Lion Finance Group Plc · LSE:BGEO
Lion Finance — BGEO Group — Investor Day (November 2016)
28 slides from Lion Finance's investor day presentation, Nov 22, 2016
Slide 1: Georgia Global Utilities
Georgia Global Utilities Speakers: Archil Gachechiladze, CEO GGU Giorgi Vakhtangishvili, CFO GGU Giorgi Tskhadadze, CEO Water Business BGEO Investor Day 22 November 2016 | Tbilisi, Georgia
Slide 2: Contents
Contents • Strategy • Business and performance overview • Annexes BGEO Group Investor Day page 2 GGU 22 November 2016 | Tbilisi, Georgia
Slide 3: GGU strategy
GGU strategy 1 UTILITY 2 ENERGY BUSINESS WATER UTILITY HYDRO & other renewables REVENUE 2016E: GEL 129.4mln HYDROs: CURRENT 149MW operating STANDING EBITDA 2016E: GEL 68.2mln 50MW ready to build 70% water losses 85MW pipeline HYDROs: 200MW operating MEDIUM EBITDA 2018: GEL 80mln+ 100MW ready to buil
Slide 4: Contents
Contents • Strategy • Business and performance overview • Annexes BGEO Group Investor Day page 4 GGU 22 November 2016 | Tbilisi, Georgia
Slide 5: GGU – a privately-owned natural monopoly
GGU – a privately-owned natural monopoly GGU is the only profitable water-utility player in Georgia with plenty of room for efficiency GGU is the largest privately owned water utility company in Company has strong execution track record & financial Georgia strength – Natural monopoly in Tbilisi, Rus
Slide 6: GGU business lines
GGU business lines Two revenue streams, each with solid cash generation capabilities Revenue Operating figures (2016A 9M) Overview 1 Water – Owns and operates entire network for – Revenue – GEL 84.7mln Supply and water supply and sanitation services - Sanitation pumping stations, reservoirs, – Numbe
Slide 7: GGU water sales
GGU water sales Overview Number of Clients 2011-2016 9M – Water is sourced from Zhinvali reservoir (90%) and Number of households Number of legal entities Mukhrani/Natakhtari (10%) aquifer to feed the cities of Tbilisi, 509,620 496,859 489,056 475,546 464,620 Rustavi and Mtskheta 433,883 – Customer
Slide 8: GGU infrastructure network overview - Tbilisi
GGU infrastructure network overview - Tbilisi GGU owns 100% of the infrastructure – Company operates c. 2,700km of water supply and c. 1,700km of wastewater pipeline network which consists of: trunk lines, tunnels of potable water and aqueducts, distribution networks to customers – Around 536mln m3
Slide 9: GGU business cycle
GGU business cycle Description of business cycle Production Distribution Treatment Water treatment, Water distribution and Wastewater collection Water production transportation and sales and treatment dispatch – River water intake – Dispatch centre – Collector – Business centres – Wells – Trunk pipe
Slide 10: GGU business centre concept
GGU business centre concept Introducing business centre concept – WATER LOSSES Key challenge is to minimize water losses through prudent investments and efficiency initiatives, managing technical and commercial losses – ZONING CONCEPT The essence of the concept is to identify and localize the water
Slide 11: GGU business centre concept – pilot business centre
GGU business centre concept – pilot business centre General Information Tbilisi Share of Description characteristics pilot business centre Area, km2 – Pilot business centre project cost amounts to GEL 0.7mln 502 29% Length of water network, km 2,338 31% Length of waste water network, km 1,389 29% Vo
Slide 12: GGU management team
GGU management team GGU group management Water business management Archil Gachechiladze Giorgi Tskhadadze Chief Executive Officer Chief Executive Officer - Joined GGU in November 2016 - Joined GGU in December 2014 - Previously served as Deputy CEO, Corporate & Investment Banking at Bank - Previously
Slide 13: GGU consolidated income statement (2015 9M-2016 9M)
GGU consolidated income statement (2015 9M-2016 9M) y-o-y Numbers are given in GEL, thousand 2016A 9M 2015A 9M % change - Total water sales increased by 3% as compared to LY comparative results REVENUES Revenue from water supply to legal enteties 58,589 57,094 3% - Drop of electric power sales is du
Slide 14: CAPEX evolution
CAPEX evolution Capex and EBITDA evolution 2013-2018E Capex split by type in 2016E (%) 100 Commercial Other, 6% Projects, 11% 82.3 75.3 80 New customer 68.2 61.8 connections, Power plants, 54.9 55.5 7% 60 energy and dam 22.0 safety, 25% 22.3 40 18.8 19.8 18.5 22.8 46.3 20 30.4 33.4 27.1 16.4 13.4 -
Slide 15: Contents
Contents • Strategy • Business and performance overview • Annexes BGEO Group Investor Day page 15 GGU 22 November 2016 | Tbilisi, Georgia
