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A2A – LGH Partnership
Massimiliano Masi – CEO of Linea Group Holding
July 2017
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
GEOGRAPHICAL PRESENCE AND ACTIVITIES
Generation (Traditional)
Generation (Renewable)
Cogeneration
Waste-to-energy
Other waste plants
Assets
Sizable presence in Lombardy
Hydro
Biomass
Biomass
Photovoltaic
Hydro
Hydro
LGH 2016 EBITDA BY BUSINESS
LGH KEY NUMBERS
A2A LGH
GEOGRAPHICAL PRESENCE
• 250 Municipalities served• 1 Million inhabitants served• Second largest Multi-utility in Lombardy• 265k PDR in Gas Distribution• 45k Pod in Electricity Distribution• Over 600k inhabitants served in collection• 280k customers in Gas and Electricity Sale
2
District Heating
34%
24%7%
25%
11%
ENVIRONMENT
NETWORKS
DISTRICT HEATING
ENERGY RETAIL
GENERATION (RES) & TRADING
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.3
MAIN ASSETS - ENVIRONMENT
3
2
76
4 5
1
2
3
COLLECTION
TREATMENT
DISPOSAL
Areas Inhabitants(#)
Cremona 82 k
Lodi 136 k
Rovato 177 k
Fombio 34 k
Crema 167 k
Type Location Capacity (kt/y)
1 WTE Lomellina 380 kt/y
2 WTE Cremona 70 kt/t
3 Selection Coccaglio (BS) 60 kt/y
4 Selection Fombio (LO) 59 kt/y
5Special Waste Treatment
Crema (CR) 90 kt/y
Type Location
6 Landfill Augusta (SR)
7 Landfill Grottaglie (TA)
1
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.4
MAIN ASSETS - NETWORKS, HEAT & ENERGY RETAIL
124
3
2 HEAT
1 NETWORKS
3 ENERGY RETAIL
Type LocationInstalled Capacity
(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
Asset Location # PoD
Electricity Networks Cremona ~45 k
Type # PdR
Gas Networks ~265 k
Type # Custormers
Gas and Electricity >280k
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.5
6
7
10
138
1
2 345
11
14
17
1819
912
1615
MAIN ASSETS – ELECTRICITY GENERATION
Type LocationInstalledCapacity
(MWe)
BusinessUnit
1 Run-of-river Hydro Plant Mazzunno (BS) 11.7
Generation
2 Run-of-river Hydro Plant Darfo (BS) 11.4
3 Run-of-river Hydro Plant Resio (BS) 12.8
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
Environment
8 Biogas Malagnino (CR) 1.7
9 Biogas Provaglio d' Iseo (BS) 1.7
10 Biogas Augusta (SR) 1.7
11 Biogas Ragusa (RG) 1
12 Biogas Rovato (BS) 2.5
13 Biomass Plant Cremona (CR) 1
14 Biomass Plant Rodengo Saiano (BS) 1
15 Cogeneration Plant Cremona (CR) 13
Heat
16 Cogeneration Plant Crema (CR) 6
17 Cogeneration Plant Lodi (LO) 4
18 Cogeneration Plant Rho Nord (MI) 2.8
19 Cogeneration Plant Rho Sud (MI) 1
TOTAL 76.4
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
565
-355
210
Net InvestedCapital
NFP Equity
514
74
6
Revenues EBITDA EBIT
6
LGH - MAIN FINANCIAL HIGHLIGHTS AND PEER COMPARISON
LOCAL UTILITIES:
2015
EBITDA
(€M)
LINEA GROUP HOLDING:
2016 FIGURES (€M)
● Multi-utility● Water Cycle● Environment● Generation
LGH: 2nd multi-utility in Lombardy9th multi-utility in Italy
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.7
DEVELOPMENT DRIVERS
Networks
• Strong Growth in Gas distribution thanks to gas tenders
• DH developmentthanks to saturationof current network potential
Waste Treatment
• Increased efficiencyand availability on Lomellina Plant
• Better flow management and integration with A2A’s existing and under development plants
• Price increases due to lack of availabilityof landfills
Waste Disposal
• Further developmentof Augusta and Grottaglie landfills
• Price increases due to lack of availabilityof landfills
Synergies
• Full potentialdevelopment of synergies with A2A according to «Multi-utility of the territories» model
LGH’s contribution to 2021 Group’sEBITDA up to 115 M€
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
Territorial leadership
Growth pole
Territorial investments
More quality & synergies
PARTNERSHIP CRITERIA PARTNERSHIP OPPORTUNITIES
• Optimization of the presence in Lombardy
• Financial, industrial and operative synergies
• Stronger positioning in all businesses
• Investments optimization
• 1st project of “Multi-utility deiTerritori” 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
