Galp Energia, Sgps S.a. Class B · EURONEXT:GALP
Galp Energia, Sgps S.a. Class B — Galp Energia — Investor Day (October 2007)
90 slides from Galp Energia, Sgps S.a. Class B's investor day presentation, Oct 22, 2007
Slide 1: Investor Day
INVESTOR DAY Lisbon, 22 October 2007
Slide 2: Disclaimer
DISCLAIMER Matters discussed in this presentation may constitute forward-looking statements. Forward-looking statements are statements other than in respect of historical facts. The words “believe,” “expect,” “anticipate,” “intends,” “estimate,” “will,” “may,” "continue," “should” and similar expres
Slide 3: Strategy Overview
STRATEGY OVERVIEW Lisbon, 22 October 2007 Manuel Ferreira De Oliveira, CEO
Slide 4: A Focused Management Team
A FOCUSED MANAGEMENT TEAM Chief Executive Officer Manuel Ferreira De Oliveira Head of Refining, Head of Power Head of E&P and Head of Oil Marketing CFO Head of Natural Gas Supply and Logistics André Freire de International Oil João Pedro Francesco Massimo José António Almeida Palmeiro Fernando Manue
Slide 5: A Total Return of 102% in One Year
A TOTAL RETURN OF 102% IN ONE YEAR +97% +21% +10% 23-Oct 23-Nov 23-Dec 23-Jan 23-Feb 23-Mar 23-Apr 23-May 23-Jun 23-Jul 23-Aug 23-Sep Galp Energia PSI20 Index DJ Euro Stoxx Oil & Gas Source: Bloomberg 5 Investor Day
Slide 6: Proven Track Record on Implementation
PROVEN TRACK RECORD ON IMPLEMENTATION Conversion Project 9 Oporto Cogeneration Facility 9 Oporto Cogeneration Facility 9 Wind Farms 9 Wind Farms 9 CCGT 2 9 CCGT 2 9 Strategic plan CCGT 1 9 CCGT 1 9 CCGT 1 9 under execution 9 9 9 9 Sines Sines Sines Sines Cogeneration Cogeneration Cogeneration Cogene
Slide 7: Growing with a More Balanced Portfolio
GROWING WITH A MORE BALANCED PORTFOLIO R&M Target 50% G&P 25% E&P 25% 1H2007 G&P 26% R&M 57% E&P 17% 481 M€ 2006 G&P 33% R&M E&P 59% 8% 958 M€ 2005 G&P EBITDA 32% R&M adjusted 63% E&P Breakdown 5% 877 M€ 7 Investor Day
Slide 8: Towards a More Integrated Oil Business
TOWARDS A MORE INTEGRATED OIL BUSINESS E&P 150 Kbbl/d Building an E&P Portfolio Improving refining Refining 300 Kbbl/d competitiveness Marketing 300 Kbbl/d Distributing refining throughput To be achieved 8 Investor Day
Slide 9: Towards a More Integrated Gas & Power Portfolio
TOWARDS A MORE INTEGRATED GAS & POWER PORTFOLIO New businesses New sources New sourcing Gas to contracts Power Midstream Trading Supply Spain Trading Sourcing Sourcing Supply contracts Supply contracts Portugal Portugal Current Target 9 Investor Day
Slide 10: Carefully Managing the Environmental Risk
CAREFULLY MANAGING THE ENVIRONMENTAL RISK Galp CO2 emissions balance (Mton) • Licenses for 2008-2012 period on PNALE’s1 EU approval • Expected reduction in CO2 3.4 0.2 emissions in line with estimated PNALE reduction 3.3 • New projects consider CO2 cost • Actively developing clean energy projects Bi
Slide 11: Biofuels Is a Natural Core Business to Galp
BIOFUELS IS A NATURAL CORE BUSINESS TO GALP Oil value Mineral oil Logistics Refining Logistics Distribution production chain Biofuels Vegetableoil Vegetable oil value production production Logistics Biorefining Logistics Distribution chain No additional Focus on Biodiesel II much investment Negotiat
Slide 12: Strategic Presence in African Downstream
STRATEGIC PRESENCE IN AFRICAN DOWNSTREAM Galp presence in Africa • GDP growth of 15% in Angola in 2006 (35%-2007E) • Positive EBITDA contribution (10M€) Cape Verde • Leverage on Galp’s access to oil & gas upstream and biodiesel feedstock Guinea-Bissau Angola An option to grow Mozambique 12 Investor
Slide 13: To Become an Integrated Energy Company
TO BECOME AN INTEGRATED ENERGY COMPANY The right assets Integrated Sustained The right expansion value strengths focusing on creation return The right opportunities 13 Investor Day
Slide 14: Exploration & Production
