1. business and industrial
2. energy
3. electricity

Third Quarter 2014 Results
No ember 4
November
4, 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 (GAS NATURAL FENOSA).
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
N
t ti
or warranty
t iis given
i
by
b GAS NATURAL FENOSA as to
t th
the accuracy, completeness
l t
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
A
l t and
d investors
i
t
are cautioned
ti
d nott to
t place
l
undue
d reliance
li
on forward-looking
f
d l ki
statements,
t t
t which
hi h
imply significant assumptions and subjective judgements, which may or may not prove to be correct. GAS
NATURAL FENOSA 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
forward-looking
presentation, including, without limitation, changes in GAS NATURAL FENOSA’s business or acquisition
strategy or to reflect the occurrence of unanticipated events or a variation of its evaluation or assumptions.
2
Agenda
1. Highlights
2. Financials
3. Analysis
y
of operations
4. Conclusions
3
Highlights
4
Key financial indicators
Net Income: €1,239 million (+10.6%)1
EBITDA: €3,606 million (-2.3%)1
Investments: €1,015
€1 015 million2 (+15.2%)
(+15 2%)1
Net Debt: €13,843 million3 (-2.9% vs 31/12/13)1
Notes:
1
Changes vs 9M13 after restatement of 9M13 figures to IFRS 11.
2
Tangible and intangible.
3
Net debt of €13,221 million excluding electricity tariff deficit for 2013 and withholdings on 2014 electricity payments made by CNMC.
5
IFRS 11
● As from 1 January
y 2014,, IFRS 11 is mandatory,
y, so the equity
q y method is
now used for the accounting of joint ventures
● The following table shows the restatement to IFRS 11 of GNF
GNF’s
s 9M13
figures:
9M13 as
reported
9M13
IFRS 11
Net Income
1,120
1,120
-
EBITDA
3,865
3 690
3,690
(175)
Investments 1,035
1,008
(27)
15,168
,
,
14,772
((396))
(€ million)
Net Debt
Change
g
EBITDA change
breakdown
UF Gas
Ecoeléctrica
Renewables
Other
(92)
(53)
(25)
(5)
6
Regulation in Spain
G
Gas
● Measures included in Royal Decree-Law
Decree Law 8/2014
8/2014, in effect as of 5 July 2014
● New regulation brings both higher stability and predictability
● Fi
Financial
i l stability:
bili
rules
l set to prevent future
f
tariff
iff deficits
d fi i from
f
arising, and current tariff deficit to be recovered over 15 years
● Predictability: 6-year regulatory periods, first one to end in 2020
● Remuneration for distribution continues to be based on a parametric
formula
● Incentive on growth focused on higher volume customers and
network expansion into new municipalities
● Impact on 2014 accounts of ~€45 million lower remuneration
7
Regulation in Spain
Electricity
Proposals
Networks
6.5% allowed return on assets, based on standard
values, with a limit and ex ante definition of the
maximum annual investment amount for the system
CHP and
renewables
Remuneration calculated on standards with an allowed
return of 7.5%
New facilities remunerated through competitive
mechanisms
Generation
New mechanism of capacity payments
Regulation on mothballing
Supply
New definition of regulated tariffs (PVPC, TUR)
New tariff structure
Plans on energy efficiency and savings
Self-consumption
Interruptibility
New remuneration based on competitive bids
Status
9
Pending to define
standards and
parameters, foreseeably
in force in 2015
9
Regulation in force
Resettlements in
progress
X
Pending development
9
In force
Pending development
In force but for energy
certification
Pending development
X
9
X
9
In force in 2015
R
l t
f
k to
t guarantee
t the
th system’s
t ’ financial
fi
i l stability
t bilit with
ith
Regulatory
framework
measures to prevent new deficits
8
Acquisition of CGE (I)
Strategic fit
1
Entry into a key new market in Latam with an immediate access to
a leading market position
2
Transaction increases GNF’s geographic diversification together
with a contribution of a more balanced business/risk profile
3
Reinforces GNF’s leadership in gas distribution in the major Latam
population hubs
4
Significantly strengthens GNF’s electricity distribution platform in
Latam
5
Accelerates 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
9
Acquisition of CGE (II)
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
63
6,3
36
3,6
22
19
2,2
12
GNF presence
5
4
1,5
0,5 0,7
Mon
nterrey
6
e Chile
Santiago de
8
1
1,2
2
11 1
1,1
Caracas
Bogotá
B
Rio de JJaneiro
Buenoss Aires
Sao
o Paulo
Méxxico DF
9
Lima
13
+
No GNF presence
Note:
1
Includes gas distribution customers in Chile (664,116, Metrogas, GasSur and Gasco Magallanes) and in Argentina (474,198, Gasnor).
