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24th July 2001
ElettrogenElettrogen::
Presentation toPresentation toanalystsanalysts
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Forward-looking Statements:
Cautionary Statement for Purposes of the Safe Harbor Provisions of the United States Private Securities Litigation Reform Act of
1995. The U.S. Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. This presentationcontains certain forward-looking statements regarding the proposed acquisition of Elettrogen (the Acquisition), including the timing thereof and
the financial and other results expected to be achieved following the Acquisition, that are subject to risks and uncertainties. Forward- looking
statements include information regarding: the timing of necessary regulatory approvals; the timing of the consummation of the Acquisition;
estimated future revenues, earnings, EBITDA, return on invested capital, return on equity and other financial targets; the structure of the
Acquisition; management strategy; synergies; operational efficiencies; cost and tax savings; tariffs and pricing structure; capital expenditures
and other investments; asset disposals.
For all of these forward- looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.The following important factors, in addition to those discussed elsewhere in this presentation, could
affect the timing of the Acquisition and the future financial and other results of Endesa and Elettrogen, including after the consummation of the
Acquisition, and could cause the Acquisition to be delayed or not to be consummated, or those results or other outcomes to differ materially
from those expressed in our forward-looking statements:
Economic and Industry Conditions: materially adverse changes in economic or industry conditions generally or in our markets; the effect of
existing regulations and regulatory changes; tariff reductions; the impact of any fluctuations in interest rates; the impact of fluctuations in
exchange rates; natural disasters; the impact of more stringent environmental regulations and the inherent environmental risks relating to the
companies business operations; the potential liabilities relating to the companies nuclear facilities.
Transaction or Commercial Factors: any delays in or failure to obtain necessary regulatory, antitrust and other approvals for the Acquisition,
or any conditions imposed in connection with such approvals; our ability to integrate the businesses of Endesa and Elettrogen successfully; the
challenges inherent in diverting management's focus and resources from other strategic opportunities and from operational matters during the
integration process; the outcome of any negotiations with partners and governments.
Political/Governmental Factors: political stability in Latin America; changes in Spanish and foreign laws, regulations and taxes.
Operating Factors: technical difficulties; changes in operating conditions and costs; the ability to implement cost reduction plans; the ability to
maintain a stable supply of fuel and the impact of fluctuations on fuel prices; other acquisitions or restructurings;the ability to implement an
international and diversification strategy successfully.
Competitive Factors: the actions of competitors; changes in competition and pricing environments; the entry of new competitors in our
markets.
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Transaction HighlightsTransaction Highlights
l
Consortium led by ENDESA with a 45% stake
l Final price to be paid: Euro 2.63 bn (Euro 3.69 bn EV)
l ENDESAs total investment: Euro 990 m
l IRR = 9.5%. ENDESAs return on investment= 14%
l EPS neutral in 2002, 2% accretive in 2003
l Consolidated by the equity method.
l EU approval expected in 60 days
l Completion expected in 4Q 2001
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4 Endesa has developed a strategic plan for Italy platform on Elettrogens power plants
and geared towards value creation:
4 in competitive terms (repowering of plants)
4 focusing on energy supply and trading
4 Elettrogen (5.5TW) in Italy, together with SNET (2.6TW) in France and TEJO (0.6TW)
in Portugal will allow:
4 to complete the construction of a competitive business base with growth potential
4 to balance the country risk of Endesas portfolio
4 to achieve a unique position in a priority market (southern Europe)
4 Plans for Elettrogen foresee:
4 a 12.3% EBITDA annual growth over next five years
4 earnings accretion for Endesa from year 1
4 achieving a return for shareholders of 14%
The Elettrog enThe Elettrog enacquisi t ion is an excellent investmentacquisi t ion is an excellent investment
opportuni tyopportuni ty
Implementation of Endesas European StrategyImplementation of Endesas European Strategy
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Endesa has been
analysing 28 potentialinvestment
opportunities in Europe
Implementation of Endesas European strategyImplementation of Endesas European strategy
The Elettrogen bid is the result of an in-depth analysis
of th e avai lable opportun i t ies in Euro pe that f i t Endesasstrategic ob ject ives
11 were disregarded as they did not
meet minimum required returns
10 were analyzed in depth but no bindingoffers were submitted
4 of them were successful (NRE, REMU,
SNET, Elettrogen)
We have ach ieved 100% of ou r
capacity target in Europe for 2005
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Attractive prices based on generation structure
Defined tariff framework for 2001 -2004
40% of domestic electricity production based on oil
plants. No nuclear and little coal-fired capacity.
