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A2A STRATEGIC PLAN• 2017 RESULTS & BUSINESS PLAN UPDATE• Q1 2018 RESULTS
June 2018
2017 RESULTSWHERE WE START FROM
2018-22 STRATEGIC PLAN
FINANCIALS
CLOSING REMARKS
Q1 2018 RESULTS
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 3
REVENUES EBITDA
GROUP NET INCOME
+16%
ORDINARY EBITDA
-2% +10%
NET FINANCIAL POSITIONGROUP ORDINARY NET INCOME
+26% +10% -226 €M+90 €M
€M
FY 2017 VS. FY 2016 RESULTS
CCGT PERFORMANCE
ORGANIC GROWTH IN NETWORKS & DH AND IN
ENERGY RETAIL
GAS MARGIN
LGH: STANDALONE AND FY CONSOLIDATION
HYDRO VOLUMES
FEED IN TARIFF/GREEN CERTIFICATES
SAN FILIPPO DEL MELA "MERCHANT” IN Q3 2016
NON-RECURRING YOY COMPARISON
EPCG PUT OPTION EFFECTS AND
DECONSOLIDATION SINCE JULY 2017
FY 2017 vs. FY 2016
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 4
+102-20
€M
EBITDA ORDINARY VS. RECURRING
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 5
* -86 €M, of which -60 €M D&A (EPCG write-off) and -26 €M EPCG put option discounting
€M
1,231 -435 372 2 -22 232-3 -154-83 -12056 --2402016 RESTATED
FROM EBITDA TO GROUP ORDINARY NET INCOME
+120 +36€M
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 6
MandatoryDevelopmentMaintenance
Note: EPCG and M&A projects excluded
€MBY ACTIVITY
+29% CAPEX 2017 vs 2016
Smart CityCorporateNetworks & District HeatingWasteEnergy RetailGeneration
CAPEX BREAKDOWN
BY BUSINESS
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 7
€M
(1) Funds from operations after working capital change; (2) EPCG CAPEX included (4 €M); (3) 2017: 206 €M EPCG deconsolidation; 110 €M M&A; 2016: M&A price and NFP at closing
1,231 10 780 -376 -517 -239-67 -133-168-93 -126 2782016
NET FREE CASH FLOW
2017 RESULTS
WHERE WE START FROM
2018-22 STRATEGIC PLAN
FINANCIALS
CLOSING REMARKS
Q1 2018 RESULTS
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 9
RESHAPEPublic lighting, smart city, energy efficiency
• First-mover in consolidating energy efficiency sector
• +60% A2A Smart City EBITDA
• 120 K LED installed (+135%)
RELAUNCHConsistent industrial growthSelective external growth
• + 560 K customers(EE and Gas free market customer base)
+ 800 Kt waste treated+ 200 €M of RAB
• ~130 €M of operatingefficiency
• 14 M&A deals+ 105 €M EBITDA
• Largest territory aggregations (+1 in pipeline)
REGENERATIONActive role in the energy market transformation
• CCGT fleet active management:4x production vs. 2014
• Stable profitability (volatility <10%)
• Created PV platform (+35 MW)
• Pilot projects on innovative solutions (UVAP, drones…)
2017 vs. 2014 data
DELIVERED STRATEGIC VALUE SINCE 2014
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 10
Industrial targets achievedFinancial targets overdelivered
EBITDAHigher and more stable margin
NFP/EBITDACapital structure reinforced
CAPEXInvesting more withquality
DPSDividends growing steadily
+ 18%
- 18%
+ 60%
+ 61%€c/
share
€M
ROIGrowing, stable return >10%
+ 52%
%
Merchant High VolatilityMerchant Low VolatilityQuasi RegulatedRegulated
€M
+187
+168
DELIVERED FINANCIAL VALUE
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 11
Scarcity of natural resources and new technologies drive a deep industry transition, paving the way to a smarter planet
CIRCULAR ECONOMY ENERGY TRANSITION SMART SOLUTIONS
%Mt
GWM
toe
INSTALLED CAPACITY IN GER, FRA, SPA, UK, SWI
Source: A2A estimates Source: European Environment Agency
ENERGY CONSUMPTIONS EU 28LANDFILL DISPOSAL
Sources: Ispra (2010 and 2016), A2A estimates (2025)
• Landfills phase out• Acceleration in sorted collection• Waste system balance
and material recovery
• Decarbonization• Energy democracy• Reduction of PV and wind LCOE
• Energy efficiency• Smart services to citizen and
digitalization (IoT)• Green mobility
-47%
-23 Mtoe
-17 Mtoe
NuclearCoal
PrimaryFinal
-97 GW
MAIN INDUSTRIAL TRENDS
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 12
a2a T
2018 2022
TTransformation
a2a E
2018 2022
EExcellence
a2a C
2018 2022
CCommunity
Sustainability
business strengthening& change
agile organization, leader in operational
excellence
attract and empower people engage external ecosystem
Inspiring principle of enterprise development
NEW STRATEGIC FRAMEWORK
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 13
GENERATION MARKET WASTE NETWORK
Flexible and greener energy
More solutionsto involve customers
Value from endto beginning
Smarter and more reliable
TRANSFORMATION
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 14
• Further expansion of RES platform
