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Analyst meeting
March 22nd, 2006
FY 2005 Consolidated results
Agenda
Summary
Financials 2005
Outlook 2006
Regulatory and legal aspects
Highlights 2005
Summary
• Financials 2005
- 2005 Results in line with expectations
• Outlook 2006
• Regulatory and legal aspects
- New electricity law published on June 1st, 2005
- Court of Appeal law into force as of February 1st, 2006
• Highlights 2005
- Energy Off-take from Elia’s network in 2005
- Tariff evolution to the advantage of Elia’s customers
- Significant increase of cross border capacity with France
- Explicit auctioning of capacity on North/South borders
- Acquisition 70 kV-net of Imea (industrial port area of Antwerp)
- Constitution of the Belgian Electricity Exchange on July 7th, 2005
Agenda
Summary
Financials 2005
Outlook 2006
Regulatory and legal aspects
Highlights 2005
Overview of Key IFRS Figures
ChangeIncome statement (€ million) 2005 2004 In %Operating Income 714,2 704,4 1,4%EBITDA (1) 295,9 264,6 11,8%Operating result (EBIT) 211,8 191,8 10,4%Financial result (93,8) (98,7) -5,0%Taxes (41,5) (33,6) 23,5%Consolidated net profit 76,5 59,5 28,6%Net profit per share (€) 1,60 1,42 12,7%Dividend per share (€) 1,27 1,27 0,0%Balance sheet (€ million) 31/12/05 31/12/04Total assets 3.855,8 3.789,5 1,7%Equity 1.282,7 1.061,5 20,8%Net debt 2.080,1 2.164,8 -3,9%Equity per share (€) 26,80 25,29 6,0%
Total number of shares (end of period) 47.898.052 41.979.640 14,1%(1) EBITDA = EBIT + depreciation + changes in provisions
IFRS
BottomBottom--up Approach of up Approach of Elia’sElia’s P&L in 2005 (EUR m)P&L in 2005 (EUR m)Determination of net profitDetermination of net profit
2005 Profit and Loss
685,7
63,2
76,5
34,7
637,7
Charges Revenues
tariff
Non tariff
Costs
Net profit
Surplus
(1)
(2)
(3)
(1) OLO of 4,1683%; Beta of 1,0485 and a risk premium of 2,54%(2) Av. Equity =1.201,1 and Av. Assets = 3.775,3
(3) OLO of 4,1683%; deviation rate of 70bp and tax rate of 33.99%
Average RAB 2005 3.371Reference equity (33%) 1.112Cost of equity 6,83%Equity reference remuneration (A) 76,00
Av. equity / Av. assets 32,05%Deviation on ref. equity -0,95%Equity deviation remuneration 3,21%D-factor (B) -1,02
Over-depreciation (C) -8,18
Fair remuneration (A+B+C) 66,79
B/M Decision CREG over 2004 0,62Reversal provision before regulation 0,49
Net profit Belgian GAAP 67,90
IFRS reconciliation 8,6
Net profit IFRS 76,50
IFRS Impact on Equity and Net Profit IFRS Impact on Equity and Net Profit for year ending 31 December 2005for year ending 31 December 2005
Net
Pro
fitEq
uity
Reconciliation Be GAAP - IFRS
1.282,71.322,2 26,3
(165,8)
89,1 29,6
(18,7)
2005 BelgianGAAP
Employeebenefits
Regulatoryassets
Deferredtaxes
HedgeReserves
Others 2005 IFRS
76,567,9 4.1
(2,3)(2,9)
8,0
2005 BelgianGAAP
EmployeeBenefits
Regulatoryassets
Deferred taxes CapitalisationSoftware
Others 2005 IFRS
1.7(1)
(1)
(1) Mainly relates to reversal goodwill Bel Engineering, inventory valuation, provisions & consolidation of Elia Re
Evolution 2005 RABEvolution 2005 RAB
Regulated Asset Base 2005
Average RAB
3.324 3.371
3.443
3.299(1)