Saturated interconnection with neighbouring countries:
no levelling effect on prices
A progressive renewal of the generation assets will
begin to take place.
Solid historical and expected demand growth
Annual electricity demand growth in last 20 years:
>3% vs. 2% EU average
Per capita consumption 50% below France
Italy: a strategic priorityItaly: a strategic priority
Electricity rpices in Neighboring countries
100%
150%
2005 2010 2015
Price
Italy Austria Switzerland France
Variable generation costs
0
10
0% 50% 100%
c/kWh
Italy France
Peak demand
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Beginning of its deregulation process
Regulatory environment similar to Spain
Endesa has experience in a similar deregulation process
Italy shows both cultural and industrial affinities with Spain
Pool expected for mid- 2002
Meanwhile generators will continue to sell electricity at regulated prices.
Enough gas supply with a large number of competitors that ensure its
availability at competitive conditions
1998
Electricity in EU.
>40 GWh/a 22% >20 GWh/a 27% >9GWh/a 33%
1999 2000 2001 2002 2003
Transposition to Italy
(Bersani Decree)
>9GWh/a 40%>20 GWh/a 35%>30 GWh/a 30%
Calendar for the deregulationCalendar for the deregulation
Italy: a strategic priorityItaly: a strategic priority
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It allows Endesa:
To achieve immediately critical mass in Italy benefiting from current attractive prices
and capture market share in the profitable Italian supply market
Difficulties for the development of greenfield projects will delay the entry in 4 - 5 years
Elettrogens assets provides:
Good locations across Italy
Favourable generation mix (similar to the countrys average)
Good access to the grid
Good positioning regarding future environment of lower prices (first units to be
repowered in Italy)
Elettrogen - a platform for integrated activities in Italy:
Opportunities for additional development: new assets and customers
Support from local partner: ASM Brescia (4th largest Italian municipality-owned utility)
with agreements to develop new projects:
generation
supply and trading
Possibility of alliances with other strategic partners
Elettrogen: an excellent investment opportunity
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Euro
3.69 bn
(EV)
IRR: 9.5%
An IRR that meets Endesas profitability requirements for its
strategic plan
Meeting profitability requirements
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Current IRR from Elettrogen 6.5%
Operating efficiencies (+1%) 7.5%
Additional revenues (+0.5 - 1%) 8 - 8.5%
(trading/supply/CTCs)
Tax optimisation (+1.5%) 9.5 - 10%
Source of value creation
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ENDESA BSCH
NEWCO
CAPITAL: Euro 2,190 M
ELETTROGEN
DEBT: Euro 1,500 M
45%
Euro 986 M
40%
Euro 876 M15%
Euro 328 M
100%
MERGER NEWCO AND ELETTROGEN:
EQUITY: Euro 2,190 M
DEBT: Euro 1,500 M
ASM BRESCIA
Shareholding structure of the winning consortium
Return on Endesas investment
ENDESAs return on
investment: 14%
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With the price offered for Elettrogen the transactionis expected to be EPS neutral in 2002 and 2% accretive in 2003
Expected improvement of EBITDA, ROIC
*ROIC = FCF/IC, FCF = EBITDA - CAPEX-TAXES
ROIC*
2001 2006
+389 pb
EBITDA (Euro M)
2001 2006
CAGR12,3%
6,7
10,6
356
635
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Generationrevenues
Tariff fixed for 2001 and 2002.
