Vito GamberaleFuture networks.Infrastructure governance for developmentand sustainabilityMeeting «Industry» 2012Rome, September 29, 2012Vito Gamberale
Vito Gamberale2TABLE OF CONTENTS– Infrastructure networks in Italy Pg. 3– F2i and the development of networks and industries Pg. 17o Gas Pg. 24o Water Pg. 31o Renewables Pg. 35o Airports Pg. 40o TLC Pg. 45o Highways Pg. 51o Development of new industries Pg. 55– Conclusions Pg. 59
Vito Gamberale3Infrastructure networks in Italy
Vito Gamberale4Infrastructure networks in Italy●Industry services offered to citizens inevitably imply the concept ofnetwork.●Networks are necessary to reach the users in any location at any time, ifpossible.●There are various types of networks and «networking companies»:– infrastructures: for transportation (ports, airports, highways, railways,etc.), energy (power, gas, district heating, etc.), supply/disposal (water,sewage, waste, etc.), technology (telephone, internet, TV, satellite networks,etc.).– services (these usually make use of the infrastructure networks): mail,logistics (transportation of people, goods, etc.), commercial/industrial(distribution, supply chains, etc.).
Vito Gamberale5Infrastructure networks in Italy●Networks of any kind are built on nodes and branches that link themto each other.●In order for a network to be effective and efficient, it is necessary that:– single nodes are functional: not only do unnecessary nodes preventimprovement of the network performance, but they also generate additionalcosts that lead to diseconomies– branches link nodes rapidly and effectively, otherwise some nodes,including important ones, could result in being inadequately connected.●As for infrastructure networks, today the representations of twoexamples of European, and maybe worldwide, excellence are here:highspeed railway network and power distribution network. Both aremanaged by «national champions» that merge service, developmentand profit!
Vito Gamberale6Infrastructure networks in Italy●Let’s focus on infrastructure networks, the area in which I operate. In Italythere are still some critical situations, as some networks arecharacterised today by:– small nodes, that sometimes outnumber demand (e.g. airports)and sometimes cannot fully supply demand (e.g. waste toenergy plants)– a lack of modern and efficient branches (e.g. highways,telecommunication networks).
Vito Gamberale7Infrastructure networks in ItalyAirports– Thanks to 33 airports ofnational/regional relevance,1Italy is the first Europeancountry for airport density onthe territory…Regional/national airport density (n. ofairports/100,000 km2 - 2011)1Airports with over 100,000 passengers/year.Average number of passengers per airport – inmillions(airports with over 100,000 passengers/year - 2011)Source: Assaeroporti and the main airport associationsof the represented European countries.– …these airports are usually smallcompared to those of majorEuropean countries…4.509.013.546.180.001.002.003.004.005.006.007.008.009.0010.00Italy Germany France Spain11687024681012Italy Germany France Spain
Vito Gamberale8Infrastructure networks in ItalyAirports– …the gap widens if we consider the average traffic in the biggestairports (>1 mil passengers/year):Average number of passengers per airport –in millions (airports with over 100,000passengers/year – 2011)Source: Assaeroporti and the main airport associationsof the represented European countries.6.2610.899.018.300.002.004.006.008.0010.0012.00Italy Germany France Spain
Vito Gamberale9− Italy still has few operating plantscompared to main Europeancountries…− …and these plants are usually verysmall.Operating WTE plantsWTE plants average capacity(thousands of tons of disposed solid urbanwaste/year)Infrastructure networks in ItalyWaste to energy plants5270130020406080100120140Italy Germany France100429154050100150200250300350400450Italy Germany France
Vito Gamberale10− Given an average of 1kg/inhabitant of waste production per day, Germany andFrance could dispose of almost their entire waste production with waste to energyplants. Italy just one-fourth of it!!●The lack of WTE plants makes Italy, of all big European countries,the country that most resorts to landfills for waste disposal (over50% of its total solid urban waste production)!Infrastructure networks in ItalyWaste to energy plantsWTE capacity per inhabitant(kg/inhabitant/year)86367309050100150200250300350400Italy Germany France
