The ERG Group presented its 2018 – 2022 Business Plan during a meeting with the Financial Community in Milan on 8 March 2018.
Business Plan
We have radically changed our business portfolio in anticipation of long-term energy scenarios, achieving a leadership position in renewables not only in Italy but also in Europe. Since completing our industrial transformation that we began 10 years ago, we have become one of the leading independent producers of energy from renewable sources in Europe.
We have reached an installed capacity of more than 2,900 MW with a portfolio of assets that is well diversified, from both a technological and a geographical standpoint. Our strategy has always been to anticipate trends in the industry and it is for this reason that the 2018- 2022 Business Plan was approved a year in advance, in 2018.
The industry for the generation of electricity from renewable sources has radically and fundamentally changed in recent years in Europe. While on the one hand governments are pushing ever harder for decarbonization in favour of renewable sources, on the other hand there has been a drastic change in the competitive scenario through the gradual introduction of competitive auctioning for the award of new renewable capacity and the consequent abandonment of incentive systems.
Renewables have therefore changed from being a business with strong infrastructural connotations to a business with purely industrial characteristics. Within the changed competitive environment, our strategy is to continue growing in renewable energies, now leveraging our own industrial know-how, our territorial presence, the quality of our own assets, our operating efficiency and the flexibility of the integrated Energy Management portfolio.
The objective for the 2018-2022 period is to increase the installed capacity by approximately 850 MW via three channels:
1) Greenfield and co-Development: we intend to continue our growth strategy through internal growth of our pipeline of projects or co-development agreements in France, Germany and United Kingdom.
2) Repowering and Reblading in Italy: in view of technological developments in the wind power industry, we are aiming to carry out repowering and reblading on wind farms equipped with obsolete technology, with turbines below one MW, with incentives already expired or expiring, but at the same time located in the windiest sites and therefore with very high expected profitability even in the absence of incentives.
3) M&A: we intend to continue exploiting opportunities for growth in renewables in the countries of or interest, levering the experience acquired in the course of our transformation and the synergies deriving from consolidation with our own portfolio.
In the course of 2018, we took several steps forward in the growth outlined by the Business Plan, adding nearly 200 MW both through M&A in solar (with particular reference to the acquisition of Forvei for 89 MW and the recent acquisition of Andromeda for 51 MW, which is consolidated as from 2019), and through greenfield development (entry into operation of the Torfou and Valle del'Aa wind farms in France), and bringing forward the repowering project with presentation of the applications for authorisation for an even higher number of MW than included in the Plan.
We have reached an installed capacity of more than 2,900 MW with a portfolio of assets that is well diversified, from both a technological and a geographical standpoint. Our strategy has always been to anticipate trends in the industry and it is for this reason that the 2018- 2022 Business Plan was approved a year in advance, in 2018.
The industry for the generation of electricity from renewable sources has radically and fundamentally changed in recent years in Europe. While on the one hand governments are pushing ever harder for decarbonization in favour of renewable sources, on the other hand there has been a drastic change in the competitive scenario through the gradual introduction of competitive auctioning for the award of new renewable capacity and the consequent abandonment of incentive systems.
Renewables have therefore changed from being a business with strong infrastructural connotations to a business with purely industrial characteristics. Within the changed competitive environment, our strategy is to continue growing in renewable energies, now leveraging our own industrial know-how, our territorial presence, the quality of our own assets, our operating efficiency and the flexibility of the integrated Energy Management portfolio.
The objective for the 2018-2022 period is to increase the installed capacity by approximately 850 MW via three channels:
1) Greenfield and co-Development: we intend to continue our growth strategy through internal growth of our pipeline of projects or co-development agreements in France, Germany and United Kingdom.
2) Repowering and Reblading in Italy: in view of technological developments in the wind power industry, we are aiming to carry out repowering and reblading on wind farms equipped with obsolete technology, with turbines below one MW, with incentives already expired or expiring, but at the same time located in the windiest sites and therefore with very high expected profitability even in the absence of incentives.
3) M&A: we intend to continue exploiting opportunities for growth in renewables in the countries of or interest, levering the experience acquired in the course of our transformation and the synergies deriving from consolidation with our own portfolio.
In the course of 2018, we took several steps forward in the growth outlined by the Business Plan, adding nearly 200 MW both through M&A in solar (with particular reference to the acquisition of Forvei for 89 MW and the recent acquisition of Andromeda for 51 MW, which is consolidated as from 2019), and through greenfield development (entry into operation of the Torfou and Valle del'Aa wind farms in France), and bringing forward the repowering project with presentation of the applications for authorisation for an even higher number of MW than included in the Plan.
