Fiscal 2010 First Quarter Results Conference Call

Transcription

1 Fiscal 2010 First Quarter Results Conference Call February 11, 2010 Sophie Brochu, President and CEO Pierre Despars, Executive Vice President, Corporate Affairs and CFO

2 Cautionary note regarding forward-looking statements Certain statements in this presentation may be forward-looking pursuant to applicable securities laws. Such forwardlooking information reflects the intentions, plans, expectations and opinions of the management of Gaz Métro inc. (GMi), Gaz Métro s general partner, and are based on information currently available to management and on assumptions with respect to future events. The words plans, expects, estimates, forecasts, intends, anticipates or believes, or similar expressions, including the negative of these terms and future or conditional forms, often identify forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties and other factors outside management s control. A number of factors could cause actual results of Gaz Métro and GMi to differ materially from the results discussed in the forward-looking statements, including, but not limited to, terms of decisions rendered by regulatory bodies, general economic conditions, the competitiveness of natural gas in relation to other energy sources, the reliability of natural gas supplies, the integrity of the natural gas distribution system, exchange rates fluctuations and other factors described in the 2009 Annual Information Form of each of Gaz Métro and GMi under the item Risks, and in the Management s Discussion and Analysis of each of Gaz Métro and GMi for the quarter ended December 31, Although the forward-looking statements contained herein are based upon what management believes to be reasonable assumptions, including assumptions to the effect that no unforeseen changes in the legislative and regulatory framework of energy markets in Quebec and in the State of Vermont will occur, that no significant event occurring outside the ordinary course of business, such as a natural disaster or other calamity, will occur, and other assumptions described in the Management s Discussion and Analysis of each of Gaz Métro and GMi for the quarter ended December 31, 2009, management cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of this date, and management assumes no obligation to update or revise them to reflect new events or circumstances, except as required pursuant to applicable securities laws. Readers are cautioned not to place undue reliance on these forward-looking statements. ADJUSTED INDICATORS NOT STANDARDIZED IN ACCORDANCE WITH GAAP In the view of Gaz Métro s management, certain indicators, such as adjusted net income, adjusted net income per unit and distributable cash provide readers with information it considers useful for analyzing its financial results. However, they are not standardized in accordance with Canadian generally accepted accounting principles (GAAP) and should not be considered in isolation or as substitutes for other performance measures that are in accordance with GAAP. The results obtained might not be comparable with similar indicators used by other issuers and should therefore only be considered as complementary information. 2

3 Fiscal 2010 first quarter highlights Adjusted net income (1) of $79.1 million ($0.66 per unit), up $7.9 million ($0.07 per unit) compared to Q1 of 2009 fiscal year Quebec distribution activity and transportation segment contribute to good performance For several quarters, natural gas has maintained its competitive advantage over all other energies in all market segments in Quebec and Vermont Gaz Métro well positioned to sustain deliveries and attract new customers as economic recovery will take hold Overall, natural gas deliveries up 4.0% In Quebec, 1,783 new contracts signed in residential and commercial markets Nearly 15% higher than the same period last year Surpassed by more than 2% contracts signed in first quarter of 2008 fiscal year, which had been a record year in that regard for Gaz Métro (1) Adjusted to exclude a $1.0 million unfavourable non-monetary impact for the first quarter of the 2010 fiscal year and a $0.7 million unfavourable non-monetary impact for the first quarter of the 2009 fiscal year, related to future income taxes. 3

4 Growth initiatives and outlook Seigneurie de Beaupré wind power projects (50% interest) Environmental decree obtained from the Quebec government The two wind farms, which will have total installed capacity of 272 MW, are to be commissioned in December 2013 Along with our partner, Boralex Inc., we may now proceed with the other planned stages of the projects Natural gas for vehicles Working to expand our commercial base in transportation market, more specifically targeting fleets of heavy duty diesel trucks Quebec government s biomethanation program 4

5 Distributions Distribution of $0.31 per unit paid on January 5, 2010 Distribution of $0.31 per unit declared, payable on April 1, 2010, to Partners of record on March 15, 2010 Gaz Métro, which has already indicated it expected to pay distributions of $0.31 per unit in each quarter of the 2010 fiscal year, maintains this outlook 5

