Naturgy Energy Group, S.a. · BME:NTGY
Naturgy Energy — Gas Natural Fenosa — 9M 2017 Earnings Presentation
63 slides from Naturgy Energy's earnings presentation, Nov 7, 2017
Slide 1: Third Quarter 2017 Results (9M 2017)
Third Quarter 2017 Results (9M 2017) November 7, 2017
Slide 2: Agenda
Agenda 1. Highlights 2. Outlook 2017 & New strategic plan 2018-2020 3. 9M17 consolidated results 4. 9M17 results by activity 5. Outlook 2018 6. Conclusions Appendices 1
Slide 3: 1. Highlights
1. Highlights
Slide 4: Business performance and main figures
Business performance and main figures Robust performance in Networks 9M17 vs. 9M16 (€m) 9M171 9M161 9M16 Strong growth in International generation proforma2 proforma2 Challenging 3Q17 in gas supply with improving outlook for 4Q17 EBITDA 3,1403 3,582 3,391 -7.4% Adverse weather conditions con
Slide 5: Key highlights
Key highlights 1 Strong performance in Networks and International generation continued 2 Growing renewable energy exposure in Spain 3 Abnormal weather conditions persisted in Electricity Spain 4 Impact of natural disasters on GNF operations 5 CGE Chile restructuring 6 Successful debt optimization dr
Slide 6: Strong performance in Networks and International generation continued
1 Strong performance in Networks and International generation continued Networks EBITDA (€m)1,2 International generation EBITDA (€m) Growth (%) Growth (%) 217 2,171 2,057 +5.5% 190 +14.2% 29 826 35 -17.1% 827 -0.1% +6.3%X 188 +21.3% +9.3% 155 1,230 1,345 1 1 9M16 Proforma 9M17 Proforma 9M16 9M17 Gas
Slide 7: Growing renewable energy exposure in Spain
2 Growing renewable energy exposure in Spain 250MW photovoltaic capacity awarded on July 26, on top of the 667 MW wind capacity awarded in May 17 Ongoing renewable projects in Spain 2017YTD Capacity Total Investment Installed capacity awarded (MW) investment 2018E (MW) 2018E2 Wind projects 1 65 ~€
Slide 8: Abnormal weather conditions persisted in Electricity Spain
3 Abnormal weather conditions persisted in Electricity Spain Electricity Spain normalised EBITDA 2017E (€m) 715 2017 abnormal factors ~110 ~490-510 ~380-400 ~60 ~50 EBITDA 2016 Impact of social Exceptional hydro Evolution of Abnormal hydro Lag effect EBITDA 2017E Normalisation of Normalised voucher
Slide 9: Impact of natural disasters on GNF operations
4 Impact of natural disasters on GNF operations Country Description Chile Natural disasters (snowstorms and fires) resulting in power outages, civil liabilities and property damages Civil GNF undertaking the necessary actions to comply with the new regulation interpretation and liabilities & avo
Slide 10: CGE Chile restructuring
5 CGE Chile restructuring Merger of electricity distributors Rationale and impacts GNF Internacional Corporate restructuring and simplification driving to: Improved corporate governance Operational efficiencies via CGE Gas CGE consolidation of corporate CGE Natural Servicios functions/costs an
Slide 11: Successful debt optimization drive continued reduction in cost of debt
6 Successful debt optimization drive continued reduction in cost of debt Evolution of financial results post-tax1 savings (€m) Average cost of debt2 72 -16.3% 4.3% 32 3.6% 11 1Q17 vs. 1Q16 1H17 vs. 1H16 9M17 vs. 9M16 9M16 9M17 Debt refinancing / extension with improved terms of ~€3.0bn in 3Q17 (of
Slide 12: Sale of a 20% minority equity interest in Gas distribution business in Spain (GNDB)
7 Sale of a 20% minority equity interest in Gas distribution business in Spain (GNDB) Transaction description GNDB enterprise value (€bn) EV / EBITDA Sale of a 20% equity interest2 in GNDB to a 2016 ~11.2x 15.7x consortium formed by Allianz and CPPIB 13.9 GNDB remains a core asset of GNF’s +€4.0
