HistóricoA Successful Equity Story4 The English company“San Paulo GasCompany” wasauthorized to explorethe concession ofpublic lighting servicesin São Paulo18721 The Canadiancompany “Light”acquires the company19122 The administration ofthe company wastransferred to the cityof São Paulo and thecompany was namedas “Comgás”19684 1996: Comgás becamea publicly-listedcompany 1997: Comgás’ sharesstarted to be tradedon the Bovespa stockexchange1996/19976 Largest Brazilian gasdistributor,responsible for morethan 30% of naturalgas’ sales in thecountry20108 The company wasnationalized and wasnamed as “CompanhiaPaulistana de Serviçosde Gás (Comgás)”19593 The control wastransferred to thestate-owned company“CompanhiaEnergética de SãoPaulo (CESP)”19845 Privatization: Comgáswas acquired by theconsortium formed byBritish Gas and Shell Beginning of a 30-yearconcession(renewable foradditional 20 years)19997 # 1,000,000residential customers20119
Área de concessãoComgás at a Glance5What is ComgásR$ 341mm19991.3 bi m3R$ 50mm2,500km17314,034R$ 4,095mm20104.9 bi m3R$ 405mm6,900km68767,214Net RevenueVolumeCapexNetwork# Municipalities# Meters25%CAGR(1999-2010)13%21%10%13%8%Growth Since PrivatizationMore than 1 million residential customersConcession area comprising 177 cities (São Paulo,Campinas, baixada Santista e Vale do Paraíba) – 27% ofBrazil’s GDP(1)30-year concession renewable for additional 20 yearsLargest distributor of piped natural gas in BrazilNotes:(1) Approximate and potential values.
Área de concessãoComgás at a Glance (Cont’d)6Key Figures (3Q11)7,692 kmNetwork R$ 4,085mmNet RevenueOperational Financial (LTM)(1)819,907 unitsMeters R$ 875mmEBITDA1,063,364 unitsUDAs (1) R$ 328mmNet Income4.9 bi/m3Volume (LTM) (1) R$ 501mmCapexNotes:(1) LTM (Last Twelve Months) until September 30, 2011.(2) UDAs (autonomous residential units).
A Comgás é uma Companhia Regulada ...Comgás Highlights7Premium asset locatedin a strategic concessionareaSubstantial growth in theresidential segmentDiversified client baseImpressive track record:significant growth withprofitability and soundcapital structureSolid regulatory frameworkand transparent concessionschemeFavorable prospectsfor natural gas inBrazil
Área de concessãoStrategic Concession Area8Premium Asset Located in a Strategic Concession AreaGas BrasilianoGás NaturalSPSCOMGÁSSupply and Demand LocationSantos BasinConcession AreaComgás’ Concession AreaHighlightsIntersection of pipelines (GASBOL, GASAN, GASPAL)Short distance to the natural gas supply (Santos Basin)High population density100% of gas demand contractedCustomers (3Q11)Residential: 1.1 mm UDAs (1)Commercial: 10.2 thousandIndustrial: 1.0 thousandThermal Gen.: 2 plantsCogeneration: 23 metersNGV: 360 gas stationsConcession Area (2)27% Brazil’s GDPPopulation: 29.6 mmHouseholds: 8.2 mmVehicles: 10.0 mmNotes:(1) UDAs (autonomous residential units).(2) Approximate and potential values.State of São PauloDrilled wellCampos BasinPre-salt reservesProduction fieldExploration blockEspírito Santo BasinExisting NetworkTransmission pipeline Network in Expansion Main Highways Network Under StudyLULA
Comgás: uma combinação de competências e princípiosComgás: a Regulated Company9ARSESP: The sewage and power regulatory agency of theState of São Paulo3rd cycle tariff review (2009-2014): regulatory WACC of9.55%5-year margin review with annual inflation readjustments(IGP-M), X Factor (efficiency) and K Factor (volume mixdeviations)All operating expenses compose the regulatory asset baseGas and transportation costs: pass-throughDifference captured in the current account,periodically adjusted by SelicOverview Concession of Public ServicesSmall Volumes(Residential andCommercialConsumers)Exclusivity in commercialization anddistribution throughout the wholeconcession periodLarge Volumes(OtherConsumers)Distribution: exclusivity throughoutthe whole concession period (98.1%of margin)Commercialization: possibility ofnew agents competing 12 years afterthe signing of the concessioncontract (1)Notes:(1) Starting in 2011, clients with a gas consumption over 300,000 m3 per month can be considered free consumers. Therefore, they can use any other commercializationagent.Solid Regulatory Framework and Transparent Concession Scheme