EXPLORATION & PRODUCTION Lisbon, 22 October 2007 Fernando Gomes
Slide 15: Long Term Peak Oil Production Expected at 80 Kbbl/d
LONG TERM PEAK OIL PRODUCTION ON CURRENT PORTFOLIO EXPECTED AT 80 KBBL/D • 4 blocks offshore Working production evolution 34.0 Angola 2X • 10 blocks offshore • 3 areas onshore1 Brazil 17.0 12.4 9.5 • 7 blocks offshore 5.1 5.0 6.2 Portugal 3.5 1.9 1.8 • 5 blocks offshore 2004 2005 2006 2007E 2012E To
Slide 16: Gaining Scale in E&P with Limited Risk Profile
GAINING SCALE IN E&P WITH LIMITED RISK PROFILE Working Production Rationale Strengths target (Kbbl/d) • Building an E&P • Flag carrier, with portfolio strong ties with Portuguese speaking 150 • Attractive 14% IRR countries assuming 35 Usd/bbl • Ability to exploit • Balancing political geopolitical a
Slide 17: Evaluating New Opportunities to Support Further Growth
EVALUATING NEW OPPORTUNITIES TO SUPPORT FURTHER GROWTH • 9th round: 312 blocks being auctioned, onshore and offshore • Galp already present in some of the basins Brazil • Partnership with Petrobras • MoU signed with PDVSA to study the development of several projects (short, medium and long term) Ven
Slide 18: Contingent Resources' Evolution Confirms Quality of Angola Assets
CONTINGENT RESOURCES’ EVOLUTION CONFIRMS QUALITY OF EXPLORATION ASSETS IN ANGOLA (BLOCKS 14, 14K AND 32) Million bbl June 30, 2006 Dec 31, 2006 Reference crude price (Usd/bbl) 62.5 65.0 Proved (P1)2 35.6 35.7 +0% Net entitlement1 Proved + Probable (P2)2 41.4 50.4 +22% Working Contingent Resources3 4
Slide 19: Block 14 – Significant Discoveries in 2007
BLOCK 14 – SIGNIFICANT DISCOVERIES IN 2007 Key highlights Location • 11 commercial discoveries • 2 recent discoveries: Lucapa-1 and Malange-1 • More than 50 prospects identified • 16 exploration and 16 appraisal wells drilled • Exploration period expired on February 2007 Next steps • Appraisal wells
Slide 20: Block 32 – Favourable Prospects
BLOCK 32 – FAVOURABLE PROSPECTS Key highlights Location • 12 commercial discoveries • Two 3D seismic acquisitions covering whole block • More than 20 prospects identified • 16 exploration wells drilled • 2 appraisal wells drilled Next steps • Full screening of potential development plans • Appraisal
Slide 21: BM-S-11 – Key Asset
BM-S-11 – KEY ASSET Key highlights Location • Tupi discovery • Opening of a new hydrocarbon play • Hydrocarbons in place: 1.7 to 10 billion boe • Tupi Sul appraisal well proved the southern extension of Tupi discovery, located 9.5 km away • Iara Area in 3rd Exploration Phase Next steps Area: 2,600 k
Slide 22: Appendix
APPENDIX ©E savverersia
Slide 23: Understanding a Production Sharing Agreement
UNDERSTANDING A PRODUCTION SHARING AGREEMENT Working Production Total Production Fraction of Shared production between the that is contractor and allocated to Cost Oil Profit Oil the recovering Concessionaire the at the terms contractor's Equity agreed in the costs, Production contract. between Vari
Slide 24: Working Production to Double on Block 14
WORKING PRODUCTION TO DOUBLE ON BLOCK 14 Working Production 34.0 • Tômbua - Lândana production from CPT to start in 2010 2X • Increase weight of light oil in working production 17.0 12.4 • Natural production decline of Kuito 9.5 field 5.1 5.0 6.2 3.5 • Increase of BBLT contribution in 1.9 1.8 produc
Slide 25: Block 14 – Strong Growth in Production Expected
BLOCK 14 – STRONG GROWTH IN PRODUCTION EXPECTED Key highlights Location • Producing fields: Kuito, BBLT, TL • Kuito works for development definition after FPSO contract finished • Optimization works to lift BBLT production above nominal capacity Next steps • Pursue TL EPCI1 • Pursue Negage pre-devel
Slide 26: Block 14K – Pre-Development Studies Under Way
