Viridor Capital Markets Event

Transcription

1 Viridor Capital Markets Event 30 January 2019 DAN MORE INTERESTING PIC? SOMETHING THAT SHOWS VIRIDOR ERF/RECYCLING?

2 Disclaimer For the purposes of the following disclaimers, references to this document shall mean this presentation pack and shall be deemed to include references to the related speeches made by or to be made by the presenters, any questions and answers in relation thereto and any other related verbal or written communications. This document contains certain forward-looking statements with respect to Pennon Group s financial condition, results of operations and business and certain of Pennon Group's plans and objectives with respect to these matters which may constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 (the PSLRA ). Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as anticipate, aim, believe, continue, could, due, "estimate, expect, forecast, goal, intend, probably, "may", plan", project, seek, should, target, will and related and similar expressions, as well as statements in the future tense. By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will or will not occur in the future. Various known and unknown risks, uncertainties and other factors could lead to substantial differences between the actual future results, financial situation development or performance of the Group and the estimates and historical results given herein. Undue reliance should not be placed on forward-looking statements which are made only as of the date of this document. Important risks, uncertainties and other factors that could cause actual results, performance or achievements of Pennon Group to differ materially from any outcomes or results expressed or implied by such forward-looking statements include, amongst other things changes in Government policy on renationalisation and use of single use plastics; regulatory reform; compliance with laws and regulations; maintaining sufficient finance and funding to meet ongoing commitments; non-compliance or occurrence of avoidable health and safety incidents; tax compliance and contribution; increase in defined benefit pension scheme deficit; non-recovery of customer debt; poor operating performance due to extreme weather or climate change; macro-economic risks impacting commodity and power; poor service and/or increased competition leading to loss of customers; business interruption or significant operational failure/incidents; difficulty in recruitment, retention and development of skills; failure or increased cost of capital projects/exposure to contract failures; and failure of information technology systems, management and protection, including cyber risks. Forward looking statements should therefore be construed in light of such risks, uncertainties and other factors and undue reliance should not be placed on them. Nothing in this document should be construed as a profit forecast. All written or verbal forward-looking statements, made in this document or made subsequently, which are attributable to Pennon Group or any other member of the Pennon Group or persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. Pennon Group may or may not update these forward-looking statements. This document is not an offer to sell, exchange or transfer any securities of Pennon Group or any of its subsidiaries and is not soliciting an offer to purchase, exchange or transfer such securities in any jurisdiction. Without prejudice to the above, whilst Pennon Group accepts liability to the extent required by the Listing Rules, the Disclosure Rules and the Transparency Rules of the UK Listing Authority for any information contained within this document which the Company makes publicly available as required by such Rules: a) neither Pennon Group nor any other member of Pennon Group or persons acting on their behalf shall otherwise have any liability whatsoever for loss howsoever arising, directly or indirectly, from use of the information contained within this document; b) neither Pennon Group nor any other member of Pennon Group or persons acting on their behalf makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained within this document; and c) no reliance may be placed upon the information contained within this document to the extent that such information is subsequently updated by or on behalf of Pennon Group. Past performance of securities of Pennon Group cannot be relied upon as a guide to the future performance of any securities of Pennon Group.

3 Programme 10:00-10:45 Main Presentation 10:45-11:15 Q&A 11:15-12:00 - Investing in our people - Technology and Innovation - Energy Optimisation 12:00 Close

4 Main Presentation Overview Government Resources & Waste Strategy Excellent Viridor Track Record Focus on De-risked Infrastructure Model Confidence in Long-term Market Outlook Market Opportunities in Plastics

5 Overview Viridor bringing resources to life Excellent Viridor track record, successful diversification and growth - leading the way in UK waste Confidence in long-term market outlook Viridor has been re-positioned to focus on de-risked infrastructure model, investment backed by profitable, long-term contracts Successful execution in residual waste - construction, contracts, operation of Energy Recovery Facility (ERF) portfolio Landfill continued feature of UK waste Developing new opportunities - ERFs, Energy Parks Government Resources & Waste Strategy aligned to Viridor Strategy Plastics on fast-track driven by Blue Planet effect Broader recycling to be addressed over time Market opportunities in recycling reprocessing - opportunities akin to our residual waste model Delivering for customers, employees and shareholders 5

6 Overview Viridor bringing resources to life Living our core values: Trusted, Collaborative, Responsible, Progressive Our core values are embedded in our way of operating Working in long-term partnerships Delivering outstanding service to customers and communities Supporting value creation for shareholders Significant investment in UK waste c. 1.5bn ERF investment Leading, responsible, sustainable UK waste operator 6

7 Overview Viridor bringing resources to life Successful diversification and growth 7

8 Government Resources & Waste Strategy DAN CHANGE PIC SOMETHING THAT RELATES TO GVT? Pennon PennonGroup Groupplc plc 2019

