A2A Company Presentation€¦ · A2A Company Presentation Milan, 9 September 2014 Italian Infrastructure Day at Borsa Italiana. This information was prepared by A2A and it is not

A2A CompanyPresentation

Milan, 9 September 2014

Italian Infrastructure Dayat Borsa Italiana

This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 2

Agenda

• Company profile

• Focus on Infrastructure

• Last release (H1’14)


A2A in a snapshot

Significant critical mass

Among domestic utilities A2A ranks

• 2nd largest in terms of renewable capacity• 4th largest in terms of overall electricity production• 1st in terms of heated volumes• 1st in terms of electricity production by WTE• 2nd in terms of distributed electricity• as one of the most diversified operators in terms

of business mix

• 4th in terms of EBITDA among domestic utilities• as the best performer in terms of debt reduction in

2013• 1st in terms of revenues and EBITDA among local

utilities

Progress in a challenging environment

• Rather stable operating results in spite of mostunfavourable scenario

• 2013-2015 Business Plan – focussed on consolidation,ahead of schedule in 2013

Shareholding structure

• Ongoing deleveraging and efficiency efforts in 2014

• New Business Plan in the first months of 2015

Born in 2008 by a merger of local utilities, A2A is jointly controlledby the cities of Brescia and Milan

Shift to a traditional corporate governance model in June 2014 –newly appointed Chairman and CEO with broad executive powers

(1) Group net income adjusted for the impact of extraordinary items: 2013 = 156€M; 2012 =116 €M; 2011 = 165 € M; 2010 = 243 €M

Source: CONSOB – updated at 30/06/2014


COGENERATION& DISTRICT HEATING

Cogenerationplants

Networks

89 M€ 8%

WASTE

Collection

Treatment

255 M€ 22%

NETWORKS(EPCG included)

Water

Electricity networks

Gas networks

268 M€ 23%

ENERGY(EPCG included)

Fuel sourcing

Powergeneration

Whole-sale &Trading

540 M€ 47%

PORTFOLIO MANAGEMENT

DisposalHeat/Electricitysale

Electricity/Gassale

Heat/Electricitysale

(1) Adjusted EBITDA, excluding costs of redundancy schemes (-25 €M), regulatory impacts (+24 €M) and EBITDA from “Other services & Corporate” (-18 €M)

Sources: AEEG and Company Annual Reports

A2A business portfolio

2013EBITDA(1)

About 50% of Group EBITDA from regulated activities/concessions orlong-term contracts

• Flexible business model which allows for optimizations both in the business units and across them

This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.

A2A asset portfolio

5


A2A 2013 Volumes

6

* without Intermediated Ipex volumes

As of June 2012 Edipower production includes 77% of production of the plants managed in tolling regime and 100% of production of the S. Filippo delMela, Turbigo (groups 1-2-3) and Brindisi thermoelectric plants and some hydroelectric and photovoltaic plants.As of November 2013 Tusciano and Turbigo productions are not included, while the quantities of the remaining Edipower plants are 100% of productionAs of January to May 2012, Edipower production includes 20% of production of the plants managed in tolling regime


A2A strengths and opportunities

7

CO

GEN

ER

ATIO

N&

DIS

TR

IC

TH

EA

TIN

GW

AS

TE

NETW

OR

KS

EN

ER

GY

• Diversified and well-balanced generation mix - to exploit market opportunities

and mitigate overall risk

• Flexible plant portfolio: almost 90% of hydro flexible reservoir/basin vs. run-of-

river; CCGT plants with a low minimum load

• Relevant market share in the Northern Zone

• CCGT plants are new or recently revamped, no contractual constraints (take or

pay gas), no demand constraints (heat-lead)

• Most widely used system in Europe to achieve energy efficiency targets

• Boost for local investments

• Clean and cutting-edge technology (e.g. heat pump)

• Environmental benefits: reduction of pollutant emissions in cities

• Diversified technology/fuel mix (cogeneration, biomass, etc.)

