Strategy Presentation

Transcription

1 Strategy Presentation Milan, March 11 th,

2 Disclaimer Snam Rete Gas s Chief Financial Officer, Antonio Paccioretti, in his position as manager responsible for the preparation of financial reports, certifies pursuant to paragraph 2, article 154-bis of the Legislative Decree n. 58/1998, that data and information disclosures herewith set forth correspond to the company s evidence and accounting books and entries. This presentation contains forward-looking statements regarding future events and the future results of Snam Rete Gas that are based on current expectations, estimates, forecasts, and projections about the industries in which Snam Rete Gas operates and the beliefs and assumptions of the management of Snam Rete Gas. In particular, among other statements, certain statements with regard to management objectives, trends in results of operations, margins, costs, return on equity, risk management 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, Snam Rete Gas s actual results may differ materially and adversely from those expressed or implied in any forwardlooking statements. Factors that might cause or contribute to such differences include, but are not limited to, economic conditions globally, political, economic and regulatory developments in Italy and internationally. Any forward-looking statements made by or on behalf of Snam Rete Gas speak only as of the date they are made. Snam Rete Gas does not undertake to update forward-looking statements to reflect any changes in Snam Rete Gas 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 Snam Rete Gas may make in documents it files with the Italian Securities and Exchange Commission and with the Italian Stock Exchange. 2

3 Focused on Delivering Value along the Regulated Gas Chain Carlo Malacarne Chief Executive Officer 3

4 A Leader in the Regulated Gas Business Supply Infrastructure Sales to end users CAPITAL EXPENDITURE Driving profitable long term growth EFFICIENCY Exploit value through operational synergies and financial structure LOW RISK PROFILE Focus on regulated gas business and solid balance sheet SHAREHOLDERS RETURN Attractive and sustainable return policy A CLEAR AND SOLID VALUE CREATING STRATEGY 4

5 Agenda Business Environment Capex Plan Operational Efficiency Associates & Financial Management Final Remarks 5

6 Agenda Business Environment Capex Plan Operational Efficiency Associates & Financial Management Final Remarks 6

7 A Clear and Stable Regulatory Framework along the Integrated Gas Chain TRANSPORT DISTRIBUTION STORAGE* REGASIFICATION RAB methodology Re-valued historical cost Re-valued historical cost Parametric method for central assets Re-valued historical cost Re-valued historical cost WACC real pre-tax 6.4% (transport) 6.9% (metering) 7.6% (distribution) 8.0% (metering) 7.1% 7.6% INCENTIVES on new investments 1% for 5 years (on security capex) 2% for 7/10 years (on capacity development capex) 3% for 10/15 years (on entry capacity development capex) +2% for 8 years (on substitution of cast iron pipelines and the renewal of odorization systems) +4% for 8 years (on development of existing sites) +4% for 16 years (on new sites) +2% for 8 years (on development of existing terminals <30%) +3% for 16 years (on new terminals or development >30%) EFFICIENCY X-factor 2.1% on opex (only on commodity component) 3.2% on distribution opex 3.6% on metering opex 2.0% on opex 1.5% on depreciation 0.5% on opex * Current Regulatory framework extended until December

8 A Very Low Risk Business Factor Exposure Note Regulation Demand Low Low Clear and stable: ~ 85% of the overall business (*) with regulatory rules set for 3 to 4 years Well placed to leverage best regulatory practices No exposure in distribution and storage business Limited exposure in transport business: revenues 15% commodity linked Commodity (energy) Low Fuel gas pass-through from January 1 st, 2010 Capex Low Remunerated on the spending Proved track record in obtaining authorization and investment execution Interest Rate Low Regulatory real cost of debt reset at the beginning of each regulatory period Debt: ~60% fixed rate (duration of ~ 3 years, in line with regulatory periods) Inflation Low RAB Revenues Annually inflation linked Currency Zero 100% revenues, cost and debt denominated in euro Re-financing Low Solid balance sheet: debt ~50% of RAB 80% M/L term * In terms of RAB (Transport & Distribution) 8