6 Review of fiscal 2010 first quarter results Overview (in millions of dollars, except for per unit data, in dollars) 3 months ended December 31 Change $ % CONSOLIDATED NET INCOME AND CASH FLOWS (unaudited) (unaudited) Revenues (112.8) (15.8%) Gross margin (4.1) (1.8%) Net income % Adjusted net income (1) % Adjusted net income, excluding non-recurring items (2) % Cash flows related to operating activities (3) (8.3) (5.3%) Net income per unit % Adjusted net income per unit (1) % Adjusted net income per unit, excluding non-recurring items (2) % Distributions paid per unit Weighted average number of units outstanding (in millions) Number of units outstanding (in millions) Dec. 31, 2009 Dec. 31, 2008 CONSOLIDATED BALANCE SHEETS (unaudited) (unaudited) Change Total assets 3, ,605.6 (75.8) (2.1%) Total debt 1, ,917.7 (133.4) (7.0%) Partners' equity ,008.3 (21.8) (2.2%) Partners' equity per unit (0.18) (2.2%) Debt/total capitalization ratio (%) 64.4% 65.5% (1.1%) (1.7%) (1) Adjusted to exclude an unfavourable non-monetary adjustment of $1.0 million in the first quarter of the 2010 fiscal year and an unfavourable non-monetary adjustment of $0.7 million in the first quarter of the 2009 fiscal year, related to future income taxes (2) Excluding non-monetary impact related to future income taxes and impact of non-recurring items (3) Before change in non-cash working capital items 6

7 Review of fiscal 2010 first quarter results Cash flow summary (in millions of dollars) 3 months ended December 31 Change Cash flows related to operating activities (1) 2007 (1) 2009 vs vs 2007 before change in non-cash working capital items (8.3) 28.4 Change in non-cash working capital items (71.9) (67.6) (56.4) (4.3) (11.2) Cash flows related to operating activities (12.6) 17.2 Maintenance CAPEX (29.9) (29.8) (27.8) (0.1) (2.0) Change in deferred charges and credits and intangible assets (2) (26.8) (37.0) (47.4) Distributable cash (deficiency) (2.6) (2.5) 25.6 Distributions paid to Partners (37.3) (37.3) (37.4) Financing requirements (16.8) (14.3) (40.0) (2.5) 25.7 Investments in development activities Development CAPEX (8.4) (6.8) (7.5) (1.6) 0.7 Increase in interest in a company subject to significant influence (12.6) (8.8) (46.1) (3.8) 37.3 (21.0) (15.6) (53.6) (5.4) 38.0 Financing requirements (37.8) (29.9) (93.6) (7.9) 63.7 Financing activities Unit issues (0.2) Other financing activities (27.3) (38.3) (27.3) (38.5) Impact of exchange rate fluctuations on cash and cash equivalents (0.6) (2.7) 2.1 Net increase (decrease) in cash and cash equivalents (18.4) 19.5 (7.8) (37.9) 27.3 (1) Figures from December 31, 2008 and 2007 have been modified to reflect certain reclassifications to the consolidated balance sheet. (2) Deferred charges and credits will be recovered from / returned to customers in accordance with regulatory framework 7

8 Segment results Energy Distribution Segment in Quebec 3 months ended December 31 Change In millions of dollars $ Energy distribution Net income Gaz Métro - QDA Increase in net income from natural gas distribution activities in Quebec (Gaz Métro-QDA) explained by : Increase of 0.26% in authorized ROE in 2010 fiscal year compared to 2009 fiscal year, including anticipated productivity gains (no productivity gains anticipated for 2010 fiscal year) Higher revenues from regular and short-term interruptible service sales in industrial market, in context of highly favourable competitive position of natural gas compared to heavy fuel oil Recognition of entire $4.0 million GEEP incentive, due to early achievement of annual objective, versus $1.0 million recognized in Q1 of 2009 fiscal year Partially mitigated by: $11.0 million in anticipated overearnings attributed to customers as partial repayment of anticipated productivity loss in 2010 rate case Increase should reverse in the coming quarters as it stems from a temporary timing difference between the revenue recognition profile, which follows the customer s consumption profile, and that of costs 8

