What is the state of health of the main Italian Multiutilities? A part of the 2017 Report of the Observatory on Alliances and Strategies in the Pan-European Market of Agici Finanza di Impresa Utilities, presented and discussed at the annual conference at Palazzo Clerici - 2 March 2017, is dedicated to this topic. Here are the highlights.
Revenues: between ups and downs with a negative trend
The aggregate revenues of the companies belonging to the Multi-utility cluster show a fluctuating trend in the period 2008-2018. After a slight decrease between 2008 and 2009, there was a recovery until 2012 (about €20 billion, +2,285 billion on 2008) followed by a progressive contraction until 2014 (-19,4% compared to 2012) . The arrest of the positive trend reflects, in particular, the negative trend of the sales of listed companies which contract revenues more than unlisted companies. The two-year period 2014-2015 shows a new improvement, albeit slight (+1,51%), which seems to be confirmed in the forecasts for the three-year period 2016-2018. In fact, analysts' estimates outline a picture of growth, albeit gradual and limited, which should lead to an overall stabilization of turnover over the years.
Profit: conditioned by extraordinary games
The dynamics of the aggregate net profit in the period 2008-2015 (see figure) is strongly fluctuating, alternating years of significant contraction with periods of significant growth. The negative result of 2009 (aggregate net profit of €127 million, -82,3% compared to 2008) is justified by the effects of the crisis, while the contraction in 2011 (aggregate net profit of -336 million €) it is linked to the losses of A2A and Iren. Indeed, these two companies influenced the results of the sample because a
they are attributable to both a large part of the losses of 2011 and 2013, and the growth of 2012.
Between 2014 and 2015, all multiutilities, listed and unlisted, increased their net income. For the three-year period 2016-2018, analysts expect strong growth in aggregate net profit, which goes from €560,6 million in 2015 to €977 million in 2018. But the leap should already take place in 2016 on the basis of the analyst projections.
In particular, a very high performance is expected of A2A, a company which more than the others, in recent years, has suffered contractions in its results attributable to extraordinary items.
The leading Multiutilities in Italy: performance improving
An analysis of the results of the individual multi-utility companies as at 30 September 2016 already highlights the causes of the sharp rise in aggregate profit throughout 2016. An overall growth in margins can be noted, attributable to higher operating efficiency, greater exploitation of synergies as well as than to external growth operations.
• A2A increases its net profit by €86 million (+36% compared to September 30, 2015 equal to €323 million) thanks to the positive operating results (EBITDA equal to €872 million) for the non-proportional partial demerger of Edipower in favor of Cellina Energy Srl, due to the positive industrial performance of the main business units in terms of GOM increase and cost efficiencies. The 2016 result also benefits from higher non-recurring items for 13 million euros and the contribution deriving from the consolidation
for the months of August and September 2016 of the Generation and Trading Business Unit of the LGH Group.
• Iren has a net profit of 124,9 million euro (+26,3% compared to 98,8 million in September 2015). This growth appears to be connected to the efficiency initiatives linked to the performance improvement process, launched in 2015 and strengthened with the 2016-2021 business plan. This refers to the optimization of procurement, trading and marketing strategies and also to a more flexible management of cogeneration plants in the production of electricity and heat. The increase in net income is also linked to the adjustment of the value of the equity investment in TRM, following the acquisition of the controlling stake in the company.
• Hera recorded, at the end of the third quarter of 2016, a net profit of €142,2 million (+13,8% on September 2016) attributable to the higher EBITDA (+1,6%). This is due to the benefits from the acquisitions in the free market sectors, from the growth of the electricity and waste management area (with an increase above all during the third half of the year).
• Lastly, for Acea the growth in profit as at 30 September 2016 was €64,3 million (+47,1%). This derives from the higher Ebitda (from €530,9 million in 2015 to €646,1 million in 2016) thanks to the tariff dynamics of the water sector (+ €31,7 million), as well as the positive financial management result (+8,6 .2015% compared to the same period of XNUMX).
Debt position: towards a rebalancing
Finally, a note on the aggregate Net Financial Position. In the 20141 Report2015, introducing the analysis of the main economic-financial data for Multiutilities, we headlined: "A stable sector with the need to reduce debt". Today, three years later, companies have moved in this direction for the third consecutive year, satisfying the desired trend reversal (NFP in 10.265 of €2016 million and expected in 8,3 at €2012 billion, slightly lower than in XNUMX).
The projections for the years 2016-2018 of listed companies outline a stable or slightly improving picture. After the decrease in the NFP in 2016, an increase follows in 2017 and 2018 (expected value NFP 2018 equal to €10,2 billion); despite this, the estimated growth of the debt position in 2017 and 2018 is expected to stabilise, in line with that recorded in 2015 (2018 NFP lower than 2015 NFP by 93 million euros).
Going into the details of the individual companies, it can be seen that the aggregate figure is conditioned by Iren, which should, in fact, first significantly increase its debt position (from €489 million in 2016 to €2,432 billion in 2017), and then reduce it significantly in 2020 and 2021. After an increase in the NFP between 2 and 2015, the estimates of A2016A's debt position envisage a significant drop in the following three years (approximately -€200 million between 2016 and 2018) linked to a of higher investments and the higher distribution of dividends. With regard to Hera and ACEA, there has been an increase in their NFP: between 2016 and 2018 Hera should increase its debt position by approximately €100 million, while ACEA by €150 million.
For management confirmation
The picture that emerges appears overall positive if one relates to the great fears of the post-crisis of 2008-2009. Companies are facing the strong processes of change in the sector with determination, having also taken steps to:
a) organizational rationalizations (which indeed could also be unfinished), b) the exploitation of economies of scale deriving from previous M&A operations, c) recourse to the debt market by exploiting the favorable conditions on the cost of financing, d ) to the implementation of important projects on the innovation side - in particular digitization - with the first results that are beginning to be tangible.
On the other hand, the prospects still appear uncertain due to the continuous changes that new technologies are bringing to the market. However, the companies have traced quite clear and defined development lines, sometimes prudent and therefore with some implicit upside.
In conclusion, we believe that the management that has operated in these difficult years has done well on the whole
(very well in some cases) and we believe that, beyond the political aspects linked to the appointments in a few months' time, it is extremely important to give another three years to continue the work. Changing direction could interrupt a complex job that is not finished anyway.