BLOCK 14K – PRE-DEVELOPMENT STUDIES UNDER WAY Key highlights Location • 2 commercial discoveries • 3 prospects identified • 3 exploration wells drilled • 1 appraisal well drilled in 2007 • Date of Lianzi Commercial Discovery effective since May 2006 Next steps • Pursue Pre-Development Studies Area:
Slide 27: Block 33 – New Operator to Be Appointed
BLOCK 33 – NEW OPERATOR TO BE APPOINTED Key highlights Location • 3D seismic survey covering whole block • 1 discovery • 5 exploration wells drilled • Calulú Provisional Development Area approved by concessionaire • Initial Exploration Phase expired on May 2005 Next steps • Waiting for concessionair
Slide 28: Santos Basin – Drilling Campaign Just Starting
SANTOS BASIN (BLOCKS 8, 21, 24) – DRILLING CAMPAIGN JUST STARTING Key highlights Location • 3 blocks: BM-S-8, BM-S-21 and BM-S-24 • 3D seismic survey completed • More than 10 prospects identified • 2 exploration wells being drilled Next steps • Geologic & Geochemical studies under way • Exploration
Slide 29: Espírito Santo – Positive Signs from Seismic Survey
ESPÍRITO SANTO – POSITIVE SIGNS FROM SEISMIC SURVEY Key highlights Location • Galp operator in 5 blocks • 3D seismic surveys covering all blocks completed • More than 20 leads identified • 8 mature prospects ready to be drilled Next steps • Finish seismic and geological evaluation Area: 378 km2 • 5
Slide 30: Portiguar Basin – Oil Discoveries Under Evaluation
PORTIGUAR BASIN – OIL DISCOVERIES UNDER EVALUATION Key highlights Location • Galp operator in 20 blocks • 2D and 3D seismic surveys completed • More than 30 Leads identified • More than 12 Prospects identified • 10 operated exploration wells drilled in 2007 • 3 oil discoveries Next steps • Finish se
Slide 31: Sergipe/Alagoas – Exploration Works in an Early Phase
SERGIPE/ ALAGOAS – EXPLORATION WORKS IN AN EARLY PHASE Key highlights Location • 2D and 3D seismic surveys completed • 5 leads identified • 2 prospects identified • 1 exploration well planned Next steps • Finish seismic and geological evaluation • Drill 3 exploration wells • Identify more leads and
Slide 32: Espírito Santo Offshore – Exploration Work Just Beginning
ESPÍRITO SANTO OFFSHORE – EXPLORATION WORK JUST BEGINNING Key highlights Location • 3D seismic survey • 3 leads identified • 3D Seismic reprocessing on-going Next steps • Finish seismic and geological studies • Identify more leads and prospects • 1 exploration well to be drilled up to 2010 Area: 722
Slide 33: Potiguar Offshore – First Exploration Well in 2012
POTIGUAR OFFSHORE – FIRST EXPLORATION WELL IN 2012 Key highlights Location • 3D seismic survey • More than 10 leads identified • 3D seismic reprocessing on-going Next steps • Finish seismic and geological studies • Identify more leads and prospects • BM-POT-16/BM-POT-17: 1 exploration well each, to
Slide 34: Peniche – New Frontier Area
PENICHE – NEW FRONTIER AREA Key highlights Location • Concession contract signed on May 2007 • Exploration Period: 8 years • Whole area being new frontier • More than 10 leads identified Next steps • Geological studies and seismic reprocessing under way • 2D and 3D seismic acquisition planned for 20
Slide 35: Alentejo – New Frontier Area
ALENTEJO – NEW FRONTIER AREA Key highlights Location • Concession contract signed on February 2007 • Exploration Period: 8 years • Whole area is new frontier • Seismic and geological studies under way Next steps • 3,000 km 2D seismic acquisition and processing during 2008 • Commitment exploration we
Slide 36: More than 12 Leads Already Identified
MORE THAN 12 LEADS ALREADY IDENTIFIED Key highlights Location • Farm-in Agreement signed in 2007 • Exploration period: 3+2+2 years • More than 12 leads identified • Intensive 2007/2008 seismic acquisition program on-going (more than 8,400 km2 3D seismic plus 3,100 km 2D seismic) Next steps • Seismic
Slide 37: An Unexploited Area
