FS Italiane Group Investor Presentation - July 2020 - Sipotra
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FS Italiane Group
Investor Presentation
July 2020
Informazione Pubblica
INDICE
CONTENTS
1 Ferrovie dello Stato Italiane Group Overview
2 Operations and Industry Overview
3 Corporate Sustainability
4 Sustainable Finance
5 Financial Overview
6 Contacts
2
Informazione Pubblica
Disclaimer
IMPORTANT NOTICE – STRICTLY CONFIDENTIAL
By accessing this investor presentation, you agree to be bound by the following limitations.
This presentation has been prepared by Ferrovie dello Stato Italiane S.p.A, is the sole responsibility of Ferrovie dello Stato Italiane S.p.A.. The information set out herein may be subject to updating, revision, verification and
amendment and such information may change materially. Ferrovie dello Stato Italiane S.p.A. is under no obligation to update or keep current the information contained in this presentation or in the presentation to which it relates and
any opinions expressed in them is subject to change without notice. None of Ferrovie dello Stato Italiane S.p.A. or any of its respective affiliates, advisers or representatives shall have any liability whatsoever (in negligence or
otherwise) for any loss whatsoever arising from any use of this presentation or its contents, or otherwise arising in connection with this presentation.
This presentation is being communicated in the United Kingdom only to persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 and to persons to whom it may otherwise be lawful to communicate it to (all such persons being referred to as relevant persons). This presentation is only directed at relevant persons and any investment or
investment activity to which the presentation relates is only available to relevant persons or will be engaged in only with relevant persons. Solicitations resulting from this presentation will only be responded to if the person concerned
is a relevant person. Other persons should not rely or act upon this presentation or any of its contents.
The information in this presentation is confidential and this presentation is being made available to selected recipients only and solely for the information of such recipients. This presentation may not be reproduced, redistributed or
passed on to any other persons, in whole or in part. This presentation is for information purposes only and does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or solicitation of any
offer to buy or subscribe for, any securities of Ferrovie dello Stato Italiane S.p.A. nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. This presentation does not
constitute a recommendation regarding the securities of Ferrovie dello Stato Italiane S.p.A.
This presentation and the information contained herein are not an offer of securities for sale in the United States and are not for publication or distribution to persons in the United States (within the meaning of Regulation S under the
United States Securities Act of 1933, as amended.
This presentation is for distribution in Italy only to "qualified investors" (investitori qualificati), as defined pursuant to Article 100 of Legislative Decree no. 58 of 24 February 1998, as amended and restated from time to time (the
Financial Services Act), and as defined in Article 34-ter, paragraph 1(b) of CONSOB Regulation no. 11971 of 14 May 1999, as amended and restated from time to time (the CONSOB Regulation), or in other circumstances provided under
Article 100 of the Financial Services Act and Article 34-ter, CONSOB Regulation, where exemptions from the requirement to publish a prospectus pursuant to Article 94 of the Financial Services Act are provided.
This presentation may contain projections and forward-looking statements. Any such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause Ferrovie dello Stato Italiane S.p.A.’s
actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Any such forward-looking statements will be
based on numerous assumptions regarding Ferrovie dello Stato Italiane S.p.A.’s present and future business strategies and the environment in which Ferrovie dello Stato Italiane S.p.A. will operate in the future. Furthermore, any
forward-looking statements will be based upon assumptions of future events which may not prove to be accurate. Any such forward-looking statements in this presentation will speak only as at the date of this presentation and
Ferrovie dello Stato Italiane S.p.A. assumes no obligation to update or provide any additional information in relation to such forward-looking statements.
3
Informazione Pubblica
Ferrovie dello Stato Italiane
Group Overview
Informazione Pubblica
FS Group in a snapshot
Ferrovie dello Stato Italiane SpA (“FS” or the “Issuer”) – 100% Italian State owned – is the holding company of the Italian railway group
(FS Group). As one of the largest industrial groups in the country, it manages rail and road networks and transport services by rail and
bus both passenger and freight, contributing to develop integrated mobility and logistics in Italy and abroad.