Slide 13: Sale of Gas distribution and supply activities in Italy (I)
8 Sale of Gas distribution and supply activities in Italy (I) Transaction description Key terms and metrics Sale (100%) of GNF´s gas distribution activities in Italy together with services company GN Italia1 to 2i Aggregate Italian Rete Gas operations Sale (100%) of GNF’s gas and electricity sup
Slide 14: Sale of Gas distribution and supply activities in Italy (II)
8 Sale of Gas distribution and supply activities in Italy (II) Transaction rationale Gas distribution EV (€m) RAB premium ~30% 1 GNF competitive positioning EV / EBITDA1 2016 ~10.0x 11.7x Limited probability of maintaining competitive position in the upcoming retendering for local + €111m 727 dist
Slide 15: 2. Outlook 2017 & New strategic plan 2018-2020
2. Outlook 2017 & New strategic plan 2018-2020
Slide 16: Outlook 2017
Outlook 2017 2017E Net income: bridge to recurrent operations ~ €1.3-1.4bn ~70 ~15 ~ €1.2bn ~85 (~190) (~115) 1 3 4 Net income Capital gains CGE Chile Electricity 2 Natural Restructuring Recurrent 2017E (Italy) restructuring Spain abnormal disasters costs efficiency Net income factors plan (2017) 20
Slide 17: New strategic plan 2018-2020
New strategic plan 2018-2020 New strategic plan 2018-2020 to drive medium / long-term shareholder value Global macro and energy sector outlook has evolved GNF profile has changed: Electricaribe deconsolidation, 20% GNDB disposal, 100% Italy disposal Proceeds from GNDB and Italian transactions
Slide 18: 3. 9M17 consolidated results
3. 9M17 consolidated results
Slide 19: EBITDA evolution
EBITDA evolution 9M17 vs. 9M16 EBITDA1 (€m) 3,582 -7.4%(2) 3,391 83 27 (191) (58) 3,140 (293) (10) 3 EBITDA Electricaribe EBITDA 9M16 Networks International Gas Electricity Spain Rest of EBITDA 9M16 deconsolidation proforma generation activities 9M17 Robust performance of regulated and contracted
Slide 20: Net income evolution
Net income evolution 9M17 vs. 9M16 Net income (€m) 930 5 935 -15.2%3 70 26 793 (51) (187) Net income Electricaribe Net income Activity 1 Financial result Recurrent Other 2 Net income 9M17 9M16 desconsolidation 9M16 post-tax effective tax rate proforma improvement Strong focus on financial manageme
Slide 21: Net debt evolution
Net debt evolution Net debt (€m) Net Debt / LTM EBITDA ~3.5x 15,723 15,423 1,350 1,165 (330) (1,885) 2 Net debt Cash flow from Dividends Investing 1 Other Net debt 4Q16 ordinary activities cash-flow 9M17 Net debt of ~€13.5bn proforma of 20% GNDB disposal and 100% disposal of Italian operations (Ne
Slide 22: Investments
Investments 9M17 vs. 9M16 Investments1 (€m) Growth (%) 1,269 -11.5% Other Int. Gen. 81 1,123 Total investments growth of 3.6% vs. 9M16 53 -19.8% excluding the LNG tanker investment of €206m Electricity Spain 62 65 +120.8%3 in 9M16 117 Gas 230 83 +33.9%4 Networks Europe comparison affected by the
Slide 23: 4. 9M17 results by activity
4. 9M17 results by activity
Slide 24: Networks Europe
Networks Europe EBITDA1 (€m) Growth (%) Electricity +1.3% Spain: +2.4%2 EBITDA growth driven by higher 1,145 1,160 net sales and accrued investments brought into 35 20 -42.9% operation Moldova impacted by regulatory changes 460 457 +0.7% Investments underpin EBITDA growth: €161m in 9M17 (of wh
Slide 25: Networks LatAm
Networks LatAm Gas distribution EBITDA (€m) Net increase in connection Chile: Increased sales in the residential Change Country 9M17 9M16 Variation points vs. and commercial segments (%) 9M16 (´000) Colombia: Comparison affected by the Chile 175 151 24 +15.9% ~22 atypical demand and dry 2016 (“E