Comgás: uma combinação de competências e princípiosSponsorship From Top Sector PlayersSHELL BRAZILHOLDING BV6.34%INTEGRALINVESTMENTS BV71.91%SHELL GAS BV16.49%BG SÃO PAULOINVESTMENTS BV83.51%OTHERSHAREHOLDERS21.75%10The Comgás’ controlling shareholder is Integral Investments, which has as main shareholders the BG Group and Shell with a stakeof 83.5% and 16.5%, respectively.Current Shareholders’ Structure of ComgásPresence in Brazil since 1994Operates in more than 20 countries inthe energy market (Exploration andProduction, Liquefied Natural Gas,Transmission and Distribution, PowerGeneration)Presence in Brazil since 1913Main activities: distribution of oilproducts, operations in the gas andpower sectors, exploration and offshoreproduction
60.0070.0080.0090.00100.00110.00120.00130.00140.00Dec-10 Feb-11 Mar-11 May-11 Jul-11 Aug-11 Oct-11 Dec-11-5.010.015.020.025.030.035.0A Comgás é uma Companhia Regulada …Market Performance and Corporate Governance11LTM Comgás Share Price Performance Corporate Governance( Index = 100 as of December 13, 2010)29,0%30,7% (16,8%)LTM PerformanceClass of SharesAllows the existence of common shares(voting rights) and preferred shares (non-voting rights)Board ofDirectors9 members (minimum requirement is 3members)2 independent board seats (currently only1 seat occupied)Tag Along 80% only for ON sharesSarbanesOxley (1)Comgás already has comparable standardof SOX procedures in placeNote:(1) Standard not required by BM&FBovespa corporate governance segments or the Brazilian Corporate Law.(2) Includes the volume related to ON shares and PN shares.Source: BM&FBovespa and Factset as of December 13, 2011.Base 100Volume(R$mm) BMF&BovespaLevel Traditional (“Lei das S.A.”)Volume CGAS(2) CGAS ON CGAS PN IBOV
Área de concessãoHistorical High Payout Ratio17Dividend Payout (R$ mm)Notes:(1) Announced Dividends and Juros Sobre Capital Próprio; non-audited numbers.(2) Dividends calculated based on previous accounting method until 2009 and considering announced dividends.Dividend(2) Payout Ratio (%)45042726827533411 1627 2530333095%17% 15%26%10%77% 75%53%73% 74%2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011(1)
Área de concessãoDebt Overview18OverviewDebt Breakdown: Short / Long-Term Debt Debt Composition by Lender (R$ mm)Debt Schedule (R$ mm)Local CurrencyForeign CurrencyEIB28%BNDES57%Others15%LT Debt78%ST Debt22%Jun/11 Sep/11LT Debt80%ST Debt20%Notes:(1) European Investment Bank.(1)358246 22118774 7718729663932051 ano 2 anos 3 anos 4 anos 5 anos + 6 anos378251408216140470Debt denominatedin foreign currencyis fully hedged3Q11 Debt Overview (R$ mm)Short Term Debt 378Long Term Debt 1,486Total Debt 1,864(-) Cash & Marketable Securities 172(=) Net Debt 1,692Net Debt / EBITDA LTM 1.9xNet Debt / Book Value of Equity 1.4x
Growth AvenuesIntegrated growth strategy– Capture of all business opportunities within a region (industrial, NGV, residential andcommercial)Expansion projects in regional fronts– Optimize the use of resources leading to scale and efficiency gainsCompetitive edge of natural gas if compared to other energy sourcesPossible increase in natural gas competitiveness– Possible change in supply/demand natural gas balance, following recent upstreamdiscoveries in the pre-saltIntegrated,regionalexpansion withinthe concessionareaMore than R$ 2,0 billion(1) in Capex programme between 2009 and 2014Expansion activities driven by low volume / high margin residential andcommercial latent potential but anchored by remaining industrial loadsopportunitiesAll regulatory targets are being achieved and committed plan will be fullydeliveredCapex Plan forthe next years12(1) Real Terms 2009, as per Regulatory Business Plan (2009-14 cycle)20