• No boiler requiring maintenance at user level

• Tariff customisation

• District cooling option

• Full integration along the value chain

• Higher value/technology for waste treatment and disposal (e.g. Waste to

Energy, Mechanical Biological Treatment)

• Expansion abroad by leveraging on innovative A2A systems and international

partners

• R&D (e.g., Ecoergite)

• Successful management of Acerra WTE plant

• High service quality

• Good continuity of electricity and gas distribution services

• Efficient customer care

• Focus on costs

• Focus on new technologies (e.g., smart grids)

• Development of environmental market efficiency projects

• Further enhancement of best in class perfomance in

customer relationship management

• CCGT portfolio restructuring

• Conversion of obsolete power plants

PROJECTS

• Development of high-margin treatment and disposal

(e.g., remediation)

• Organic waste collection in Milan

• Start of new Asti glass treatment plant

• New collection vehicles following the winning of Como

collection tender

• Opportunities in treatment and disposal in South Italy

• Development of district heating network interconnections

in Milan area, joined to heat production enhancement in

order to boost efficient heating system

• Development of energy efficiency projects in the

heating/facility management field

• Growth also by further integration with Wte

• Gas distribution tenders

• Development of new efficient public lighting system in

Milano and Brescia with LED technology and green

certificate production

• Geographical consolidation (e. g., water)

• Investment in the integrated water cycle of Brescia to

further improve the quality of water distributed (e.g.,

Chrome VI)


Agenda

• Company profile




Infrastructure operations – Domestic Market Positioning

# Ranking

#5

#4listedutility

ELECTRICITY NETWORKSElectricity distributed (TWh)

WATERWater distributed (Mcm)

GAS NETWORKSGas Distributed (Mcm)

Infrastructure EBITDA represents around 30% of 2013 EBITDA

#1

DISTRICT HEATINGHeated volumes (Mcm)

EBITDA 2013:125 €M

EBITDA 2013:111 €M

EBITDA 2013:86 €M EBITDA 2013:

11 €M

#2

Sources: AEEGSI (electricity and gas networks), annual reports and other company information (district heating and water)


Networks

10

CONCESSIONS

Power Networks Gas Networks Water


Part of the heatgenerated by theGroup comes fromthe WTE plantsin Brescia, Milanand Bergamo(which account foran overall installedthermal capacityof approximately305MWt)

Cogeneration and District Heating

CONCESSIONSBUSINESS MODEL

Canavese

MI

BG

BS

VA

Famagosta

Tecnocity

NovateMilanese

Goltara

Lamarmora

Carnovali

VareseVia Rossi

Lombardy

11


Networks – Gas distribution tenders

95,3%

76,4%

65,9%

42,0% 41,7%

23,6%

11,8% 11,4% 10,3% 8,0% 6,1% 3,7%

37,1%

25,1%

18,3%

4,7%

17,8%

5,3%

68,5%

4,6%

25,8%

18,3%

61,3%

42,5%

2,7%

47,4%45,2%

27,9%

9,3%

14,6%

2,3%

0,7%

3,4%

16,9%

4,7%

7,2%

12,4%

41,5%9,2%

11,4%

2,7%

2,5% 2,4% 4,4% 8,1% 7,9% 6,5% 1,5%

30,0%

11,7%

41,5%

19,4%

1,8%

17,7%

2,5%

58,8%

45,3%

12,9%28,6%

16,7%

12,5%

23,9%

Milano 1 Brescia 3 Bergamo 4 Bergamo 2 Brescia 2 Bergamo 6 Brescia 1 Bergamo 1 Milano 4 Bergamo 3 Milano 3 Brescia 4 Bergamo 5 Varese 2

Gruppo a2a consorzio servizi valle camonica azienda servizi valtrompia unigas distribuzione

F2i condotte nord linea distribuzione erogasmet

gas plus reti italgas s.i .me. societa' impianti metano Altri

• The main outlines of gas distribution reform are under review• Tenders for the assignment of the gas distribution services have to be carried out only for ATEMs (Aree

Territoriali Minime), which are clusters of municipalities (177 in the whole national territory) established by theMinistry for Economic Development

• The first tenders are expected to start in 2015 and the last ones will probably take place in 2018• Each concession will be granted for 12 years

MARKET SHARE OF PLAYERS IN A2A POTENTIAL TARGET ATEMS

Sources: A2A internal elaboration based on MSE and Federutility data


(*) real pre-tax; (**) “X-Factor” does not include inflation rate

ELECTRICITY

4th Regulatory period: 2012-2015

•New tariff not linked to change in unit volumes consumption

•WACC*: in 2014-2015, 6.4% (distribution, metering) ; +1% for new investments

•Price cap**: 2.8% (distribution), 7.1%(metering)

•Parameters under interim reviews: risk free rate (2 years)

GAS

4th Regulatory period: 2014-2019 (6 years)

• Tariff not linked to volumes

• WACC*: 6.9% (distribution), 7.2% (metering).