• Conventional plants reconversion
• Leadership consolidation in flexible CCGT plants, optimizing risk/return ratio thanks to Capacity market
• Improvement of gas sourcing
• Match of growing need for peak capacity
• Exploration of innovative flexibility services
• ~170 MW of new RES (M&A + green-field)
• Project development for Brindisi, S. Filippoand Monfalcone
• +800 MW dispatched CCGTs vs. 2017
• CCGT results balanced mix of market(MGP/MSD) and Capacity
• LNG opportunities, better short/long term mix
• Evaluation of new peak plants (e.g. OCGT)
• Projects on UVAM, UVAP, storage, …
Flexible and greener energy
GREENERPORTFOLIO
LEADERSHIPIN GAS-FIREDGENERATION
ADEQUACY & FLEXIBILITYPROVIDER
MGP (Mercato del Giorno Prima) = day ahead market; MSD (Mercato dei Servizi di Dispacciamento) = ancillary services market; UVAP (unità virtuali abilitate di produzione) = aggregated production unit for ancillary services market; UVAM (unità virtuali abilitate miste) = joint unit for ancillary services market (production and consumption)
GENERATION A2A KEY ACTIONS
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 15
RATIONALES FOR NEW RES GROWTH:
• Align generation mix with global trends
• Accelerate decarbonization
• Achieve industrial synergies:- Integrated dispatching - Operating efficiencies- Overhead cost reduction - Service quality improvement
• Platform to position A2A in the new scenario:- Repowering utility-scale plants- Develop pipeline of green-field- Exploit synergies with B2B/B2C
• Focus on PV, open to opportunities in wind
A2A NEW RES CAPACITY
Depending on market opportunities and regulatory evolution
Potential switch in internal vs. external growth mix
~20-25 MWper year
M&A
Green-field
3rd party plants dispatched ~35 MW
per year
500+ €M total investments in RES
Potential further developmentsaccording to emerging opportunities
GENERATION FOCUS ON RES
MW
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 16
• Stable margins
• Possible upsides in "regulated" components
• CCGT fleet competitive in MSD
• Medium-term stability
• Steady load factor in a 20% range (lower than market average)
• Balanced mix of MGP and MSD
• ~25% regulated margins
• ~45% RES
PUN base load
Clean spark spread
ACTUALBP
+51
Capacity+Incentives
Green merchant
CCGT merchant
Traditional thermal
%
€/MWh
%
CCGT LOAD FACTOR
PLANTS CONTRIBUTION MARGIN
€M
PUN & SPREAD
GENERATION 2022 ASSUMPTIONS & TARGETS
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 17
CUSTOMER FOCUS
• Outstanding client service, with new multi-channel customer experience
• Preservation of excellent operations
• VAS in safety, comfort, energy-saving
• Energy advisor for SMEs and large enterprise
• Digitalization to enhance service/acquisition
• New CRM
• Growth in all customer segments, also including large clients
BOOSTIN NEW SERVICES
• New services: flexibility, DERs and storage
• New EPCs in energy efficiency services
• Organic growth in Public Lighting
• Expansion of electric mobility business
• New projects in flexibility and DERs
• 3x EPC contracts
• +150 k lights managed
• +500 new charging stations for EVs
MEDIUM-LONG TERM CHALLENGE
• Innovation & Digital to develop new services
• Unlocking IoT opportunities
• Further fiber network development (+2,000 km)
• Pilot projects on IoT
More solutions to involve customers
MARKET A2A KEY ACTIONS
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 18
‘000POD
‘000
FREE MARKET – EE&GAS (EOP)
LIGTHING POINTS
ANTICIPATE THE MARKET CURVE
OF EVS PENETRATION
#
CHARGING STATIONS FOR EVS
• Growth from Mass Market liberalization
• Stable customer base
• Expansion in new territories
• Organic growth
• Secure key territories
• Focus on key locations
€M
• Benefit from market liberalization • Roll-out of A2A Energy Solutions
+67
MARKET 2022 ASSUMPTIONS & TARGETS
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 19
FROM WASTE TO COMMODITY
END-TO-END PARTNER FOR URBAN SERVICES
CONTINUOUS TECHNICAL INNOVATION
• Become leader in recycling, selling high-quality secondary raw materials
• New WTE capacity to maintain safety of the Italian waste treatment system
• Enlarging geographic presence, leveraging on value chain integration
• Smart and innovative solutions for our territories
• Maintain plants at best available technology for environment sustainability
• Improve circularity with innovation
• +2 plastic treatment plants
• +4 organic treatment plants
• +155 Kt of new WTE capacity
• Secondary Recovered Fuel treatment plant EoW
