ENERgy (ENE)

219

Number of Employees

€90.9M

Turnover

€5.3M

EBITDA

VISion

Anticipating solutions for a sustainable business

MISSION

To execute construction projects for electrical and mechanical infrastructures, for clients in the industrial and in the Energy Distribution and Transmission sectors, under a turnkey/EPC contract with value creation, through the integration of different skills and technologies

STRATEGY

Consolidate its position in the utilities sector in Portugal
To maximise the existing relationships with customers and utilities sites in Africa, Central Europe and in Chile
To expand the activity to new clients and selected target-markets

WHICH GEOGRAPHIES?

STRATEGIC PILLAR

Technological Innovation

Developing our offer of financing solutions for the clients’ projects
Proactively seeking business opportunities associated with public funding for electric plant building
Relying on diversifying the mix of renewable energy projects in order to achieve a balance between risk and profitability

Operational excellence

Integrated management of the execution resources for projects in the systemic areas
Developing skills/procedures for risk management and project management

Proactive comercial approach

Improving commercial skills, promoting synergy with the remaining systemic areas
Evolution of our footprint to ensure scaling
Reinforcing our commercial partnership network in countries where Efacec has difficulty in reaching the market

Focus on the client

Developing partnerships supplementary to the project, with special focus on sharing of risks and faithful execution

Talent Development

Building a dual career model, fostering the professional development of technical tasks, as well as management tasks
Revising our performance assessment model, transversally incorporating throughout Efacec the specificity of functional families versus functional group
Revising the compensation and benefit model, guiding it towards its strategic (e.g.: commercial proactivity) and tactical goals
Defining a talent management model that allows for high potential employees to be singled out, guiding them through to more accelerated pathways of professional development
Putting together a behavioural, functional and management training plan, one that enables us to prepare our employees for the Efacec 2020 vision

The outlined strategy is materialised in 11 initiatives, which foreseeably will have a positive impact on the EBITDA around mid-2017.

GLOBAL MARKET VISION

The lowering price on the crude oil barrel has led to a decreasing performance of the economies that depend on this resource, contributing to the postponement or decline in larger projects and consumer goods importing in these regions.

OPERATIONAL PERFORMANCE

In 2016, the ENE BU reached one of its best results of the last years. This was mainly due to the diversification of origin in the orders, from various regions and markets, diminishing the impact of the international crisis.

Operationally speaking, 2016 was a year of improved performance in efficiency and in project management, in cost and risk control, and in planning correctly for the rigorous shutdown of the legacy projects in Algeria.

SUBESTAÇÕES
In 2016, in the Substation business, the ENE BU completed a significant set of projects in the Eurasian region, namely Armenia and Georgia. As a relevant milestone, we should point out the completion of the 500/220kV Jvari Substation, in Georgia, the first 500kV Substation that was built in the turnkey regime by Efacec. Likewise, we completed the Medium Voltage Substations network reinforcement and also the associated transmission network in São Tomé and Príncipe, as well as several projects for Substations in Portugal, Angola and Mozambique.

In Angola, we should point out the design and completion of several substations as well as building and completing a 30/6kV Substation for the Calueque Dam.

In South America, the highlight was the building of Substations in Chile, the procurement of two turnkey building contracts for substations, for Transelec and for the El Arrayán Wind Farm.

In the Maghreb region, the ENE BU won an international competition organized by STEG – Société Tunisienne de l’Electricité et du Gaz – to build and expand 28 substations, in a turnkey agreement, which referred to the 11th Plan for the Energy Transportation Network of Tunisia.

HYDROPOWER PLANTS
As to the Hydropower Plants’ business, 2016 was characterised by the continuation and completion of ongoing projects in Portugal, for EDP, and by an increasing number of projects in Africa, namely in Angola.

As far as EDP is concerned, the highlight is on the completion of Salamonde II 250MVA Hydropower Exploitation, as well as finishing assembling the main systems and beginning of testing in the Foz do Tua 2x150MVA Hydropower Exploitation.