Slide 16: GGU consolidated income statement (segments)
GGU consolidated income statement (segments) Numbers are given in GEL thousand 2016A 9M 2015A 9M y-o-y % change Electricity Water Electricity Water Electricity Water REVENUES Revenue from water supply to legal enteties - 58,589 - 57,094 3% Revenue from water supply to individuals - 22,867 - 21,950 4
Slide 17: GGU consolidated balance sheet (2015 9M-2016 9M)
GGU consolidated balance sheet (2015 9M-2016 9M) y-o-y y-o-y - 13% decrease in inventories compared to Numbers are given in GEL, thousand 2016A 9M 2015A 9M 2015A YE % change % change the LY 9M is a result of better inventory ASSETS management systems introduced in 2016 Non-current assets Property, p
Slide 18: GGU consolidated cash flow statement (2015 9M-2016 9M)
GGU consolidated cash flow statement (2015 9M-2016 9M) y-o-y Numbers are given in GEL, thousand 2016A 9M 2015A 9M % change - Collections rates for legal entities was 92%, CASH FLOW FROM OPERATING ACTIVITIES while for households – 94%; resulting in GEL Cash receipt from customers 98,844 101,721 -3% 7
Slide 19: GGU consolidated income statement – quarters (2016)
GGU consolidated income statement – quarters (2016) Numbers are given in GEL, thousand 1Q16A 2Q16A 3Q16A REVENUES - Decrease of electric power sales in Q2 is due to Revenue from water supply to legal entities 17,034 19,353 22,203 repair works of the Zhinvali HPP tailrace tunnel Revenue from water su
Slide 20: Acquisition of remaining 75% interest in GGU
Acquisition of remaining 75% interest in GGU Acquired remaining 75% interest in GGU Transaction Rationale – Acquired remaining 75% stake in GGU A profitable company with Exit strategy through potential significant capacity for – The settlement of the cash consideration of US$ 70.0 million IPO is fea
Slide 21: Georgian water utility sector – capitalizing on efficiency gains
Georgian water utility sector – capitalizing on efficiency gains Underdeveloped industry, with significant efficiency and long term growth Highlights and Summary potential – Underdeveloped WSS industry holds an ample potential of – Significant funding-gap in the past has – GGU has introduced extensi
Slide 22: Georgia’s electricity market – stable outlook, sustainable growth
Georgia’s electricity market – stable outlook, sustainable growth Despite a significant upgrade of installed capacity in past 3 years (up 445 Snapshot of Georgia’s electricity balance MW1) a US$ 380,000/day electricity deficit remains to be bridged kWh, mln – 75% of Georgia’s installed capacity is –
Slide 23: Regulatory framework in Georgia
Regulatory framework in Georgia The main regulatory bodies Elements of regulatory discretion MRDI MoA MENR GNERC Regulatory provisions and by-laws – Ministry of Regional Development and Infrastructure (MRDI); Environmental safety and sustainability Recovery of surface and underground – Ministry of E
Slide 24: Water and Energy Tariff Setting Methodology Study (1/2)
Water and Energy Tariff Setting Methodology Study (1/2) We have upside from tariff increase, as there are strong arguments for increase and our current business plan is based on flat-tariffs Water Electricity Context: Context: – Regulator (GNERC - regulates all utility prices in Georgia, appointed b
Slide 25: Water and Energy Tariff Setting Methodology Study (2/2)
Water and Energy Tariff Setting Methodology Study (2/2) Existing assets Net book value WACC Return on assets New CAPEX Depreciation Costs for water supply Total operating and Costs for maintenance expenses waste water – Most controversial item used by the Regulator is WACC, which is set at 13.54% ac
Slide 26: Key raw materials
Key raw materials GGU is self sufficient as it owns its major material inputs (water & electricity) Water Electricity Fuel Chlorine Coagulant Key end-user Power source of Operating Use Water treatment Water treatment consumable distribution process Activities Consumption in 2015 536,401,
Slide 27: Share purchase agreement
Share purchase agreement – In 2008, the Government of Georgia, Ministry of Economic Development of Georgia and the Government of Tbilisi sold 100% shares in GWP, RWC and MWC to Georgia Global Utilities Ltd BVI – Within the Share Purchase Agreement (SPA), the government required the buyer to carry ou
Slide 28: Disclaimer – forward looking statements
Disclaimer – forward looking statements This presentation contains forward-looking statements that are based on current beliefs or expectations, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or cu