100%
Coordination and control
of the whole industrial and
financial process
INFRASTRUCTURE TRANSPORT SERVICES: BUSINESS SUPPORT
STATIONS AND REAL SERVICES:
INFRASTRUCTURE OPERATION AND Trenitalia
ESTATE:
DESIGNING: MAINTENANCE: Busitalia Italcertifer
GS Rail
Italferr Rete Ferroviaria Italiana Mercitalia Fercredit
FS Sistemi Urbani
ANAS others Ferservizi
Group Revenue by segment (2019) ** Consolidated Highlights (€mn)
2019 2018
Real Estate Other services
Services 3% Revenue 12,435 12,078
1% EBITDA 2,609 2,476
EBITDA Margin 21% 20.5%
Infrastructure
39% EBIT 829 714
Transport EBIT Margin 6.7% 5.9%
58% Net Income 584 559
Net Invested
49,977 48,418
Capital
Equity Source: FS 2018-2019 Annual Report
42,318 41,763 **Net of (1,727)m of cons.adj. 5
Informazione Pubblica Net Financial Debt 7,659 6,655
Benchmarking with European rail players
(€b) 2018 2019 Issuer Rating
Revenue 12.1 12.4 S&P BBB
EBITDA margin % 20.5% 21% Fitch BBB-
EBIT margin % 5.9% 6.7%
(€b) 2018 2019 Issuer Rating
Revenue 44 44,2 S&P AA
EBITDA margin % 10% 12% Moody’s Aa1
EBIT margin % 4.7% 4.1%
(€b) 2018 2019 Issuer Rating
Revenue 33.3 35.1 S&P AA-
EBITDA margin % 12% 15% Moody’s Aa3
EBIT margin % 6.7% 5.1% Fitch A+
Source: FS, DB, SNCF Annual Reports and rating agencies’ websites 6
Informazione Pubblica
Rating Overview
RATING COMMENTS
FS' rating reflects the:
Issuer • “very important” role for the Italian government as holding group of the country’s national
Rating BBB railway and the “integral” link with its sole owner (Italian Govt)
Outlook • “Strong” business risk profile: «…dominant market position in the Italian transport segment and
Stand NEGATIVE network concessionaire…the vertical integration combines infrastructure manager and
Alone transportation services and gives earnings operating stability»
Credit bbb+
• “Intermediate” financial risk profile: «We expect FS will maintain funds from operations (FFO)
Profile to debt at 22%-23% over the next few years»
SACP upgraded to On September 30th 2019 S&P revised upward FS's stand-alone credit profile (SACP) to
'bbb+' from 'bbb', «…reflecting our expectation that the company will continue to maintain
‘bbb+’ from ‘bbb’ on solid financial metrics, supported by resilient business performance, public grants
September 30th commensurate with the scale of its investments, and a solid regulatory framework. »
FS' rating reflects the:
Issuer • Full ownership and high integration with the Italian government and its key role for railway
Rating BBB- transport and mobility in Italy as well as the national infrastructural development
Outlook
• Revenue Defensibility: «…a dominant market share in passenger transportation services in
Stand STABLE Italy and growing operations in UK, Greece and Netherlands»
Alone
Credit bbb • Financial profile: «…Fitch expects FS to maintain strong operating cash flow generation
Profile capacity»
Downgrading on 8th On May 8th 2020 Fitch downgraded FS rating, mirroring the same rating action on Italy occurred
on April 28st. Ferrovie’s Standalone Credit Profile (SCP) is unchanging at “bbb”.
May 2020
Source: S&P and Fitch reports. Please refer to the rating agencies’ websites for further information.
7
Informazione PubblicaOperations and Industry
Overview
Transport
Informazione PubblicaTrenitalia: rail passenger transport in Italy and abroad
Financial highlights
Key highlights
€mn 2018 2019
• Everyday manages about 9,000 trains and each year transports c. 600 million Revenues 5,362 5,531
passengers EBITDA 1,483 1,626
• Trenitalia is also abroad with c2c (since 2017) and the West Coast Partnership EBIT 386 524
(since 2019) in UK, Thello in France, Trainose in Greece and Netinera Group
active in Germany (previously directly owned by FS). Also, in May 2020, Net Income 257 385
Trenitalia won the tender for operating the high-speed services in Spain for EBITDA Margin 27.6% 29%
the next 10 years.
EBIT Margin 7.2% 9.4%
Two business segment
INVESTMENTS 2019 € 1,451 million*
55% new rolling stocks
25% rolling stocks maintenance*
Medium Long distance revenues (€mn) Regional revenues (€mn)
High Speed services 2018 2019 Change Commuter 13% IT, technologies and plants
2018 2019 Change
International and passenger services
2,493 2,583 +3.6%
regulated domestic 2,835 2,923 +3%
services (PSC with the
PSC Regional
services
7% revamping rolling stocks
State)
* Includes hard maintenance
Source: Company information, Trenitalia 2019 Annual Report 9
Informazione PubblicaFocus: High Speed Transport
Frecce network • The Medium\Long Haul Passenger Division ensures the national and international
passenger transportation, including High Speed services
