RESULTSPRESENTATION
21stMARCH
2018
2018 HIGHLIGHTS
In 2018, EBITDA stood at €492.3M, an increase of 1.0% compared with the previous year, mainly driven by the Portgásconsolidation (€34.2M). Additionally, there was a positive contribution from the sale of the LPG(1) business (€3.7M) andElectrogas (∆€0.7M). However, these gains were partially offset by the decline in asset remuneration (-∆€35.3M), following theparameters set in the current electricity regulatory period and the decrease in bond yields;
Net profit and Recurrent Net Profit decreased to €115.7M (-8.1%) and €137.2M (-11.4%), respectively, in spite of the positivecontribution of Financial Results that reached €57.8M (5.7% YoY). Financials benefited from the reduction in the average cost ofdebt (2.2% versus 2.5% in 2017) and the decrease in Net Debt (-€103.1M to €2,653.1M);
The maintenance of CESE(2) led to an effective tax rate of 42.0% for the full year;
The deceleration of demand for new gas and electricity infrastructures resulted in a reduction in Total CAPEX and Transfers toRAB. Capex amounted to €121.9M (€155.6M in 2017) and Transfers to RAB to €88.5M (€158.8M in 2017);
The Cabinet of the Energy Secretary of State approved the PDIRGN(3), in January 04, and the PDIRT-E(4), in February 19, whichinclude a total amount of CAPEX of €55M and €535.1M, respectively, for the period 2018-2027.
(1) Liquefied Petroleum Gas; (2) Extraordinary energy sector levy; (3) Natural Gas System’s Development and Investment Plan; (4) Electricity Transmission System’s Development and Investment Plan. 2
RESULTS AT A GLANCE
€M 4Q18 2018 2017 Δ% Δ Abs.
EBITDA 113.9 492.3 487.5 1.0% 4.8
Financial Result -14.3 -57.8 -61.2 5.7% 3.5
Net Profit 24.8 115.7 125.9 -8.1% -10.2
Recurrent Net Profit 24.7 137.2 154.8 -11.4% -17.6
Average RAB 3 832.0 3 832.0 3 924.7 -2.4% -92.8
CAPEX 54.7 121.9 155.6 -21.6% -33.6
Net Debt 2 653.1 2 653.1 2 756.2 -3.7% -103.1
3
PT 10Y Treasury Bond Yields
Source: Bloomberg, Bank of Portugal, REN.
6.3% 5.2%
20172018
Electricity
GasT 6.0% 5.5%
GasD 6.3% 5.8%
BASE RoR
Jan17 – Dec17:
3.07%
Average bond yield
Jan18 – Dec18:
1.84%
SOVEREIGN DEBT RISK OF PORTUGALwith a slightly decreasing trend
4
CAPEX(€M)
TRANSFERS TO RAB(€M)
CAPEX REACHED €121.9MOf which Portgás accounted for €24.9M
5
135.1
85.7
14.2
11.3
6.3
24.9
20182017
155.6
121.9
-33.6€M(-21.6%)
Portgás
Natural gas transportation
Electricity
134.2
53.8
14.6
11.0
10.0
23.7
2017 2018
158.8
88.5
-70.3€M(-44.3%)
1) RoR is equal to the specific asset remuneration, divided by the average RAB.
RoR
RAB
6.1%1 5.2%0.3% 5.5%5.9% 5.3%15.8%
(€M)
AVERAGE RAB DOWN BY 2.4% TO €3,832.0MPortgás had a positive contribution of €9.3M
6
9.3
PortgásAverage RAB 2017 Lands Electricity without premium
Electricity with premium
Natural gasTAverage RAB 2018
3,924.7
3,832.0
-12.7
-41.2 -5.3
-42.9
RAB REMUNERATIONELECTRICITY(ex. Lands)(€M)
RAB REMUNERATIONNATURAL GAST(ex. tariff smoothing effect)(€M)
-1,44M€Impact of the decrease in the asset base by €46.5M to €2,091.9M.
Impact of the change in asset mix – assets with premium weight increased to 54% in 2018 from 53% in 2017.
+€0.15M
Impact of the change in the rate of return resulting from the new framework – to 5.92% from 7.08% in assets with premium, and to 5.17% from 6.33% in assets without premium.
-€24.92M
Impact of the €42.9M decrease in the asset base, to a total of €1,032.6M.
-€2.37M
Impact of the decrease in the rate of return, to 5.52% from 6.02%.
-€5.29M
RAB REMUNERATIONPORTGÁS(1)
(€M)
-€2.27MImpact of the decrease in the rate of return, to 5.82%. from 6.32%.
Impact of the €9.3M increase in the asset base, to a total of €464.5M.
+€0.54M
1) In 2017, Portgás contributed with €7.1M (last 3 months of 2017) for REN’s RAB remuneration.
-€2.59M
RAB REMUNERATION DROPPED BY €36.7MDriven by the decrease in both RoR and asset bases (Electricity and NGT)
7
63.749.9
80.2
66.7
20182017
143.9
116.5
-27.4€M(-19.0%)
Electricity with premium
Electricity without premium
64.7
57.1
2017 2018
-7.7€M(-11.8%)
28.827.0
20182017
-1.7€M(-6.0%)
External Supplies and Services include €1.2M from Electrogas acquisition in 2017.
OPERATIONAL COSTS(€M)
OPEX WAS €131.3M, 8.0% ABOVE 2017 VALUEWithout Portgás, OPEX fell by 2.3%
8
Δ Other Operating CostsΔ External Supplies and Services
121.5
PortgásOPEX2017
Δ Personnel Costs OPEX2018
-1.5(-11.1%)
12.4(n.m.)