Slide 26: Networks LatAm
Networks LatAm Electricity distribution EBITDA (€m) Change Sales Country 9M17 9M16 Variation (%) growth (%) Chile: Higher sales and operating efficiencies offset the lower margins of Chile 238 227 11 +4.8% +2.6% the tariff review and perimeter changes3 Panama: Impacted by lower demand and Panama
Slide 27: Gas
Gas EBITDA (€m)1,2 Growth (%) Stable results in infrastructure 605 547 -9.6% Higher sales (+9.8%) driven by a significant increase in 221 international LNG (+48.7% vs. 9M16) offset by lower 222 0.5% residential sales in Spain (-10.3%) Margin pressure on Spanish industrial segment in 3Q17, 384
Slide 28: Electricity Spain
Electricity Spain GNF production (TWh) Pool price1 (€/MWh) EBITDA (€m) 553 -0.7% 177 20.1 19.9 +16 €/MWh 1.0 -72% Hydro 3.7 production 50 171 260 13.9 70 11.1 34 64 2.0 1.7 205 126 3.3 3.3 9M16 9M17 9M16 9M17 9M16 9M17 Nuclear Special Regime 1Q 2Q 3Q Thermal Hydro EBITDA 2017E vs. Higher generatio
Slide 29: International generation
International generation EBITDA (€m)1 Investments (€m) Growth (%) 117 Growth (%) 217 +14.2% +1293 190 29 35 -17.1%2 93 >100% 53 4 188 +21.3% 155 48 25 -47% 9M16 9M17 9M16 9M17 Mexico Other International Maintenance capex Growth capex Total availability (%) Change (%) International generation growth
Slide 30: 5. Outlook 2018
5. Outlook 2018
Slide 31: Outlook 2018
Outlook 2018 Outlook GNF activities Key drivers 2018 Continued investment/organic growth (Mexico, Chile) Networks Argentina regulatory review (full impact in April 2018) Ordinary review of gas procurement contracts Gas Significant progress in new business initiatives Improving trends in in
Slide 32: Outlook 2018: Focus on gas supply (I)
Outlook 2018 Focus on gas supply (I) Outlook Key drivers 2018 Volumes Stable / slightly down vs. 2017 given early quantities from Cheniere in 2017 and Italian disposal Volume sales for 2018 already contracted and secured >75% Positive expectations in ordinary review of procurement contracts du
Slide 33: Outlook 2018: Focus on gas supply (II)
Outlook 2018 Focus on gas supply (II) Outlook Key drivers 2018 Improving trends in international LNG on the back of higher demand expectations in Asia, also supporting higher prices in Europe JKM and NBP prices for full calendar year 2018 compare favorably vs. 2017 JKM (FY 2018E vs. FY 2017E) NB
Slide 34: Outlook 2018: Focus on gas supply (III)
Outlook 2018 Focus on gas supply (III) Outlook Key drivers 2018 Progress in new business initiatives geared towards profitable mid- sized customers and attractive market segments (FSRU, small scale solutions, bunkering) Good progress in ensuring contracted sales to end customers at GNF attractiv
Slide 35: Outlook 2018: Focus on Electricity Spain
Outlook 2018 Focus on Electricity Spain Outlook Key drivers 2018 Hydro production GNF vs. system (GWh) Expected recovery to normalized 50,000 5,000 hydro production levels 40,000 4,000 Normalisation ~3.0TWh 30,000 3,000 of hydro production GNF generation mix and CCGT 20,000 2,000 capabilities to
Slide 36: 6. Conclusions
6. Conclusions
Slide 37: Summary and conclusions
Summary and conclusions Results 9M17 Strong performance of regulated activities, notably in Gas networks and International generation Challenges in the liberalized business largely related to abnormal weather conditions expected to subside Net income 2017E in the target range (~€1.3-1.4bn) sub
Slide 38: Questions & Answers
Third Quarter 2017 Results (9M 2017) Questions & Answers
Slide 39: Appendices
