Corporate Presentation L o n d o n, 1 0 O c t o b e r 2 0 1 7
Disclaimer This document has been prepared by Falck Renewables S.p.A. (the "Company") for use during meetings with investors and financial analysts and is solely for information purposes. The information set out herein has not been verified by an independent audit company. Neither the Company nor any of its subsidiaries, affiliates, branches, representative offices (the Group ), as well as any of their directors, officers, employees, advisers or agents (the Group Representatives ) accepts any responsibility for/or makes any representation or warranty, express or implied, as to the accuracy, timeliness or completeness of the information set out herein or any other related information regarding the Company and/or Group, whether written, oral or in visual or electronic form, transmitted or made available. This document may contain forward-looking statements about the Company and/or the Group based on Company s current views, beliefs, expectations, opinions, as well as based on current plans, estimates, assumptions, projections and projects of the Company and/or Group. These forward-looking statements are subject to significant risks, uncertainties and other factor (many of which are beyond the Company and/or the Group s control) which might cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Given these risks, uncertainties and other factors, you should not place undue reliance on the forwardlooking statements in this document. The information set out in this document is provided as of the date indicated herein. Except as required by applicable laws and regulations, the Company assumes no obligation to provide updates of any of the aforesaid forward-looking statements or to conform these statements to its actual results. Under no circumstances shall the Company, the Group and/or any of the Group Representatives be held liable (for negligence or otherwise) for any loss or damage howsoever arising from any use of this document or its contents or otherwise in connection with the document or the aforesaid forwardlooking statements. This document does not constitute an offer to sell or a solicitation to buy or subscribe the shares of the Company or Group and neither this entire document or a portion of it may constitute a recommendation to effect any transaction or to conclude any legal act of any kind whatsoever. This document may not be reproduced or distributed, in whole or in part, by any person other than the Company. By viewing and/or accepting a copy of this document, you agree to be bound by the foregoing limitations. 2
Agenda Group Overview 4 Renewables Market 9 Roadmap 2021 13 1H 2017 Highlights 24 Outlook and Conclusion 28 Appendix 31 3
GROUP OVERVIEW
Falck Renewables Today 2002 START OF OPERATIONS Actelios SpA listed on MTA Development of Biomass and WTE projects Beginning of development of wind projects in the UK (Falck Ren. Wind) Young quality assets 15.5y residual life 2004 STAR SEGMENT Listed on the STAR segment of Italian Stock Exchange 2010/11 FALCK RENEWABLES 2013 Consolidation of all renewables energy businesses of Falck Group PARTNERSHIP WITH FUND MANAGED BY COPENHAGEN INFRASTRUCTURE Sale of minority interest in six UK wind farm projects 2016 2021 ROADMAP Presentation of the new industrial plan 2017-2021 Service sector Clear Dividend Policy European IPP mainly focused in Wind & Solar Selective growth in new markets Strong Cash flows and solid Financial position M 133 cash available as of 30 June 2017 5 2017 NEW ENTRANCE IN US AND NORDIC MARKETS Acquisition of ready to build wind projects in Norway and Sweden Acquisition of operational PV project in the US 8.5% growth YoY (2017-2021) Growing in mature markets: Nordics and US
Group Over view 858* MW Across Europe 1,766 MW under Management by Vector Cuatro 32 plants 413MW 292MW 16MW 46MW 1,468 MW of solar PV 298 MW** of Wind 49MW 42MW 796MW 16MW 46MW Global Presence Vector Cuatro Offices as of 20 September 2017 6 * Includes minority stake in La Muela (26%) wind farm and Frullo Energia Ambiente (49%) for a total amount of 37MW ** Includes Cabezo (23,2 MW) and France projects (42 MW)