• +2 ashes treatment plants EoW
• New tenders, also outside Lombardy
• 120 €M cumulated capex for waste collection
• Increased plant efficiency (e.g. flue gas treatment)
• Technical innovation projects in collaboration with suppliers and customers (e.g. Big Data on WTE, secondary plastic use)
Note: EoW = End of Waste
Value from end to beginning
WASTE A2A KEY ACTIONS
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 20
INHABITANTS SERVED BY A2A
M
€M
• +11% inhabitants
• New areas in Northern Italy
• Consistent with EU Circular Economy Pack• M&A pipeline not included• Positioned to be nationwide player
WASTE TREATED IN A2A WTE
WASTE TREATED IN A2A PLANTS
Mt
Mt
• +1.1 Mt treated
• 100% organic growth
• New WTE capacity
• Performance optimization of existing WTEs
WASTE 2022 ASSUMPTIONS & TARGETS
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 21
Smarter and more reliable
CROSS-BUSINESS SYNERGIES
SMART GRID AND QUALITY IMPROVEMENT
GASTENDERS
• Multi-business operation synergies (e.g. smart meters deployment, gas/ee integration in Unareti)
• Adoption of automated and digital solutions for asset and workforce management
• Achieve smart and resilient networks
• Improve energy efficiency of DH networks
• Develop water cycle performance
• Selective growth in high-priority ATEMs
• Focus on geographical consolidation
• Roll-out of new smart meters:
• ~250 K Gas meters
• ~300 K EE meters
• ~50 K Water meters
• Digital asset management platform fully-phased
• 2 new EE primary stations
• New heating storage
• 21 new water treatment stations
• -40% water losses
• Milano1 tender completed
• +10% POD
• -50% ATEM
NETWORKS A2A KEY ACTIONS
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 22
RAB 2017
Incremental RAB 2018-2022
€B
RAB GAS & EE
DH SALES
MPOD
GWht
• Asset base strengthening
• +11% EE Capex vs. previous Plan
• Consolidation in gas market
• Scale optimization
• DH networks extension
• +150 k clients served
• Synergies and new tech driveconsolidation & efficiencies
• Organic CAPEX to strengthen RAB• Steady development of DH
€M
POD GAS
ATEM
NETWORKS 2022 ASSUMPTIONS & TARGETS
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 23
INTEGRATEDMULTI-BUSINESS PORTFOLIO
EXECUTIONCAPABILITIES
URBAN SYSTEMINTEGRATOR
A2A unique business portfolio with a well balanced volatility/growth mix
Maximization of cross-BU synergies
Proven ability in CAPEX execution and in reacting to scenario changes
Possibility to replicate successful models (LGH, plants flexibilization, PV, …)
A2A positioned to lead urban circular economy and energy transformation
Deep multi-level infrastructural presence
Proven capability to attract and involve local players in key territories
GW
GENERATION
MARKET
WASTE
NETWORKS Hydro+RES
CCGT
Other
ACTIVE GENERATION CAPACITY
A2A UNIQUENESS
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 24
En&A project: 65% of target savings already achieved
En&A spun-off Mistral project, to focus operational excellence through:- Lean process redesign- Agile way of working
Digitalization and technologicalinnovation are key improvement levers
2015 2016 2017 2018 2019 2020 2021 2022
MISTRAL
En&A
47
82
130153
175201
219 227
€M
LOCKED IN
EXCELLENCE AGILE ORGANIZATION
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 25
More than 500 €M of cumulated CAPEX on D&T, Innovation projects, accounting for ~20% of total Group CAPEX in next 5 years
11
43 21
89
72
6
5
131
84
77
GENERATION MARKET WASTE NETWORKS
TECH INNOVATION
DIGITAL INNOVATION
€M
• Plants digitalization & flexibilization
• Energy efficiency improvement of plants
• Energy efficiency solutions
• E-moving
• Smart cities
• Smart bins
• WTE links to 3rd parties (wasted heat recovery)
• Smart meters gasdistribution
• Remote control empowerment
• 100% WFM coverage
• Digital renewal of workspaces
• Best of breed software and hardware
CORPORATE
5Y CUMULATED CAPEX
EXCELLENCE DIGITAL & TECH CAPEX
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 26
Adopted start-up approach to innovation based on rapid prototyping and market testing
Built an innovation engine to provide a constant flow of tested solutions ready to be deployed
Engaged external ecosystem with 70+ partners involved with (e.g. Universities, Associations, Start-up incubators, Suppliers, Customers, Technology Labs, Peer Companies, …)
Created internal innovation task force with dedicated budget and team
Activated open innovation process to test and accelerate projects with the external ecosystem