• The Italian High Speed network connects the main metropolitan areas of the country
and it has been the key element for the modal shift from plane to rail in Italy
Milan – Rome route modal share
Highway Air Train
100%
80% 36% 36%
44% 49%
55% 57% 61% 63% 62% 64% 67% 69%
60%
40%
20%
0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Launch of the ‘Frecce’ network
The ETR 1000, named “Frecciarossa 1000” is the new high-speed train
of Trenitalia, comfortable, safe and environmentally friendly, designed
to meet the most advanced techniques. Eligible Green
Able to travel on all European high-speed networks. Project
The fleet counts 50 ETR 1000 with the last delivered in January 2018
Part of fleet was funded via the two green bond issued by FS in
November 2017 and July 2019
10
Informazione Pubblica Source: Company informationFocus: Regional Transport
Overview Trenitalia regional services portfolio as of today
• Offers urban, regional and interregional mobility 8ys* 2ys(a)
5ys
Longer PSCs
• Business with local administrations is regulated by 5+5ys Trenord 15ys enable more
different Public Service Contracts (‘PSCs’) 15ys** fleet
15ys 22ys
• PSCs are subject to specific regulation in terms of investments
eligible costs and adequate capital investments 15ys 15ys
returns 15ys Eligible Green
Trenitalia has been renewing Project
Public Service Contracts with a
8ys*
• In 2019 revenues related to regional passenger much longer duration (15years) 15ys 8ys*
services equal € 2,923mn (+3% vs. 2018) with all 20 Italian regions 15ys 15ys
8ys*
8ys 15ys
9ys
* negotiation ongoing for new 15 years PSCs
** Turin Metropolitan, the rest of the regional services expected
to be directly assigned
(a) negotiation ongoing for a new 10 years PSC
11
Informazione PubblicaBusitalia: road passenger transport in Italy and abroad
For an integrated mobility
Key highlights
Financial highlights
• Busitalia provides local bus transport, both urban and suburban, in Veneto (regionally and
locally in Padova after winning the public tender), Tuscany, Umbria and Campania €mn 2018 2019
• In August 2017 Busitalia acquired Qbuzz, the Dutch company which operates public bus Revenues 624 691
transport services in the Netherlands
EBITDA 55.3 65.8
• In 2018 Qbuzz won public transport 8ys concessions in DNG and Groningen-Drenthe areas 8.8% 9.5%
EBITDA Margin
• Busitalia also operates the replacement of rail services by bus including Freccialink
One of the country’s top players FLEET INVESTMENTS 2019 € 192 million
Production Investments
800
691
700 Revenues 624
110 mn Bus-Km in Bus fleet 600 CAGR +30%
472
renewal 500
354
400 330
Passengers ongoing 300
293
203
200 mn/year towards green 200 111
fuel (electric, 100
0
hybrid etc..) €mn 2012 2013 2014 2015 2016 2017 2018 2019
Source: Company information; Busitalia Annual Reports 12
Informazione PubblicaMercitalia: freight and logistic services
Integrated governance for the freight services
The new Mercitalia Hub, with Mercitalia Logistics as sub-holding has been created with the aim of restructuring the cargo business and rationalize the
freight operators active in the Group to improve quality and efficiency of cargo services provided
Increase and strengthen the presence in the intermodal transport segments
Financial highlights
Develop operating synergies to increase competitiveness and market share €mn 2018 2019
Revenues 1,018 1,060
EBITDA 29 94
EBITDA Margin 2.8% 8.8%
Investments 2019: 174 million mainly for fleet upgrading
New electric locomotives and wagons together with technology upgrades will Eligible Green
Project
enhanced the Group cargo fleet
13
Informazione PubblicaOperations and Industry
Overview
Infrastructure
Informazione PubblicaRFI: Railway Infrastructure Manager
Key figures High Speed Network Traditional network
€mn 2018 2019
Revenues 2,790 2,799
Track access charges 1,175 1,182
CdP-Service 1,015 1,022
ancillary traffic services 222 203
Real estate services 111 113
Other income 278 279
EBITDA 449 481
EBITDA margin % 16% 17%
EBIT 312 350
EBIT margin % 11% 12%
Net Income 274 302
Draft
Work In progress
NETWORK HIGHLIGHTS 2019 Operating (HS)
Operating (HS up to 250 km\h)
16,779 km Lines
12,016 km Electified Lines INVESTMENTS 2019 € 4,679 million
Funded by the Programme Agreement 2017-2021
23,035 km Traditional tracks
98% Traditional network 47% Maintenance and Safety
1,467 km High Speed tracks
2% High Speed network ~ +80% in 6 years
53% Network Development
Source: Company information; FS 2019 Annual report; RFI 2019 Annual report and RFI Website 15
Informazione PubblicaANAS: road infrastructure
• ANAS is part of FS Group since January 2018, following the equity transfer from
the MEF.