9 European Gas Market Gas Demand in Europe* bcm Net Import in Europe* CAGR ~ 1.0% ~ Net import CAGR ~ 3.0% ~ Norway 200 Africa & Middle East Domestic production Russia E 2015E 2020E 2008 Additional import 2020E * Countries: EU 27 Source: Eurogas, Annual Report ; IEA, World Energy Outlook 2009 (Nov. 2009) 9

10 Italian Gas Market Cagr + 1.9% bcm Other Sectors 77.6* ~96 ~2 Thermoelectric 28.7 Cagr + 3.3% ~41 Industrial** 16.5 ~21 Residential & Commercial* 31.1 ~ E 2015E 2020E * Weather adjusted ** Include: NGV, Agriculture and Non-Energy Use Demand growth driven by thermoelectric sector Source: Italian Ministry of Economic Development and SRG estimates 10

11 Agenda Business Environment Capex Plan Operational Efficiency Associates & Financial Management Final Remarks 11

12 Investment Priorities to tackle Current and Future Challenges Strengthen security, flexibility and service quality of the gas system Create conditions for developing a Southern European gas hub Transport & LNG Selected projects to meet capacity requirements Facilitate swap among different supply sources for the domestic market Create conditions for the gas transit to European markets Storage Increasing capacity for modulation services and peak demand control Optimize balancing of the system Facilitate gas system liquidity Distribution Support gas demand growth Consolidate asset base increasing re-delivery points and profitability Proactive and selective portfolio management Increase quality of service 12

13 New Investments to strengthen Italian System Security and Flexibility Italian Transport and Storage System Peak capacity vs Peak Demand* European Main Transport System Load factor** Mscm/d ~12% ~15% Average ~3% % Peak Capacity Peak Demand Safety buffer 52% 52% 70% * SRG estimates on the basis of : an interruption of the main gas supply importation a peak day demand considering cold weather conditions ** Source: SRG estimates based on Ocse, GRTgaz, Enagas, Saggas, Gas Natural and National Grid 13

14 Gas Hub and Reverse Flow Opportunities PASSO GRIES TARVISIO GORIZIA NEGP ROVIGO LNG (CAVARZERE) PANIGAGLIA LNG NABUCCO SOUTH STREAM GALSI IGI GME MEDGAZ TRANSMED Gas hubs Existing import pipelines Existing LNG terminals Planned import pipelines Planned LNG terminals MAZARA DEL VALLO GELA 14

15 Consolidated Capex Plan billion Spending* Consolidated RAB** bn RAB Breakdown % 1.4 bn 5 bn CAGR 4.5% 100% 80% 60% % 20% E 2010E 2011E 2012E 2013E RAB incentivized RAB with base remuneration 0% Transport Distribution Storage Strong programme to fuel profitable growth in our asset base * Net of subsidies ** RAB evolution calculated assuming annual inflation rate of 2% and on the basis of the current approved regulatory frameworks 15

16 Consolidated Capex Plan Details Spending (*) Incentive scheme % Expansion & New entry points 3% premium for yrs Transport ~0.9bn ~3.4bn Regional & National Develop. 2% premium for 7 10 yrs Safety 1% premium for 5 yrs Maintenance Base return: 6.4% Spending (*) Incentive scheme % Development of new fields 4% premium for 16 yrs Storage ~0.2bn ~0.8bn Expansion of existing fields 4% premium for 8 yrs Maintenance Base return: 7.1% Spending (*) Incentive scheme % Substitution of cast iron pipes 2% premium for 8 yrs Distribution ~0.3bn ~0.8bn 50 Metering 8% allowed return Other investments Base return: 7.6% 16 * Net of subsidies

17 Solid Transport Projects to develop Capacity Requirements Reverse flow Mscm/d PASSO GRIES Po Valley infrastructure PANIGAGLIA LNG TARVISIO GORIZIA ROVIGO LNG (CAVARZERE) North- East Reinforcement South-North Developments E 2015E >2015E Import from Algeria (GALSI) MAZARA DEL VALLO GELA Transport capacity needed in Italy Existing capacity Capacity under construction Additional required capacity Engineering & Construction Feasibility study 17

