a2a networks & heat business unit - amazon s3€¦ · italy energy retail 90 ... smart city...

A2A NETWORKS & HEAT BU

Stefano Donnarumma - General Manager, A2A Networks & Heat BU

October 2016

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 AT A GLANCE - THE LEADING ITALIAN MULTI-UTILITY

A2A GROUP

2

Local

utilities

A2A Footprint

MONTENEGRO

Focus in Northern Italy withpresence in Montenegro

Technological Partnerships inwaste sector in UK, Spain,Greece

ITALY

A2A FOOTPRINTFINANCIAL HIGHLIGHTS

A2A vs COMPETITORS, EBITDA 2015

Sources: A2A 2015 Results & Business Plan Update; Company Annual Reports; CONSOB (shareholding structure updated at 30 September 2016)

SHAREHOLDING STRUCTURE100%: # of shares 3,132,905,277

Total

A2A Spa (treasury shares) 0.8%

Norges Bank 3.0%

Municipality of Brescia 25.0%

Municipality of Milan 25.0%

Free Float 46.2%

53.8% 100.0%46.2%

4.9 €BRevenues

1+ €BEBITDA

2.2 €B Capex 2016-20


2016-2020 STRATEGIC PLAN – SHAPING THE FUTURE TODAY

3

A2A GROUP

HIGHLIGHTS

RESTRUCTURE

Substantial reduction inthermoelectric powergeneration exposure

RELAUNCH

Growth acceleration inenvironment, smart

networks and energyservices

RESHAPE

Buying options insmart city

and green economy

DISCIPLINE

Discipline inoperationsand capital

DIALOGUE

Dialogue &engagement withkey stakeholders

DIGITAL

Digital &technological

transformation

STRATEGIC PLAN GUIDELINES

INVESTMENTSFOR

GROWTH

~ € 2.2B cumulated Capex

EBITDA by 2020 € 1.3B (CAGR 4.5%)

- € 0.5B debt reduction in 5 years

Thermal capacity reduction (- 40%)

Strong growth in core skills markets

Regulated / Quasi-regulated EBITDA(1)

by 2020 ~60%

Maintain Solid investment gradecapital structure

DPS(2) 2015 + 13%; stable dividendexpected in 2016

DPS bound to grow thereafter

DIVIDENDPOLICY

ANDCAPITAL

STRUCTURE

BUSINESS-MIXREBALANCE

(1) Regulated activities: Networks, EPCG Electricity distribution, incentivized energy production; Quasi regulated activities: Urban Waste Collection & Treatment, District Heating, Public Lighting(2) Dividend Per Share 2015 4.1 €c/shareSources: A2A 2015 Results & Business Plan Update; Company Annual Reports


SUSTAINABILITY – A2A COMMITMENT TOWARDS 2030

4

A2A GROUP

30 ACTIONS by2020

SUSTAINABLEDEVELOPMENT

GOALS vs VALUE CHAIN

GOALS andTARGETS - 2030

ACTION and ENABLINGDRIVERS - 2020

2030 GOALS

THE SUSTAINABILITYPOLICY AND THE 42030 COMMITMENTS

67%recycling

Highlights@2020

100%Smart meter

gas

- 34% t CO2

from electric generation(baseline 2008-2012)

A2A developed a path to define the 2030 commitmentsand short-medium term actions for 2020, identifyingquantitative and measurable KPIs

Relevant to Networks & Heat BU

DECARBONIZATION

1st CLUSTER

CIRCULAR ECONOMY

2nd CLUSTER

SMART TECHNOLOGYINNOVATIONS IN

NETWORKS AND SERVICES

3rd CLUSTER

PEOPLE INNOVATION

4th CLUSTER

25%reduction of injury rate(baseline 2013-2015)

Sources: A2A 2015 Results & Business Plan Update; Company Annual Reports


DIVERSIFIED AND INTEGRATED BUSINESS PORTFOLIO

A2A GROUP

5

(1) Declared EBITDA equal to 1,044 €M, excluding costs of redundancy schemes (-1 €M), non recurring items (26 €M) and EBITDA from “Other Services & Corporate” (-21 €M)