Falck Renewables: Leading Renewable Energy Forward Sustainable Renewable Energy Pure Play Well Positioned to Capture Growing Market Opportunities Long-Term Value-Creating Growth Strategy Strong Balance Sheet and Disciplined Capital Allocation Strategy Regionally diversified, quality assets Strong expertise as developer and long-term owner Customer-centric culture and first mover communitydriven approach Core asset-based model drives strong cash flows and funds expansion Expandable platform for services Seasoned management team with track record of operational and transactional excellence Growing in mature markets Focus portfolio and expand pipeline Extend core services Increase profitability Financial flexibility resulting from cash and line of credit availability Committed to delivering value by sustainably growing annual returns Balance leverage Low risk profile 2021 Roadmap: Generating sustainable shareholder value and enhancing energy choices for customers and communities 7
Corporate Governance Ownership Board of Directors Falck Energy Spa 1.77% Treasury Share 0.52% Free Float 37.71% Falck SpA; 60.00% Executive Director Non Executive Director Independent Dir. according to T.U.F. and Corporate Governance Code Supervisory Body under Italian Legislative Decree no. 231 of 2001 consists of two external members, including the Chairman, and one internal (the Head of Internal Audit). Internal Control and Risk Management System The company established an Internal Audit department and a Risk Management department. The Internal Control and Risk Management system is supervised by the Board of Statutory Auditors. The Board consists of twelve members; six of them are independent Directors (50%), one was appointed as Lead Independent Director. Committees of the Board of Directors There are two committees, Control and Risks, and Human Resources. They have a consultative and advisory role in respect to the Board. Both committees include independent Directors only. 8
RENEWABLES MARKET
Renewables Market Opportunities Renewables present an attractive and established long-term investment opportunity Growing Renewable Capacity Continued Commitment to De-carbonization Affordable and Predictable LCOE* Evolving Customer Needs The rapid growth in renewables is driven by industrial trends and public policy support 10 *Levelised Cost of Electricity
Renewables: A Growing Global Energy Source Renewables are forecasted to continue to represent a substantial portion of global installed capacity through 2030 Global Installed Capacity (GW) ~6,100 ~9,300 ~3,200 Solar ~780 Other ~50 Solar * ~600 Coal ~430 Natural Gas & Oil ~550 EUROPE new installations 2014-2030 Wind:142 GW Solar: 63 GW 2014 2030 Wind * ~740 Nuclear ~120 USA new installations 2014-2030 Wind: 88 GW Solar: 119 GW 11 Global Commitment to Clean Energy 160 countries have publicly announced clean energy plans Wind ~770 Bioenergy ~80 EU committed to renewable share of >27% of total energy consumption by 2030 Renewewable Source CAGR (2014-2030) Hydro +2.2% Wind +8.0% Solar +11.9% Source: World Energy Outlook 2016 New Policies Scenario International Energy Agency * From World Energy Outlook 2015 New Policies Scenario -International Energy Agency **Others include geothermal CSP and marine energy Bioenergy +3.7% Others** +11.0% Hydro ~450
Renewables: Attractive and at the Center of the Energy Web 160 140 120 100 80 60 40 20 0 100 80 60 40 20 0 125 Economic Rationale Boosting the Uptake of Renewables LCOE Trend in Solar ($/MWh) 98 2012 2013 2014 2015 Source: Lazard LCOE report US market Bloomberg - Clean Technica - Solar & Wind Power Prices Often Lower Than Fossil Fuel Power Prices 72 70 79 2012 2013 2014 2015 Source: Lazard LCOE report US market Bloomberg LCOE Trend in Wind ($/MWh) 59 55 Combined Gas Cycle 64 55 63 47 2016 65 2016 Combined Gas Cycle 63 Renewable Energy Companies Best Positioned to Respond to Customer Needs Storage Distributed Generation Energy Efficiency Price Predictability Clean Energy Leveraging the value of our infrastructure to create an interconnected, collaborative and multidimensional model leveraging technology to improve energy services globally 12
2021 ROADMAP
Falck Renewables: 2021 Roadmap Goals Today 2021 2021 Driving Sustainable & Profitable Growth 858 MW Total capacity owned 2,500 MW Asset managed globally* 18% Assets less than 5-years old 0.95 Mton of CO2 avoided*** 1,300 MW Total capacity owned 4,500 MW Asset managed globally* 44% Assets less than 5-years old 1.3 Mton of CO2 avoided*** 685M Cumulative** Operating Cash Flow 702M Cumulative** CapEx 201M 2021 Ordinary EBITDA 14 * Includes Falck Renewables owned assets and Vector Cuatro managed assets ** 2017-2021 *** calculated as 430 g/kwh
