BUSINESS DEVELOPMENT ISSUES IN LATIN AMERICA

Transcription

1 BUSINESS DEVELOPMENT ISSUES IN LATIN AMERICA Iberdrola Renovables SA Julio 2007 February

2 Contents I. Iberdrola Group Numbers II. Iberdrola Renewables Growth Strategy III. Renewable countries IV. Some Data about Latin America V. One Example: The Case of Colombia VI. Conclusions 2

3 Iberdrola Group Numbers Financial Data Nine months 2007 (Billion euros) Operational Data Nine months of 2007 Total Assets Installed capacity (MW) Income Stock Market Value (30 October 2007) Net Profit (Profit year 2006: M euros) Energy Production (GWh) Energy Sales (GWh) Nº of Customers (Gas & Electricity) (millions) Nº of Employees

4 Iberdrola Group Strategic Markets Iberdrola focusses in the Atlantic Region: Four strategic markets North America: 2º Wind energy producer (in US) 3º Gas storing (in US) United Kindom: 3rd Distribution Co Among the5 major retailers 1ª Wind energy producer Latin America: 1º Private generation Co Mexico 1º Distribution Co Brazil Spain: 1 º Utility 4

5 Iberdrola Group Production Numbers Coal 6% Production Mix 2006 Cogeneration 2% Oil 2% Hydro 14% Wind 9% GWh Production Growth +10,8% % +15% Coal + Oil Combined Cycle Comb. Cycle 40% Nuclear 27% +18% Emission Free * Hidráulica + Nuclear + Eólica Driven by Low Emission Technologies

6 Iberdrola Renovables Evolution Leader in Spain CORE 2007 Startegic Plan Stock market Acquisition of Scottish Power Getting into European market Getting into US market MW MW MW

7 Iberdrola Renovables Near Future World Leader in Wind Energy Installed Wind Capacity MW Pipeline MW USA Res United Kindom 1,741 MW (26%) 364 MW (5%) 507 MW (7%) MW (62%) Spain Rest MW by 2010 USA 18% 16% 51% Spain 15% United Kindom

8 Iberdrola Renovables: Growth Strategy Medium Term Short term G r o w t h P o t e n t i a l + _ Asia Latin America Medit. S- E Low Interest USA Spain U.K. Poland France Canada Greece East Europe Germany Portugal Case-by- case oportunities _ Regulating frame / Infrastructures + 8

9 Renewable Countries: Clues for success Countries Installed Capacity (MW) In 2006 Ac Dec 2006 Feed-In Mechanism Certifictes Germany Spain Danmark Italy Netherlands U.K Portugal France Sweden Austria Greece Belgium Total More than 90% installed wind capacity in countries with feed-in tarif. High growth rates in countries with feed-in tarif No significant successes where certificates * Data as of Dec 2006 Feed-In tarif: key for success 9

10 Feed-in results in less cost for end user Bélgica Dinamarca Finlandia Italia España RU Prices for end user of wind energy are higher in countries with certificates Fuente: Communication from the Commission : The support of electricity from renewable energy sources, dic 2005 Due to higher risks, profitability required by investors under certificate schemes are higher. Final customer pays more at the end 10

11 Renewable Countries: MWs vs Mechanism Feed-in Tax Incentives Feed in Feed in Certificates Data as of dec

12 Renewable countries: average prices of wind energy in 2007 PAIS REGULACION /MWh USA Certificates/Incentives 81 Spain Feed In (RD 436) 79 United Kindom Certificates 114 Greece Feed in/ Investment subsidees 90 Francia Feed in 82,5 Polonia Certificates 74 Brasil Feed in (PROINFA) 82 12

