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Results Presentation Nine Months 2012

Results Presentation Nine Months 2012

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Generation & supply business Generation & supply business Presentation Transcript

  • Generation & Supply Business 1
  • Generation & SupplyAgendaGlobal ResultsOverview of the businessesRegulationSupplyInvestmentsManagement and efficiency 2
  • Generation & Supply Key Figures A cash flow generating business 2011 Installed capacity 31 GW 2011 EBITDA: ~ Eur 2.3 bn Output managed 121 TWh 16% Electricity sales 133 TWh 14% 70% Gas sales 39 TWhg Customers 19 MSpain UK Mexico Investments Eur 500 M Workforce 7,900 3
  • Generation & Supply Performance Revising investment levels to the challenging environmentunder which the business will operate in the coming years …Cash flow generation (Eur M) EBITDA by geography (2014) 17% 3,900 18% 65% 5,300 1,400 1,416 SPAIN U.K. Mexico FFO Net FCF investment… will result in a strong cash flow generation for the Group 4 4
  • Generation & SupplyAgendaGlobal ResultsOverview of the businessesRegulationSupplyInvestmentsManagement and efficiency 5
  • Generation & Supply Spain Business pressured by overcapacity of inefficient technologies (national coal, solar energies) and taxes Iberdrola’s response Average hydro year Closure of inefficient plants and revising CCGTs operation Stopping renewable investments Global procurement management Thermal gap decreasing Increasing taxes Hibernation analysis Slow and gradualinternalisation of higher costs Lower investments Excess of offer Focus on loyalty Liberalisation by 2014 6
  • Generation & Supply United Kingdom The “carbon tax” is going to impact the market equilibrium in the medium term Iberdrola’s answerIncreasing renewable output Closure of inefficient plants due to off-shore Reducing thermal gap Longannet availability plan “Carbon tax” from 2013 Optimising market operations Capacity payment key Analysis of new investments: for not closing coal Damhead Creek 2Increasing non energy costs Cultivating loyalty in customers’ bills with rational growth 7
  • Generation & Supply Mexico Stable business, maximising availability Iberdrola’s answer Plans to maintain availabilityIncreasing electricity demand Efficient management of energy surplusHigher competitiveness of gas v other technologies Efficiency improvements Enertek expansion in 2014 Competitive gas prices v CFE tariff Analysis of investments: Cogen. Monterrey, new auctions 8
  • Generation & Supply Commodities evolution European commodity markets are not stable in the long term 2011 2012 2013 2014 Oil - $/barrel 111.3 112.6 109.8 103.7 Coal price continues Coal - $/t rising, while the 122.4 92.9 93.5 103.1 decoupling between US and European gas Henry Hub - $/MMBtu 4.0 2.8 4.0 4.2 prices is maintained NBP - $/MMBtu 9.4 9.2 10.4 10.7 European markets CO2 - €/t 13.0 7.9 8.2 8.7 do not reflect environmental taxes Electricity ESP - Eur/MWh 49.9 49.7 53.4 54.5 on energy (Carbon Tax, CO2 auctions, taxes on fossil fuels) Electricity UK - Eur/MWh 55.0 54.9 62.2 66.3Sources: ICE, McCloskey, NYMEX , ECX, OMEL, ICAP, N2EX and Bloomberg 9
  • Generation & Supply Thermal gap Spain The need for thermal output is decreasingTWh Thermal GapNevertheless, almost all thermal capacity currently installed is still required 10
  • Generation & Supply Thermal gap United Kingdom In the short term, the need for thermal capacity will be reduced TWh Thermal Gap Nevertheless, a significant part of the installed capacity will disappearin the mid term due to obsolescence and new environmental regulation 11
  • Generation & Supply Impact of the “carbon tax” in the UK The implementation of the carbon tax affects market equilibrium Impact of the new taxon electricity production costs From April 2013, a GBP 4.94/MWh tax will be applied on GBP CO2 emissions (carbon tax) 1.90 /MWh GBP 4.70 /MWh Market prices have internalised the higher costs of the marginal technology (CCGT) CCGT Coal Coal competitiveness deteriorates due to tax pressure on this technology 12
  • Generation & Supply Reserve margin in the UK A gradual reduction of the reserve margin is forecasted until 2015/16 , but with no security of supply problems … Reserve Margin• Reserve margin reduction … Firm capacity/Peak demand • Closure of coal plants after 20,000 hours • Less efficient CCGTs withdrawing from the 15% market 10% Acceptable level 5%• ... to tight levels, but acceptable from a security of 0% supply standpoint until 12/13 13/14 14/15 15/16 16/17 2015/16 Source: Ofgem … which will imply a progressive improvement in margins (especially CCGTs) and will encourage capacity payments … 13
