Project Wheel. FY 2015 Results and Business Plan. August 2016

Project Wheel FY 2015 Results and 2016-2020 Business Plan August 2016 1 Table of Contents PAGE 1. Company Overview 4 2. Market Context and Indust...
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Project Wheel FY 2015 Results and 2016-2020 Business Plan August 2016 1

Table of Contents PAGE

1. Company Overview

4

2. Market Context and Industry Overview

14

3. Recent Performances Analysis

20

4. Company Business Plan 2016 – 2020

28

5. Appendix

36

2

DISCLAIMER THIS PRESENTATION IS NOT, NOR SHALL BE CONSTRUED AS, AN OFFER, INVITATION OR SOLICITATION OF AN OFFER TO BUY OR SELL SECURITIES. IT IS SOLELY TO BE USED AS A COMPANY PRESENTATION AND IT IS PROVIDED FOR INFORMATION PURPOSE ONLY. THIS DOCUMENT DOES NOT CONTAIN THE INFORMATION THAT IS MATERIAL TO AN INVESTOR. BY ATTENDING THE PRESENTATION OR BY READING THE PRESENTATION SLIDES YOU AGREE TO BE BOUND AS FOLLOWS: This document and its contents are confidential and may not be reproduced, redistributed, published or passed on to any other person, directly or indirectly, in whole or in part, for any purpose. This presentation, prepared by Waste Italia S.p.A.. (the “Company”), is furnished on a confidential basis only for the use of the intended recipient and only for discussion purposes. This document may not be relied upon for the purposes of entering into any transaction. The information contained herein has been obtained from sources believed to be reliable, however the Company does not represent or warrant that such information is accurate or complete and such information has not been independently verified. The views reflected herein are those of the Company and are subject to change without notice. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the presentation and the information contained herein and no reliance should be made on such information. Neither the Company nor any of its representatives shall accept any liability whatsoever (whether in negligence or otherwise) arising in any way from the use of this document or its contents or otherwise arising in connection with this document or any material discussed during the presentation. This presentation contains forward-looking statements, which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or including the words “target,” “believe,” “expect,” “aim,” “intend,” “may,” “anticipate,” “estimate”, “would,”, “will”, “could”, “should”, “plan”, “potential”, “predict”, “project” or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company’s control that could cause the Company’s actual performance or achievements to be materially different from future performance or achievements expressed or implied by such forward-looking statements. Such forwardlooking statements are based on numerous assumptions regarding the Company’s present and future strategies and the environment in which it will operate in the future. These forward-looking statements speak only as of the date of this presentation and no reliance should be made on these statements. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any of such statements are based.

3

COMPANY OVERVIEW

Overview of Waste Italia COMPANY OVERVIEW 

Waste Italia operates in the waste management business in the north-west part of Italy



Key business segments include:

OVERVIEW OF THE OPERATING SITES

- Collection and brokerage: waste collection, transportation and brokerage services of both owned and third party landfill spaces, for non-hazardous and special waste

Romagnano

Cermenate Agrate

- Sorting & Treatment: sorting and treatment carried out at plants and aimed at reducing the environmental impact of customers’ commercial and production activities for non hazardous special and urban waste

Collegno

Cavenago Albonese Milan

Orbassano Castello d’Annone Bossarino

into energy for non hazardous special and urban waste

Ecosavona

Genoa

As of April 2016, the Company operated 7 collection service centers, 8 waste sorting & treatment facilities and 7 active landfills MAIN NEW LANDFILLS AND PROJECTS



Faeco

Turin

- Disposal: final waste disposal that cannot be recycled nor turned 

Buccinasco

Chivasso

The Company is planning to develop the following new projects in the next 5 years

- 2 new landfills located in Cavaglia (Piemonte)(1) and Chivasso

Legend Waste Italia Landfills Competitor Landfills Collection Depot Selection & Treatment Facility Geotea Landfills

(Piemonte) as part of the Wastend Project

- New waste treatment plant near the Ecosavona landfill - The Wastend Project: an integrated waste disposal, sorting & treatment and recovery plant in Chivasso, aimed at substituting 4 existing treatment plants

(1)

The Company is currently waiting for approvals from local authorities for the development of the new landfill. In case the new landfill will not be approved, the Management will develop a new landfill in Lombardy (“Verde Imagna Landfill”) as an alternative .

5

GROUP STRUCTURE DESCRIPTION 



SIMPLIFIED GROUP STRUCTURE

Waste Italia is controlled by Gruppo Waste Italia S.p.A. (the “Parent Company”), which is engaged in the implementation and development of waste management solutions

Settimo Torinese Municipality 42.8%

22.1%

8.9%

Other Businesses

Gruppo Waste Italia S.p.A.

In November 2015, the Parent Company went through a corporate reorganization spinning-off its activities in the renewable energy and energy efficiency solutions industry (Innovatec), focusing just on the environmental and waste management business

Production EPC & O&M

91.4%

District Heating

Production of energy from renewable sources

District heating

Waste Italia Partecipazioni S.r.l. International Division 96.4%

International development and offices

Waste Italia Holding S.p.A.(1)

Notes’ Restricted Group 100.0% Waste Italia S.p.A. (“Issuer”)

100% Waste 2 Water S.r.l.

76% Ecoadda S.r.l.(2)

100%

100%

S.M.C. S.p.A.

Seta

Mr. Giuseppe Chirico (former CEO) owns a minority stake of 3.6% in Waste Italia Holding SpA. Energia e Ambiente Lodigiana owns a 21% equity stake and LGE Srl owns a c.4% equity participation in Ecoadda. Other shareholders are local municipalities in the north east Turin province. Vado Ligure Municipality (25%) and Savona Municipality (5%) own minority stakes in Ecosavona. On January 1st 2016, Geotea SpA and Bossarino Srl have been merged into Waste Italia SpA

100%

Verde Imagna S.r.l.

100%

Faeco S.r.l.

100%

100%

49%(3)

(1) (2) (3) (4) (5)

Free Float 26.2%

KM Verde

Bossarino S.r.l.(5)

Geotea S.p.A.(5)

70% Ecosavona(4)

6

Waste Italia Business Model(1) Waste Italia benefits from vertical integration, ensuring flexibility and presence through the value chain The ability to operate through the waste cycle is mainly driven by geographic proximity and relationship with key partners (local municipalities and private clients)

Parts of the waste management cycle in which Waste Italia operates

(1)

Please refer to the following section for an overview of the various waste management industry segments.

7

Management Team The Management Team has extensive experience in waste management and environmental industries. During the past years the Management Team has worked closely with business partners and municipalities, developing fundamental relationships which are key to maintain and grow the business in the future Pietro Colucci Chairman of Gruppo Waste Italia

 

 

Giuseppe Chirico CEO of Gruppo Waste Italia and Waste Italia

 

Flavio Raimondo Member of the Board of Directors and CEO of Ecosavona



Mario Bagna Member of the Board of Directors Head of Commercial Department



Roberto Maggio Member of the Board of Directors Head of External and Institutional Affaires



Sebastiano Chizzali Head of Technical Department

 







 

Tenure: 16 Years Led the acquisition of Waste Management Inc.’s Italian operations in 2000, which later became the Waste Italia Group Spearheaded the Group’s expansion at a national level Main shareholder of the Group

Marco Fiorentino Member of the Board of Gruppo Waste Italia

 



Tenure: 13 Years Previously CEO at Eco Logica Italiana and General Manager at Plastic Omnium Lander

Alessandra Fornasiero IT, Communication and special projects director

Tenure: 2 Years General Manager of Kinexia since 2014 Previously General Manager at Toshiba T&D

Raffaele Vanni Head of Finance

Tenure: 12 Years In charge of Waste Italia’s commercial activities since 2014 Previously Head of Commercial Accounts for Italian Eco Logic