Vito Gamberale11– Italy’s highway extension, compared to population, is much below theEuropean average:European highway network – Density per inhabitant(network km per million inhabitants)Average = 179 km/mil inhabitantsData: CIA The World Factbook 2010●This shows that Italy needs to develop over 4,000 km of newhighways to match the European average.Infrastructure networks in ItalyHighways111156 166328-50100150200250300350Itlay Germany France Spain
Vito Gamberale12– Italy (excluding Milan, the best cabled city in Europe thanks toMetroweb) is placed in the lower ranks in terms of broad band networkpenetration (>1Mbit/s)…Infrastructure networks in ItalyTLC networksSource: Eurostat23%26%41%49%49%50%51%52%54%54%54%57%57%58%61%62%64%64%67%69%70%70%70%75%76%80%80%83%0% 20% 40% 60% 80% 100%RomaniaBulgariaGreeceSlovakiaItalyPortugalCyprusHungaryLithuaniaCzech Rep.LatviaPolandSpainIrelandAverageSloveniaAustriaEstoniaFranceMaltaLuxembourgUKBelgiumGermanyFinnlandNetherlandsDenmarkSweden% of homes connected to Broad Band networks in Europe(Dec. 2010)
Vito Gamberale13– …and average download speed is among the lowest of the mostdeveloped countries:Infrastructure networks in ItalyTLC networksMbit/sKoreaSwedenNetherlandsSwitzerlandTaiwanDenmarkBelgiumNorwayPortugalGermanyJapanFranceUSAUKCanadaRussiaSpainAustraliaPolandTurkeyChinaBrazilGreeceItalyMexicoArgentinaSouthAfricaIndiaIndonesiaEgypt
Vito Gamberale14Infrastructure networks in ItalyGas distribution●Besides the examples presented above, another widespread featurewas the extremely limited dimension of the network operators forlocal public services, that are characterised by low concentration and,therefore, by small investments to provide a strictly standardised,innovative and quality service.●Some examples: the gas distribution sector, with over 250 operators,whose rationalisation F2i is contributing to (see later)…Over 250 operators22,6%17,0%6,5% 6,5% 6,1%3,1%2,3%1,7%F2iRetiItalia23.1%17.3%6.5% 6.1% 5.9%3.2%2.3%2.1%ERG10.1%2iG3.2%G64,0%
Vito Gamberale15Infrastructure networks in ItalyWater system●…and the water system, also characterised by limited concentration because of alocal (municipality/province) outreach of its managing companies:15MdARIEOthers134295125122Data from:BCGData from: BCGITALY SPAIN FRANCEFirst 3operators25.8%Others74.2%Others65.0%Others38.0% Others30.0%First 3operators35.0%First 3operators62.0%First 3operators70.0%LISTED MULTI-UTILITY COMPANIES BIG MUNICIPALISED COMPANIESAbout 3,000otheroperatorsMarketshare1. Other minor subsidiaries: SAP, AM Ter, Idrotigullio, Acos and Asp (Piedmont), ASA Livorno (Monza), Astea (Marche), Aquenna (Sicily)29.5%24.3%46.2%
Vito Gamberale16Infrastructure networks in Italy●Therefore, overall, Italy is characterised by an inefficient management ofsome infrastructure networks, which determines a gap with Italy’s mostdirect competitors in Europe (Germany, France, as well as Spain).●This gap has of course negative effects on other industry sectors aswell, for which infrastructures represent a connective tissue.●I developed my industrial expertise inside of big companies. This makes mebelieve that infrastructures in Italy need big, credible and financiallysolid entities in each sector, operating at a national level and capable ofproviding significant investments to develop and innovate thenetworks.●The government can no longer play this role nowadays because of alack of public financing that, in the past, was the engine of infrastructuredevelopment. An efficient management of infrastructure can thereforeonly be achieved through private financing, as long as this source offunding remains healthy and non-speculative.●These are exactly the inputs that brought the concept of F2i, aprivate, yet institutional fund, which can aggregate existinginfrastructures in industries using the funds from their assetmanagement to allow for their development.