Tariff framework approved for the years 2003 and 2004
O&M costs: meet Endesas ratios (excluding workforce) in 2006
Workforce:
From 2004 onwards meet the benchmark of our domestic operations Expected reduction through early retirement programmes: already
agreed with the unions 290 employees until 2005
Estimated Investment in repowering: Euro 904 M
The EPC contract for Ostiglia signed with Enel Power.
Repowering will allow to maintain margins through time by: a 26% increase in net power of thermal groups
a 5% increase in their availability
a 41% increase in the fuel efficiency
a 57% decrease in fuel cost per kw/h
Operating
costs
Increasing EBITDA and ROIC
Expected improvement in Elettrogens profitability
Investments
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Asset revaluation allows the elimination of goodwill and its tax
deductable. Positive impact on the valuation ofEuro 500 M
DIT (Dual Income Tax): tax benefit (lower corporate tax) for the net
increase in equity (considered in 5 years). Positive impact in valuation:
Euro 90 M.
Supply and trading:
Energy sold to eligible customers reaches 50% of Elettrogens output
in 2004 and 100% in 2008.
CTCs In accordance with the domestic regulator they will cover the
difference between the fixed revenues recognised and the pool prices.
Estimated CTC amount for Elettrogen: Euro 135 M
Tax effect
Other sourcesof value
Increasing EBITDA and ROIC
Expected improvement in Elettrogens profitability
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Endesa has shown its ability to
reduce costs and improve its
efficiency
9.26
6.195.77
1996 1999 2000
-38%
Generation
O&M Costs (Euro/MWh)
...
Endesa can
transfer
these
improve-
ments to
Elettrogen
Endesa vs.currentElettrogen Efficiency
Employees/MW
0.22
0.26
EndesaElettrogen
O&M/ MWh (Euro)
5.8
8.0
Endesa
Elettrogen
Current 2007
2007
0.22
4.3
Current
Transferring Endesas best practices
-15%
-46%
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Comparable Italian listed companies
EV/EBITDA PER
27.1
9.5 41.3
Elettrogen 12.3% 42.4%
Source: Consensus brokers estimates
6.3 26.7
16.8 68.4
2002 2002
8.1
Edison
ACEA Roma
AEM Milano
Enel
9.3 23.1
CAGR02-06
CAGR02-06
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Comparable Transactions in other European markets
Generation transaction mu lt iples
Target Bidder Plant Total EV/MWType Capacity MW Euro mn
Saltend Calpine Gas 1.200 0,779
Humber Centrica Gas 1.260 0,606Rye House ScottishPower Gas 715 0,713
Sutton Bridge EDF/London Gas 790 0,933
Killingholme NRG Energy Gas 650 0,998
Roosecote Edison Mission Gas 220 0,920Yorkshire CoGen PowerGen Gas 176 0,781
0,818
Rugeley International Power Coal 1000 0,328
Cottam EDF/London Coal 2.000 0,325Eggborough British Energy Coal 1.960 0,517
Drax AES Coal 3.945 0,721
Ferrybridge Coal 1.504Fiddler's Ferry Coal 1.960
0,492
Sandanska Energo Hydro 56 0,680
Stora Enso Fortum Hydro, nuclear 1.511 1,224
Fortum (plants) Kemijoki Hydro 68 2,904Fortum (plants) Helsinki Energia Hydro 240 0,367
1,294
Plant Total TotalElettrogen (after repowering) Type Capacity MW EV
Gas (CCGT) 3510 2.872,8
Fuel/Coal/Orimulsion 1201 590,9
Hydro 1014 1.312,1EV after repowering 5725 4.775,7
Repowering capex 904,0
EV before repowering 3.871,7
0,568Edison Mission
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Comparable Transactions in other European markets
Generation transaction mu lt iples
Target Bidder Plant Total EV/MW
Type Capacity MW Euro mn
Unin Fenosa National Power Hidro/Coal 5.500
0,900 - 1,000*Hidrocantbrico ENbW Hidro/Coal 2.160
0,805
* dependiendo de la valoracin de los clientes
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4 A very significant step in the 2001-05 expansion program in Europe has beensuccesfully completed
4 The price paid (3.69bn Enterprise Value) represents a discount against themost directly comparable transaction
