Deutsche Bank 2008 Energy & Utilities Conference. Fred Fowler President and CEO

Transcription

1 Deutsche Bank 2008 Energy & Utilities Conference Fred Fowler President and CEO May 28-29, 2008

2 Safe Harbor Statement Some of the statements in this document concerning future company performance will be forward-looking within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements, and you should refer to the additional information contained in Spectra Energy s Form 10-K and other filings made with the SEC concerning factors that could cause those results to be different than contemplated in today's discussion. Reg G Disclosure In addition, today s discussion includes certain non-gaap financial measures as defined under SEC Regulation G. A reconciliation of those measures to the most directly comparable GAAP measures is available at the end of this packet and on our website. 2

3 Strategically Located Assets 2007 Natural Gas Throughput 3.6 Tcf Miles of Transmission Pipe 18,000 Miles of Gathering & Processing Pipe 58,500 Miles of Distribution Pipe 35,000 Storage Capacity 265 Bcf Retail Customers 1.3 million 3

4 2007 Accomplishments $1.53 ongoing fully diluted EPS - 9% over our $1.40 employee incentive target Strong earnings at all businesses Excellent 4Q07 $0.47 ongoing fully diluted EPS Capital expansion plans delivered: $1 billion in expansion capex 13 new projects in-service totaling about $650 million 10-12% return on capital employed $20 million corporate cost reduction Strong investment grade balance sheet IPO of Spectra Energy Partners at a record yield Successfully launched Spectra Energy and delivered on 2007 financial, operational and investment commitments 4

5 2008 Outlook and Beyond Expect to exceed our $1.56 ongoing, fully diluted EPS employee incentive target for 2008 Committed to dividend growth Increased by $0.04/share to $0.92/share in January 2008 Expect to increase to $1.00/share in July 2008 Continue to execute on Capex plans $1 billion+ per year spending through 2010 $1.5 billion in projects expected in-service during 2008 Expansion projects expected to add $500 million in incremental annualized EBIT by 2011 Aggressively pursuing post-2010 opportunities 2008 Long Term Incentive 50% based on TSR relative to a peer group of companies for three years Targeting ~ 8% compounded annual ongoing diluted EPS growth 5

6 Natural Gas Flows: Shifting Sources, Growing Demand Demand Volume CAGR : Combined SET Markets 2.5% Northeast 1.6% Southeast 4.1% Pacific Northwest 1.9% British Columbia 1.1% Ontario 1.5% Lower States 1.6% Source: ICF International (Formerly EEA), January 2008 Supply Basins Major Spectra Energy Markets Current Supply Flows Future Supply Push 6

7 Well-Positioned for Growth Expansion Opportunities Pine River Expansion South Peace Pipeline West Doe Phase II Dawn Area Storage Tribute Storage Dawn Storage Deliverability Dawn-Trafalgar Phase III M&NE Phase IV (Canaport TM ) M&NE Phase V AGT East/West post 2010 West Project Egan Storage Expansion TIME II (Phase II) Lebanon Connector TIME III Northern Bridge Moss Bluff Storage Expansion Gulfstream Expansion (G-2) Glade Spring Copiah Storage SE Supply Header Gulfstream III & IV Algonquin J-2 Islander East Ramapo NY City Extension TEMAX Steckman Ridge Storage 7