10
Acquisition of CGE (III)
Improves GNF’s
GNF s business risk profile
% 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%
M i
Mexico
22%
Brazil
27%
Domestic
56%
Domestic
49%
International
44%
Distrib
bution
Busiiness
1
Other
12%
Mexico
Chile
14%
36%
Brazil
17%
Colombia
21%
Rating Profile
Mexico: BBB+
Colombia: BBB
B il BBB
Brazil:
BBBChile: AA-
International
51%
Electricity
36%
Electricity
37%
Gas
63%
Gas
64%
The acquisition increases GNF’s presence in LatAm while improving the risk profile of the portfolio through
exposure to Chile’s high credit rating and the reliable historical performance of CGE
Notes: 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
Acquisition of CGE (IV)
E ti t d impact
Estimated
i
t
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
33
3.3x
Dividend
Payout
62.1%
2 5 – 3.0x
2.5x
30
30
3.0x
diluting its
shareholders
~62%
N/A
With this acquisition GNF 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.
12
Acquisition of CGE (V)
Transaction calendar
12th Oct
• Announcement of takeover bid for 100% of CGE
13th Oct
• First day of acceptance period
11th Nov
• End of acceptance period
14th Nov
• Announcement of result of takeover bid (effective
transfer of p
property)
p y)
13
2013-2015 Efficiency plan
Key initiatives
in
2013-2014
Cost savings
g on EBITDA1 ((€ million)
300
- Reducing
services and
discretionary
cost
2002
- Streamline
commercial and
operational
costs
108
- Cost
optimization in
corporate areas
2013
2014 E
2015 E
Achieved €188 million at end 3Q14, in line with targets set in the
St t i Plan
Strategic
Pl 2013
2013-2015
2015
Notes:
1
Restated under IFRS 11.
2
€80 million achieved in 9M14.
14
EBITDA 9M14 vs 9M13 (I)
(€ million)
+4.0%
3,690
147
-2.3%
3,837
3,606
(151)
EBITDA 9M13 1
Activity growth
EBITDA 9M14 pro- Regulatory impact 2
forma
(80)
Currency
translation
EBITDA 9M14
Operational improvements offset by translation of currency exchange
differences and impact from RDL 9/2013 and RDL 8/20142
Note:
1
Restated for comparative purposes under IFRS 11.
2
Impacts on Electricity, both liberalized and regulated (formerly “Special Regime”), electricity distribution in Spain and gas distribution in Spain. RDL 9/2013 having
been in effect from 14 July 2013 therefore without impact on 1H13. RDL8/2014 having been in effect from 5 July 2014 therefore without impact on 9M13.
15
EBITDA 9M14 vs 9M13 (II)
Impact from
f
LatAm currency exchange differences
ff
By country
By quarter
(€ million)
(€ million)
69
Rest
37
8
Brazil
Mexico
29
26
12
23
Colombia
9M14
3
1Q14
2Q14
3Q14
LatAm currencies achieve stable p
performance in 3Q14
Q
16
Net Debt evolution
(€ million)
14,252
1,056
-2.9%
2 9%
1 047
1,047
13,843
(2 512)
(2,512)
Net Debt 1
31/12/13
Investments
Dividends
FFO and other
13,221
(622)
Net Debt
30/09/14
Electricity tariff
deficit 2
Net Debt
30/09/14
adjusted
Solid cash flow generation allows for steady Net Debt reduction
investments dividend payment and tariff deficit
despite investments,
Notes:
1
Restated for comparative purposes under IFRS 11.
2
€428 million electricity tariff deficit for 2013 and €194 million withheld by CNMC against 2014 electricity payments.
17
Financials
18
Consolidated Income Statement
(€ million)
Net sales
9M14
9M131
Change %
18 223
18,223
18 273
18,273
(0 3)
(0.3)
(12,803)
(12,654)
1.2
Gross Margin
5,420
5,619
(3.5)
Personnel,, Net
(617)
(633)
(2 5)
(2.5)
Taxes
(359)
(399)
(10.0)
Other expenses, Net
(838)
(897)
(6.6)
3,606
3,690
((2.3))
(1,184)
(1.198)
(1.2)
(185)
(169)
9.5
253
8
-
Operating Income
2,490
2,331
6.8
Financial results, Net
(587)
(592)
(0.8)
(75)
(54)
38.9
1,828
1 828
1,685
1 685
8.5
Corporate tax
(448)
(396)
13.1
Minority interest
(141)
(169)
(16.6)
1 239
1,239
1 120
1,120
10 6
10.6
Purchases
EBITDA
Depreciation and impairment losses
Provisions
Other
Equity income
I
Income
Before
B f
T
Tax
Net Income
Note:
1
Restated for comparative purposes under IFRS 11.