2015Ordinary

EBITDA1,023 €M(1)

GENERATION &TRADING

Fuel sourcing

Powergeneration

Whole-sale &Trading

340 €M 33%

Generation& Trading

∼2 GW hydroinstalledcapacity inItaly

ENERGY RETAIL

90 €M 9%

Electricity / Gassales

free market regulated

market

Energy RetailMarket leaderfor

• quality

• customersatisfaction

WASTE

205 €M 20%

Heat / Electricityproduction

Collection andstreet sweeping

Treatment

Disposal

Waste

N.1 for electricityproduced byWTE plants

EPCG(Montenegro)

Power generation

Electricity networks

53 €M 5%

EPCG∼0.7 GW hydroinstalledcapacity (76%of total)

Top strengths

356 €M 34%

Networks & Heat – Focus of Today

Infrastructure

Stable cashgenerating business

INFRASTRUCTURE

Integrated Water Cycle

Electricity networks

Gas networks

Heating Distribution

Energy Efficiency& New ServicesTechnologicalleadership in LED andenergy efficiencyservices

ENERGY EFFICIENCY &SERVICES

Heat Generation,recovery and sales

Energy EfficiencyServices

Public Lighting andsmart city services


NETWORKS & HEAT BU – KEY FINANCIALS

6

NETWORKS & HEAT BU

2015 EBITDA BREAKDOWN 2015 CAPEX BREAKDOWN BY CATEGORY100% = 181 €M

(1) Net of non-recurring items (3 €M)

100% = 353 €M(1)

75% of EBITDA in electricity, gas distributionand water cycle

Development CAPEX is the main component


INFRASTRUCTURE: TRADITIONAL BUSINESS,STABLE CASH GENERATOR

7

NETWORKS & HEAT BU


• Diversified Portfolio of Networksto manage regulatory risk

• Excellent continuity of electricityand gas service

• Highest safety standards

• Focus on cost efficiency and newtechnologies (e.g. smart grids)

Electric PowerDistribution

GasDistribution

WaterCycle

HeatingDistribution

BUSINESS MODEL

1,120,000 Points of Redelivery 1,260,000 Points of Redelivery

1,000 km network 7,000 km network


ENERGY EFFICIENCY & SERVICES:SOURCE OF NEW OPPORTUNITIES

NETWORKS & HEAT BU

8

• Diversified technology/fuel mix

• High efficiency cogeneration

• Environmental friendlytechnology

• District Cooling option

• Technological leader in LED PublicLighting in Italy

• 1,000+ MWt of Thermal Capacityand 200,000+ Lights


Gas-fired high efficiencycogeneration

Geothermalheat pumps

Solarthermal

Public lightingBiomass

Heat recoveryfrom third parties

BUSINESS MODEL


STRATEGIC CONTEXT

9

NETWORKS & HEAT BU


Growth of investment innetworks to rebalance

business portfolio

InvestmentGrowth

• 1,106 € Million Investments in2016-20 plan in Network &Heat BU (~50 % Group Capex)

• Additional projects withpotential upside under study

Regulatory RiskMitigation

ChallengingRegulation

• WACC Remuneration Impact• Water tariff• Gas National tenders• Local Aggregations

Network re-design tosupport new services

NewTrends

• Integrated management ofnetworks

• Advanced Automation• E-mobility growth• Changing Consumer Behavior


GROWTH DRIVERS

10

NETWORKS & HEAT BU

ExternalGrowth

OrganicGrowth

Smart CityServices

Energy EfficiencyServices

ENERGY EFFICIENCY & SERVICES

INFRASTRUCTURE

Water InfrastructureEnhancement

M&A

GasTenders

LocalAggregations

LED LightDeployment

Smart GridInfrastructure

New Heat TransportationBackbone (Cassano)