8 Significant Growth Projects Organic Growth Projects (Execution) Expansion Project Segment Status Execution agreement with shippers completed, currently in permitting process and/or in construction Segments: UST = U.S. Transmission UST (SEP) = Part of U.S. Transmission but is Spectra Energy Partners project Dist = Distribution WC = Western Canada Transmission and Processing Est. CapEx CapEx ($MM) In-Service M&NE Phase IV (Canaport TM ) Expansion UST Execution 320 2H08 Ramapo UST Execution 245 2H08 Dawn Storage Deliverability Dist Execution 120 2H08 TIME II (Phase II) UST Execution 90 2H08 Gulfstream Phase III UST (1/2 SEP) Execution 65 2H08 Egan Storage (Caverns 4 & 3) UST (1/2 SEP) Execution 60 / 140 2H08 / 2H09 West Doe Phase II WC Execution 5 / 40 2H08 / 2H09 Dawn-Trafalgar Pipeline Phase III Dist Execution 75 2H08 Pine River Phase 3 WC Execution 45 2H08 Glade Spring Expansion UST (SEP) Execution 20 2H08 Gulfstream Phase IV UST (1/2 SEP) Execution 75 1H09 South Peace Pipeline WC Execution 130 2H09 Dawn Area Storage Dist Execution 35 / 15 1H09 / 2H09 Algonquin J-2 Expansion UST Execution 35 2H09 AGT East to West UST Execution 395 2H09 Northern Bridge UST Execution 45 2H09 M&NE Phase V UST Execution 255 2H10 Total Organic Projects in Execution $ 2.2 B 8

9 Significant Growth Projects Organic Growth Projects (Development) Expansion Project Segment Status Est. CapEx ($MM) In-Service TEMAX UST Development N/A 1 2H10 TIME III UST Development N/A 1 2H10 Total Organic Projects in Development Total Organic Projects (incl( Execution) $.7 B $ 2.9 B Development in various stages of negotiation 1 Not Available - Scope of project subject to change Segments: UST = U.S. Transmission UST (SEP) = Part of U.S. Transmission but is Spectra Energy Partners project Dist = Distribution WC = Western Canada Transmission and Processing 9

10 Significant Growth Projects Greenfield Projects Expansion Project Segment Status Est. CapEx ($MM) In-Service Tribute Storage Dist Execution 35 1H08 Southeast Supply Header UST Execution 500* 2H08 Steckman Ridge Storage UST Execution 140 1H09 Total Greenfield Projects in Execution $ 0.7 B * We are currently analyzing the costs for SESH; this amount could increase by 15-20%. Execution agreement with shippers completed, currently in permitting process and/or in construction Segments: UST = U.S. Transmission UST (SEP) = Part of U.S. Transmission but is Spectra Energy Partners project Dist = Distribution WC = Western Canada Transmission and Processing 10

11 Significant Growth Projects Major Opportunities post-2010 Expansion Project Segment Status Est. CapEx ($MM) Moss Bluff Storage Expansion UST (1/2 SEP) Execution 115 Major Opportunities post-2010 (Execution) $0.1 B Gulfstream Expansion (G-2) UST (1/2 SEP) Development N/A 1 NY City Extension (formerly Rockaway Beach) UST Development N/A 1 Copiah Storage UST Development N/A 1 West Project UST Development N/A 1 Islander East UST Development N/A 1 Lebanon Connector UST Development N/A 1 Total Major Opportunities post-2010 $4 B $5 B Development in various stages of negotiation 1 Not Available - Scope of project subject to change Segments: UST = U.S. Transmission UST (SEP) = Part of U.S. Transmission but is Spectra Energy Partners project Dist = Distribution WC = Western Canada Transmission and Processing 11

12 2008 Projects In-Service Major Projects expected to be in-service in 2008: Southeast Supply Header Ramapo M&NE Phase IV Dawn Storage Deliverability/Tribute Time II (Phase II) Gulfstream Phase III Dawn Trafalgar Phase III Egan Storage Expansion Pine River Phase 3 Total 2008 EBIT contribution from these projects ~$90 million Additional 2009 EBIT expected to be ~ $110 million About $1.5 billion of projects expected to be placed in-service in

13 Texas Eastern Transmission Northeast Market - Rockies Supply Strategy Destination of Rockies Supply Rockies Supply ~ 1.5 Bcf/d (Bcf/d) Rockies Supply Arriving at Clarington, OH ~ Confirmed TETLP Expansions from Clarington, OH (0.695) Third Party Projects (0.400) Remaining at Ohio ~ Northern Bridge Nov, MMcf/d BP, Merrill Lynch Oakford, PA 1 TIME II Nov MMcf/d NJN, PSEG Texas Eastern Market Area Ohio New Jersey 4 TEMAX Nov MMcf/d ConocoPhillips 3 TIME III Nov MMcf/d Current Open Season Transco Interconnect 13

