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Gas Natural Fenosa Acquisition of CGE
A Material Step Forward in our International Development
October 13th, 2014
Disclaimer
This document may contain market assumptions, different sourced information and forward-looking
statements with respect to the financial condition, results of operations, business, strategy and the
plans of Gas Natural SDG, S.A. and its subsidiaries (GNF).
Such assumptions, information and forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and actual results may differ materially from those in
the assumptions and forward-looking statements as a result of various factors.
No representation or warranty is given by GNF as to the accuracy, completeness or fairness of any
information contained in this document and nothing in this report should be relied upon as a promise
or representation as to the past, current situation or future of the company and its group.
Analysts and investors are cautioned not to place undue reliance on forward-looking statements,
which imply significant assumptions and subjective judgements, which may or may not prove to be
correct. GNF does not undertake any obligation to update any of the information contained herein or
to correct any inaccuracies it may include or to release publicly the results of any revisions to these
forward-looking statements which may be made to reflect events and circumstances after the date of
this presentation, including, without limitation, changes in GNF’s business or acquisition strategy or to
reflect the occurrence of unanticipated events or a variation of its evaluation or assumptions.
Transaction Description
3
Transaction considerations
Acquisition of
a Tier I Utility
in a new Latam
Market
• #1 electricity distribution and transmission company in Chile and leading natural gas distributor
in the country with relevant presence in the LPG industry
• Stable market with investor-friendly regulatory frameworks
• Balanced mix of regulated / liberalised businesses improving GNF’s risk and business profile
• One of the lowest risk and most dynamic economies in the world
Attractive Country
and Industry
Fundamentals
Transaction
Procedure
• Solid credit rating profile paired with attractive macroeconomic growth prospects
• Increasing penetration of LNG sourcing upon recent investments in new capacity, ruled by
international prices
• Irrevocable purchase agreement with CGE controlling families for the acquisition of a 54%
stake in the company
• Intention to acquire up to 100% of CGE through the immediate launch of a public tender offer;
not subject to regulatory or antitrust approvals in Chile
• Price per share of 4,700 CLP representing an equity value of US$3.3bn (if 100% acceptance
achieved)
Agreed Price
• Total firm value including assumed debt and minorities of $7.4bn
- Assumed net debt of US$2.3bn as of 1H-2014
• Implied FV/EBITDA 15E multiple of 10.6x
Impact in GNF
• Contributes to GNF’s commitment for the completion of the 2013-15E Strategic Plan targets,
while maintaining stable financial metrics
4
Gas Natural Fenosa’s entry into Chile
Through the acquisition GNF gains immediate scale in a highly stable
country with attractive credit rating metrics
Country
Real GDP
Growth 2014E1 (%)
Public Debt as a %
of GDP1
Rating2
3.3%
15.3%
AA-
•
Leading economy in Latam
with solid macroeconomic
fundamentals and low
2.3%
41.0%
perceived risk by investors
BBB+
•
1.5%
59.4%
BBB-
GDP expected to grow at ~3%
in real terms supported by a
sound business environment
4.6%
42.0%
BBB
•
One of the best positioned
Latam countries in terms of
4.0%
15.7%
BBB+
economic freedom and “Doing
Business” ranking
This transaction allows GNF to become one of the few European utilities to be able to
participate in the excellent growth prospects of the country
1. World Bank as of June 2014. 2. Rating S&P, as of October 10th, 2014.
5
CGE is a diversified utility with solid track-record
5
Summary Financials
Services & Holding
Revenues (US$m)
EBITDA LTM 1H14: ($-24m)
~100%
1
100%
57%
3,927
2
Electricity Distribution
EBITDA LTM 1H14: $213m (28%)
EBITDA LTM 1H14: $111m (15%)
727
2013
LTM 1H14
51-70%
4
Natural Gas Distribution
LPG2
EBITDA LTM 1H14: $291m (39%)
EBITDA LTM 1H14: $137m (18%)
Key Data
Operating Data
743
598
3
Electricity
Distribution
#1 in Chile,
Sales of 13.2 TWh,
3.4m customers in Chile and Argentina
Electricity
Transmission
#1 in Chile,
network of 3,578 km
Natural Gas
Distribution
#1 in Chile
1.1m customers in Chile and Argentina
Chile LPG
Volume sold of 325 kt at Gasco GLP
(distributor) and 717 kt at Gasmar (wholesale)
Colombia LPG
Volume sold of 124 kTN / year
Services / Other
IT / financial / real estate services
to group companies
1,601 employees
2
4,121
Gas 1
Electricity Transmission
52%
1
3,862
EBITDA (US$m)
2012
2013
LTM 1H14
2012
Subsidiaries / Affiliates
EBITDA Breakdown (LTM 1H-2014)
By Geography
By Business3
3
4
4
Colombia
2%
Argentina
2%
LPG Chile
18%
Distribution
28%
4
5
Chile
96%
Natural
gas
39%
Transmission
15%
FX CLP/US$ 590.
Source: Company Filings.
1. CGE’s gas division Gasco is listed in the Santiago Stock Exchange. 2. Includes LPG activities in Chile and Colombia besides Gasco Holding & Adjustments. 3. Excludes Services & Other $-24m. 4. 20% stake.
