SE Utilities & Infras - Sector/Renewables, Enel/Endesa, Spain/Portugal/Hydrogen, Iberdrola, Atlantia, Enagas, Enel, Naturgy, Atlantia, Enav, Terna, Spain/Renewables, Italy/Spain/Covid [2020-10-15] The EC has presented its Renovation Wave strategy, that aims to at least double renovation rates in the building sector in the next ten years and make sure renovations lead to higher energy and resource efficiency. The document is clear in stating that the decarbonization and efficiency of buildings will be necessary to achieve the proposed -55% emissions reduction target by 2030 compared to the 1990 levels. On this purpose, the Commission will increase the standardization and use of certificates for the building sector, while setting up the bar of renewable energies and decarbonized gases to substitute fossil fuels in the energy supply mix for heating and cooling systems. La Repubblica publishes that the Board of Enel, that will be held today (October 15), will not discuss on Macquarie’s offer for its 50% stake in Open Fiber. Endesa’s CEO Jose Bogas may have stated that between 2020 and the end of 2022 the company could invest €7.5bn, i.e. €1.7bn more than initially planned in the strategic plan. Spain and Portugal’s governments have presented the 31st Spanish-Portuguese Summit document, stating they will cooperate to create a European hydrogen market. Large Spanish utilities, including Endesa, Iberdrola, Naturgy and EDP Spain, would have pointed out the role of green hydrogen for the decarbonization of hard-to-abate-sectors, including heavy transport and industrial processes. We publish our 9M20 preview for Iberdrola: EBITDA performance is obviously impacted by the Covid-19 related economic deceleration and forex depreciation in Brazil. These effects should have been partially compensated by the mainly contribution from new capacity additions in renewables and in CCGTs in Mexico as well as the positive review of the price cap in the UK. ASPI may be valued €10-11bn pre-discount in the agreement for the sale to CDP. ART provided several details on ASPI’s new financial plan: tariff increases are confirmed to be at 1.75% and IRR on past investments was set at 13.7%. Abu Dhabi’s Mubadala, through its subsidiary Mubadala Petroleum & Petrochemicals, has announced that it has acquired a 3% stake in Enagas. Enel, through its subsidiary Enel Green Power would have agreed the sale of 100% stake in its wind farm of 42MW in Bulgaria to Met Group. Enel has acquired 251,840 shares in the period 5-9 October, reaching 0.03% of its share capital. El Economista reports that Naturgy and Eni may have reopened negotiations with Egypt to reach a solution for the plant of Dalmietta. Atlantia’s traffic figures for week 41 confirmed the Unauthorized redistribution of this report is prohibited. This intended for Nicolo Pessina deterioration of the recovery trans for both motorways and airports. On Enav, en-route September traffic declined 60%. Terna has announced yesterday to have inaugurated the new power line connecting Capri to the mainland. CEO Stefano Donnarumma said during the event that the company will invest €14-15m in the next years to support the energy transition. Caisse de dépôt et placement du Québec has reached an agreement to purchase 216MW solar PV plants from Q-Energy, located throughout Spain. Number of Covid-19 cases are on the way up: (1) In Italy the number of total cases increases +7,332 or +2.01% vs Tuesday’s +1.64%. Ongoing infections up by +5,252. Daily reported deaths are 43. (2) In Spain, the number of total cases increased +5,104 reaching 908,056. A total of 33,413 deaths have been reported as of 14 October, with +486 deaths recorded in the last 7 days. SECTOR/RENEWABLES – EC PRESENTS ITS RENOVATION WAVE: HIGHER PENETRATION OF RENEWABLES AND UPDATED REGULATORY FRAMEWORK CRUCIAL TO CUT EMISSIONS IN THE BUILDING SECTOR The European Commission has presented its Renovation Wave strategy, that aims to at least double renovation rates in the building sector in the next ten years and make sure renovations lead to higher energy and resource efficiency. They point out that the achievement in full of Strategy’s targets will result in 35 million building units renovated by 2030. Moreover, the EC observes that 85% of the EU’s building stock were built before 2001 and 85-95% of the buildings that exist today will still be standing in 2050. Find attached link to EC’s press release: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1835 Renovation Wave document: https://ec.europa.eu/energy/sites/ener/files/eu_renovation_wave_strategy.pdf Key Commission actions and indicative timelines: https://ec.europa.eu/energy/sites/ener/files/renovation_wave_strategy_-_annex.pdf Main points to highlight are the following: Buildings currently responsible for 36% of EU’s greenhouse gas emissions – According to the Commission, buildings are responsible for c. 40% of the EU's energy consumption and 36% of greenhouse gas emissions, but only 1% of buildings undergo energy efficient