50
350
3,000
SCREENINGideas
concepts
projects
PROTOTYPING
COMMUNITY PEOPLE STRATEGY & EXTERNAL ECOSYSTEM
• Insourcing
• Work-school
• Talent
• Technical skills lab
DEVELOP PEOPLE
• Governance Playbook
• Work environment reshape
• Organizational health
COLLABORATE• Process redesign
• Lean – kaizen
• Contracts harmonization
SIMPLIFY
• Dynamic staffing
• Smart working
• Quality of execution
PROACTIVITY
From a hierarchic organization to a more inclusive managerial model
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 27
60+ core goals built on our 4 sustainability pillarsUpdate of sustainability plan and targets100% executives with sustainability MBOs
SMART GRIDAND SERVICES
CIRCULARECONOMY
DECARBONIZATION
PEOPLEINNOVATION
CO2 emissions reduction Energy efficiency projects
Green energy sold to Mass Market
Low-impact vehicles DH users
Dispersed heat recovery and DH non-fossil sources
% sorted collection
New recycling plants
Project on reduction/ reuse/recycle
Water network losses
Depurated waste water
Digital users
# LED lighting points
EV charging stations
Contact centre quality
Smart bins Smart meter
Service interruption
Smart grid
Smart city projects
Banco dell’Energia step 2
Roadwork siteinspections
SUSTAINABILITY PLAN PATH
Reduction of the accident rate
Environmental education
Strategic framework | Transformation | Excellence | Community | Sustainability
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 28
Integration of Sustainability Plan and Financial BP @2022In line with 2030 sustainability goals
SMART GRIDAND SERVICES
CIRCULARECONOMY
DECARBONIZATION PEOPLEINNOVATION
ONLINE MEMBERS OF A2A ENERGIA COMMUNITY
‘000
SMART WORKING% on total employees applicable
%
%
MATERIAL RECOVERY RATE IN GROUP’S PLANTSON TOTAL WASTE COLLECTED
CO2 /kWh CARBON INTENSITY
g/kWh
SUSTAINABILITY: KPI TARGET EXAMPLES
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 29
1,135
BYBU
BYMIX
NetworksWaste
MarketGeneration
Other
Merchant High VolatilityMerchant Low VolatilityQuasi RegulatedRegulated
1,391€M
+256CAGR +4.1%
EBITDA 2017-22
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 30
€M
+189CAGR +10.5%
NET INCOME 2017-22
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 31
Note: EPCG and M&A projects excluded
Merchant High VolatilityMerchant Low VolatilityQuasi RegulatedRegulated
MandatoryMaintenanceDevelopment
OtherMarketGenerationWasteNetworks
€M
CAPEX 2018-22
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 32
€M
(1) Funds from operations after working capital change; (2) M&A price and NFP at closing
-0.2
CASH FLOW GENERATION 2017-22
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 33
1,150 - 1,180 €M
(1) Incl. ~60 €M M&A; (2) Excluding change in perimeter
2018EBITDA
360 - 390 €MNET INCOME
600+ €MCAPEX(1)
0 - 100 €MNET FREE CASH FLOW(2)
GUIDANCE
GUIDANCE 2018
Plus 20 - 30 €M non recurring
REITERATED AFTERQ1 2018 RESULTS
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 34
EBITDA+180 €M of EBITDA
CAPEX2.8 €B cumulated CAPEX
+15%
+51% NFP/EBITDANFP/EBITDA down to 2.2x
-19%
€M
Merchant High VolatilityMerchant Low VolatilityQuasi RegulatedRegulated
€M
ROIReturns consistently >11%
STABLE
+180
2022 TARGETS
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 35
Better dividends visibilitywith stronger capital structure
5.822% 2017
6.722% 2018
~7.522% 2019
min +5% yearlymin 24%
20202022
A2A DIVIDEND PER SHARE (€c)
FFO/NET DEBT
DIVIDENDS
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 36
UPSIDESOF ONGOING ACTIVITIES
EXTERNAL GROWTH
COMPLEXINDUSTRIALPROJECTS
FEASIBILITY PROJECT LIST EBITDA IMPACT
Operational excellence: further Mistral roll-outs
Gas networks: further growth through additional gas tender
Geographical growth in environmental business
New energy solutions additional development
Local aggregations
DER & RES acquisitions (mainly PV) with possible minority interests
Flexibility and ESCO
Public lighting & gas networks M&A
Potential development abroad
Extra investments for primary stations & “colonne montanti” (1)
Generation plants reconversion
Heat transportation backbone Cassano-Milano
Peak technologies development
Business adjacencies on economy of scarcity (food tech, …)
10-30
5-15
[NEW] tbd
[NEW] 5 - 10
70 - 90
20 - 40
[NEW] tbd
[NEW] tbd
10 - 20
5 - 8
5 - 10
50 - 60
[NEW] 5 - 15
[NEW] tbd
• • • •
• • • •
• • • •
• • • •
(1) Electrical connection from road level to user’s individual apartment [NEW] not included in last year’s
«additional projects list»
• • • •
• • • •
• • • •
