Niska Gas Storage Partners LLC NAPTP Annual Conference

Transcription

1 Niska Gas Storage Partners LLC NAPTP Annual Conference Simon Dupéré President and Chief Executive Officer Vance Powers Chief Financial Officer Rick Staples Executive Vice President May 22, 2013

2 Forward Looking Statements Some of the statements in this presentation concerning future performance will be forwardlooking within the meaning of US securities laws. Forward-looking statements discuss our future expectations, contain projections of results of operations or of financial condition, forecasts of future events or state other forward-looking information. Words such as may, assume, forecast, position, strategy, expect, intend, plan, estimate, anticipate, believe, project, budget, potential, or continue, and similar expressions are used to identify forwardlooking statements. Forward-looking statements may include statements that relate to, among other things, our ability to achieve our expansion plans on time and on budget, including the expansion of our existing facilities and current storage capacity and the acquisition and development of new assets and projects; EBITDA estimates; our ability to fund or finance acquisitions and development or expansion projects; our ability to maintain stable cash flows; our ability to maintain or re-contract our contracted capacity; our ability to pay quarterly distributions; projections about the natural gas industry, including spread, commodity prices, volatility, and supply and demand dynamics for natural gas, natural gas storage capacity and services in North America. Except for historical information contained in this presentation, the matters discussed in this presentation include forward-looking statements that involve risks and uncertainties. Our targets of contracted capacity may not be realized. Niska Gas Storage Partners LLC does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated and unanticipated events. Forward-looking statements are not guarantees of future performance or an assurance that our current assumptions or projections are valid. Actual results may differ materially from those projected. 1

3 Overview

4 Niska s Market Profile Ticker Unit Information NYSE: NKA Unit Price (May 15, 2013) $14.82 Public Units Outstanding Total Units Outstanding Market Data Current Distribution on Common Units (Quarterly/Annualized) Current Yield (May 15, 2013) 9.5% Market Capitalization as of May 15, 2013 (millions) 17.5 million 34.5 million $0.35/$1.40 $ 511 Enterprise Value (millions) 1 $ 1,155 Selected Financial Information Estimated FY2014 Adjusted EBITDA 2 (Millions) Revolver Capacity (millions) $ % Senior Unsecured Notes (Due March 2018, millions as of 05/15/2013) $125-$135 $644 Ownership Breakdown Managing Member Interest 1.98% Sponsor Common Units 48.29% Public Common Units 49.73% Notes: 1. Enterprise Value is calculated as market capitalization plus total long-term debt outstanding. 2. We use the non-gaap financial measure Adjusted EBITDA in this presentation. A reconciliation of Adjusted EBITDA to its most directly comparable financial measure as calculated and presented in accordance with GAAP is set forth in the Appendix on page 28. 3

5 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Natural Gas Storage The Natural Gas Storage Industry Capitalizes on the seasonal, monthly and daily imbalance between supply and demand for natural gas Provides customers with the ability to store natural gas for use or resale in a higher value period Storage required for excess summer supply Also required to meet peak winter demand Allows customers to match largely constant supply with variable demand US Monthly Supply vs. Demand (Bcf/Day) Winter Demand Summer Demand 40 US Nat Gas Supply US Nat Gas Demand 4

6 Fiscal 2013 A Year of Accomplishments Financial Highlights Achieved Adjusted EBITDA of $138.6 million 1 and Cash Available for Distribution of 74.0 million 1, both at the high end of guidance ranges of $130-$140 million and $65-$75 million respectively Completed monetization of $50 million of inventory, proceeds from which are to be directed towards higher value opportunities Completed equity restructuring which better positions common unitholders for growth, and improves potential access to capital Ended fiscal year with strong balance sheet, currently over $40 million cash/cash equivalents and no revolver drawings Organic Growth Initiatives Added 4 Bcf at AECO in Alberta, bringing total working gas capacity to 226 Bcf Applied for 25 Bcf expansion at Wild Goose in California; expected to be approved and in service in Fiscal 2014 New Potential Business Lines Strong headway made in the evaluation of Starks, in Louisiana, for potential liquids storage, in discussions with potential customers and permit applications underway 1) Excludes inventory write-down benefits of $43.1 million 5

7 Overview of Strong Asset Base and Organic Growth Platform

8 Niska s Diversified Assets Canadian Operations (AECO Hub TM ) Bcf Countess (Alberta) 70.5 Bcf Suffield (Alberta) 83.5 Bcf US Operations 71.5 Bcf Wild Goose (CA) 50.0 Bcf Salt Plains (OK) 13.0 Bcf NGPL Capacity 8.5 Bcf North American Marketplace Western Canada Eastern Canada West Niska Market Access Total Working Gas Capacity: 226 Bcf Central Midwest Direction of Natural Gas Flows Starks Northeast Gulf Coast South Atlantic Mid Continent 7