AN UNEXPLOITED AREA Key highlights Location • New frontier area • Exploration period: 4+2+2 years • Production period: 30 years • 1 main lead identified • Geological studies under way Area: 17,000 km2 Water depths: up to 2,600 m Next steps Galp Energia share: 10% Operator: ENI • Acquisition of 2,000
Slide 38: Refining, Supply and Logistics
REFINING, SUPPLY AND LOGISTICS Lisbon, 22 October 2007 Marques Gonçalves
Slide 39: Strong Position in Iberia
STRONG POSITION IN IBERIA Refining and Logistics Infrastructure Key Highlights • 100% of Portuguese or 20% of Iberian refining Coruña Somorrostro (220 kbpd) capacity (120 kbpd) • 69% of production corresponds to gasoline (25%) and middle distillates (44%) Porto Tarragona • Ownership interest in key
Slide 40: Sines Is One of the Most Recent Refineries in Europe
SINES IS ONE OF THE MOST RECENT REFINERIES IN EUROPE Asset Description Sines refinery diagram • Sines (1979), includes the following units: • Topping • 2 vacuum distillation • Fluid catalytic cracking • Visbreaker • 2 diesel hydrodesulphurization • Sines refinery is producing reformulated gasoline f
Slide 41: A Specialities Refinery in Porto
A SPECIALITIES REFINERY IN PORTO Asset Description Porto refinery diagram • The Porto refinery complex, built in 1969, includes: • Hydroskimming fuel plant • Aromatics plant • Base oil plant • Lubricants blending plant • Producer of paraxylene, ortoxylene, toluene and benzene for Portuguese and expo
Slide 42: Enhancing Value Opportunity from Existing Portfolio
ENHANCING VALUE OPPORTUNITY FROM EXISTING PORTFOLIO Rationale Strengths Refining margin target (Usd/bbl) +65% 8.9 • Market conditions • Integrated refining favour diesel vs fuel and marketing operations +3.5 • Dieselization of Iberian market • Financial capabilities to support investment • Improveme
Slide 43: Potential Efficiency Gains in Refinery Operations
POTENTIAL EFFICIENCY GAINS IN REFINERY OPERATIONS Sines Refinery Porto Refinery Maintenance Personnel cost efficiency efficiency Personnel, Maintenance, work hr/1000 Usd/EDC EDC Refining margin Maintenance, improvement Personnel, Process Usd/EDC work hr/1000 efficiency Process EDC utilization, % Pro
Slide 44: Optimizing Refining System
OPTIMIZING REFINING SYSTEM 9 Pre-Flash 6.9 7.9 9 Vacuum distillation 9 Visbreaker Porto 9 Vacuum Flash 9 Starting operations: 2010 Naphtha and fuel VGO Fully oil integrated 9 Hydrocracker refining system 9 Vacuum distillation 9 Vacuum Flash Sines 9 Starting operations: 2011 5.3 6.8 Nelson complexity
Slide 45: Towards One Refining System
TOWARDS ONE REFINING SYSTEM LPG LPG Gasoline focus Naphtha Gasoline T KERO FCC LCO+SLURRY O CRUDE P LPG P I Diesel N G VGO Diesel focus Naphtha HDC VGO Sines Diesel AR Vac. Vac. HGO HGO Dist. Dist. Res. oils Porto RV RV VB VB Porto Flux. RVB RVB F. Oil 45 Investor Day
Slide 46: Improving Refining Portfolio Competitiveness
IMPROVING REFINING PORTFOLIO COMPETITIVENESS Product Yield (M ton; %) Crude Processed (M bbl; %) 13.6 14.8 98.5 109.7 11% 11% Others Heavy/Medium 25% 19% Gasoline 59% Light Middle Distillates 75% Fuel 44% 57% 41% 20% 25% 13% Current After Current After Conversion Conversion Adjust production mix to
Slide 47: Refining's EBITDA Fuelled by Conversion and Upgrading Investments
REFINING’S EBITDA FUELLED BY CONVERSION AND OTHER UPGRADING INVESTMENTS Conversion Economics Perfomance Improvement Economics Estimated Capex 1,000 M€ Estimated Capex Starting Cogeneration plants 1502 M€ operations Energy efficiency program 100 M€ Porto 2010 Environmental compliance 174 M€ Sines 201
Slide 48: Extracting Further Value from Existing Assets
EXTRACTING FURTHER VALUE FROM EXISTING ASSETS Impact on Gross Margin (M Usd) 100 345 2 Current Refining margin Volume effect Total 1 effect 1 Assuming refining margin increment of 3.5 Usd/bbl times 98.5 M bbl. 2 Assuming refining margin of 8.9 Usd/bbl times incremental crude processed of 11.2 M bbl.