-1.9(-5.2%)
0.7(1.5%)
131.3
€9.7M(8.0%)
2017
2018
(1) ITC - Inter Transmission System Operator Compensation for Transits; (2) Item related to Portgás.
CORE OPEX(€M)
€13.8M
(14.1%)
With the new electricity regulatory period starting in 2018, “Forest clearing” costs are now subject to revenue cap (Core OPEX), and therefore no longer a pass-through cost. This amounted to €3.8M in extra Core OPEX.
CORE OPEX WAS €13.8M HIGHER YOYExcluding Portgás and Forest clearing it was €0.4M above the previous year
9
Subsoil occupation levies(2)
Other
4.9115.6
121.5
Core OPEX
97.7-3.5
-1.0
-3.2
6.0
OPEX ITC(1) mechanism
-9.7-2.7
Costs withNG
transportation
-3.7
Forest clearing Costs with ERSE
92.8
18.4
14.5
Other
-2.0
Costs withNG
transportation
109.1
Subsoiloccupation
levies(2)
3.8
OPEX ITC(1) mechanism Costs with ERSE
-7.2
93.2
3.8
Core OPEX
131.3
-2.7 -4.0-3.8
111.6
Distribution Forest ClearingTransmission
(1) Includes -Δ€0.6M of NG tariff smoothing effect (natural gas);(2) Includes €1.2M related to the one-off costs with Electrogas (in 1Q17) and Δ€0.09M of OPEX own works.
EBITDA(€M)
EBITDA REACHED €492.3M Portgás contributed with €34.2M
10
34.24.0
3.4 0.8
EBITDA2018
EBITDA Portgás Δ OPEXcontribution
(2)
EBITDA2017
Δ OtherΔ Electrogas’Net Profit
proportion
Δ Recoveryof
amortizations
Δ Assetremuneration(1)
LPG business sale
487.5-35.6 -1.3
492.3
-0.8
€4.8M(1.0%)
DEPRECIATIONS ANDAMORTIZATIONS(€M)
FINANCIAL RESULTS(€M)
TAXES(1)
(€M)
(1) In 2018, without taking into account the special levy on the energy sector, the effective tax rate reached 29.3%, versus 25.7% in the previous year, which led to a €5.9M difference in taxes. This variation was mainly due to a higher State surcharge (∆€2.2M), to 9% in 2018 from 7% in 2017, and a higher amount of deferred taxes, due to the increase in receivables from tariff deviations (∆€2M).
BELOW EBITDAFinancials benefited from both lower stock and lower cost of debt
11
13.4
218.7221.7
222.0
3.3
2017 2018
235.1
€13.1M(5.9%)
Transmission Distribution
-61.2-57.8
2017 2018
€3.5M(5.7%)
52.558.5
25.8CESE
2017
25.3CESE
2018
78.383.7
€5.4M(6.9%)
NET DEBT(€M)
The Average cost of debt decreased by 0.31p.p. to 2.2%.
(1) Includes Δ€6.4M of positive tariff deviations.
NET DEBT DOWN BY 3.7% TO €2,653.1M
12
144.2
55.4
100.6
89.225.2
Operating Cash Flow(1)
Net DebtDec 2017
LPG sale
-509.8
Net Debt2018
OtherCESE
-4.0
Income tax (payments)
Dividends (received-paid)
Interest (net)Capex (payments)
2,756.2
-3.9
2,653.1
€-103.1M(-3.7%)
NET PROFIT(€M)
NET PROFIT DECREASED BY 8.1% TO €115.7MOn the back of higher amortizations (€13.1M) due to the Portgás acquisition
13
Δ EBITDANet Profit2017
Net Profit2018
Δ Below EBITDA Δ CESE
-15.5(-4.6%)
115.7
125.9
4.8(1.0%)
0.5(2.1%)
€-10.2M(-8.1%)
In 2018, REN’s EBITDA was stable, with the contribution from Portgás almost fully compensating for the decrease in returns fromassets. Operational income also benefitted from the sale of the LPG business that belonged to Portgás;
Financials improved as a result of the reduction in the amount of Debt and its effective average cost;
Despite these positive effects, Net Income was hurt by an increased level of Amortization, higher Taxes and the payment for thefifth time of CESE. By year-end, the Company paid €25.3M, which brought the effective corporate tax rate to 42.0%. Over thelast five years, the total CESE payments made by REN amounted to €127.5M;
During this year, S&P upgraded REN's rating to ‘BBB/A‐2’ from ‘BBB‐/A‐3’ (in October) and Fitch reaffirmed REN’s Rating at ‘BBB’,with a stable outlook (in April). Consequently, REN maintained its position as the Portuguese listed Company with the best ratingfrom all three major agencies;
With reference to 2018 results, the Board of Directors will propose, at the General Shareholders’ Meeting that will take place onMay 3, the payment of a dividend of 17.1 cents per share. This decision is in line with the previous year and with REN’s dividendpolicy.
FINAL REMARKS
14
This presentation and all materials, documents and information used therein or distributed to
investors in the context of this presentation do not constitute, or form part of, a public offer,
private placement or solicitation of any kind by REN, or by any of REN’s shareholders, to sell or
purchase any securities issued by REN and its purpose is merely of informative nature and this
presentation and all materials, documents and information used therein or distributed to investors
in the context of this presentation may not be used in the future in connection with any offer in
relation to securities issued by REN without REN’s prior consent.
DISCLAIMER
15
Visit our web site at www.ren.pt
or contact us:
Ana Fernandes – Head of IR
Alexandra Martins
Telma Mendes
Av. EUA, 55
1749-061 Lisboa
Phone number: +351 210 013 546