9 Government Resources & Waste Strategy Viridor leading the debate 9

10 Government Resources & Waste Strategy Aligned to Viridor Strategy R&W Strategy Issue Changes to UK waste policy as expected Falling recycling rates - New packaging recycling targets Recyclability of packaging - Incentives for Producer Responsibility - Rewarding recyclability and use of recycled content Waste input quality to MRFs - Standardised household collections increasing household waste quality Profitability challenged - PRN reform expected, making recycling more profitable, enabling investment and innovation Includes our recommendations 10

11 Government Resources & Waste Strategy Aligned to Viridor Strategy First comprehensive waste strategy for over a decade Successful Viridor engagement Proposed reforms significant and positive, recycling focus Energy recovery seen as long-term feature of waste market New ERFs to be located close to heat offtakes Implementation timeline conservative, complete by 2035 Consultations have begun additional detail being revealed Brand leaders already implementing aspects of strategy plastics Supports investment in residual waste and recycling 11

12 Government Resources & Waste Strategy Significant opportunities - plastics recycling reprocessing Plastics in the public consciousness Blue Planet effect Extended Producer Responsibility important for investment case for new recycling infrastructure Includes tax on plastic packaging containing <30% recycled content Places responsibility of 100% recycling costs on producers Will boost demand, underpinning market for plastic recyclate Proposed target 75% recycling rate for packaging in 2030 Consistent collections will provide more reliable quality feedstock Opportunity to implement ERF-style contract-backed, index-linked return model for plastics Plastics on fast-track 12

13 Excellent Viridor Track Record

14 Excellent Viridor Track Record Leading the way in UK waste Viridor growing proportion of Group earnings Efficient and effective deployment of capital Investment of 1.5bn in ERF portfolio Driving for an efficient and effective cost base Strong sustainable Pennon balance sheet headroom for investment of c 750m (1) (3) (2) 1) Earnings before interest, tax, depreciation and amortisation (EBITDA) 2) Statutory EBITDA before non-underlying items 3) Underlying EBITDA adjusted for share of joint venture EBITDA and IFRIC 12 interest receivable 14 Sustainable Viridor EBITDA growth

15 Excellent Viridor Track Record Leading the way in UK waste (1) EBITDA 2017/ m (1) EBITDA 2013/ m EBITDA growing in absolute terms Focus on long-term, predictable, asset-backed, index-linked returns Almost two thirds of EBITDA from ERFs Only 2% of EBITDA from ERFs Focus on cash generative operations 15 1) Statutory EBITDA before non-underlying items, pie chart shows contributions after pro rata allocation of indirect costs 70% of EBITDA from long-term contracts

16 Excellent Viridor Track Record Leading the way in UK waste ERF Financial Performance c. 28m c.60% > 8% EBITDA/plant (1) EBITDA Margin IRR (2) ERF Operational Performance 2.8mt Base Tonnage (3) 240MW > 90% Base Energy (3) Availability ERF current outperformance of 10% 16 (1) Based on a typical large, 300kt plant (2) Post-tax real (3) Includes joint ventures based on % ownership

17 Excellent Viridor Track Record Leading the way in UK waste Dunbar Avonmouth IFRIC 12 Interest Receivable Share of JV EBITDA Underlying EBITDA (1) Glasgow (IFRIC 12) 167m Beddington Adjusted EBITDA Portfolio of ERFs, only one left in construction Differentiated from our water peers earnings growth kicker Future growth from build-out of ERF portfolio 2017/ /21 1) Statutory EBITDA before non-underlying items Strong platform for the future 17

18 Confidence in Long-Term Market Outlook DAN MORE INTERESTING PIC? SOMETHING THAT SHOWS WASTE?

19 Confidence in Long-Term Market Outlook Strong drivers across all activities underpin Viridor Strategy Conservative assumptions based on third party analysis Long-term expectation for strong market supply UK Waste Market, Mt Recyclable Combustible Other Residual RDF Exports 1) Household waste growth linked to number of houses 2) Commercial & Industrial waste growth has tracked at GDP less 1% since 2013, expected to continue UK waste arisings expected to remain c.80mt 19 Source: DEFRA, SEPA, NRW and Viridor analysis

20 Confidence in Long-Term Market Outlook ERF market fundamentals remain strong Conservative assumptions based on third party analysis Combustible residual market - suitable for ERF treatment - remains robust DEFRA strategy provides a 10Mt range depending on speed of implementation of the Strategy 35 UK Combustible Residual Waste Market, Mt ERF Capacity (others) Viridor ERF Throughput Capacity Gap No New Policy - DEFRA Potential Residual Waste with Consistent Collections - DEFRA 1) DEFRA 2018 estimates 2) Net of RDF export forecast 20 Source: Tolvik, Defra, SEPA, NRW, MSW and Viridor analysis Viridor capacity gap forecast to remain >7MT (2) by 2035