9 Capacity (Bcf) Competitive Advantage: Low Cost Organic Growth Corporate Developments and Capacity Increases Niska becomes a publicly traded Master Limited Partnership Potential 25 Bcf, pending CPUC approval Organic Growth of 21 Bcf in Fiscal 2012/13 at an average cost of ~$3.50/Mcf Growth of 60 Bcf at an average cost of ~$2.75/Mcf Total growth of 81 Bcf since Niska s inception, including 21 Bcf in the past 2 years Projected FY 2014 Capex of less than $10 million Niska Advantages: - Low-cost (vs competitive acquisition environment) - Low-risk (expanding footprint of existing facilities) AECO Added 4 Bcf of capacity in Q2 of Fiscal 2013 Cost neutral expansion made possible through improved efficiencies Wild Goose Completed majority of cost intensive groundwork for additional growth as of Q3, Fiscal 2013 Applied to California Public Utilities Commission (CPUC) for approval of expansion to 75 Bcf from existing 50 Bcf of working gas capacity 8

10 Growth Opportunities

11 Starks Storage Project Strategic Diversification Industrial Zone Petrochemical Zone STARKS Beaumont Lake Charles Mont Belvieu Nederland Port Arthur Louisiana Texas Ethane Batch NGLs Ethane/Propane Mix Crude Oil Keystone XL Gulf Salt Storage Processing Export Refining Starks has a strategic location on the US Gulf Coast, midway between Beaumont, TX and Lake Charles, LA. This Gulf Coast area represents 44% of the US crude oil refining and 82% of US ethylene production, all within reach of Starks. 10

12 Starks Storage Timely NGL or Crude Solutions Strategic Location Major refineries, petrochemical complexes and product pipelines in close proximity to Starks location. Competitive Advantage Full technical review of existing, fully-brined caverns confirms ability to store liquid hydrocarbons. Customer Focus Discussions in progress with several potential key customers. Regulatory Progress Applications underway; anticipate filing for permits to use cavern for storage within the next 3 months. Strategic In-service Date Use of existing caverns expedites in-service date to mid Storage timed to be available when majority of Gulf Coast petrochemical projects/expansions are anticipated to be online. 11

13 Sundance Gas Storage Project Strategic Location West Central Alberta Sundance Location Greenfield storage project located in Alberta Potential for up to 70 Bcf of working gas capacity in depleted natural gas reservoir; 50/50 joint venture with major 3 rd party producer Regulatory approvals and land rights already secured Strategically located to support growing gas demands within Alberta, 6 announced LNG projects on the Canadian West Coast, and increasing oil sands demand Strong upside potential in the right market environment Direct synergies with our existing AECO Hub facilities Sizable, well-located depleted reservoir gas storage project 12

14 Market Environment Overview

15 Storage Fundamentals US Heating Degree Days Working Gas in US Storage, Bcf Winter Storage Drawdowns, Bcf 1, ,500 3,500 Record 3.93 Tcf fill last fall Record storage overhang last spring 2,500 2,000 Much colder (~9%) than normal winter Normal winter heating demand Normal winter on average O N D J F M 10 Year Avg FY 2012 FY 2013 Source: NOAA 2,500 1, Third largest storage withdrawal in 13 years N D J F M A M J J A S O 5 Year Range 2011/ /13 Source: EIA 1,500 1, vz 09/10 10/11 11/12 12/13 Source: EIA Set two inventory records this past year record overhang spring 2012, record fill in autumn 2012 Sharp drawdown in essentially normal winter more temperature-sensitive load Heating load this past winter was on par with 10 year average Withdrew 2.3 Tcf of natural gas from storage inventory, third largest in 13 years Natural gas market becoming more reliant on storage 14

16 Supply/Demand Outlook Lower 48 Dry Gas Production, Bcf/d 70 8 Forecast Actual Jan-08 Jan-10 Jan-12 Jan-14 Coal to Gas Switching, Bcf/d Incremental to 2008 Est Range bcfd YoY Reduced Demand E Total US Gas Demand, Bcf/d 80 Forecast LNG 70 Lease & Plant/Pipe Fuel Electric Power Industrial Res/Com/Veh Source: EIA, Short Term Energy Outlook Production continues to stabilize near term at around Bcf/d Expect significant 5 Bcf/d loss of power generation market due to high gas prices, comparatively soft coal prices Translates to ~1.0 Tcf total year-over-year demand reduction over summer injection season Lower demand this year due to lower power demand; continued growth over longer term Demand side infrastructure under construction (gas-fired power, LNG, fertilizer plants, petro-chemical plants); on line Supply / demand balance tightening over medium term good for storage 15