+59 €M for the BUover 2016-2020 Plan

New projects on topof strategic plan[est. 65 - 95 €M]

EBITDA TARGETS

ArtisticLighting



FOCUS – GAS TENDERS: DOMESTIC MARKET OVERVIEW

11

NETWORKS & HEAT BU

MARKET STRUCTURE OUTLOOK

KEY NUMBERS

• Highly concentrated market: first 5 players cover 67% of totalmarket,

• 2 large national players: Italgas (30%) and 2i Rete Gas (18%) havea strong presence all across Italy

• Many small players with low market shares: more than 200players managing less than 20k cubic meters

Main Players(market share as number of redelivery points managed)

• Consolidation process ongoing(expected around 30-40 players atthe end): technical and financialconstraints for small players,incumbents and big players areexpected to consolidate theirpositions (synergies from economiesof scale)

• Regulatory evolution: introduction ofa new mechanism for Capex tariffrecognition (DCO 456/16)

• Tenders bidding period: 175 tenderswill be held in the next 4 years, needto accurately select ATEMS in which tocompete

Iren

33%

a2a(Unareti)

4%

8%7%

Hera

18%

2i Rete Gas

30%

ItalgasOthers(< 4%)


INITIATIVE HIGHLIGHTS KEY BENEFITS

KEY NUMBERS

FOCUS – GAS TENDERS: COMPANY OVERVIEW

12

NETWORKS & HEAT BU

• 175 ATEMs (Aree Territoriali Minime, i.e., Minimal Local Areas) inItaly defined by Ministry for Economic Development

• Assignment of ATEMs concessions subject to tenders

• 12-year concessions, first tenders in 2016 and the last onesexpected to close in 2019, First service management in H2 2017

Current Footprint A2A (Unareti) Competitive Position

A2A has competitive advantage in territories where it is incumbent player

• Increased geographical penetrationopportunity to extend presence inareas not covered today

• Increase Asset Baseopportunity to increase investment aspart of tender requirements

• Operational EfficiencyCost reduction due to economies ofscale in increased territorial coverage

• Present in 26 ATEMs today• Average Market Share 40%

• Top 3 ATEMs Market Share• Milano 1 - 96%• Brescia 3 - 74%• Bergamo 4 - 69%

15-20%RAB Increase 2020 vs 2015



FOCUS – GAS TENDERS: DETAILS ON THE PROCESS

13

NETWORKS & HEAT BU

100%

Economic Offer

Technical Offer -Safety & Quality

27%

Technical Offer -DevelopmentPlan

45%

Total Tender Score

28%

TENDER SCORING BREAKDOWN TENDERS SUCCESS FACTORS

Economical criteria have a ceiling and are based onthe following elements:• Discount on gas tariff• Discount on prices related to additional services• Annual fee to the municipality• Extension of the network for new customers• Additional energy efficiency obligation

Safety and Quality are based on the followingelements:• Network inspections in order to prevent gas leaks• Emergency service performance• Odorization service performance• Improving the level of other quality standard levels

set by the Authority (e.g., works execution; …)

Network Development Plan relies on:• New Builds: investment plan for the extension and

the increase of capacity of the distribution network• Maintenance: investment plan for the substitution

of network components• Innovation: investment plan for the technological

innovation of the network system

• Target ATEMs Selectionbased on strategic fitting andexpected level ofcompetition

• Right balance betweenprobability of success andprofitability Economicoffer impacts on ATEM’sprofitability

• Best technical projectTender scoring is weightedtowards technical elementsof the bid



KEY NUMBERS

FOCUS – SMART GRID INFRASTRUCTURE

14

NETWORKS & HEAT BU

ImprovedDemandManagement

IntegratedDistributionManagementSystem

Integration withIndustrial EnergyManagementSystems

Automation ofsubstations toimprove networkresilience

Management ofvolatile renewalenergy powergeneration

Infrastructuredeployment fornew services(e.g.. e-mobility,last mileconnection)

