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)
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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