21 Confidence in Long-Term Market Outlook ERF development potential N East N West York E Mid W Mid East London S West S East We continue to see under-capacity in the UK residual waste market - though it varies by geography Viridor interest in new ERFs determined by availability of attractive long-term contracts in-line with our model Assessing opportunities based on: Largest forecast GDP growth Largest volume of waste exported to EU Lowest landfill capacity Largest EfW Capacity Gap Largest forecast housing growth Number of consented projects 3 new ERF opportunities identified for further analysis Source: Tolvik Market supports another phase of ERF development 21

22 Focus on De-risked Infrastructure Model DAN BORING PIC CHANGE BUT ERF PHOTO

23 Focus on De-risked Infrastructure Model Successful execution in residual waste transformation 23

24 Focus on De-risked Infrastructure Model Responsible landfill operator There is a long-term capacity gap for residual waste in the UK Demand for landfill solution remains strong into the medium term Today s landfills are sophisticated requiring highly engineered and controlled operations We are operating a site specific strategy optimising long-term value Sites are being kept open for longer and new cells will be created where there is commercially attractive demand Well-managed open sites forecasting 6 sites for the medium/long-term Restoring and repurposing closed sites for alternative uses 3 sites returned for development in recent years Landfill continued feature of UK waste 24

25 Focus on De-risked Infrastructure Model Reliable landfill gas generation Landfill gas volumes ahead of recent declining trends Continuing investment in landfill gas Optimising engine capacity for improved longer term reliable yield Planned preventative maintenance securing reliable generation Gas is supplied to fuel engines to generate electricity fed directly to the national grid In 2017/18 this was enough to supply all the houses in a city the size of Exeter (for a year) Power prices are hedged to manage market price risk currently seeing benefit of higher year on year hedged prices Investing to optimise landfill gas 25

26 Focus on De-risked Infrastructure Model Developing Energy Park opportunities ERF fleet offers potential for integrated Energy Parks Creating further value from ERFs Value to be derived from not using the national grid creating Energy Parks at ERF and landfill sites Energy Parks could provide heat and power to: Viridor & Pennon Third parties Viridor facilities on Energy Parks benefit from co-located heat and power, providing structurally lower cost base than competitors Value-enhancing Energy Park development 26

27 Focus on De-risked Infrastructure Model Developing energy park opportunities Established connections Runcorn heat and power off-take to Inovyn (full CHP*) Private wire electricity from Dunbar landfill to Tarmac cement works Heat off-take from landfill gas engines and ERF at Beddington into Sutton Decentralised Energy Network (ESCo) connecting to community heating Solar and landfill gas engines at Westbury landfill Peterborough ERF heat connection to council depot Future potential Private wire power supply from Exeter ERF to SWW s treatment plant Data centres (intensive electricity consumption) Plastics and glass recycling plants (energy intensive CHP*) Community heating networks Private wire electricity supply bypassing the Grid Wind, solar and gas engine peaking plants at landfill sites Other intensive energy users (e.g. steel works and paper processing plants) Energy Parks creating value and reducing carbon impacts *CHP combined heat and power 27

28 Market Opportunities in Plastics Pennon PennonGroup Groupplc plc 2019

29 Market Opportunities in Plastics Plastics market 38% Plastic packaging currently recycled 75% UK Target for recycled packaging 12% 3 Current Viridor market share Further reprocessing plants identified New Waste and Resource Strategy will increase the amount of packaging for recycling market size for some plastics projected to almost double Viridor recycling facilities accredited by international brand leaders well-positioned for growth Energy parks provide significant cost advantage for energy intensive reprocessing Viridor well-positioned in a growing market 29

30 Market Opportunities in Plastics Plastics Households Bottle Manufacturing Plant Kerbside Collection Plastics Circular Economy Viridor Plastics Processing Facility Viridor Materials Recycling Facility Viridor Plastics Sorting Facility Established position in plastics 30

31 Creating options for the future Viridor bringing resources to life Exploring options for: - 3 new ERFs - 3 plastics processing facilities Extending life of 6 strategic landfill sites Building on our success in creating Energy Parks Viridor well-positioned in a growing market 31

32 Overview Viridor bringing resources to life Excellent Viridor track record, successful diversification and growth - leading the way in UK waste Confidence in long-term market outlook Viridor has been re-positioned to focus on de-risked infrastructure model, investment backed by profitable, long-term contracts Successful execution in residual waste - construction, contracts, operation of Energy Recovery Facility (ERF) portfolio Landfill continued feature of UK waste Developing new opportunities - ERFs, Energy Parks Government Resources & Waste Strategy aligned to Viridor Strategy Plastics on fast-track driven by Blue Planet effect Broader recycling to be addressed over time Market opportunities in recycling reprocessing - opportunities akin to our residual waste model Delivering for customers, employees and shareholders 32

33 Q&A DAN MORE INTERESTING PIC? SOMETHING THAT SHOWS VIRIDOR ERF/RECYCLING?