• With ANAS, alongside RFI, FS group is now Europe’s largest integrated rail and
road hub in terms of both number of people serviced and investments Financial highlights
€mn 2018 2019
Designing, construction and maintenance Revenues 2,046 2,163
of national roads EBITDA 157 128
Concessionaire of 29,000 km of roads
~ 1,300 km of highways Contratto di Programma 2016-2020 signed with the MIT
17%
36% new projects
routes completion
INVESTMENTS 2018 € 1,308 million
Fully funded by the Contratto di 2%
Programma 23.4 bn road access
reactivation
post-
44% earthquake
extraordinay
maintenance and 1%
safety upgrade other investments
16
Informazione PubblicaCorporate Sustainability Informazione Pubblica
FS Sustainability approach
Our sustainability approach permeates the full organizational structure ensuring integration of environmental, social and
economical aspects within strategic business decisions
FOR THE FS GROUP, SUSTAINABILITY MEANS SHAPE EACH DECISION NOT ONLY
LOOKING AT THE SHORT-TERM RETURN, BUT WITH A LONG-TERM VIEW CAPABLE TO
CREATE A LONG-LASTING VALUE FOR THE WHOLE SOCIETY
ECONOMIC SOCIAL ENVIRONMENTAL
COMMITMENT COMMITMENT COMMITMENT
Be at the forefront of an Be pioneers in the
Be a leader integrated mobility development and
in the mobility sector project that, through a implementation
by promoting the quality virtuous business model, of large-scale integrated
and efficiency of transport encourages fair business mobility solutions that
and infrastructure services practices and active help regenerate natural
engagement capital
18
Informazione PubblicaSustainability as driver of the Group’s business model
• Life Cycle Assessment • Renewal of the passengers
• Envision protocol: The first fleet with high energy
rating system for design and For a long term vision on the
useful life of the infrastructure, efficiency trains both high-
construction of sustainable speed and regional and low
infrastructure, reducing assessing its environmental
footprint carbon emissions buses
negative externalities
• The new High Speed line • Renewal of the cargo fleet
Napoli-Bari is the first INFRASTRUCTURE with high energy efficiency
European infra project to TRANSPORT electric locomotives
receive the certification
RESPONSIBLE CUSTOMERS
PROCUREMENT • We pay close attention to
• We integrate delivered and perceived service
environmental and social quality
issues in the procurement • We promote an integrated
of goods, services and works door-to-door system through
• Suppliers CSR assessment: the creation of intermodal
we encourage our suppliers hubs, vehicle sharing
to improve their agreements, bus-rail
environmental performance connections, etc...
19
Informazione PubblicaDevelopment of a sustainable mobility
The 2019-2023 Business Plan does integrates the principles of social, environmental and economic sustainability,
aimed at increase and improve an even more integrated mobility in Italy and abroad.
Indeed, the Plan envisages 58 billion euro of investments for infrastructure and transportation upgrading, which
eventually will allow reducing private cars with further 90 million passengers per year moved to the Group’s offered
transport solutions.
FS GROUP 2023 TARGETS FS GROUP LONG TERM GOALS
2030-2050
1. sustainable mobility
• passenger - 5% modal shift from
private car to public and shared
mobility, within 2030 (baseline
2015)
• freight – 50% freight rail transport
and 50% freight transport services
by road, within 2050
2. safety – best in class in Europe and “zero
fatalities” within 2050
3. energy and emissions - carbon neutrality
within 2050
20
Informazione PubblicaSustainable Finance Informazione Pubblica
Sustainable finance endorsing a sustainable strategy
Increased awareness of the importance to strive for a more sustainable business,
FS financial decisions essential and strategic to allocate the new debt sources to the most
effective investments complying with the ESG principles
• Since our first green bond issuance in 2017 Ferrovie corporate finance started up a new path on the tracks of the
corporate sustainability, with the finance decisions becoming one of the strongest drivers in this respect
• Indeed, the Green Bond Framework has been earmarked, since it’s inception, to the financing of investments for
Green Bond the renewal of rail passengers transport fleet both in the High Speed and Regional sector and then expanded also
Framework to the freight business in 2019
• For 2020 FS expanded the concept of the sustainable finance to other capital markets
products
New Sustainable • To fund other «green» investments than the Eligible Green Projects of the Green Bond
Finance Framework which will remain addressed to green bond funding
22
Informazione PubblicaGreen Bond Framework
Use of Proceeds
• FS strongly believes that rail and public transport are critical for sustainable development and global efforts to combat
climate change, by facilitating the modal shift away from cars and trucks into less carbon intensive modes of transport.
• FS updated its Green Bond Framework which is in accordance with the 2018 ICMA Green Bond Principles and which aims at
financing projects with a positive impact in terms of environmental and social sustainability.
The GBF obtained a Second Party Opinion from Sustainalytics and is aligned with EU taxonomy.
ELIGIBLE GREEN PROJECTS - EGB
To ensure energy efficiency improvements, carbons emission reduction and modal shift to rail both for the local and long distance public
transport and for freight transport, among other improvements related to air quality and comfort for passengers and safety for freight
forwarding
• Investments in public passengers transport rolling stock renewal
Use of NEW ELECTRIC MULTIPLE UNIT (EMU) TRAINS FOR REGIONAL NEW HIGH SPEED TRAINS “ETR 1000”
Proceeds PASSENGER TRANSPORT
• Investments in freight transport rolling stock renewal*
NEW ELECTRIC LOCOMOTIVES FOR FREIGHT TRANSPORT NEW WAGONS FOR FREIGHT TRANSPORT
FS may decide to include additional Project Categories for future issuances
Look-back period of 3 years
* In the GBF since June 2019 and aligned with criterion 5 of Transport criteria - Low Carbon Land Transport and the Climate Bonds Standard. In 2018 MIR transported 0,0001% of the 23
ONU Codes 1972 (natural gas) as fossil fuel, on the total tons of transported goods Informazione Pubblica2 Green Bonds for a total 1.3 billion euro issued so far
Allocation and environmental impact performance
REGIONAL TRAINS POP & ROCK HIGH-SPEED TRAIN ETR 1000 FREIGHT ELECTRIC LOCOMOTIVES and WAGONS
€515 million €667 million €118 million
Allocation
and
Impact
40 locomotives
Reporting 60 trains 20 trains
140 wagons
of Eligible
Green
projects
financed -20%(a) -20.5%(a) -4%(a)
8,861 tCO2 saved 13,150 tCO2 saved 47 tCO2 saved
FS will keep on green issuance to complete regional and high speed fleet upgrading
and to fund further «green» investments
(a) The ETR1000 emissions are estimated in comparison with the ETR500; regio trains data are evaluated in comparison with comparable trains, operating in the market.