19
EBITDA breakdown
Change
%
€m
(€ million)
9M14
9M131
Gas Distribution:
1,185
1,282
(97)
(7.6)
Europe
726
754
(28)
(3.7)
Latin America
459
528
(69)
(13.1)
Electricity Distribution:
715
721
(6)
(0.8)
Europe
465
469
(4)
(0.9)
Latin America
250
252
(2)
(0.8)
Gas:
891
861
30
3.5
Infrastructures
211
192
19
9.9
680
669
11
1.6
Electricity:
723
745
(22)
(3.0)
Spain
564
581
(17)
(2.9)
Global Power Generation
159
164
((5))
((3.0))
92
81
11
13.6
3,606
3,690
(84)
(2.3)
Supply
2
Other
Total EBITDA
Notes:
1
Restated for comparative purposes under IFRS 11.
2
Includes retail supply in Italy, formerly under Distribution Europe (gas).
20
Investments
Tangible and intangible
(€ million)
-4.9%
881
20
(2%)
59
8381
26
(7%)
68
(3%) (8%)
300
(34%)
261
342
195
(41%)
(23%)
(30%)
241
207
(27%)
(25%)
9M132
Gas Distribution
Electricity Distribution
9M14
Electricity
Gas
Other
z In addition, €177 million corresponding to a new LNG tanker (under lease)
Capex focus on future growth vectors: gas distribution networks in
Europe and LatAm
Notes:
1
Tangible and intangible investments; total investments of €1,015 million after adding €177 million from new tanker under lease.
2
Restated under IFRS 11.
21
A comfortable debt maturity profile
A off S
As
September
t b 30,
30 2014
(€ million)
1
Net Debt: €13.8 billion1
Gross Debt: €17.7 billion
7,691
7,472
2,204
778
41
2014
2,370
2,565
1,381
1,818
2,210
2016
2017
2018
2,049
921
2015
2019+
z Average life of Net Debt ~5 years
z 90% of Net Debt maturing from 2017 onwards
All financial needs from 2014 to 2016 are already covered
Note:
1
Net debt of €13,221 million excluding tariff deficit for 2013 and withholdings on 2014 payments made by CNMC.
22
An efficient Net Debt structure
As of September 30
30, 2014
Majority of debt at fixed rate
with very competitive cost
Conservative currency exposure
policy
7%
5%
18%
Fixed
Euro
Floating
US$
87%
82%
Other
Diversified financing
sources
23%
Capital markets
9%
68%
Institutional banks
Bank loans
Efficiency of debt structure as key pillar for value creation despite a
challenging financial environment
23
Ample liquidity available
As of September 30, 2014
(€ million)
Committed lines of credit
Uncommitted lines of credit
Cash
TOTAL
Limit
Drawn
Undrawn
7,208
400
6,808
191
102
89
-
-
3,905
,
7,398
502
10,802
,
z Additional capital market capabilities of ~€4
~€4,000
000 million both in Euro and
LatAm (Mexico, Panama and Colombia) programmes
Enough liquidity available to cover needs for over 24 months
24
A sound capital structure
Solid cash flow and financial ratios…
(September 30, 2014)
Net Debt/EBITDA
FFO/Net Debt
23.9%
25.0%
2.9x
2.8x
Pre-tariff
deficit
Post-tariff
deficit
Pre-tariff
deficit
Post-tariff
deficit
… supported by a strong capital structure
z Diversified debt maturity profile
z 82% at fixed interest plus next years’ rates fixed in a low scenario bring
a predictable and stable cost of debt
z No FX risk: subsidiaries financed in local/denominated currency
25
Analysis of operations
26
Gas Distribution
E
Europe
(I)
Sales
Connection p
points
(GWh)
(‘000)
143 573
143,573
2,726
-13.5%
5,604
124,212
+1.1% 5,664
5 664
452
456
5,152
5,208
30/09/13
30/09/14
2,542
140,847
121,670
9M13
9M14
Spain
Italy
Continued expansion of distribution networks
27
Gas Distribution
E
(II)
Europe
Investments
(€ million)
206
15
182
13
169
191
9M13
9M14
+13 2%
+13.2%
z Lower gas sales in both Spain
and Italy due to very mild
temperatures
EBITDA