• • • •
• • • •
• • • •
• • • •
• • • •
• • • •
• • • •
ADDITIONAL PROJECTS
€M
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 37
~60-70 €M net additional EBITDA fully consolidated
Almost complete coverage of Lombardy
Open to new aggregation opportunities
NORTHERN LOMBARDYMULTIUTILITYBenefits of industrial partnership:
• Sharing technical and management skills
• Optimization of industrialand financial position
Preservation of the identity of existing companies
Enhancement of investment capacity
Improvement of quality standardsand service level
ASPEMLARIO RETI HOLDING
AEVV
A2A
LGH
Industrial entities strongly rooted in our territory
ACSM-AGAM
ADDITIONAL PROJECTS: AGGREGATIONS
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 38
#smartcompanysmartplanet
Strategic view alignedto medium-long term trends
(looking forward to 2030)
A2A uniqueness: business natural hedging,
cross BU synergies, integration
Strong confidenceto deliver higher quality results
Potential for upsides,including local aggregations
KEY TAKEWAYS
39
CONSOLIDATED RESULTS: P&L AND BALANCE SHEET
FY 2017 VS FY 2016 RESULTS
€M€M
ANNEXES
40
COMMITTMENT TO CURB GLOBAL WARMING
RES MATURITY AND DERsSCALABLE TECHNOLOGY
GROWING RELEVANCEOF GAS-FIRED PLANTS
• Awareness about resource scarcity
• EU targets on energy efficiency and RES
• Ambitious Italian SEN targets
• Wind & PV LCOE close to grid parity
• Further storage cost reduction
• DERs included in balancing services
• CCGTs to offset intermittent RES
• Gas-fired plants as system backup
• Convergence of LNG global gas prices
Mtep
€/MWh
Mtpa
LCOE (LEVELIZED COST OF ELECTRICITY)
LNG SUPPLY BY COUNTRYEU RES PENETRATIONFinal energy consumptions covered by RES
SEN = Strategia Energetica NazionaleSources: EU Commission, IHS; World Energy Outlook; World Energy Council; Irena
GENERATIONMAIN INDUSTRY TRENDS
2016 2020 2025 20300
40
60
80
90
110
120
COAL high range
GAS high range
FV residential
GAS low range
COAL low range
WIND onshoreFV utility
EXPECTED GRID
PARITY
1.6x
ANNEXES
41
CUSTOMER EMPOWEREMENT
• Full retail liberalization from July 2019
• Demand for value-added services
• Stronger competition
ENERGY EFFICIENCY
• New technology and regulation boosting growth
• New prosumers with PV, CHP and storage
NEW ENERGY SOLUTIONS
• New retail flexibility market (DSR, DSM)
• Growing demand for electric mobility
SMART SERVICES
• Increase of connectivity
• Smarter management of urban services
• Commercial readiness of Low Power Wide Area
solutions (LoRa)
%POD
ARERA 2017
ITALIAN ELECTRIC ENERGY CONSUMERS
ITALIAN INVESTMENTS
SEN 2017 – ’21-30
€B
A2A internal forecast
CARS SOLD BY TECHNOLOGY (ITALY)
%sales
Ministry of Economic Development
BROADBAND > 100 MBPS COVERAGE IN ITALY
%
* BEV = battery electric vehicles; PHEV = plug-in hybrid electric vehicles
MARKETMAIN INDUSTRY TRENDS
ANNEXES
42
SHORTAGE OF CAPACITY
GROWTH OF SORTED WASTE
METROPOLITAN CITIES AS DRIVING FORCES
• Landfill expiration drives up prices(-2 Mt landfilled 2014-16)
• Italian WTEs capacity shortage (gap of ~6 Mt MSW + ~6 Mt Industrial)
• Italy sorted collection grew to 53%
• South lagging at 38% with structural treatment gap
• International trends increase instability of current waste export
• ~40% of Italian MSW due to 12 cities
• Urban ecosystem driver of circular economy
• Sharing of best practices among cities
€/ton
Mt %
PUSHING OTHER 11 METROPOLITAN CITIES TO REACH MILAN AREA %, INCREASE OF ~2 Mt OF SORTED WASTE
MSW DISPOSAL PRICE (NORTHERN ITALY) SORTED COLLECTION IN ITALY BY MAIN MATERIALS
% SORTED WASTE COLLECTED IN METROPOLITAN CITIES
Note: MSW = Municipal Solid Waste
Ispra 2017Ispra 2017A2A internal data
WASTEMAIN INDUSTRY TRENDS
ANNEXES
43
NETWORKS
MULTISERVICECONVERGENCE
ENVIRONMENT IMPACTAND ENERGY EFFICIENCY
GAS DISTRIBUTIONTENDERS
• Cross-business regulation patterns :
‐ Greater attention to service quality
‐ High capex need (also in water)
• Technological synergy across businesses
• Decarbonization of the sources
• Growing electrification
• Greater attention to sustainable heat generation
• Delays in gas tenders triggering M&A Deals
• High transaction prices due to tender postponements
HEATING DH SOURCES (ITALY) GAS TENDERS (ITALY)WATER SECTOR CAPEX (ITALY)
€B %
AIRU 2016 A2A INTERNAL DATABLUE BOOK 2017
Fossil boiler
Cogen.
Res
# kPOD+150%
MAIN INDUSTRY TRENDS
ANNEXES
44
2018B-2022 STRATEGIC PLANSCENARIO AND MAIN ASSUMPTIONS
UdM 2016 2017 2018 2019 2020 2021 2022
Exchange Rate €/$ €/$ 1,11 1,13 1,20 1,20 1,21 1,23 1,25
