In 2020, the Covid-19 pandemic represented also an emergency for Iren Group that had to be managed in a proactive and timely manner, given the massive spread of the infection, as early as February, in the areas where the Group is active. In order to provide extensive information on how the Group has managed the emergency and what impacts it has had, also concerning Consob’s Call for Attention (no. 1 of 16/2/2021), these pages provide an overview of the measures adopted, with specific details disclosed in the relevant chapters of this Report.
From an economic and financial point of view, the Group demonstrated its ability to effectively pursue its objectives despite the health emergency, increasing investments compared to 2019 and confirming the recovery of the slight delays recorded on some construction sites due to the lockdown. The performance achieved at the end of the year (for detailed analysis, see the chapter “Growing and creating value” and the Consolidated Financial Statements) show a limited impact attributable to the health emergency, confirming the effectiveness and resilience of the business model – based on a solid positioning in regulated, semi-regulated and free-market sectors and with a strong integration between Business Units that guarantees economies of scale and intersectoral opportunities – and of the actions undertaken as part of the strategic development pillars focused on people, customers/residents, sustainability, technological evolution and efficiency, digitalisation and growth.
The growth strategy, represented in the Business Plan to 2025, also outlines the role that Iren Group will be able to play in the post-Covid-19 recovery, with more than 3.7 billion Euro of investments, of which 2.1 billion Euro related to the concept of multicircle economy, which engages all business areas in projects, services and infrastructures for the responsible use of resources and more than 300 million Euro of investments in digitalisation of internal processes and towards the market. In addition to this, there is the orientation towards a nationwide expansion in the waste sector, energy efficiency and customer products and services, transferring know-how, skills and service quality to other regional contexts. A plan of future action consistent with the Next Generation EU guidelines and the prospects of the country’s economic recovery that could involve the utilities in consolidation operations on the areas and encourage the acceleration of investments.
In order to guarantee the most effective management of the crisis and the continuity of the essential services managed, on 20 February, Iren established an emergency management committee to deal with a continuously evolving situation in a coordinated and timely manner, directing activities, defining extraordinary measures, organising operational plans to prevent infection and ensuring constant information both internally and externally, maintaining, through the CEO, a close liaison with the Board of Directors.
From 21 February 2020, as soon as the authorities recorded the spread of the infection in the areas of reference, the Group immediately structured the actions for the protection of workers, in line with the indications of the health authorities, necessary to guarantee the continuity of activities and keep 5,000 employees operational for the management of waste collection and disposal, gas and electricity distribution, integrated water service, district heating, energy generation, water quality control and public lighting. The significant investments in digitalisation made by the Group in past years have favoured the effective management of emergencies, also thanks to the continuous introduction of remote work for about 3,000 employees. For an in-depth examination of the actions concerning workers’ protection, see the chapter “Iren people”.
Iren also took immediate action concerning customers and communities (see the chapter “Customers and Communities” on pages 94-119 of the “Sustainability Report”) to support the situations of economic difficulty generated by the pandemic, to ensure the health and safety of people who needed to come into contact with the Group for administrative or service demands and also to reduce situations of discomfort and isolation produced by the lockdown phase. For all the teachers, students and families “forced” to stay at home, Iren Group has offered on the dedicated page #iorestoacasa with EduIren the opportunity to learn more about the issues of waste, water and energy and has supported numerous distance learning projects.
From the point of view of service continuity, energy production plants have continuously operated at full capacity to constantly guaranteeing electricity and gas distribution activities and those relating to the integrated water service management, public lighting, and traffic light networks. Similarly, urban hygiene and waste collection activities continued uninterruptedly in all the municipalities served, with a strengthening of street sanitation, the introduction – in line with the indications of the Istituto Superiore di Sanità – of new procedures and methods of door-to-door waste collection for people who are positive or in quarantine, and the entire operation of the treatment and disposal plants, which have contributed to the effective management of waste connected to situations of infection in both the domestic and health sectors. Furthermore, thanks to the implementation of unique Emergency Plans that also involved direct support services for essential services (e.g., procurement, warehousing, vehicle management, information systems, etc.), all this was made possible.
Suppliers have been asked to adopt the same measures for protecting their employees as those adopted by Iren Group, and special procedures have been established for access by the personnel of supplier companies to Iren’s premises and for operations to be carried out in contact with the company personnel. Also, the Group adopted specific measures to support its suppliers in taking on the additional costs resulting from the Covid-19 emergency in the performance of contracted activities (for more information, see the section “Customers and Communities” on pages 119-124 of the “Sustainability Report”).
Finally, the Group maintained a constant flow of communication both internally and externally and continuous contact with the leading companies in the industry, with Utilitalia, with the regulatory and control bodies and all the relevant bodies, in a logic of collaboration and comparison for the management of the emergency.