Vito Gamberale17F2i and the development of networks and industries
Vito Gamberale18– Thanks to a fundraising of 1,852 mil€, F2i is the biggest fund operating inItaly and counts among the biggest country infrastructure fundworldwide.– F2i was created as a private, yet institutional tool by high standingsponsors, who contributed to the establishment of the Fund’s solidreputation: the government, through CDP major Italian banks (Unicredit, Intesa SanPaolo) an important international bank (Merrill Lynch – BoA) the networks of former banking foundations and private welfarefunds life insurance companies and pension funds.F2i and the development of networks and industries
Vito Gamberale31.7 mil € (1.9%)26.8 mil € (1.6%)19F2i created 6 industries, reunited in a structured group, committing over1,670 mil€ (90% of total fundraising).1,668.1 mil €GASRENEWABLESTRANSPORTATIONWATERAIRPORTSTLCCommitted436.4 mil € (26.2%)272.9 mil € (16.4%)129.5 mil € (7.8%)489.2 mil € (29.3%)228.1 mil € (13.7%)53.5 mil € (3.2%)Investments currently in the portfolio+ Dismissions+ Fund management costs= COMMITTED TOTALF2i and the development of networks and industries75% 85.1%100%100%100% 40%40%100% 70%29.8%87.5% 61.4%15.7%100%49.8%26.3%Water branchParmaSasternetF2i TLC MetrowebMilan and BresciaprojectsInfracisAlerionCleanPowerF2i RenewableResourcesHFVF2i Airports GESACSEAF2iReti ItaliaENELRete Gas2iGasG6 Rete GasMediterraneadelle AcqueF2i ReteIdrica Italiana1,609.6 mil € (96.5%)
Vito Gamberale20– As mentioned, some sectors in Italy are very fragmented and alsocharacterised by a localistic management approach.– Many infrastructure assets have been created and managed according tothe (often political) needs of the local entities in which they are set, farfrom a global vision of strategic network for a «country economic system».– This is why many sectors are still very fragmented today, lacking areference «national champion» (following for example Veolia or GdF’sexample in France) and can hardly provide an adequate service andoperate on a larger number of international markets.– Without a national strategy for infrastructure, the other countries’ «nationalchampions» (E.On, GdF, EdF, etc.) could acquire important Italian assets.– To date the concepts of «network» and «industry» are still missing inthe various sectors.F2i and the development of networks and industries
Vito Gamberale2i Gas (formerlyE.On Rete)21ENEL Rete GasAlerionHFVInfracisMediterranea delleAcqueParma Water SystemGESACSEAMetrowebMoon and Link ProjectsSasterNetGASRENEWABLESHIGHWAYSWATERAIRPORTSTLCF2i acts as a true «public company»: each project develops with theobjective to create an industry within a specific sector, fosteringcooperation among subsidiaries and the integration of the managedinfrastructure networks:F2i and the development of networks and industriesObjective: to represent an important independent manager of gas distributionnetworks and to act as an aggregating entity in a currently strengtheningsector. Foresees independence between sales and distribution.Objective: to develop two independent entities with authoritativeshareholders, managers and management. Today the renewable energysector is afflicted by contradicting regulations that prevent its futuredevelopment in Italy.Objective: to access the closed sector of highways as referencestakeholder for companies with extremely fragmented publicshareholders.Objective: to create a «national champion» in a sector crucial to Italy,which requires great investments to modernise the existing plants,despite the demagogy created by the referendum in 2011.Objective: to create an aggregation focus in a strongly fragmentedsector, characterised by a distorting and worrisome «low-cost»predominance, mainly publicly-owned, with no specific strategy.Objective: to facilitate the development of optic fibre in the mostpopulated and developed areas of Italy.G6 Rete Gas
Vito GamberaleF2i and the development of networks and industries22− Within four years, F2i managed to offer a new business model forinfrastructures in Italy by creating a structured group of companiesand company industries, each representing a benchmark in theirrespective sector.− The companies where F2i holds the share majority or plays an importantrole in their governance, registered in 20111:− aggregated turnover: 1,530 mil €− EBITDA: 630 mil€ (EBITDA margin: 41%)− employees: 8,130− investments: 583 mil € (91% EBITDA)1Aggregated closing data 2011. Referred to: ERG, 2i Gas, G6 Rete, Alerion CleanPower, HFV, Mediterranea delleAcque, GESAC, SEA, Metroweb.●In 2011, F2i subsidiaries have invested over 90% of their EBITDA.●No infrastructure system invests such a high portion of theirEBITDA!