Slide 49: Oil Marketing
OIL MARKETING Lisbon, 22 October 2007 João Pedro Brito
Slide 50: Galp Focusing in Iberia
GALP FOCUSING IN IBERIA 2006 Sales to final clients (M ton) Market Portugal Share 1.7 9.0 Spain 0.4 3.6% 4.4 46% 2.5 Retail Wholesale LPG Special Clients Total Space to grow in the Spanish market 50 Investor Day
Slide 51: Increase Retail Activity Efficiency and Effectiveness
INCREASE RETAIL ACTIVITY EFFICIENCY AND EFFECTIVENESS Business Overview Key areas GALICIA • 1,041 service stations: 818 in Portugal and 5.5% CASTILLA-LEÓN 223 in Spain 1.5% ARAGÓN 0.8% CATALUÑA 2.9% • In the past 3 years there was a significant MADRID 4,2% expansion growth in C-stores business, over
Slide 52: Wholesale as a Relevant Distributor of Refining Throughput
WHOLESALE AS A RELEVANT DISTRIBUTOR OF REFINING THROUGHPUT Business Overview Main business segments’ clients 2006 Transports Manufacturing • 52% market share in Portugal 615 741 • Represents over 32% Resellers Aviation 772 168 of refining throughput Construction Marine • Aviation and marine segments
Slide 53: An Innovative Approach to a Mature LPG Market
AN INNOVATIVE APPROACH TO A MATURE LPG MARKET Business Overview • Stable market share in Portugal of 44% • Deliveries consistently high levels of profitability • Over 20 thousand points of sale • Market to stabilize at current levels • Launch of new products to capitalize on Galp Energia brand (cook
Slide 54: Volume Growth Impacted by GDP Evolution
VOLUME GROWTH IMPACTED BY GDP EVOLUTION Sales Volume (%) Sales Volume (%) 140% 140% Diesel 120% 120% Total Diesel 100% 100% Total 80% 80% Gasoline Gasoline Portugal 60% 60% Spain 2000 2001 2002 2003 2004 2005 2006 2000 2001 2002 2003 2004 2005 2006 GDP Growth (%) GDP Growth (%) 6 6 4 4 2 2 0 0 2000
Slide 55: Extracting and Expanding Value in Iberia
EXTRACTING AND EXPANDING VALUE IN IBERIA Rationale Strengths Galp Iberian Market (M ton) • Sustain market • Long position in leadership in Portugal refining • Extract further value • Strong brand from existing assets awareness 13.6 • Develop non-fuel • Logistic assets in 11.6 business place to suppo
Slide 56: A More Efficient and Effective Retail Activity in Portugal
A MORE EFFICIENT AND EFFECTIVE RETAIL ACTIVITY IN PORTUGAL Galp Sales Volume (M ton) 37% 37% 37% • Strong market share of 37% 2.1 2.0 2.0 • Increase penetration of premium products, from 7% to 15% • More than 120 million transactions per year 2004 2005 2006 Galp retail market share Number of Service
Slide 57: Delivering on Spanish Strategy
DELIVERING ON SPANISH STRATEGY Sales Volume (M ton) Galp market share • Boosting Galp presence in Spain 7% 5.3 • Market share in Spain increased to 7% 2% 3% 4% • No geographic overlapping 1.7 2.5 2.7 • Increasing refining and marketing integration • More than doubling volumes 2004 2005 2006 After Ag
Slide 58: Highly Complementary Retail Network
HIGHLY COMPLEMENTARY RETAIL NETWORK Galp Current Galp + AGIP GIJON ASTÚRIAS CANTABRIA PAIS BASCO GALICIA 10.5% GALICIA 3.5% 3.0% NAVARRA 5.5% 5.5% CASTILLA-LEÓN 7.3% CASTILLA- LA RIOJA ARAGÓN CATALUÑA LEÓN ARAGÓN 1.0% CATALUÑA 1.5% 4.9% 0.8% 2.9% 4.4% 9.7% BARCELONA MADRID MADRID 4,2% 5.5% CASTILLA-
Slide 59: Geographical Diversification Achieved
