Corrado Santini - Infrastructures in Southern Italy

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Infrastructures in Southern Italy

Investments in water services, waste sector and photovoltaics

Corrado Santini – Senior Partner of F2i

April 7th 2014

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Water services

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Water services (1/2)

(*) Source: BCG, Bluebook.(**) Including Germany, France, UK and Spain

SEWAGE SERVICES

% of serviced population(*)

WATER PURIFICATION SERVICES

% of serviced population(*)

LEAKS IN THENETWORK

% on managed water(*)

Compared to Europe, the Italian sector of

water services presents numerous structural

critical points:

- average 30 year old plants;

- low service coverage with just 85% and 70%

of the population having access to sewage

and waster purification services respectively

(compared to an average of 95% in the main

European countries);

- large leakages in the network, 32% on

average (compared to average 17% in the

main European countries).

A lack in water infrastructures is prevalent in

Southern Italy and on the islands.

(**)

(**)

(**)

38%

40%

32%

29%

25%

32%

17%

0% 20% 40% 60%

Islands

South

Centre

North-East

North-West

ITALY

EUROPE

57%

70%

70%

79%

78%

70%

95%

0% 20% 40% 60% 80% 100%

78%

85%

84%

82%

91%

85%

95%

0% 20% 40% 60% 80% 100%

Islands

South

Centre

North-East

North-West

ITALY

EUROPE

Islands

South

Centre

North-East

North-West

ITALY

EUROPE

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Water services (2/2)

*Source: BCG, Bluebook. F2i analysis**Excluding impact on consumptions (+) and estimating that works targeted by the investments will be carried out by Southern companies

The lack of water infrastructures in Italy is mainly due to poor

investments since the 90s (around 1 bil €/year, ie 17 €/year per

inhabitant, compared to 70 €/year per inhabitant registered in

Germany, France and UK).

The approved area action plans include investments for around

60 bil € over the next 30 years (2 bil €/year), i.e. 34 €/year per

inhabitant.

The planned investments for the south and the islands account

for approximately 0.8 bil €/year.

Such amounts represent 2.5% of Southern Italy's GDP (a rate

that is twice bigger compared to Northern and Central Italy).

Considering that these investments are double the amount of the

(insufficient) investments performed to date, they represent a

potential 0.1-0.2% growth of Southern Italy's GDP (functional

to the increase in investments compared to the past).**

€/inhabitant 73 76 75 17

‰ on GDP 2.9‰ 3.3‰ 3.0‰ 0.8‰

6.05.0 4.8

1.0

Germania Francia UK Italia

€/inhabitant 34 28 35 31 38 42

‰ on GDP 1.4‰ 1.0‰ 1.2‰ 1.2‰ 2.4‰ 2.6‰

Investments in water services from 1996 to 2008Yearly average (bil €)*

Planned investments until 2040 in ItalyYearly average (bil €)**

2.0

0.4 0.4 0.40.5

0.3

ITALY North West

NorthEast

Centre South Islands

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Waste sector

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Waste sector (1/2)

For the waste sector, the European regulations demand (i) a

progressive dismissal of landfills, (ii) the increase of

sorting and recycling, and (iii) the application of the waste

to energy (WTE) process as an ultimate disposal

technique.

Italy – along with Spain – is the one that most resorts to

landfills among the major European countries (49% of urban

waste was disposed in 2011 – compared to a European

average of 37%).

Resorting to landfills is particularly evident in the south of

Italy, where many regions largely exceed 60%.

As the dismissal of the current landfills is constantly

postponed, the EU initiated four infringement procedures

against Italy (exceeding assignment of waste management,

and illegal or unregulated landfills).

Sorting in Italy accounted for around 40% in 2012.

Compared with the best European rate (Germany, over 60%),

Italy also suffers from the delay of the southern regions in

this industry (Apulia, Calabria and Sicily are below 20%).

Ue Ger Francia UK Italia Spagna

Discarica Termovalorizzazione Riciclaggio e Compostaggio

37%

23%

40%

37%

63%

28%

35%

37%

49%

12%

39%

49%

18%

33%

63%

8%

29%

Landfill <30%

Landfill 30%-60%

Landfill >60%

% rate of disposal in landfills in Italy per region in 2011(**)

Waste treatment techniques in Europe in 2011(*)

(*) Source: Eurostat. (**) Source: ISPRA.

Landfills Waste to energy Recycle and composting

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Waste sector (2/2)

€/inhabitant 41 31 47 51

‰ on GDP 1.7 ‰ 1.1 ‰ 1.8 ‰ 3.2‰

Potential yearly investment until 2020 in Italy

to build new WTE plants

(€ bil/year) (**)

# plants

Capacity per plant (thousend tons/year)

Capacity per inhabitant

(kg/day/inhab.)