Vito GamberaleF2i and the development of networks and industries23− Thanks to F2i, important assets managed by foreign companies havereturned, together with their cash flows, under Italian control:●E.On Rete Gas− Gesac− G6 Rete− Metroweb
Vito GamberaleF2i and the development of networks and industries25GAS− F2i is in the gas distribution sector with the F2i Reti Italia Group,generated through the acquisition of ENEL Rete Gas (2009), E.On Rete(today 2i Gas ─ 2010) and, recently, of G6 (formerly GdF Group – 2011):Enel Rete GasF2i Reti Italia2i Gas*14.9%85.1%100%75% 25%Managed by F2i since April 2011In the future,these threecompanies willmerge in asingleoperationalcentreG6100%Managed by F2i sinceSeptember 2011* Formerly E.On Rete1Pro-forma consolidated data (2iGas and G6 are included on a 12month basis), net of IFRIC 12principle effects and extraordinarygains and losses.• Rab (mil €): 2,684• Proceeds (mil €): 6051• EBITDA (mil €): 3261 (54%)• Investments (mil €): 189• Employees (#): 2,112• Customers (#): 3,820,000• Managed network (km):56,833• Concessions (#): 1,970F2i Reti Italia54%of the EBITDA
Vito GamberaleF2i and the development of networks and industries26GASCapillary presence of F2i Reti Italiaon the territoryF2i Reti Italia− By aggregating three importantnetworks, F2i Reti Italiabecame, after just two years,the second biggest nationalplayer for market share in a stillvery partitioned sector (over 250operators).Municipalities with Enel Rete GasMunicipalities with E.onMunicipalities with G6
Vito GamberaleF2i and the development of networks and industries27GAS− The group dimensions allow significant investments that favourdevelopment, innovation, efficiency and safety of the network:Investments mil €ERG + + +1899310854% of theEBITDAOther operators ~47F21 Reti ItaliaGroup~49Benchmark €/customerOthersTransparency, qualityand safetyGrowth
Vito GamberaleF2i and the development of networks and industries28− The absence of conflicts of interest allows for transparency (particularlyas to measurments) and efficiency towards customers:GASInspected network (%) Actual average time for assistanceSource: AEEGYear: 2010AEEG1 request~30’F21 Reti ItaliaGroup60’Averagein Italy:55%1. Authority for Electricity and Gas.78%77%63%57%54%41%36%29%Enel Rete GasHeraA2AIrenG6 Rete GasEni (Italgas)E.On ReteToscana Energia
Vito GamberaleF2i and the development of networks and industries29Incentives from AEEG for safety recovery(1) (k€)(1) Includes incentives distributed during 2010 per number of odorisation measurements and dispersion in the network.50%22%12%2%14%% incentivescompared to total% marketshareOthers5/30/135/30/13 5/30/13 17%23%2%6%52%− The investment commitment creates a quality service, recognised andawarded by the gas authority!GAS8441146961.314273
Vito GamberaleF2i and the development of networks and industries30− F2i Reti Italia Group represented the main innovation in the gasdistribution sector in 2000: the group fostered and guided theconcentration process of the market.− The group’s acquisitions could bring back in Italy strategicnetworks previously controlled by foreign companies.− The presence of a big independent operator, which can rely onsolid investors, brings actual significant benefits to the gassector, by promoting efficiency and technological development tothe network.− F2i Reti Italia aims to consolidate its role as a big independentoperator in gas distribution, capable of representing a safety,transparency and efficiency benchmark for the authorities andthe entire sector.GAS
Vito GamberaleF2i and the development of networks and industries32WATER− F2i approached the water system with the acquisition of 40% ofMediterranea delle Acque (MdA) in 2010.− The company manages the integrated water system of both municipalityand province of Genoa; it delivers water to about 875,000 inhabitants.− It reports to the Iren Group, a multi-utility group in Genoa, Turin, Parmaand Piacenza, born from the merge of Iride and Enìa.− Thanks to its long water networkof over 2,500 km and its longsewage and depuration networkof 1,600 km, MdA delivers to thenetwork about 95 mil m3 ofdrinkable water.− Its current area plan includesabout 700 mil € of investments,of which 600 mil € still to beaccomplished.− MdA employs about 415 people.100% 100%60% 40%49% 66.50%IREN SpAIREN Acqua e Gas SpAMdAF2iF2i Rete Idrica ItalianaAM.TER. IDRO-TIGULLIO
Vito GamberaleF2i and the development of networks and industries33WATER− Following MdA’s successful case, F2i and Iren are currently andprogressively assigning the water activities of the Group to MdA in theEmilia Romagna region (provinces of Piacenza, Reggio Emilia andParma).− This operation rationale is to dimensionally increase MdA following, forinstance, a geographical proximity pattern.− MdA’s dimensions (turnover andEBITDA in 2011 were,respectively, about 130 mil €and 48.5 mil €) may actuallydouble at the completion ofthe assignment.− This operation will develop inthree different steps: eachwill focus on assigningactivities in each of the threeprovinces. Based on thepolitical opportunitiesavailable, both partnersdecided to start in theprovince of Parma (this firststep – currently facingopposition by the WaterSystem Agency of the EmiliaWater network EmiliaRomagna region
