Lehman Brothers European Gas Seminar

Transcription

1 Lehman Brothers European Gas Seminar Luciano Sgubini Chief Operating Officer Gas & Power Division London, May 25 th 2004

2 Disclaimer This presentation contains forward-looking statements regarding future events and the future results of Eni that are based on current expectations, estimates, forecasts, and projections about the industries in which Eni operates and the beliefs and assumptions of the management of Eni. In particular, among other statements, certain statements with regard to management objectives, trends in results of operations, margins, costs, return on equity, risk management and competition are forward-looking in nature. Words such as expects, anticipates, targets, goals, projects, intends, plans, believes, seeks, estimates, variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Therefore, Eni s actual results may differ materially and adversely from those expressed or implied in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, economic conditions globally, the impact of competition, political and economic developments in the countries in which Eni operates, regulatory developments in Italy and internationally and changes in oil prices and in the margins for Eni products. Any forward-looking statements made by or on behalf of Eni speak only as of the date they are made. Eni does not undertake to update forward-looking statements to reflect any changes in Eni s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any further disclosures Eni may make in documents it files with the US Securities and Exchange Commission. 2

3 European Gas Market & Eni Strategy 3

4 European market deregulation: convergence to a single market Market share capped Proposed Regulated and flexible Third Party Access Accounting Management Legal Ownership LUXEMBOURG IRELAND NETHERLAND ITALY BELGIUM AUSTRIA SPAIN UK Directive 2003/55/CE! 100% eligible customers by July 2007! Regulated third party access to the system except for storage facilities (regulated/negotiated)! Legal unbundling of T&D activities Negotiated and not flexible SWEDEN FRANCE GERMANY DENMARK! Major emphasis on the supply security! National independent regulatory function Transportation & Distribution Unbundling 4

5 European market: demand trend and competitive scenario European** gas demand (Bcm) +3.0% Other Powergen Driver: growth in electricity demand and start-up of new CCGT 2015 Competitive scenario! New entrants in the deregulated markets! New investments in infrastructures mainly LNG plants! Increasing role of producing countries willing to monetize their gas reserves (Qatar, Egypt, Nigeria, Iran, etc.) * * Europe includes EU 15, Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Czech R., Estonia, Hungary, Lettonia, Lithuania R., Macedonia, Norway, Poland, Romania, Serbia, Slovak R., Slovenia, Switzerland and Turkey 5

6 Europe: gas demand growth in main markets UK 2% 19 Germany Iberia France 2.4% % % 26 Demand growth Cagr (%) Italy 3% 20 Turkey 7.8% 15 Volume growth (Bcm) Eni estimates on WoodMackenzie data 6

7 Gas & Power Strategic Guidelines PRIORITIES Italy Europe! Leverage on gas demand growth respecting ceilings! Integrate commercial presence! Organic growth in power generation business! Reduce presence in regulated business! Develop profitable projects leveraging on upstream and downstream gas integration! Increase market share in attractive and fast growing markets! Developing LNG business Sustain attractive returns 7

8 G&P: Reported Operating Income by Activities Million 3,178 3,672 3, , ,529 1, , ,121 1,137 1,120 1,099 1, Q Q 2004 Transport abroad Marketing & Distribution (Italy-abroad) Powergen Snam Rete Gas 8

9 Eni Achievements in G&P: gas sales increase leveraging on international expansion Bcm Italy Internationally 5.6* /2003 Ceiling respected in the Italian gas market * * 52.6** * 52.8** First quarter data * 9.1* 18.9** 18.8** Q Q 2004 * Including gas sales in South America ** Including self consumption 9

10 G&P: Italian gas market confirms dynamic trend Bcm Italian gas demand Thermoelec. Industry Resid.& Comm *+5.3% Normalized for weather effect %* % +1% +10% % % +6% -0.1% 1Q Q Eni gas sales in Italy Final customer** Wholesalers ** Including Italgas sales ,7 11, , ,9 1Q Q

11 Eni: acting proactively in the Italian gas market opening ITALIAN DEMAND PRICE TRENDS NET OF SCENARIO (Bcm) +3.3% % Gas demand and price trends Powergen. Other 11

12 Eni: acting proactively in the Italian gas market opening (Bcm) % ~85.0 ~90.0 Italian Gas demand driven by powergeneration Powergen. Other Ceiling Eni sales! Higher flexibility in the supply contract both in Italy and abroad Supply contract! No risk on Take or Pay in period thanks to the expansion abroad and gas demand increase driven by power generation 12

13 Eni: Ongoing Expansion in the Italian Electricity Market Capacity and production development CAPACITY GW Ferrera Erbognone and Ravenna Brindisi and Mantova Ferrara TWh PRODUCTION Final Final market market share share from from 3% 3% in in to to 10% 10% in in

14 Eni: Ongoing Expansion in the Italian Electricity Market INSTALLED CAPACITY* (GW) SALES (TWh) OPERATING RESULT ( million) Q Q Q Q Q Q 2004 * In commercial operation Trading Production 14

15 Eni Regulated Asset Base STRATEGIC TARGET REGULATORY FRAMEWORK RECENT DEVELOPMENTS Reduce exposure in regulated assets according to market dynamics and industrial needs October 2003 DECREE LAW sets the new rules for ownership in both gas and electricity transmission activity:! Maximum stake allowed: 20%! Timing: within June 2007 March 2004! Sale of 9.05% of Snam Rete Gas! Total cash in: 650 mln! Gain on disposal: 519 mln In line with strategic targets 15