2021 Roadmap: Strategic Priorities to Drive Value Creation Growing in Mature Markets Capitalize on growth in core markets Enter select mature markets with strong fundamentals Monitor emerging markets for future entry Focus Portfolio and Expand Pipeline Onshore wind and solar are core of growth strategy Explore opportunities in the customer centered clean energy web (distributed generation, storage, software) Evolve asset base and expand pipeline Extend Core Services Continue business core service extension Enhance service offerings to asset owners and energy users Increase Profitability Employ hands-on approach to maximize revenues and value from full life cycle approach Increase efficiencies and extract additional value from existing assets Increase reach and optionality of our footprint 15
2021 Roadmap: Geographical Expansion Falck 1,300 MW assets owned +11% CAGR in EBITDA (2017-2021) Vector Cuatro ~3x MW wind assets under management +25.6% CAGR in EBITDA (2017-2021) 16 +43% growth in wind assets (2017-2021) 7x growth in solar assets (2017-2021) Vector Cuatro only presence Falck Renewables current presence Falck Renewables areas of interest Growth in mature markets, expansion of Vector Cuatro s services dedicated to assets owners VC as an antenna to monitor emerging market opportunities Engineering focus on wind and higher value added services 4.4% contribution to ordinary group Net Income (up from 3% in 2017)
2021 Roadmap: Focus in Four Distinct Regions Installed Capacity (MW) by Region (2017-2021) North Europe France, UK, Netherlands, Ireland Nordics Norway, Sweden, Finland, Denmark South Europe Italy, Spain North America 858 403 +52% 1,002 413 30 40 1,303 433 200 60 Expand presence in Europe in attractive new markets Reinforce position in existing markets Enter in North America gradually, starting with 30 455 519 610 MW installed in 2019 in the USA 2017 2019 2021 Energy Output (TWh) 2.1 3.1 Capitalize and consolidate on strength in Italy and UK to fund expansion in selected, low-risk mature markets with strong existing renewable fundamentals 17
2021 Roadmap: Focus Portfolio Installed Capacity (MW) by Technology (2017-2021) Wind Solar PV 858 46 16 46 66 1,303 1,141 890 796 46 116 Other 1,002 Falck will remain a wind oriented company, with more than 87% of wind assets Strong expansion in solar PV with an installed capacity in 2021 seven times higher than today Average of 150 BPS over Country WACC 2017-2019 2017 2019 2021 Focus investments on highest return opportunities in core onshore wind and solar PV while developing tech-based solutions to capture additional value across the energy management chain 18
Nordics Wind: a market with solid fundamentals Green energy demand driven by lowest Levelized Cost of Energy (LCOE) Low risk countries (AAA) and strong growing economies ~ 70 MW ~ 115 MW Significant untapped onshore wind potential Liquid «Nordpool market» allows various hedging opportunities and potential C&I PPAs Projects size allowing economies of scale Wind hours expected: ~ 3,500 COD: 2019-2020* Under development: 125 MW Wind hours expected: ~ 3,400 COD: 2019-2020 Projects Okla and Hennoy Projects Aliden and Brattmyrliden Consistent with strategy: Income and Risk profile diversification 19 * To be better precisely defined
PROJECT OPPORTUNITY MARKET RATIONALE US Solar: a further geographical diversification Solar largest source of new generating capacity in the US Solar 2010-16: +65% Wind 2010-16: +13% Resource availability Grid parity: PPA prices are at parity with competing new techs, long term also without incentives Low cost of operations: Asset management, O&M and BOP New models: CCA, Community Solar, storage Tax incentives: 2017 Federal tax credit support ITC (Investments Tax Credit) at 30% Signed not closed (expected in November) 20 Source: US solar market insight SEIA, EIA 92 MW dc Installed Capacity: 92MW dc Location: Bladen and Cumberland counties - North Carolina COD: September 2017 Expected Production: ~ 150 GWh/year Long term PPA with Duke Energy
2021 Roadmap: Extend Core Ser vices Construction & Finance Operations* Performance improvement Active Energy Management Construction & Finance Operations* Performance improvement Active Energy Management Late Stage Development Energy Efficiency Late Stage Development Energy Efficiency Early Stage Development Falck Renewables Today Supply/Client Early Stage Development Falck Renewables Tomorrow Supply/Client Enhance customer value proposition by building on strong in-house competencies to offer owner services in asset operations, management and optimization 21 *Does not include O&M/ESP