z 3Q EBITDA in
i Spain
S i reflects
fl t
(€ million)
754
53
726
-3.7%
impact from RDL 8/2014
50
i i liti
z 32 new municipalities
701
676
9M13
Spain
connected in Spain in 9M14
9M14
Italy
EBITDA suffering
ff i from
f
regulation
l ti and
d lower
l
demand
d
d
28
Gas Distribution
Latin America (I)
()
Gas sales (GWh)
172,213
+8.5%
Connection points (000)
186,775
+4.3%
6,253
-1.9%
34,630
35,315
13,846
+31.0%
+5 8%
+5.8%
1,332
6,521
1,409
18,142
+4.8%
+13.5%
68,929
2,605
2,486
78,201
+5.4%
3 1%
+3.1%
54,123
55,802
9M13
9M14
Argentina
927
889
Brazil
+2.2%
1,546
1,580
30/09/13
30/09/14
Colombia
Mexico
Activity growth benefited from higher Colombian industrial sales
29
Gas Distribution
Latin America (II)
( )
Investments
000 new
z Growth capex leads to 268
268,000
(€ million)
118
136
z
+15 3%
+15.3%
z
9M13
9M14
z
EBITDA1
(€ million)
528
z
506
-4.2%
9M13
z
connection points vs end 9M13
Argentina: higher margins after new tariff
framework
Brazil: regulatory review in Rio; strong
sales to power generation and expanding
in residential and SME markets
Colombia: benefiting from growth in both
industrial and retail customer portfolios
Mexico: sustained network expansion
with an emphasis in the capital; new
concession awarded in the Northwest
Peru: activity to be initiated in 2H15
9M14
Region constitutes an important platform for growth
Note:
1
Disregarding impact from translation of currency exchange differences.
30
Electricity Distribution
E
Europe
(I)
TIEPI1 ((Spain)
p )
Sales
(minutes)
(GWh)
26,448
1,858
24,590
-2.2%
25,857
9M13
9M14
33
37
1,919
23,938
+12.1%
9M13
Spain
9M14
Moldova
Lower electricity
y sales after falling
g demand in Spain
p
due to mild winter
weather and weaker markets
Note:
1 “Tiempo de interrupción equivalente de la potencia instalada” = Equivalent time of power supply interruption for the installed capacity.
capacity
31
Electricity Distribution
E
Europe
(II)
Investments
(€ million)
illi )
-17.1%
152
7
145
points at end of 9M14
117
9M13
(€ million)
z Over 4.52 million connection
126
9
z Recent regulatory measures in
Spain lead to lower opex and
sharp containment in capex
9M14
EBITDA
469
27
465
26
442
439
9M13
Spain
-0.9%
z Efficiency plan with focus on
electricity distribution
9M14
Moldova
R
lt iinclude
l d impact
i
t from
f
l ti in
i Spain
S i (RDL 9/2013)1
Results
new regulation
Note:
1 RDL 9/2013 having been in effect from 14 July 2013 therefore without impact on 1H13.
32
Electricity Distribution
Latin America (I)
()
Electricity sales (GWh)1
Connection points (000)1
+6.3%
12,792
12,035
8,841
9M13
525
+5.4%
3,365
+6.6%
9,427
3,194
2,900
2,375
9M14
Colombia
30/09/13
+3.5%
3,002
+4.2%
547
+3.4%
2,455
30/09/14
Panama
Current operations offer potential for both network growth and
efficiency improvements
Note:
1
Excluding operations in Nicaragua, sold in February 2013.
33
Electricity Distribution
Latin America (II)
( )
Investments1
(€ million)
88
81
38
38
-8.0%
50
43
9M13
9M14
z Performance helped by growth
in demand and customer
figures
EBITDA2
(€ million)
249
74
265
z Reduction of energy losses and
73
bad debt in line with plan
+6.5%
175
9M13
Colombia
192
9M14
Panama
Strong operating performance with EBITDA +6.5% disregarding
disposals and translation of currency exchange differences
Notes:
1
Disregarding disposal of Nicaraguan assets in 2013.
2
Disregarding disposal of Nicaraguan assets in 2013 and impact from translation of currency exchange differences.
