A2A – LGH Partnership
Massimiliano Masi – CEO of Linea Group Holding
July 2017 GEOGRAPHICAL PRESENCE AND ACTIVITIES
GEOGRAPHICAL PRESENCE LGH 2016 EBITDA BY BUSINESS
Hydro Hydro 11% 34% ENVIRONMENT NETWORKS Hydro 25% DISTRICT HEATING ENERGY RETAIL 24% GENERATION (RES) & TRADING Biomass 7% Biomass
Photovoltaic
LGH KEY NUMBERS A2A LGH Assets • 250 Municipalities served Generation (Traditional) • 1 Million inhabitants served Generation (Renewable) Sizable presence • Second largest Multi-utility in Lombardy Cogeneration • 265k PDR in Gas Distribution in Lombardy Waste-to-energy • 45k Pod in Electricity Distribution Other waste plants • Over 600k inhabitants served in collection District Heating • 280k customers in Gas and Electricity Sale 2 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. MAIN ASSETS - ENVIRONMENT
1 COLLECTION
Areas Inhabitants(#) Cremona 82 k Lodi 136 k Rovato 177 k Fombio 34 k Crema 167 k
2 TREATMENT
Type Location Capacity (kt/y) 1 WTE Lomellina 380 kt/y 2 WTE Cremona 70 kt/t 3 3 Selection Coccaglio (BS) 60 kt/y 5 4 Selection Fombio (LO) 59 kt/y 1 4 2 Special Waste 5 Crema (CR) 90 kt/y Treatment
3 DISPOSAL
Type Location 6 7 6 Landfill Augusta (SR) 7 Landfill Grottaglie (TA) 3 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. MAIN ASSETS - NETWORKS, HEAT & ENERGY RETAIL
1 NETWORKS
Asset Location # PoD Electricity Networks Cremona ~45 k
Type # PdR Gas Networks ~265 k
2 HEAT
Installed Capacity Type Location (MWt) 1 DH Network Cremona (CR) 160 2 DH Network Lodi (LO) 41 3 DH Network Rho (MI) 33 4 DH Network Crema (CR) 30 3 4 2 1 3 ENERGY RETAIL
Type # Custormers
Gas and Electricity >280k
4 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. MAIN ASSETS – ELECTRICITY GENERATION
Installed Business Type Location Capacity Unit (MWe) 1 Run-of-river Hydro Plant Mazzunno (BS) 11.7 2 Run-of-river Hydro Plant Darfo (BS) 11.4 3 Run-of-river Hydro Plant Resio (BS) 12.8 Generation 4 Run-of-river Hydro Plant Lozio (BS) 0.9 5 Run-of-river Hydro Plant Corna (BS) 0.7 6 Photovoltaic Cremona (CR) 0.5 7 Biogas Castrezzato (BS) 1 8 Biogas Malagnino (CR) 1.7 1 9 Biogas Provaglio d' Iseo (BS) 1.7 5 4 10 Biogas Augusta (SR) 1.7 2 3 Environment 18 1412 9 11 Biogas Ragusa (RG) 1 19 7 12 Biogas Rovato (BS) 2.5 17 1615 13 Biomass Plant Cremona (CR) 1 6 8 14 Biomass Plant Rodengo Saiano (BS) 1 13 15 Cogeneration Plant Cremona (CR) 13 16 Cogeneration Plant Crema (CR) 6 17 Cogeneration Plant Lodi (LO) 4 Heat 18 Cogeneration Plant Rho Nord (MI) 2.8 10 11 19 Cogeneration Plant Rho Sud (MI) 1 TOTAL 76.4
5 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. LGH - MAIN FINANCIAL HIGHLIGHTS AND PEER COMPARISON 514 565 LINEA GROUP HOLDING: 2016 74 210 FIGURES -355 (€M) 6
Revenues EBITDA EBIT Net Invested NFP Equity Capital
LGH: 2nd multi-utility in Lombardy th LOCAL 9 multi-utility in Italy UTILITIES: ● Multi-utility ● Water Cycle 2015 ● Environment EBITDA ● Generation (€M)
6 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. DEVELOPMENT DRIVERS
Networks Waste Treatment Waste Disposal Synergies
• Strong Growth in Gas • Increased efficiency • Further development • Full potential distribution thanks to and availability on of Augusta and development of gas tenders Lomellina Plant Grottaglie landfills synergies with A2A • DH development • Better flow • Price increases due according to «Multi- thanks to saturation management and to lack of availability utility of the of current network integration with A2A’s of landfills territories» model potential existing and under development plants • Price increases due to lack of availability of landfills
LGH’s contribution to 2021 Group’s EBITDA up to 115 M€
7 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. PARTNERSHIP RATIONALE
PARTNERSHIP CRITERIA PARTNERSHIP OPPORTUNITIES
• Optimization of the presence in Territorial leadership Lombardy Growth • Financial, industrial and operative pole synergies • Stronger positioning in all Territorial investments businesses • Investments optimization More quality & synergies • 1st project of “Multi-utility dei Territori” model
8 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. EXPECTED SYNERGIES
(Yearly data – fully on stream)
PROCUREMENT OPTIMIZATION ~ 9 €M EBITDA
OPERATIONAL ~ 3 €M EFFICIENCY • Additional Contribution of ~19€M per year by 2020 • Low execution risk 15% vs. 2015 EBITDA • Other potential upsides not included • 7% Synergies in annual Capex Net Financial Cost of Debt Expenses ~ 7 €M
