Gaz de France. Storage. Leading position in Europe. Gaz de France. Investor Day 22 May 2007

Transcription

1 Storage Leading position in Europe

2 Disclaimer The objectives summarised above are based on data, assumptions and estimates deemed reasonable by. The said data, assumptions and estimates may evolve or be changed as a result of uncertainties due in particular to the economic, financial, competitive, regulatory or weather conditions. In addition, the materialisation of certain risks factors described in Chapter 4 of the Document de Référence filed with the Autorité des marchés financiers ( AMF ) under Number R on 27 April 2007 (hereinafter referred to as the Document de Référence ) could have an impact on the group s operations and its ability to achieve its objectives. In addition, achieving those objectives is dependent on the success of the commercial strategy described in Chapter of the Document de Référence. consequently disclaims any undertaking and gives no representation as to the fact that it will achieve its objectives and does not undertake to publish or issue possible revisions or updates of such forward-looking statements or information, beyond what is required by the laws and regulations with which it must comply. This communication does not constitute an offer to purchase or exchange or the solicitation of an offer to sell or exchange any securities of Suez or an offer to sell or exchange or the solicitation of an offer to buy or exchange any securities of, nor shall there be any sale or exchange of securities in any jurisdiction (including the United States, Germany, Italy and Japan) in which such offer, solicitation or sale or exchange would be unlawful prior to the registration or qualification under the laws of such jurisdiction. The distribution of this communication may, in some countries, be restricted by law or regulation. Accordingly, persons who come into possession of this document should inform themselves of and observe these restrictions. To the fullest extent permitted by applicable law, and Suez disclaim any responsibility or liability for the violation of such restrictions by any person. The ordinary shares to be issued in connection with the proposed business combination to holders of Suez ordinary shares (including Suez ordinary shares represented by Suez American Depositary Shares) may not be offered or sold in the United States except pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, or pursuant to a valid exemption from registration. In connection with the proposed business combination, the required information document will be filed with the AMF and, to the extent is required or otherwise decides to register the ordinary shares to be issued in connection with the business combination in the United States, may file with the United States Securities and Exchange Commission ( SEC ), a registration statement on Form F-4, which will include a prospectus. Investors are strongly advised to read the information document filed with the AMF, the registration statement and the prospectus, if and when available, and any other relevant documents filed with the SEC and/or the AMF, as well as any amendments and supplements to those documents, because they will contain important information. If and when filed, investors may obtain free copies of the registration statement, the prospectus as well as other relevant documents filed with the SEC, at the SEC s website at and will receive information at an appropriate time on how to obtain these transaction-related documents for free from or its duly designated agent. Investors and holders of and Suez securities may obtain free copies of documents filed with the AMF at the AMF s website at or directly from on its website at: or directly from Suez on its website at: as the case may be. 2

3 Introduction Yves Colliou Chief Operating Officer for the "Infrastructures" Branch

4 Storage in Group Group Energy Supply and Services Infrastructures Exploration & Production Purchase / Sale of Energy Services Transmission Storage France Distribution France Transmission and Distribution International Storage activities 4

5 Underground Natural Gas Storage Jean-Marc Leroy Vice-President Major Infrastructures Division

6 Contents Storage to grow in value as European storage needs increase Well established European leader with 50 years of successful track record Unique position in France, a non-price regulated market Leverage commercial offering to create value Robust outlook, driven by development and internationalisation 6

7 Contents Storage to grow in value as European storage needs increase Well established European leader with 50 years of successful track record Unique position in France, a non-price regulated market Leverage commercial offering to create value Robust outlook, driven by development and internationalisation 7

8 Review of traditional storage needs Storage to grow in value as European storage needs increase 1 Adjust demand versus supply Annual modulation Seasonal modulation (summer / winter) Optimise transmission & production infrastructures Manage security of supply Supply disruption: pipeline incident, extreme weather conditions Gas demand injection Storage withdrawal LNG import Pipeline gas import injection 8