Electricity network enhancement with new hardware andsoftware to harness opportunities created by new technologies

• Increase of Regulated Asset Basenew hardware and software investmentswill be recovered and remunerated @WACC

• Lower Operating Costreduction of workforce required fornetwork maintenance and management

• Enabling of new service offeringsEnergy efficiency and services formunicipalities (e.g. smart city)

7-15 €MEBITDA upside



FOCUS – DISTRICT HEATING: COMPANY OVERVIEW

15

NETWORKS & HEAT BU

Today:

Local distributor in the cities of Milan, Brescia andBergamo

First Italian operator

More than 2 TWht of heat delivered to customers (25% ofthe market)

Strong integration with waste cycle (50% of heat fromWTE)

Tomorrow:

Growth in volumes (network expansion and acquisition ofnew network nearby)

Enhancement of the green energy mix by reduction offossil fuels, use of locally available waste heat and RES,recycle of energy from waste in the circular economy.

CO2 reduction in coherence with A2A sustainabilitycommitment.




KEY NUMBERS

FOCUS–NEW HEAT TRANSPORTATION BACKBONE (CASSANO)

16

NETWORKS & HEAT BU

• Enabler of new business opportunities130,000 citizens live in themunicipalities served by the newpipeline

• Source of white certificates for energyefficiency

• Positive Environmental impactReduced CO2 and pollutant particlesemissions from heating (today heatingis provided with natural gas/oil boilers)

760MW Cassano Power Plant owned since 1961

From early 2000s the Plant has gone through significantenhancements to increase efficiency and decrease the Emissions

Today at 30km from Milan it is a potentially relevant source ofheat that will be delivered to Milan through a major pipeline

Interest to co-finance the investment expressed by LombardyRegion, Ministry of the Economic Development, also in line withthe Efficiency Strategy of EU Commission

50-60 €MEBITDA upside



FOCUS – WATER INFRASTRUCTURE ENHANCEMENT

17

NETWORKS & HEAT BU

3537362825

’17 ’182016 ’19 2020

Verziano depuration site(rendering)

161 €M Investment Plan

• Increase of Regulated Asset Basenew investments to solve Europeanviolation and avoid fines

• Lower Operating Costrationalization of network design tolimit energy losses and water leakages

• Better Water QualityBest in class technology for new waterdepurators to become top rank inquality in Italy

New regulation increased allowed tariff for water distributioncollection and purification to allow investment increase fornetwork improvement

• 17 projects for water distribution services• 9 projects for drainage water collection network improvement• 4 projects for water depuration (e.g. Verziano)


KEY NUMBERS

50+ €MEBITDA one-offincrease 160+ €M

Capex Plan 2016-2020




KEY NUMBERS

FOCUS – LED LIGHT DEPLOYMENT

18

NETWORKS & HEAT BU

161,000 LED

2015 …@2020

309,000 LED

2016

200,000+ LED

TraditionalLights

LEDLights

Deployment of LED technology on all A2A managed PublicLighting InfrastructureA2A is a technological leader with 100,000+ LED installed in 2016M&A opportunities to grow this business under consideration

• Lower Operating Costreduced need for maintenance withlong lasting LED technology

• Energy saving and better light quality59 million of kWh saved bymunicipalities, clearer light to increasevisibility at night

• Win-win solution for A2A and thelocal authorities involved

Milan Area Satellite view, March 2016


50%Energy efficiency

23,000Tons of CO2 avoided



KEY NUMBERS

FOCUS – ARTISTIC LIGHTING

NETWORKS & HEAT BU

19

4,000+Lighting Points installedand to be converted toLED technology

Milan Castle lit by A2A Monument Lighting, May 2016

Deployment of LED technology on all A2A managedArtistic Lighting Infrastructure

A2A is a leader in the business of Lighting Monuments andPublic Buildings

• Higher visibility to Municipalitiesincreased brand recognition forA2A through public lighting