17 Western Canada Major Natural Gas Hub Proposed: Spectra and BG Pipeline Proposed Kitimat and Prince Rupert LNG Link Proposed: Coastal GasLink Northwest 0.6 Bcf/d Horn River: CNOOC Kogas Inpex GTN 1.6 Bcf/d Duvernay Montney: Kogas Petronas PetroChina Sinopec Mitsubishi Duvernay: PetroChina Northern Border 2.0 Bcf/d * Pipeline flows based on 2012 averages TransCanada Mainline 1.5 Bcf/d Alliance 1.4 Bcf/d Source: PIRA, Bentek CNOOC Sinopec KOGAS Petronas Mitsubishi Asian LNG Project Participants (China) (China) (South Korea) (Malaysia) (Japan) Robust supply, >12 Bcf/d, 20% size of total US dry gas production Strong domestic demand of >5 Bcf/d and growing Deliveries of >7 Bcf/d to major markets in Western US, Midwest and East on 5 major pipelines 6 announced LNG projects off west coast; first exports scheduled for 2015/2016 Poised to supply Asian LNG markets: Growing Asian ownership of Canadian natural gas reserves; LNG export projects AECO storage essential to balance supply and demand Western Canadian Dry Gas Production Forecast (Bcf/d) Alberta British Columbia AECO Hub for Western Canadian gas 16

18 Niska s Product Mix and Outlook A. Fixed Fee-Based (~80%) Composed of LTF (long-term firm) and STF (short-term firm) contracts STF tenor ranges from 1 month to <2 years LTF tenor usually 1-3 years, can be longer Primary difference is that LTF customers have flexibility, STF customers do not STF demand is growing, with existing customers demanding more; new entrants B. Optimization (~20%) Purchase, storage and sale of natural gas for Niska s own account Captures significant value along the forward curve Optimizes facility utilization, provides flexibility to capitalize on near-term opportunities Fully hedged in accordance with robust risk management policy % 76% Capacity Allocation (Bcf) % 68% Fiscal 2010 Fiscal 2011 Fiscal 2012 Fiscal 2013 Fiscal 2014 Estimate Fixed Fee-Based % 28% 60% 72% Optimization 251 (E) 20% 80% Target Achieved: 60% contracted before April 1,

19 Financial Overview

20 April 2013 Equity Restructuring Restructuring Overview Eliminated all subordinated units Notional units preserve voting rights for five years - receive no distributions Created new class of incentive distribution rights, which receive 48% of any cash distributions above $0.35 per unit No changes to common units or MQD Benefits to Unitholders Better positioned for growth Simplifies capital structure Demonstrates continued support from private equity sponsor Improves potential access to capital markets 19

21 Niska Before and After Before Restructuring Carlyle/Riverstone Funds, through Niska Sponsor Holdings Coöperatief U.A. ( HoldCo or Sponsor ) 16,992,245 Common Units 33,804,745 Subordinated Units Post Restructuring Carlyle/Riverstone Funds, through Niska Sponsor Holdings Coöperatief U.A. ( HoldCo or Sponsor ) 16,992,245 Common Units Public Unitholders 17,500,000 Common Units 25.12% Membership Interest 72.9% Membership Interest and Incentive Distribution Rights 100% Niska Gas Storage Management LLC 1.98% Managing Member Interest Public Unitholders 17,500,000 Common Units 49.7% Membership Interest 48.3% Membership Interest and New Incentive Distribution Rights 100% Niska Gas Storage Management LLC 1.98% Managing Member Interest Niska Gas Storage Partners LLC (NYSE: NKA) Niska Gas Storage Partners LLC (NYSE: NKA) Previous Structure Subordinated Units 33.8 Million Implied Ownership 48.52% Common Units 34.5 Million Implied Ownership 49.50% New Structure Subordinated Units 0.0 Implied Ownership 0.00% Common Units 34.5 Million Implied Ownership 98.02% 20

22 Positive Impact of Potential Distribution Increases 21

23 Recent Financial Results and Highlights $ millions Actual Results Fiscal Years Ending March 31 Low Guidance High Guidance Adjusted EBITDA (1)(2) $ 136 $ 139 $ 125 $ 135 Cash Available for distribution (1)(2) $ 64 $ 74 $ 60 $ 70 Cash distributions (3) $ 61 $ 48 $ 48 $ 48 Distribution coverage ratio 1.0x 1.5x 1.2x 1.4x Fixed charge coverage ratio (FCCR) (TTM Reported) 1.9x 2.6x 1.8x 1.9x (1) Fiscal 2013 Adjusted EBITDA and Cash Available for Distribution amounts exclude inventory write-down benefits of $43 million. (2) See appendix page 28 for historical reconciliations of net income to Adjusted EBITDA and Cash Available for Distribution (3) Subject to Board of Directors Approval Strong Fiscal 2013 Results: - Generated $138.6 million in Adjusted EBITDA and $74 million of Cash Available for Distribution, both at the high-end of guidance range - Strong Balance Sheet going into F 14 - $40 million of cash, no revolver drawings - Strong Distribution Coverage Ratio F 13 ended with 1.5x, 1.2x 1.4x forecasted for F 14 - FCCR above 1.75x in all periods 22