4Transaction is 2% EPS accretive in 2003 and neutral in 2002
4 ROIC expected to grow from 6.7% in 2001 to 10.6% in 2006 through:
4 the repowering of several plants
4 the transfer of Endesas best practices to reduce controllable costs
4 100% of the target for capacity in Europe until 2005 has been achieved
4 Acquisition financed by asset disposals both in Spain and Latin America
InIn SummarySummary
The right asset at the righ t price
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Back-up slides
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Interconnection capacity Interconnection capacity
Capacity ofInterconnection:9,582 MW
% on peakdemand: 18%
Switz. 4,182
Austria 285
France
3,941
Capacidad de las interconexiones
MW
Slovenia 1.174
Main agents (% share in generation)Main agents (% share in generation)
50%
7%
9%
3%
9%
2%
3%
1%
0%
0%
16% EnelElettrogen
Eurogen
Interpower
Edison
Sondel
Eni
AEM Milano
Amga Genova
ACEA Roma
Otros
Total installed capacity in the Italian market is74,956 MW
Current fuel mixCurrent fuel mix
Gas
40%
Orimulsion
11%
Coal
11%
Hydro
10%
Oil
28%
Gas InfrastructureGas Infrastructure
Overview of the Italian marketOverview of the Italian market
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De-regulation of the Italian electricity systemDe-regulation of the Italian electricity system
The Bersani Decree, enacted on 1/04/99, transponds the EU Directive 96/92 on energy.
Highlights:
ENEL to divest 15 GW prior to January 2003. Three companies have been set up:
Elettrogen (5,438 MW), Eurogen (7,008 MW) and Interpower (2,611 MW)
ENEL maintains the ownership of the transmission grid
The management of the transmission grid is transferred to an independent entity
(Grid operator , 100% State-owned)
Tariff framework set for 2001 and 2002
Tariff allows the recovery of fuel costs
Fixed costs and capacity remuneration according to availability
Development of competitive wholesale market expected for end 2002
CTC payments to cover the difference between current tariff revenues and future
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This structure allows to modelize CTCs in accordance with the current Italian legislation
A readjustment of the model will be required once some regulatory uncertainties are solved
A preliminary valuation of CTCs would be Euro 135 M
A. Gross CTCs Applicable to thermal plants from 2000 - 2006
Compensates the difference betweenrevenues from previous regulatory frameworkand from new competitive environment (lessan efficiency factor)
Plant by plant analysis
CTCs are calculated as a difference betweenthe pool price (less cost of fuel) and a 46.9
Lit/Kwh remuneration
CTC calculation
B. Hydro Penalty Hydro plants will pay 12 Lit/Kwh as a
compensation for their low variable costs
CTCs = A - B
Italy: a CTC scheme already proposedItaly: a CTC scheme already proposed
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The expected Italian poolThe expected Italian pool
Bilateral contracts
GenerationEnel
Produzione
(
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Mix before and after RepoweringMix before and after Repowering
Total installed capacity: 5,438 MWTotal installed capacity: 5,438 MW
Thermal Plants
Hydro Plants
Italian generators per MWItalian generators per MW
Tavazzano Oil /Gas
Year comm.of operations (avge)1992 Generation(GWh) 4,339
Insta lled capacity (MW) 1,204 Employees 262
Fiume Santo Orimulsion
Yearcomm. of operations (avge) 1983 Generation (GWh) 4,983
Installed capacity (MW) 880 Employees 358
Nucleodi Catanzaro Hydro
Year comm. of operations (avge)---- Generation (GWh) 102
Installed capacity (MW) 115 Employess 74
Nucleodi Cotronei Hydro
Year comm. of operations. (avge)---- Generation (GWh)403
Installed capacity (MW) 369 Employees 100
Nucleodi Terni Hydro