In Angola, we point out the commencement and consignment of the Luachimo Hydropower Exploitation, one of the most important jobs in this area, a job that will be going on for the next 3 years. This venture is located in the Lunda Norte province, and it entails rehabilitating the equipment in the existing dam and building a new power plant, which will be equipped with four new generators, with 11 MVA each, and is part of the several jobs that were procured with Efacec: the detail engineering, building, transportation, assembly and commissioning of all the hydro mechanical equipment, generator groups (turbine and alternators), electric installations and automation.

RENEWABLE ENERGY
In 2016, producing electricity from renewable energy sources had identical costs to producing power from fossil energy. This situation was partly a result of the significantly reduced costs for photovoltaic modules that we’ve seen in the last years and, consequently, of the investment’s associated value. Despite this, we saw no significant accomplishments in the Unit’s target markets, in 2016. This delay in the performance cycle will foreseeably be reverted in 2017.

We should point out, in 2016, the completion of the S. Pedro VI 23.7MW Solar Farm, in Chile, in the Atacama Desert.

FINANCIAL PERFORMANCE

ECONOMIC INDICATORS

(MILLIONS OF EUROS)

The ENE BU received, in 2016, orders in the amount of EUR 105 million, which represent a significant increase when compared to the previous year (+116%)

In the Hydropower area, the orders received in 2016 include several projects with EDP, namely the Energy Production Management project for the Foz do Tua plant and Salamonde II, which amounts to EUR 5 million, and an adjustment to the Hydropower Rehabilitation contract in the Luachimo Dam in Angola, to the amount of EUR 10 million.

As far as Substations are concerned, the main contributions came through the STEG (Tunisia) contract, to the amount of EUR 39 million, and the Don Goyo Substation contract – El Arrayán Spa Wind Farm (Chile) in the amount of around EUR 18 million, and for the New Valdivia 220kV Substation, for Transelec. In Armenia and Georgia, we point out the contracts for substations, in the amount of EUR 8 million. In Angola, we point out the new contract with Coca-Cola, to the amount of EUR 3 million

As to the Renewable energies area, Efacec signed a contract with Planta Solar S. Pedro Photovoltaic Farm, to the amount of EUR 3 million.

As to the backlog, the orders placed at the end of 2016 match approximately two years of revenue.

When compared to 2015, revenue for 2016 showed a decline of 11%, due to a pronounced drop in the Renewable energy activities (EUR -23 million), partially compensated by a rise in the Hydropower area (EUR +10 million), and impacted by the late start, later than scheduled, of two important projects: STEG (Tunisia) and Luachimo (Angola).

Through the improved performance of the projects that were completed during 2016 in Chile, in Portugal and in Georgia, we achieved a substantial improvement in the gross margin of that period, directly reflected on the EBITDA, associated to a continued trend in the reduction of fixed costs (approximately 5%).

EXPECTATIONS FOR 2017

For 2017, in the substation business, Efacec intends to consolidate its position in Portugal, in the utilities sector, particularly with EDP and REN, and also in all the substations for Renewable Energy farms without preferential tariffs..

The Unit’s main focus, globally speaking, will be on maximising the existing relationships with clients and local utilities in Africa (Angola, Mozambique, GuineaBissao and São Tomé), Central Europe (Armenia e Georgia) and Chile, as well as to expand our activity to reach new clients and selected target-markets.

In the Hydropower plants’ business, we want to meet the multiple demands from Portugal, in the on-going projects. Yet, because of decreasing investment in the domestic market, the Unit’s focus has to be one of pursuing its globalisation strategy, particularly in the macro regions of Africa and Latin America, namely Angola, Colombia and Mexico.

In the Renewable Energy business, the Unit will be seeking to consolidate its position in the market by identifying potential clients in small and medium-size projects, up to 5MW, pin-pointing the opportunities that arise in Latin America and Africa and also by seeking partnerships with the sector’s players for larger, 60MW, projects

Because of the deregulation in the free-tariff market in Portugal and the increasing licensing of solar farms, there is the possibility that this area will show significant growth in the domestic market’s turnover, potentially bringing several new orders. At the same time, we foresee growth in our order-acquisition power from Africa, in medium-sized solar farms, up to 30MW, namely in the Ivory Coast and in Kenia.