In this document, the impacts resulting from the Covid-19 pandemic are described and highlighted with a dotted line in the text to give transparency of the phenomenon to all stakeholders.
Important events in 2020
Manifestation of interest for the gas sales business unit of Sidigas.com
In January 2020, Società Irpina Distribuzione GAS S.p.A. (Sidigas) accepted the binding manifestation of interest presented by Iren to acquire the business unit of its subsidiary Sidigas.com S.r.l. related to natural gas sales, with a portfolio of about 55 thousand customers (95% of them in the retail sector), mainly in the Province of Avellino. The transaction is subject to the observance of certain pre-conditions. Sidigas S.p.A. and Iren have agreed an exclusivity period for the finalisation of the transaction.
Disposal of the stake in OLT Offshore LNG Toscana
To complete the transaction undertaken in 2019, and following the authorisations obtained from the competent bodies, on 26 February 2020, the Group transferred to SNAM 49.07% of OLT Offshore LNG Toscana. The sale of the equity investment has allowed the Group to optimise its financial structure, freeing up resources to develop the Business Plan’s investments and seize opportunities for growth along external lines.
Contract for expansion of Turbigo power station
On 3 March 2020, Iren signed with Ansaldo Energia a contract worth 180 million Euro for the final design, supply and construction of a new, gas-powered combined-cycle electricity generation plant and related auxiliary works, which will make it possible to increase the total installed capacity of the Turbigo site from the current 850 MW to around 1,280 MW. The expansion will make the plant one of those that, operating at high flexibility and in a way complementary to renewable sources, are essential for sustaining the adequacy of the Italian electricity production system. In the Capacity Market auction, the expansion of the power station enabled recognition of the contribution for fifteen years, starting from 2022, totalling 117 million Euro.
Treasury share purchase programme
On 27 March 2020, Iren S.p.A. initiated a second tranche of the share repurchase programme undertaken in 2019. The Shareholders’ Meeting, held on 29 April, authorised the Board of Directors to purchase and dispose of treasury shares, for a maximum of 65,000,000 shares (equivalent to 5% of the share capital), for eighteen months from that date, revoking, for the unexecuted portion, the previous authorisation to purchase approved on 5 April 2019. On 12 May, the Board of Directors authorised the Chief Executive Officer to carry out the repurchase programme within the limit of 2% of the share capital, taking into account the shares already held in the portfolio. The purpose of the repurchase programme is to provide the Company with treasury shares to be used in the context of external growth operations. At 31 December 2020, Iren S.p.A. held a total of 15,868,004 treasury shares, equal to 1.22% of the share capital.
Acquisition of the district heating business unit of SEI Energia
On 23 April 2020, Iren Energia and Fineurop Investment Opportunities S.p.A., the contracting party in the composition with creditors of SEI Energia, concluded the sale and purchase contract for the business unit of SEI Energia, itself relating to district heating, already managed under lease by Iren Energia since September 2018, in the municipalities of Rivoli and Collegno and 49% of the company NOVE, manager of the service in the municipality of Grugliasco, for a total connected volume of 5.2 million cubic metres and 150 GWht/year of thermal energy supplied. For consideration of 24.4 million Euro, the acquisition is part of a plan to integrate with the existing network in the metropolitan area of Turin, exploiting the thermal energy produced by the Group’s cogeneration and waste-to-energy plants.
Acquisition of seven property complexes
At the end of April 2020, Iren repurchased from REAM SGR S.p.A. seven property complexes for management and operational support use located in Turin, Genoa, Parma and Reggio Emilia, which were already the subject of lease agreements. The total value of the transaction was 97 million Euro, with zero impact on net financial debt.
Shareholders’ Meeting
On 29 April 2020, the Ordinary Shareholders’ Meeting approved the Company’s Financial Statements for the year 2019 and the Directors’ Report. It also resolved to distribute a dividend of 0.0925 Euro per ordinary share (excluding treasury shares), confirming the Board of Directors’ proposal. The dividend was payable from 24 June 2020. The Meeting also approved Section One of the Report on the 2020 Remuneration Policy and Compensation Paid in 2019 and cast a favourable consulting vote on Section Two.
Subscription of an 80 million Euro loan for sustainable investments in the water sector
On 6 May 2020, Iren signed a Public Finance Facility (PFF) with the Council of Europe Development Bank (CEB) for an amount of 80 million Euro and a duration of 16 years to finance a significant part of the investment plan in the water infrastructures in the provinces of Genoa and Parma, concerning, in particular, the expansion and improvement of the aqueduct and sewerage network and the treatment systems. The agreement is part of the sustainable management of water resources promoted by CEB in line with Iren’s development targets and contributes to strengthening the Group’s financial structure.
