Spectra Energy Corp. Fred Fowler, President and CEO. Credit Suisse Energy Summit

Transcription

1 Spectra Energy Corp Fred Fowler, President and CEO Credit Suisse Energy Summit February 7, 2007

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 forwardlooking statements, and you should refer to the additional information contained in Spectra Energy s Form 10 filed 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 on Spectra Energy s Investor Relations website at Credit Suisse Energy Summit February 7,

3 The Premier Pure-Play Midstream Natural Gas Company in North America Key Investment Highlights Strategically located assets connecting the fastest growing markets with the most diverse supplies Changes in the natural gas industry are creating numerous expansion opportunities Seasoned management team with incentives based on the gas business results Strong balance sheet and stable cash flows Financial flexibility to pursue expansion projects and acquisitions Targeting 5-7% compounded annual ongoing diluted EPS growth from Credit Suisse Energy Summit February 7,

4 Strategic Asset Locations One of the Largest Pure-Play Midstream Systems in North America Credit Suisse Energy Summit February 7, Natural Gas Throughput 3.2 Tcf Miles of Transmission Pipe 17,500 Miles of Gathering & Processing Pipe 58,500 Miles of Distribution Pipe 35,000 Storage Capacity 250 Bcf Retail Customers 1.3 million 4

5 Natural Gas Flows: Shifting Sources, Growing Demand Spectra Internal Projections: Demand Volume CAGR : Combined SET Markets Florida British Columbia SET Northeast Ontario Lower 48 States Source: CERA. 2.5% 4.1% 2.8% 2.1% 2.0% 1.0% Supply basins Major Spectra markets Current supply flows Future supply push Credit Suisse Energy Summit February 7,

6 Well-Positioned for Growth ~$3 Billion of Expansion Opportunities Gas Gathering Pipelines Processing Plant Expansion St. Clair Power Dawn Area Storage Dawn Storage Deliverability Dawn-Trafalgar Phase 2 3 Canaport Cape Cod NE Gateway Project Strategy Market Pull Supply Push Time II Lebanon Connector TEMAX/Lebanon East AGT East/West Islander East Ramapo Rockaway Beach Accident Egan Expansion Moss Bluff Expansion Copiah Storage SE Supply Header Gulfstream 3 & 4 Credit Suisse Energy Summit February 7,

7 Significant Growth Projects Organic Growth Projects Expansion Projects Cape Cod Time II Dawn-Trafalgar Pipeline Phase II, III Ramapo Canaport Maritimes Expansion St. Clair Power Status In-Service 2H07 2H07 2H07 & 2H08 2H08 2H08 2H07 Gulfstream Phase III, IV 2H08 / 1H09 TEMAX / Lebanon East 2H09 Western Canadian Plant Development 2H07 & 2H08 Expansion / Growth Western Canadian Gas Development 2H08 Gathering Projects AGT East to West Development 2H09 Estimated Total Capital $1.8 - $2.2 B agreement with shippers completed, currently in permitting process and/or in construction Development in various stages of negotiation Credit Suisse Energy Summit February 7,

8 Significant Growth Projects Greenfield Projects Expansion Pro jects Northeast Gateway Status In-Service 2H07 Islander East 2H08 Southeast Supply Header 2H08 Lebanon Connector Development 2H09 Rockaway Beach Development 2H10 Estimated Total Capital $1.2 - $1.5 B agreement with shippers completed, currently in permitting process and/or in construction Development in various stages of negotiation Credit Suisse Energy Summit February 7,

9 Significant Growth Projects Storage Projects Expansion Projects Accident Storage Status In-Service Dawn Storage Deliverability 2H08 Egan Storage Moss Bluff Storage Dawn Area Storage Development Copiah Storage Development 2009 Estimated Total Capital $0.6 - $0.8 B agreement with shippers completed, currently in permitting process and/or in construction Development in various stages of negotiation Credit Suisse Energy Summit February 7,