-~40% vs. 2015 Financial expenses
9 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. SYNERGIES TIME-TABLE
2017* 2018 2019 2020
PROCUREMENT % 24% 49% 74% 100% OPTIMIZATION
OPERATIONAL % 43% 60% 73% 100% EFFICIENCY
Shipping and Energy Call Center Management Optimization Internalization
% - 45% 25% 100% 100% COST OF DEBT
Renegotiation costs Bond repayment
TOTAL €M 1 8 16 19 SYNERGIES
*2017 synergies include small components related to 2016 10 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. EXAMPLES OF SYNERGIES ALREADY ACHIEVED
2017
- Integration of sourcing policies between A2A and LGH: PROCUREMENT - Gas smart meter joint purchase OPTIMIZATION - Technical equipment harmonization of waste collection vehicles - Extension of maintenance and insurance contracts -…
- Commodity Upstream supply chain optimization OPERATIONAL - Job Rotation Policies EFFICIENCY - Waste Flow optimization - Net working capital management - Business process alignement ongoing -…
- Debt and cash management performed by A2A - Strong debt cost decrease COST OF DEBT -…
Synergy execution faster than expected 11 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. GOVERNANCE AND FUTURE STEPS
SHAREHOLDERS STRUCTURE SHAREHOLDERS AGREEMENT
The Agreement between A2A and the other LGH shareholders : 4-year duration and expires in 2020
PRE-DEAL POST-DEAL 2016 2017 2018 2019 2020 Expiry Cogeme AEM Cremona 31% 15% ASM Pavia Way–Out Scenarios AEM Cremona 8% 15% Astem Cogeme 31% 7% • Three years after closing (2019), the parties, SCS SCS 4% 9% will determine the future of LGH giving
A2A 51% priority to: Astem 13% ASM Pavia - a merger between A2A and LGH 16% or, alternatively
- the renewal of the Shareholders agreement
• The agreements also foresees additional safeguards for the Partners
12 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. Annexes
13 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. MAIN OPERATING DATA
Total Electricity Production ~0.4 TWh
Total Heat Production ~0.3 TWht
14 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. TRANSACTION FINANCIALS
100% 51% Most of the Earn- €M in/out will be defined by march 2019 €M Base 13.9 112.8 112.8 Equity Value 175.2 89.3 9.6 89.3 47.2
Earn-in 18.8 9.6
TOT. UPFRONT 193.9 98.9 65.5
Stock Cash Earn-out 27.2 13.9 Base Earn-in Earn-out Total Total Equity Value
MAXIMUM EQUITY VALUE 221.1 112.8
15 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. CONTACTS AND IR PRODUCTS
Publications A2A Investor Relations Team a2a Concise and thorough insight in the A2A Group in the form of a long 2017 presentation divided into three main parts: Our World, Our Results and Our Mail: [email protected] Investor Responsibilities. The selected contents are all publicly available information, Guidebook which you may find spread across a large number of Company documents Phone: +39 02 7720 3974 • Historical economic, financial and operational company data as of 2008 – Investor on annual and quarterly basis http://www.a2a.eu/en/investor/ Databook • Economic, financial and operational data useful for building A2A earnings (excel file) model – 2015 FY reported and 2016-20 BP forecast • Tables of the Investor Guidebook mainly relevant to a quantitative analysis Newsletter a2a 2017 Brief and synthetic document that shows the highlights and the strengths of Periodic update service for investors Company A2A business model and analysts on the significant steps of Profile A2A Business Plan – such as relevant investments, new projects, The publications are available at the following link: http://www.a2a.eu/en/investor/guidebook/ achievements, contracts, agreements. Moreover A2A publishes the following documents in the Investor Library Section on A2A website: If you wish to subscribe to the service, • Documents prepared by the Market Analysis, Modeling and Pricing Unit of A2A please visit A2A website at the - Overview of the Italian Energy Market (yearly basis) - Notes on energy and environmental markets (quarterly basis) following link • Documents prepared by Divisional Managers of A2A http://www.a2a.eu/en/investor/overvi - A2A Environment BU ew/newsletter/ - A2A Networks & Heat BU - Main Regulatory Issues for Investors
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. 16 This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.