GHG emission for freight loco refer to the train\km production of only half year in 2019 due to the deliveries completed in Feb. 2020 so they are not comparable with the data of passenger trains which refer to
train\km production of two uyears (2018-2019). 24
Informazione PubblicaExternal Reviews
Sustainalytics provided a Second Party Opinion on this Green Bond Framework and a Pre-issuance verification on the
Climate Bonds standard
FS obtained the Climate Bonds certification on its second green bond issuance
KPMG provided a Third Party Opinion on the first Green Bond Report
Ferrovie Green Bond
Impact of Use of Proceeds
Framework
Ferrovie ’s
“Ferrovie’s Green Bond Framework
sustainability
“Given the declared (estimated) energy
is credible and impactful, and strategy improvements of the new electric trains
aligns with the four core compared to previous models, as well as
components of the GBP 2018.” recyclability of the trains, Sustainalytics
“Ferrovie has demonstrated a is of the opinion that the eligible
commitment to integrate sustainable category contributes to increased
practices into its business strategy and sustainability and energy efficiency of
operations, as aligned with its strategic Ferrovie’s operations and the transport
vision” system in Italy.”
Sustainalytics believes that the eligible category is aligned with Ferrovie’s overall sustainability strategy and efforts, and will also
contribute to the advancement of UN SDGs, specifically 9, 11, and 12.
Based on the above, Sustainalytics is confident that Ferrovie is well-positioned to issue green bonds, and that Ferrovie Green Bond
Framework is robust, transparent and in alignment with the Green Bond Principles 2018.
25
Informazione PubblicaFS Italiane Climate Bonds Initiative Certification on Green Bond
First Italian issuer to obtain the CBI Certification
• FS Italiane obtained the Climate Bonds Initiative Certification for its second green bond issuance
• The Eligible Green Projects selected for the FS green bond align with the Low Carbon Land Transport criteria as
outlined by the Climate Bonds Standard*:
Criterion 3: Emissions threshold for public passenger transport - All infrastructure, infrastructure upgrades, rolling stock and vehicles for
electrified public transport pass this criterion, including electrified rail, trams, trolleybuses and cable cars. Buses with no direct emissions
(electric and hydrogen) also pass
Criterion 4: Emissions threshold for dedicated freight railway lines - All infrastructure, infrastructure upgrades and rolling stock for electrified
freight rail lines pass this criterion
Additionally, as per CBI’s requirements for dedicated freight railway lines, Ferrovie has confirmed that no more than 50% on the share of fossil
fuel freight t-km will be transported by the line
First Italian issuer
to obtain the CBI
Certification
*Climate Bonds Standard Version 2.1 and Low Carbon Land Transport Version 1.0
https://www.climatebonds.net/files/files/Climate%20Bonds%20Standard%20v2_1%20-%20January_2017.pdf
https://www.climatebonds.net/files/files/Low%20Carbon%20Transport%20Background%20Paper%20Feb%202017.pdf 26
Informazione PubblicaNew sustainable finance solutions
Latest transaction 2020
• Euro 300 million euro bank loan, where Euro 200 million have been earmarked to an ESG
Tranche financing Trenitalia new 17 Frecciargento electric long-haul passengers trains,
which are aligned with the EU Taxonomy standards
Green Loan
• structured to seize the interesting opportunities created by the liquidity ECB’s measures
• The ESG Tranche guarantees a lower pricing in respect to the cost of financing
EU Taxonomy aligned • Euro 400 million of Trenitalia rolling stocks for public service financed this
private placement year via Eurofima are aligned with the EU Taxonomy standards and are
funded via Eurofima Green Bond Programme
• The new concept of Hybrid regional trains are on the investment pipeline (up to
«Climate action» EIB € 900 million)
financing • we will dedicate them an ad-hoc EIB “climate action” financing for max 50% of
investment amount in accordance to EIB policy
FS expanded, innovating, sustainable financial solutions to all its counterparties
27
Informazione PubblicaTangible impact of a sustainable finance approach
50 new Frecciarossa 1000 (€ 1.7 billion) fully deployed
High Speed fleet renewal
Further 14 Frecciarossa 1000 expected in 2023 Green Bond
and expansion Green Loan
17 new Frecciargento (€ 160 million) 11 delivered, completion expected in 2021
EU Taxonomy
89 new Jazz trains (€ 600 million) fully deployed Eurofima
Green Bond
Regional fleet renewal 515 new Pop and Rock trains (€ 4.5 billion) 76 delivered, completion in 2023-2026
Hybrid trains, 135 units max (max € 900 million) 76 already ordered, deliveries in 2021-2023
EIB financing
Within five years 80% of Trenitalia's national fleet for regional transport will be renewed and we do think
corporate finance decision towards sustainable finance tools will have played a key role in achieving this goal
28
Informazione PubblicaFinancial Overview Informazione Pubblica
Robust financial performance continues to improve
13.000
12.500 12.435 Revenues Solid increase in revenue
12.000 12.078
11.500 over the period.