GEOGRAPHICAL DIVERSIFICATION ACHIEVED Sales Galp + AGIP (M ton) Breakdown Portugal 11.6 by Country 1.7 Spain 0.4 5.9 45% 3.6 55% Retail Wholesale LPG Special Clients Total 12% Iberian market share 59 Investor Day
Slide 60: Further Integration to Reduce Risk Enhances Value
FURTHER INTEGRATION TO REDUCE RISK ENHANCES VALUE Sales volumes (M ton) 13.6 13.6 11.6 +2.0 9.0 +2.6 100% To hedge 100% of refining throughput Galp 85% Energia needs to get 66% additional 2 M ton in Spain while diversifies geographical exposure Refining Current After LT target throughput volumes AGI
Slide 61: Natural Gas
NATURAL GAS Lisbon, 22 October 2007 Massimo Rivara
Slide 62: Strong Competitiveness of Existing Contracts
STRONG COMPETITIVENESS OF EXISTING CONTRACTS Sourcing Contracts Sales volumes (bcm) 4.6 4.2 • 5.7 bcm secured 4.0 • High flexibility • Maturity 2020/2026 • Option to deliver in any point in Iberia NG supply sources 2006 2004 2005 2006 Portuguese market Trading Algeria 45% Nigeria 55% Leverage on gas
Slide 63: Seeking for New Sources
SEEKING FOR NEW SOURCES Rationale Strengths Iberian market (bcm) 52.4 +40% • Strong growth • Competitive gas prospects sourcing 37.5 • Geographical expansion • Strong costumer base into Spain • Developing power • Defend current market projects share in Iberia • Access to critical 15% • Access to sou
Slide 64: Guaranteed Access to Critical Infrastructure
GUARANTEED ACCESS TO CRITICAL INFRASTRUCTURE Regasification Terminal Regasification Terminal Bilbao Irún – Larrau Mugardos Pipeline (In construction) 52% 100% 80% • Regasification capacity available for Iberian needs Regasification Terminal Barcelona 58% • Galp Energia has an important stake in Rega
Slide 65: Galp Storage Assets Key for Opportunistic Trading
GALP STORAGE ASSETS KEY FOR OPPORTUNISTIC TRADING Galp Storage Rationale • Location : Carriço • Stable return • Underground storage capacity: • Equivalent to a LNG vessel • 1st cavern already in operation (40 Mm3) • Ability to exploit trading opportunities • 2nd cavern to start operations in • One o
Slide 66: Stable Return with Growth Potential
STABLE RETURN WITH GROWTH POTENTIAL Infrastructure Liberalization • Unbundling of commercialization activities for companies with more than 100 thousand clients • Over 800 thousand clients • Others will have to present separate accounts Regulation • Actual regulated asset base of 853 M€ • Expected r
Slide 67: Strong Growth Prospects in Iberian Natural Gas Market
STRONG GROWTH PROSPECTS IN IBERIAN NATURAL GAS MARKET NG Market – Portugal (bcm) NG Market – Spain (bcm) 7.6 44.8 0.9 CAGR 5% CAGR 11% 33.5 12.4 2.7 10.5 4.0 0.7 18.1 1.5 14.3 4.0 14.3 1.8 8.6 2006 2012E 2006 2012E NG in Primary 15% 22% 22% 25% Energy Electric Industrial Residential and others 67 In
Slide 68: Higher Margin Volumes Kept at Galp
HIGHER MARGIN VOLUMES KEPT AT GALP Liberalization calendar > 10 k m3/y Remaining To be regulated > 1 Mm3/y from 1st July 2008 Not Electric regulated 2007 2008E 2009E 2010E Regulated and electric volumes to be maintained at Galp 68 Investor Day
Slide 69: Growth Coming from Own Consumption and Geographical Expansion
GROWTH COMING FROM OWN CONSUMPTION AND GEOGRAPHICAL EXPANSION Galp Energia NG Sales (bcm) Includes Trading and other liberalized sales +1.6 6.2 from LDC’s 0.3 0.6 4.6 LDC’s regulated sales 0.6 2.8 0.7 Includes incremental consumption from two 1.5 new cogens and Spanish market 2.5 1.8 Maximum level o