9 Gaz Métro-QDA Normalized natural gas deliveries (1) 3 months ended December 31 Change Bcf % (in billions of cubic feet ) Markets Industrial firm % Industrial interruptible % Commercial % Residential (0.3) (3.0%) TOTAL % 3 months ended December 31 Change m 3 % (in millions of cubic metres) Markets Industrial firm % Industrial interruptible % Commercial % Residential (6) (3.0%) TOTAL 1,603 1, % 9 (1) Volumes normalized for temperature and wind velocity. Conversion factor: 1 billion cubic feet = million cubic metres. Differences due to rounding. 9

10 Gaz Métro-QDA Regulatory developments Last December, the Régie de l énergie rendered a decision on Gaz Métro s rate application for the 2010 fiscal year In its decision, the Régie did not retain the ATWACC proposed by Gaz Métro as the method for establishing the authorized base ROE Instead, the Régie chose to modify certain parameters of the formula presently used to establish the ROE fixing it at 9.20% for the 2010 fiscal year, an increase of 56 basis points over the 8.64% ROE that the existing parameters would have produced Given the context in which the application was made, the Régie deemed that it was reasonable to grant a temporary adjustment, for the 2010 and 2011 fiscal years, to reflect the impact of the financial crisis The Régie also renewed, effective in fiscal year 2011, the automatic rate of return adjustment formula The Régie rendered its final decision on the tariffs for the 2010 fiscal year on December 17,

11 Gaz Métro-QDA Outlook for 2010 fiscal year 10.00% Productivity gains $1.8M or 0.18% GEEP incentive $4.0M or 0.40% GEEP incentive $4.0M or 0.41% 9.89% Excess return (1) (3) $5.4M or 0.55% 9.80% 9.60% 9.40% 0.44% 9.20% 9.20% (2) 9.34% 9.61% 9.20% 9.00% 8.76% 8.94% % % 8.40% 8.20% 8.00% Authorized Base ROE Total Authorized ROE Total Authorized ROE (including GEEP incentive) Achieved ROE (1) Excess return (or overearnings) shared 75% with customers. Amount shown is Gaz Métro s share (25%). For 2010 fiscal year, Gaz Métro must reimburse anticipated productivity loss to customers before it can share into overearnings. (2) No productivity gains anticipated in (3) Achieved ROE in 2009 subject to Régie s approval. 11

12 Gaz Métro-QDA Outlook for 2010 fiscal year (based on rate case approved by Régie) (in millions of $) Rate Base Authorized Net Income: Authorized base earnings (1) 1, Dividends on preferred shares (2) 6.8 Income taxes Capital tax 2010 Rate Case 2009 Rate Case , Performance incentive mechanism (3) 0.0 Net income before GEEP (4) performance incentive GEEP (4) performance incentive 4.0 Net income (1) Net of financial charges related to capitalized interest on transitory accounts before their integration in the rate base (2) Based on deemed capital structure (3) Gaz Métro s share (50%) of anticipated productivity gains before tax (4) Global Energy Efficiency Plan Maximum per year assumed (before tax) Differences due to rounding 12

13 Segment results Energy Distribution Segment in Vermont 3 months ended December 31 Change In millions of dollars $ Energy distribution in Vermont Net income VGS and GMP (2.5) Financing costs of investments in segment (1.0) (1.3) 0.3 VGS and GMP, net of financing costs (2.2) Unfavourable impact of a timing difference in the recognition of revenues and costs for Green Mountain Power Corporation (GMP) Weakening U.S. dollar in relation to Canadian dollar (negative impact of $0.6 million) Partially offset by: an increase in GMP s electricity rates 13

14 Energy Distribution Segment in Vermont Natural gas and electricity volumes 3 months ended December 31 Change % Natural gas deliveries in Vermont (in billions of cubic feet ) TOTAL (0.1) (4.0%) (in millions of cubic metres) TOTAL (3) (4.0%) 3 months ended December 31 Change GWh % Electricity distributed in Vermont (in gigawatthours) TOTAL (17) (3.6%) Conversion factor: 1 billion cubic feet = million cubic metres. Differences due to rounding. 14