11.000 2.609 In 2018 and 2019 from both the
2.476 EBITDA industrial performance and new
10.500
acquisitions
10.000
9.826
9.500 9.602
9.299 …focus on expenses containment
9.000 8.928 despite employees growth and new
8.500 8.585
8.390
2.313 acquisitions
8.000
2.293
7.500 1.975
2.114 Operating Costs
7.000 6.986
6.500 6.610 6.635
6.276
6.000
€mn 2014 2015 2016 2017 2018 2019
Consistent profitability and margins
3.000 30,0%
2.609 24,9%
2.476
2.500 2.313 25,0%
20,5% 21,0%
2.000 20,0%
1.500 15,0%
€mn
1.000 718 714 829 10,0% 7,7%
552 559 584 5,9% 6,7%
500 5,0%
0 0,0%
2017 2018 2019 2017 2018 2019
EBITDA EBIT Net Income EBITDA Margin EBIT Margin
30
Source: FS 2019Informazione
Annual Report PubblicaGroup revenues breakdown
• In 2019 Revenues reached the record amount of €12,435 million (+3% vs 2019),
• lasting positive performance of the transport segment both rail and road services and infrastructure services
DELTA REVENUES CONTRIBUTION GROUP REVENUE BY SEGMENT TRANSPORT REVENUES: MARKET VS. PSCS
12,435 High
+ 85 58% Transport
12,078 Speed
services
+ 363
Regional + 65
38% Infrastructure 37% 38%
million
Services 3% other services
Bus
Services
+ 62 1% real estate
62% 63%
Freight
Services + 17
Infrastructure 2018 2019
2018 Euro million 2019
Services + 133 Market revenues Public service contract fees
Euro million
Source: FS 2019 Annual Report
31
Informazione PubblicaFocus on operating costs
• In 2019 operating costs amounted to €9,826 million (+2.4% vs 2018)
The overall increase is essentially due to higher service costs (+€370 million) offset by lower costs for raw materials (-€108 million) and the
decrease in use of third-party assets (-€117 million, of which: -€130 million due to the initial application of IFRS 16).
Personnel costs slightly increased for turnover
Breakdown of operating costs Total operating costs by division
6.000 7.000
6.269 6.278
4.853 4.945
5.000 4.741 6.000
4.371
5.000 4.557 4.675
4.000 Personnel Transport
expense
4.000 Infrastructure
3.000 Raw materials
3.000 Real Estate
2.000 1.599 1.491
Services Services
2.000 Other services
1.000
Other costs incl. 1.000 432 Cons. Adj.
€mn 0 Capitalisation 125 285 119
€mn 0
2018 2019
-1.000 2018 2019
-1.000
-1.221 -1.351
-2.000
-2.000 -1.634 -1.678
-3.000
Source: FS 2019 Annual Report
32
Informazione PubblicaFS Group’s CAPEX profile
Leading investor in development of transport, infrastructure and logistics
• In 2019 FS’s capital expenditure exceeded €7 billion (€ 6,943 million in 2019, excluding ANAS, of which €4,116 million through
government grants mainly earmarked to rail infrastructure).
• The majority of capex is related to the maintenance and development of the rail infrastructure network carried on by RFI, with a
focus on Traditional network (~ €4.5bn). Rail infrastructure capex is almost totally funded by the Government as per the
“Contratto di Programma” between Ministry of Infrastructure and Transport and RFI.
• Trenitalia accounted for 21% (€1,451million).
FS Capex in 2017 - 2019 2018 capex breakdown
8.000 Mercitalia
Other capex
6.943 Group
6%
7.000 Busitalia Group 3%
5.871 3%
6.000 5.407
Trenitalia
5.000
21%
4.000
RFI - High
3.000 Speed RFI - Traditional
2016network
1% network
2.000
66%
2017
1.000
€mn
0
2017 2018 2019 Capex excludes Anas S.p.A. and FSE S.r.l. investments recognised pursuant to IFRIC 12
ANAS investments in 2019 accounted for € 1,308 million
Source: FS 2019 Annual Report 33
Informazione PubblicaFS’ debt profile
Funding diversification
• Total gross financial debt (long term + short term) amounts to € 11,306mn at YE 2019 vs. €11,404mn at YE 2018. The bulk of FS
Group’s debt is held by FS Holding (€ 8,565mn, 75% of total).
