TRANSITION AND FOCUS, REVISED GUIDANCE AND
ENGIE SUPPORT
- Focus on mainstream business lines: Grid Support and
Microgrids
- Technology play in the new market segment of utility-scale
Solar-plus-Storage
- Longer term play on e-mobility with Vehicle-to-the-Grid
applications
- Slower growth during the transition, 2020 revenue guidance
reduced to €40m, outstanding €100m revenue target postponed to 2022
and Backlog1 reduced to €36m
- Reaffirmed support of ENGIE and financial backing
confirmed
Regulatory News:
ENGIE EPS’ (Paris:EPS) Chief Executive Officer, Carlalberto
Guglielminotti presented today the 2020-2025 Long Term Strategic
Plan to the Board of Directors of Electro Power Systems S.A. (ENGIE
EPS).
The Board of Directors of Electro Power Systems S.A. (ENGIE EPS)
approved the new strategic focus, the 2020 revised target, and the
2022 financial guidance. The Board of Directors also acknowledged
the 2020-2025 Long Term Strategic Plan presented by the
management.
* * *
ENGIE EPS’ Strategy has been historically focused on two storage
market segments, as represented in its 2018 Registration
Document:
- Grid Support Solutions: where ENGIE EPS’ technology is
aimed at providing customers with large scale hybrid storage
solutions and energy storage systems to master the intermittency of
renewables and address the burgeoning demand for ancillary
services; and
- Off-Grid Power Generation Solutions, or
“Microgrids”: ENGIE EPS’ technology in this market is
aimed at enabling renewables as a reliable and affordable
stand-alone power source in emerging markets, displacing diesel and
oil-fired generation.
In addition to the above two segments, as announced in 2017 with
the 2020 Strategic Plan, ENGIE EPS has long been nurturing
important ambitions in e-Mobility, as the expected game changing
impact of electrical vehicles could provide a storage and power
electronics expert such as ENGIE EPS with significant growth
potential. In this sector, ENGIE EPS has maintained active R&D
efforts, and most importantly acted as a technology partner to Fiat
Chrysler Automobiles (FCA) since 2016 and will continue its
technological play in the segment of Vehicle-to-the-Grid.
REFOCUS ON MAINSTREAM BUSINESS
The new strategy strengthens the focus on Grid Support and
Microgrids market segments, but with a renewed and more streamlined
approach.
(1) Microgrids
This market segment, historically core for ENGIE EPS and
characterized by the diesel replacement business model in off-grid
or weak grid areas, now includes also the new segment
Solar-plus-Storage:
- Off-Grid Microgrids: this solution continues to
represent an important share of ENGIE EPS’ pipeline2. The customer
value proposition of this application is enabling renewables as a
reliable and affordable stand-alone power source in emerging
markets, displacing diesel and oil-fired generation with all-in
cost competitive solutions.
- Utility-Scale Solar-plus-Storage: 2018 and so far 2019
witnessed the taking off of “Solar-plus-Storage” market around the
world. Driven by the extensive deployment and falling costs of
solar and storage technologies, more and more power producers,
operators and investors assessed the convenience of a centralised
application with solar and storage coupled onsite.
(2) Grid Support
In this segment ENGIE EPS will address standalone multi-megawatt
scale storage plants aimed at providing grid operators and
conventional power plants with energy storage systems addressing
the burgeoning demand for primary, secondary and tertiary reserve,
reactive power and black-start capabilities, aimed at lowering grid
costs and therefore electricity. In addition, this segment includes
large scale energy storage systems for power quality applications
and demand side management, addressing mainly commercial and
industrial users, as well as e-mobility.
- Utility-Scale Storage: this application includes all
standalone utility-scale plants in front-of-the-meter built to
provide services at the grid level, including ancillary services,
energy-shifting, peaking capacity and transmission services. This
market will be big in the short and mid-terms, while it might be
partially cannibalized after 2030 by behind-the-meter
installations.
- Thermal Power Plants retrofitting: ENGIE EPS has a great
experience in hybridization of thermal power plants, particularly
after the successful commissioning of the 20MW system in Spain and
the new 7 MW project in Italy with ENGIE.
- Power Quality: this application includes large-scale
storage solution aimed to provide commercial and industrial users
with energy storage systems including different services, namely
reducing their energy bills, by peak-shaving their consumption
profile, optimizing the utilization of distributed generation,
enabling participation in demand-response schemes, and furthermore
delivering sustainable power-quality and backup power.
- Vehicle-to-the-Grid: the diffusion of EVs is expected to
dramatically change the electric grid scenario in the next few
years. Vehicle-to-the-Grid applications to stabilize electrical
grids with EVs and second-life battery use in stationary storage
might be a game changer.
SELECTIVENESS ACROSS BUSINESS LINES
ENGIE EPS has historically addressed on a global scale emerging
countries and developed economies on a wide scope of existing and
future solutions.
However, selectiveness and focus will be instrumental for ENGIE
EPS to fully deliver the ambitious growth targets.