ICE Brent €/bbl 40,8 48,4 50,9 55,9 57,8 58,3 58,3
Coal API 2 €/tonn 54,0 74,8 72,0 67,9 63,3 61,0 57,0
CO2 EUA ETS €/tonn 5,4 5,8 7,4 7,7 8,5 9,5 11,0
AEGSSI Gas Tariff (Pfor) €c/mc 15,6 18,1 18,8 18,4 17,4 17,2 17,0
PSV €/MWh 15,6 19,7 19,4 19,0 18,0 17,8 17,6
TTF €/MWh 14,0 17,3 17,4 17,2 16,3 16,1 15,9
PUN Base Load €/MWh 42,7 54,0 51,0 49,7 48,6 48,6 48,4
PUN Peak Load €/MWh 48,2 61,8 58,2 55,7 54,6 54,6 54,4
CCGT Gas Cost (PSV) €/MWh 37,6 46,7 46,5 45,6 43,4 43,0 42,6
Peak Spark Spread €/MWh 10,5 15,1 11,7 10,1 11,2 11,6 11,8
Spark Spread (PSV) €/MWh 5,1 7,3 4,5 4,1 5,2 5,6 5,8
Clean Spark Spread (PSV) €/MWh 3,1 5,1 1,7 1,2 2,0 2,0 1,7
Dark Spread €/MWh 12,5 16,4 14,6 15,0 15,8 16,8 18,2
Clean Dark Spread €/MWh 7,2 10,7 7,5 7,5 7,5 7,5 7,5
White Certificates €/TEE 145,5 273,5 300,0 280,0 270,0 260,0 250,0
ANNEXES
45
67
* 2017 excluding one-off equal to 4€M
*
*
CAGR -0,2%
Breakdown by BU sub-segment
Breakdown by growth driver
2018B-2022 STRATEGIC PLAN
19
-61
€M
BU GENERATION
ANNEXES
46
PlantDispatching
Development Options
Business Plan AssumptionsDriver
2018B-2022 STRATEGIC PLANBU GENERATION – Drivers & Assumptions
• Acquisitions already concluded for 50MW installed
• +150MW in 2022 expected thanks to new developments and new acquisitions
• REN investment: 511M€ from 2019 to 2022
• Stable production level vs 2017 in Coal, CCGT and Hydro normalized
• PUN baseload 2022: 48 €/MWh
• Stable Clean Peak Spark Spread 2022: 8 €/MWh
Capacity & AncillaryMarkets
• Introduction of Capacity Market mechanism in H2 2018
• MSD margins in line with last 3-year average net of extraordinary events recorded in 2016 and 2017
ANNEXES
47
2017
ordinary
173
Power
Market
57
Gas
Market
50
Increase of
CtA and other
fixed costs
-40
New Energy
Solutions,
Smart City
and other
25
2022
265
Breakdown by BU sub-segment
Breakdown by growthdriver
CAGR+8.9%
*
*
2017
ordinary
173
Regulated
Mkt
-90
Free Mkt
growth
@ flat UM
224
Free Mkt
Unitary
margin
-27
Increase
of CtA and
other
fixed costs
-40
New Energy
Solutions,
Smart City
and other
25
2022
265
*2017 excluding one-off equal to 51€M
2018B-2022 STRATEGIC PLANBU MARKET
€M
ANNEXES
48
Free Market development
Unitary Margin
Fixed costs
Business Plan assumptionsDriver
• Significant step in Mass Market customer base due to market full liberalization (2.3M POD in 2022 vs 0.9M POD in 2017)
• Strong customer focus leveraging digitalization (new CRM), value-added services, excellent customer service
• Increase in B2B sales (+3TWh 2022 vs 2017)
• No growth from M&A in the plan
• Expected to reduce ~3% avg p.y. on growing competition(1)
• CtA, per unit, planned to grow ~5% avg p.y. on growing competition
• Steady Cost-to-Serve, per unit, thanks to strong focus on operating performance
New services
En
erg
y R
eta
il
• Expansion in in Public Lighting (+150K lights managed through organic growth), energy efficiency and e-mobility
• Smart Services
• New projects in flexibility, DERs and storage
(1) Mass Market unitary margin on raw material component
2018B-2022 STRATEGIC PLANBU MARKET – Growth Drivers
ANNEXES
49
CAGR +6.7%
Breakdown by BU sub-segment
Breakdown by growth driver
2018B-2022 STRATEGIC PLANBU WASTE
* 2017 excluding one-off equal to 10€M
*
€M
*
ANNEXES
50
Existing treatment
plants
• Volume increase on Milan and Parona WTE for refurbishment(+ 0,12Mtons); cost efficiencies and better flow management
• About +2% p.a. of price increases driven by structural shortfall of landfilland treatment plants
New treatment
plants
Business Plan assumptionsDriver
• ~0.8 Mtons of growing capacity on 12 new sites, mainly related to organicand plastic treatment and to one new WTE plant
• 70% of development (~600 kton) already authorized or in advanced stage
• Plant roll-outs spread through plan timespan
• Most of economic benefits from internal waste flows integration
• 1 M&A: due diligence already done; waiting for final closing expectedwithin 1H 2018
2018B-2022 STRATEGIC PLANBU WASTE – Drivers & Assumptions
ANNEXES
51
2018B-2022 STRATEGIC PLANBU WASTE – New treatment plants
# Plants Capacity (kton)2018 - 2022
Capex
Authorized 3 282 178
Authorization in advanced
stage 5 315 127
Authorization not
necessary 1 n.a. 10
M&A 2 240 18
Authorization to be
requested1 n.a. 60
TOTAL 12 837 393
€M
ANNEXES
52* 2017 excluding one-off equal to +4€M; 2017 in a like-for-like basis
*
Breakdown by BU sub-segment
Breakdown by growthdriver
2018B-2022 STRATEGIC PLANBU NETWORKS
*
CAGR +2.9%
HeatingNetworks
€M
ANNEXES
53
Gas tenders