Germany 70 429 1.0

France 130 154 0.8

Italy 52 100 0.2

North 29 170 0.5

Center 15 67 0,24

South 8 157 0,17

Existing WTE plant in Europe and in Italy (*)

*Source: "Zero landfill" project, Cassa Depositi e Prestiti (2014). **Source: F2i estimates.***Excluding the impact on consumption (+) and estimating prudently that 50% of the investments will be executed by a company outside Southern Italy (parametric values based on recent WTE cases in Northern Italy, where 50% of the works were deployed by foreigner companies)

Compared to other countries, Italy's WTE capacity is

limited, especially in the south.

To be able to achieve the German levels of disposal

(1 kg/day/inhab.), Italy should invest approximately

2.5 billion Euro/year from now until 2020 (of

which 1 bil €/year in the south), for a total of 15

billion Euros.

The approximative estimated impact on Southern

Italy's GDP would be over 0.15%.

2.5

0.90.5

1.0

Italia North Centre South

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Photovoltaic sector

Private and confidentialPhotovoltaic sector (1/3)

In photovoltaics, Italy ranks second at a European level

for installed power (16.4 GW at the end of 2012),

following Germany (32.3 GW).

In 2012, new plants in Italy generated additional 3.6 GW

(+28% vs 2011), with a total investment of around 7 bil €

(1.8 bil € per MW).

New plants were planned in 2013 on the national territory

accounting for around 1.5 GW (+9% vs 2012) (**), i.e. 1.5-2

bil €.

In 2012 the solar production covered around 6% of total

consumption of electric power in Italy (5% in Germany).

In Italy, 44% of the installed capacity is located in the north,

37% in the south and 19% in central Italy.

Apulia, with 14.9%, represents the biggest value, followed

by Lombardy (11.1%) and Emilia Romagna (10%).

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Regional distribution of installed power at the end of 2012 (**)

North: 44%

Centre: 19%

South: 37%

Installed powerGW bil MW inhab.

Production(TWh/year)

Corresp.

hours

% elect. power

Used power

Germ.

32.3 394 27.9 864 5%

Italy 16.4 274 18.9 1,150 6%

Spa. 5.1 108 8.2 1,600 3%

Fra. 4.0 64 4.0 990 1%

GB 1.8 28 1.3 725 0.5%

Photovoltaic plants in Europe in 2012 (*)

(*) Source: EPIA – Global Market Outlook for Photovoltaics 2013-2017 (**) Source: GSE

Installed power of photovoltaic plants: 16,420 MW

Partitioning per installed power class

0.1-1.0

1.1-3.0

3.1-5.0

5.1-8.0

8.1-12.0

12.1-15.0

Private and confidentialPhotovoltaic sector (2/3)

The decrease in management and investment costs is leading the photovoltaic sector towards what is referred to as "grid parity"

(already achieved by some plants in Sicily).

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The cost for more competitive photovoltaic plants (on industrial scale and

located in the south) will be lower compared to combined cycle gas plants.

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

2010 2012 2014 2016 2018 2020

Combined cyclegas

FV FV cost range

LCOE – Levelised Cost of Electricity, €/kWhLCOE HFV per ground system plant in Sicily

0.35

0.30

0.25

0.20

0.15

0.10

0.05

0.00

Private and confidentialPhotovoltaic sector (3/3)

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Expected investments in photovoltaics in Italy for the upcoming

years

To match Germany's performance (in terms of MW per bil inhabitants),

Italy should install a further 7,200 MW, with an estimated investment of

total 8 bil €.

If this target is achieved by 2020, the yearly investment would account

for around 1 bil €/year.

As Southern Italy is highly exposed to sun, it should be able to attract

much more than the 37% rate achieved in the past with total investments.

It should be prudently considered that, according to the current

incidence data of the investments in the south compared to total

investments, the empirically estimated impact on Southern Italy's GDP

would be essentially zero.

€/inhabitant 17 16 16 18

‰ on GDP 0.7 ‰ 0.6 ‰ 0.6 ‰ 1.1‰

Potential yearly investment until 2020 in Italy

to build new photovoltaic plants

(€ bil/year) (*)

*Source: F2i estimates.**Excluding the impact on consumption and estimating prudentially that 70% of photovoltaic panels will be imported (-)

1.0

0.40.2

0.4

ITALIA North Centre South

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Summary

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Possible investments in the upcoming years in Southern Italy in water services, waste sector and photovoltaics

Industry: water services

Industry:waste (WTE)

Industry:photovoltaics Total

Yearly investments in Italy 2.0 bil € (for 30 years) 2.5 bil € (for 8 years) 1.0 bil € (for 8 years) 5.5 bil €

Percentage for the south: 40% 40% 40% 40%

Yearly investments in Southern Italy: 0.8 bil € 1.0 bil € 0.4 bil € 2.2 bil €

€ per inhabitant/year 40 € 50 € 18 € 108 €

‰ on Southern Italy's GDP 2.5‰ 3.2‰ 1.1‰ 6.8‰

Impact on Southern Italy's GDP* + 0.1%/+0.2% 0.15% 0% 0.25-0.35%

*Provisional estimates. Excluding the impact on consumptions (+) and assuming parametric values of the impact of imports (-) [+0.1%/+0.2%].