Santos’ BasinPré-SalCurrentExpansionComgás’ Concession AreaGeographic Expansion Indicated in the Business PlanExpansion activities simultaneously progressing inthe cities of the concession areaTargets for 2009-2014 period:5.000km of network to beestablished282km of network renewal500k+ clients to be connected15 working fronts simultaneously1.000 direct employees and morethan 4.000 indirect working on theexpansionAims for excellence in operationalsafety and integrity of thedistribution networkExtensive field analysis and selectionof the best opportunities consideringDistance from existingnetworkDemographic densityEconomic profile andpropensity for consumptionPerspective of futuredevelopmentPotential for integration ofvarious market segments21
Industrial SegmentComgás is present in all the relevant industries in the concession areaA diversified customer base, more than 1,000 corporate clientsA multi-use product: from heat and low-pressure steam production to more complex processesAdvantages compared to other fuels:No storage requirementsEnvironmental issuesGuarantee of supplyLow operational costGrowth Strategy:Maintain a strong consumer base with future growth in line with growth in GDP / industrial productionApproach small and medium enterprises (SMEs) to anchor expansion projectsBring new industrial corporate clients into the concession areaDescription22 (1) Data as of August, 2011
Residential SegmentKey growth strategy for Comgás:Geographic expansion, capturing the existingpotential and connecting around 100.000clients per yearIncrease average unit consumption byoptimizing and expanding customer baseHigh potential market, with com growthdriven by:New real estate developmentsGas conversions in built residenciesLarge customer base with more than 1million residential clientsAlternative for LPG and electricityDescription Concession Area Potential(1,2)(1) Potential to be update as per IBGE Census 2010(2) Concession area potential doesn’t consider organic growth(3) Considered in the plan to achieve 100.000 clients per yearApartmentHouses59%13%8%20%2%13%7%78%already connected to NGcustomers to be capturednot connected customersunachievable market(MM of households)6.21.523+ 45,000 new buildings (launch) to be captured(3)
Natural gas vehicular (NGV) may be usedas fuel for both individual and masstransportationStands out for savings and environmentalbenefitsToday more cost competitive than gasolineand ethanolStrong economic benefit for heavy usersComgás is currently working withgovernment in the implementation ofpublic policies that should favor the sectorFiscal incentives (IPVA reduction)Public transportation policyGrowth StrategyProject currently under way: use of NGV inbus fleet and other heavy users (trucks)Description Benchmarking Analysis: October, 2011Natural Gas Vehicle (NGV) SegmentPrices (R$)Cost per Km (R$)Payback (months)(1)Note:(1) Assumptions: i) Consumption: NGV 12km/l, Alcohol 7km/l, Gasoline 10 km/l ii) Cost of gas equipment: R$ 5,200 iii) Traveled km per month: 5,000246.206.64vsGasoline vsEthanol1.32 1.872.78NGV Ethanol Gasoline0.110.27 0.28NGV Ethanol Gasoline
Other MarketsMore than 10,200 clientsFocus in medium to large establishmentsGrowth platform integrated with expansionof residential segmentHigh development potential of newapplications:Market in early stage of developmentwith high consumption potentialDedicated structure to develop nonconventional applicationsdevelopment : acclimatization,commercial cogeneration andgeneration at peak hoursCommercial Thermal Generation and CogenerationThermal Generation:Demand depends on the level ofthermal dispatchBack to back gas contractsCogeneration :Industry strategic decision aimingefficiency and energy security in themedium and long termSustainable growth is dependent onfirm supply of gas and visibility ofprices vis-a-vis electricityMarket with a high developmentpotential25