Slide 70: Power
POWER Lisbon, 22 October 2007 André Ribeiro
Slide 71: A Gas to Power Portfolio
A GAS TO POWER PORTFOLIO 800 1,200 MW CO2 Wind io mitigation t fol o r a p n g opi el CCGT v De CCGT Gas to 160 Power 160 Wind 80 New Cogens Cogen Cogens Special Regime Producers Market 71 Investor Day
Slide 72: CCGT Projects with Sound Fundamentals
CCGT PROJECTS WITH SOUND FUNDAMENTALS CCGT load factor and Spanish pool price Projected Installed Capacity (MW) cent€/ KWh 63% 7 61% 6 400 50% 52% 46% 47% 5 39% 40% 4 800 3 2 400 1 0 2003 2004 2005 2006 3Q 2010E 4Q 2010E Gas Portuguese CCGT load factor 600 Mm3 consumption Spanish CCGT load factor Sp
Slide 73: Cogeneration Business with Positive Impact on Galp's Value Chain
COGENERATION BUSINESS WITH POSITIVE IMPACT ON GALP’S VALUE CHAIN Regulation Projected installed capacity (MW) 244 • Granted tariff for a period of 15 years 82 • Tariff covers avoided costs in - 82 80 • Investment in alternative baseload technology • O&M and fuel costs 2007 2008E 2009E 2010E Total Na
Slide 74: Galp Energia Delivering on Wind Project
GALP ENERGIA DELIVERING ON WIND PROJECT Regulation Projected installed capacity (MW) 1 • Average regulated tariff of 73.6 €/MWh, +144 +8 80 to be adjusted with CPI from start of +76 operations +64 400 +108 • Granted tariff for a minimum of 15 years or 33 GWh/MW and option to pass to 2009E 2010E 2011
Slide 75: Moving into Power Business
MOVING INTO POWER BUSINESS Rationale Strengths Target installed capacity (MW) • Value accretive Gas & • Efficient gas sourcing Power integrated contracts Hydro approach 1,200 • Opportunity to • Attractive electricity develop competitive market growth generation mix • Opportunity in green • Strong cu
Slide 76: Gas & Power Approach Reduces Overall Business Risk
GAS & POWER APPROACH REDUCES OVERALL BUSINESS RISK Galp Energia planned Natural Gas generation mix Demand (bcm) 160 Cogens 2.1 Additional Galp Energia incremental demand 0.4 1.1 Galp Energia own 800 CCGT consumption 4.0 Portuguese market 2006 160 Wind Galp Energia Market 2012E Own consumption increa
Slide 77: Call Option Profile of Integrated Gas and Electricity Approach
CALL OPTION PROFILE OF INTEGRATED GAS AND ELECTRICITY APPROACH Additional flexibility gain from CCGT project Gas margin Gas cost Spark spread CCGT project will allow to arbitrage between gas trading and power margins 77 Investor Day
Slide 78: Portfolio's Competitiveness to Be Complemented by Hydro
PORTFOLIO’S COMPETITIVENESS TO BE COMPLEMENTED BY HYDRO Indicative cost structure by generation type (MWh) CCGT and Hydro usage Nuclear Hydro CO2 free Available technologies Gas Coal Fuel Capital O&M Fuel CO2 Source: BCG 78 Investor Day
Slide 79: Hydro Incremental Capacity Is an Opportunity to Diversify
HYDRO INCREMENTAL CAPACITY IS AN OPPORTUNITY TO DIVERSIFY New hydro capacity to be licensed Project Installed capacity (MW) Production (GWh) Ribeiradio 70 110 Foz Tua 234 340 Fridão 163 299 Padroselos 113 102 Gouvães 112 153 Daivões 109 148 Vidago 90 114 Almourol 78 209 Pinhosão 77 106 Girabolhos 72
Slide 80: To Become the Alternative Player in Portugal