9 New needs emerge from gas market development Storage to grow in value as European storage needs increase 1 Meet shorter flexibility requirements Weekly: week-to-week variation due to temperature, holidays Daily: day-to-day variation (working days / weekends) Hourly: e.g. peak consumption in morning / end afternoon Optimise gas fired power generation plant dispatch Gas supply flexibility Spark spread: arbitrate between power generation means Allow development of arbitrage Spot / "futures" markets Geographical opportunities Seize future price opportunities / mitigate risks (seasonal spread, ) Respect stringent service public obligations (supply disruption) Match needs of gas transmission network 9

10 10 Example of seasonal and geographical arbitration Gas price projection ( /MWh) janv-01 mai-01 sept-01 janv-02 mai-02 sept-02 janv-03 mai-03 sept-03 janv-04 mai-04 sept-04 janv-05 mai-05 sept-05 janv-06 mai-06 sept-06 janv-07 mai-07 sept-07 janv-08 mai-08 sept-08 0 NBP Zeebrugga Henry Hub Geographical opportunity Seasonal arbitration 1 Storage to grow in value as European storage needs increase

11 Flexibility needs will follow growth in gas demand Storage to grow in value as European storage needs increase Expected gas demand growth of ~ 2%/ year on Gas demand in the EU-25by sector 1 Source: WEO 2004,IEA 11

12 Growth in imports will reinforce need for flexibility Storage to grow in value as European storage needs increase 1 Imported gas to replace domestic production EU dependency will grow from 40% in 2005 to 75% in 2020 Distance from supply source to increase Flexibility decline linked to production decline Storage: a strategic means of securing supply bcm European Gas Production and Imports Production Net imports Source: WEO 2004,IEA 12

13 Limitations to flexibility tools competing with storage Storage to grow in value as European storage needs increase 1 Swing on long-term contracts Producers less inclined to negotiate long-term contracts with high swing level Flexibility gas production Decrease due to expected EU production decline Gas market hub Limitation in terms of availability / capacity Customer interruptible contracts Commercial limits Linepack / LNG "peak-shaving" Technical limits (capacity) 13

14 How underground storage will benefit from growth environment Storage to grow in value as European storage needs increase Current storage volume to double in 2025 i.e +4 % / year CAGR Storage volume in 2006: 63 bcm In bcm 2.8 IEA estimate: Additional EU storage requirements up to bcm Clingendael estimate: + 60 bcm in Source: IGU 2006 / GSE 2007 Source: Clingendael the European market for seasonal storage

15 Storage to grow in value as European storage needs increase 1 15 Europe offers the world s strongest growth opportunities Global market (as of Jan. 2006) ~ 320 bcm of working volume 11.5 % of global gas consumption 3 main regions Global annual growth rate of 1.7% per year, since 1989 Track record of growth rate > 5% per year in Europe Worldwide storage market per region (%) Europe Former Soviet Union Source: Cedigaz % Other areas 40 Working volume annual growth (%) Average 1.7% 0.25 North America 2.2 Former Soviet Union North America 5.3 Europe

16 Development will be driven by market value of storage Storage to grow in value as European storage needs increase 1 Gas price summer Market value of storage = Intrinsic value + extrinsic value Intrinsic value winter Intrinsic value: differences in gas prices between summer / winter summer Extrinsic value + option value (risk mitigation) t 16 Extrinsic value: day-to-day arbitration indexed on current and future price of gas

17 Storage value to be further increased through internal efficiencies Storage to grow in value as European storage needs increase Intrinsic High Low Seasonal Spreads Increasing Value Costs* Marketing Storage Capabilities Price Volatility 1 Low Extrinsic High * Costs to inject, withdraw & store 17

18 Development of storage M&A transactions Storage to grow in value as European storage needs increase Dynamism of storage market is emphasized by the emergence of storage market asset transactions Examples: Site sold Type of storage Country date Transaction price Byley Salt cavern UK /cm Humbly Grove Depleted field UK /cm 1 18

19 Contents Storage to grow in value as European storage needs increase Well established European leader with 50 years of successful track record Unique position in France, a non-price regulated market Leverage commercial offering to create value Robust outlook, driven by development and internationalisation 19

