The Acquisition of GE Energy Rentals. Rupert Soames Chief Executive

Transcription

1 The Acquisition of GE Energy Rentals Rupert Soames Chief Executive

2 Transaction highlights 2 Acquisition of substantially all the Energy Rentals business, excluding large gas turbines, of GE for a maximum total cash consideration of $212m ( 111m)* A milestone in the implementation of Aggreko s strategy Strengthens Aggreko s position in power and temperature control rental Provides additional fleet to support Aggreko s growth Enhances shareholder value see Notes 1 & 2 Earnings neutral in 07 and materially accretive from 08 onwards ROIC covers WACC from 2008 Significant operating synergies * An exchange rate of =US$ has been used

3 Transaction Structure 3 Mix of business and asset purchases Estimated total consideration $206m; capped at $212m Initial Consideration an estimated $179m Closing Balance Sheet Tangible Net Assets estimated to be $167m, includes $27m NBV of assets subject to deferred consideration Initial Payment = $167m + Premium of $39m $27m deferred consideration Will be subject to movement depending on working capital and timing of completion Deferred Consideration of up to $27m Fleet assets valued at $27m NBV will be paid for as they are delivered and accepted by Aggreko over the twelve months following completion Premium will be refunded pro-rata if deferred assets are not delivered and accepted Acquisition to be funded by new debt facilities provided by existing lenders Completion contingent on normal closing conditions and regulatory approvals expected in November 2006

4 GE Energy Rentals GE-ER

5 Overview of GE-ER 5 Started in 1998 as a strategic initiative by GE to enter energy rental marketplace Built by a combination of acquisition and organic investment The only competitor to Aggreko with a multi-national footprint, present in both Power Projects and Local Business Positioned in areas of key interest to Aggreko Experienced and talented workforce Large inventory of fleet assets in power and temperature control No significant fleet assets outside power & temperature control Loss making in 2005; broke even in H1 2006

6 GE-ER s multi-national footprint 35 locations in 12 countries, 240 people 6

7 GE-ER Profit and Loss Territory North America Europe Middle East Asia & Australia South America Revenues excl Major Events Major Events (Olympics, Storms, etc) Total Revenues EBITDA EBIT Revenues $m to 31/12/ * (6) % of Revenues excl Major Events 45% 23% 12% 10% 10% 100% * Revenues include $13m of asset sales

8 GE-ER Balance Sheet Net Book Value at 30 th June Balance Sheet NBV US$m Fleet Assets* GE-ER as at 30/6/ Other Assets 31 Gross Assets 172 Liabilities Assumed (21) Net Tangible Assets 151 * Includes $27m of NBV of assets subject to deferred conditional payment

9 Rationale

10 Rationale 10 Supports our strategy of growing our core business in power and temperature control by fleet investment, geographic expansion and acquisitions Provides additional fleet at a time when Aggreko is growing rapidly, and needs more capacity Strengthens our position in key areas in which we currently operate Gives us access to new areas Brings good people and customers as well as fleet Transaction creates valuable synergies and efficiency gains

11 Delivering on our stated strategy Strategy Update set out the future drivers of Aggreko s growth: Organic growth, driven by: Market growth Increased investment in fleet Geographic expansion Local business and International Power Projects Driving for improved operational efficiency Acquisitions Acquisition of GE-ER fulfils all these criteria

12 Provides additional fleet needed to grow our business Strategy Update said we would need to increase capex rapidly to support growth 2006 fleet capex 120m vs average 60m pa Significantly increases the size of Aggreko s fleet Generators +31% by fleet megawatts Chillers +28% by fleet megawatts Improves age profile of fleet GE-ER generators average 4.9 years old, Aggreko 5.7 years old GE-ER sets have historically run fewer hours per year Substantially increases our gas fleet GE-ER have large fleet of Jenbachers Suppliers & technologies we know

13 Strengthens our position in key areas 13 GE-ER has established positions in many geographies in which Aggreko operates North America Europe Middle East Asia Australia South America But also brings us access to new areas Chile Mexico South Florida