Vito GamberaleF2i and the development of networks and industries34The objectives of F2i’s operations are:− access a strategically crucial sector in Italy that requires importantinvestments and bringing fresh financial resources to developthe managed assest− create a partnership with IREN, the major operator in the utilitysector in Italy. This partnership scored a positive result with the MdAoperation and is currently further developing through the aggregationof the IREN Group’s water system assets in the Emilia RomagnaRegion− use the growth and consolidation opportunities of afragmented sector, creating a «national champion».To achieve this, F2i will operate on new initiatives with the objectiveto aggregate some of the major national entities of this sector.WATER
Vito GamberaleF2i and the development of networks and industries36RENEWABLES− F2i accomplished one of its first actions of investment in the renewablessector: Alerion CleanPower and HFV.− F2i accessed this sector believing and following the opening of thevarious governments towards renewable energy. F2i’s developmentplans included a 7-fold increase of the fotovoltaic capacity by 2016compared to 20101 and doubling the eolic capacity (in 2020 vs. 2010).− Such plans however cannot currently find adequate support and have,de facto, been stopped by new law regulations on the subject.Evolution of the Italian capacity and development objectives by 2016 (fotovoltaic) and 2020 (eolic)according to PANER and its updatesFotovoltaic Eolic12010 is a benchmark year for the National Action Plan for Renewable Energies (PANER) of the Italian Government.690 797 9131.2551.7182.1232.7263.7364.8505.8146.87812.68002.0004.0006.0008.00010.00012.00014.0002001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2020
Vito GamberaleF2i and the development of networks and industries37RENEWABLES− Alerion CleanPowero Listed at the Milan Stock Exchange, Alerion operates since 2003 as aninvestment company in turn-around operations in different sectors. In 2004the company accessed the renewables sector, which has become today itscore business.o This is the first greenfield investment made by F2i (agreed in March 2008),which makes it major partner holding 15% in the framework of a trade unionagreement.o Alerion has over 250 MW of operating resources (95% eolic) in 15 plants(5 in Puglia, 4 in Sicily, 3 in Campania, 1 in Molise, 1 in Lazio, 1 in Bulgaria).o Its plant portfolio includes about 100 authorised MW (in Romania). This setsAlerion among the biggest 10 operators in the Italian sector ofrenewables.o Alerion employs about 100 employees and has invested over 500 mil €,most of which in central and southern Italy.o Thanks to Alerion, F2i accessed the eolic sector as an independentoperator with development potential while remaining a listed company.o In Italy the company’s actions are extremely limited by recentgovernmental regulations on the eolic sector. In view of these new marketconditions, the government should now promote and foster theconcentration of this sector in order to allow for operators of sufficientdimension to be able to compete both in Italy and abroad.
Vito GamberaleF2i and the development of networks and industries38RENEWABLES− HFVo Holding FotoVoltaica SpA (HFV) is a joint venture, born in 2009, of F2iand the Portuguese investment company Novenergia II (institutional fundspecialised in renewable energies) with the objective to acquire fotovoltaicplants and projects.o The objective of HFV is to build and manage fotovoltaic plants by 2012 forabout 100 MW investing about 350 mil €.o To date the HFV portfolio includes already operating MW, 95% of whichhave been installed in the southern regions of Italy; after just two years thecompany is one of the five biggest players on the market.o The operating plants are distributed as follows:o 12 ground plants in Puglia (9), Molise, Lazio and Sicilyo 5 plants in agriculture greenhouses in Calabriao 1 roof plant in Emilia-Romagna.o HFV employs about 25 people, including hired employees and techniciansthat are responsible for the construction site project management and plantmaintenance.o Management efficiency and the resources made available by theshareholders allows HFV to reach its objectives despite the numerousunfavourable regulations of the past three years in this sector.
Vito GamberaleF2i and the development of networks and industries39F2i accessed the renewables sector with the objective to:− foster the development of its subsidiaries, making themindependent first-level players both in Italy and Europe− involve Italy’s depressed areas in this particular sector oftechnical innovation, creating jobs, particularly for youngpeople.− F2i’s strong commitment unfortunately clashed with ill-conceived governmental measures in this sector:o in the fotovoltaic industry, the regulations changed four times, in atimespan of over just three years. The current rates represent ¼ of the 2009rates, when HFV was founded1o in the eolic industry, the current rates (from 90 to 125 €/MWh vs. 180€/MWh in force at the time when Alerion was acquired) virtually obstruct newinvestments, also in view of the average wind in Italy (<2,000 heq/y, vs.2,200-2,500 in other big European countries).RENEWABLES1 For plants with capacity between 1 and 5 MW the planned rate in January 2013 will be 113 €/MWh vs. 360 €/MWh+ EE cost as planned in the second Energy Account.
