Galp Energia, Sgps S.a. Class B · EURONEXT:GALP
Galp Energia, Sgps S.a. Class B — Galp — Investor Day (June 2021)
58 slides from Galp Energia, Sgps S.a. Class B's investor day presentation, June 2021
Slide 1: Capital Markets Day: Thriving through the energy transition
CAPITAL MARKETS Thriving through the energy transition June 2021 1 Capital Markets Day 2021
Slide 2: Disclaimer
Disclaimer This document may include forward-looking statements, including, without limitation, regarding future results, namely cash flows, dividends, and shareholder returns; liquidity; capital and operating expenditures; performance levels, operational or environmental goals, targets or commitmen
Slide 3: Index
Index 01 | Strategy Refresh | 04 06 | Decarbonisation Path | 36 02 | Upstream Growth | 11 07 | Financial Framework | 39 03 | Downstream Transformation | 18 08 | Concluding Remarks | 48 04 | Renewables Growth | 27 09 | Appendix | 51 05 | New Energies | 32 3 Capital Markets Day 2021
Slide 4: Strategy Refresh
01 Strategy Refresh 4 Capital Markets Day 2021
Slide 5: Upcoming decade of deep transformation
Upcoming decade of deep transformation accelerating towards a cleaner future 2021 Social and regulatory pressure accelerating the decarbonisation pace Growing share of electricity with expected significant increase in EV sales Solar and wind becoming a relevant energy source for power generation Gre
Slide 6: Strategy with a purpose for a truly sustainable path
Strategy with a purpose for a truly sustainable path Let’s regenerate the future together! Reshape Refresh Reenergise Portfolio Relations People 6 Capital Markets Day 2021
Slide 7: Key business pillars built upon solid foundations
Key business pillars built upon solid foundations Upstream Downstream Renewables New Growth Transformation Growth Energies Commercial | Industrial & Energy Management Unique high-quality Opportunity to Expand our portfolio to Develop future options cash generative transform and extract deliver conti
Slide 8: Reshaping portfolio to thrive through the energy transition
Reshaping portfolio to thrive through the energy transition Net Capex 2021-25 Adjusted Operational Cash Flow (OCF)2 >20% c.50% Upstream ≥15% Industrial & EM Expected IRR1 10-20% €0.8-1.0 bn Commercial >€1.7 bn >€2.3 bn Illustrative p.a. >9 % Renewables (eIRR) >10% New Energies Upstream Growth Downst
Slide 9: Clear capital allocation to support a value driven growth story
Clear capital allocation to support a value driven growth story Maintaining Net Debt/Ebitda at c.1.0x 01 Net Capex 02 Shareholder distributions Base dividend Variable distributions €0.8-1.0 bn p.a. annual cash dividend subject to + €0.5/share <1.0x ND/Ebitda1 2021-25 average (2021 maintained at €0.5
Slide 10: Distinctive investment proposition combining sustainable growth and value
Distinctive investment proposition combining sustainable growth and value Growth Growth from Competitive from established + Renewables + shareholder businesses businesses distribution c.35% 2021-25 OCF growth Upstream growth from Expanding Robust low cost & carbon renewables baseline intensity asset
Slide 11: Upstream Growth
02 Upstream Growth 11 Capital Markets Day 2021
Slide 12: Upstream: value focused growth proposition
Upstream: value focused growth proposition from a low breakeven cash contributor Growth Resilience High-return Value developments options Continue to deliver Top tier low cost & Focused value Manage portfolio peer leading low carbon intensity maximisation from for value production increase portfolio
Slide 13: Delivering unique upstream growth whilst developing further value options
Delivering unique upstream growth whilst developing further value options WI Production from sanctioned projects (kboepd) <$3/boe Production +c.25% costs 125-135 2025 + Further growth options >20% IRR new developments1 Net entitlement production c.€6 bn 2021-25 OCF accumulated 13 Capital Markets Day
Slide 14: Leading Upstream profitability and carbon intensity
Leading Upstream profitability and carbon intensity allowing top portfolio competitiveness and longevity New developments breakeven Industry carbon intensity $/bbl kgCO2e/boe 60 60 45 45 c.25 18.8 30 30 IOGP2 9.9 15 15 0 0 Source: Rystad1; Galp’s internal NPV10 portfolio breakeven Source: Wood Macke
Slide 15: Short-term cash engine with significant value still to be captured