Roadmap 2021:Financial Goals Debt to Equity Ratio EBITDA ( M) CAGR +11% 1.4x 1.6x 1.9x 132 166 201 2017 2019 2021 2017 2019 2021 NFP ( M) 941 767 626 8.0x NFP to EBITDA Ratio 7.0x Peers Average 5.5x* 7.0x 4.7x 4.6x 4.7x Falck Renewables Debt Covenant Falck Renewables NFP to EBITDA ratio 2017 2019 2021 2017 2019 2021 Sustainable ratio with room for further expansion 22 *Average NFP to EBITDA ratio for peers 2013 2015 EDPR, Alerion, Greentech, Futuren, Terna Energy, Boralex, EnergieKontor, Enel, PNE, Alterra, Scatec Solar, Capital Stage, NextEra
Based on pay-out ratio Strong Balance Sheet and Commitment to Increasing Dividend Deliver Attractive Returns Proposed Dividend Per Share (in c )* 4.7x 4.9 5.3 5.8 6.3 Average NFP/EBITDA Maintain a sustainable ratio throughout the plan well within the corporate financing covenant and substantially below the peer average 2017 2018 2019 2020 2021 2021 Roadmap enables sustainable investments in short- and long-term growth while supporting progressive annual dividend 23 * Years in Y-axis represent timing of dividend payment e.g. 2017 represents FY2016 dividend payment
1H 2017 HIGHLIGHTS
1H 2017 Highlights Strong 1H results vs same period 2016 (+9.6% EBITDA): Better production compared to 1H 2016 (+1.6%), offset by lower than expected wind conditions in Italy, France and Spain Mitigated the impact of pound exchange ratio (- 9.5% YoY) Better prices in Italy (+14%), UK (+11%) and Spain (+112%) Stable NFP and reduced financial charges Average interest rate 3.85% in 1H 2017 (down from 4.6% in 1H 2016) Strong performance by Vector Cuatro NFP below FY 2016 levels, primarily due to good cash flow generation Increase of useful life in wind and solar group assets (positive impact on net income) 25 Progress on pipeline and client services to support future growth Signed acquisition of two wind projects in Norway (70MW) + 125 MW pipeline Start up and agreement with local developer in the Netherlands for greenfield projects Vector Cuatro: reached 1,766 MW under management (of which 17% wind assets) in progress of ~ 35% since the Capital Market Day
1H 2017 Results Ahead of Expectations ( M) 1H2017 1H2016 YoY Change REVENUES 141.0 128.6 12.4 EBITDA 78.2 71.3 6.9 % on revenues 55.5% 55.5% EBIT 43.9 35.7 8.2 EARNINGS BEFORE TAXES 25.4 16.6 8.8 NET EARNINGS 19.5 11.0 8.5 GROUP NET EARNINGS 12.8 9.0 3.8 NFP (541.2) (562.0) 20.8 * + + + + + + + INSTALLED CAPACITY 821 MW 760 MW 61 MW ENERGY PRODUCTION 1,000 GWh 984 GWh 16 GWh + + 26 * As of 31 December 2016 FY 2017 guidance confirmed
1H 2017 Debt Breakdown Gross Debt Nature Without Derivatives % Gross Debt Without Derivatives Hedged 2% 2% 1% Financing with recourse Project financing without recourse Other financings without recourse 26% Hedged Un-hedged 74% 740M 97% 740M Average interest rate of 3.85% (including interest rate swap) 27
OUTLOOK AND CONCLUSIONS
Guidance 2017 confirmed EBITDA 1H 2017 m 78.2 Prices Volumes Exchange Ratio Positive trend vs 1H 2017 expectations Negative trend in 1H: total volumes -9.8% vs expectations Average exchange ratio in 2H 2017 @ 0.91 EBITDA 2017E 132-136 UNCHANGED NFP (626) Subject to potential acceleration of development activities UNCHANGED 29
Final remarks On Track to Deliver 2021 Roadmap Milestones Year 1 Milestone Achieved Next steps Initiate strategic expansion into select mature markets with strong fundamentals Nordics: acquisition of consented wind projects in Norway (70 MW) and in Sweden (115 MW) US: acquisition of PV operational project (92MW) subject to certain conditions precedent New opportunities under evaluation Achieve increased access to pipeline and partnerships with developers Netherlands: agreement with K&P (local developer) to co-develop an initial pipeline of about 150 MW (onshore wind and solar) Strengthened business development management team New agreements under evaluation Complement existing activities with service offerings in asset operations, management, and optimization Vector Cuatro: new opening in Dubai to increase assets managed for third parties Strengthened management team and reorganized business Vector Cuatro: considering new high valueadd services (Performance improvement, Advance analytics, life extension) Scouting clean energy web opportunities Invest in team and technology to develop active energy management Started in-house dispatching for PV and WtE plants in Italy Completion of assets dispatched in house in Italy by early 2018 30 Continue internal improvement programs aimed at reducing costs Acquired competencies in wind performance improvements areas Framework agreement with providers to reduce O&M cost under discussion Reduction of financial charges Opex in control notwithstanding significant BD effort Stronger investment in data analytics Innovative continuous ISP re-contracting New technology upgrades to increase availability and efficiency on turbines