15 Segment results Natural Gas Transportation Segment 3 months ended December 31 Change In millions of dollars $ Natural gas transportation Net income TQM, PNGTS and Champion Financing costs of investments in segment (0.9) (1.2) Rate adjustment for TQM's 2009 fiscal year approved by NEB (2.9) - (2.9) Income tax recovery at PNGTS level (1.2) - (1.2) Net income, excluding non-recurring items Recognition in the first quarter of the 2010 fiscal year of the $2.9 million favourable impact of a rate adjustment for the 2009 fiscal year the National Energy Board approved for Trans Québec & Maritimes Pipeline Inc. (TQM). Income tax recovery in Portland Natural Gas Transmission System (PNGTS) Lower financing costs 15

16 Segment results Natural Gas Storage Segment 3 months ended December 31 Change In millions of dollars $ Natural gas storage Net income Intragaz Financing costs of investments in segment (0.5) (0.6) 0.1 Non-monetary impact related to future income taxes (0.5) (0.7) Non-monetary impact related to future income taxes (0.2) Adjusted net income

17 Segment results Energy Services and Other Segment 3 months ended December 31 Change In millions of dollars $ Energy services and other Net income Energy, water and fibreoptic Financing costs of investments in segment (0.4) (0.6) 0.2 Non-monetary impact related to future income taxes (0.1) - (0.1) Non-monetary impact related to future income taxes Adjusted net income Gain on sale of Teldig Systems Inc. (0.8) - (0.8) Adjusted net income, excluding non-recurring items (0.5) Sale of all of the shares of Teldig Systems Inc. on November 16, 2009, which generated a gain of $0.8 million Reduction in financing costs Partially mitigated by: Lower profitability in Consulgaz Inc. 17

18 Segmented results Non-allocated expenses 3 months ended December 31 Change In millions of dollars $ Non-allocated expenses Non-allocated expenses - (1.4) 1.4 Non-monetary impact related to future income taxes (0.4) - (0.4) (0.4) (1.4) 1.0 Non-monetary impact related to future income taxes Adjusted net loss - (1.4) 1.4 No significant expenses related to Seigneurie de Beaupré wind power projects and Rabaska 18 18

19 Consolidated adjusted net income, net of financing costs of investments 3 months ended December 31 Change In millions of dollars, except for unit data, in dollars $ % Energy distribution Gaz Métro - QDA VGS and GMP (2.2) Natural gas transportation Non-recurring items (4.1) - (4.1) Natural gas storage Non-monetary impact related to future income taxes (0.2) Energy services and other Non-monetary impact related to future income taxes Non-recurring items (0.8) - (0.8) (0.5) Non-allocated expenses (0.4) (1.4) 1.0 Non-monetary impact related to future income taxes (1.4) 1.4 Adjusted net income, excluding non-recurring items (1) % Non-recurring items Adjusted net income (2) % Non-monetary impact related to future income taxes (1.0) (0.7) (0.3) Net income % Adjusted net income per unit, excl. non-recurring items (1) % Adjusted net income per unit (2) % Net income per unit % (1) Excluding non-monetary impact related to future income taxes and impact of non-recurring items (2) Excluding non-monetary impact related to future income taxes 19

20 Q&A Session 20

21 Appendix Gaz Métro-QDA - Current competitive position of natural gas in Quebec Market Main Competitors How Competitive? (1) Industrial Ex.: Large companies in petrochemical, metallurgy, etc. industries #6 Fuel Oil Short term: spot price significantly lower Long-term: less expensive, more flexible and less polluting Commercial & Institutional Ex.: Hospitals, schools, restaurants, etc. Electricity #2 Fuel Oil Small business: 11% cheaper Large business: 31% cheaper Small business: 24% cheaper Large business: 39% cheaper Residential heating (2) Electricity #2 Fuel Oil From parity to 12% cheaper 10% to 20% cheaper (1) As at February1 st, Current market prices. (2) Using high efficiency equipment. 21

22 Appendix B Gaz Métro-QDA - Targeting new customers Q1 of 2010 fiscal year Q1 of 2009 fiscal year Change Change (%) Total new contracts signed in residential and commercial markets 1,783 (1) 1,552 (1) % Number of customers 182, ,659 3, % (1) Including 170 additional sales to existing customers in Q1 of 2010 fiscal year (154 in Q1 of 2009 fiscal year) New contracts signed in Q1 of 2010 fiscal year contributed to revenues in the quarter or will do so in coming quarters or fiscal years New contracts include additional sales to existing customers which translate into additional revenues but not into additional customers 22