(83) (7) 181
53
2004 Depreciation Divestm. &Decomm.
Capex Change inWCR
2005
(1) Small difference with € 3.311m Y/E RAB 2004 of analyst presentation of April 25th, 2005 due to CREG B/M decision of June 2005 over 2004
1,7
(25,3)
36,3
68,6
(27,6)
53,7
20
05
Inventory & trade debtors <1 year
Deferred charges
and accrued income
Total Change in
WCR
Trade creditors & others
Accrued charges
& deferred income
Surplus 2005
Working Capital Requirements 2005
Changes in Working Capital Requirements (EUR m) Changes in Working Capital Requirements (EUR m) (1)(1)
(1)(1) Based on Belgian GAAP accountsBased on Belgian GAAP accounts
33,641,5
98,793,8
72,884,1
24,018,2
117,2 122,9
147,8144,0
145,1138,9
2005 2004
Personnel Expenses
Evolution of Costs between 2005 and 2004 (EUR m)Evolution of Costs between 2005 and 2004 (EUR m)
Ancillary services(reserve energy)
Depreciation
Others
Financial charges
Taxes
Raw materials, Services & Other goods
637,7 644,9
-4,6%
+15,5%
-5,0%
Breakdown Costs
-4,3%
-2,6%
21,929,4
21,812,4
11,29,4
12,016,1
2005 2004
Breakdown of Non Breakdown of Non –– Tariff Revenues in 2005 and 2004 (EUR m)Tariff Revenues in 2005 and 2004 (EUR m)
Others
Telecom & third party services
Fixed assets own construction capitalised
International revenues
71,0
63,2
Non - Tariff Revenues
-25,4%
-16,1%
-43,1%
34,2%
511,9467,3
39,625,4
191,6150,3
27,9
28,5
2005 2004
Breakdown of Tariff Revenues in 2005 and 2004 (EUR m)Breakdown of Tariff Revenues in 2005 and 2004 (EUR m)
Connection tariffs
Tariffs for ancillary services
Tariffs for grid use
685,7 756,8
Tariff Revenues
-21,6%
55,9%
14,1 69,5 Shortfall on costs20,6 53,9 Surplus revenues (tariff & non-tariff)
Tariffs out of previous surpluses
34,7123,4
2,1%
-8,7%
Significant decrease of recorded difference between approved budget and reality
7,3
13,3
13,7
0,4
Surplus regulatedrevenues
Surplus international& other income
Shortfall in charges Adjustments to theregulated profit
Total Surplus
Deviation from Budget 2005
Access and balancing fees
Auctioning fees NorthCongestion fee South3rd party services
Purchase ancillary servicesLower interest ratesLess debt than forecasted
Reaso
ns
RAB adjustment
(1) Elia’s recorded difference for 2005 is EUR 34,7m of which 27,3 will be allocated by the CREG during the 1st half of 2006
Sources of surplus over budget at the end of 2005 (EUR m)Sources of surplus over budget at the end of 2005 (EUR m)
(1)
34,7
In millions of EUR Surpluses 2004 2005 2006 2007 2008 2009 2010 Total
Surplus 2003 134,6 25,4 36,4 36,4 36,4 134,6Bonus 2003 3,2 3,2 3,2Used -25,4 -39,6 -65,0Total 2003 137,8 0,0 36,4 36,4 72,8
Surplus 2004 119 28,0 9,8 9,8 23,8 23,8 23,8 119,0Bonus 2004 3,5 3,5 3,5Used -28,0 -28,0Total 2004 122,5 0,0 13,3 9,8 23,8 23,8 23,8 94,5
Surplus 2005 34,7 34,7 34,7Bonus 2005Used -7,4 -7,4Totaal 2005 34,7 27,3 27,3
Total Surplus 295,0 Total to reverse 27,3 49,7 46,2 23,8 23,8 23,8 194,6
Overview treatment of surpluses
Overview of allocation and use of total surplusesOverview of allocation and use of total surpluses
About EUR 200m available for future tariff reductions
(1) Financing of federal levies Q4 2005 (decision CREG) (2) To be allocated by CREG in decision B/M over 2005
(1)
(1)
(2)
883,5 883,5
996,0 995,7
250,0 344,6
0
500
1.000
1.500
2.000
2.500
31/12/2005 31/12/2004
Shareholders'loans LT EurobondsBanks LT Shareholders'loans ST
Standard & Poor’s rating:Long Term: A-Outlook: Stable
Elia benefits from a strong credit ratingElia benefits from a strong credit rating
Financial Debt Position
2.129,5 2.223,8
€ millions 2005 2004 Net debt 2.080 2.165Leverage (D/D+E) 62,4% 68,0%EBITDA / Gross interest 3,2 3,0Net debt / EBITDA 7,0 8,2Average cost of debt 4,4% 4,0%% Fixed of gross debt 72,4% 87,7%
Interest rate
European I.B. 125 Euribor + 5 bpCommercial PP 250 -Confirmed Credit facility 50 Euribor + 32,5 bpUnconfirmed Credit facility 875 To be negotiatedTotal 1.300
Unused Credit lines
Amount (€m)
2,05
1,271,17
79,3%77,6%
89,6%
80,9%
-0,4
0,1
0,6
1,1
1,6
2,1
2002 2003 2004 2005
In E
UR
70,00%
75,00%
80,00%
85,00%
90,00%
Dividend Pay-out ratio
Elia’sElia’s dividend policy ensures a steady dividenddividend policy ensures a steady dividend
Dividend Policy
• Steady dividend despite 14,1% increase in number of shares
• Pay-out ratio over 2005 Belgian Gaap result is 89,6% (79,6% under IFRS)
(1)
1,27
(1) Contains exceptional dividend of EUR 0,88
Agenda
Summary
Financials 2005
Outlook 2006
Regulatory and legal aspects
Highlights 2005
Evolution 2006 RAB as approved by CREGEvolution 2006 RAB as approved by CREG
Outlook 2006: RAB
Average RAB
3.371 3.341
3.239
3.443
(85) (6) 140
(253)
