Investor Presentation • Jan 21, 2016
Investor Presentation
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Stable and supportive of network investment plan
Estimated reduction by 5% from 4.81 €bn in 2015 to 4.55 €bn in 2016 WACC revision from 6.4% to 5.6%
Estimated at 21 €bn
Investor Relations
| Resolutions | Longer regulatory periods | |||
|---|---|---|---|---|
| Main | New WACC methodology | |||
| changes | Regulatory lag reduction | |||
| Gradual approach to the extension of asset life | ||||
| Allowed opex | ||||
| Key confirmations |
No exposure to energy volumes | |||
| Quality of service | ||||
| Pillars for the future |
New framework for innovative investments | |||
| Smart meters regulation draft | ||||
| Totex regulation starting from 2020 |
Investor Relations
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Investor Relations
Enel Group Investor Relations
| 2016-18 | Update rules (2019-21) | |||
|---|---|---|---|---|
| Real risk-free rate | 0.5% | October 2017- September 2018 high rating Countries risk free rate – 0.5% floor |
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| Country risk premium | 1% Based on Italy-Germany 10 year bond spreads change in 2018 vs. 2015 |
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| Equity risk premium | 5.5% Based on the new Risk Free Rate and on a fixed 6% Total Market Return |
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| β unlevered | 0.39 Potential update in 2019 within tariff regulatory period |
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| Debt spread | 0.5% No interim update |
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| Gearing= D/(D+E) | 0.44 | Alignment to European benchmark - cap 0.5 |
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| Tax shield | 27.5% | To be updated at the end of 2018 | ||
| Tax rate | 34.4% | To be updated at the end of 2018 | ||
| Inflation rate | 1.5% | European Central Bank forecast at the end of 2018 | ||
| "F" Factor | 0.5% | Resulting from the update of Tax rate, Tax shield and Inflation | ||
| WACC real pre-tax |
5.6% | 5 |
New regulatory period for electricity distribution in Italy Main changes: regulatory lag reduction
Investor Relations
| Previous regulation 2012-15 |
New regulation 2016-23 |
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|---|---|---|
| Remuneration on RAB |
Year t-2 capex included in year t RAB +1% WACC for new investments |
Year t-1 capex included in year t RAB +1% WACC premium on 2012-14 capex replaced by a RAB uplift |
| Allowed depreciation |
Year t-2 capex included in year t Depreciation |
Year t-2 capex included in year t Depreciation |
Lag reduction to 1 year with neutral NPV and positive effects on cash flow
New regulatory period for electricity distribution in Italy Main changes: extension of asset life
Life for MV and LV lines built after 2007 extended from 30 to 35 years
Further possible revision with the introduction of Totex mechanism in 2020
Investor Relations
50% of 4th regulatory period extra efficiencies
Residual value of 3 rd regulatory period extra efficiencies
2014 opex
Allowed opex calculated on 2014 costs
50/50 profit sharing for the 4th regulatory period extra-efficiencies
Residual value of 3 rd regulatory period and 50% of 4th regulatory period extra efficiencies to be returned to consumers by 2019 via the X-factor
Investor Relations
| Previous regulation 2012-15 |
New regulation 2016-23 |
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|---|---|---|---|---|
| Distribution | 2.8% | X-factor set to return to consumers the 2nd and 3rd regulatory period extra efficiencies (by 2015 and 2019 respectively) |
1.9% | X-factor set to return to rd and 4th consumers the 3 regulatory period extra efficiencies (both by 2019) |
| Metering | 7.1% | 1% | ||
| Weighted average |
3.1% | 1.8% |
X-factors set only to return previous periods extra-efficiencies by 2019
Enel Group Investor Relations
Allowed revenues will continue to be based on the average number of customers
Allowed revenues to be guaranteed by an equalization mechanism
New regulatory period for electricity distribution in Italy Key confirmations: quality of service
Stable incentive mechanisms on frequency and duration of interruptions
Frequency: four year extension supportive of structural network investments
Duration: premium maintained to sustain the high quality levels already achieved
New regulatory period for electricity distribution in Italy Pillars for the future: new framework for innovative investments
Investor Relations
New regulatory mechanism "Output based" replacing extra WACC remuneration
New bonus mechanisms based on a benefit sharing between the distributor and the system
First two main innovative functionalities on MV grid RES observability systems and advanced voltage regulation to increase RES hosting capacity
New regulatory framework as fundamental enabler for the future smart grid development
New regulatory period for electricity distribution in Italy Pillars for the future: 2 nd generation digital meters
New meter functional requirements definition ongoing
Cost benefit analysis process in line with European guidelines
Potential first TOTEX application on the second generation meter investment
Smart meters regulation to be finalized by first half 2016
Enel estimates based on criteria foreseen by the resolution and on tariffs applied to customers; final allowed revenues will be published in April - July 14
Including estimated NPV of depreciation of electromechanical meters as per Resolution n. 654
A new regulatory framework to face the current macroeconomic scenario and system needs
2016 estimated results in line with November business plan figures
A positive context to encourage investment in networks and innovation
This presentation contains certain forward-looking statements that reflect the Company's management's current views with respect to future events and financial and operational performance of the Company and its subsidiaries. These forward-looking statements are based on Enel S.p.A.'s current expectations and projections about future events. Because these forward-looking statements are subject to risks and uncertainties, actual future results or performance may differ materially from those expressed in or implied by these statements due to any number of different factors, many of which are beyond the ability of Enel S.p.A. to control or estimate precisely, including changes in the regulatory environment, future market developments, fluctuations in the price and availability of fuel and other risks. You are cautioned not to place undue reliance on the forward-looking statements contained herein, which are made only as of the date of this presentation. Enel S.p.A. does not undertake any obligation to publicly release any updates or revisions to any forward-looking statements to reflect events or circumstances after the date of this presentation. The information contained in this presentation does not purport to be comprehensive and has not been independently verified by any independent third party.
This presentation does not constitute a recommendation regarding the securities of the Company. This presentation does not contain an offer to sell or a solicitation of any offer to buy any securities issued by Enel S.p.A. or any of its subsidiaries.
New regulatory period for electricity distribution in Italy Contact us
Tel. +39 06 8305 7975
Visit our website at:
www.enel.com (Investor Relations)
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