• Price cap**: up to 2016 1.7% for distribution and 0% for metering

• Parameters under interim reviews: risk free rate (2 years), price cap (3 years)

• Tariff in ATEMs with reduced price cap (0% for two years)

1st Regulatory period: 2012-2015

2014-2015 - Final tariff method (MTI):- allowed revenues based on full recovery cost as at 2012- overall return equal to 6.8%*, with an additional 1% extra return for investments made from 2012- additional tariff component in case of relevant capex- inflation recognized to operating costs is set every year (2.1% in 2014)- working capital is covered by a specific component on unpaid bills

WATER

Regulatory Body: the Energy Authority (AEEGSI)

Networks – Tariffs

REGULATORY SCENARIO


Energy efficiency – Regulatory framework

White Certificates represent the main tool to achieve climate and energy objectives

Energy efficiency represents

- a source of growth for district heating – supported by incentives

- a source of optimization for networks (electricity and gas)


15

Research and innovation projects

• E-Moving project - Among the testing being promoted by theAEEGSI.

Promoted by A2A

Electric car

• Smart Domo Grid: smart grid solution withdemand/response functionality

Co-financed by the Ministry of Economic Development and ledby A2A with the Polytechnic University of Milan and Whirlpool

• IDE4L (Ideal Grid for All) mainly focuses on electricalfunctionalities

Co-financed by the EU within the 7th Framework Program

• Work Force Management (WFM) system• Distribution Management System (DMS)Both developed by A2A

• Completing the district heating offer with a district coolingservice

Pilot project developed by A2A

Network managementInnovative primary substations

Smart house

District Cooling

Most of A2A R&D budget is dedicated to infrastructure projects

• Two smart grid pilot projects in Milan and Brescia

Approved by AEEGSI, pursuant to Resolution ARG/elt 39/10

Grid automation and distributed generation


Agenda

• Company profile




Main messages

H1 2014 – MAIN MESSAGES

H1 2014 Scenario was quite unfavourable and unexpected:

Energy markets scenario furtherly worsened

Weather conditions varied significantly against long term average

A2A diversified and flexible business mix limited the adverse impact onoperating results:

Positives: strong domestic hydro production; trading and environmentalmarkets; gas portfolio optimization; networks resiliency

Negatives: thermal generation volumes; EPCG hydro slump; waste incentiveexpiry; reduction of heat volumes

Ongoing company optimization yielded further achievements:

A sizeable debt reduction: more than 300 €M down in the period

Continued focus on cost cutting


-59

18

NET SALES

EBITDA

€M

EBIT

H1 2013

2,582

551

302

2,845

610

330

H1 2014 Change Change %

-9.7%

-263

-28

-9.2%

-8.5%

2013 H1 2014 Change

NET CAPITALEMPLOYED

EQUITY

7,222

3,348

-341

-39

TOTAL NFP 3,874 -302

6,881

3,572

3,309

NET INCOME 97133 -27.1%-36

H1 2014 - Main financial highlights

KEY FACTS

• Negative climate neteffect

• Negative marketprice/volume trend

• Positive OperatingEfficiency

• Continued Deleveraging

• Expiry of CIP 6 revenues

1

2

3

Detailed afterwards

4


Climate effects

MILANDAILY DEGREES

Dail

yD

eg

rees

YTD ∆ vs 2013: -28,1%

EPCG HYDRAULICITY

HYDRAULICITY

∆ H1 ‘13 VS AVG 10 YRS

EPCGHYDRO PRODUCTION

GWh

+788


-99

19

BRESCIADAILY DEGREES

Dail

yD

eg

rees

YTD ∆ vs 2013: -31,8%

A2A HYDRAULICITY

HYDRAULICITY


A2AHYDRO PRODUCTION

GWh

~+300


~+900

Previous Year Current Year

NegativeClimateeffects

PositiveClimateeffects

1


Market price/volume trend

20

2

2004-2014 PUNEVOLUTION(€/MWh –half yearaverage)

INSTALLEDGENERATION

CAPACITY(GW) vs

ELECTRICITYCONSUMPTION

(TWh)

As of 2005, huge investments in thethermoelectric sector have beenplaced to increase the capacity after acritical under-capacity period

Additional renewable capacity,subsidized by the government, hasbeen rapidly developed starting from2009