6
Irrevocable Agreement with CGE Controlling Families
Current Shareholding Structure
Irrevocable agreement signed ensuring full control of the Company (54.2%)
Marín Family
22.6%1
Grupo Almería
Pérez Cruz Family
21.0%1
10.6%1
CGE
56.6%
Gasco2
1. Direct shareholding.
2. In addition the Marín family holds 4.9% of Gasco, Grupo Almería 3.6% and the Pérez-Cruz family 12.8%, these holdings not being part of the transaction.
7
Public Tender Calendar
11th Oct
• Signing of irrevocable purchase agreement between GNF and CGE controlling families
• Meeting of CGE’s Board of Directors
• Publication of Significant Event by CGE in Chilean regulator
12th Oct
• Announcement of Takeover Bid for 100% of CGE
• Publication of Significant Event by GNF in CNMV
13th Oct
• Delivery of Prospectus to local financial authorities
• First day of the Acceptance Period
11th Nov
• 30th day of the Acceptance Period. Acceptance Period finishes in case of no extension
(extension period of max. 15 calendar days)
14th Nov
• Announcement of Successful Takeover Bid (effective transfer of property)
28th Nov
• Last payment day*
*Payments can be made between the 15th and 28th of November.
8
Strategic Fit
9
CGE’s fit in Gas Natural Fenosa’s corporate strategy
1
Entry into a key new market in Latam with an immediate access to
a leading market position
2
3
4
5
Transaction increases GNF’s geographic diversification together
with a contribution of a more balanced business/risk profile
Reinforces GNF’s leadership in gas distribution in the major Latam
population hubs
Significantly strengthens GNF’s electricity distribution platform in
Latam
Allows the integration of GNF’s global LNG business within the
Chilean market based on international pricing mechanisms
6
Supports the participation in electricity generation projects in
Chile in the near future
10
Improves GNF’s business risk profile
% of 2013A EBITDA
+
Liberalised
34%
Liberalised
33%
Global
Regulated
66%
Regulated
67%
Country and % EBITDA Latam2
Country and % EBITDA Latam2
Latam 26%
Latam 35%
Other
18% Colombia
33%
Mexico
22%
Brazil
27%
Domestic
56%
Domestic
49%
Distribution
Business
International
44%
Other
12%
Mexico
Chile
14%
36%
Brazil
17%
Colombia
21%
Rating Profile
Mexico: BBB+
Colombia: BBB
Brazil: BBBChile: AA-
International
51%
Electricity
36%
Gas
64%
1
Electricity
37%
Gas
63%
The acquisition of CGE increases GNF’s exposure to emerging markets (Latam) and successfully
positions the company to exploit attractive organic growth potential in the region
1. Including CGE’s EBITDA in electricity distribution & transmission and natural gas distribution. 2. Weight of each country in GNF’s total Latam EBITDA.
11
Reinforced position in Latam as leading distributor in
both natural gas and electricity
Diversified Asset Base…
… with solid and growing operating metrics
Combined # of connections as of 1H-2014
Panama
Electricity Distribution
0.5m connections
Mexico
Gas Distribution
1.4m connections
Colombia
Starting gasification
projects
Gas Distribution
2.6m connections
Electricity Distribution
2.4m connections
Brazil
Gas Distribution
0.9m connections
Argentina
Gas Distribution
2.0m connections1
Electricity Distribution
0.9m connections2
Chile1
Gas
Gas Distribution
0.7m connections
Electricity Distribution
2.5m connections
Total Gas Distribution
7.4m connections
Total Electricity Distribution
6.3m connections
Electricity
Gas & Electricity
Source: Company Filings.
1. As of 1Q14.
2. Latest available figures
as of 2013.
Achieving global presence in the Latam region through leading
and strongly well-regarded brands
12
Reinforces GNF’s leadership in Latam gas distribution
Population of main urban areas
# customers of top gas distribution
companies in Latam
17%
(in million)
(in million)
7.4
6.3
3.6
22
19
2.2
12
GNF presence
5
4
1.5
0.5 0.7
Monterrey
6
Santiago de Chile
8
1
1.1 1.2
Caracas
Bogotá
Rio de Janeiro
Buenos Aires
Sao Paulo
México DF
9
Lima
13
+
No GNF presence
1. Includes gas distribution customers in Chile (664,116, Metrogas, GasSur and Gasco Magallanes) and in Argentina (474,198, Gasnor).