13 Latin America: some figures (aprox) LATAM MEXICO BRASIL REP DOM CHILE COLOMBIA PANAMA PERU ECUADOR ARGENTINA GUATEMALA COSTA RICA Installed (MW) Generation mix 52%H 45%T 21%H 72%T 7%O 76%H 21%T 3%O 14%H 83%T 3% G 39%H 61%T 66%H 33% T 1%O 44%H 56%T 50%H 50%T 50%H 50%T 42%H 54%T 4%N 38%H 60%T 2% G 63%H 19%T 17% G Demand growth 5% 5,20% 4% 4,40% 5,50% 4,70% 5% 6,50% 6,20% 7% 7,00% 7% Rating (S&P) BBB+ BB+ B+ A+ BB BB+ BB+ CCC+ B+ BB BB Price range (Apr) $/MWh $/MWh $/MWh $/MWh $/MWh $/MWh $/MWh $/MWh $/MWh $/MWh Electric market Liberalized Generation Lib Liberalized Liberalized Liberalized Liberalized Liberalized Liberalized Liberalized Liberalized Monopoliy ICE Types of contracts PPAs - Licts PPAs - Licts PPAs - SPOT PPAs - SPOT PPAs - SPOT PPAs PPAs - SPOT PPAs - SPOT PPAs - SPOT PPAs - SPOT Licitaciones Allowed parties CFE - Clients Distribution Cos Distribs - Clients Distribs - Clients Distribs - Clientes Distribution Co Distribs - Clientes Distribs - Clientes Gens-Dist-Clientes Distribs -- Grandes Cl ICE Applicable laws X Law 5/07 -Regl 2008 law 2008 Law 08 Law 2004 Law 2003 / Reg 2005 NA Types of support Incentive Feed in (-) Feed in Certificate Incentive Incentive Feed in Feed in Incentive Feed in (-) Wind Potential Capacity > > > Hours (Sur) 3000 (W) (N) > (S) (Norte-Este) (C-N) (Norte) (S) (Centro) 3500 Wind share >

14 Latin America: Some facts from figures Huge undeveloped wind potential Generation mix base on Hydro + Thermal High rates of growth: concerns about availability in the future Wide ranges of prices. Some very low Ratings below investment grade: higher requirements Liberalized markets: energy competes per price In many countries renewable cannot compete w/o support Some interesting support initiatives but limited support, so far 14

15 Example of Colombia: Price history (1 Euro = CO $ CO $ = 2,69 cents of euro) Source: Empresa Operadora del Mercado XM S.A.

16 Example of Colombia: Price forecast Black = MIX 1 (H + G) Red = MIX 2 (H + G + C) BLUE= MIX 3 (H + G + C + R) US$/MWh Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Source : Estimates of generation costs, including the cargo por confiabilidad, under different generation mixes

17 Example of Colombia: Present Situation Profitability considering average investment and financing conditions together with Colombia electricity market conditions is in the range of 1% to 5% Operational Inputs : Average market values Commissioning : 2009 Investment : 2.200mUS$/MW Capacity Factor: 35-40% (above normal, considering the best resources of the country: Guajira) Electricity market price(*): 30 US$/MWh Other Income (*) ( cargo por confiabilidad, certificates ): 10-20$/MWh Depreciation: 20 years Corporate tax: 33% of EBIT Tax Incentives: Financial Inputs Tax credit up to 40% of the total investment during life cycle (*) Crecimiento anual = Inflación

18 Example of Colombia: Effect of some potential measures Possible measures to increase profitability to a prospective investor can be of two types, or combinations Additional Income (Certificates, CDMs, extras to market price, ) Total increase above the assumptions: +10 US $/MWh bp above base case +20 US $/MWh bp above base case +30 US $/MWh bp above base case Mild financing schemes (effect on ROE) * Exemption period 3 years : +170 bp above base case (equity) 2 years: +100 bp above base case (equity) 1 year : + 50 bp above base case (equity) Lower Interest Rates 0,0%: +653 bp above base case (equity) 2,5%: +260 bp above base case (equity) 4,0%: +90 bp above base case (equity) * Return on equity has been calculated estimating no witholding tax and 100% of cash flows and reserves (after debt) converted to dividends Note: Base case Equity: 70% senior debt at an interest rate of 5% 18