Duferco’s investments in power-generating assets in Italy have been performing in a satisfactory manner overall. However, if, on the one side, several aspects relating to operations have been optimized through a series of plant enhancements, on the other hand, certain unexpected regulatory changes introduced by the legislator during FY 2014 have radically affected the sector.
This has resulted in a high level of uncertainty regarding the future of renewables and any investment connected thereto. Some of Duferco’s new initiatives in this field have consequently experienced delays in their implementation until the regulatory framework is clarified and the grounds for additional investments become firmer.
Photovoltaic power plants
Most of the 11.5 MW photovoltaic capacity is installed on Duferco’s steel production facilities in Italy (predominantly in Sicily, with two exceptions in Tuscany and Friuli), with only one being mounted on third party roofs in the Apulia region. Such plants benefit from long-term incentives that were fixed by the government at the time of the commercial operation of each system. During FY 2014, however, the Decree DL n.91/2014 (which added to the adverse effects of DL n.145/2013) has implemented retroactive measures that materially reduced the incentives granted by law. Despite suffering from the effects of such rules, Duferco’s photovoltaic investments are expected to continue generating satisfactory levels of remuneration to the shareholders. The aggregate production of such plants reached 13.4 GWh in FY 2014, generating total revenues of approx. 5.7 MEUR, while the average residual life of the photovoltaic power plants is now around 17 years.
Small hydro power plants
Duferco’s run-of-river hydro power plants are concentrated in the regions of Calabria and Tuscany/ Emilia and in FY 2014 generated around 17.4 GWh of energy, entirely remunerated at long term incentivized tariffs, resulting in a turnover just over 4.1MEUR.
The plan to expand the portfolio of mini hydro power plants in FY 2014 has been hindered by uncertainties relating to the applicable legislation, which prior to the award of incentives, requires such renewable projects to qualify according to a number of criteria, based on which a limited number of initiatives are selected by state-owned GSE (Gestore Servizi Elettrici). Despite the fact that Duferco’s new initiatives were not among the successful projects, it is still the intention of the shareholders and management to develop the business and grow in the sector, provided that attractive investment opportunities are identified.
Duferco is constantly looking at new initiatives across different technologies and assessing their risk/remuneration profile, in order to understand if there is an appropriate fit with the current portfolio and strategy.
Among the latest opportunities analyzed are systems capable of converting organic waste into gas and then into electric energy. These projects seem to have the most attractive potential among those considered and are therefore currently being actively developed.
The origination business has also received a significant impulse during FY 2014, a year in which Duferco has sourced and managed approximately 1’300 GWh generated by third party power plants, mainly renewables, contracted all over the Italian territory.
In this activity, Duferco is capable of creating added value for itself and the producers by leveraging on its trading capacity and optimizing the sale of their energy production.