Tag along for ONs 80% 80% 100% 100%Tag along for PNs 100% n.a.1Minimum free float of 25% P P PMinimum of 20% of independent members on the Board P PFinancials in IFRS P P P PDisclosure of transactions involving controlling shareholders ormanagement (quarterly financial information) P P P PSpecial vote for preffered shareholders P n.a.1Annual Calendar of Corporate Events P P PMaximum of 2 years mandate for Board Members, allowing re-election P P PArbitrage Board P PSummary of Corporate Governance Levels on Bovespa(1) Not applicable (“n.a.”) due to the absence of preferred shares in “Novo Mercado” listing segmentSource: “Novo Mercado”, “Nível 1” and “Nível 2” listing regulation by BM&FBovespa and Brazilian Corporate LawNova Leidas SAsStatus QuoOf all companies listed in differentiated governance levels, 125 are at the “Novo Mercado”, 19at“Nível 2” and 38 at “Nível 1”27
(1) Due to the liquidity increase and the presence at the “Novo Mercado” listing segment of BM&FBovespa, other utility companies (listed at NM) havein average 10 research analysts currently covering its shares . Comgás currently is covered by 4 active research analystsShares listed at the highest governance level of BM&FBovespa – acknowledge by investors as today’smarket standards, same rights and transparency for all shareholders (only voting shares)Better exposure to the banks research analysts , and consequently increase in exposure to the generalfinance community(1) – possibility to access a more vast universe of investors, increasing the company’scapability of accessing the Capital MarketsPotential for value uplift through a re-rating, as happened in past migrations to “Novo Mercado”Increase in the share liquidity (one type of share), concentrating the liquidity of the current two types ofshares into one type of shareNew governance standards: i) guarantee of 20% of independent board members , ii) 100% tag along to allshareholders, iii) complete information of all corporate events to shareholdersBenefits of a Potential Migration to “Novo Mercado”28
2011 TIM 0.84 P22011 Ultrapar 1.002010 Anhanguera 1.002010 ALL 1.002010 Mahle 1.00 P2009 Paranapanema 1.00 P22008 lochpe-Maxion 0.83 P2008 Estacio 1.002008 Equatorial 1.002007 Hering 1.00 P2007 Romi 0.90 P2007 Magnesita 0.83 P2006 BR Foods 1.00 P2006 Embraer 1.00Average 0.96Median 1.00Year CompanyConversion Ratio:ON shares per 1 PNshareAditionalDividends of10%1Source: Factset/Economatica for stock prices. Bloomberg Data for Company Actions (CACS tool). CVM Website for GM events.Notes:(1) Companies which the bylaws granted an additional 10% dividend to the PN shareholders when compared to ON shareholders, same case asComgás(2) TIM and Paranapanema bylaws granted an additional 6% dividend to its PN shareholders when compared to ON shareholders(3) WEG and Portobello are not being considered in the analysis due to some specificities for each regarding the period screening and recentevents at the moment of the migration (WEG migration was followed by an acquisition announcement which polluted the analysis; forPortobello, the migration was not followed by a liquidity event to increase liquidity - still around 10% of free-float)(4) “Fato Relevante”(Material Fact) as of December 2, 2011Previous Migrations to “Novo Mercado”“Studies conducted bythe Company’s principalshareholders andManagement show that aconversion at a ratio ofone ordinary share toeach preferred share ofthe Company is in thebest interest of theCompany and itsshareholders.”429
Área de concessãoDisclaimer30The forward-looking statements in this report related to theoutlook for the business, estimated financial and operatingresults and growth prospects of COMGÁS are merely projectionsand, as such, are based exclusively on management expectationsregarding future performance. These expectations dependsubstantially on market conditions and the performance of theBrazilian economy, the business sector and the internationalmarkets, and are therefore subject to change without priornotice.