Federico Malgarini Head of Financial Planning

Tenure: 6 Years Previously General Manager at ASM and Managing Director at Sei Energia

Maurizio Arzenati Head of Operations



Tenure: 5 Years Previously Operations Director at Geotea, Director of the landfill division at Daneco Impianti and Head of Biogas at Green Holding Group

Marco Acquati Head of Administrative Department



Board of Directors at Waste Italia SpA

 

  

 







Tenure: 16 Years Worked with Mr Colucci since the acquisition of Waste Italia Inc.’s Italian operations in 2000 Specialized in corporate transactions, M&A, as well as in structured finance transactions

Tenure: 14 Years Previously worked at Arthur Andersen, as developer of ERP systems, and Unendo Group

Tenure: 7 Years CFO at Innovatec SpA since 2014 (ongoing) Previously CFO at Kinexia Group from 2009 to 2012 Tenure: 5 Years In charge of internal control, financial planning and development of international projects Led the Geotea acquisition diligence and financing work streams Tenure: 1 Year Previously Operations Director at Ingenico, XPO and Gruppo Fagioli

Tenure: 3 Years Previously Assistant to CFO at Plati Elettroforniture and Senior manager at PwC

8

Waste Italia’s leverage In the market The special waste market in Italy is characterized by short term contracts (usually one year) for Collection. Sorting & Treatment and Disposal are characterized by non-exclusive / flexible agreements (for all parties involved). Management’s ability to maintain clients and review contracts is instrumental to the Company’s performances KEY PECULIARITIES OF THE ITALIAN WASTE MARKET

WASTE ITALIA’S ANGLE

POSSIBLE RISKS AND MITIGATIONS

1

Extremely fragmented market across each stage (horizontally) • In addition, not having a network of partners constitutes a barrier for obtaining national client contracts

Waste Italia is able to service national clients • Large untapped nationwide market constituted by large supermarkets approaching waste management on a local scale

New players entering the market may change the competitive landscape • Large multi-utilities owned by municipalities are starting to enter Waste Italia’s market segment (e.g. HERA) increasing competitive pressures • These players have greater financial resources and ability to develop and manage a nation-wide network • New entrants are seeking to gain market presence through aggressive under-pricing strategies • Waste Italia needs to anticipate and respond to changing market conditions and continue to invest and develop the business • Management’s capabilities, experience and relationships are key to understand these changes and preserve the Company’s competitive position • Relationships are critical to retain customers and set pricing policies

2

Virtual absence of fully integrated players (vertically) • Having full visibility on the waste management process is key for industrial clients (legal responsibility of waste producers)

Waste Italia’s competitors are often its clients • Waste Italia is a relatively large player with numerous relationships in key regions, curbing competitive tension in key areas

3

Limited number of players with commercial capabilities • Competitors are mainly family owned SME focused on serving historical clients with limited commercial resources

Unique long-term experience in the market • Waste Italia was the first mover setting up a dedicated salesforce to offer a superior quality service as shown by the 98% retention rate

4

Flexibility of agreements • One year contracts for Collection • Non-exclusive / flexible agreements for S&T and Disposal

Possibility to implement arbitrage strategy on pricing • Waste Italia is present across the value chain, giving it full visibility and capacity to tweak prices according to market trends

Ability to renew existing contracts and win new ones is key • The Company’s future success depends on the Management’s ability to retain and renew existing contracts, as well as expand the client base

5

Lengthy process to develop new Sorting & Treatment facilities • On average, in Italy one can expect 2/3 years to complete the authorization process

Consolidated relationship with local authorities • Relationships with municipalities are key to the business • Management knows very well the authorization process for new facilities, allowing for the most efficient process given constraints

Continued relationships with municipalities required • The Company needs to maintain and further develop the relationships with municipalities • Any prolonged restructuring process would impact the Company’s ability to continue working with public entities, damaging the value of the business

6

Challenging environment to develop greenfield landfills • Strong local opposition to new sites. Development capacity limited to expansionary of existing

Waste Italia has a large network of existing landfills • Good relationships with local authorities due to established and successful presence; long term control of existing facilities

Need to continue investing in the network • The Company must continue to invest in expanding its capacity of current and future landfills, in order to continue growing and support business performance

9

Business Segment Overview CORE BUSINESS SEGMENTS Collection



Description 

Collection and transportation of waste from producers via own fleet and third party collectors Transportation to sorting & treatment facilities and landfills

ANCILLARY BUSINESS

Sorting & Treatment



Sorting materials into recoverable and nonrecoverable



Compacting



Refuse-derived fuel (“RDF”)

Landfill





Facilities



7 service centres



7 depots



150 vehicles (o/w 65 owned)



EBITDA Margin(1)

(1)

Based on FY2015 figures.



12,400 Kw total production capacity from Biogas



Other renewable energy assets

7 operating landfills (of which 4 are expected to continue operating in the following years and 3 with limited residual capacity)



9 biogas / PV facilities

Permanent disposal of waste



8 selection & treatment facilities

276



154



741



n.m.



34%



8%



43%



15%



10-12%



~ 0%



> 50%



~70%

Volume (kton)(1) % of total revenue(1)

Biogas & Others

10

Illustrative Segments Overview and Inter-company Trading (1) The Company’s business segments are partially inter-related, with the collection business reporting in 2015 c.€6m intercompany revenues / costs with the Sorting & Treatment division and c.€1m intercompany revenues / costs with the Landfill Disposal segment, while the Sorting & Treatment division reported c.€2.6m intercompany revenues / costs with the Landfill division

COLLECTION

SORTING & TREATMENT

LANDFILL DISPOSAL

EXTERNAL CLIENTS

EXTERNAL CLIENTS

EXTERNAL CLIENTS

Volumes 276k tons

Revenues

Disposal in 3rd parties’ landfills / S&T plants

Volumes 208k tons Costs € (13) m

(1) (2) (3)

Collection 64k tons

Volumes 58k tons

€5

Waste-to-Water 30k tons

Volumes

690k tons

€3m

Revenues

€ 50 m

m(3)

Rev.(3) €6m

Internal Transfer

€ 39 m

Internal Transfer

Revenues

Volumes

Disposal to 3rd parties

Volumes(2) 98k tons Costs(2)

€ (7) m

Sale of raw materials

Volumes 11k tons Revenues

€1m

Volumes Rev. 43k tons € 2.6 m

Volumes 10k tons

Rev. €1m

Leachate disposal

Volumes 186k tons Costs

€ (4) m

Revenue flow described in the diagram is based on total revenue value of c.€100m (from Collection, Sorting & Treatment and Disposal activities), excluding other revenues for c.€17m from other operations (including the biogas and PV plants). Including Waste to Water 2015 volumes (c.€30k tons) and operating costs (c.€4m), pursuant to sale of Alice Ambiente to Waste to Water on March 2015. Transfer pricing is normally determined as an “average market price” applied to external clients. Higher transfer prices between collection and treatment depends mainly on the different mix of materials that are passed through the two waste management processes. On average, the unsorted waste is generally characterized by a transfer price of €110/ton, while materials coming from external clients have generally a lower price as they can be provided also in homogenous groups (e.g. single trucks of paper or plastics).

