Acquisition of EGF
November 14, 2014
Framework of the transaction
Acquisition of EGF
Deal:
Privatization of 95% of EGF (remaining 5% were attributed
to employees)
Price:
€147 M for 95% stake of EGF (includes exercise of put option by
municipalities)
Conditions:
Deal is subject to the Portuguese Competition Authority's
non-rejection
Closing:
Deal expected to be concluded in first half 2015
2
Description
of EGF
Description of EGF
EGF overview
EGF is the market leader in Portugal in waste treatment and recycling activities,
which are regulated
EGF is present in 174 municipalities and serves around 6.4 million inhabitants,
which represents a 68% market share in municipal solid waste (MSW)
treatment business
65% of EGF revenues derived from resilient sources: regulated revenues
for MSW treatment and renewables FiT1 framework
1
Feed-in tariff
4
Description of EGF
EGF overview
Geographic presence
Concessions overview
5
Description of EGF
Portfolio of services
Collection
Collection in ecocenters
Treatment/ Recovery/ Disposal
Transfer Stations
Products
Organic recycling
Energy
Bottom ashes
Selective collection of
biodegradable waste
Mechanical treatment
Selective collection of
degradable materials
Sanitary landfills
Sorting centers
Organic compost
Urban Waste
Organic
Waste
Energetic valorisation
Refuse-derived fuel
Glass, plastic, metal and
paper
Incineration processes
Biogas valorisation
Others (wood, oils, etc.)
EGF is present in the whole waste management services value chain
6
Description of EGF
A Regulated Asset Base (RAB) regulatory model
Currently, solid waste management activities are remunerated on a cost plus basis
A new regulatory framework based on a return on RAB will start in 2016, with
regulatory periods of three to five years
Return on RAB for each period is set by the regulator1 and is based on- a WACC formula
Framework allows for incentive mechanisms, such as opex and revenue optimization
Regulatory framework
1
Entidade Reguladora dos Serviços de Água e Resíduos (ERSAR)
7
Description of EGF
Historical financial data (€M)
Resilient turnover
Strong Ebitda margin in the
last three years (over 38%)
Net debt/Ebitda ratio of 2.4x
in 2013
8
Strategic Rationale
of the acquisition
Strategic Rationale of the acquisition
Acquisition of a Portuguese market leader highly
complementary with SUMA
Waste treatment
SUMA is the market leader of the privatized
waste collection and street cleaning (WCSC)
SUMA has a share of 50.5% in the private market
of WCSC, serving more than 50 municipalities
The private sector serves 44% of the Portuguese
population
EGF is the market leader in the regulated market
of waste treatment segment. Following the
transaction SUMA and EGF will cover all regions
in Portugal
SUMA
EGF
CESPA
Focsa
Public entities
10
Strategic Rationale of the acquisition
Long term concessions will allow for more stable cash-flows
of waste management segment
All concessions have a 20 year length (until 2034)
Strong operational free cash-flow
Annual capex of €30 M in first two years, will decrease to c.€15 M in the
following years
Utility sector profile, with resilience to economic cycles
11
Strategic Rationale of the acquisition
EGF: an attractive company with high potential growth
Asset quality: high quality waste treatment infrastructure
Scope for upside: operational improvements will allow for efficiency gains and
synergies
Growth potential: high expectations for increasing turnover due to the new
goals aiming at convergence to European Standards until 2020 in terms of
recycling and reutilization
Growth drivers: more environment-friendly waste destinations and increased
weight of value added waste treatment forms, such as sale of energy and
recycled materials
12
Strategic Rationale of the acquisition
EGF and SUMA together, have scale to gather
international market opportunities in a strong position
EGF and SUMA serve 3.8 million people in waste collection and treat more
than 3.7 million tons of waste
SUMA intends to increase its presence in Africa and LatAm countries and will