• #PoD: ~+130k (+8%)
• #ATEMs: 10-15 (target @ 2022)
• Capex: +260€M
Commercial development
• DH development mainly in eastern Milan area (saturation of Silla 2 WTE plant thermal capacity)
• New connections: 30 MW/Yr average (vs. 60 MW/Yr average past 3 yrs)
Business Plan AssumptionsDriver
2018B-2022 STRATEGIC PLANBU NETWORKS – Drivers & Assumptions
Tariffs• Regulated revenues: in line with ARERA rules (for current regulatory periods)
• Current regulatory structure continuity until 2022 (no assumptions related to TOTEX/Standard costs regulations)
Cost Efficiency
• Mistral project included in the BP projections
ANNEXES
54
2018B-2022 STRATEGIC PLANEBITDA Cash Conversion
Average Cash Conversion in%
Business Plan
2018 - 2022
%
Historical
2015 - 2017
Cash Flow calculated asEBITDA – Δ Net Working Capital – Capex – Tax
(1) Excluding REN (EBITDA and Capex)
€M
319
232
305
420
183
12188 91
Generation Market Waste Networks
62% 43% 30% 15%370
163
237
372
230
70 71 55
Generation Market Waste Networks
AverageEBITDA(1)
2018-2022
AverageCash Flow(1)
2018-2022
AverageEBITDA
2018-2022
AverageCash Flow2018-2022
AverageEBITDA
2018-2022
AverageCash Flow2018-2022
AverageEBITDA
2018-2022
AverageCash Flow2018-2022
57% 52% 29% 22%
Generation NetworksWasteMarket
AverageEBITDA
2015-2017
AverageCash Flow2015-2017
AverageEBITDA
2015-2017
AverageCash Flow2015-2017
AverageEBITDA
2015-2017
AverageCash Flow2015-2017
AverageEBITDA
2015-2017
AverageCash Flow2015-2017
ANNEXES
2017 RESULTS
WHERE WE START FROM
2018-22 STRATEGIC PLAN
FINANCIALS
CLOSING REMARKS
Q1 2018 RESULTS
56
Key Financial Indicators
REVENUES EBITDA
GROUP NET INCOME
NET FINANCIAL POSITION
€M
* Restated values refer to effects coming from LGH’s PPA and classification of EPCG’s economic values under IFRS 5
Highlights
CCGT AND HYDRO VOLUMES
CCGT PERFORMANCE ON MSD
ENVIRONMENTAL MARKETS
MOODY’S UPGRADES A2A’S RATING FROM
BAA3 TO BAA2
SCENARIO EFFECT
GAS MARGIN
Q1 2018 vs. Q1 2017
57
Analysis of results
Group EBITDA Overview
+14% -16% - -1%
€M
• Negative impact of growing gas price on clean spark spreads
• Production Volumes up 24%
• Strong MSD
• Green Certificates portfolio sold (~632 GWh)
• Customer base growth in line with plan
• Stable unitary margins
• Higher marketing costs
• Strong negative temporary items
• Collection: lower paper prices and higherdisposal costs
• Increasing disposal prices to treatment plants
• Waste Treatment: decrease in Grottaglielandfill disposal due to delay in authorization (authorized in April 2018)
• Lower regulated revenues on electricitynetworks
• District Heating: negative scenario effectspartially offset by higher DH volumes
• Higher IWC tariffs
GENERATION
WASTE
MARKET
NETWORKS
58
From EBITDA to Group Net Income
Analysis of results
Q1 2017Restated
393 (99) 258 4 (4) 1802 (27)(11) (78)-
€M
• D&A: 2017 CAPEX & REN acquisitions
• Net Financial Expenses: unwinding of derivatives (one off on REN)
• Tax rate: Q1/17 30%; Q1/18 32%;
59
Capex & Net Free Cash FlowAnalysis of results
(1) Funds from operations afterworking capital change
(2) Includes 1€M capex related to EPCG
393 (239) 171 (54) (8) 109
Q1 2017 Restated
(4) (45)(1)67 117(2)
€MBREAKDOWN BY ACTIVITY
BREAKDOWN BY BUSINESS
+23€M
201753€M
201876€M
€M
Net Free Cash Flow
408
-317
130
-5
0
-49
167
-76
91
-41
50+23€M
(+43%)
60
Business Units EBITDA Breakdown
Annexes
€M
Reported Ordinary Reported Ordinary
a2a 393 388 408 402 15 4% 14 4%
Generation 150 149 171 170 21 14% 21 14%Power Generation 122 121 160 159 38 31% 38 31%
Gas Margin 28 28 11 11 -18 -63% -18 -63%
Market 49 48 41 40 -8 -16% -8 -16%Energy Retail 44 44 38 37 -6 -15% -7 -15%
Public Lighting 4 4 2 2 -1 -32% -1 -32%
Energy Solutions 1 1 1 1 0 14% 0 14%
Waste 71 71 72 71 1 1% 0 0%Collection 20 20 15 14 -6 -28% -6 -29%
Urban Waste Treatment 49 49 53 52 4 7% 3 6%
Other Treatment Plants 2 2 5 5 4 197% 3 184%
Networks 128 125 126 124 -2 -2% -1 -1%Electricity Networks 35 33 30 31 -5 -14% -2 -6%
Gas Networks 30 30 32 31 2 7% 1 3%
Water Cycle 9 9 12 12 3 33% 3 33%
District Heating 54 53 52 50 -2 -4% -3 -6%
Smartcity 1 1 2 2 1 n.s. 1 n.s.
Other -6 -5 -4 -5 2 n.s. 1 n.s.
2017 Q1 2018 Q1 Delta
Reported Ordinary
61
P&L and Balance Sheet
Annexes – Q1 consolidated results
€M Q1 2017 Restated
Q1 2018 CHANGE %
Revenues 1,622 1,812 190 11.7%
EBITDA 393 408 15 3.8%
D&A (99) (108) (9) 9.1%
Provisions (11) (13) (2) 18.2%
EBIT 283 287 4 1.4%
Net Financial
Expenses(27) (30) (3) -11.1%
Associates & JV 2 1 (1) -50.0%
Result from non
recurr. Transactions0 0 0 n.a.