The tariff structure iscomposed by 3components:Gas cost (passthrough)Transport cost (passthrough)Average maximummargin (“P0”) definedby the regulatorduring the tariffrevisionRegulated TariffComgás: uma combinação de competências e princípiosComgás: a Regulated Company (Cont’d)33Main Aspects of the Concession ContractAnnual readjustment ofdistribution margin by theinflation rate (IGP-M),excluding the “X Factor”and the “K Factor”Annual adjustment of thetariff according to the gasand transportation costsaccounted yearly on May31st (or eventually before,subject to the regulator)The review considers:WACC over theregulatory asset baseand investmentsOperational expensesDepreciationSales volumeOccurs every 5 yearsMaximum Margin Review“X Factor”: efficiencyfactor determined by theregulator considered inthe annual adjustment ofthe “P0”The “X Factor”determined in the 3rdtariff cycle is 0.82%p.a.“K Factor”: adjustmentfactor that compensatesdeviations in the effectivemaximum margin inrelation to the authorizedmaximum margin= +“X Factor” and “K Factor”Annual Tariff Readjustments
Comgás: uma combinação de competências e princípiosNatural Gas Supply: Contracts34ContractsContracts TCQ Firm Contract Firm of Energy Auction Weekly SaleContract Models Firm Firm Firm of Energy Firm of Short Term Short TermGas Source Bolivian Not Determined Not DeterminedExceeding contracts of PBwith othersdistributor/thermal powerplantsExceeding contracts of PBwith othersdistributor/thermal powerplantsDaily Contract Quantity8.75mm m3/day until oct/118.10mm m3/day until jun/194.3mm m3/day 1.0mm m3/day 3.2mm m3/day According to the bidsEnd of Contract Jun/19 Dec/13 Dec/12 Mar/12 Mar/12PriceCommodity + TransportationFixed Charge +Variable ChargeFixed Charge +Variable ChargeAccording to the auctionAccording to the offeredbid and the acceptancefrom PetrobrasCommodity: quarterlyadjusted based on OilBasket (Brent) +Exchange RateTransport: annualadjustment according toUSA inflation rate (CPI)Fixed Charge: annualadjustment by IGP-Minflation rateVariable Charge:quarterly adjustmentbased on Oil BasketFixed Charge: annualadjustment by IGP-Minflation rateVariable Charge:quarterly adjustmentbased on Oil BasketTCQ Contract: Current contracted daily volume of Bolivian gas is 8.75mm m3/day, which will be periodically reduceduntil it reaches the volume of 8.10mm m3/day in August 2012Firm Contract: Contracted daily volume of 4.27mm m3/day, which will be periodically increased until it reaches thevolume of 5.22mm m3/day in August 2012Firm of Energy Contract: Petrobras supplies natural gas or indemnifies clients of the additional costs incurred due to theconsumption of an alternative fuel. Gas supply may be interrupted at the discretion of Petrobras, but with no risk ofsupply cuts for Comgás consumers. Petrobras will also bear the cost of the financial impacts incurred by Comgás and itsclients in question
Área de concessãoCurrent Account35Regulatory Current Account (R$ mm)Current Account(5)1229153264469528(55)(157)(230)(198)(128)4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11REGULATORY CURRENT ACCOUNTCompensation mechanism used toreimburse the company or thestate in case the real cost of gasdiffers from the cost used fortariffsMonthly calculated by theregulator. However onlyadjusted once a year (May)Difference between thecost of gas used for tariffsand the real cost of gasincurredThe balance is debited / creditedin a regulatory accountThe effect of the regulatorycurrent account is considered onlyfor tax purposes, it is excludedfrom financial accounting (IFRS)Main implications: volatility in thecompany’s results