Vito GamberaleF2i and the development of networks and industries41− At the end of 2010 F2i accessed the airport sector by acquiring 70% ofGesac, the company managing the Naples airport, Capodichino, thanksto a concession expiring in 2043.− Gesac was founded in 1980 through the input of the Naples Municipalityand Province, and by Alitalia. In 1997, following the privatisation process,the public bodies sold a participation of 70% to the UK Group BAA (laterpurchased by the Spanish Group Ferrovial).− The airbase spreads out on a 2.8 km2 ground with a 2,628 m long and45 m large runway, including 27 airplane parking lots. It includes 56 check-in desks and 15 gates.− In recent years, the company promoted a significant investment plan todevelop the airport infrastructures (over 190 mil € of cumulated Capexbetween 1998 and 2009, compared to net cumulated gains of 47.6 mil €),partly financed with public funds (63 mil €) and parlty self-financed.− The investment plan for 2009-2012 amounts to a total of 90 mil €, ofwhich about 65 mil € have been accomplished by 2011.− In 2011 Gesac managed a passenger traffic of 5.8 mil/passengers, andemployed about 300 people.AIRPORTS
Vito GamberaleF2i and the development of networks and industries42AIRPORTS− At the end of 2011, F2i purchased 29.75% of SEA shares from the MilanMunicipality; SEA manages the airport network of Milan (Linate andMalpensa airports) since 1948. The current 40-year agreement has beenundersigned alongside ENAC in 2001.− SEA and the group companies provide all the related activities andservices, such as airplane landings and take-offs, airport security, theactivities related to passengers and the handling of goods, as well ascommercial services.− Milan’s airport network is located in one of the most important areasof economic development in Europe (Lombardy’s GDP exceeds thenational GDP by 20%) and represents a bridge between the Mediterraneanregion and continental Europe.− In 2011 Milan’s airport network registered 28.4 million passengers,310,00 air flights and over 470,000 t of goods.− Turnover is about 580 mil € (net profit 54 mil €); over 5,000 peopleemployed.− Development plans include investments of about 600 mil € by 2015(capacity increase, and a third runway at the Malpensa Airport,enlargement of the Cargo area, etc.).
Vito GamberaleF2i and the development of networks and industries43AIRPORTS− Italy’s airport system is characterised by:o an excessively large number of airports with low-specific traffic, particularlyin northern and southern Italy (lower concentration in the south)o mainly public ownershipo uncertainty rate regulationso lack of investments (no significant interventions in the main airports inrecent years).PMOCTATRNCUFMXPVBSLINBGYBZOTSFTRSVCEVRNPMF FRLFLRPEGBLQ RMIAOIPSRFCO CIA FOGBRIGOANAP BDSSUFCRVTPS REGAHOOOOLBCAGPSASIE− SEA and Gesac represent two exceptions inthe national situation:o SEA manages Milan’s airport system, the onlyone, besides Rome, that has a trulyinternational dimension and is located inItaly’s most developed areao Capodichino is located in a «low-density»airport area, even though it has a large pool ofpotential users with a significantdevelopment potential.Together, these two companies managed 34.2mil/passengers in 2011, which is about 23% ofthe total Italian traffic.Airports >10 mil passengersAirports >5<10 mil passengersAirports >2<5 mil passengersAirports >0.25<2 mil passengersAirports <0.25 mil passengersHigh concentration area
Vito GamberaleF2i and the development of networks and industries44− F2i started the airport industry with a particular know-how and track record,and with a bright growth perspective:o thanks to Gesac, F2i «brought back» the considerable cash flowsproduced by the company to Italy and equipped them for growth anddevelopmento thanks to SEA, F2i recognised the needs of local bodies to sell Italy’sstrategic assets to reduce their debt and, again, prevent them fromgoing under foreign control.− The long-term objective is to promote business and infrastructuredevelopment, rationalisation and achievement of high profitability levels,with benefits for satellite activities and for the socio-economic system.− F2i pursues an investment strategy that aims to create a new airportnetwork: therefore, a concept of «national network» instead of«runway-focused» system, which would favour aggregation, theclosing of unemployed airports, and a recognisable, modern airportformat of quality.− Other possible privatisations in this sector act as drivers to develop thisstrategy in the short run, also in view of the mainly public shareholders ofmany airports. F2i focuses particularly on other important national airports(Cagliari, Genoa, etc.)."AIRPORTS
Vito GamberaleTLCF2i and the development of networks and industries46− Metroweb, founded in 1997, is the F2i controlled company with the largesturban optic fibre network in Europe, with about 3,270 km of infrastructure(lines) – corresponding to about 324,000 fibre.− The company operates as a dark fibre provider: it rents its infrastructureto TLC operators that subsequently implement their value-addedconnection services in an autonomous way.Infrastructure Dark Fibre Connectivity WEB IP-TVWireline -WirelessBusinessResidentialTelecom Operators and Service Providers End UsersInfrastructure Dark Fibre Connectivity WEB IP-TVWireline -WirelessBusinessResidentialTelecom Operators and Service Providers End UsersValue chain in the optic fibre sector− In 2011 Metroweb generated about 56 mil € revenues, with operationalmargins of about 80%. This company employs 34 people.− Metroweb services, through Fastweb, initially addressed businesses.At a second stage, also thanks to professionals who needed fast domesticconnections to work from home, the company’s offer extended to endconsumers.