20 Development background 1956 Beginning of injections in Beynes new aquifer facilities : Cerville, Saint-Illiers, Chemery 1970 First cavern facility Tersanne Gournay sur Aronde Well established European leader with 50 years of successful track record Etrez (salt cavern) new aquifer facilities : Soings, Saint-Clair, Germigny 1990 Pointe du Lac (Canada) 1992 Saint Flavien (Canada) 1993 Manosque (salt cavern), Céré (aquifer) 1994 Pozagas (Slovakia) 1995 Purchase of Trois Fontaine gas field 2001 Peckensen (EEG - Germany) 2003 PEG (Germany) 2007 Amgaz / Depomures (Romania) 20

21 Mastering all storage technologies & skills Expertise in all forms of underground storage Aquifer Porous storage - Seasonal needs Depleted field Salt cavern Short duration Well established European leader with 50 years of successful track record 2 Capabilities to design, construct, maintain and operate underground storage facilities Geological and geophysical expertise in common with E/P Development of specific storage expertise: simulation models Focus on safety and environmental protection Increasing performance and availability of facilities to offer improved services and meet new market requirements 21

22 Major assets in France and abroad CANADA Pointe du Lac Reltbrook (filiale PEG) Well established European leader with 50 years of successful track record Saint Flavien Goumay-sur-Aronde Cerville Saint-Clair-sur-Epte Trois Fontaines Saint-Illiers Beynes Soings-en-Sologne Chémery Céré-la-Ronde FRANCE Germigny- sous- Coulombs Tersanne Manosque Alsace Sud Etrez Peckensen (filiale EEG) GERMANY Fronhofen (filiale PEG) Hauterives Schmidhausen (filiale PEG) Gasag SLOVAKIA Lab 4 (filiale Pozagas) Lab 1, 2, 3 (filiale Nafta) 2 Aquifer 22 Salt cavern Depleted fields New facilities

23 operates 14 bcm in total capacity, ~20% of European capacity 23 Well established European leader with 50 years of successful track record 2 * April 2007 France* Aquifers facilities 8.6 bcm Salt cavities 0.9 bcm Germany Involved in approx. 1.1 bcm share 440 mcm (incl. 123 mcm operated by others) Slovakia Involved in approx. 2.4 bcm share 507 mcm Romania Involved in approx. 350 mcm (exp. to 900 mcm planned) share 183 mcm (exp. to 495 mcm planned) Canada Involved in approx. 133 mcm share 57 mcm

24 2 nd largest technical capacity in Europe 12.9 In technical capacity ( bcm) Well established European leader with 50 years of successful track record 2 Stogit Italy 8.8 Gaz de France (France) 5 E.ON Ruhrgas Germany NAM Netherlands Wingas Germany MOL Hungary Centrica Storage UK 2.3 Enagas Spain TIGF France VNG Germany RWE Transgas CS OMV Austria 1.9 RWE DEA Germany NAFTA Slovakia BEB Germany Source : Ergeg, monitoring report of TPA, 2006 ( volume figures) 24

25 France: 12 underground storage facilities 9 aquifers facilities (8.6* bcm) 3 salt cavern facilities (0.9* bcm) Well established European leader with 50 years of successful track record Expansion underway: Trois Fontaines (depleted field) Alsace (salt cavern) Hauterives (salt cavern) 2 25 Lacq *April 2007 Aquifer storage facility () Salt cavern storage facility () Aquifer storage facility (TIGF) Planned storage facility ()

26 Germany: Key positions Well established European leader with 50 years of successful track record Operated by Group (PEG, EEG) share capacity (WG) mcm Reitbrook PEG 50% + Mobil 175 Schmidhausen PEG 33% + Mobil + BEB 50 Fronhofen PEG 34 Peckensen EEG 60 Interests (operated by others) Berlin-Grunewald GASAG 112 Empelde PEG 7.5% (through EGM) 11 total capacity: approx. 1.1 bcm EMPELDE Duisburg Wuppertal Duesseldorf Frankfurt GDF-PEG REITBROOK Bremen Hannover Kassel Hamburg Leipzig Muenchen GDF-PEG PECKENSEN Berlin Dresden GRUNEWALD 2 Aquifer Salt cavern Depleted fields GDF-PEG FRONHOFEN GDF-PEG SCHMIDHAUSEN 26