24 Capitalization Table April 30 March 31 March $ millions $ millions $ millions Cash Debt: Senior notes Revolving credit agreement Capital lease Total Equity Total capitalization 1, , ,497.6 Total debt / total capitalization 52.7% 54.7% 53.9% Long-term debt / long-term debt + equity 52.7% 52.4% 48.8% Total debt / Adjusted EBITDA (TTM) 5.4x 5.3x 5.8x Long-term debt / Adjusted EBITDA (TTM) 5.4x 4.8x 4.7x Capital Structure provides solid liquidity across varying market environments Credit metrics stable; revolver borrowings fully paid April 2013 Revolving credit agreement extended until June 2016 on more favorable terms 23

25 Niska Outlook

26 Building Unitholder Value, Path to Growth Strong Balance Sheet $40 million of cash (including cash equivalents), $100 million of working capital currently High quality assets, essential to North American natural gas infrastructure Equity Restructured Common unitholders better positioned for growth Simplified capital structure Improved access to capital markets, if required Low-Cost Organic Growth Proven low-cost organic growth track record Significant 25 Bcf expansion planned at Wild Goose in California Potential development project at Sundance in Central Alberta, depending on market conditions Attractive Diversification Development of a foothold in liquids storage at Starks in the Gulf Coast 25

27 Appendix

28 Explanation of Non-GAAP Financial Measures Non-GAAP Financial Measure Adjusted EBITDA We define Adjusted EBITDA as net earnings before interest, income taxes, depreciation and amortization, unrealized risk management gains and losses, loss on extinguishment of debt, foreign exchange gains and losses, inventory impairment write-downs, gains and losses on asset dispositions, asset impairments and other income. Adjusted EBITDA is used as a supplemental financial measure by our management and by external users of our financial statements such as commercial banks and ratings agencies, to assess: - the financial performance of our assets, operations and return on capital without regard to financing methods, capital structure or historical cost basis; - the ability of our assets to generate cash sufficient to pay interest on our indebtedness and make distributions to our equity holders; - repeatable operating performance that is not distorted by non-recurring items or market volatility; and - the viability of acquisitions and capital expenditure projects. The GAAP measure most directly comparable to Adjusted EBITDA and Cash Available for Distribution is net earnings. For a reconciliation of Adjusted EBITDA to net earnings, please see the schedule provided in the attached pages. This press release contains forward-looking estimates of Adjusted EBITDA and Cash Available for Distribution for the fiscal year ending March 31, Reconciliations to GAAP net earnings are not provided for these forward-looking estimates because GAAP net earnings for the fiscal year ending March 31, 2014 are not accessible. Niska is able to estimate interest expense, income tax benefits, depreciation and amortization, inventory write-downs, impairments of assets (including goodwill), losses on extinguishment of debt, foreign exchange gains and losses and other income. However, the Company is unable to predict future unrealized risk management gains and losses and these amounts could be material, such that the amount of net earnings would vary substantially from the amount of projected Adjusted EBITDA and Cash Available for Distribution. Non-GAAP Financial Measure Cash Available for Distribution Niska defines Cash Available for Distribution as Adjusted EBITDA reduced by interest expense (excluding amortization of deferred financing costs and the effects of unrealized gains or losses on interest rate swaps), income taxes paid, maintenance capital expenditures and other income. Niska's Adjusted EBITDA and Cash Available for Distribution are not presentations made in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"). 27

29 Guidance and Reconciliation of Net Earnings to Adjusted EBITDA Historical and Estimated for Fiscal Years Ended March $ millions Net earnings (loss) (165.8) (43.6) Add (deduct): Interest expense Income tax benefit (19.7) (18.9) Depreciation and amortization Unrealized risk management losses (gains) (83.2) 89.9 Goodwill impairment write-down Inventory impairment write-down Other Adjusted EBITDA Benefit of inventory impairment write-down Adjusted EBITDA excluding estimated benefit of inventory impairment write-down Add (deduct): Cash interest expense (69.9) (63.6) Maintenance capital expenditures (1.9) (1.8) Income taxes paid (1.0) 0.7 Other Cash available for distribution

30 For Further Information Contact: Investor Relations Kate Walsh or Brandon Tran th Ave SW Calgary, AB T2P 0A7