• Part of FS' debt is funded directly through guaranteed State transfers (€ 1.68 billion out of the total debt of € 11.3 billion at YE
2019). This debt is earmarked to infrastructure investments.
• Net Financial Debt amounts to € 7,659mn at YE 2019 increasing by 1,004 million on YE 2018, mainly due to new debt raised for
capex, increase in lease liabilities recognised for new leases as per IFRS 16 and decrease in the financial asset from MEF due to
collections of the year.
Breakdown Financial sources 2012 - 2019 (a)
EMTN Bonds Supranational Entities Bank Loans
Strong Liquidity Position
7%
Eur 2 bn Committed RCF
with 11 primary banks
13% EMTN
11% 13% bonds in
12%
CSPP since
July 2016
as well as
Access to Capital Markets
88%
45% in the Eur 7 bn EMTN Programme
76% Pandemic
2012
42% Emrgency EIB
2013 Purchase
37% 56% Programme
CDP
2018
PEPP Eurofima
2019
(a) These percentages are calculated on the long term debt held by FS\RFI\TI
Source: FS 2018 Annual Report 34
Informazione PubblicaBalanced debt maturity profile
Effective management of financial expense
• The Group has a balanced debt maturity profile extending over the next 14 years, with the majority of maturities falling due over the next 7 years
• Historically low borrowing costs and an effective management of financial costs, including interest rate risk management policies, has resulted in a
containment of interest expense on debt, generating value for the Group. In the last 4 years average interest expense stable around 1.5%
Group long term debt maturity profile as of 31 Dec. 2019* Interest expense on Group’s financial liabilities **
2.000
1.800
2,7%
1.600 2,4%
1.400
1.200 1,8%
1,7% 1,7%
1.000 1,5%
800
600
400
200
0
€mn
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2014 2015 2016 2017 2018 2019
uncovered covered by State tranfer
* Maturity profile calculated on the long term debt, included the current portion of the long term debt, held by FS\RFI\TI
** The financial expense is net of government grants, therefore the ratio is calculated on the debt not funded through guaranteed government grants
Source: FS 2019 Annual Report
35
Informazione PubblicaEur 7 billion EMTN Programme
Proved access to the bond market 13 bonds for Euro 5.08 billion outstanding
as of 31.12.2019
Amount
Series Issue date Maturity
(Euro mio) * 5 benchmark size ° 8 private placement
1* 07/2013 750 07/2020
public issuances
Among them, the two first
65% 6% Polo corporate bond fully
2* 12/2013 600 12/2021 29% RFI
Trenitalia Mercitalia underwritten by the EIB,
3° 01/2016 300 12/2025 one of them financed
through the Juncker Plan
• For the • For the • For the funds of the EFSI
4° 07/2016 350 07/2022
purchase of HS completion of purchase of
5° 07/2016 50 07/2031 and regional the HS freight loco,
trains infrastructure wagons and
6* 06/2017 1000 06/2025 other invest
7* 12/2017 600 12/2023
8° 12/2017 100 12/2025
FS offers room for new issue at medium-long term tenors
9° 03/2018 200 03/2030 and is eager to develope its «green curve»
10* 07/2019 700 07/2026
11° 08/2019 100 08/2029
Latest FS capital market transaction:
12° 12/2019 140 12/2029 10 year private placement issued in August with a final spread around
50 basis points below the BTP. Net proceeds will finance the
13° 12/2019 190 06/2024 completion of the high-speed network
2 private placement issued in December for a total of Euro 330mln.
Net proceeds will finance the completion of the high-speed network
and Polo Merci investments 36
Informazione PubblicaDebt service capacity
• Given improvement in profitability and conservative debt management, Net Financial Debt / EBITDA has
keeping stable around to 3x in last 5 years.
• Historically low borrowing costs and effective management of financial costs, including interest rate risk
management policies, resulted in EBITDA interest cover improved substantially in the last five years.
• FS Italiane maintains a strong and stable capitalisation.