Short-term cash engine with significant value still to be captured Tupi & Iracema (Brazil) Other projects Berbigão, Sururu and Atapu (Brazil) > 2 bn boe produced, a small fraction of total Continue fields ramp-up recoverable resources Pursue in-field opportunities Sépia (Brazil) Further attractive d
Slide 16: Bacalhau I growth lever
Bacalhau I growth lever one of the most attractive projects in the industry Recent Final Investment c.$ 8 bn +40 kbpd Decision for Phase I Total investment WI production at (100% basis – Galp’s stake 20%) plateau (net to Galp) 220 kbpd FPSO, one of the largest and most technologically advanced 2024
Slide 17: Further high-potential optionality
Further high-potential optionality exploring 2025+ opportunities Area 4 | Rovuma LNG (Mozambique) Exploration activities One of the most competitive LNG Delivering selected high-potential projects worldwide wells Pre-FID activities focused on Block 6 (São Tomé and Príncipe) cost and concept optimisa
Slide 18: Downstream Transformation
03 Downstream Transformation 18 Capital Markets Day 2021
Slide 19: Transforming Commercial business
Transforming Commercial business capturing more value from a differentiated client driven offer Strong brand Integrated offer Digitalisation Client focused A leading player in Enhancing Integrated Expanding the Iberia and selected cross and up selling approach using customer African markets opportun
Slide 20: Key value levers on Commercial transformation
Key value levers on Commercial transformation focused on strong network, digitalisation and electrification Retail network Electric mobility Electricity Natural gas From legacy service Maintaining leading Grow electricity sales Retain stations to innovative, position in Portugal through competitive
Slide 21: Commercial: a resilient cash contributor
Commercial: a resilient cash contributor with business transformation to unlock more value 10-20% Returns from transformation OCF generation initiatives c.€ 400 m Fast time to market at low risk + Decentralised energy + Mobility and e-mobility + Convenience + Other value pools >40% 2025 low carbon O
Slide 22: Industrial & Energy Management: transforming operations
Industrial & Energy Management: transforming operations whilst adapting to market trends Energy Resilience Decarbonisation Investments management Ensure Sines’ Improve energy Capital efficient Maximise value industrial site efficiency and investments, across the energy competitiveness reduce emissio
Slide 23: From a grey refinery to a green energy hub
From a grey refinery to a green energy hub improving energy efficiency and reducing carbon footprint 2017 Grey refinery Concentrating operations in Sines Energy efficiency optimisation Expand advanced biofuels production Enhance crude sourcing flexibility Grow green H2 opportunities Green energy hub
Slide 24: Improve Sines' resilience and sustainability through selective investments
Improve Sines’ resilience and sustainability through selective investments Optimise refining efficiency Enhance resilience Low cost improvements with fast time to market Evaluating fuel desulphurisation project (20 kbbl/d) Energy Predictive Digitalisation Additional flexibility Compliance Capital ef
Slide 25: Decarbonise Sines' hub through advanced biofuels
Decarbonise Sines’ hub through advanced biofuels Integrating HVO production Developing 270 ktpa of renewable products Products aligned with future Diversified waste feedstock Pre-engineering works Industrial synergies regulation on road and base, with sourcing strategy to consider reusage of to supp
Slide 26: Enhancing the role of Energy Management
Enhancing the role of Energy Management enabling additional value creation across the energy chain Strong asset & client base Value creation levers Boosting EM Upstream equity Integrated margin & risk Extract value from existing asset base production growth management NG/LNG contracts Capture supply
Slide 27: Renewables Growth
04 Renewables Growth 27 Capital Markets Day 2021
Slide 28: Renewables: growing a competitive portfolio
Renewables: growing a competitive portfolio capable to deliver long-term growth Expansion Risk management Partnerships Integration Expand Adjusting risk Maximising value Value pools and existing portfolio, profile to market synergies with diversifying conditions other businesses geographies and tech
Slide 29: Expanding renewable footprint