13
GNF takes a considerable step forward in the
consolidation of its electricity distribution platform
in Latam
Electricity distribution clients among largest players in Latam,
(million users)
Tier 2
Tier 1
13.9
11.5
8.2
6.3
2.2x
2.7
1.0
2.9
2.9
3.0
3.2
3.4
1.1
+
GNF has led an important shift from high risk electricity distribution businesses in Central America to reliable
regulatory regimes in Latin America with focus on growth and stability
14
Attractive and competitive Chilean gas market within
a defined and stable regulatory framework captained
by a top-class asset
Absolute leader in natural gas and LPG…
Natural gas market share1
(by # of customers)
Metrogas constitutes an unparalleled asset
LPG market share1
(by gas volume)
#1 natural gas distribution player in terms
of market presence in Chile
2
Gasco
2
MagallanesGas Sur
3%
4%
Gas Galpo
12%
Gasco
27%
Leading position to capture the strong gas
densification potential in certain areas
80%
Other
73%
… enjoying a defined regulatory and
profitability framework in natural gas
Competitive market with pricing freedom mechanisms
within a defined profitability framework
World class technical regulation
High quality infrastructure located in a major
population hub with potential for increasing
penetration
Unique access to the increasing LNG market at
attractive international pricing through its
participation in LNG Quintero
Stable shareholding structure ensuring best in
class corporate governance and asset control
Indefinite life concessions
Growth drivers linked to economic development
1. As of March 2014.
2. Controlled by Gasco.
Sound financial track-record paired with attractive
profitability and moderate leverage
15
Chile could be integrated into the flexible and
integrated LNG platform of Gas Natural Fenosa
Demand for LNG is expected to boost in Chile
Expected LNG Demand in Latam in 2020 (in Mtpa)
CGE secures its participation in the LNG
market through a relevant presence in
Quintero Terminal
2.6
1.5
0.5
0.5
Terminal Use
Agreement
Regas
SPA
20%
Stake
7.9
LNG Sale
Gas Sales
Agreement
4.9
Gas Sale
(33% of gas
volume output)
0.6
LNG Demand
by 2020
CGE Controlled
Subsidiary
Chile is expected to become one of the main LNG import markets ruled by international
pricing mechanisms in which GNF could leverage the potential of its LNG platform
16
Opportunity to participate in future generation
projects in Chile
Key Generation Milestones in Chile
Projected Capacity Expansion
• Additional installed capacity of 11,296 MW by
2030
+11.3 GW by 2030
• Emphasis on energy costs reduction
and focus on LNG
• Promotion of LNG through:
 ENAP’s LNG regasification capacity
available to be contracted by generators for
10 years
7.5
28.9
Indicative 2030
Total 2030
3.8
17.6
 Promotion of Quintero’s terminal expansion
 Boost the construction of a 3rd regasification
terminal
Dec 2013
Under Construction
SING
SIC
Source: CNE “Informe preliminar de precio nudo SIC” as of October 2014.
17
Valuation, Financing
and Impact on GNF
18
Key Valuation Parameters
Agreement with CGE Controlling Families…
Agreed Share Price
… below past observed market references
CLP 4,700/share
Precedent Transactions in
Chile 2006-2012 (FV/LTM EBITDA)
FV/LTM EBITDA of 10.2x1
FV / EBITDA 2015E of 10.6x2
13.5x
Firm Value Buildup
(in $bn)
13.5x
12.0x
1.9
(0.1)
2.3
7.4
7.4
5.6
1.
2.
3.3
3.3
100% Equity
Assumed
Net Debt
FX: CLP/$ 590.
FX: CLP/$ 601.
Electricity Distribution
Minorities
Other FV Adj.
Firm Value
Electricity
Transmission
Gas Distribution
Transaction Multiple of 10.2x
19
Key Financing Parameters
CGE Debt Breakdown
As of June 30, 2014
(as of 1H–2014)
€ in millions
Limit
Committed Lines of Credit
7,194
Drawn
275
Undrawn
Other
3%
6,919
Bank Loans
35%
Uncommitted Lines of Credit
190
55
135
Undrawn EIB Loan
225
–
225
Cash
–
–
5,528
Total
7,609
330
12,807
Transaction Price
Bonds
62%
Total Gross Debt: $2,551m (€1,978m)
at a c.7.5% interest cost1
€2,573
Gas Natural Fenosa has ample liquidity available to fund this transaction
1. Weighted average nominal interest cost (including inflation in UF) by amount of debt outstanding.
Source: Company filings.
Note: FX CLP/$: 590. €/US$: 1.29.
20
CGE Builds on GNF’s Committed Targets
Under IFRS 11 (€bn)
EBITDA
2012A
2015E
CGE 2013
€4.7
>€5.0
€0.6
Maintains GNF’s
Net Income
€1.4
~€1.5
€0.1
commitment to meet its
2013-2015E inorganic
ambitions without
Net debt /
EBITDA
3.3x
Dividend
Payout
62.1%
2.5x – 3.0x
3.0x
diluting its
shareholders
~62%
N/A
With this acquisition Gas Natural Fenosa maintains its commitment to accomplish the proposed
financial targets announced in November 2013 without execution risk and low leverage impact
Source: Company Filings.
Note: FX CLP/€ 761. FX US$/€: 1.29.
21
Conclusions
22
A material international transaction for GNF
1
2
3
4
5
Contributes to GNF’s commitment to build on its announced
strategic and financial targets
Enables the entrance in a leading Latam economy with very solid
fundamentals gaining relevant presence from the beginning
Allows the integration of a truly leading energy distribution
platform through the whole Latam region
Underpins the future participation in profitable generation
projects and LNG activities
Acquisition of a top class asset with
proven track-record and detected upsides
23