34
Energy
Gas and electricity demand in Spain
Conventional gas demand
(GWh)
Electricity demand
(GWh)
-0.9%
-9.2%
242,189
184,339
182,669
9M13
9M14
219,935
9M13
Source: Enagas
9M14
S
Source:
REE
Gas demand depressed
p
by
y milder winter which together
g
with
weaker markets also leads to lower electricity demand
35
Energy
G supply
l (I)
Gas
(GWh)
153,029
13,872
Spain
International1
-4.7%
145,826
-12.5%
20,519
-16.1%
+23.2%
12,140
87,401
70,955
17,208
+13.5%
54,793
48,263
118,638
-1.8%
116,478
+43.7%
3 %
22,692
9M13
9M14
Third party supply and Industrial
Residential
9M14
9M13
Europe
32 608
32,608
2
Rest
CCGTs
Spanish sales impacted by mild winter and lower sales to CCGTs;
sustained
t i d growth
th in
i foreign
f
i markets
k t
Notes:
1
Does not include UF Gas.
2
Sales to end customers.
36
Energy
G supply
Gas
l (II)
z International sales represent 37% of total in
EBITDA
(€ million))
669
680
+1.6%
%
9M13
9M14
9M14
z Consolidating presence in main
international LNG markets in Asia and
America (new contract in Chile from
2016)
z Sustained sales growth in Europe with
an aim to increase presence to new
countries
z Expanding in retail liberalized markets in Europe with ~12 million active
contracts (gas, power and services) with continuing expansion into residential
and small and SME markets
z Average contracts per customer increase 7.1% to 1.50 with a 16.5%
growth in maintenance contracts
z New tanker added to LNG fleet will further enhance operating flexibility
Benefiting from balanced and well
well-diversified
diversified customer base
37
Energy
El t i it Spain
S i (I)
Electricity
GNF’s total production (GWh)
23 817
23,817
-4.2%
-5.6%
1,666
22,815
1,572
-6.8%
3,659
,
3 410
3,410
-0.4%
3,181
3,169
+17.5%
3 552
3,552
4,174
-10.8%
11,759
CCGTs
9M13
Coal
10,490
9M14
Nuclear
Hydro
Cogen. and Renewables1
Thermal g
gap
p recovery
y continues in 3Q14 but still lower average
g pool
p
prices vs 9M13
Note:
1
Formerly “Special Regime”.
38
Energy
Electricity Spain (II)
Electricity sales
(GWh)
Average pool price
(€ million)
(€/MWh)
+3.6%
24,892
25,788
9M13
9M14
EBITDA
-4.9%
41.10
9M13
39.10
9M14
-2.9%
581
564
9M13
9M14
Source: REE
EBITDA impact from new regulatory measures (RDL 9/2013)1
compensated with good performance from liberalized supply
Note:
1 RDL 9/2013 having been in effect from 14 July 2013 therefore without impact on 1H13.
39
Energy
C
Cogeneration
ti
and
d renewables
bl 1
Total production (GWh)
z Commissioning of new small hydro
-5.6%
1 666
1,666
-70.7%
1,572
76
+23.6%
335
259
271
plants leads to a significant growth
in output
z Temporary halt of part of
cogeneration capacity after new
regulation
+2.2%
1,161
1,136
z Negative impact from low average
pool prices for 9M14 despite
recovery in 3Q
9M13
Wind
9M14
Small hydro
Cogeneration
Results include the impact from new regulatory
measures (RDL 9/2013)2
Notes:
1
Formerly “Special Regime”.
2
RDL 9/2013 having been in effect from 14 July 2013 therefore without impact on 1H13.
40
Global Power Generation (GPG)
International generation
z GPG includes electricity generation
Production
(GWh)
13,778
assets formerly under LatAm and
other
13,492
-2.1%
2.1%
z Lower g
generation activity
y in Central
America and Caribbean
9M13
9M14
z Lower investments corresponding
p
g
to higher concentration of capex for
Bii Hioxo wind farm (Mexico) in
9M13
Investments
(€ million)
146
106
-27.4%
9M13
9M14
z EBITDA grows 1.2% to €166 million
disregarding impact from
translation of foreign exchange
differences
Maintaining a stable activity profile
41
Conclusions
42
Conclusions
EBITDA -2.3%
2 3% after impact from regulation and translation
translation, +4
+4.0%
0%
disregarding the above impacts
Net income +10.6% after disposal of telecoms assets
Recent regulatory developments in electricity and gas in Spain help
dispel uncertainty
CGE acquisition enhances GNF’s international growth while
maintaining a solid business model and risk profile
Confidence in fulfilling the targets set in the 2013-2015 Strategic Plan
43
Th k you
Thank
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