A GLANCE AT THE BUSINESS

CARLOS
FREITAS

ENERGY BUSINESS UNIT

It’s foreseeable that the solar market will grow in Portugal. In what way is Efacec’s strategy equipped to respond to the new trends that come from that possibility?

We expect these opportunities in the free-tariff solar market in Portugal to be fulfilled and to become a reality. A lot of our growth in the solar market is dependent on the Portuguese market and we’re prepared for that, as a result of our extensive experience in building solar farms under EPC contracts, both in Portugal as well as internationally, namely Romania, Bulgaria and Chile. In Chile, our greatest accomplishment is the 57MW farm built in the Atacama desert, which shows one the best efficiency-rates worldwide. Because of this, we’ve gained experience in project and engineering development, based on the specific products we make for this purpose (PVStations and Power Transformers), as well as the partnerships we’ve established with solar panel manufacturers, combined with our internal synergies, namely in the Substation field that is supplementary to building the farms. We do have a competitive advantage that allows us to look to the projects ahead of us, in Portugal, with confidence, which will allow us to reach our growth objectives in this market, and also to be strong contributors to the solar business.

What about the Hydropower plants’ business, what is Efacec’s view of the future and the strategy defined to reach it?

Ever since the 90’s up until now, we’ve seen major investments in Portugal as far as water resources and large dams’ exploitation is concerned, in which Efacec has participated actively both in the building of small and medium-sized hydro exploitation plants of Agilde, Roxo and Ruivães, as well as larger dams like Alqueva II, Ribeiradio and Ermida, Salamonde and Foz do Tua. This active participation allowed us to develop skills
and to accumulate know how in the BOP – Balance of Plant, electromechanical and hydro mechanical areas, as well as in project management. This allows us to be a player as far as Hydropower plants with a capacity to develop medium power/dimension under an EPC contract are concerned, and to be a part of larger projects for hydropower plants and dams, partnering with the most important players in the market. This way, we manage to split the risk and share experiences with supplementary entities in the engineering business. The end of a cycle of larger investments in the Hydropower business in Portugal and the know how and experience acquired and accumulated, allows us to confidently look at the future and to replicate our international experience as we successfully enter such markets as the African and very likely the Latin American market also.

What about the future of the substation business, how do you see it?

O negócio das Subestações na Efacec existe desde a década de 80. Tem The substation business is part of Efacec since the 1980’s. Its references are spread out throughout the world, up to 500KV, in places like Brazil and Georgia where, in 2016, we finished building a new 500/220KV substation with great success, under a turnkey contract. Because of this globalisation, Efacec has accumulated both know-how and experience, as well as skills that encompass different areas, such as construction, designing, sizing, supplying, managing, supervision and commissioning. This experience has been evolving through very strong skills, as far designing and sizing are concerned. As to our managing, supervising and commissioning skills, we’ve been following the market’s trends and evolution when it comes to using new calculation tools and 3D designing. We’ve also been reinforcing our skills in project and risk management, and this has allowed us to be more efficient and to have better outcomes when building our projects. The challenge in the next few years will be to consolidate our presence in Central Europe, Chile and Africa, namely in Northern Africa and Southern Africa, where we hold a strong position. We also want to put this advantage together with our entrance into new selected markets and by improving our customer acquisition.

We use internal cross-selling to strengthen our presence and our products’ integration in the markets, due to the LCC manufacturers’ strong competition and presence. We also seek to strengthen our partnerships and to maximise the usage of products manufactured by more competitive clients.

We’ll also be increasing our presence and our references in the GIS – Gas-Insulated Switchgear, substations’ segment, seeking out new partners, and investigating and developing skills as far as the HVDC is concerned.

Paulo Vaz - Unidade de Negócio de Automação

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José Sousa - Unidade de Negócio de Ambiente e Indústria