Appendices
Slide 40: 1. Financials
1. Financials
Slide 41: Consolidated income statement
Consolidated income statement Change (€m) 9M17 9M16 % Net Sales 17,940 16,576 +8.2% Purchases (12,796) (10,940) +17.0% Gross Margin 5,144 5,636 -8.7% Personnel Costs, Net (724) (745) -2.8% Taxes (341) (344) -0.9% Other Expenses, Net (939) (965) -2.7% EBITDA 3,140 3,582 -12.3% Depreciation and Impair
Slide 42: Electricaribe EBITDA & Net income contribution – 2016
Electricaribe EBITDA & Net income contribution – 2016 2016 EBITDA (€m) 62 253 64 77 50 1Q16 2Q16 3Q16 4Q16 2016 2016 Net income (€m) 4 (6) (3) (39) (44) 1Q16 2Q16 3Q16 4Q16 2016 41
Slide 43: Consolidated income statement with reclassification of Italian operations and ECA deconsolidation
Consolidated income statement with reclassification of Italian operations and ECA deconsolidation 9M17 ex. 9M16 ex. 9M16 ex. %2017/ (€m) 9M17 Italy 9M16 Italy ECA Italy Italy ECA/Italy 2016 Energy margin 4,512 97 4,415 5,019 96 4,923 334 4,589 (3.8) Other 730 1 729 714 1 713 8 705 3.4 Gross Margin 5
Slide 44: EBITDA breakdown
EBITDA breakdown Change 9M16 (€m) 9M17 (€m) (%) proforma1 Gas networks 1,344 1,226 118 +9.6 Spain 680 653 27 +4.1% LatAm 664 573 91 +15.9% Electricity networks 812 8201 (81) -1.0%1 Europe 480 492 (12) -2.4% LatAm 332 3281 41 +1.2%1 Gas 547 605 (58) -9.6% Infrastructure 222 221 1 +0.5% Supply 325 384
Slide 45: EBITDA analysis
EBITDA analysis Gas/Electricity Regulated(1)/Non regulated Spain/International 15% 41% 50% 50% 59% 85% Gas Electricity Regulated1 Non regulated Spain International Note: 1 Includes contracted activities (EMPL, International generation, renewables) 44
Slide 46: Currency translation effect on EBITDA
Currency translation effect on EBITDA Gas Distribution Electricity Distribution EBITDA (€m) EBITDA (€m) Currency Currency Country 9M17 9M16 Activity Country 9M17 9M16 Activity translation translation Argentina 42 3 0 39 Argentina 15 9 (1) 7 Brazil 209 173 17 19 Chile 238 227 7 4 Chile 175 151 2 22 P
Slide 47: Net investments
Net investments Change (€m) 9M17 9M16 €m % Gas networks 370 453 (83) -18.3% Europe 117 264 (147) -55.7% LatAm 253 189 64 +33.9% Electricity networks 435 415 20 +4.8% Europe 161 172 (11) -6.4% LatAm 274 243 31 +12.8% Gas 53 230 (177) -77% Infrastructures 14 6 8 - Supply 39 224 (185) -82.6% Electricit
Slide 48: Financial structure (I)
Financial structure (I) A comfortable debt maturity profile As of September 30, 2017 (€m) Net debt: €15.7 billion Gross debt: €18.0 billion 7,924 7,924 2,328 2,572 2,159 2,026 1,008 2,151 2,571 2,026 203 848 2017 2018 2019 2020 2021 2022+ Average life of Net debt ~ 5.5 years 81% of Net debt matu
Slide 49: Financial structure (II)
Financial structure (II) An efficient net debt structure As of September 30, 2017 Majority of debt at fixed rates Conservative currency exposure policy at a very competitive cost 4% 10% 20% Euro 6% US$ Fixed CLP Other Floating 80% 80% Diversified financing sources 23% Capital markets 15% Institution
Slide 50: Financial structure (III)
Financial structure (III) Strong liquidity position As of September 30, 2017 Limit Drawn Undrawn (€m) Committed lines of credit 7,591 451 7,140 Uncommitted lines of credit 506 150 356 EIB loan 52 - 52 Cash - - 2,231 TOTAL 8,149 601 9,779 Additional capital market capabilities of ~€6,200m both in E
Slide 51: 2. Operating figures
2. Operating figures
Slide 52: Networks: Gas distribution Spain
Networks Gas distribution Spain Gas sales (GWh) Connection points ('000) +5.6% +0.7% 138,583 131,237 5,311 5,348 9M16 9M17 9M16 9M17 51
Slide 53: Networks: Gas distribution LatAm