Leverage evolution Capitalisation
18
16,9 35%
16 16,0 15,6 15,6
30% 31%
30% 29% 30%
14
27% 27%
12 25%
10,8 10,8
10 20%
18% 19% 18%
17% 18%
8 16%
15%
6 5,6
5,2 5,2 5,0 10%
4,6 4,3
4
2,9 3,4 2,9 3,1 2,9
2,7 5%
2
x.x
- 0%
2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019
Net Financial Debt\Equity Total Debt\EQUITY
Net Financial Debt\EBITDA Total Debt \ EBITDA
EBITDA\Interest expense
Source: FS Annual Reports
37
Informazione PubblicaFY 2019 Consolidated Financial Statements
Income Statement Reclassified Statement of Financial Position
€mn 2018 2019 Change % €mn 2018 2019 Change
REVENUE 12,078 12,435 3.0 Net operating Working Capital (324) (262) 62
Revenue from sales and services 11,566 11,957 3.4 Other Net Assets 2,378 2,928 550
Other income 512 478 (6.6) Working Capital 2,054 2,666 612
OPERATING COSTS (9,602) (9,826) 2.4
Net non-current assets 50,986 51,132 146
EBITDA 2,476 2,609 5.4 (4,303) 319
Other provisions (4,622)
Amortisation, depreciation, provisions and Net assets held for sale 482 482
(1,762) (1,780) 1
impairment losses
NET INVESTED CAPITAL 48,418 49,977 1,559
EBIT 714 829 16.1
Net financial expense (97) (176) 81
Net current financial debt (555) 677 1,232
653 5.8 Net non-current financial debt 7,210 6,982 (228)
PRE-TAX PROFIT 617
(60) 3.4 Net financial debt 6,655 7,659 1,004
Income taxes (58)
PROFIT FROM CONTINUING OPERATIONS 559 593 6.1 Equity 41,763 42,318 555
Loss from assets held for sale, net of taxes (9) 100
PROFIT FOR THE YEAR 559 584 4.5 COVERAGE 48,418 49,977 1,559
38
Informazione PubblicaCOVID – 19 implications, response, restart
IMPACT
• High Speed services offer reduced to only 3% in March and April following government restrictions measures, with effects on revenues from traffic
• Revenues from the State and Regions for the regulated services stable as per the PSCs provisions.
• Infrastructure sector impact very limited, with regular investments grants flows from the Government.
• Rail freight transportation crucial for food, drugs and other essential goods during the lockdown
ACTIONS
• OPEX reduction and CAPEX rescheduling
• Effective funding management, finalizing expected annual needs in 1HY and preserving a solid liquidity position, with €2 billion of committed RCF
basically undrawn - and now full available - and around €1.5 of uncommitted facilities.
• New strategy for a commercial resetting aimed at ensuring a safe customer journey in order to encourage train and bus utilization
• Close contact with the Government for extraordinary measures
RESTART
• Reactivation of High Speed services offer up to to 75% from July and then gradually increasing
• positive demand feedback so far and expected comeback to pre-COVID level at the beginning of 2021
• Government support confirmed
• Working on a new Industrial Plan looking at this unprecedented event as a further stimulus to push foward our path for a sustainable growth.
39
Informazione PubblicaCOVID-19 Government support
Extraordinary measures for the FS Group
• Strong committment from the Italian Government in supporting the national railway and public transportation system
• Confirmation of FS Group vital role for Italian GDP as well as the essential social service for the country
• Government will partially compensate FS Group through grants, total amount not fixed yet
• Possible review of further support needs next months
DECRETO RILANCIO – IMPACT FOR FS GROUP
art. 196 € 270 million for RFI in 2020
art. 214, c.1-2 Overall € 350 million for ANAS in 2021-2034
art. 214, c.3-4 Overall € 1.190 million for railway undertaking in 2021-2034.
FS Group share (mainly Trenitalia and Mercitalia) will be defined shortly by
MEF and MIT (expected around 60%)
art. 200, c.1 Overall € 500 million in 2020 for local public transport companies.
FS Group share (mainly Trenitalia, Busitalia, FSE) will be defined shortly by MEF
and MIT
40
Informazione PubblicaEU initiatives
Rail sector will benefit from the latest EU initiatives
Extract of the Next Generation EU press release 27 May 2020
"The European Green Deal as the EU's recovery strategy:
• A massive renovation wave of our buildings and infrastructure and a more circular economy, bringing local jobs;
• Rolling out renewable energy projects, especially wind, solar and kick-starting a clean hydrogen economy in Europe;
• Cleaner transport and logistics, including the installation of one million charging points for electric vehicles and a
boost for rail travel and clean mobility in our cities and regions;
• Strengthening the Just Transition Fund to support re-skilling, helping businesses create new economic opportunities."
European Commission Vice-President Frans Timmermans said: “When it comes to public investment
to relaunch the transport sector, committing to clean and more sustainable mobility will be key. We
have also seen how for instance the public transport sector is suffering across the EU. We absolutely
need a vibrant and strong public transport sector to fulfil our Green Deal Goals. The Connecting
Europe Facility, InvestEU and other funds can for instance support the financing of 1 million electric
vehicle-charging points, clean fleet renewals, sustainable transport infrastructure, especially also
looking at the modalities of rail and electric mobility.”
41
Informazione PubblicaContacts:
Stefano Pierini – Head of Finance, Investor Relations and Real Estate
Tel.+39 06 44102348
Mail: s.pierini@fsitaliane.it
Vittoria Iezzi – Head of Debt Capital Market
Tel. +39 06 44106655
Mail: v.iezzi@fsitaliane.it
Lorenza Di Cintio – Debt Capital Market
Tel. +39 06 44103772
Mail: l.dicintio@fsitaliane.it
Cuono Altobelli– Debt Capital Market
Mail: c.altobelli@fsitaliane.it
https://www.fsitaliane.it/content/fsitaliane/en/investor-relations.html
https://www.fsitaliane.it/content/fsitaliane/en/investor-relations/debt-and-credit-rating.html
42
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