The electricity consumptiondropped in late 2008 and, after ashort recovery up to 2010, continuedto fall reaching levels of 2001 inH1 2014

In H1 2014 PUN hit its historicalminimum

KEY POINTS

KEY POINTS


H1 2013

360

Other costs

-14

Change inperimeter

1

Net savings

-4

H1 2014

343

H1 2013

12,572

Change inperimeter

36

Net reduction

-244

H1 2014

12,364

Progressive efforts on Operating Efficiency

21

H1 2014 OPERATING EFFICIENCY

FTE (1)

LABOUR COSTS(€M)

OTHER FIXEDCOSTS (€M)

H1 2013

289

Change inperimeter

-7

Net savings

-17

H1 2014

265

• A2A -155 FTE

• EPCG -89 FTE

-24

-17

-208

3

(1) A2A Group’s Full Time Equivalent


31/12/12

4,372

31/3/13

4,238

30/6/13

4,074

30/9/13

4,048

31/12/13

3,874

31/3/14

3,721

30/6/14

3,572

-135-164

-26

-174-153

-149

ExtraordinaryOperations Metroweb disposal (61€M) Small Hydro disposal (38€M) Enel/A2A lawsuit settlement (90€M)

22

Continued Deleveraging

2012-2014 NFP EVOLUTION (€M)

4

-800


EBITDAH1 2013

EBITDAH12014

∆ vs 2013

A2A ELECTRICITY 197 190 -7

A2A GAS 49 59 10

EPCG ELECTRICITY 53 22 -31

ENERGY 299 271 -28

WASTE 128 115 -13

COGENERATION AND

DISTRICT HEATING60 39 -21

A2A NETWORKS 128 138 10

EPCG NETWORKS 3 8 5

NETWORKS 131 146 15

OTHER SERVICES AND

CORPORATE-10 -11 -1

TOTAL ADJUSTED EBITDA 608 560 -48

Costs of redundancy schemes -22 -9 13

AEEGSI OPINION 535/12 24 -24

TOTAL EBITDA 610 551 -59

KEY POINTS

Tariff increase (+3)

Lower hydraulicity (-31)

Gas portfolio optimization

Higher environmental markets margin (+4)

Network and customer development (+3)

Lower sales due to climate effect (-20)

Non current items (-6)

Exipiry of Cip6 revenues - Brescia WTE plant (-17)

Higher environmental markets (+32)

Trading portfolio margin (+6)

Industrial portfolio margin (-45)

Higher Electricity allowed revenues (+18, of which +6

related to current year and +12 related to previous years)

Lower Gas allowed revenues (-2)

M€

H1 2014 vs H1 2013 - EBITDA breakdown

23

(*) H1 2014 costs of redundancy schemes entirely related to Energy segment

*

(1) (2)

(1) of which 65€M Electricity Networks and 54€M Gas Networks

(2) of which 78€M Electricity Networks and 52€M Gas Networks


H1 2014 - From EBITDA to net income (1/2)

H12013 H12014Δ vs H1

2013Key points

EBITDA 610 551 -59

D&A, provisionsand write-downs

-280 -249 +31

Financial charges -116 -99 +17

Associates,JV and others

7 -2

EBIT 330 302

Result from non-recurring transactions -3 -

5

-28

+3

€M

Depreciation (+14)

• Bad debt provision (+16)

• Provisions (+1)

Epcg

Derivatives FV 28 -2 -30 Decrease in Forward interest rates

Acsm-Agam (-1)

Dolomiti Energia (-1)

Net financial charges (+11)

Other charges (-5)

Derivatives realized (+11)


H1 2014 - From EBITDA to net income (2/2)

H12013 H12014Δ vs H1

2013Key points

EBT 246 206 -40

MINORITIES -19 -8 +11

TAXES -94 -101 -7

€M

NET INCOME 133 97 -36

IFRS 5 - - -

Epcg

H1 2013 one-off (-9)

Deferred tax assets - Irap redefinition (-4)

Robin Tax (+4)


NFP31/12/2013

-3,874

Netprofit+D&A

+330

Changein

Assets/Liabilities

+198

Capex

-124

Dividends

-102

NFP30/06/2014

-3,572

26

H1 2014 - Net debt and cash flow

A2A GROUP NET FINANCIAL POSITION EVOLUTION 2013-H12014 (€M)