EBT 258 258 0 -
Taxes (78) (83) (5) 6.4%
Net Result from
disc. operations4 2 (2) -50.0%
Minorities (4) (4) 0 -
Group Net Income 180 173 (7) -3.9%
2017 FY Q1 2018 CHANGE %
Tangible Assets 4,606 4,592 (14) -0.3%
Intangible Assets 1,893 1,902 9 0.5%
Shareholdings and Other Non
Current Financial Assets71 71 0 -
Other Non Current
Assets/Liabilities(117) (129) (12) 10.3%
Deferred Tax Assets and
Liabilities301 295 (6) -2.0%
Provisions for Risks, Charges
and Liabilities for landfills(625) (626) (1) 0.2%
Employee Benefits (319) (315) 4 -1.3%
Net Fixed Capital 5,780 5,790 10 0.2%
Net Working Capital* 437 756 319 73.0%
Other Current
Asset / Liabilities*(305) (431) (126) 41.3%
Current Tax
Asset / Liabilities103 26 (77) -74.8%
Working Capital and Other
Current Assets/Liabilities235 351 116 49.4%
Non current Assets /Liabilities
held for sale224 226 2 0.9%
Total Capital Employed 6,239 6,367 128 2.1%
Equity 3,013 3,191 178 5.9%
Net Financial Position 3,226 3,176 (50) -1.5%
Total Sources 6,239 6,367 128 2.1%
€M
62
Average dataQ1
2017
Q1
2018
D % vs
2017
Brent $/bbl 54,7 67,2 23%
CO2 - EU ETS cost €/Tonn 5,2 9,8 90%
€/$ €/$ 1,1 1,2 15%
Brent € €/bbl 51,4 54,6 6%
PSV(1) €/MWh 20,4 21,9 7%
AEEGSI Gas Tariff (2) c€/mc 19,2 20,8 9%
Coal € (API2) €/Tonn 76,4 70,6 -8%
PUN baseload(3) €/MWh 57,4 54,3 -5%
PUN peak(3) €/MWh 66,4 62,6 -6%
PUN off-peak(3) €/MWh 52,4 49,6 -5%
CCGT gas cost(4) €/MWh 48,9 52,6 8%
Costo Coal €/MWh 38,5 35,8 -7%
Environmental costs (CCGT) €/MWh 2,0 3,7 90%
Environmental costs (Coal) €/MWh 5,0 9,5 90%
Spark Spread CCGT_PSV vs Baseload €/MWh 8,6 1,7 -80%
Spark Spread CCGT_PSV vs Peakload €/MWh 17,5 10,0 -43%
Spark Spread CCGT_PSV vs Off-Peak €/MWh 3,5 -3,0 n.s.
Clean Spark Spread vs Baseload €/MWh 6,6 -2,0 n.s.
Clean Spark Spread vs Peakload €/MWh 15,6 6,3 -60%
Clean Dark Spread vs Baseload(5) €/MWh 13,9 9,0 -36%
(1) Gas at virtual trading point
(2) Pfor 162/14 Oct 2014-Mar 2016.
(3) hourly average for each month
(4) based on gas at virtual trading point with 51% efficiency; includes transport costs
(5) 35% efficiency - includes cost spread on API2 and transport cost
(6) data subject to update by Terna
Energy Scenario
Annexes
63
• Acquisition of new PV plants from Impax (+15.7 MW)
GENERATION
WASTE
MARKET
NETWORKS
a2a T
2018 2022
TTransformation
EExcellence
a2a E
2018 2022
CCommunity
a2a C
2018 2022
• Cavaglià Plastic treatment plant construction finalized (to be tested)
• Brescia sorted collection rate up to 65% on march 2018
• Tender on collection in Rapallo won
• Public Lighting: +4K lighting points • Moody's upgrades A2A's ratings from Baa3 to Baa2 with stable outlook
• Q1 2018 CAPEX - over 13 €M in Digital and 3 €M in Tech Innovation
• INTERNAL Community:‒ Talent program pilot on BU Networks
‒ Contract harmonization BU Market completed
‒ Smart working pilot extended
‒ New policy on work environment reshape
• EXTERNAL Community: ‒ Innova2a workgroup project started
‒ First innovation initiative tested, in scale up mode across the whole organization
Sustainability
• Approved the updated Sustainability Plan integrated with the 2018-2022 Strategic Plan• Voluntary assessment on sustainability topics by an independent Rating Institution (Standard Ethics) • “Missione Terra” event to increase awareness of sustainability issues, + 800 students involved• New campaign on circular economy matters (Viaggio della Materia) on web, social and mass media
• Aggregations: Northern Lombardy Multiutility project approved by municipalities
• EPCG: agreement on accelerated put option execution with local government
Annexes
Update on Strategic Progress
• Boosted CAPEX execution (Unareti +30% vs 2017Q1)
• Val Trompia water treatment plant – project launched, work starting oct 18
• Heat storage project started
2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 64
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 any part 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-looking information 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-looking statements 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 factors include, 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-looking statements are current only at the date on which they are made.
A2A Investor Relations Team
Mail: [email protected]
Phone: +39 02 7720 3974
http://www.a2a.eu/en/investor/
Annexes and data in excel format for modelling are available on A2A website at the following links:
https://www.a2a.eu/en/investors/presentations-conference
https://www.a2a.eu/en/investors/strategy
A2A 2018 Investor Guidebook kit: https://www.a2a.eu/en/investors/publications-services/investor-guidebook-kit
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