Market context and guidance

In order to keep up with scenario changes, we have launched an important infrastructural investment plan which, without affecting the soundness of our financial structure, has an immediately positive impact on performance and EBITDA.

Market trends and context

The scenario in which we operate is influenced by certain megatrends, such as development of the circular economy, energy transition (through decarbonisation and electrification), the drive towards technological innovation and digitalisation, as well as the constantly increasing emphasis on customer focus and progressive consolidation in the reference markets.

Sustainability & Circular Economy

- Central role of utilities in sustainability with particular focus on circular economy

- Protection of water resources and recyclingtransformation of waste into new resources

Energy transition

- Push toward decarbonization, phase-out of coal vs RES boost

- Electrification and new energy consumption related to emerging needs driven by the new European Green Deal

Innovation & Digital

- Digital and innovation as enablers for development along the entire value chain

- Technological enabling of new advanced services (e.g. predictive maintenance, smart meter)

Consolidation in reference markets

- Progressive consolidation of competition in select reference markets (e.g. Waste, Water)

- Opportunities for utilities to become leaders of target geographies or supply chains

Customer centricity

- "Paradigm shift" with customer value becoming more important

- Transition from "Commodity-Based" to "Service-Based"

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We operate in a complex area of reference together with national players and local utilities, among which Hera, Iren, and A2A. We are present in sectors that are highly regulated, including in terms of tariffs. The reference regulatory context is extensive and articulated, according to the specific nature of the businesses managed (water, energy and environmental) but also the variety of areas in which the detailed legislative and regulatory provisions affecting our business intervene.

The technological scenario shows great dynamism, with intense research and development activities on the part of innovative service producers, as well as the pervasive application of these technologies in all the group's areas of operation.

In addition to these long-term trends, 2021 was the year of relaunch as regards the economic and production systems, the recovery of social relationships towards a “new normality”, following the discontinuity generated by the pandemic emergency.
In Italy the National Recovery and Resilience Plan (NRRP) was initiated, proposing a strategy centred around digitalisation and innovation, the ecological transition and social inclusion.
At European level, the climate law was approved, setting the target for carbon neutrality at 2050, with a milestone of 2030 for the 55% reduction in greenhouse gas emissions with respect to 1990.

Water sector: The Authority’s action, for all regulated sectors, is directed towards ensuring the usability and distribution of services in a homogeneous manner throughout the national territory, defining suitable levels of service quality, drawing up certain and transparent tariff systems based on predefined criteria and enhancing the protection of user and consumer interests.
For service managers, development opportunities are therefore closely linked to their ability to adopt advanced technological systems and efficient performance improvement models, together with general objectives that take account of social issues, environmental protection and the efficient use of resources.
Moreover, the ruling by the Italian Regulatory Authority for Energy, Networks and Environment (ARERA) on the quality of the integrated water service more heavily rewards the efficiency of operators, with the introduction of a premium and penalty mechanism associated with performance standards. For service managers, development opportunities will therefore be closely linked to the capacity to adopt evolved technological systems and efficient models, which can significantly improve performances.

Energy: at global level, the Glasgow COP26, held in November 2021, led to the sharing of major targets, such as limiting the increase in temperature to 1.5° with respect to pre-industrial levels, as well as new and binding commitments to decarbonisation. The European Union has gone ahead with regulating the Taxonomy of eco-compatible activities with a view to steering private investments towards the promotion of a sustainable economy. 
The National Energy Strategy adopted by the Italian government in 2017, together with the Integrated National Energy and Climate Plan (INECP) definitively approved at the end of 2019, defined certain key elements, including:

  • decarbonisation through a strong drive towards electrification and an increase in the percentage of consumption covered by renewable energy sources;
  • energy efficiency, in line with ecological transition objectives;
  • the increase in energy security so as to guarantee the flexibility, adequacy and resilience of the electricity grid;
  • the development of technology and innovation in order to enable the “new downstream”, making the customer active and aware;
  • the full liberalisation of the market and consolidation of players.

To respond to these changes, Acea is working on new initiatives, from developing renewables to e-mobility.

Environment: the market context in the area of Waste Management is showing a high “potential demand”, for example insofar as concerns landfill disposal, waste-to-energy, composting and the production of biogas. This sector is also favoured by the national regulatory framework, which envisages forms of incentive, and by the European Union indications on the Circular Economy (“Closing the Loop”), aimed at recycling and recovering materials, facilitating the development of a new system of plant engineering designed to close the infrastructural gap, particularly in the treatment of organic waste. The sector offers growth opportunities also due to the availability of new technologies (for example, composting) and the possible industrial integrations with other operators. The situation is therefore propitious for our growth strategy, also via acquisitions and with a view to positioning the Group as major operator in the treatment and recycling of paper, plastic, metal and wood.

Read more about our strategic initiatives in all business sectors.

For further information regarding market trends and the regulatory and tariff framework, reference is made to the 2021 Consolidated Financial Statements

For further information regarding the sustainability context, reference is made to the Sustainability Report.

Business and Financial Outlook in 2022

The results achieved by Acea Group as at 31 December 2021 are in line with forecasts.

The Group confirms its strategy aimed at making major investments in infrastructure, with a positive impact on operating and economic performances, while maintaining a sound financial structure.

The Company has launched a process for the definition of an ecological transition plan that will chart the path of the Group, in line with the long-term goals of the 2030 Agenda, to lay the groundwork for the update of the Business Plan, which will have a ten-year time frame.

In relation to the international geopolitical crisis arising from the Russia-Ukraine conflict, there are difficulties and uncertainties when assessing the effects and repercussions that could arise from the continuation of this international crisis.

Management is currently engaged in monitoring the situation on international markets and will continue its analysis of commodity price trends over the coming months. With regard to the short and medium-term effects of a financial nature, the Group is carrying out appropriate monitoring activities in order to take timely action.

The Group's financial structure is sound for future years. At 31 December 2021, 85.7% of debt is fixed rate in order to ensure protection against possible increases in interest rates as well as any financial or credit volatility. At 31 December 2021 the average duration of medium/long-term debt stood at 5 years. We mention the reduction in average cost, which went from 1.74% at 31 December 2020 to 1.42% at 31 December 2021.

Based on the results achieved in 2021, we have defined the guidance for 2022 as follows:

  • an increase in EBITDA between 2% and 4% compared to 2021;
  • investments substantially in line with 2021;
  • a net financial debt between 4.2 and 4.3 billion Euro.

2024 objectives

  2019 2020 2021 2022 objective 2024 objective
EBITDA (mln Euro) 1,042 1,155 1,256 1,270 1,442
Net profit (mln Euro) 284 285 313 317 382
RAB (bln Euro) 4.2 4.8 5.6* 5.3 5.9
NFP/EBITDA (multiple) 2.9x 3.05x 3.17x 3.2x 3.0x

*RAB "accounting" which includescapex until 2021