18 New Storage Capacity to facilitate Gas System Development PASSO GRIES TARVISIO SETTALA GORIZIA BORDOLANO MINERBIO ROVIGO LNG (CAVARZERE) Mscm/d bcm PANIGAGLIA LNG ~13% ~35% ~ FIUME TRESTE E 0 Peak Capacity Modulation Capacity MAZARA DEL VALLO GELA 18

19 Selected Investments to increase Profitability in the Distribution Business Main projects Substitution of: ~500 km mainly of cast iron pipes 1.5 mln of old metering devices ~8% ~6.3 New connections on existing distribution network and development of new distribution network (~ 2,000 km) Start up of remote meter reading E Redelivery points (millions) 19

20 Agenda Business Environment Capex Plan Operational Efficiency Associates & Financial Management Final Remarks 20

21 Operating Costs: a solid baseline to value creation Controllable fixed costs m Controllable fixed costs Opex outperformance ~110 Allowed opex 500 ~ Outperformance: Fully retained for 3-4 years Mainly due to transport and distribution business 21

22 Savings from Integration: further cost efficiency and synergies Controllable fixed costs (in real terms) FY 2008 Total amount*: m 500 % Annual Savings* m ~ 80 Labour cost ~ 40 Launching already selected projects to exploit additional efficiency * Pro-forma figure External costs E 2012E >2012E *Based on 2008 controllable fixed costs m 27 of savings in 2009 and well on track to achieve efficiency targets Annual savings fully retained up to

23 Agenda Business Environment Capex Plan Operational Efficiency Associates & Financial Management Final Remarks 23

24 Italgas Associates: a profitable asset base Others Operational Data 2009 AES Torino 1.3 million redelivery points 147 Local Municipalities served 1 District Heating in Turin (AES Torino) Acam Gas Umbria Distribuzione Gas 2009 Preliminary Results (pro-quota) ( m) Toscana Energia Total AES Toscana Other Torino Energia companies EBITDA (*) 23 7 EBIT NET PROFIT Net Financial Debt (*) of which District Heating EBITDA = m 26 Size: EBITDA based 24

25 Solid and Efficient Capital Structure STRONG BALANCE SHEET Confirming leverage targets in the medium/long term Average (D/RAB) ~ 50% LIMITED EXPOSURE TO INTEREST RATES Benefiting current low interest rate scenario Active control of P&L results volatility in the medium term Fixed-rate debt ~60% of the total Average duration~ 3 years EFFICIENT CAPITAL STRUCTURE Maintaining and strengthening control of our financial efficiency FY Average cost of debt 2.9% Cost of debt at competitive level m LIMITED REFINANCING RISK M/L term debt: ~ 80% of the total Average M/L maturity: ~ 4 years M/L Term Debt Maturity Profile at Dec

26 Agenda Business environment Capex plan Operational efficiency Associates & Financial management Final Remarks 26

27 Confirming Attractive Shareholders Returns Yearly growth +4% 0.20 /share E 2011E 2012E Dividend policy based on DPS Semi-annual payment Dividend sustainable 27

28 A Clear Strategy to drive Performance and Value Creation CAPITAL EXPENDITURE 6.4 bln capex program for % investments financed by cash flow generation RAB: estimated 4.5% yearly increase in Incentivized RAB from ~20% to ~40% of the total EFFICIENCY Current operational efficiency outperformance: ~110 mln Additional efficiency from integration: 80 mln in 2012 Maintaining current financial efficiency LOW RISK PROFILE Fully regulated company with long term visibility Solid capital structure ATTRACTIVE & SUSTAINABLE RETURNS TO SHAREHOLDERS DPS FY2009: 0.20 DPS : expected +4% yearly increase CONTINUING TO DELIVER 28

29 Q & A Session 29

30 Strategy Presentation Milan, March 11 th,