• Lower Operating Costreduced need for maintenance withlong lasting LED technology

• Reduced EmissionsReduced CO2 Emissions


50%Energy Saving


En&AProject

Business UnitConsolidation

• Consolidation of control rooms and call centers• Increased efficiency in field works• More leverage in negotiation of roadworks

contracts with suppliers• Integration of information systems and processes

Before Aftera2aSpA

a2aReti Elettriche

a2aReti Gas

a2aLogistica

a2aServizi allaDistribuzione

100%

100%

100%

100%

100%

NewcolaunchedApril 1st

2016

En&A a project for efficiencies onoperative fixed and variable costs, CAPEX,and revenue increase

a2aSpA


OPERATIONAL EFFICIENCY IMPROVEMENT

20

NETWORKS & HEAT BU

+50 €M A2A EBITDA

177 Projects at Group level

44 Projects at Networks& Heat BU level

INVOLVEMENTMore than 400 resources involved

SCORECARDSscorecards with detailed schedules,responsibilities and targets

MASTERPLANSDetailed projects masterplans forProcurement, ICT, HR

MONITORINGMonthly monitoring of progress atprocess level


R&D AND INNOVATION PROJECTS

21

NETWORKS & HEAT BU

ONGOING PROJECTS BUILDING THE 2020 CITY

New conceptPrimary Cabins

Work ForceManagement

Integrated DistributionManagement System

IDE4L (Ideal Grid for All)

S.C.U.O.L.A. (Smart Campus asUrban Open Labs)

B.S.L. (BresciaSmart Living)

Sharing Cities


SMART LIGHTS

SMARTMETERING

SMARTSECURITY

CONNECTEDCITY

DIGITAL ISLANDS E-MOBILITY

PARTNER OFNISSAN

PARTNER OFSHARE & GO

13 NEW HIGHSPEED CHARGERS

NEW OWNe-FLEET

SMART DOMO GRID

ELECTRICITY LOADBALANCING

ELECTRIC COSTOPTIMIZATION

PILOT PROJECTWITH 22 FAMILIES

HOUSE OF THEFUTURE


KEY INVESTMENT HIGHLIGHTS

• Solid diversified business

• Key player in Regulated Sectors

• Tangible growth opportunities

• Technological Trends enabling additional growth

• Critical mass from a perimeter enlargement

• Management background with strong track record

• Strong commitment to Sustainability

22

Deliveringquality and

growth with lowrisk to increase

shareholdervalue

A2A GROUP

This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.23

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/

CONTACTS AND IR PRODUCTS

a2a

2016

InvestorGuidebook

InvestorDatabook(excel file)

Concise and thorough insight in the A2A Group in the form of a longpresentation divided into three main parts: Our World, Our Resultsand Our Responsibilities. The selected contents are all publiclyavailable information, which you may find spread across a largenumber of Company documents

• Historical economic, financial and operational company data asof 2008 – on annual and quarterly basis

• Economic, financial and operational data useful for building A2Aearnings model – 2015 FY reported and 2016-20 BP forecast

• Tables of the Investor Guidebook mainly relevant to aquantitative analysis

Periodic update service for investors and

analysts on the significant steps of A2A

Business Plan – such as relevant

investments, new projects, achievements,

contracts, agreements. If you wish to

subscribe to the service, please visit A2A

website at the following link

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

newsletter/

Brief and synthetic document that shows the highlights and thestrengths of A2A business model

Moreover A2A publishes the following documents in the Investor Library Section on A2A website:• Overview of the Italian Energy Market (yearly basis)• Notes on energy and environmental markets (quarterly basis)Both documents are prepared by the Market Analysis, Modeling and Pricing Unit of A2A

Newsletter

Publications

The publications are available at the following link: http://www.a2a.eu/en/investor/guidebook/

a2a

2016

CompanyProfile

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

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

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

a2a networks & heat business unit - amazon s3€¦ · italy energy retail 90 ... smart city...

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