9
PROCUREMENT OPTIMIZATION
OPERATIONAL EFFICIENCY
Cost of Debt
~ 9 €M
~ 3 €M
~ 7 €M
EBITDA
Net Financial Expenses
15% vs. 2015 EBITDA15% vs. 2015 EBITDA
-~40% vs. 2015 Financial expenses
-~40% vs. 2015 Financial expenses
• Additional Contribution of ~19€M per year by 2020
• Low execution risk• Other potential upsides not
included• 7% Synergies in annual Capex
(Yearly data – fully on stream)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.10
2017* 2018 2019 2020
PROCUREMENT OPTIMIZATION
OPERATIONAL EFFICIENCY
COST OF DEBT
24% 49% 74% 100%
43% 60% 73% 100%
- 45% 25% 100% 100%
Renegotiation costs Bond repayment
1 8 16 19
%
%
%
€MTOTAL
SYNERGIES
Call Center Internalization
Shipping and Energy Management Optimization
*2017 synergies include small components related to 2016
SYNERGIES TIME-TABLE
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.11
EXAMPLES OF SYNERGIES ALREADY ACHIEVED
PROCUREMENT OPTIMIZATION
OPERATIONAL EFFICIENCY
COST OF DEBT
2017
- Debt and cash management performed by A2A- Strong debt cost decrease- …
- Integration of sourcing policies between A2A and LGH:- Gas smart meter joint purchase- Technical equipment harmonization of waste collection
vehicles- Extension of maintenance and insurance contracts- …
- Commodity Upstream supply chain optimization- Job Rotation Policies- Waste Flow optimization- Net working capital management- Business process alignement ongoing- …
Synergy execution faster than expected
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.12
SHAREHOLDERS STRUCTURE
Way–Out Scenarios
• Three years after closing (2019), the parties, will determine the future of LGH giving priority to:
- a merger between A2A and LGH
or, alternatively
- the renewal of the Shareholders agreement
• The agreements also foresees additional safeguards for the Partners
SHAREHOLDERS AGREEMENT
The Agreement between A2A and the other LGH shareholders : 4-year duration and expires in 2020
2016 2017 2018 2019 2020
Expiry
GOVERNANCE AND FUTURE STEPS
SCS9%
Astem13% ASM Pavia
16%
Cogeme 31%
AEM Cremona 31%
A2A 51%
SCS 4%
Astem7%
ASM Pavia8%
Cogeme15%
AEM Cremona15%
PRE-DEAL POST-DEAL
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.15
BaseEquity Value
89.3
Earn-in
9.6
Earn-out
13.9
Total
112.8
Total
65.5
47.2
112.8
Cash
Stock
Earn-out
100%
27.2
Base Equity Value
Earn-in
175.2
18.8
MAXIMUM EQUITY VALUE 221.1
TOT. UPFRONT 193.9
51%
13.9
89.3
9.6
112.8
98.9
€M
€M
Most of the Earn-in/out will be defined by march 2019
TRANSACTION FINANCIALS
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 Investor Relations Team
Mail: [email protected]
Phone: +39 02 7720 3974
http://www.a2a.eu/en/investor/
CONTACTS AND IR PRODUCTS
a2a2017Investor Guidebook
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 Results and OurResponsibilities. The selected contents are all publicly available information,which you may find spread across a large number of Company documents
• Historical economic, financial and operational company data as of 2008 –on annual and quarterly basis
• Economic, financial and operational data useful for building A2A earningsmodel – 2015 FY reported and 2016-20 BP forecast
• Tables of the Investor Guidebook mainly relevant to a quantitative 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/overvi
ew/newsletter/
Brief and synthetic document that shows the highlights and the strengths ofA2A business model
Moreover A2A publishes the following documents in the Investor Library Section on A2A website:• Documents prepared by the Market Analysis, Modeling and Pricing Unit of A2A
- Overview of the Italian Energy Market (yearly basis)- Notes on energy and environmental markets (quarterly basis)
• Documents prepared by Divisional Managers of A2A- A2A Environment BU- A2A Networks & Heat BU- Main Regulatory Issues for Investors
Newsletter
Publications
The publications are available at the following link: http://www.a2a.eu/en/investor/guidebook/
a2a2017Company Profile
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