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Results Presentation Nine Months 2012

Results Presentation Nine Months 2012

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    Networks business Networks business Presentation Transcript

    • Networks Business
    • Networks Agenda Networks 1. 2011 Key Figures 2. Strategic Positioning 3. Regulatory Environment 4. Investment Plan (2012-2014) 5. Business EvolutionSpainUnited KingdomUnited StatesBrazil 2
    • Networks Key Figures 2011 Key Figures 2011 EBITDA Breakdown Operating Data1 Supply points 22.3 M Brazil Spain Distributed Energy (GWh) 191,795 23% 42% Installed Capacity (MW) 635 14% USA Employees >17,000 21% EBITDA (Eur M) 3,892 United Kingdom Investments (Eur M) 1,7251 –Includes Neoenergia stake of 39% 3
    • NetworksStrategic positioningGeneral criteria of investment prioritization Appropriate returns and value creation Immediate income generation Stable and predictable 4
    • Networks Regulatory Environment Regulatory environmentSPAIN • PENDING NEW REGULATORY EX ANTE FRAMEWORK UK • CLEAR REGULATORY ENVIRONMENT USA • REGULATORY AGREEMENTS IN FORCE FOR THE MEDIUMBRAZIL AND LONG TERMS Investment in countries with stable conditions 5
    • Networks Investment Plan 2012-2014 INVESTMENTS 2012 - 2014 Investment Plan (Eur M) Investments by Geography 2012-14 2,050 2,000 2,100 ESP 235 BRL 12% 230 230 25% 475 705 660 UK USA 37% 1,345 1,110 1,160 26% 2012 2013 2014Generation Transmission Distribution Around Eur 6.2 bn during the period 6
    • Networks Business Evolution Despite the reduction in 2012 of Spanish revenues … Cash-flow generation (Eur M) EBITDA by country (2014) 3,150 22% 36% 9,300 18% 6,150 24% SPAIN U.K. U.S.A. BRAZIL FFO Net FCF investments … moderate EBITDA growth in the period,due to new investments and the efficiency plans across all geographies 7
    • Networks AgendaNetworksSpainUnited KingdomUnited StatesBrazil 8
    • Networks Spain: General landscape GENERAL LANDSCAPEECONOMIC • Energy consumption at 2007 levelsSITUATION • Income reduction in 2012: Eur 156 M below 2011REGULATORY • New investments generate returns from year N+2FRAMEWORK from when they enter serviceRD 13/2012 • The new regulatory framework announced is currently in development Adapting investments to the new regulatory framework Maximizing efficiency 9
    • Networks Spain: Regulatory framework Business Plan Hypotheses Consolidation of current remuneration and establishing a RAV to be amortised over the remaining useful life of the assets Remuneration of new investments with rates of return appropriate for the activity and similar to other countries Recognition of Opex based on standards, promoting operating efficiency Enhancing incentives for quality of supply and reduction in lossesRemuneration system similar to the countries in which we operate 10
    • Networks Spain: InvestmentsInvestment Plan adaptation to the new regulatory framework Investment Plan (Eur M) Type of investment 2012-2014 13% 28% 22%350 200 200 37%2012 2013 2014 Growth Refurbishment Metering Smart Grid Expected around Eur 750 M in the period 2012-2014 11
    • Networks Spain: Efficiency Focusing on efficiency improvement Eur M OPEX EVOLUTION (Gross) Difference with CBL* (RPI and GWh) Workforce reduction OPEX (250 employees) 33 11 32 Lower contractor costs 638 635 629 620 Re-engineering Processes 2011 2012 2013 2014 Obtaining savings against inflation and activity increase*Costs Base Line 12
    • Networks AgendaNetworksSpainUnited KingdomUnited StatesBrazil 13
    • Networks United Kingdom: Regulatory Framework Distribution Transmission• DPCR5 for SP Distribution and • RIIO-T1 in force until 2021 SP Manweb• In force until April 2015 • Agreement included in fast- track process in January 2012• Negotiations started for RIIO-EDI1• Will last until 2023 • Investment of £2.6 bn 14 14
    • Networks United Kingdom: Expected T&D returns Stable and predictable regulatory environment Distribution Transmission REAL Vanilla WACC 4.7% 4.8% IRR* 7.2% 7.5% Gearing 65% 55% Incentives* +90 bps +40 bps* Nominal post-tax 15
    • Networks United Kingdom: Investments and RAV RAV increases by 38% Investment Plan (Eur M) RAV Evolution (£ M) 2012-14: Eur 2,290 M 5,115 4,529 920 3,994 850 3,718 1,956 1,570 1,233 520 1,104 470 545 220XX 2,761 2,959 3,159 2,614 300 380 3752012 2013 2014 2011 2012 2013 2014 Transmission Distribution Transmission Distribution 16
    • Networks AgendaNetworksSpainUnited KingdomUnited StatesBrazil 17
