Strategy Update. London, September 18 th, 2008

Transcription

1 Strategy Update London, September 18 th, 2008

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 forward-looking 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 Strategy Update Value creation leveraging on disciplined strategy execution Carlo Malacarne Chief Executive Officer

4 Maintaining Strategic Focus SOLID BALANCE SHEET CAPITAL EXPENDITURE To meet market needs in the long term To fuel profitable long term organic growth EFFICIENCY Operational Capital structure SHAREHOLDERS RETURNS Attractive Sustainable 4

5 REGULATORY FRAMEWORK GAS MARKET SCENARIO CAPEX PLAN EFFICIENCY COMMITMENT SHAREHOLDER RETURNS FINAL REMARKS 5

6 Tariff Approval Thermal year NEW RAB SET BY THE AUTHORITY: 12.3 bn year-end 2007 (of which 12.2 bn for transport) REVENUE FROM INVESTMENTS CARRIED OUT IN THE 1st REGULATORY PERIOD: 39 m IN THE 2nd REGULATORY PERIOD: 233 m ADDITIONAL FEE TO COVER EXTRA COSTS FOR FUEL GAS Capex fuelling revenue growth LNG: tariff criteria for the 3 regulatory period 6

7 REGULATORY FRAMEWORK GAS MARKET SCENARIO CAPEX PLAN EFFICIENCY COMMITMENT SHAREHOLDER RETURNS FINAL REMARKS 7

8 European Gas Market Trend Gas demand in Europe* bcm European net import* CAGR 2.1% ~ ~ CAGR 4.9% Net import Domestic production E 2015E 2020E Other countries Norway Algeria Russia Additional import 2020E * Countries: EU 27 Source: EU Commission Green Paper, EU Energy Policy Data 8

9 Italian Gas Market Outlook Gas demand in Italy bcm Italian net import CAGR 2.7% ~40 > CAGR 3.9% Net import Other countries Norway Libya Algeria Domestic production E 2015E 2020E Russia Additional import 2020E Source: Ministry of Industry 9

10 Gas Demand Growth in Italy 1H 2008* CCGT Programme bcm Other Thermoelectric % bcm Other 1.0 Cagr >2 % * ~114 ~1 ~53 34 GW in operation by 2011* 23.8 GW in operation/start (23.4 at the end of 1Q 2008) 8.8 GW under construction (8.4 at the end of 1Q 2008) Industrial ** Thermoelectric Industrial ** 21.4 ~26 Residential & Commercial* H H 2008 Residential & Commercial* 30.2 ~ E 2015E 2020E Under construction * Weather adjusted ** Include: NGV, Agriculture, Non-Energy Use Source: Ministry of Industry and SRG estimates * CCGT utilization estimated at an average of ~ 5,100 h/y Driven by power generation sector 10

11 REGULATORY FRAMEWORK GAS MARKET SCENARIO CAPEX PLAN EFFICIENCY COMMITMENT SHAREHOLDER RETURNS FINAL REMARKS 11

12 New Capacity Requirements to meet Gas Demand Growth million Scm/d Transport capacity needed in Italy Additional Required Capacity Capacity under construction Existing Capacity Developing projects for medium and long term 12

13 Capex Plan billion Yearly spending RAB evolution* bln Incentive scheme % 1 bln 3.3 bln CAGR 5% Regional & National Development Maintenance Safety E 2009E 2010E 2011E Expansion & new entry points Selective programme fuelling profitable organic growth 13 * Assuming an annual inflation rate of 2% for the period

14 Capex Update Main Projects m 1 bln +64.5% In progress Maintenance Safety Regional & National Development Expansion & new entry points In Progress: Mazara-Menfi Montalbano-Messina Rende-Tarsia-Morano Martirano-Rende Mortara-Alessandria-Oviglio Flaibano-Gonars Poggio Renatico-Cremona Enna compressor station Poggiorenatico compressor station The capex breakdown is included in the tariffs proposal 1H H 2008 FY 2008 Galsi New framework agreement to be finalized On track to deliver capex programme 14

15 Galsi: a major project Design and engineering phase New entry point capacity: 8 bcm/y 600 km pipelines New 40 MW compressor station 15 Final investment decision expected at the beginning of 2009