Expanding renewable footprint through a dynamic and flexible business model 2025 2030 Operating capacity1 12 GW >4 GW 12 GW operating capacity1 operating capacity1 >4 GW Focus on Iberia and selective Geographical diversification: new markets entry > 50% outside Iberia Iberia Outside Iberia Under dev
Slide 30: Balancing risks and returns
Balancing risks and returns whilst delivering sustainable value Business model Expected returns Balancing risk exposure Predominantly PPA >9% Development & operation Levered capital structure Financing strategy Geographies 60-70% Asset rotation Debt weight Technologies Energy management Storage & hy
Slide 31: Generating profitable growth with potential to further expand
Generating profitable growth with potential to further expand OCF generation1 Portfolio development based on matured technologies, € 250-300 m competitive at market conditions Capturing enhanced returns from portfolio related value pools c.€ 100 m FCF Positive before 2030 1 Pro-forma Adj. OCF consid
Slide 32: New Energies
05 New Energies 32 Capital Markets Day 2021
Slide 33: New Energies: developing future options
New Energies: developing future options and value pools with scaling up potential Transition Innovation Scalability Synergies Pursuing Developing Assessing high Adjacent solutions projects that fit innovative potential leveraging decarbonisation solutions based on businesses industrial skills and el
Slide 34: Privileged position to develop green hydrogen solutions
Privileged position to develop green hydrogen solutions taking advantage of the energy hub’s industrial skillset Pursue first 100 MW Green H2 crucial role in decarbonisation, Replace Sines’ grey with green H2, with various use cases becoming aligning with RED II regulation, whilst economic during th
Slide 35: Assessing entry into the Li-ion battery value chain
Assessing entry into the Li-ion battery value chain capturing an early mover advantage on this high-potential business Pursue first EV adoption driving fast growth in Galp positioned to expand into Li-ion battery demand lithium chemical processing in Portugal 25 kton EU committed to build a vertical
Slide 36: Decarbonisation Path
06 Decarbonisation Path 36 Capital Markets Day 2021
Slide 37: ESG: Actively engaged and continually improving transparency and performance
ESG: Actively engaged and continually improving transparency and performance #1 In Europe Environment Social Governance Top 3 (AAA) Out of 30 Integrated O&G Defining measurable Balanced BoD Safety as decarbonisation independence & a core value targets diversity Promoting Developing talent Active ris
Slide 38: Reinforcing our decarbonisation targets
Reinforcing our decarbonisation targets supported by a reshaped portfolio Galp Decarbonisation Roadmap 2030 2050 2017 Absolute Emissions (Scopes 1 & 2) Industrial reconfiguration Energy efficiency -40% From operations Net Zero Emissions Carbon Intensity (Scopes 1, 2 & 3) Renewable electricity -40% (
Slide 39: Financial Framework
07 Financial Framework 39 Capital Markets Day 2021
Slide 40: From strategy to reporting
From strategy to reporting Maintaining business units’ structure unchanged Key business pillars Upstream Downstream Renewables New Growth Transformation Growth Energies Upstream Industrial & EM Commercial Renewables & New Energies Refining, biofuels, B2B and B2C cogeneration, businesses: oil, gas, E
Slide 41: Cash generation growth
Cash generation growth from a robust and resilient long-term portfolio OCF generation1 +c.35% Operational performance driven by Upstream growth and >€2.3 bn Downstream transformation Renewables and New Energies >€1.7 bn Others gaining relevance by 2025 Renewables & New Energies Group 2021 Ebitda est
Slide 42: Disciplined investment plan
Disciplined investment plan supporting portfolio reshape and growth Focus on high-quality / Net capex high-return developments and business transformation c.50% of net capex €0.8-1.0 bn p.a. allocated towards low carbon 2021-25 average 2021 at €0.5-0.7 bn Projects’ realignment and cash preservation
Slide 43: Upstream: continue to deliver superior value
Upstream: continue to deliver superior value supported by investment discipline Sources & Uses 2021-25 accumulated (€bn) Brent @$60/bbl Cash engine delivering OCF of Significant net capex €1.1-1.3 bn p.a. in 2021-24 reduction with no material and >€1.4 bn by 2025 contribution from Rovuma LNG given c
