fully» Integrate acquired customer base Exploit capacity market Demand response TAP contract Lead consolidation of s/m sized players in key areas M&A Personalized approach through data analytics/ai Omnichannel mgmt always on Caring of customers Acting to increase the value of our customer base 21

27 ENERGY: main targets Ebitda Growth m +1.5% CAGR Customer base evolution (M clients) 2, >3m (10) A2016 Negatives Int. Growth M&A E2021 A2016 Organic G. New opportunities E2021 All levers at work to continue expansion 22

28 From CSR to Creating Shared Value Intelligent use of energy Efficient use of resources ~300 m 30% Group Ebitda ~450 m 40% Group Ebitda Innovation & Territorial development 2/3 rd of growth to 2021 comes from shared value 23

29 2021 financial targets Cost of Debt (%) Tax rate (%) EIB financing 4,0% 110m 3,8% 3,7% 3,5% 40,2% 36,8% 35.1% ~32% A'14 A'15 A'16 E'21 A'14 A'15 A'16 E'21 EPS 5Y CAGR (CAGR %) ~+4.7% Cash Flow per share ( cents per share) +4.3% Cagr +4,5% 48,5 5Y CAGR plan to '20 5Y CAGR plan to'21 A'16 F'17 E'18 E'19 E'20 E'21 Enhancing EPS and cash flows [per share] 24

30 Closing remarks Business Plan to 2021

31 Dividend policy uprise DPS ( c matured in the year/incr. %) +1.5 c +17% 10,5 10,5 10,0 10,0 10,0 10,0 = ,5 9,5 9,5 '16 '17 '18 '19 '20 '21 Old BP to 20 New BP to 21 Increase / Decrease vs Old plan to 2020 Pay out above 60% throughout BP period 25

32 Closing remarks Healthy set of results emerging from F2017: a good start of the 5 years plan. Deployment of our leadership across different business areas: 2.9 b to be invested where we can maximise returns. Return on Equity (%) 8,6% 9,4% Growth strategy leveraging on a clear and granular business strategy. Finance strategy structured on strong cash flow and well-balanced debt ratios. Further financial fire power to enhance shareholders returns. A'16 E'21 Ready to lead sector transformation 26

33 ANNEX

34 An uninterrupted growth Ever growing results since establishment (M, % GDP growth) Ebitda grown by 4.8 times ENERGY WASTE NETWORKS GDP '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 A'02 M&A Org. Growth & Syn. A'16 EPS Cagr 9% thanks to peculiar business model 27

35 Business Plan main assumptions Main assumptions A 15 A 16 E 21 Brent (Dollar/Barrel) Exchange rate /$ PUN ( /MWh) Inflation (5Y moving average) 0% (0.1%) 1.0% Green certificate biomass plants ( /MWh) Green certificate other plants ( /MWh) White certificates ( /TEP) CO 2 certificates ( /ton) Tax rate (%) 38.4% 35.1% 32% Cost of Debt (%) 3.8% 3.7% 3.5% 28

36 Consolidated Group Ebit target Ebit by strategic area A 16 E 21 Other 7 Other 26 Energy 153 Energy 169 Networks m 566 m Networks 265 Waste 96 Waste

37 Financial Debt Gross debt maturities as of 30/09/2017* Interest rate breakdown in 2021 (%) 3, % 2.255, ,9 Rates 25,0 55,9 448,9 48,7 336,6 915,2 68% '17 '18 '19 '20 '21 Post Gross Debt Variable Fixed * Excluding short term credit facilities 30

38 Track record of Hera s two pillar Business model Ebitda Growth by 4.8x: drivers Constant M&A contribution to Ebitda Avg. Growth per annum: +22 m deals executed A'16 Tot. 192 A'02 M&A Org. Growth & Synergies 20-25% avg. synergy extraction A'16 Organic Growth & Synergies always positive Avg. Growth per annum: +30 m Outstanding & constant track record A'16 Tot. An unique, effective & reliable two pillar business model 31

39 Some more sustainability ahead Energy Resources Operating areas smart use of energy efficient use of resources innovation and contribution to development Energy efficiency Emission reduction Renewable energies More circular economy Sustainable management of water Employment development Economic development and social inclusion Innovation and IT Start construction of a biodigestion plant for biomethane in Bologna Public lighting: implement energy saving measures and replace lighting fixtures with LED lamps for an annual savings of approximately of 2,400 toe Electricity consumption: 100% from renewable sources in 2017 for the business of Hera SpA. Extend to AcegasApsAmga and Marche Multiservizi by Reduce by 19% by 2020 the carbon footprint of energy production compared to 2015 Increase the sorting collection rate to 70% by 2021 and the recycling rate of packaging to 74%. Continue limiting the use of landfills: - 7% of municipal waste in 2017 and 6% in 2020; - Design a mechanical-biological treatment plant for Pesaro; - Build a glass pre-treatment plant in Rimini. Complete the waste management service offered to industrial customers with solutions in the field of circular economy and increase the recovery rate of industrial waste Increase separate waste collection: to 58% in 2017 and 66% in 2020 at Group level Rimini Seawater Protection Plan: complete 1 more project and upgrade of Servola Plant to completely avoid discharges in the sea Counselling and training employees on new technology and IT Implementing the company welfare and smart working Supporting diversity and inclusion More job rotation, open innovation Accident prevention: improve rate of frequency index through training and awareness raising actions 32

40 Waste business Economics Capex E 17-E 21: 606 m A 16 E 21 EBITDA EBIT A'16 E'17 E'18 E'19 E'20 E'21 Ebitda Breakdown Highlights A 16 E 21* Waste treated 6,868 8,211 Urban 2,048 1,820 Special 2,341 3,667 by products 2,479 2,724 A'16 Collection Treatment E'21 * Excluding volumes from M&A 33

41 Water business Economics Capex E 17-E 21: 760 m A 16 E 21 EBITDA EBIT A'16 E'17 E'18 E'19 E'20 E'21 Volumes sold (Mmc) RAB * A 16 E 21* RAB* 1,414 1,577 A'16 *Numbers exclude M&A E'21 *Numbers exclude M&A 34

42 Gas business Economics Capex E 17-E 21: 1,229 m A 16 E 21 EBITDA EBIT A'16 E'17 E'18 E'19 E'20 E'21 Capex Gas tenders Ebitda Breakdown Highlights A 16 E 21* Volume Sales &Trading (Mcm) 3,914 3,142 RAB (m ) 1,065 1,527 A'16 E'21 Gas distribution Gas sales District Heating Heat management *Numbers exclude M&A and third parties RAB 35

43 Electricity business Economics Capex E 17-E 21: 192 m A 16 E 21 EBITDA EBIT A'16 E'17 E'18 E'19 E'20 E'21 Ebitda Breakdown Highlights A 16 E 21* Volume Sold (TWh) RAB (m ) A'16 E'21 Electricity distribution Electricity sales Power Generation *Numbers exclude M&A 36

44 RAB growth and WACC assumptions RAB growth* (B ) WACC assumptions (%) (0.01) A 16 E 17 E 18 E 19 E 20 E 21 Gas distribution 6.1% 6.1% 6.1% 6.3% 6.3% 6.3% 1.41 Gas metering 6.6% 6.6% 6.6% 6.8% 6.8% 6.8% 0.37 Third parties 0.26 Electricity distribution 5.6% 5.6% 5.6% 5.8% 5.8% 5.8% Water distribution 5.3% 5.3% 5.3% 5.3% 5.6% 5.6% 2016 Gas Water Electricity D.H. E2021 *Excluding RAB stemming from M&A 37

45 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. 38