Agreement with Engie for the extension of district heating in Turin
On 15 May 2020, Iren Energia and Engie signed a function-based agreement for the development of district heating in Turin. Under the agreement, Engie will produce thermal energy from its cogeneration plant in Leinì and transport it to the area covered by Iren Energia’s distribution network, which will thus extend the district heating network to the north-east area of the city by 2024, serving a potential connected volume of 17 million cubic metres. The significant increase in users served will thus be possible without building new production sites in the urban area.
Acquisition of control of Nord Ovest Servizi and Asti Energia e Calore
On 21 July 2020, Iren Group acquired from ASTA S.p.A., through Ireti and Amiat, 50% of the shares of Nord Ovest Servizi S.p.A. (NOS) increasing to 75% and, through Iren Energia, 28% of Asti Energia e Calore S.p.A. (AEC), standing at 62%, with a total outlay of 6.5 million Euro. NOS holds an equity investment (45%) in Asti Servizi Pubblici S.p.A., a subsidiary of Municipality of Asti, which operates in the integrated water system, environment and transport sectors, and which in turn holds the remaining 38% of AEC. The transaction is part of Iren Group’s area consolidation strategy.
Acquisition of I.Blu and partnership with Idealservice in environmental services
Following the preliminary agreement signed and all the conditions precedent having been met, on 12 August 2020, Iren Ambiente completed the purchase of 80% of the share capital of I.Blu from Idealservice for the amount of 16 million Euro. I.Blu operates in the selection of plastic waste to be sent to recovery and recycling, through two plants with a total capacity of 200,000 tons/year, and in the processing of plastic waste for the production of Blupolymer (a polymer for civil uses) and Bluair (“reducing agent” for steel-making plants). The Company plans to increase the existing plants’ capacity and build a new plant to treat heterogeneous plastics (plasmix) that currently have no outlet in the recycling market. The operation will allow Iren to become a national leader in selecting plastics and, in the future, in the treatment of plasmix. Also, Iren Ambiente and Idealservice have signed an agreement that provides subcontracting of selection activities and services on multi-material plants and a partnership between Idealservice and San Germano for the collection of municipal solid waste in some areas of Northern Italy.
Business Plan to 2025
On 29 September 2020, the Board of Directors approved the 2020-2025 Business Plan, which confirmed the strategic framework of the previous Plan and presents an increase in the investments and margins that will continue the growth recorded in recent years (for more details see page 29 of the “Sustainability Report”).
Confirmation of Iren’s rating
On 20 October 2020, the Fitch agency confirmed the Group’s BBB rating with a stable outlook. The assessment is mainly based on the update of the Business Plan to 2025, which confirms the prevalence of regulated and quasi-regulated activities, resulting in a limited impact of the adverse market effects of the Covid-19 emergency. In addition, Fitch assesses positively the Group’s liquidity profile.
Sustainable finance operations
At the end of October 2020, Iren and the European Investment Bank (EIB) signed a 100 million Euro Green Energy Loan with a 16-year term, and they will implement the loan to finance development and efficiency projects for the district heating network in Turin. The transaction further strengthens the overall stock of finance instruments adopted in 2017 to finance the Group’s sustainable investments. Furthermore, on 19 December 2020 and for the fourth consecutive year, Iren successfully concluded the issue of a Green Bond for a total amount of 300 million Euro, with securities with a minimum denomination per unit of 100,000 Euro and maturing on 17 January 2031, intended to finance projects that contribute to the achievement of the sustainability targets defined in Iren’s Business Plan to 2025 (for more information see page 66 of the “Sustainability Report”).
Acquisition of Unieco’s Environment Division
On 17 November 2020, Iren Group completed Unieco’s Environment Division’s acquisition after obtaining clearance from the Antitrust Authority. The activities of the Environment Division, located in Piedmont, Emilia-Romagna, Marche, Tuscany and Puglia, are carried out through many subsidiaries and associated companies that oversee the main sectors of the environmental chain: intermediation, treatment, sending for disposal and disposal of special hazardous and non-hazardous waste, along with collection and management of mechanical-biological treatment plants, composting, energy enhancement and disposal of municipal waste. The transaction allows Iren Ambiente to consolidate its national position in the environmental sector, expanding the regional area served and gaining a strategic position in waste collection in the region of Tuscany, together with the strengthening of its role as the primary operator in the treatment and disposal of special waste.
Adoption of the new Corporate Governance Code
On 18 December 2020, the Iren’s Board of Directors decided to adopt the Corporate Governance Code, approved by the Corporate Governance Committee of Borsa Italiana with publication on 31 January 2020, which the Company will apply as of 1 January 2021. At the same time, the Board of Directors approved a document highlighting the Company’s governance solutions regarding the provisions of the Code, as published on the Group’s website.