Networks Gas distribution LatAm Gas sales (GWh) Connection points ('000) +8.1% +4.1% 217,029 200,805 8,003 7,691 +13.6% 43,851 38,587 +6.8% 1,743 1,632 19,865 -5.5% 21,012 34,950 -1.6% +3.9% 35,519 2,833 2,944 +18.6% 63,071 +3.8% 575 597 53,190 +4.9% 1,074 1,024 +5.3% 55,292 52,497 1,627 +1.1% 1,645
Slide 54: Networks: Electricity distribution Europe
Networks Electricity distribution Europe Electricity sales (GWh) TIEPI1 (Spain) (minutes) +0.4% 25,783 25,883 +2.8% 1,945 1,999 9M16 9M172 +0.2% 35 29 23,838 23,884 +17.1% 9M16 9M17 Spain Moldova Note: 1. “Tiempo de interrupción equivalente de la potencia instalada” = Equivalent time of power supply
Slide 55: Networks: Electricity distribution LatAm
Networks Electricity distribution LatAm1 Electricity sales (GWh) Connection points ('000) 0.9% 26,904 27,139 +3.0% -0.7% 3,593 3,700 10,942 10,868 +2.7% 2,983 3,065 +2.3% 12,168 12,448 +0.8% +4.1% 3,794 3,823 610 635 9M16 9M17 9M16 9M17 Panama Chile distribution2 Chile transmission Note: 1 Proforma
Slide 56: Gas and electricity demand in Spain
Gas and electricity demand in Spain Conventional gas demand (GWh) Electricity demand (GWh) +0.5% +4.5% 197,184 188,205 189,234 188,746 9M16 9M17 9M16 9M17 Source: Enagás Source: REE 55
Slide 57: Electricity: Spain (I)
Electricity Spain (I) GNF’s total production (GWh) GNF’s total production in cogeneration and renewables1 (GWh) -0.7% 1,978 -13.7% 20,073 42 19,935 -13.7% +35.7% 1,707 1,978 1,707 57 1,019 452 -72.4% -26.8% 3,691 3,341 331 +0.4% 3,329 3,808 +25.0% 3,047 -11.1% 1,484 1,319 +25.3% 10,060 8,028 9M16 9M
Slide 58: Electricity: Spain (II)
Electricity Spain (II) GNF electricity sales (GWh) Average pool price1 (€/MWh) Average OMIP prices2 (€/MWh) -4.7% +47.9% +12.5% 27,554 26,248 50.3 47.2 42.0 34.0 9M16 9M17 9M16 9M17 9M16 9M17 Source: OMIP Source: REE Notes: 1 Average price in the daily power generation market 2 Monthly average of th
Slide 59: Electricity: International generation
Electricity International generation Total production (GWh) Total availability (%) 1 +4.2% +5.2% 13,925 13,361 +4.4% 1,315 96.2% 1,259 91.4% +2.8% 94.6% 92.0% +4.2% 12,102 12,610 +5.7% 91.3% 96.5% 9M6 9M17 9M16 9M17 Mexico Rest of countries Mexico Other International Notes: 1. The average of net ele
Slide 60: Gas: Gas sales by markets
Gas Gas sales by markets1 Spain International (GWh) -3.3% (GWh) +26.1% 129,588 125,373 131,083 28,743 -6.6% 26,852 103,918 11,561 +21.9% +48.7% 14,904 85,933 -10.3% 18,205 57,807 16,338 -4.2% -2.1% 71,079 68,089 46,111 45,150 9M16 9M17 9M16 9M17 Industrial Spain Residential Spain Industrial Europe I
Slide 61: Gas: Evolution of reference prices vs. Brent
Gas Evolution of reference prices vs. Brent PVB vs. BRENT (FY 2018E vs. FY 2017E) NBP vs. BRENT (FY 2018E vs. FY 2017E) JKM vs. BRENT (FY 2018E vs. FY 2017E) 13.5% 12% 12.5% 11% 11.5% 10% 10.5% 9.5% 9% 01-Jan 01-Apr 01-Jul 01-Oct 01-Jan FY 2017 PVB/Brent (%) FY 2018 PVB/Brent (%) FY 2017 NBP/Brent (
Slide 62: Disclaimer
Disclaimer This document is the property of Gas Natural SDG, S.A. (GAS NATURAL FENOSA) and has been prepared for information purposes only. As such, it cannot be disclosed, distributed or published for any other reason, in whole or in part, without the express and prior written consent of GAS NATURA
Slide 63: Thank you
Thank you This presentation is the property of Gas Natural Fenosa. Both its subject matter and its graphic design are for the exclusive use of its staff. ©Copyright Gas Natural SDG, S.A. INVESTOR RELATIONS tel. 34 912 107 815 tel. 34 934 025 897 e-mail: relinversor@gasnaturalfenosa.com website: www.