A turn towards decarbonisation pursuing the sBTI (Science Based Target Initiative) goals through thedevelopment of investments to recover natural resources, the gradual exit from the most polluting businesses, the extension of district heating and the intensification of Waste to Energy (WTE) processes. Double down on the Environment and Water businesses (organic growth investments, innovation).
Strategic guidelines, risks, and mitigation actions
Strategic guidelines, risks, and mitigation actions
A concrete, visible and flexible plan to manage the risks implicit in the various trends.
80%
Regulated
20%
Unregulated
8,2 Bn €
60%
Development
40%
Maintenance
8,2 Bn €
Low execution
risk
risk
High predictability
of results
of results
High
flexibility
flexibility
Main implications on the new Plan
Main implications on the new Plan
The three strategic pillars in addition to translating the ambition of the Iren Group are also the most relevant implications of the new Business Plan.
- Derisking Decarbonisation
- Derisking for positioning in regulated or semi-regulated businesses
The objective is to optimise cross-selling between enterprises, expand the range of services in different geographical locations, prioritise investments in areas of presence, targeting the needs of local markets. Focus on local consolidation.
- Diversified and resilient business model
Optimisation of quality (actual and perceived) and customer experience across all businesses by leveraging new digital solutions and processes (e.g. call centre insourcing).
- Service quality and customer loyalty as resilience factors
Exposure of business areas to trends
Exposure of business areas to trends
In like with the industry trends identified, strategic and cross-cutting guidelines are provided. The exposures of the main business lines to industry macro-trends are presented below. Networks and Environment are in fact the segments most favourably impacted by the expected trends.
After browsing the table more can be learnt about the risks implicit in the trends and the mitigation actions proposed in the 2024-2030 Business Plan for each Business Unit.
Networks
Waste management
Energy
Market
Corporate
Electricity
Gas
Integrated Water System
Cross themes
-
Main strategic risks implicit in trends
- Business and reputational risks in the event of disservices or service interruptions
- Reputational and business risks linked to the technological and digital inadequacy of networks
Derisking Target @2030
-35%
System Average Interruption Duration Index (SAIDI) vs 2023
Main mitigation actions
- Network resilience interventions aimed at ensuring the improvement of performance, commercial security and technical quality and the quality of assets
- Upgrade to networks of the future through the acceleration of investments to support the electrification of consumption (distributed generation, electric vehicles) and digitalisation (2G smart meters, remote control)
- 5 new primary stations
- Interventions for network resilience through the National Recovery and Resilience Plan (PNRR)
+93%
Regulatory Asset Base (RAB) growth vs 2023
-
Strategic risks implicit in trends
- Stranded assets to reduce consumption faced with the drive towards electrification
- Industrial technical risk due to transition to new technologies for the energy transition (e.g. hydrogenation of networks)
- ESG risk for potential risks on network security (i.e. network losses) due to the acquisition of minimum territorial areas (ATEMs)
Derisking Target @2030
>97%
Gas networks Hydrogen blend ready @2030
Main mitigation actions
- Maintaining the current network in reference territories and during the energy transition/digitalisation
- Network replacement to increase security
+18%
Regulatory Asset Base (RAB) growth vs 2023
-
Main strategic risks implicit in trends
- Environmental risks associated with water abstraction
- ESG and business risks related to security in terms of network losses
- Operational efficiency and service quality risks
Derisking target @2030
20%
Water losses (traditional territory @2030)
257
Water withdrawals from the environment (liters/inhabitant/day - all areas)
+73%
Regulatory Asset Base (RAB) growth % vs 2023
Main mitigation actions
- Maintenance and adaptation interventions for the reduction of environmental risks related to water abstraction (e.g. dam maintenance) to improve operational efficiency and the quality of service
- Interventions aimed at network upgrading (i.e. leakage reduction, improvement of purified water quality, increase of drinking water rate)
- 4 new purification plants
- Interventions for network resilience through the National Recovery and Resilience Plan (PNRR)
4,265
Treatment capacity (K equivalent inhabitants)
86%
District subdivision of aqueduct networks (traditional territory)
4x
Reuse of purified water vs 2023
-
Main strategic risks implicit in trends
- Impact of climate change and hydrogeological disruption on assets
Main mitigation actions
- Increased investment in network resilience and maintenance
- Structural interventions
- Emergency service 24/24
- Redundant networks