27 Romania: High growth potential Well established European leader with 50 years of successful track record 2 Operated by the Group share capacity (WG) mcm Depomures 50% 150 Amgaz 65% + Romgaz 32.5 total capacity (mcm) Depomures Amgaz 300, will expand to , will expand to 300 ROMANIA Tirgu-Mures (Depomures) Nades-Prod-Seleus (Amgaz) Bucarest UGS in depleted fields GDF subsidiary, in service Romgaz 27

28 Slovakia: A strategic position in Europe Operated by Group share capacity (WG) mcm Nafta 234 Well established European leader with 50 years of successful track record Pozagas 273 total capacity (mcm) Nafta (Lab 1, 2, 3) 1,730 Bratislava SLOVAKIA Depleted fields 2 Pozagas (Lab 4) 631 Gajary Baden (project)

29 Natural gas storage is a specialist business Capital intensive activity with long lead times Type of storage Working Volume Million cm Typical investment M (*) Lead Time (**) Aquifers 2, years Well established European leader with 50 years of successful track record 2 Depleted field 2, years Salt cavity years Source: Clingendael the European market for seasonal storage 2006 * Cushion gas included (0,1EUR/cm) - ** Except geophysical campaign Operations requiring specific and rare skills Geophysics Large industrial management project Authorisation for developing storage (reservoir) HSE* management * Health, Safety, Environment 29

30 Contents Storage to grow in value as European storage needs increase Well established European leader with 50 years of successful track record Unique position in France, a non-price regulated market Leverage commercial offering to create value Robust outlook, driven by development and internationalisation 30

31 A non-regulated clear legal framework Unique position in France, a non-price regulated market 3 2 directives for 2 objectives European legal framework: Security of supply (2004) Internal market liberalisation (2003) Ensure 3rd party access to storage Give alternatives for Member states: regulated non-regulated French transposition ( ): storage is a non-regulated market Prices are fixed by the storage operator No price regulation European voluntary guidelines: Guidelines for Good Practices for Storage System Operators (GGPSSO) Compliance with GGPSSO shows a transparent and non-discriminatory access to storage 31

32 Capacity follows end-customer: underlying principle for security of supply and market liberalisation Unique position in France, a non-price regulated market End-customers Storage rights right: profile J x consu. right: profile M x consu. Supplier allocation (Σ right) of the customer portfolio 3 32

33 Capacity dedicated to end-user rights is sold at price defined by storage operator Unique position in France, a non-price regulated market Total customers in France right Storage capacity dedicated to end-customers and suppliers Sold at price defined by the storage operator 3 33

34 Remaining capacity auctioned at market price Unique position in France, a non-price regulated market right Capacity available to any supplier Storage capacity dedicated to end-customers and suppliers Auctioned at market price Sold at price defined by the storage operator 3 34

35 s strength in managing change Unique position in France, a non-price regulated market Storage - 1 st January customers EDF trading Sempra trading Merrill Lynch Rhodia Total EDF Altergaz Gas Natural Storage - 1 st June customers Gazprom trading Poweo Distrigaz SPE GRTgaz Essent Négoce Eon Ruhrgas RWE trading Soteg Vitol ENOI ENI 3 35

36 Development of storage market has accelerated s capacity to innovate and adapt rapidly Unique position in France, a non-price regulated market 3 Diversity of storage customers: Energy companies: Gas, power producers Incumbent / new actor Transmission system operators Industrials Traders Banks Speed of market evolution: 2 years Larger number of market players Increased ability in: Information System Marketing Sales Cost efficiencies Technical process Reactivity and Creativity: New commercial skills New operational modes 36

37 Contents Storage to grow in value as European storage needs increase Well established European leader with 50 years of successful track record Unique position in France, a non-price regulated market Leverage commercial offering to create value Robust outlook, driven by development and internationalisation 37

38 Competitive commercial offering in France Leverage commercial offering to create value Storage services are transparent and competitive Recent improvements further develop flexibility Auction results emphasise offering value Objective: develop new products to extract more value 4 38