16 Ongoing Key Projects for South-North Developments New network capacity at entry point : ~13 bcm/y Gonars Grado Gorizia Villesse North- East Reinforcement New network capacity at entry point : ~12 bcm/y Po Valley Additional East-West network flexibility Additional gas import by 2015: +35% Planning, authorization and construction increase vs Panigaglia LNG Capacity expansion from 3.5 bcm/y to 8 bcm/y GALSI New entry point capacity: ~8 bcm/y

17 Solid Projects Platform driving Sustained Capex KEY PROJECTS ON STREAM BEYOND 2011 Gonars Grado Gorizia Villesse yearly spending South-North Developments North- East Reinforcement > 1 billion Panigaglia LNG Po Valley 17

18 Further Significant Investment Potential Beyond 2015 To meet gas demand increase To catch gas hub opportunities bcm CAGR ~2.0% NEGP NABUCCO SOUTH STREAM GALSI IGI GME MEDGAZ TRANSMED Source: SRG estimates Gas hubs Existing import pipelines Existing LNG terminals Planned import pipelines Planned LNG terminals 18

19 REGULATORY FRAMEWORK GAS MARKET SCENARIO CAPEX PLAN EFFICIENCY COMMITMENT SHAREHOLDER RETURNS FINAL REMARKS 19

20 Cost Efficiency Controllable fixed costs (in real terms) UP TODAY Regulatory target: -6% In the second regulatory period SRG Commitment -15% In the second regulatory period Achieved in 2007 FURTHER EFFICIENCY MATCHING ADDITIONAL COSTS OF INCREASED OPERATING ACTIVITY Controllable fixed costs Transport infrastructure Million -~15%* Km Mw 2008 External costs Labour cost Cost reduction* , km +133 Mw , ,889 31, Network in operation Compression power *In real terms 20

21 Capital Structure: efficiency in cost of capital LEVERAGE COST OF DEBT Regulatory target: 41.2% In the second regulatory period Regulatory target: 4.67% In the second regulatory period Achievements: 62.9% At the end of 1H 2008 Achievements: 4.2% At the end of 1H 2008 Significant outperformance vs regulatory targets 21

22 Capital Structure: strong balance sheet LEVERAGE Book value (D/D+E) 1H 2008 RAB (D/RAB) 62.9% 49% Book value (D/D+E) Average RAB (D/RAB) 65% ~50% Cash Cash flow flow from from operation: ~ 4 4 billion 1H 2008 DEBT STRUCTURE Floating 45% 55% Fixed & Inflation linked Sustainability of funding M/l term debt: ~ 79% of total Average maturity: ~ 4.5 years Fixed rate average duration: ~ 3.5 years Reduction of interest rate volatility 22

23 REGULATORY FRAMEWORK GAS MARKET SCENARIO CAPEX PLAN EFFICIENCY COMMITMENT SHAREHOLDER RETURNS FINAL REMARKS 23

24 Delivering on Shareholders Return INTERIM DIVIDEND 2008 CASH OUT /share 2007 Final Dividend May 22 nd 0.13 / share 0.23 billion +12.5% Interim Dividend October 23 rd 0.09 / share 0.16 billion = 2008 Overall cash distribution 0.39 billion Expected 2008 DPS Up ~10% vs 2007 Sustainable Competitive yield in the Utility sector Yield** 5.1% ** Overall cash distribution/ 1H 2008 average market cap (net of treasury shares) 24

25 REGULATORY FRAMEWORK GAS MARKET SCENARIO CAPEX PLAN EFFICIENCY COMMITMENT SHAREHOLDER RETURNS FINAL REMARKS 25

26 SRG s Value Proposition Delivered & Confirmed STRONG BUSINESS FUNDAMENTALS Consistent strategy with long term visibility Stable and valuable regulation PROFITABLE ORGANIC LONG TERM GROWTH Strong capex platform with promising further opportunities Operating and financial efficiency Solid capital structure ROBUST RETURNS TO SHAREHOLDERS Attractive and sustainable dividend Competitive yield 26

27 27 Q & A Session

28 Strategy Update London, September 18 th, 2008