- Development of innovative technical/economic solutions
- Preparation of development pipeline
- Consolidation in the target areas of the integrated water service and gas distribution
Collection
Treatment and Disposal
Cross Themes
-
Main strategic risks implicit in trends
- Legal and corporate risk arising from M&A transactions
- Risk of not reaching collection targets such as number of inhabitants served, million tonnes of waste collected, % of sorted waste collection
Derisking Target @2030
+43%
Waste flows collected vs 2023
5.5 mln
Residents served @2030
Main mitigation actions
- Focus on local areas of influence but with an openness to opportunities in metropolitan cities and national capitals
- Spatial development to protect flows on existing and development facilities (M&A, consolidations, tenders not only in historical local areas)
- Drive for sorted waste collection with extension of the point-based pricing model
- Drive for automation and digitalisation to increase efficiency
- Efficiency of operating costs while maintaining a high quality of service
>75%
Sorted waste collection @2030
-
Main strategic risks implicit in trends
- Risk of inefficiency and business slowdown related to landfill saturation and plants
- Risk of technical obsolescence of existing plants
- Regulatory complexity of the sector and authorisation processes for disposal and material recovery plants
- Plant design delays and over costs (e.g. CO2 capture plants) due to potential inefficiencies in the supply chain
- Risk implementation for plants with innovative technologies
- Risk of non-achievement of ESG targets
Derisking Target @2030
+101%
Emissions avoided from waste recovery (ktCO2 vs 2023)
+84%
Recovery of material (kton vs 2023)
+320%
Biomethane produced (Mm3 vs 2023)
Main mitigation actions
- Contribution to the achievement of recycling and recovery targets through the development of plants (6 new)
- Optimisation of waste streams
- Design of landfill extensions or new constructions
- Expansion of energy recovery capacity (4 WTE Turin line, 2 WTE of which one in Gioia Tauro)
- Reduction of technical and industrial risk with maintenance on existing plants (e.g. plastic recycling plants)
- Interventions on circular material treatment plants (sludge, plastic, wood, paper) with a positive reputational and environmental impact
- Continuous planning and monitoring, with a dedicated cross-business task force for project authorisation and dialogue with entities
+63%
Waste treated (kton vs 2023)
+60%
Electricity from WTE (TWh vs 2023)
-
Strategic risks implicit in trends
- Change in prices of recycled materials
- Impact competitive dynamics on optimising sources and uses in the plastics supply chain
Mitigation actions
- Differentiation of flows and plant implementation plans on the different supply chains
- Renegotiation of contracts with Municipalities
- Increased collection base and treatment capacity
- Consolidation of the collection service in the local areas of reference
RES
CCGT, Thermal and Heating
Energy Efficiency
Cross themes
-
Main strategic risks implicit in trends
- Reputational and business risk due to the misalignment of the emission mix with the path of decarbonisation and market standards
- Regulatory and business risk due to authorisation processes and potential delays in greenfield development of renewable plants, hydroelectric concessions
- Risk of technical obsolescence of hydroelectric plants
- Fiscal and financial risk due to volatile energy scenarios and incentive variability
- Failure to renew hydroelectric concessions
- Energy commodity price risk
Derisking Target @2030
2,060
RES capacity MW VS 814 @2022
1.3
Hydroelectric production (TWh VS 1.1 @2023)
Main mitigation actions
- RES development for decarbonising the technology mix: greenfield renewable capacity, Energy Communities
- Reducing the risk of technical obsolescence with maintenance and renewal measures in the hydroelectric field
- Renewal of hydroelectric concessions
- Drive towards energy communities
- Repowering of hydroelectric plants
- Periodic management and monitoring of energy sector risks (Risk Policy with Risk Commission, management with hedging, definition of risk metrics, etc.)
2.4
Photovoltaic and wind power generation (TWh vs 0.2 @2023)
-
Main strategic risks implicit in trends
- Technical-industrial and business risk due to the potential lack of flexibility and operational adequacy of plants
- Reputational and business risk due to the misalignment of the emission mix with the path of decarbonization and market standards
- Strategic and business risk due to potential contraction of district heating demand
- Energy commodity price risk
Derisking Target @2030
+24%
district heating volumes (Mln m3 vs 2023)
-47%
carbon intensity (gCO2/KWh) vs 2023
Main mitigation actions
- Reduction of the risk of technical obsolescence with maintenance and renewal interventions in the thermoelectric and cogeneration fields (e.g. initiatives in aerothermal energy and flexibilisation)
- District heating network development through adoption of innovation (e.g. smart grids) and levers for decarbonisation (e.g. thermal waste etc.)