16 Europe: leveraging on upstream and downstream gas integration to sustain returns Gas availability Network! Monetizing equity gas! Competitive long term diversified supply portfolio! No territorial sales restriction clauses! Implementing new infrastructures for new markets TARGET 2007 Total supply 97 Bcm (Equity & Contracted) 23 Bcm/y (Greenstream Blustream and Damietta LNG) Markets! Developing in attractive and growing markets DOUBLE DIGIT IRR ON PROJECTS Sales in target markets 24 Bcm 16

17 European G&P Strategy confirmed: to become a major player in natural gas business European sales (Bcm) Eni is free to resell gas supplied by Gazprom outside Italy according to territorial restrictions clause cancellation (EU committments) CAGR +12% * Including Libyan gas in 2007 ** Including E&P direct sales ! Target markets! Iberian peninsula! Germany! Turkey! Hungary (secondary distribution)! Shippers *! Equity ** Associates Consolidated G&P E&P 17

18 G&P: 1Q 04- strong growth in European sales Bcm Associates Consolidated Shippers % ** 2003** % Q 2003** 1Q 2004** Main companies Pro quota volume sales! GVS (50%)! Galp (33.3%)! UF Gas (50%)! Iberdrola! Tigaz! North Sea G&P! Turkey ** Not including E&P direct sales of equity gas (6 bcm in 2002 and 4.5 bcm in 2003, 1.2bcm in 1Q03 e 1 bcm in 1Q 04) and Latin America sales in secondary distribution ( 2 bcm in 2002 and in 2003, 0.3 bcm in 1Q03 e 0.3 bcm in 1Q 04) 18

19 Libya: integrating upstream and downstream gas Bcm Eni Target Consolidated Start up IV Q 2004 confirmed Total physical progress is 89% 8 bcm sold at the Italian border to Italian players with take or pay long term contracts (20 years) LIBYA Transportation activity fully consolidated 19

20 Turkey: develop supply leveraging on pipeline projects Strong growth Bcm in demand 14 WoodMackenzie Global insight CERA low Eni sales Target Equity Method Consolidation of transportation activity bcm 4.5! Gas flow in line with new build up: 1.2 bcm in 2003 TURKEY Consolidated! Confirming supply of Turkish market with 16 bcm/y of gas from Russia by 2010, 8 of which are Eni s quota 20

21 Developing in Large Markets: Germany and Northern Europe Dynamic Area Baden Wurttemberg Demand Bcm Others GVS CAGR +2% North West Europe E 2007E 2010E! Interconnected/liquid market! Short Term sales opportunity Eni salestarget Eni Targets Achievements Germany and North Europe bcm Bcm , , , , Associates Consolidated! Maximize margins and sales leveraging on equity and long term supply portfolio! Strengthen GVS growth and Eni position in the German market! In February 04 Eni started direct supply to GVS. Volumes delivered will grow from 0.4 bcm to about 1 bcm beyond

22 Expanding in Growing Markets: Iberian peninsula Strong growth in demand Residential / Commercial Industry Power Generation Bcm CAGR +7% E 2007E 2010E Eni sales Target Eni presence: 14% market share Galp/ GDP Union Fenosa Gas Bcm Gas de Portugal (33%) Iberdrola UF Gas (50%)

23 Galpenergia Deal: in line with Eni strategy in gas business Deal terms Strategic results! Final agreement on March 31st! Acquisition by Eni of a 49% stake in Gas de Portugal (GDP)! GALP portfolio reorganization subject to Antitrust Authorities approval! Future cash in: 667 million! Industrial partnership to strengthen Eni s role in Iberian gas market! Focus on gas marketing activities 23

24 Portugal: Eni future role in gas market Current GALP shareholding 1st phase Eni to acquire 33.33% of Gas de Portugal REN EDP Eni Iberdrola Gov. REN EDP Eni 18.3% 14.3% 33.34% 4.0% 30.0% 33.33% % % GALP GDP GDP Petrogal! Wholesales! Transport (HP)! Distribution 24

25 Portugal: Eni future role in gas market Current GALP shareholding 2nd phase Unbundling of domestic High Pressure Network Exit of REN REN EDP Eni Iberdrola Gov. REN EDP Eni 18.3% 14.3% 33.34% 4.0% 30.0% 100% 51% 49% GDP GALP Petrogal Regulated transport high pressure gas network New GDP! Wholesales! Distribution 25

26 LNG: Eni integrated Presence in Iberian Peninsula Under construction Reganosa Sines In operation Sagunto Reganosa bcm/y start: 1Q % Union Fenosa 21% Endesa 10% Sonatrach 50% Financial institutions & Others Sagunto bcm/y start: 3Q2005 Sines 6 bcm/y start: 4Q % GalpEnergia/GDP Projects on track 50% Union Fenosa 30% Iberdrola 20% Endesa Damietta LNG Plant-Egypt (100% UF Gas) Total capacity: 7 bcm On stream: 1Q

27 LNG Prospects Total sales Bcm Direct sales Associates Egypt 1.9 Algeria Nigeria Oman Indonesia Direct sales Associates 27

28 G&P: Capex profile Billion SRG Powergen Marketing Transportation abroad % 26% 27% ~1.1! Snam Rete Gas deconsolidation! Powergen: maintenance Capex only (< 50 million ) % Aver Investments: ~ 4,400 mln in

29 Lehman Brothers European Gas Seminar Luciano Sgubini Chief Operating Officer Gas & Power Division London, May 25 th 2004