TO BECOME THE ALTERNATIVE PLAYER IN PORTUGAL 1 SRP 1 SRP Fuel oil Coal CCGT More efficient generation mix than average CCGT Nuclear Hydro Hydro Iberia 2010E Galp target portfolio 1 SRP – Special Regime Production 80 Investor Day
Slide 81: Lock in Value in Electricity
LOCK IN VALUE IN ELECTRICITY Sales Mix Base Case Sales Mix Target Pending on supply margin’s evolution Galp electricity Final clients Pool Galp electricity Final clients Pool production production Leverage on oil and gas customer base 81 Investor Day
Slide 82: Financial Overview
FINANCIAL OVERVIEW Lisbon, 22 October 2007 Francesco Antonietti, CFO
Slide 83: Galp's Businesses in Different Momentums
GALP’S BUSINESSES IN DIFFERENT MOMENTUMS EBITDA IFRS (M€) EBITDA Adjusted (M€) 1,241 0.5x 958 627 0.5x 587 581 560 481 425 0.4x 320 272 1.0x 118 125 79 80 79 80 E&P R&M G&P Consolidated E&P R&M G&P Consolidated 2006 1H2007 2006 1H2007 1H07/06 • E&P confirming growth in production • R&M stable even w
Slide 84: Adjusted EPS Increased by 71% to €0.34
ADJUSTED EPS INCREASED BY 71% TO €0.34 IFRS Adjusted H106 H107 % Ch. € Million H106 H107 % Ch. 6,130 5,894 (3.9%) Sales 6,054 5,890 (3.0%) 615 627 2.0% EBITDA 404 481 19.2% 475 498 4.8% EBIT 264 360 36.4% 19 31 59.4% Income from Associates 19 31 59.4% 354 401 13.4% Net Income 167 285 71.0% 0.43 0.48
Slide 85: Controlled Operating Costs
CONTROLLED OPERATING COSTS External Supplies & Services 2006 (M€) Operating costs1 2006 (M€) Variable costs 2006 13 Fixed costs 2006 79 24% 0% 3% 4% 221 208 19 693 130 858 270 347 17 69% 71% 66% E&P R&M G&P Consolidated 87% Employees (#) 31% 29% 34% 12 (77) 13% (194) 2 (38) E&P R&M G&P Consolidated
Slide 86: Capital Expenditures Supporting Growth
CAPITAL EXPENDITURES SUPPORTING GROWTH Breakdown by segment: M€ Maintenance (%) Expansion (%) Total Capex Comments Maintenance and environmental investments in both refineries, 70 construction of new service stations in R&M1) 50 50 145 131 Portugal and in Spain, construction of 30 strategic storage
Slide 87: Low Debt Level at 0.4x Debt to Equity
LOW DEBT LEVEL AT 0.4x DEBT TO EQUITY 30 June 2007 M€ Short Term Long Term Debt exposure to interest rates Fixed rate Bonds - 226 25% Bank debt 325 273 Variable rate 75% Commercial 275 - Paper Debt reimbursement plan (M€) Cash (182) - 245 Net Debt 918 68 36 38 37 26 20 Average life - 3.98 years 2007
Slide 88: Strong Cash Flow Generation Allowed Debt Reduction
STRONG CASH FLOW GENERATION FROM OPERATING ACTIVITIES ALLOWED DEBT REDUCTION M€ 1,192 38 918 319 1,280 1,606 305 Net debt 2005 Operating cash Investment Dividends paid Net interests Others Net debt flow cash flow net and taxes 1H2007 of subsidies 88 Investor Day
Slide 89: Off Balance Sheet Responsibilities
OFF BALANCE SHEET RESPONSABILITIES Total responsibilities Coverage Type of benefits 2006 • Pension Fund: 370 M€ Pensions 397 M€ (95% funded) Pre and early • Provisions: 213 M€ retirements 81 M€ • Accumulated deviation1: 106 M€ • 64 M€ within the corridor Health and life insurance 211 M€ • 42 M€ outs
Slide 90: Stable and Clear Dividend Policy
STABLE AND CLEAR DIVIDEND POLICY Annual Dividend of year n Net income IFRS 50% payout @ replacement x ratio Annual Dividend cost 2006 dividend of 0.304 €/share (paid in June 19, Interim Dividend of year n+1 2007) Annual 50% x dividend of Interim dividend year n • Subject to approval of all related p