- Extension of the district heating network
- Drive towards decarbonisation/circularity of the system
- Energy optimisation in the district heating network operation
- Adoption of pilot innovative technologies
- Completion of plant flexibilisation including air cooling
- Decommissioning of thermoelectric merchant generation (post 2027)
- Periodic management and monitoring of energy sector risks (Risk Policy with Risk Commission, management with hedging, definition of risk metrics, etc.)
-58%
Thermoelectric capacity and CCGT (TW vs 2023)
-
Main strategic risks implicit in trends
- Fiscal and financial risk due to the circulating absorption capacity for ISS work
- Changes in the legal/regulatory framework with negative effects on business (e.g. reduction of incentives)
Derisking Target @2030
600
Building redevelopment projects #2024-2030
Main mitigation actions
- Monitoring regulatory developments regarding incentives for energy efficiency interventions and business reorientation
- Development of integrated services portfolio complementary to energy communities for long-term value generation
- Development of service portfolio for value generation in local areas and municipalities of reference
- Developing districts starting with the upgrading of key services (e.g. schools, hospitals, public buildings)
- Integrated management of complex redevelopment projects of relevance to local areas by leveraging the smart Public Private Partnerships (PPP) instrument (e.g. security, access to limited traffic zones, parking etc.)
-
Strategic risks implicit in trends
- Risks in the authorisation and implementation of new plants or modifications to existing plants
- High level of competition on hydroelectric, electric and thermal plant concessions
Mitigation actions
- Planning, monitoring and dialogue with authorising agencies with a dedicated cross-business task force for project authorisation
- Monitoring of expiring concessions, proactive dialogue with entities and achievement of set targets, and preparing extensive development pipeline
- Preparation of extensive development pipeline
- Consolidation of the district heating and public lighting service in the target areas
Customers
Services
-
Main strategic risks implicit in trends
- Strategic and business risk of margin reduction and increased churn rate due to competitive pressure and quality standards/customer engagement
- Strategic and business risk of customer base reduction due to aggressive actions by competitors, extraordinary repricing and overshooting of higher protection
- Risk of non-return of Capex Call To Action on customers with high churn rate
- Risk of lack of effectiveness of commercial campaigns
- Energy commodity price risk
Derisking Target @2030
+18%
customer base #M vs 2023
+46%
Heat sold (TWht vs 2023)
Main mitigation actions
- Investment in electricity and gas sales campaigns for the maintenance and growth of the customer base with strong mitigating impact on the strategic and business risk side
- Recurring investments in commercial campaigns to mitigate baby churn rate
- Focus on raising service quality and customisation; anti-churn policies and loyalty programmes, selection of low churn sales channels (web, counter)
- Acceleration path rebalancing acquisition channel mix in favour of pull, digital and physical store channels
- Medium to long-term Power Purchase Agreement (PPA) development with end customers (both B2B and B2C)
- Periodic management and monitoring of energy sector risks (dedicated Risk Policy with Risk Commission, management by hedging, definition of risk metrics, etc.)
+450
New stores/corner shops @2025
-
Main strategic risks implicit in trends
- Reputational and business risk due to misalignment of consumption electrification efforts with the market trend
- Business risk due to pressure on margins and churn rates due to competing “any-to-any” ecosystems (service platforms with integrated customer experience)
- High level of competition on new products and developments
Derisking Target @2030
150
Stand-alone insurance and services contracts (k vs 20 @2023)
Main mitigation actions
- Numerous investments aimed at mitigation of risks related to the achievement of targets and strategic objectives of the plan
- Investments enabling the cross-selling of IrenPlus services with strong mitigating contribution to strategic and business risk (high-fidelity home solutions)
- Development of bundled offers (including connectivity)
- Stand-alone insurance growth
People
IT
-
Strategic risks implicit in trends
- Loss of key skills with repercussions on achievement of objectives
- Difficulty in finding specialised professional profiles in line with evolving business needs and/or traditional profiles
- Difficulties in implementing non-inclusive policies/conduct
- Difficulties in implementing new leadership models in view of the changing environment with possible repercussions on the execution of strategic guidelines
Mitigation actions
- Critical skills mapping, retention and corporate welfare initiatives, compensation & benefits policies, back-up figures
- "Multi-channel" personnel selection (e.g. "IrenFutura," Linkedin, specialised sites, social pages); change management/training programs
- Diversity management initiatives and programs
- Leadership Project
-
Strategic risks implicit in trends
- Growing complexity of the transformation process, affecting project implementation
- Lack of resilience of IT/ OT systems due to causes attributable to vendors, cyber attacks, natural events, ...
Mitigation actions
- PMO skills acquisition and training
- Training/procedures; access control, backup and restore
- Business Continuity Management model implementation