Investor Presentation. October 21, 2008

Transcription

1 Investor Presentation October 21, 2008

2 Forward looking statements To enable investors to better understand the Partnership s outlook for the future and make more informed decisions, the matters discussed herein may contain forward-looking information about Gaz Métro s objectives, strategies, financial condition, operating results and activities. Such information expresses, as of the date hereof, the estimates, forecasts, projections, expectations or opinions of the Partnership concerning future events or results. Actual results may differ materially from the results anticipated herein and, consequently, we cannot guarantee that any forward-looking statement will materialize. Forward-looking information does not take account of the impact transactions or non-recurring matters, announced or arising after the statements have been made, might have on the Partnership s activities. The main risks and uncertainties that could cause actual results and future events to differ materially from current expectations include, but are not limited to, factors related to the economy and markets, competition, commercial risk, regulation, energy supply, continuity of activities and financing of investments as well as the value of such investments as explained in detail in the Partnership s annual report. Gaz Métro therefore cautions readers not to place too much reliance on forward-looking information. Gaz Métro intends to update forward-looking information to the extent provided under applicable securities legislation. ADJUSTED INDICATORS NOT STANDARDIZED IN ACCORDANCE WITH GAAP In the view of Gaz Métro s management, certain adjusted indicators, such as adjusted net income, adjusted net income per unit and distributable cash provide readers with information they consider 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 Gaz Métro: Quebec s natural gas company 3

4 Natural gas: a regulated and stable industry Public Utility Monopoly Size Stability $3.3 billion in assets 51 years 4

5 Sounds great 5

6 But this is what we experience every day Energy consumption* 4% 2% 44% 40% 43% 20% 44% 25% 13% Quebec 36% Ontario 30% Canada Coal Petroleum products Electricity Natural gas 70% of residential homes in Quebec use electricity as their primary heating source A unique competitive environment *Statistics Canada,

7 The truth: it s the competition that makes us stronger 7

8 Our core business Our growth initiatives 8

9 Our core business: natural gas Gaz Métro 97% of all natural gas in Quebec 10,000 km of distribution network Vermont Gas Systems 100% of all natural gas in Vermont Trans Quebec & Maritimes Pipeline and Portland Natural Gas Transmission System > 1,000 km of transportation pipeline in Quebec and the Northeast U.S. Intragaz 5.1 bcf of underground storage in Quebec 97% of our net income comes from regulated activities 9

10 Our 210,000 customers* Residential customers 155,450 74% volume 25.8 bcf 11% % of distribution revenues 16% *FY 2007, Quebec & Vermont Commercial customers 52,515 25% volume 66.4 bcf 29% % of distribution revenues 66% Industrial customers 2,518 1% volume bcf 60% % of distribution revenues 18% 10

11 The economics Our core business 1. Our profit zone 2. The regulatory balance sheet 3. Rate of return on equity 4. Generating a regulated income 5. Base authorized net income 6. Incentive mechanism 7. Authorized net income 8. Rate setting 11

12 1. Our profit zone Distribution Supply Transportation Load balancing 12

13 2. The regulatory balance sheet Our Rate Base Our Deemed Capital Structure Think regulated assets: the necessary assets required to provide service Debt 54.0% Preferred equity 7.5% Common equity 38.5% 13

14 3. Our rate of return on equity* Spread Compensation for providing the service and assuming the business risk 4.27% 9.05% Authorized base ROE (FY 2008) Forecasted 30-yr Canada bond yield 4.78% Determined by an automatic formula and approved every year by the Régie de l énergie *FY

15 4. Generating regulated income* $1,813 M X 38.5% X 9.05% = $60 M** Rate base Deemed common equity (fixed) Authorized base ROE (linked to interest rates) Regulated income on equity If our rate base and/or interest rate Our income *FY 2008 **less certain financial charges 15

16 5. Base authorized net income* $60 M + $7.1 M + $43.3 M = $110.4 M Regulated income on equity Dividends on deemed preferred equity Income taxes and capital taxes Base Authorized Net Income *FY

17 6. Incentive mechanism* Doing the Right Thing Sharing of productivity gains Compensation for improving energy efficiency.47%.39%.86% Spread Compensation for providing the service and assuming the business risk 4.27% 9.05% 9.91% Forecasted 30-yr Canada bond yield 4.78% *FY

18 7. Authorized net income* $110.4 M + $8.8 M = $119.2 M Base Authorized Net Income Incentive Mechanism Authorized Net Income *FY

19 8. Rate setting Required revenue Anticipated volumes = Distribution rates Authorized net income + cost of service Forecasted volumes of natural gas delivered Allocating the required revenue across our different customer classes Our ability to increase rates is calibrated to the competitive position of natural gas vs. other energy sources 19

20 Our core business Our growth initiatives 20

21 Our strengths 51 years in business Energy industry Quebec Vermont Competitive marketplace Customer-focused approach Partnering Permitting & licensing Regulated Industry Regulatory environment Large projects 21

22 Our growth and acquisition criteria 1. Sector that we know 2. Value creation 3. Long-term contracts and solid counterparties 4. Risk profile maintained 5. Shared core values 22

23 Our growth initiatives 1. Growth in our core natural gas business 2. Electricity distribution in Vermont 3. Wind energy production in Quebec 4. Liquefied natural gas (LNG) terminal in Quebec 23

24 1. Growing our core business: targeting new customers Marketing initiatives: New image and message Energy industry Residential and commercial customers Significant breakthrough in new home construction Industrial customers A potential for 15 bcf equal to 7.5% of total 2007 volume Quebec Vermont Customer-focused approach Partnering Permitting & licensing 7,183 new customers in 2007 (up from 2,572 in 1997) Regulatory environment Large projects 24