    • Networks United States: Regulatory Framework Distribution Transmission NEW YORK• Tariff agreements in NY (NYSEG and RGE) in force until December • MPRP Transmission project under 2013. construction in Maine with a total• Option to extend tariffs for the investment of $1.4 bn year 2014 MAINE • New investment opportunities• Tariff agreement in Maine (CMP) under analysis for transmission in force until December 2013 from 2015• A multi-annual rate case will be negotiated in 2013 which will come into effect in 2014 18 18
    • Networks United States: Expected Returns Basic principles of the remuneration system Guarantee of a basic ROE considering leverage of 50% Enhancing efficiency, sharing the improvements obtained above the basic ROE between consumers and the company Average ROEs estimated for the period 2012-2014 … Distribution Transmission Gas > 10.0% >12.0% >10.0%… with additional incentives (ESM) that could reach 50-100 bp 19
    • Networks United States: Investments and RAV RAV multiplies by 1.3x Investment Plan (Eur M) RAV Evolution (M USD) 2012-14: Eur 1,585 M 6,138 5,751605 5,235 4,766 510 1,522 470 1,309 1,088255 784 160 190 4,147 4,441 4,617XX 3,982 350 350 2802012 2013 2014 2011 2012 2013 2014 Transmission Distribution Transmission Distribution 20
    • Networks United States: Efficiency In the period 2009-2011, NOE/GM* ratio has improved from 50% to 41% Reduction of External Services 20% reduction in workforce (without considering sale of Connecticut gas) In the period 2012-2014 the goal is to maximize returns Achieving all metrics, avoiding penalties Allowing a forecasted NOE/GM* ratio of 34% in 2014* Net Operating Expenses / Gross Margin 21
    • Networks AgendaNetworksSpainUnited KingdomUnited StatesBrazil 22
    • Networks Brazil: Regulatory Framework (1/2)Distribution: Impact of the 3rd cycle of Tariff Reviews• Elektro: In force until August 2015• Neoenergia Distributors: Next review April 2013• Rate of return of 7.5% real, 12% nominal• The 3rd cycle incentivises efficiencies, defining Regulatory Opex based on a benchmarking model• Incentives/Penalties for the quality of supply• Concessions in force until 2027 23 23
    • Networks Brazil: Regulatory Framework (2/2) Generation/Transmission: successful tendering model• Predictable and secure tendering model, with fixed tariffs yearly readjusted by inflation.• Tendering with offer from contractor (controlled investment risk).• Access to BNDES financing in preferential conditions (60-70%).• Without hydro risk, guaranteed income volume independent of the energy generated.• Long-term concession contracts (30-35 years).• MP 579: no impact on Neoenergía Generation/Transmission, opportunity for Distribution.• High wind and hydro potential in Brazil: good positioning of Neoenergía. 24
    • Networks Elektro: Investments and RAV Investment of Eur 265 M during the period 2012-2014 Investment Plan (Eur M) RAV Evolution (R$ M) 2,471 2012-14: Eur 265 M 2,331 90 90 2,169 85 2,080XX2012 2013 2014 10/11 11/12 12/13 13/14 25
    • Networks Elektro: Efficiency Efficiency Plan launched in 2012 will minimize the impact of the Tariff Review … OPEX (R$ M) OPEX saving Efficient OPEX The saving in Opex forecasted for 2012 is R$ 40M surpassing the 70 40 50 R$ 35M forecasted objective In 2012 Elektro has won the 437 433 434 442 Award of the Best Distributor in Brazil granted by ABRADEE2011 (Jan-Dec) 2012 2013 2014 … positioning Elektro among the most efficient distributors within Aneel’s benchmarking for the next Tariff Review in 2015 26
    • Networks Neoenergia: Investment Plan (Distribution) Investment of Eur 565 M in the period 2012-2014 …Investment Plan (Eur M and 39%) RAV Evolution (R$ M and 39%) 3,700 2012-14: Eur 565 M 260 3,067 2,467 957 50 2,251 853 436 25 160 145 743 387 700 35 35 314 25 285 185 25 2,308 1,827 100 1,266 1,410 85 2012 2013 2014 10/11 11/12 12/13 13/14 CELPE COSERN COELBA CELPE COSERN COELBA … associated with the incorporation of 866,000 new costumers and a 19% increase in distributed energy 27
    • Networks Neoenergia: Investment Plan (Generation) Investment of Eur 695 M in the period 2012-2014, related to the construction of new hydro plants and wind farms … Investment Plan (Eur M and 39%) Investment Description 2012-14: Eur 695 M 230 230 235 UHE Teles Pires 1,820 MW (50.1% Neoenergia) Sep14 COD 55 35 40 UHE Baixo Iguaçu 350 MW 70 (60% Neoenergia) Jan16 COD 70 115 15 10 Windfarms 288 MW (50% Neoenergia/50% IBR) Jan13 COD 105 110 80 Belo Monte 11,230 MW (10% Neoenergia) 2015 COD 2012 2013 2014Otros Baixo Igua. Eólicas T.Pires … doubling installed capacity (from 1,600 MW to 3,000 MW) 28