14 Financial Overview

15 Business Segment Overview NYSE: SE Western Canada U.S. Distribution Transmission (1) (1) Transmission & Field Services Processing (1) Texas Eastern Transmission Algonquin Gas Transmission Maritimes & Northeast Pipeline (77.53%) Gulfstream Natural Gas System (25.5%) Market Hub Partners (50%) Spectra Energy Partners (84%) NYSE: SEP Union Gas BC Pipeline & Field Services Empress System Midstream Assets DCP Midstream (50%) DCP Midstream Partners (15.05%) NYSE: DPM (1) Represents Spectra Energy Transmission ( SET ) 15

16 Strong First Quarter 2008 ($ millions) 1Q08 1Q07 Reported Net Income $ 367 $ 236 Special Items - 4 Discontinued Operations - - Extraordinary Items - - Ongoing Net Income $ 367 $ 240 Reported Diluted EPS $ 0.58 $ 0.37 Ongoing Diluted EPS $ 0.58 $ 0.38 Over 50% increase in ongoing EPS Robust commodity markets at Field Services and Empress Strong Canadian dollar Continued growth from base business: U.S. Transmission: New projects contributing to EBIT Distribution: Continued growth in storage and transportation Western Canada: Improving production outlook Field Services: Improved plant efficiencies and increased volumes Expect to exceed employee incentive EPS target of $

17 Review of Value Enhancement Plan The plan: Up to $600 million share repurchase Open Market Purchase Other negotiated transaction such as Accelerated Stock Repurchase Substantially pre-funded Proposed dividend increase From $0.92/share to $1.00/share, effective 3Q08 Almost 14% increase in 2008 Consistent with our 60% payout ratio The rationale: Excellent earnings in 1Q08 Strong commodity market outlook Solid earnings growth Strong investment grade balance sheet 17

18 2008 Crude Oil Price 2008 Crude Oil Pricing $129 05/19/2008 Fwds $122 $ Settled Prices $/bbl $108 $101 $94 $87 $80 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 SE 2008 Annual Avg Forecast Assumption as of Late Oct 2007 ($83.2) 2008 Annual Avg of Settled and Forward Prices as of 05/19/08 ($118.2) Pricing information compiled from NYMEX WTI Futures. 18

19 Commodity Exposure Overview Jan 2008 DCP Midstream s primary exposure is to NGL prices (for which we assume a 60% price relationship to oil); changes in contract mix have resulted in some exposure to natural gas DCP Midstream* * Represents Spectra Energy s 50% interest in DCP Midstream Estimated average price of crude oil for 2008 is $83 / Bbl 1 $1.00 / Bbl change in oil = ~ $12 MM change in EBIT Estimated average price of natural gas for 2008 is $8.00 / MMBtu $0.10 / MMBtu change in natural gas = ~ $2 MM change in EBIT 1 Based upon 2008 forward curve for last half of October Empress Empress is exposed to changes in frac spread Empress: estimated average frac spread for 2008 is ~ $7.25 / MMBtu 2 $0.50 / MMBtu change in frac = ~ $16 MM EBIT 2 Based upon average frac spread for 2006 and 2007 Canadian Dollar Canadian earnings are exposed to exchange rate risk Exchange rate at parity for full year $0.01 change in Fx rate = ~ $3 MM change in Net Income Hedging No hedges in place for above exposures, except cash flow hedges at DCP Midstream s MLP 19

20 Great Investment Opportunity Premier Natural Gas Infrastructure Company Attractive industry dynamics Connects diverse supply base to fastest growing markets Solid investment grade balance sheet; strong & stable cash flows Financial flexibility Solid, steady growth and attractive dividend yield Management committed to enhancing shareholder value Expect to deliver total shareholder return in excess of 10% 20

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