In this respect, the new strategy outlines the necessity for
ENGIE EPS to prioritize efforts and resource allocation on the
markets where: (i) storage is most promising, e.g. with favorable
regulation and already announced tenders and (ii) ENGIE has the
ability to support the ENGIE EPS efforts.
To the same extent, ENGIE EPS will sharpen its business segments
and focus exclusively to the newly rationalized mainstream
businesses.
BUSINESS MODEL AND BACKLOG UPDATE
Eventually, in terms of business model, since 2015 ENGIE EPS had
started a strategic shift from a pure technology provider play to
an EPC contractor business model to address its customers’ needs to
have a turn-key contractor and single point of responsibility.
In the new strategy EPC activity will continue to be a valuable
business model in Off-Grid Microgrids, Utility-scale Storage,
Thermal Power Plant retrofitting and Power Quality.
For the new Solar-plus-Storage segment ENGIE EPS cannot
realistically provide EPC solutions because of the very large size
of projects inconsistent with ENGIE EPS’s balance sheet.
Nonetheless ENGIE EPS has already defined with ENGIE Solar a
suitable structure where ENGIE EPS can leverage its competitive
advantage by playing its natural role as a system integrator and
technology provider for the energy storage system, or even for the
power island in the case of projects of limited size. This would be
the case for the project with ENGIE Solar in Mexico, where ENGIE
EPS negotiated with ENGIE Solar an expanded role as supplier of the
entire power island.
The short term consequence of this adjusted strategy is the
reduction of the Backlog from €52m to €36m. However this ensures a
more sustainable business model for ENGIE EPS in the medium term,
especially in light of the larger size of Utility-Scale
Solar-plus-Storage tenders already announced in the market.
REVISED 2020 TARGETS, ENGIE SUPPORT AND LONG TERM
AMBITION
The refocusing and selectiveness approach outlined in the
2020-2025 Strategic Plan, coupled with the Backlog reduction
arising from a more industrial and technology oriented business
model, implies slower growth during the transition.
Therefore the 2020 revenue guidance has been reduced to €40m and
the outstanding €100m revenue target postponed to 2022. Results of
the new strategy should materialize in the medium term, with a
sustained strong revenue and margin growths. In this respect, the
ENGIE EPS management has presented an indicative ambition for 2025
of €400m revenues in its 2020-2025 Long Term Strategic Plan.
In this context, ENGIE has confirmed its strong support for the
new strategy, through:
- including ENGIE EPS in the scope of the Renewables Global
Business Line which will be implemented in the next few weeks3;
and
- meeting ENGIE EPS’ short term cash needs and working capital
exposure in form of intercompany lending
***
The Investor Conference Call is scheduled on 24 June 2019 at
8:00am CET, the dial-in and the presentation will be available on
the corporate website: engie-eps.com/financial-calendar.
In addition, the webcast of the investor conference call will be
available on the corporate website: engie-eps.com/media in the
Investor Call section, on the same day starting from 1:00pm.
***
About ENGIE EPS
ENGIE EPS is part of the ENGIE group and specializes in
microgrids and storage solutions that enable intermittent renewable
sources to be transformed into a stable power source. Listed on
Euronext Paris (EPS:FP), ENGIE EPS is listed in the CAC® Mid &
Small and the CAC® All-Tradable indices. Its registered office is
in Paris and conducts its research, development and manufacturing
in Italy. Thanks to technology covered by 130 patents and
applications, ENGIE EPS develops utility scale energy storage
systems to stabilize electrical grids that are heavily penetrated
by renewable sources in developed countries, and microgrids in
islands and emerging economies to power off-grid areas at a lower
cost than fossil fuels. More information on www.engie-eps.com
About ENGIE
Our Group is a global reference in low-carbon energy and
services. In response to the urgency of climate change, our
ambition is to become the world leader in the zero-carbon
transition "as a service" for our customers, in particular global
companies and local authorities. We rely on our key activities
(renewable energy, gas, services) to offer competitive turnkey
solutions. With our 160,000 employees, our customers, partners and
stakeholders, we are a community of Imaginative Builders, committed
every day to more harmonious progress. Turnover in 2018: EUR 60.6
billion. The Group is listed on the Paris and Brussels stock
exchanges (ENGI) and is represented in the main financial indices
(CAC 40, DJ Euro Stoxx 50, Euronext 100, FTSE Eurotop 100, MSCI
Europe) and non-financial indices (DJSI World, DJSI Europe and
Euronext Vigeo Eiris - World 120, Eurozone 120, Europe 120, France
20, CAC 40 Governance).
1 Backlog means, as of a given date, the estimated revenues and
other income attributable to (1) purchase orders received,
contracts signed and projects awarded as of the date hereof, and
(2) project development contracts associated with a power purchase
agreement, where the agreed value is a price per kWh of electricity
and an amount of MW to be installed. 2 Pipeline means the estimate,
to date, of the amount of potential projects, tenders and requests
for proposal for which the ENGIE EPS Group has decided to
participate or respond. 3 The creation of this Business Line is the
subject of a consultation process with the ENGIE’s relevant
employee representative bodies and will therefore take effect at
the end of this process in July 2019.
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