Slide 44: Commercial: strong cash contributor
Commercial: strong cash contributor supported by the ongoing transformation Sources & Uses 2021-25 accumulated (€bn) OCF to increase from 75% of capex focused c.€300 m in 2021 to on transformation projects c.€400 m by 2025, with low with short time to market carbon contributing >40% Commercial 2021
Slide 45: Industrial & Energy Management: transformation plan
Industrial & Energy Management: transformation plan to increase resilience and offer low carbon products Sources & Uses 2021-25 accumulated (€bn) OCF growing from Galp refining margin 70% of capex during the $3-4/boe €100 – 150 m in 2021 to period allocated to business >€350 m by 2025, o.w. EM trans
Slide 46: Renewables & New Energies: expanding renewables portfolio
Renewables & New Energies: expanding renewables portfolio whilst developing upcoming energies Sources & Uses 2021-25 accumulated (€bn) Maintaining deconsolidated Developing 3.8 GW and business model investing for significant growth, Renewables pro-forma OCF with asset rotation to support increasing
Slide 47: Robust financial framework to drive sustainable growth
Robust financial framework to drive sustainable growth throughout the decade Group Sources & Uses 2021-25 accumulated (€bn) Resilient cash Portfolio delivery management and 10 Dividends to $20/bbl asset shareholders 2021-25 Brent rotation Variable FCF neutrality to crystallise value and support cape
Slide 48: Concluding Remarks
08 Concluding Remarks 48 Capital Markets Day 2021
Slide 49: Thriving through the energy transition
Thriving through the energy transition delivering growth and shareholder value whilst reshaping portfolio Highly resilient Competitive Robust Accelerating and value shareholder financial decarbonisation driven growth returns position Ensuring sustainable long-term value creation 49 Capital Markets D
Slide 50: Distinctive investment case in the industry
Distinctive investment case in the industry superior growth from capital light asset base ensuring competitive distributions Delivering … from low capital … driving to superior superior growth… intensive plan… distribution OCF increase Net capex/CFFO Distributions/CFFO 2021-25 2021-25 2021-25 70% 35
Slide 51: Appendix
9 Appendix 51 Capital Markets Day 2021
Slide 52: Macro assumptions and sensitivities
Macro assumptions and sensitivities Macro assumptions 2021 - 2025E Brent price $60/bbl Galp refining margin $3.0 – 4.0/boe EUR:USD 1.20 Ebitda OCF FCF1 Sensitivities (€ m) Change 2021 – 25E 2021 – 25E 2021 – 25E Brent price $5/bbl 160-180 80-100 60-80 Galp refining margin $1/boe 65-75 50-70 50-70 EU
Slide 53: Key guidance
Key guidance Corporate 2021 2021-25 Ebitda >€2.0 bn >€3.0 bn by 2025 >€2.3 bn by 2025 OCF1 >€1.7 bn c.35% growth Net Capex €0.5 – 0.7 bn €0.8-1.0 bn p.a. Upstream Commercial Industrial & EM Renewables Operational Operational Operational Operational 2021 Production: 125-135 kboepd Convenience contrib
Slide 54: Debt indicators
Debt indicators Debt Indicators Debt reimbursement (€m) 31 Dec., 31 Mar., (€m) 2020 2021 1,000 Cash and cash equivalents 1,678 1,739 800 Undrawn credit facilities 1,262 1,263 Gross debt 3,743 3,291 600 Average funding cost 1.7% 1.5% 400 Net debt 2,066 1,552 200 Leases (IFRS 16) 1,089 1,125 0 Net deb
Slide 55: Upstream & Renewables Portfolios
Upstream & Renewables Portfolios Upstream Projects Reserves Brazil Angola 2020 Reserves 1P (mboe) 385 BM-S-11 Tupi 9.2% Block 14 BBLT TL Kuito 9% Reserves 2P (mboe) 700 BM-S-11 Iracema 10% Block 14k Lianzi 4.5% Reserves 1C (mboe) 525 BM-S-11A Berbigão 10%1 Block 32 Kaombo 5% Reserves 2C (mboe) 1,720
Slide 56: Carbon-related targets
Carbon-related targets Metrics and methodology Metric Methodology 2017 2030 2050 Absolute Emissions’ c.4 -40% Emissions related to Galp’s mtonCO2e reduction from operations operations (scopes 1 & 2) (Sc. 1 & 2) Carbon Intensity Emissions from operations (scopes 1 & 2) + emissions Net Zero Production
Slide 57: Acronyms
Acronyms $ (or USD) Dollar Ebitda Earnings before interest and taxes, depreciation and amortisation m Million % Percentage eIRR Equity Internal Rate of Return mboe Million barrels of oil equivalent & And EM Energy Management MJ Megajoules @ At ESG Environmental, Social and Governance MSCI Morgan Sta
Slide 58: galp.com
galp.com 58 Capital Markets Day 2021