benefit from integration with EGF, as it allows the company to qualify for
tenders in large cities
EGF’s track record on energetic valorisation will be an important credential
in international tenders
13
Strategic Rationale of the acquisition
Mota-Engil’s integrated management will allow synergies
Integration of redundant
activities
Sharing of innovation and
developing activities
Acceleration of
internationalization
Economies of scale in
procurement
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Transaction Structure
& Fundamentals
Transaction Structure & Fundamentals
Consortium structure
61.5%
38.5%
80%
10%
Suma
Tratamento
100%
10%
Consortium between
SUMA
and
its
shareholders acquire
EGF in the context of
its privatization
SUMA holds 80% of
Suma Tratamento, and
MEAS and Urbaser
hold 10% each
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Transaction Structure & Fundamentals
Transaction price
Implicit figures of transaction
Equity value (100% EGF)
€149.9 M2
€ 13.38 per share
(+) Net debt
€158.5 M3
11,200,000 Shares
(+) Minority interests
€102.6 M
Enterprise value:
€411.0 M
Acquisition price
(Price of EGF shares)
(Shares representing 100% of EGF1
share capital)
1
(municipalities)
A public offer of 5% of EGF shares for EGF workers will occur after signing, however the public tender required a bid for 100% of shares, as the bidder will have
the obligation to buy the shares not acquired by workers under such public offer. 2) Excludes value of shares of municipalities/ associations of municipalities
who exercised the put option. 3) Net debt as of 31 December 2013.
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Transaction Structure & Fundamentals
Transaction’s financing
Non recourse MLT1 loan of €88M
At consortium level
At EGF level
1
Corporate MLT1 loan of €59M
Refinancing EGF subsidiaries in €158.5M
(non recourse debt)
Medium long term
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Transaction Structure & Fundamentals
Acquisition and sector multiples
Recent transactions multiples
Shareholder IRR: 9.4%
EV / SALES
EV / EBITDA
PER
2011
2012
2013
2.4
2.6
2.3
6.2
6.9
6.9
8.8
6.2
9.0
EV
EV/SALES EV/EBITDA
Gruppo Waste Italia (32.72%) - IT
€185.3M
2.2
18.4
Veolia ES Solid Waste, Inc. (100%) - USA
€1,556.3M
2.5
n.a
Neales Waste Management Ltd (100%) - UK
€11.6M
0.8
4.8
WCA Waste Corporation (100%) - USA
€329.5M
1.9
8.3
Donarbon Limited (100%) - UK
€58.0M
2.6
16.3
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Transaction Structure & Fundamentals
Environment & Services (E&S) division (after transaction)
Full consolidation of EGF from 1H15 onwards
Turnover of the E&S division would have been c.€565 M in 2013
E&S’s division Ebitda would have risen to €142 M, with waste management
representing 55% of the total
Turnover
2013 proforma
Waste management
Logistics
1
Water
Energy and maintenance
Turnover Ebitda
78
37
23
4
30%
565
142
25%
Logistics
Water
mg
258
200
68
40
Waste management
Energy and maintenance
19%
34%
9%
Ebitda
million euro
1
Indaqua subsidiary, which is consolidated by the equity method
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Disclaimer
This presentation used sources deemed credible and reliable but is not guaranteed as to
accuracy or completeness. It also contains forward looking information that expresses
management’s best assessments but might prove inaccurate. The information contained in
this presentation is subject to many factors and uncertainties and therefore subject to
change without notice. The company declines any responsibility to update, revise or correct
any of the information hereby contained. This presentation does not constitute an offer or
invitation to purchase securities of Mota-Engil nor any of its subsidiaries.
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João Vermelho
Director, Head of Investor Relations
Maria Borrega
Investor Relations Officer
Email:[email protected]
[email protected]
Email: [email protected]
Rua de Mário Dionísio, 2
2796-957 Linda-A-Velha
Portugal
Rua de Mário Dionísio, 2
2796-957 Linda-A-Velha
Portugal
Tel. +351-21-415-8671
Tel. +351-21-415-8443