A BIG STEP FORWARD IN THE BP EXECUTION
| ESG Achievement | |
|---|---|
| ERG included in the ECPI Global Clean Energy Index | The inclusion of ERG in the ECPI Global Clean Energy Index, which selects the 80 top publicly-listed companies in developed countries, active in the production and trading of renewable energy, which satisfy ESG (Environmental, Social and Governance) criteria, has also been confirmed. |
| Achieved rating B from CDP | ERG achieved a B rating from the Climate Change programme promoted by the Carbon Disclosure Project (CDP), the international not-for-profit organisation set up to gather and disseminate quantitative and qualitative information and data regarding the strategies used by firms to combat "climate change". The rating assigned exceeds both the average achieved by the Utilities sector (C rating), and the average insofar as concerns the region of Europe (B- rating). |
| Ranked 16th in the | ERG ranked 16th place in the "Corporate Knights Global 100 Most Sustainable Corporations in the World Index" published by the Canadian company Corporate Knights. With a score of 75.39%, ERG is the leading Italian company, as well as the only one included among the Top 50. Read more on the press release published on 4 February 2019 |
| Obtained ESG rating from Vigeo, IGI, Ethibel and Oekom | |
| Signed 2 ESG Loans | 20 November 2018 - ERG executes two Environmental |
Business Outlook (expected outlook for the main operating and performance indicators in 2019)
- WindFor wind power in Italy, although greater output is forecast than in 2018, the expectation of lower prices on electricity markets in the second part of the year, associated with the lower unitary revenue of the incentive and higher production costs for some maintenance activities, lead to forecast a slightly lower profit than in the previous year.
With regard to other Countries, results are expected to increase in 2018, mainly as a result of:
• better performance of existing assets, both in terms of volumes and due to the higher prices of electricity;
• higher installed power in France by approximately 90 MW fully operational for the entire year 2019;
• higher installed capacity in Germany, by 22 MW;
• partly offset by the smaller presence in Northern Ireland as a result of the sale of a wind farm of 28 MW, which took place in March 2018.
In general, the total EBITDA of the Wind sector is expected to grow compared to the previous year thanks to the increased capacity and output abroad which more than offset the slight decrease in the expected results in Italy. - SolarThe expected results for 2019 are significantly higher than in 2018, thanks to the good performance of existing installations and to the contribution of the new ones acquired in January of this year.
For the entire year 2019, the EBITDA is expected to be more than doubled compared to EUR 32 million in 2018. - HydroelectricFor this assets, results are expected to decline significantly compared to 2018, because of markedly lower water resources compared to the exceptionally high values recorded the previous year.
In addition, this will also negatively affect the possibility of modulating the plants and participating in the dispatching services market as in 2018.
EBITDA for the hydroelectric sector is therefore forecast to be significantly lower compared to the exceptionally high values recorded last year. - ThermoelectricResults are expected to be higher than in 2018 thanks to very low natural gas prices and higher electricity prices in Sicily, such as to more than offset the growth of CO2 costs, with consequent higher Clean Spark Spreads.
Control over costs and the greater production of White Certificates (TEE) will also contribute to these better results. - In brief...In brief, at consolidated level for the 2019 financial year, EBITDA is forecast to be higher than in 2018 (EUR 491 million), between EUR 495 and 505 million, versus the value previously indicated between EUR 495 and 515 million.
This growth is expected in spite of a decreasing incentivised perimeter in the Wind sector in Italy and the lower price of the unit incentive both for Wind and for Hydroelectric, and in spite of a forecast sharp decline in the results of the Hydroelectric sector relative to the extraordinary ones of the previous year. These effects are more than offset by the better results expected from all the other generation assets and from the energy management activity.
Capital expenditure for 2019, confirmed with respect to the previous indication, is expected to be between EUR 340 million and EUR 370 million, down compared to 2018 during which some capital expenditure previously planned for the current year was carried out.
Operational cash generation will allow to contain the forecast increase in net indebtedness from EUR 1.34 billion in 2018 to an amount between EUR 1.39 and 1.47 billion at the end of 2019, partially offsetting the investments of the period, the distribution of the ordinary dividend of EUR 0.75 per share and payment of financial expenses.
The previously indicated range of between EUR 1.36 and 1.44 billion was increased to take into account the higher fair value of the instruments hedging interest rates, as a result of a higher prospective reduction of the rates in the market.
Source: Interim Financial Report as at 30 June 2019
Page updated at 29 Aug 2019