39 Transparent and competitive basic offering Main characteristics Basic duration: one year, beginning on April 1 st Leverage commercial offering to create value Storage combined on the basis of their performance and geographical location => 6 groups Bundled / unbundled capacities based on the physical characteristics Injection (i) Volume (v) Withdrawal (w) Transparent services i v w 4 All information: rates, weekly inventory level available on: 39

40 Storage rates driven by gas storage performance Leverage commercial offering to create value Aquifer Gas storage Group Ile de France Sud 1.2 Total 9.5 Working gas volume Gm 3 TWh 14 Picardie Centre Lorraine Ile de France Nord Salins Sud (Salt cavern) Withdrawal days Rates* /year MWh * April

41 Competitive storage rates Storage rates maintained within the European average Rates for period Leverage commercial offering to create value Price EUR/MWh Average storage rates French storage services Other European operators 4 41 Withdrawal duration (days) Source: CRE (French gas regulator) 2006 annual report

42 Increased flexibility to generate more value Leverage commercial offering to create value Conditional withdrawal / injection capacity option Inventory or capacity transfer option Day-Ahead daily service Daily injection / withdrawal capacity Transfer option (secondary market) 4 42

43 2007: innovative offering improvements to further increase flexibility More flexibility in capacity access More flexibility in use Leverage commercial offering to create value Title cession or transfer of right of use Secondary market development New transnational Platform via Internet operated by Fee: % of transaction Additional capacity auctions Stock 1 st april More flexible tunnel limits : permeable limits one day Intra day reversal of flow 31 st march 4 43 Ever-increasing transparency to simplify storage use: eg: Daily information available in 2007

44 Auction results emphasise value of service offering Leverage commercial offering to create value 4 Gas storage capacity auctions Capacity unlinked to end-user storage rights Mainly additional capacity Internet: secure electronic platform Auction > market price 2007 examples 7 March March May

45 Auction prices: double base rate Auction prices for 7 March 2007 sales Leverage commercial offering to create value (EUR/Mwh) Centre IDF N IDF Sud Salins 4 Auction price (EUR/Mwh) Basic storage rate (EUR/Mwh) 45

46 Contents Storage to grow in value as European storage needs increase Well established European leader with 50 years of successful track record Unique position in France, a non-price regulated market Leverage commercial offering to create value Robust outlook, driven by development and internationalisation 46

47 Strong growth track record in France Robust outlook, driven by development and internationalisation Storage activities revenues (in MEUR) (objective) 47

48 Strategy for growth and value creation Robust outlook, driven by development and internationalisation Enhance attractiveness of storage capacity offering Enrich service offering Develop and increase storage capacity liquidity on secondary market via new internet platform Drive for operational excellence Maintain and develop team skills Ensure technical reliability Optimise operations Develop storage portfolio capacity Develop existing assets Optimise permit portfolio Seize external growth opportunities 5 48 Maximise competitive strengths and create more value

49 Develop existing assets Robust outlook, driven by development and internationalisation 5 Salt cavern storage: new caverns France Etrez Germany Peckensen Porous: Reservoir extension France: Céré La Ronde, Germigny, Saint Clair sur Epte, Saint-Illiers Chemery / Soings, depending from geological surveys (3D seismic survey in process 2007) Romania: Depomures Amgaz 49

50 Continued growth momentum expected in France Robust outlook, driven by development and internationalisation 5 50 Working volume: + 1 bcm in Total working gas (Gm 3 ) 8,6 9 Investment: 150 to 200 MEUR/year* 2005 Typology of new storage facilities (in %) * without cushion gas , Storage facility Salt cavern Depleted fields Aquifer 10

51 Wrap-up Robust outlook, driven by development and internationalisation 5 Storage needs (modulation, flexibility, security of supply) are growing faster than European natural gas market European storage market is emerging and developing In this market: has key positions An important working gas volume At competitive rates With a unique flexibility storage development plan will create value: High technical / marketing skills Share common expertise/synergies with Exploration & Production division Pan-european position 51

52 Thank you for your attention It s time for questions!