11

Waste Italia Value Proposition Waste Italia is the leading vertically integrated nonhazardous special waste, recycling and resource management services company in North Italy, with the commercial capabilities to serve clients across the country





Waste Italia is able to serve its clients on a national base due to: 

Execution capabilities in terms of timing and quality



Control and traceability of the waste product in all phases from collection to disposal, granting the full compliance with regulatory standards



Emergency waste management on an ad-hoc basis

The provision of the highest level of client service is achieved through 

Careful selection of the partners operating in the national territory where the company is not directly present (network composed by over 60 long term partners)



Centralized logistic services



Dedicated customer relation services

Waste Italia Credential – Long Term National Clients

Client from over 15 years Client from over 10 years Client from over 10 years Client from over 10 years Client from over 10 years

12

Management’s Value Added Waste Italia has built a strong management team with unique competences across the entire value chain

1

Strong and consolidated relationships with large customers

Contracts normally renewed on a yearly basis (98% YoY) Each landfill is unique. Significant experience in

2 Invaluable experience in landfill authorization process

authorization process is required for future expansion of landfills

3

Unique technical skills in the management of highly complex landfill sites

4 Significant competence in extra-urban logistics

5

6

Knowledge of national and local waste management markets

Strong relationships with partners at all levels of the value chain

Expertise particularly important for complex projects such as vertical landfills

Particularly important for national collection clients, who are spread out throughout Italy

Includes appreciation of key competitors and partners in each segment Having strong relationships with clients and suppliers allows the Company to maintain a high operational and economic flexibility

13

MARKET CONTEXT AND INDUSTRY OVERVIEW

Italian Waste Management Industry Overview WASTE MANAGEMENT ACTIVITIES COLLECTION

MARKET SIZE AND SEGMENTATION DISPOSAL

SORTING & TREATMENT

MARKET SIZE - 160 MILLION TONS PER ANNUM Hazardous 5%

Collection of waste from producers and transportation to Sorting & Treatment facilities

Sorting of collected materials into recoverable (recycling and composting) and nonrecoverable materials

Special construction & demolition 29%

Permanent disposal of final non recoverable materials (landfill, incineration and energy production)

Special nonhazardous 46%

WASTE PRODUCTION SEGMENTS

KEY CHARACTERISTICS 

Urban Waste

Waste arising from public areas and public activities

Urban Waste

 

Non-Hazardous waste Special Waste

Hazardous waste

Source: ISPRA, public information.

Waste produced by commercial, industrial and production activities, not constituting a threat for health or environment Waste produced by commercial, industrial and production activities posing substantial or potential threats to public health or to the environment

Urban 20%



Special 

Waste



Collection regulated by multi-year contracts with municipalities awarded through public auctions S&T regulated by public authorities Economics are highly dependent on negotiations with public authorities / municipalities

Collection regulated by short-term contracts directly negotiated with private clients S&T activity determined by geographical proximity (max 25 km) Landfill Disposal operations economics are determined by geographical proximity as well, but with a wider radius (150/200 km)

15

Key Competitive Dynamics

COLLECTION

SPECIAL WASTE



Mainly performed by publicly participated companies, controlled by local authorities



Largely performed by small local operators (with size of less than €15m revenues)



Market segment characterized by high barriers of entry (i.e. investments in collection equipment) with less flexible contracts, awarded through public auctions based on price



Competition is focused around securing contracts with large private corporates which need to manage significant quantities of waste (e.g. department stores, supermarkets, industrial companies, etc.)



Waste Italia does not operate in this segment



Activities are regulated by local authorities



Relationship with municipalities / provinces are key in order to:

Based on geographical proximity and relationships with waste collectors



Key to have a strong network of affiliated partners, providing waste from other collection companies

SORTING & TREATMENT

This provides a competitive advantage to the Company, especially towards large corporate clients in the Special Waste segment

URBAN WASTE



LANDFILL

Waste Italia is fully integrated across the waste value chain, from collection to disposal



Ability to obtain authorizations to expand existing landfills



Securing authorization for new landfill capacity depends largely on the successful historical track record with municipalities and local authorities



Increased significance of Waste-to-Energy facilities



Secure contracts for the supply of waste to the treatment plants



Develop treatment facilities in accordance with the local regulations

Parts of the waste management cycle in which Waste Italia operates Source: ISPRA, public information.

16

Main Players in Relevant Markets Overview 



National Market (Special Waste)

COLLECTION

Key Competitors

The national market is limited to Collection. No truly national integrated players in the Waste Management industry Waste Italia is seen as a market leader due to its ability to serve clients throughout the country through its network of partners



Waste Italia is also one of the first players to develop a consulting approach to its clients – demonstrating potential savings quantitatively and implementing tailored solutions



Multi-utility Hera is Waste Italia’s most prominent competitor. Competition is limited but potentially growing

Lombardy COLLECTION 

Local Market (Special Waste)

Characterized by small players with revenues smaller than €15m

SORTING & TREATMENT 

LANDFILL 

Relatively low competitive pressure due to: - Capped new capacity on existing landfills - Increased demand in key large cities, currently facing shortage of efficient waste disposal solutions However, Waste-To-Energy plants continue to represent a threat to the business segment

Piedmont / Liguria

Multiutilities (participated by municipalities)

Other Players

17

Regulatory Framework Overview The new EU targets for waste management are reshaping the industry dynamics. Companies and individuals are incentivized to follow environmental-friendly practices and the waste management industry is forced to focus more on treatment rather than landfill disposal

EU TARGETS BY 2030(1)

1 Recycling 65% of municipal waste

IMPACTS ON ITALIAN REGULATIONS(3) 

and 75% of package waste(2)

2 Reduce landfill disposal to a



maximum of 10% of all waste 

3 Discourage landfilling and

for the waste they produce Incentivize environmental-friendly practices and support recycling schemes (e.g. packaging, batteries, electronics, etc.)

(1) (2) (3)

Tightening of authorization processes for new landfills Increased regulation for closure and post-closure activities



Reduce the volumes of waste that can be directly disposed in landfills



Increase demand for S&T services



Reduce available capacity for landfills



Increased costs for closures and post-closures activities



Increase demand for waste treatment services



Entry of new Waste-to-Energy players in the market



Increased competition in the early stages of the cycle (Collection and Sorting & Treatment)



Individuals, corporates and institutions are fully responsible for their own waste through the waste cycle (collection, treatment and disposal)



Increased competitive advantage of integrated players serving clients along the entire waste cycle

incentivize alternative solutions (e.g. Waste-to-Energy)

4 Waste producers are accountable

Mandatory treatment of waste before disposal in landfills

IMPLICATIONS ON THE INDUSTRY DYNAMICS

European Waste Directive. The directive includes also simplified, improved and harmonized definitions and calculation methods for recycling rates throughout the EU. Regulated by D.lgs 152 of 2006 (“Testo Unico Ambientale”).

18

Italian Waste Industry – Drivers & Outlook Waste volumes are correlated with GDP growth in both urban and special waste segments According to OECD, Italy GDP is predicted to grow by 1.4% year on year in 2016 and 2017, therefore a moderate growth would be expected in the waste management business over the medium term

Source: ISPRA, public information (1) Data for all special waste.