Vito GamberaleTLCF2i and the development of networks and industries47− Metroweb was the engine that led to Milan’s leadership in the urban opticfibre sector (the best cabled city in Europe). Ten years ago, Milan was thesole pioneer worldwide in the new generation of networks.− However, the other Italian regions are well behind the other Europeancountries as to ultra broad band availability (in addition, these regions donot have alternative technologies to optic fibre, such as cable TV, which islargely available in other countries):% casepassed inoptic fibre●Italy’s current technological disadvantage is mainly due to theincumbent operator, which should be the driver of the networkdevelopment but is, on the contrary, stuck with debts caused byunsuccessful privatisation!Germany France UK Italy Spain Netherlands Sweden
Vito GamberaleThe privatisation of Telecom Italia– In September 1997 STET and Telecom Italia merged. The Treasury holds 45% of thepost-merge capital.– Also in 1997, about 35% of the assets (about 13 bil €) were sold (through direct salesand public offering).– A «small but hard core» holding, just 6.6% of the shares, led by IFIL (FIAT) – whichholds only 0.6%! – overtook the control of the company and replaced themanagement.– Among all analised privatisations, this is the less profitable for the government:the EV/EBITDA ratio, for example, is a 3.4-fold (compared to 7.2 of ENEL and 5.4of ENI).– After this, the company changed ownership many times (Colaninno, Pirelli, Telco,Telefonica), which led to a heavy debt and the loss of the international prestige it hadacquired in the years of STET management.– The government’s presence with Telecom Italia will persist until 2002 with the 5.2%share held by the Treasury, and until 2006 with the 2.3% share held by the Bank ofTLCF2i and the development of networks and industries48Company Year EV/EBITDA Price/PNNuovo Pignone 1994 7.39x 2.90xILVA 1995 4.03x 1.17xENI(average 5 tranche)1995 - 2001 5.40x 2.10xENEL(ony 1st tranche) 1999 7.20x 3.00xTelecom Italia 1997 3.40x 1.70xAutostrade 1999 9.40x 4.50x
Vito GamberaleThe privatisation of Telecom Italia– The following leverage buy-out operations with Telecom led to a debt «explosion»,lasting until today:Among the biggest companies, Telecom Italia is the only privatisation that was atrue and complete failure, despite the concessors and private investors whofollowed the process, and «massacred» the company with debts. Today, suchdebts prevent the company from developing its own network and help the countrygrow!TLCF2i and the development of networks and industries49Colaninnoand “CapitaliCoraggiosi”acquisitionTelecom Italia – Net Financial Position variations/ EBITDAOlimpia(Pirelli andothers)acquisitionTelefonicaenters thecompany0.71.51.62.42.32.03.22.93.2 3.1 22.214.171.124.00.51.01.52.02.53.03.51999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Vito GamberaleTLCF2i and the development of networks and industries50●Thanks to Metroweb, F2i brought back another strategic asset to Italy(used as cash-cow by former foreign partners) using its cash flows tofoster development (also supported through some equities andbalanced debt).●F2i aims to leverage on the excellent quality of Metroweb’sinfrastructures, and its technological resources and management.●Its objective is to develop a long-term project in the TLC broad bandinfrastructure sector in Milan and in other cities in Italy (starting with themost economically-advanced, which have the highest demand).●The company could develop to rise from an urban champion to sectornational champion, and act as an aggregating centre for other existingnetworks. F2i is already actively operating in this direction, withoperations in Genoa, Bergamo and Brescia.
Vito GamberaleHIGHWAYSF2i and the development of networks and industries52− Italy’s highway sector is quite closed offto new players because of the presenceof two big private operators (Atlantia andGavio) and numerous publicconcessions:o the longitudinal highways are managedby the Atlantia Groupo the main highways in the North-Westare managed by the Gavio Groupo in the Lombardy and Veneto regions,the authorities are often managed byvery fragmented public shareownershipso the southern regions (the highways ofSalerno-Reggio Calabria, andAutostrade Siciliane) are manageddirectly by ANAS.Italy’s highway networksOther operators●Public authorities, in particular, come with numerouspartners (often with no reference stakeholder) anddifferentiating issues that affect each other.
Vito GamberaleHIGHWAYSF2i and the development of networks and industries53− F2i is present in this sector since 2008, with about 26% shares of Infracis.− Infracis is a holding with participation in important highway authorities in theNorth-West regions: in important highway concessioners from the North-East: the Brennero highway, the Brescia-Padova highway, Venete, Cisa’sroad for heavy traffic.Infracis highway networkHighway networks of other authorities− These authorities represent aninterconnected network in theregions of Lombardy and Veneto,about 780 km long (about 14% ofthe entire toll network).