14 Brings us experienced people and valuable customers employees, many of whom will become part of the Aggreko team to help support growth Customer base well diversified by sector and geography Industrial, commercial, service, utilities & telecoms Small proportion comes from GE Particular strength in major events Olympics Athens & Torino Upcoming opportunities in Beijing, Vancouver, London World Cup Regional Games Asian, South American Strengthens position in gas & emergency response Larger fleet = better fleet availability and customer choice

15 Valuable cost synergies & efficiency gains See Note 1 15 Within 3-4 years, assets acquired are expected to be generating approximately $35m operating profit Cost synergies Estimated $3m pa direct cost savings Estimated $13-$15m pa overhead cost reduction Revenue efficiencies drive GE-ER fleet utilisation to levels nearer to those achieved by Aggreko Recent GE-ER fleet utilisation c.13pp less than Aggreko s for chillers and generators Anticipate $15-$18m incremental revenue* from improved utilisation Capex benefits Savings against Aggreko planned capex of at least $26m in 2007 Estimated $10m GBV disposals of excess fleet over 3 years Estimated $27m lower replacement cost of GE-ER fleet at 2007 prices => Aggregate $7-9m pa of lower depreciation than in 2005 *Underlying revenue = 2005 revenue less asset sales & Major Events = $141m

16 Financial Considerations & Integration Angus Cockburn Finance Director

17 Measures of value: 17 See Notes 1 and 2 Estimated consideration of $206m to: 05 Revenues 1.0x 05 EBITDA 6.2x Net Assets 1.2x Gross Fleet Assets 0.6x Net Fleet Assets 1.5x EPS impact Neutral in 2007 Materially accretive thereafter ROIC ahead of WACC from 2008 IRR above internal hurdle rate for Capex

18 Acquisition financing 18 Existing lenders supporting the transaction Refinanced all existing bilateral bank facilities Total facilities increased from 200m to 370m 3 and 5 year maturities Structured as multi-currency revolving credit agreements Pricing better than existing facilities put in place in 2004 Key bank covenants unchanged 3 x interest cover 3 x EBITDA Ample headroom post acquisition

19 Integration plan 19 Integration teams up and running, with experienced outside support Early engagement with GE-ER employees key part of the plan Detailed plans in place in each region 90/10 rule 90% of the people working 100% on the existing business 10% of the people working 100% on the new business Plan is to have GE-ER fully integrated and working on Aggreko processes and systems within 12 months of completion We expect some disruption in first six months

20 Integration costs 20 GE-ER will be completely integrated into Aggreko business No separate branding or reporting; results will be measured against combined business Exceptional overhead re-structuring costs expected to be around 16m Bulk of costs related to headcount/property and carve-out of the GE-ER operations from GE organisation Costs will be incurred in 06 and 07 About 12m rebranding and servicing costs to bring GE-ER fleet up to Aggreko standards Will be included as fixed asset cost and depreciated in line with IFRS

21 Summary Rupert Soames

22 Rationale 22 Supports our strategy of growing our core business in power and temperature control by fleet investment, geographic expansion and acquisitions Provides additional fleet at a time when Aggreko is growing rapidly, and needs more capacity Strengthens our position in key areas in which we currently operate Gives us access to new areas Brings good people and customers as well as fleet Transaction creates valuable synergies and efficiency gains

23 Aggreko announced its interim results on 14 September In that announcement the Board stated that due to the Group s performance in the first half and a strong start to the second half, it expected Aggreko s performance for the year to be ahead of its previous expectations. Since that date nothing has occurred to change the Board s view of current trading. Note 1. Statements of estimated synergies and the one off costs of achieving them relate to future actions and circumstances which, by their nature, involve risks, uncertainties and other factors. Because of this, the synergies referred to may not be achieved, or those achieved could be materially different from those estimated. Note 2. This presentation should not be interpreted to mean that earnings per share of Aggreko in the financial year following completion of the acquisition, or in any subsequent period, will necessarily be greater than those for the relevant preceding financial period.

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