WASTE PRODUCTION 

Waste production is generally linked to Italian GDP growth trends 

Urban Waste is linked to population growth and consumption levels



Special Waste is linked to industrial activity intensiveness

WASTE VOLUMES PRODUCTION & GDP Urban waste production vs GDP vs Household exp. Correlation 110



There is a preference not to have waste travel excessively, therefore waste facilities are generally located near the producers of waste



Waste Italia is positioned in the “industrial heartland” of Italy (Lombardy, Piedmont and Liguria) which enables a predictable flow of waste in the future

105 100 95 90 2002

2004

2006

2008

GDP (rebased) Urban waste production (2002=100%)

2010

2012

2014

Household expenditure (rebased)

Special waste production(1) VS GDP Correlation

WASTE MANAGEMENT 

No significant trend in place for Collection segment – directly connected to production



Increasing relevance of weight in Sorting & Treatment segment 



Due to European Union Directives and national legislation, increased focus on recovery and recycling to be primarily obtained through advanced Sorting & Treatment processes

Disposal segment characterized by increasing pressure on landfill – currently 38% of Urban Waste disposal and 9% of Special Waste disposal 

Legislation favours recycling



Waste to energy (“WTE”) is an increasing threat to landfill disposal due to 

“hunger for fuel”, leading to price dumping activities



selected legislative incentives

Special waste production (million tons)

GDP at Current Prices (€ tn)

2.0

160

1.5

120

1.0

80

0.5

40

--

-2002

2004

2006

2008

GDP at current prices

2010

2012

2014

Special waste production

Italian GDP Outlook +1.40%

+1.40%

2016

2017

+0.90%

2015

19

RECENT PERFORMANCES ANALYSIS

Recent Performance Overview 

Company’s operating environment was challenging in 2015 resulting in an underperformance compared 2014 and the projected budget

- Consolidated revenues were c.€116m(1), declining by c.8% from FY 2014 pro-forma revenues(2) and reflecting a c.11% decrease compared to 2015 budget (c.€131m)

- EBITDA stood at c.€34m(1), declining by 35% from FY 2014 pro-forma(2) and reflecting a c.38% decrease compared to budget (c.€55m) - Despite the recent underperformance the Company preserved operating cash flows through working capital management and reduction of capital expenditures. However, liquidity headroom at the end of FY 2015 remained tight, as the Company reported c.€2.6m of cash on balance sheet on 31 December, 2015 

Recent results have been affected mainly by:

- Materially lower than expected performances in the landfill business segment, due to: - Authorization process for additional capacity at the Chivasso and Albonese landfills took longer than previously anticipated, resulting in significantly lower volumes of waste managed and disposed

- Lower than expected waste volumes disposed in the Ecosavona landfill (part of Geotea, acquired in 2014) - Precautionary seizure of the Cavenago landfill due to possible environmental issues, preventing the Company from disposing waste in the remaining space at the site

- Slowdown of Sorting & Treatment volumes due to increased market competition (e.g. new Waste-to-Energy players) - Lower than expected average market prices for Collection and Landfill business segments, mainly due to higher competition coming from Waste-to-Energy players and increased pressures from large multi-utilities starting to access the special waste market segment (e.g. HERA)

(1) (2)



The Company’s management has been pursuing a structural change which involves progressively developing the Company’s Sorting & Treatment segment and reducing the rate of waste disposed in landfills (“Structural Change”). The implementation of this strategy is expected to mitigate the above mentioned risks. As the contribution of the Sorting & Treatment segment increases, the overall Company’s performance is projected to stabilize as it will be less dependant on the availability of waste disposal capacity and landfills’ residual useful life, which however will continue to be a key driver in the Company’s future development



The following pages present an analysis of the Company’s recent performance and describe the main drivers that have impacted FY 2015 results

Excluding non-cash items of c.€4.2m related to a capital gain reported in relation to the estimated post-closure obligations for the Faeco landifll, following a revised agreement with the supplier that will perform the related activities on the landfill. The above mentioned capital gain is accounted as “other revenue” in the company 2015 income statement. 2014 revenues and EBITDA pro-forma for the acquisition of Geotea and Faeco were €126m and €52m, respectively

21

Recent Revenues and EBITDA Trend Overview The Company 2015 actual revenues and EBITDA results have been materially lower than 2014 proforma and 2015 budget figures Results have been mainly affected by lower than expected landfill business segment performance

REVENUES (€M)

EBITDA (€M) Geotea contribution lower than expected due to expectations of higher volume which did not materialize

Pro-Forma(1)

Pro-Forma(1)

9%

Budget ‘15 4%

4%

Budget ‘15

41%

40%

39%

42%

(5%)

37% 55

(10%)

(13%)

17

9

(2)(3)

83

32

3

12 42

95 86

32%

6

120 Newly acquired assets from Geotea and Faeco

28%

131

126

52 1

38

37

37

(2)(3)

34 7

31

78

27

17 22 20 78

73

82 25

22 11

FY11

FY12

Waste Italia

FY13 Geotea

FY14

PF '14 Faeco

FY15

FY11

FY15 Budget

Revenue Growth YoY

FY12 Waste Italia (4)

Others

FY13

FY14

PF '14

Geotea

FY15

FY15 Budget

Faeco

EBITDA Margin

Contribution from the original Waste Italia business significantly lower than expected due to landfill business underperformance (1) (2)

Pro forma for the acquisition of Geotea and Faeco in 2014. In 2014 approximately 183k tons of waste have been disposed, almost exhausting the capacity available before the Company could have the time to finalize planned additional investments to extend the space available. In 2015 the landfill had to work with limited capacity, due to the extraordinary works needed to complete the capacity expansion. Following the completion of the planned investment finalized in 2015, the landfill is currently operating at full capacity.

(3)

(4)

Includes c.€4.2m non-cash revenues related to a capital gain reported in relation to the estimated post-closure obligations for the Faeco landfill, following a revised agreement with the supplier performing the related activities on the landfill. The above mentioned capital gain is accounted as “other revenue” in the company 2015 income statement Includes biogas, intercompany and acquisitions adjustments

22

Recent Cash Flow Performances Overview Between 2011 and 2015 the Company reported an average cash conversion of c.38%(3), showing a very high volatility, mainly driven by changes in working capital Following a decrease in operating performances, the Company preserved cash flows through working capital management both in 2014 and 2015

Company’s cash available was tight through 2011 and 2013, however overall liquidity headroom increased in 2014, following the HY Bond issuance Liquidity profile weakened again in 2015, following weaker than expected performances (1) (2) (3) (4)

EBITDA AND OPERATING CASH FLOWS Lower EBITDA result following a general decrease of waste disposed in landfills and decreased availability on the existing Waste Italia landfills (pre-acquisitions)

Cash EBITDA 38

Cash Conversion

36 29

47%

22

29% OpFCF

(1)

34

2%

58%

18

54% 18

13

10 1 2011 A

2012 A

2013 A Cash EBITDA

Operating Cash Flows impacted in 2012 as a result of higher overdue receivables from SETA (c.€20m)

2014 A

2015 A

Operating Cash Flows

The Company managed to preserve its cash generation and liquidity profile by delaying payments to suppliers (accounts payables increased by c.€15m)

In 2015 the Company preserved cash flow generated by further delaying payments to suppliers and not winding down overdue payables carried on from 2014

LIQUIDITY PROFILE (2)

24

(4)

18

18 10

13 9

6 1

3

1 1

2011 A

2012 A Cash Balance

2013 A Available RCF

Cash EBITDA, excluding €4.2m revenues related to an extraordinary non-cash capital gain reported in relation to the estimated post-closure obligations for the Faeco landfill €15m RCF available at the end of 2014, following the issuance of the €200m Secured Notes and the refinancing of the existing financial indebtedness. Company average cash conversion would increase to c.47% if FY 2012 is not taken into consideration Operating Cash Flows for 2015 do not include €(5)m related to the SETA Transaction (included within Net Cash Flows)

2014 A

2015 A

Operating Cash Flows

23

FY 2015 Results Overview In 2015 the Company reported total revenues of €116m(1) and EBITDA of €34m(1). Collection and landfill disposal business segment accounted for 77% of total cash revenues and 90% of total EBITDA. Sorting & Treatment business reported €10m revenues and negative EBITDA for €(0.2)m, while biogas and PV businesses and other non-core activities contributed for €18m revenues and €3m EBITDA (net also of other operating costs and overheads)

ACTUAL VS. BUSINESS PLAN (€M) €m N e t R e v e nue s (2) Yo Y Gro wth (%) o /w Co llectio n o /w So rting & Treatment o /w Landfill Dispo sal o /w B io gas and P V o /w Other revenues Co st o f materials, co nsumables and go o ds Co st fo r services and leaseho lds G ro s s P ro f it M argin (%) P erso nnel expenses Other Opex E B IT D A