25 2. Prudent targeted diversification: electricity distribution in Vermont Energy industry Quebec Green Mountain Power Corporation Acquired on April 12, 2007 Second largest electricity distributor in Vermont 91,902 customers $400M in assets Poised for consolidation 600,000+ population 21 electric distributors* Strong authorized ROE (10.21% in 2008) Vermont Customer-focused approach partnering Permitting & licensing Regulatory environment * source: Vermont Department of Public Service Large projects 25

26 3. Prudent targeted diversification: wind power in Quebec $800 million investment Two wind projects totaling 272 MW 20-year firm contract with Hydro-Québec Partnered with Boralex & Séminaire de Québec Enercon chosen as manufacturer Generating revenue by 2014 Potential for higher ROE Energy industry Quebec Vermont Customer-focused approach Partnering Permitting & licensing Regulatory environment Large projects 26

27 4. Prudent targeted diversification: Rabaska LNG terminal: diversifying supply New source of supply Partnering with Enbridge & GDF SUEZ Letter of intent signed with Gazprom will become an equity partner in terminal will subscribe for 100% of terminal capacity All regulatory approvals obtained Potential for higher ROE A significant investment for our unitholders Next steps: finalize agreements with Gazprom Energy industry Quebec Vermont Customer-focused approach Partnering Permitting & licensing Regulatory environment Large projects 27

28 4. Prudent targeted diversification: Rabaska LNG terminal: diversifying supply 28

29 Corporate & financial overview 29

30 71% Institutional Holdings Trencap Enbridge GDF SUEZ 51.11% 16.66% 11.11% 11.11% 8.33% 1.67% 50.38% 32.06% 17.56% 30

31 Selected financial information Ticker Symbol (TSX) GZM.UN Distribution per unit (annualized) $1.24 Distribution yield 9.37% Units outstanding (in millions) Public float (in millions) 34.9 Market capitalization $1.6 B Adjusted net income per unit (fiscal year 2007) $1.24 (1) Market data as at October 15, Units outstanding and other financial data as at June 30, (1) Adjusted to exclude the impact of recording a non-monetary tax expense and tax liability of $26.2 million. Please refer to available financial documents on SEDAR and in the Investors section of Gaz Métro's Website. 31

32 Defensive characteristics of Gaz Métro s units The safety net of a utility Relative performance of Gaz Métro versus market indices* Gaz Métro S&P/TSX Capped Utilities Index S&P/TSX Composite Index S&P/TSX Income Trust Index S&P/TSX Capped Energy Trust Index /10/ /10/ /10/ /09/ /09/ /09/ /09/ /08/29 *Period from August 29, 2008 to October 17,

33 Our balance sheet Strong financial position* Our assets Assets Debt $3.3 B $1.6 B U.S., Regulated Debt to total capitalization ratio 61.9% Canada, Non-regulated Credit rating (S&P) A- (stable) Canada, Regulated Committed credit facility $400 M** *as at June 30, 2008 **maturing in December

34 Distributing the income Authorized net income for the Quebec distribution activity 135 1, Authorized net income including incentive mechanism Base authorized net income before incentive mechanism Rate base 1, Authorized net income (in millions $) ,750 1,700 1,650 Rate base (in millions $) 105 1, ROE before incentive mechanism 95 ROE after incentive mechanism (1) 9.45 % 9.69 % 8.95 % 8.73 % 9.05 % % % 9.33 % 9.57 % 9.91 % 1,550 (1) Rate Case

35 Distributing the income Stable and foreseeable distributions $1.40 $1.39 $1.40 $1.36 $1.36 $1.34 $1.33 $1.33 $1.30 $1.28 $1.25 $1.25 $1.27 $1.28 $1.24 $1.25 $1.24 (1) $ (1) Income per unit Distribution per unit (1) Adjusted to exclude the impact of recording a non-monetary tax expense and tax liability of $26.2 million. Please refer to available financial documents on SEDAR and in the Investors section of Gaz Métro's Website. 35

36 Putting tax issues into context Limited effect for taxable investors assuming Gaz Métro is converted into a Corporation* * Assuming 100% of after-tax net income is distributed. Based on the maximum combined income tax rate announced for

37 Growing our business: natural gas and more Incentive mechanism Growth The advantage of trying harder Growing core business Electricity distribution Wind power LNG terminal Spread and the safety net of a utility We developed our core competencies here Forecasted 30-yr Canada bond yield 37

38 Appendix Cash flow summary 38

39 Cash flow summary Change Fiscal years ended September vs vs 2005 (in millions of $) Cash flows related to operating activities before change in non-cash working capital items (48.2) Change in non-cash working capital items (26.1) Cash flows related to operating activities (10.0) Maintenance capital (101.4) (98.1) (82.4) (3.3) (15.7) Variations in deferred charges and credits (1) (108.9) (37.0) (64.8) (71.9) 27.8 Distributable cash Distributions to Partners (148.4) (156.3) (157.7) Free cash flows available for development Investments in development activities Acquisition of subsidiary and joint ventures (224.3) 0.0 (109.6) (224.3) Other (net of sale of commercial activities) (22.9) (41.2) (78.9) (247.2) (41.2) (188.5) (206.0) (1) Deferred charges and credits will be recuperated/returned to customers according to regulatory framework. (Example: Temperature normalization). 39

40 Gaz Métro Investor Presentation October 21,