+302 €M

• +76€M decrease intrade Receivables/Payables net amount

• +90€M Enel/A2Alawsuit settlement

• +32€M other (mainlyfiscal receivables)


26%

74%

27%

67%

29%

14%

57%

27

H1 2014 - A2A Group debt structure

H1 2014 GROSS DEBT - 3.9 €B

DEBT BREAKDOWN

BY SOURCES

DEBT BREAKDOWN

BY INTEREST

Note: EPCG not included; gross debt financial data and breakdown, excluding accounting adjustments.(*) Average forward rate, based on interest rate curves as of 30/6/2014

H1 2014 KEY FACTS

AVERAGE RATE* (%) ~4.0%

LIQUIDITY POSITION

1.9 €B liquidity position, of which:

0.35 €B cash

1.55 €B undrawn revolving committed lines andloans, with maturities longer than the next 12months

~3.9%

FY 2013 H1 2014

AVERAGE MATURITY (yrs) 6.0 5.9

27

LoansBond VariableFixed Hedged

DEBT BREAKDOWN

BY MATURITY

Within 12 months

Beetwen 12 and 24 months

Beetwen 2 and 5 yrs

Over 5 yrs

3% 3%

CORPORATE CREDIT RATINGS

• Moody's: in May, changed A2A’s outlookto Stable, and confirmed Baa3 rating

• Standard & Poor’s: BBB/A-2, NegativeOutlook

• In March, signed a 115 €M 15yr-long loanagreement with the European InvestmentBank to finance integrated wastemanagement and hydropower investments


Back-up

28


Climate effects

EBITDA

H1 2013

EBITDA

H1 2014∆ vs 2013

ENERGY EPCG HYDRAULICITY 34 -4 -38

GAS,COGENERATIONAND DISTRICT

HEATING

TEMPERATURE EFFECT 6 -21 -27

SUBTOTAL 40 -25 -65

*

**

€M

Negative climate effects

EBITDA

H1 2013

EBITDA

H1 2014∆ vs 2013

ENERGY A2A HYDRAULICITY 26 63 37

66 38 -28

* vs ten-year average production**vs sales based on ten-year average temperature

Positive climate effects

Total climate effects

*

MILANDAILY DEGREES

Dail

yD

eg

rees

YTD

∆ vs 2013: -28,1%

EPCG HYDRAULICITY

HYDRAULICITY


EPCGHYDROPROD.

GWh

+788


-99

BRESCIADAILY DEGREES

∆ vs 2013: -31,8%

A2A HYDRAULICITY

HYDRAULICITY


A2AHYDROPROD.

GWh

~+300


~+900

29

Previous Year Current Year

Dail

yD

eg

rees

YTD


H1 2014 - Energy Scenario

(1) based on PBGAS daily settlement(2) hourly average(3) based on gas at virtual trading point with 54.7% efficiency; includes transport costs(4) 35% efficiency - includes cost spread on API2 and transport cost(5) load factor related to CCGT plants not subjected to dispatching constraints (i.e. CIP6)


*

* without Intermediated Ipex volumes

In 2013 Edipower production includes 77% of production of the plants managed in tolling regime and 100% of production of the S. Filippo delMela, Turbigo (groups 1-2-3) and Brindisi thermoelectric plants and some hydroelectric and photovoltaic plants.In 2014 Tusciano and Turbigo productions are not included, while the quantities of the remaining Edipower plants are 100% of production.

H1 2014 - A2A Volumes


DISCLAIMER - This document has been prepared by A2A solely for investors and analysts. This document does not constitute an offer or invitation to purchase or subscribe any shares or other securities and neither it nor anypart of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Some information contained herein and other material discussed at the meetings may include forward-lookinginformation based on A2A’s current beliefs and expectations. These statements are based on current plans, estimates, projections, and projects and therefore you should not place undue reliance on them. Forward-lookingstatements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factorsinclude, but are not limited to: changes in global economic business, changes in the price of certain commodities including electricity, gas and coal, the competitive market and regulatory factors. Moreover, forward-lookingstatements are current only at the date they are made.

Contacts:

A2A Investor Relations Team

Mail: [email protected]

Phone: +39 02 77203974

http://www.a2a.eu/en/investor/

mailto:[email protected]



Documents

A2A Company Presentation€¦ · A2A Company Presentation Milan, 9 September 2014 Italian Infrastructure Day at Borsa Italiana. This information was prepared by A2A and it is not