renovation every year. To achieve the 55% emission reduction target, by 2030 the EU should reduce buildings’ greenhouse gas emissions by 60%, their final energy consumption by 14% and energy consumption for heating and cooling by 18%. Ad hoc funding from the NextGenerationEU; €275bn per year are needed by 2030 – The EC will ensure that part of the funds coming from NextGenerationEU, in particular from the €672.5bn (€310bn grants and €250bn loans) Resilience and Recovery Facility, will be allocated to building efficiency. They observe that building renovation is one of the sectors facing the largest investment gap in the EU. The Commission estimates that in order to achieve the proposed 55% climate target by 2030, c. €275bn of additional investments are needed per year. Member States can reduce risk perception and scale up market incentives such as energy-saving tariffs and energy-saving tenders to attract private intermediaries and aggregators. Stronger regulation and standards to incentivize public and private renovation – In Unauthorized redistribution of this report is prohibited. This intended for Nicolo Pessina order to incentivize investments in the renovation of existing buildings, the EC will propose to introduce a stronger obligation to have Energy Performance Certificates alongside a phased introduction of mandatory minimum energy performance standards for existing buildings. Moreover, the EU Taxonomy will include technical screening criteria for the buildings sector, to direct private capital towards sustainable investments in energy renovation. Renewable in building sector set to increase; decarbonized gases to play a role – The revision of the Renewable Energy Directive by June 2021 will consider strengthening the existing renewable heating and cooling targets in accordance with the proposed higher climate target for 2030 and could introduce a requirement to use minimum levels of renewables in buildings. It will also promote the use of decarbonised gases that can create local synergies with municipal and agricultural waste recycling and industrial sectors. Currently, heating and cooling systems are responsible for 80% of energy consumed in residential buildings. Commission to evaluate the inclusion of buildings emission under the EU ETS – The EC also states that the upcoming impact assessments for the revision of key climate and energy legislation, that includes the European Emissions Trading System (EU ETS), envisaged by June 2021 will look into extending the use of emission trading to include emissions from buildings. Interestingly, the Commission will also examine how the EU budget resources alongside the EU ETS revenues could be used to fund national energy efficiency and savings schemes. Circular economy model has to be adapted to building sector as well – The Commission will promote the development of standardised sustainable industrial solutions and the reuse of waste material. It will develop a 2050 roadmap for reducing whole life-cycle carbon emissions in buildings, including through the use of biobased products, and review material recovery targets. The EC is clear in stating that the decarbonization and efficiency of buildings will be necessary to achieve the proposed -55% emissions reduction target by 2030 compared to the 1990 levels. On this purpose, the Commission will increase the standardization and use of certificates for the building sector, while setting up the bar of renewable energies and decarbonized gases to substitute fossil fuels in the energy supply mix for heating and cooling systems. ENEL (O) - BOARD OF TODAY IS UNLIKELY TO TAKE A DECISION ON OPEN FIBER La Repubblica publishes that the Board of Enel, that will be held today (October 15), will not discuss on Macquarie’s offer for its 50% stake in Open Fiber. The article adds that on Monday Macquarie may have re-send its offer, reiterating the one for Enel’s 50% stake (€2.65bn) and adding another one in the case they would buy a 40% stake and State-controlled public lender CDP the remaining 10% stake. Open Fiber is equity-consolidated at Enel with a book value of c€400m. Therefore, the sale of its stake at the suggested price would generate a >€2bn capital gain, corresponding to c3% of its total market capitalization. ENEL (O) – ENDESA COULD INCREASE INVESTMENTS UP TO €7.5BN BETWEEN 2020 AND 2022 El Periodico de la Energia reports that Endesa’s CEO Jose Bogas may have stated that between 2020 and the end of 2022 the company could invest €7.5bn, i.e. €1.7bn more than initially planned in the strategic plan. Unauthorized redistribution of this report is prohibited. This intended for Nicolo Pessina Mr. Bogas also highlighted that a supportive regulatory framework and a reduction of the tax burden would be needed to unleash the full potential of Endesa’s investments in Spain. Finally, CEO would have stated that public-private partnership between the government and large companies will be needed to boost the economic recovery and increase employment in the country.