2 0 15 A c t ua l

2 0 15 B udge t

D e lt a

12 0 .3

13 0 .5

( 10 .2 )

(4.5)% 39.2 9.6 49.6 7.9 14.0 (4.4) (56.6)

3.6% 41.0 10.1 69.3 9.9 0.2 (5.0) (49.4)

(8.1)% (1.8) (0.5) (19.6) (2.1) 13.8 0.6 (7.2)

5 9 .3 49.3% (14.0) (7.2)

7 6 .1 58.3% (13.1) (8.1)

( 16 .8 ) (9.0)%

3 8 .2

5 4 .9

( 16 .7 )

42.1% 6.8 1.3 46.5 7.5 (7.1) (1.6)

(10.3)% (2.1) (1.5) (20.2) (1.5) 8.7 (2.7)

C a s h E B IT D A  Wo rking Capital

3 4 .0

5 3 .3

( 19 .4 )

(2.7)

(21.2)

18.5

C a s h F lo w f ro m O pe ra t io ns

3 1.3

3 2 .2

( 0 .9 )

(11.0) -(4.8) (1.0)

(18.9) -(3.4) (3.0)

7.9 -(1.4) 2.0

14 .5

7 .0

7 .5

(5.3)

--

(5.3)

9 .2

7 .0

2 .2

Capex Dispo sals  In Clo sure & P o st-Clo sure P ro visio n Cash Taxes O pe ra t ing C a s h F lo ws Investments in intangibles C a s h F lo w be f o re D e bt S e rv ic e s

Total Net Revenues: €116m(1)

Biogas and PV €8m

Other Revenues €10m(3) (net of non cash items) Sorting & Treatment €10m

Collection €39m

7% 9%

8%

43%

Landfill Disposal €50m

34%

(0.8) 0.9

31.7% 4.7 (0.2) 26.2 6.0 1.5 (4.2)

M argin (%) o /w Co llectio n o /w So rting & Treatment o /w Landfill Dispo sal o /w B io gas and P V o /w Other revenues and o verheads No n-Cash Items

(1) (2) (3) (4)

FINANCIAL BREAKDOWN (€M)

Total Cash EBITDA: €34m(1) Sorting & Treatment €(0.2)m

Collection €5m

Other EBITDA (net of non cash items) €(2.7)m(4)

Landfill Disposal €26m

12%

Biogas and PV 14% €6m 76% Mainly driven by Buccinasco, Cermenate and Orbassano activities, accounting altogether for €2.7m,as well as partnerships with national 3rd parties (€0.7m) and other collection services (€1.2m)

Cash Revenues and EBITDA, excluding €4.2m revenues related to an extraordinary non-cash capital gain reported in relation to the estimated post-closure obligations for the Faeco landfill Includes non-cash items Include other non-recurring revenues (revenues from sale of landfills’ spaces to third parties, sales of materials, etc.), net of non-cash items (€4.2m) EBITDA contribution from other non-core business activities, net of non-cash revenues (€4.2m) and other operating costs and overheads

EBITDA mainly attributed to the Albonese landfills (€12m) and the newly acquired sites: Faeco (€3m), Bossarino (€9m) and Ecosavona (€7m). The other landfills have reported negative EBITDA for a total cumulative value of €(4)m

24

Key Challenges in 2015 Key challenges highlighted on this page have had a cumulated impact of c.€(18)m on the Company’s EBITDA, explaining c.90% of the variance from the budget, and are mainly related to the landfill business The ability of the Company to sustain and increase volumes of waste managed depends on the capability to (i) secure additional authorizations for new disposal capacity, (ii) maintain stable relationships with municipalities and private clients to stabilize demand for services and (iii) enhance operational efficiency and maintain compliance with the regulatory requirements

CHALLENGES

In EBITDA

COMMENTS 

Albonese landfill was ready for disposal 4 months later than expected, due to longer authorization processes for the additional capacity



Management estimated to receive in 2015 authorization for additional capacity in the Chivasso landfill. However, in the context of the discussions on Wastend (to be developed in Chivasso), local authorities requested additional modifications to the project design requiring also the temporary closure of Chivasso landfill



Management is working on the required amendments to the Wastend project, which is expected to start construction activities in the second half of 2016, providing additional capacity for waste disposal starting from 2017



Landfill business segment suffered also from increased pricing pressure due to higher competition coming from Waste-to-Energy players and increased pressures from large multi-utilities starting to access the special waste market segment

Lower waste volumes disposed in Ecosavona landfill



Ecosavona initial forecasts assumed higher waste volumes from Genova municipality, which did not materialize during the year



Management has already addressed this issue by securing new contracts for 2016 to increase waste disposed in the landfill and recover volumes

Seizure of Cavenago



Cavenago Landfill was under precautionary seizure executed by local authorities due to environmental issues



The inability to access the landfill has impacted volumes and overall top-line results

Complications in landfills’ authorization processes and increased price pressure

Slowdown of treatment activities

21st



The Cavenago landfill reopened on April capacity (8% of total capacity)



Company’s results have suffered from an overall slowdown of the treatment activities due to increased market competition. Lower volumes increased the impact of fixed cost within this segment



Management is focusing on rationalizing the existing sorting & treatment plants (i.e. closing nonprofitable plants and reducing fixed costs) and developing new and more efficient waste treatment facilities (e.g. Wastend project)

€(11)m

€(4)m

€(2)m

2016 and the Company can now utilise residual available

€(2)m

Total: €(18)m

25

EBITDA 2015 – Budget vs. Actual Company 2015 actual EBITDA result has been c.30% lower than expected in the Company Budget

54.9 (2.1)

The main effect is due to underperformance of the landfills business, where lower than estimated waste disposal volumes directly impacted EBITDA

(1.5)

Non-cash EBITDA(2)

Sorting & Treatment business unit margins have been lower than expected, mainly due to negative margins in Buccinasco plant, which the Company is going to close

(20.2) 38.2

4.2

4.2

2.9

(1) (2)

Others

(1)

2015 Actual EBITDA

34.0

Landfill

S&T

Collection

2015 Budget EBITDA

2015 EBITDA result was mainly impacted by lower than expected volumes in the landfill business segment, in particular:  Chivasso, due to delays in authorization approvals  Ecosavona (new landfill), due to expectations of higher volumes from Genova that didn’t materialize  Cavenago seizure and Bossarino’s (new landfill) resulted in lower than expected margins

Includes income from other non-expected revenues related both to landfills and consultancy services (mainly related to insurance proceeds, consultancy advisory services with the Parent Company, revenues related to post-closure activities at Alice Ambiente) Non-cash EBITDA related to lower than expected provisions for the post-closure activities on the Faeco landfill (decreased from an initial estimate of c.€11m, to c.€6.5m).