  • Generation & Supply Reserve margin in the UK … nevertheless we consider that form 2016 onwards, electricity supply is not guaranteed • Carbon tax rapidly reduces coal 50 50 competitiveness 40 CO2 emissions cost (includes carbon tax) 40 30 30 • Without an adequateGBP/CO2 t 20 50 20 50 capacity payment, there are 15,000 MW of coal “at 10 40 10 40 risk”, with the only 0 0 alternative to close during 30 30 the 2016-2020-10 20 -10 20 period, lowering the reserve margin to undesired levels-20 10 -20 10 2013 2014 2015 2016 2017 2018 2019 2020 0 0 • Establishing capacity payments-10 -10 would solve the problem-20 -20 2013 2014 2015 2016 2017 2018 2019 2020 According to the European Directives, the regulator should clarify this uncertainty before December 2013 14
  • Generation and Supply Spreads in the UK Current market prices show that, with the carbon tax, coal plants are becoming less competitive CCGT plant margins Coal plant margins (GBP/MWh) (GBP/MWh)5.004.00 18.53.00 15.72.00 11.11.00 0.8 1.1 0.90.00 Winter Winter Winter Winter Winter Winter 2012 2013 2014 2012 2013 2014 NOTE: Referred margins include the Cost of the Carbon Tax . 15
  • Generation & SupplyAgendaGlobal ResultsOverview of businessesRegulationSupplyInvestmentsManagement and efficiency 16
  • Generation and Supply Spanish Regulation Draft Bill on fiscal measures sets additional taxes, differing by generation technology Nuclear Eur 8.72/MWh Hydro Eur 13.32/MWh Coal Eur 9.90/MWh CCGT Eur 7.83/MWh Wind Eur 5.20/MWh Cogeneration Eur 10.6/MWhThe estimated gross impact for Iberdrola amounts to Eur 580 M per year, in addition to the current tax burden of Eur 330 M*Includes energy efficiency, ENRESA, Ecotax, IBI, IAE and others 17
  • Generation and Supply Uncertainties of the Spanish regulation After the proposals for the new tax measures,still key uncertainties remain in the Spanish regulatory framework Will electricity imports be subject to those new taxes? Will the “Ecotasas” (regional taxes) be finally eliminated? Will these tax measures be for a temporary period? What will be the degree of internalisation of these new costs? What are the pending aspects to consider of the regulatory reform? • Capacity payments? • New incentives for the Special Regime (renewables)? • Future policy on national coal? • Capacity threshold to be eligible for Last Resource Tariff? 18
  • Generation & SupplyAgendaGlobal ResultsOverview of businessesRegulationSupplyInvestmentsManagement and efficiency 19
  • Generation and Supply Supply business 102 TWhBusbars of power supplied and 3.3 bcm of gas in 2011 (19 million contracts) Power Gas P&S* 102 TWh 3.3 bcm 2.3 mill contracts 5 (60 contracts) (110,000 contracts) (3.2 M 24 contracts) (2.0 M 2.4 contracts) (2.2 M (10.7 M contracts) contracts) (785,000 0.9 contracts) 2011 2011 2011 Continental Europe United Kingdom Mexico* Products and Services 20
  • Generation and Supply Supply business High degree of efficiency in Spain Synergies in UK due to IT developments and outsourcing Iberia UK “Cost to Serve” per contract “Cost to Serve” per contract100% -26% 100% -36%2007 2008 2009 2010 2011 2012 2013 2014 2007 2008 2009 2010 2011 2012 2013 2014 After a redesign of commercial processes and IT investments 21
  • Generation & SupplyAgendaGlobal ResultsOverview of businessesRegulationSupplyInvestmentsManagement and efficiency 22
  • Generation and Supply Total investments Recurring investments with a global criteria, new investments in environments with regulatory certainty … Investments (Eur M) Investments (Eur M) 550 -26% 550 10 450 30 450 15 400 115 400 135 35 5 75 25 125 100 170 375 435 375 275 300 200 2012 2013 2014 2012 2013 2014USA/Canada Mexico United Kingdom Spain Recurrent Growth … growth investments only to finish work in progress 23
  • Generation and Supply Total investments Growth investments linked to regulatory predictability La Muela 2013 San Esteban 2014 Extension of Enertek 2014 Extension of Cogen. Monterrey 2015 CCGT Damhead Creek 2* 2017 New tender** 2017 Pending CH Tamega Administrative Process NuGen Pending Decision* Portfolio to build a second CCGT from 2019 24** Pending of finally organized tenders by the Government
  • Generation & SupplyAgendaGlobal ResultsOverview of businessesRegulationSupplyInvestmentsManagement and efficiency 25
  • Generation and Supply Business integration 2011A huge effort by the team that has provided substantial results ...1 Analysis and revision of common procedures 100 procedures2 Action plans design 74 plans (600 tasks)3 First identification of synergies EUR 556 M in 2011-2015 … having already captured a total of Eur 121 M in 2011, equivalent to 22% of the identified synergies 26
  • Generation and Supply Management and Efficiency Working to achieve the remaining Eur 435 M synergies from 2012, through … Optimization of trading in energy markets Centralised fuel procurement Closure of facilities with environmental restrictions and reorganisation by geographic regions criteria Reductions in headcount, external providers and thermal investmentsCommercial systems improvements and outsourcing of low added value activities Improvement of products and customer portfolio 27