10 Financial Overview Credit Suisse Energy Summit February 7, 2007

11 Prudent Financial Policies Guiding Principles Investment Philosophy Minimum return thresholds Returns appropriate to risk / regulatory requirements Additive to asset base / competitive position Seek Lowest Cost of Capital Yield equity (MLP, Income Fund) Project finance / JV where appropriate Leverage Investment grade profile and flexible Consistent with asset base Target 55%-60% debt-to-total capitalization over time Dividend policy Sustainable, growing dividend Approximately 60% payout ratio over time, with beginning 2007 dividend of $0.88 / share Credit Suisse Energy Summit February 7,

12 2007 Ongoing Earnings Expectations $1.40 ongoing, fully diluted EPS for Target Incentive Payout ($MM) Gas Transmission U.S. (1) Gas Distribution Other TOTAL Ongoing Segment and Other EBIT Expect 7-9% CAGR in Spectra Energy Transmission ongoing segment EBIT for 2007 through 2009 Other financial metrics: Interest Expense = $595 MM Effective Tax Rate = ~32% SET Separation Costs = $30 MM (not included above) EBIT $ Gas Transmission & Processing Western Canada 285 Field Services (2) 555 (100) $ 1,885 No New Equity Issuances Planned. Fully Diluted Shares Outstanding = 632 MM 2007 EBITDA $ 1, (100) $ 2, EBITDA includes Spectra Energy s half of Gulfstream s DD&A and Interest of approximately $40 MM. 2. EBIT represents Spectra Energy s Equity in Earnings of DCP Midstream. EBITDA determined by adding half of DCP Midstream s DD&A and Interest. Credit Suisse Energy Summit February 7,

13 2007 Projected Cash Flow Summary ($MM) Primary Sources: Net Income (based on $1.40 per share target and 632 mm shares) Depreciation & Amortization Proceeds from Vending Assets to MLP TOTAL Sources Primary Uses: Capital Expenditures Dividends Changes in Working Capital Equity Earnings in Excess of Distributions & Other TOTAL Uses: Net Sources / (Uses) Cash Flow $ $ 1,755 $ (1,605) (550) (235) (155) $ (2,545) $ (790) Credit Suisse Energy Summit February 7,

14 Commodity Exposure Overview DCP Midstream has little exposure to natural gas prices due to natural hedges the primary exposure is NGL prices +/- $1.00 / Bbl crude = +/- $15 MM EBIT* Empress is exposed to changes in frac spread +/- $0.50 / MMBtu = +/- $12.5 MM EBIT Canadian earnings are exposed to exchange rate risk +/- C$0.01 / US$1.00 = +/- $2.5 MM Net Income No hedges currently in place Base assumptions for 2007: DCP Midstream: average price of crude oil is $68.50 / bbl Empress: average frac spread is $3.00 / MMBtu Exchange rate: C$1.11 : US$1.00 * Represents Spectra Energy s Equity in Earnings of DCP Midstream. Credit Suisse Energy Summit February 7,

15 Investment Considerations Premier pure-play midstream natural gas company in North America Attractive industry dynamics Positioned in fastest growing markets Diverse supply base Seasoned management team Strong balance sheet and stable cash flows Financial flexibility Credit Suisse Energy Summit February 7,

16 Credit Suisse Energy Summit February 7,

17 Fred J. Fowler President and Chief Executive Officer Biography Fred Fowler is president and chief executive officer of Spectra Energy Corp. Prior to Spectra Energy's spinoff from Duke Energy, Fred served as group executive and president of Duke Energy Gas where he led the company s gas businesses. He has 38 years of energy and natural gas experience. Fred joined Duke Energy in 1985 and has held positions of increasing responsibility throughout his 21 year tenure at Duke Energy, including: buyer, vice president of marketing, transportation and exchange as well as serving as group president for PanEnergy, Duke Energy and Duke Energy Gas Transmission. He received a bachelor s degree in finance from Oklahoma State University at Stillwater. The Braman, Okla., native was born in He and his wife, Jan, have a daughter and two sons. Credit Suisse Energy Summit February 7,