26

Analysis of 2015 Cash Flows – Cash Bridge(1) Operating Cash Flows

In 2015 the Company reported Operating Cash Flows for c.€18m(2) Net change in cash has been mainly affected by the coupon payment related to the high yield bond issued in 2014 (c.€22m) and by the repayment of shareholders’ loans for c.€12m

+€18.5m(2) (1.2)

(0.5)

(9.4) 15.8

Non-cash Revenues

Net drawings of bank financings related to 

(3.4)

(4.2)



(1.0) (11.0)

Net Working capital cash generation of c.€5m, including: 

38.2



€15m RCF drawing Drawing of factoring facilities of c.€1m

c.€14m cash generation in relation to working capital vs. third parties, mainly related to collection of receivables c.€(9)m absorption from increased receivables vs. related parties(5)

Includes the repayment of Shareholders Loans for c.€12m(5), related to the financial resources injected by the Group Parent Company of €18m partially used to finance the 2014 acquisitions

(4.8) (5.3)

8.8

(21.7)

(11.9) 16.2

(1) (2) (3) (4) (5)

Please refer to the Appendix section for additional information and details Not including SETA transaction which represent an investment in intangible assets for a total value of c.€5.3m Includes changes in relation to tax personnel, fiscal items and other receivables / payables Strategic acquisition; in order to be able to fully exploit the development area of the Chivasso landfill, the Group has to subscribe an agreement with SETA €4m of the €12m shareholders’ loans repayment is non-cash, as a result of receivables write-off towards the parent company

2.6

Cash Dec-15

(0.8)

Other Changes

Dividend Payments

Sh. Loans Repayment

Bank Financing

Net Cash Interest

(4)

SETA Transaction

Landfill Provisions

Capex

(3)

Other Assets / Liabilities

Related Parties WC

Inventory

3rd Party Payables

3rd Party Receivables

Taxes

Non-Cash Items

Reported EBITDA

Cash Dec-14

(1.2)

27

COMPANY BUSINESS PLAN 2016 – 2020

Business Plan Overview and Liquidity 

Over the past several months, Waste Italia’s management team has closely monitored the performance of the Company’s various business segments and has evaluated the main underlying weaknesses that contributed to the underperformance in 2015. Management has identified mitigation strategies to stabilize future performance with the goal of maximizing value for all stakeholders over time



The Company has developed a detailed Business Plan and cash flow forecast for 2016 through 2020, based on revised data inputs and assumptions on business strategies which reflect the implementation of the Structural Change previously described



The new guidelines for the 5-year Business Plan have been approved by the Company’s board of directors and include the following:

- Business growth is mainly driven by the development of the Sorting & Treatment segment, with the closure of non-performing plants and the introduction of the Wastend project which is expected to contribute to the overall margin improvement

- The performance of the landfill segment is expected to be stabilized by the introduction of the new Cavaglia and Wastend (Chivasso) sites, which will compensate for the declining capacity at the existing landfills

- Reduction in the rate of waste disposed in landfills going forward, which reflects the implementation of the envisaged Structural Change 

The key benefits of the Business Plan are:

- Developing the Sorting & Treatment segment will allow the Company to be more in line with the expected developments of the EU regulatory framework, which aims at increasing recycling practices and minimizing landfill disposal

- Mitigating the risks associated with the complex and prolonged authorization renewal processes which have recently adversely impacted the Company’s business operations. Management projects lower volumes of waste disposed in landfills which would result in an extension of the residual life of the Company’s existing landfills 

In light of the strategic review of the Company’s capital structure announced in February 2016, the Company has also examined the business’ liquidity need:

- Following a detailed analysis of the Company’s projected cash flows for the 13 weeks from June 12th, the Company’s management can confirm that the Company is projected to have sufficient liquidity headroom to continue performing in the normal course of business

- Under a potential consensual restructuring transaction, with details currently being discussed with the ad hoc committee of bondholders, new money injection of €10m will be required in order to cover for potential transaction fees and to support the liquidity headroom of the Company

29

Business Plan Strategic Guidelines (1/2) COLLECTION

The collection activity is key to Waste Italia’s operations:

Continued strong presence in the market

SORTING & TREATMENT



Secures a certain level of volumes for the Sorting & Treatment and Landfill Disposal segments



Helps build and maintain an important network of relationships



Reduces available space for competition from other players in the market



Management will focus on rationalizing collection activities, merging Orbassano and Collegno operations



The segment is expected to face additional competitive pressures in the coming years, but management expects the current level of revenues to be maintained

Sorting & Treatment is expected to become the key focus area for Waste Italia going forward:

Rationalization of structure and new focus



Business with higher potential for margin recovery



In order to reach EU objectives (maximum recovery) it is fundamental to have systematic and efficient sorting & treatment



Volumes to increase significantly as new facilities become operational (Ecosavona and the various portions of Wastend)



Management targeting a more gradual filling of landfills to preserve space and prolong the sites’ useful life while new projects are developed



Volumes are expected to increase as new landfills are developed and start operations (Wastend and Cavaglia)



Management is expecting overall prices to remain stable in the near term



The biogas activity brings a steady margin contribution to Waste Italia



Biogas has the advantage of extracting value from a compulsory activity (landfill biogas management)

Landfill Disposal

Preservation approach to landfills

BIOGAS

Continued contribution by biogas business

30

Business Plan Strategic Guidelines (2/2) COMPARISON TO THE PREVIOUS BUSINESS PLAN

CHALLENGES FACED Landfill authorization process proven to be more complex than expected Competitive pressure by Waste-to-Energy plants for disposal of waste, partly due to change in regulation allowing special waste to be used in energy production

REMEDIES

“Preservation” approach for landfills (i.e. slower take-in of waste allowing for space optimization) Focus on sorting & treatment activity

Worse than expected performance by certain sorting & treatment facilities, mostly due to lack of scale

Closure of 4 inefficient facilities Focus on large and innovative projects (i.e. Project Wastend)

Competitive pressure by local players on the collection business

Target most profitable clients, leveraging on our high level of service

KEY INITIATIVES TO IMPROVE THE BUSINESS AND FINANCIAL PROFILE OF WASTE ITALIA

A

Cost improvement for the Collection business through the rationalization of the logistic centres

B

Margin recovery for the Sorting & Treatment business through the closure of non-preforming plants and the development of the new Wastend Project

C

Introduction of two new landfill sites: Cavaglia and Wastend

D

Working capital optimization: (i) halting of compensation mechanism (clients always paying cash, even if also suppliers); (ii) comprehensive action to recover overdue receivables; (iii) reduction of overdue payables, allowing for better economic terms from suppliers

31

Business Plan Projections Overview (1/2) The expected topline growth and improvement in profitability are mainly driven by the development of the Sorting & Treatment segment

REVENUES (€M)

EBITDA (€M)

Business Plan Projections

2015 Actual

Business Plan Projections

2015 Actual

CAGR ’15-’20: 4.5%

CAGR ’15-’20: 9.0%

16.0%

Revenues are expected to grow over the 2015-2020 period with a 4.5% CAGR

10.9%

10.5%

0.8%

151

144

(7.9)%

145

36.2%

52

52

2019 E

2020 E

33.3%

65

(12.9)%

EBITDA is projected to grow from €34m in 2015 to €52m in 2020, with EBITDA margin increasing from c.29% to c.36%, following the development of the Wastend project

36.0% 35.2% 34.5%

131

130

131

(1)

116

56

55

112

(1)

(2)

29.3%

101

46 39

2015 A

2016 E

2017 E

2018 E

2019 E

g % YoY Growth

2020 E

34

34

2015 A

2016 E

% Margin on Revenues

2017 E

2018 E

Previous Business Plan (Apr-15)

Revenues are expected to decrease further in 2016E due to increased competition and pricing pressure in the collection business and lower volumes in the landfill disposal segment

(1) (2)

Not including €4.2m non-cash revenues related to a capital gain reported in relation to the estimated post-closure obligations for the Faeco landfill following a revised agreement with the supplier that will perform the related activities on the landfill. The above mentioned capital gain is accounted as “other revenue” in the Company’s 2015 income statement. Not including c.€0.9m of non-cash revenues

32

Business Plan Projections Overview (2/2) Cash Flows before Debt Service are expected to grow from €9m in 2015 to €20m in 2020, driven by the development of the new Wastend project and the introduction of a new Cavaglia landfill

CAPEX PLANNED (€M)

CASH FLOWS BEFORE DEBT SERVICE (€M)

Capex Planned 2015 Actual

Business Plan Projections

16.5%

14.9%

13.4%

2015 Actual

13.0%

Business Plan Projections

12.6%

38.0%

9.1% 35.9%

36.0%

30.9% 27.0%

23.4%

32

18

19

19

18

20 19

19

16

14 12

11 (1)

9

11

2015 A

2016 E

2017 E CAPEX

2018 E

2019 E

% of Revenue

2020 E

2015 A

8

2016 E

2017 E

Cash Flow before Debt Service

2018 E

2019 E

2020 E

Cash Conversion (%)

Previous Business Plan (Apr-15)

(1)

Including €5.3m investments in intangible assets related to the acquisition of the minority participation in SETA SpA

33

Overview of the New Projects Planned in 2016 – 2020 EXPECTED PROJECTS TO BE DEVELOPED PROJECT

PLANNED DEVELOPMENT 

Treatment plant in construction at the Ecosavona landfill, dedicated to separating and treating urban waste, as requested by the province



The new plant is expected to treat 96,000 tons of waste per annum

Wastend Project – Treatment Plant



Development of a new treatment plant in the Chivasso municipality area. The project includes the development of multiple treatment facilities (organic waste, liquids, tyres, special waste, washing, PET recycling , etc.)