Vito GamberaleHIGHWAYSF2i and the development of networks and industries54●For F2i, Infracis represented an entry point in the highwaysector, with the objective of exploiting opportunities toacquire further shares of the three highway networks in itsportfolio, or other assets.●New participations in strategic assets can be accomplishedin the future, with the objective to create a new nationalprivate, yet institutional player and to stimulate a «network»approach.●F2i presents itself as the reference private partner forauthorities still characterised by a very fragmented shared-ownership and a massive public participation (especially inindustrially-strategic Italian regions, such as the Lombardy-Veneto region).
Vito GamberaleF2i and the development of networks and industriesDevelopment of new industries56− In addition to what has already been accomplished, F2i could still launchone or two new industries, folllowing the strategy of investing in existingItalian infrastructures.− Italy’s current economic-financial situation provides a particularlyfavourable background for continuous new investment opportunitiesfor F2i, in particular:− privatisation of infrastructures held/managed by local bodies− network spin-off of the multi-utility companies− sales of infrastructure assets – out of the core business – by big industrialgroups− rationalisation and sector concentration processes imposed by recentlyapproved ministerial decrees (for example local authorities in the gasdistribution and water sectors)− an upgrade need and improvement of efficiency of the infrastructure, leadingto changes in the ownership asset (broad band, TLC towers, water, WTE)− capital need by existing infrastructures to finance important new projects(highways).
Vito Gamberale57− An example of a new industry, in which F2i could invest, is the wastedisposal management (collection, treatment, disposal and energyrecovery).– The national waste market presents high levels of «pulverisation»: in2011 the nine main operators have managed only 7% of the total volumes:WastemanagementMain operators on the Italian market – per volumes disposed− On the contrary, the European waste management market – particularly inFrance, Germany and UK – is made of large operators (Veolia, Remondis,Sita Suez, Biffa).F2i and the development of networks and industriesDevelopment of new industriesBusiness modelCollection YES YES YES NO YES NO NO YES NOTreatment YES YES YES NO YES NO NO NO NOWaste to energy (WTE) plants YES YES YES YES YES YES YES YES YESLandfills YES YES NO YES YES YES NO NO NO3,3822,8001,8001,100 1,017600331 208 9001,0002,0003,0004,000Hera A2A AMARomaVeolia Iren Acea APSAcegasWasteItaliaACSM
Vito Gamberale58− We have reasons to believe that the Italian waste management marketwill have a concentration similar to the ones of our neighbouringcountries, to overcome its current inefficiency and the constantenvironmental emergencies that it causes (Naples, Palermo, Lazio, etc.).− Over the past two years, F2i has looked many times for an entry point in thissector, analysing different previous opportunities that were not finalised(HeraAmbiente, Acegas, Marcegaglia Group’s plants).− Currently, the Fund is considering to acquire a significant share of IrenAmbiente (the fifth biggest national operator), which operates in this sectorwith two WTE plants, one landfill and 16 waste treatment plants.− F2i and Iren would like to promote the company growth to a nationallevel, turning it into a «national champion» that could operate on themarket as a leader, together with Hera and A2A (currently the leaders inthis sector).− Among the growth opportunities abroad, the most solid projects alreadyfocus on established entities, still characterised by significant revampingplans and projects for the development of new sites.WastemanagementF2i and the development of networks and industriesDevelopment of new industries
Vito Gamberale60F2i was created as a private, yet institutional investment tool to aggregateexisting infrastructures into industries in order to guarantee subsidiarieswith:– operational effectiveness– balanced financial management, preventing companies frombecoming poorer through exaggerated debts and extraordinary highdividends– focus on development, reinvesting a great part of the cash flowsgenerated by strengthening the managed networks and assets.Conclusions●In a time of very poor public financing, the infrastructure gap –both quantitative and technological – needs to be filled with themodern finance model proposed by F2i: using resources from anefficient management of existing infrastructures to finance thedevelopment of new plants and works.
Vito Gamberale61– The efficiency in F2i work shows through the Fund virtually exhaustingits resources well before the earliest deadline of the investment period.– This happend even though F2i operated with extreme caution in orderto avoid hasty operations in a time of great uncertainty and a progressivelyworsening global crisis.Conclusions●This achievement led F2i to launch a new Fund that will allow itswork to progress further.
Vito Gamberale62− The new Fund will allow F2i to:− reinforce its presence wherever its participation was already(capital injections to support development, acquisitions of newpartners, etc.)− inject new investments in industries already established toallow the development of infrastructure groups leaders in theirrespective sectors− initiate new industries also starting from the investmentopportunities determined by Italy’s current economic-financialsituation− to develop:− many small nodes from bigger nodes− and− healthy trees from certain dead branches.Conclusions