Appendix
Energy market over view UK ROC plants UK projects (no ROC, no CFD) Nordic projects Itay project today USA project today Power Prices Producer risk Producer risk Chance to fix with agreement with final consumer Producer risk Chance to fix within PPA or through agreement with final consumer All-in CFD fixed 20 years (post auctions) Fix/Variable PPA (10y 20y) Incentive ROC has regulated price with inflation N/A Elcert market price can be fixed within EPAs for up to 5y N/A Fiscal (reduces PPA price) Volume Risk Offtaker risk Different options Different options No volume risk on Producer No volume risk on Producer Offtake of Power produced Unbalancing risk Demand for green PPAdriven by obligation quota on the Suppliers easy market access Included in fees paid to offtakers Competition with other sources to market access Competition with other sources to market access and by national goals Demand of energy driven by auctions (none in sight) PPA required, in majority of states driven by State Quota (RPS) Producer risk Producer risk Producer risk Typically included in fees paid to offtakers SUMMARY Ca 50% Revenues merchant, 100% merchant post PPA 100% Revenues merchant (with chance to fix with final Consumer) 100% Revenues merchant (with chance to fix with Offtaker/final Consumer) Merchant post CFD 100% Revenues fixed plus merchant post PPA 32
Young Asset Base June 2017 * 3MW Residual Project Life Residual Debt Life Project cash flow after debt repayment Wholesale price Residual incentive life 33 * Review of assets useful life based on indipendent technical assessment
Production in 1H 2017 ( Electricity & Waste ) Energy GWh 1.6% 984 1,000 11 12 103 112 1,611 1,626 870 876 Solar Wte/Biomass Wind Positive impact from strong wind conditions in June and full contribution from Kingsburn, Spaldington and Assel Valley wind farms. Auchrobert wind farm has been operational since April 2017. 1H2016 1H2017 Waste (Ton/000) 7.6% 124 134 53 44 80 81 Waste Treatment Wte Plant Negatively impacted by lower wind conditions YoY Energy from waste/biomass better than year ago period primarily due to Biomass performance Increase in Waste treatment volumes Positive performance of solar 34 1H2016 1H2017
1H 2017 Wind Portfolio Performance UK & Italy: Evolution of Production** 1H 2017 vs 1H 2016: Load Factor* by Country (3.7%) TOTAL GROUP TOTAL GROUP (EXCLUDES REIMBURSED CURTAILMENT) (11.8)% (11.2)% 2.7% (10.8%) (8.6%) 28.0% 33.1% 1H2016 1H2017 31.7% 31.8% 24.9% 23.1% 21.6% 19.6% 29.4% 27.4% (20.4%) (23.8%) Q1 H1 35 ** variation % vs internal Index of production * Based on effective operating hours
2021 Roadmap: Path to Success Year 1 Milestones Year 3 Milestones Year 5 Milestones Initiate strategic expansion into select mature markets with strong fundamentals Achieve increased access to pipeline and partnerships with developers Complement existing activities with service offerings in asset operations, management, and optimization Invest in team and technology to develop active energy management Continue internal improvement programs aimed at reducing costs ~ 150 MW of new assets in operations, not including Auchrobert Achieve asset presence outside of existing core markets in at least two new low risk markets In control of solid pipeline of 0.6-0-8 GW gross Know How in customer centered energy web Significant presence in wind asset management and deeper asset owners services Energy efficiency investments in service Financing options in place to fund future years 8.5% annual dividend growth (off 2016 base) Installed capacity to 1,300 MW Solid options to grow outside low risk mature markets 1 GW pipeline with strong solidity and country optionality Increase EBITDA diversification and increase Net Income quality with growing services contribution Top tier operational efficiency and reduced G&A impact Fund further growth with increasing internally generated cash, project level financing, and solid existing corporate loans Deliver attractive shareholder returns through sustainable pay out growth upside 36