Wastend Project – Landfill



The Wastend project includes the development of a service landfill to be built through the re-shaping of the exhausted Chivasso 2 / Chivasso 3 landfills



In particular, the project is a landfill mining process aimed at empting the old basins, reinforcing the basement and building new available space to permit the disposal of new waste and materials from the Wastend treatment facility



The Company is planning to make investments in the next 4/5 years to develop the new landfill, which is expected to provide an approx. 2,200,000 tons of additional capacity



This new landfill is expected to start operations in 2018



The landfill is expected to operate for 11 years, until 2029

Ecosavona On-site Treatment Plant

Cavaglia Landfill(1)

34

New Business Plan 2016-2020 The business plan reflects the Management’s initiatives to pursue a progressive Structural Change which involves developing the Company’s Sorting & Treatment segment and reducing the rate of waste disposals in the landfills, with the goals of stabilising and growing the business, as well as capitalizing on the ongoing trends in the EU waste market. Management’s ability to execute the strategy is instrumental to materializing the financial projections

CASH FLOWS BEFORE DEBT SERVICE (€M) Business Plan Projections

Actual

€m

2015 A (1)

Revenues are expected to decrease further in 2016 following the closure of four treatment plants, however as these plants had negative margins, thus Management is expecting no impact on EBITDA in 2016 from the closure of these facilities Revenues are expected to increase starting from 2017 which is mainly driven by the kick-off of the new Wastend project

EBITDA growth is mainly driven by the development of the Sorting & Treatment business segment, with the completion and introduction of the Wastend Plant in 2018 The Company is expecting to improve cash EBITDA margins in 2016, from 29% to c.36%, and maintain them at this level over the life of the Business Plan

Net Revenues YoY Growth (%)

2016 E (3)

2017 E

2018 E

2019 E

2020 E

120.3 (4.5)%

102.0 (15.2)%

111.7 9.5%

129.5 16.0%

143.6 10.9%

144.7 0.8%

(4.4) (56.6)

(2.9) (44.2)

(3.2) (50.2)

(10.7) (51.9)

(10.8) (59.1)

(10.8) (59.4)

59.3 49.3%

54.9 53.8%

58.3 52.2%

66.9 51.6%

73.7 51.3%

74.5 51.5%

(14.0) (7.2)

(11.6) (8.6)

(11.9) (7.9)

(12.2) (9.1)

(12.4) (9.5)

(12.6) (9.5)

EBITDA Margin (%)

38.2 31.7%

34.6 33.9%

38.5 34.5%

45.6 35.2%

51.8 36.0%

52.3 36.2%

Non-Cash Items Cash EBITDA Margin (%) (2)

(4.2) 34.0 29.3%

(0.9) 33.7 33.3%

-38.5 34.5%

-45.6 35.2%

-51.8 36.0%

-52.3 36.2%

14.1 (16.8)

(3.3) (2.3)

(1.0) 0.7

2.0 (1.4)

(2.5) (0.4)

(0.6) (0.3)

31.3

28.1

38.2

46.2

48.8

51.5

Cost of materials, consumables and goods Cost for services and leaseholds Gross Profit Margin (%) Personnel expenses Other Opex

 Trade Working Capital  Other Working Capital Cash Flow from Operations Capex Investments in intangibles Disposals  In Closure & Post-Closure Provisions Cash Taxes Cash Flow before Debt Service

(11.0) (5.3) -(4.8)

(13.7) (0.6) (4) -(4.8)

(18.4) --(5.3)

(19.2) --(5.9)

(18.6) --(5.9)

(18.2) --(4.7)

(1.0)

(1.1)

(2.6)

(4.7)

(5.7)

(8.8)

9.2

7.9

11.9

16.3

18.6

19.9

Management is expecting to stabilize Cash Flows before Debt Service following the introduction of the new Ecosavona treatment plant, Wastend project and other operating improvements (1) (2) (3) (4)

Net revenues excluding intercompany transactions. Based on revenues adjusted for non-cash items. Includes €0.9m of non-cash revenues Intangible capex related to technical design of Wastend Project (c.€0.2m) , technical design of Cavaglia’ development (c.€0.2m) and design of the Bossarino landfill enlargement (c.€0.2m).

Cash Flows before Debt Service are expected to increase in the final two years of the Business Plan, following the completion of the Wastend Project

35

Details on the Company’s Operating Profile

APPENDIX

Company’s Collection and Treatment Plants MAIN COLLECTION CENTRES AND SORTING & TREATMENT PLANTS (1) LOCATIONS

PLANTS

Agrate

ACTIVITY 

Collection



Treatment

Albonese



Production of RDF



Buccinasco



Collection





Storage



Sorting



Collection



Treatment



Collection



Treatment



Treatment for disposal in landfill





Collection





Treatment



Collection



Sorting



Treatment



Collection



Treatment

Castello

Cermenate

Chivasso Developing

Collegno

Orbassano

Romagnano

(1)

CAPACITY 









30,000 tons / year

2015A VOLUMES

COMMENTS



Collected 17,952 tons



Collection operations to be continued



Treated 450 tons



Plant to be closed in 2016

60,000 tons / year



Treated 43,236 tons



Operations expected to continue at c.45,000-48,000 tons a year

29,700 tons / year



Collected 30,781 tons



Higher competition in the area



Treated 13,389 tons



Plant to be closed in 2016



Collected 3,973 tons



Collection operations to be continued



Treated 3,353 tons



Plant to be closed in 2016



Collected 44,2941 tons





Treated 4,681 tons

Treatment operations expected to continue at c.16,000 tons a year



Expansion ongoing (Wastend Project)



Expected to start operations in 2017



Treatment operations expected to continue at c.34,000 tons a year

33,100 tons / year

30,000 tons / year

Unlimited authorized capacity

40,000 tons / year



Collected 25,130 tons



Treated 33,316 tons

Unlimited authorized capacity



Collected 72,930 tons



Collection operations to be continued



Treated 9,707 tons



Plant to be closed in 2016

20,000 / year



Collected 28,574 tons





Treated 9,329 tons

Treatment operations expected to continue at c.9,200 tons a year

Management is planning to close 4 treatment & sorting plants, substituting them with the new Wastend Project.

Planned for Closure

37

Company’s Landfills MAIN LANDFILLS LOCATIONS Albonese

Alice

Cavenago (2)

Faeco

Ecosavona Landfills acquired in 2014

Bossarino

LANDFILLS

AUTHORIZED CAPACITY 181,800 m3

n.a.