Year comm. of operations (avge)---- Generation (GWh)1,766
Installed capacity (MW) 530 Employees 135
4,92,6
7,0
41,9
5,5
ENEL postdisposal
Eurogen Elettrogen Edison/Sondel Interpower
Capacity(GW)
MW before % by fuel type MW after % by fuel typRepowering* de Repowering*
Nat Gas -CCGT - 0% 3.510 61%Nat Gas-Fuel Oil 3.528 65% 305 5%
Coal 321 6% 321 6%Orimulsion 575 11% 575 10%
Hydro 1.014 19% 1.014 18%
5.438 5.725
* Net
Trapani Oil
Year comm. of operations(avge)1988 Generation (GWh) 147
Installed capacity (MW) 168 Employees 3
ElettrogenElettrogen: an overview: an overview
Currently the second largest generator in Italy
Ostiglia Oil / Gas
(avge)1974 Generation(GWh) 5,796
Installed cap aci ty (MW) 1,251 Employees 216
Monfalcone Oil / Coal
1984 Generation (GWh) 3,092
921 Employees 256
Year comm.of operations (avge)
Installed capacity (MW)
Year comm.of operations
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Orimulsion: synthetic fuel, similar to fuel-oil, with the same density as water, with a
similar price to coal but with a lower calorific value (6,450-6,900 Kcl/Kg) and higher levels
of sulphur (3%) and water (30%).
This fuel is currently being used at the Fiume Santo plant in Sardinia, with two groups of
160 MW each (fuel-oil) and two other groups of 320 MW each. Enels plant in Brindisi,
with three groups of 660 MW each, also uses this fuel
Fiumesantos groups 3 and 4 were initially designed to burn coal and count on all the
necessary approvals. Additionally the plant counts on a harbour which can receive coal
ships of up to 120,000 tonnes as well as all the necessary transport infrastructure.
None of the coal plants were used as ENEL decided to change the fuel to be used maybe
due to pressures from the local authorities. The presence of nearby industrial facilities
around Porto Torres (ENICHEM, the plant itself) the running of coal-fired facilities should
be accepted.
The use of orimulsion carries some extra costs, since the design of the desulphurisation
equipment contemplates fuels with a lower sulphur content.
Still, there is the possibility that the new buyer negotiates the authorisation to burn coal,
which would result in an important increase in value.
OrimulsionOrimulsion
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ASMASM BresciaBrescia
Description: One of the four largestmunicipality-owned utilitiesin Italy with its own generation capacity.
Ownership: 100% Council of Brescia
Activitie: Generation of electricity, distribution and supply ofelectricity, water and gas. Treatment of water and waste.Lighting, public transport.
Operating data: Generation: 1,695 GWh
Distribution of electricity: 1,680 GWh (505 GWh to electricutilities, 1,175 GWh to the grid)
Customers: 117,640
Gas supply: 332 million m3
Customers:149,181 water distribution: 46 mm3
Customers: 132,700 Employees: 1,425 Revenues: Euro 427 m.
Investments: Euro 79 m. Net Income: Euro 85 m
Strategy: In generation,carry out therepowering of the Mincioand Cassano plants and increase the production capacitythrough agreements (agreements for greenfields signed with
Ansaldo Energia and AEM Cremona)
Plants (kW)
Thermoelectric 221,288
Power Plant of Ponti sul Mincio 115,538
Power Plant of Cassano 105,75
Cogeneration 221,131
Power Plant Sud Lamarmora 139,161
Power Plant Diesel Nord 23,97
Power Plant Termoutilizzatore (Waste ) 58
Hydroelectric 8,18
Caffaro Power Plant (shareholder) 1,508
Prevalle Chiese Power Plant 2,13
Prevalle Naviglio Power Plant 1
Ro Volciano Power Plant 2,2
Pompegnino Power Plant 1,55
Biogas (Buffalora, Passirano and CalcinatoPlants) 5,475
Photovoltaic 96
Gas Turboexpander (Pont i sul Mincio Plant) 1,971
TOTAL 458,349
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24th July 2001
ElettrogenElettrogen::
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