558,000 m3

1,656,800 m3

1,740,300 m3

1,218,000 m3



236,913 m3



201,376 tons



12,568 m3



15,081 tons



47,350 m3



30,000 tons



1,140,935 m3



1,140,935 tons



1,391,641 m3



1,349,892 tons



292,492 m3



300,000 tons

2015A VOLUMES

COMMENTS

193,840 tons(1)



Experienced delay in the preparation of the site in H1 2015, now resolved

12,944 tons



Recently sold to avoid contractual obligations and risks connected to closure

0.0 tons



Site has been under seizure in 2015 and has resumed operations in 2016(1)

86,421 tons



Faeco transaction

225,888 tons



Geotea transaction



Additional 860,000 m3 under authorization

219,639 tons



Geotea transaction

Chivasso 3

747,100 m3



750,000m3 under authorization

7.7 tons



To be developed within Wastend Project to start operations in 2017

Chivasso 0

530,400 m3



20,000 m3

2,353 tons





20,000 tons

To be replaced / developed with Wastend Project to start operations in 2017



3,141,849 m3 (47.4% utilized)

6,632,400 m3

(1) (2)

RESIDUAL CAPACITY

741,273 tons

Including 120,000 tons of available capacity sold to Waste to Water (now Aker) in 2015 In 2015 the Cavenago landfill has been under seizure by local authorities investigating possible unauthorized waste disposal. The landfill has been reopened on April 21st 2016 and the Company can now use the residual capacity available (approx 10% of total authorized capacity)

38

Group History

2015 LATE 1980s Waste Management Inc. creates Waste Management Italia S.p.A. by integrating a number of existing operators

2000

2007

Acquisition of Waste Italia by the Fabiani and Colucci families

Acquisition of Alice Ambiente and Ecoadda S.r.l.

2011

2014

Creation of Waste Italia

Acquisition of Geotea cements Waste Italia’s position as one of the leading special waste management companies in Northern Italy

Kinexia leased, through the fully owned subsidiary Waste to Water S.r.l., Lafumet S.r.l. and Lafumet Servizi S.r.l.

2016

2015 Rebranding of Kinexia into Gruppo Waste Italia, to communicate the renewed focus of the company

Merger of Geotea S.r.l. and Bossarino S.r.l. into Waste Italia

2015 1990s

2014

Several acquisitions to expand and consolidate Waste Italia’s presence in Italy

Merger of Kinexia with Sostenya with Kinexia becoming the publicly listed holding company of Waste Italia

2008 2001-2006 Various acquisitions

Synergo, a private equity fund, acquires 32.7% of Waste Italia

2014 Merger between Waste Italia and Kinexia with Synergo becoming Kinexia’s shareholder with a 22% stake

Spin-off of the renewables and energy efficiency activities through the distribution of an extraordinary dividend to the shareholders of Kinexia in the form of Innovatec shares

39

Additional Details on FY 2015 Results

APPENDIX

Analysis of 2015 Cash Flows – Cash Bridge Operating Cash Flows

In 2015 the Company reported Operating Cash Flows for c.€18m(1) Net change in cash has been mainly affected by the coupon payment related to the high yield bond issued in 2014 (c.€22m) and by the repayment of shareholders’ loans for c.€12m

Refer to the following page for additional details

+€18.5m(1) (1.2)

(0.5)

(9.4) 15.8

Non-cash Revenues

Net drawings of bank financings related to

C A



(3.4)

(4.2)



B

(1.0)

(11.0)

Net Working capital cash generation of c.€5m, including: 

38.2



€15m RCF drawing Drawing of factoring facilities of c.€1m

Includes the repayment of Shareholders Loans for c.€12m(4), related to the financial resources injected by the Group Parent Company of €18m partially used to finance the 2014 acquisitions

D

c.€14m cash generation in relation to working capital vs. third parties, mainly related to collection of receivables c.€(9)m absorption from increased receivables vs. related parties(4)

(4.8)

E (5.3)

F

8.8

(21.7)

(11.9) 16.2

G

(1) (2) (3) (4)

Not including SETA transaction which represent an investment in intangible assets for a total value of c.€5.3m Includes changes in relation to tax personnel, fiscal items and other receivables / payables Strategic acquisition; in order to be able to fully exploit the development area of the Chivasso landfill, the Group has to subscribe an agreement with SETA €4m of the €12m shareholders’ loans repayment is non-cash, as a result of receivables write-off towards the parent company

2.6

Cash Dec-15

(0.8)

Other Changes

Dividend Payments

Sh. Loans Repayment

Bank Financing

Net Cash Interest

(3)

SETA Transaction

Landfill Provisions

Capex

(2)

Other Assets / Liabilities

Related Parties WC

Inventory

3rd Party Payables

3rd Party Receivables

Taxes

Non-Cash Items

Reported EBITDA

Cash Dec-14

(1.2)

41

Analysis of FY2015 Cash Flows – Focus on the Key Items ITEMS

A

B C

CASH FLOWS IMPACT



The Company has renegotiated a service contract with a supplier for post-closure activities to be carried out at Faeco landfill, since the required work has been re-estimated to a lower level



As the future closure obligations are lower than previously expected, the Company has decided to handle the related work themselves and develop them internally, and therefore cancel the contract with the external supplier. The Company has recorded this gain as “Other revenues” in the 2015 P&L

Receivables vs. Third Parties



In 2015 the Company collected receivables from clients for a net value of c.€16m



Total trade receivables from clients have decreased from c.€67m in 2014 to c.€51m at the end of 2015

Working Capital vs. Related Parties



The Company sold 120,000 m3 of available space in the Albonese landfill to a related party outside the restricted Group (Waste to Water, now Aker), for a total value of c.€9m, reported in the P&L within the “Landfill Revenues”(1) - Selling space in existing landfills is a normal operation in the disposal management, targeting larger clients interested in securing a certain level of capacity at an agreed price, with the aim to reduce price fluctuations risk - The Company partially off-set for €4m the increase in receivables with a portion of the outstanding shareholder loans. Therefore the total net impact on trade working capital is c.€5m



The change in working capital vs. related party is a result of different impacts, which include mainly - c.€(5)m related to the net effect of selling of available space at Albonese landfill - c.€2m positive net effect in relation to other receivables (payments on account, personnel and other shared operating costs) - c.€(2)m increased receivables vs. SETA (as better explained on the following item F) - c.€(4) in relation to decreased intragroup payables



Capital expenditures in 2015 were mainly in relation to upgrade in treatment plants and machineries of €3m including the initial development of the Ecosavona treatment plant, together with additional work at related landfills of €3m, as well as the acquisition of disposal rights in landfills of €4m

Non-Cash Revenues

D

Capex

E

Landfill Provisions



Cash payments in relation to closure and post-closure activities carried out at the Company’s landfill, to maintain the sites

F

SETA Transaction



The Company agreed to write off receivables versus the client SETA SpA for c.€5.3m, in exchange for an equity participation of 49% in the Company (implying a total equity value of c.€11m) (2)



On 31st Dec 2015, the Company had residual receivables from SETA for a total value of c.€2m



In 2015 SETA reported total revenues of c.€35m and EBITDA for c.€3.8m



In the context of the 2014 transaction, Shareholders have provided additional financings for c.€8m in order to complete the Geotea acquisition, and compensate for lower than expected proceeds from the HY bond issuance



This financing has been provided pursuant to the general basket of permitted indebtedness (c.€18m) and has been repaid in the course of 2015



€4m of the €12m shareholders’ loans repayment is non-cash, as a result of receivables write-off towards the holding companies

G

(1) (2)

DESCRIPTION

Repayment of Shareholders’ Loans

€(4)m

+€16m

€(9)m

€(11)m

€(5)m

€(5)m

€(12)m

The transaction has been priced at €75 /ton in line with the market prices. Receivables have building up since 2011 and in particular in 2012, when the Company had receivables unpaid from SETA for a total value of c.€20m. Before the transaction, the total receivables towards SETA SpA were decreased to c.€11m. After the acquisition of the 49% minority participation, the outstanding receivables vs. SETA are c.€6m. The Company has agreed with SETA a repayment plan between 2016 and 2018.

42