2005 Depreciation Divestm. &Decomm.
Capex Change inWCR
2006
(1)
(1) Mainly relates to replacement and development capex (does not include acquisitions)
Breakdown CAPEX Breakdown CAPEX
Outlook 2006: CAPEX
22%10%
24%
25%
8%
14%
Replacements
Driven by internal consumption
Driven by interconnections with neighbours
Driven by import levels & generation localisation
CAPEX 2005-2009 (IPO)€ 800 m
CAPEX 2006€ 140m
44% 53%
CREGAverage RAB 2006 3.341Reference equity (33%) 1.103Cost of equity 6,76%Equity reference remuneration (A) 74,5
Av. equity / Av. assets 34,29%Deviation on ref. equity 1,29%Equity deviation remuneration 3,19%D-factor (B) 1,4
Over-depreciation (C) -8,2
Fair remuneration (A+B+C) 67,7
B/M Decision CREG over 2005 -
Net profit as set by regulator 67,7
Determination of net profit 2006 by the regulator (Belgian GAAP)Determination of net profit 2006 by the regulator (Belgian GAAP)
Outlook 2006: Fair remuneration
(1)
(2)
• For the tariff 2006, the regulator deducted from the RAB the short term financial debt
• Elia filed a proceeding (3) against the decision for the State Council
• Elia has adapted its financial structure
• This change in financial structure could have a positive impact of about EUR 3m on the 2006 results compared to the approved net profit 2006 by the regulator
(1) OLO of 4,1293%; Beta of 1,0358 and a risk premium of 2,54(2) OLO of 4,1293%; deviation rate of 70bp and tax rate of 33.99%(3) The proceeding also includes the disagreement with the computation of the D-factor and the decommissioning
Agenda
Summary
Financials 2005
Outlook 2006
Regulatory and legal aspects
Highlights 2005
Update on legal aspects
Royal Decrees
Law
CREG Guidelines
Amended Electricity Law
• Parameters of tariff mechanism• Parameters of RAB evolution• Parameters of incentivisation
?
• Implementation of tariffmechanism
?
• 4-year tariff mechanism• Concept of return on RAB• Concept of incentivisation• Embedded financial debt• Corporate governance principles
01/06/05
Appeal Law
• New law enables third parties to challenge CREG decisions beforethe court of appeal instead of theCouncil of State
20 & 27/07/2005
• Parameters to start-up procedures
20/01/2006
Multi-year tariffs
• Procedure as foreseen in new electricity law:
Minister of Energy to send letter to Regulator
Proposal by Regulator after concertation with Elia (40 days)
Final decision by council of ministers
• Status :• Concerned Articles in Law will be implemented by
decree
• Objective of Minister remains January 1st 2007
• Elia is prepared to submit 4-year tariff proposal
Agenda
Summary
Financials 2005
Outlook 2006
Regulatory and legal aspects
Highlights 2005
1. Energy Off-take from Elia’s network
Net Energy Off-take
5.0005.2505.5005.7506.0006.2506.5006.7507.0007.2507.500
Janu
ari
Febr
uari
Maa
rt
April Mei
Juni
Juli
Augu
stus
Sept
embe
r
Okt
ober
Nov
embe
r
Dec
embe
r
GWh2004 2005
Minimal en maximal off-take of Elia-net in 2005
5000
6000
7000
8000
9000
10000
11000
12000
13000
0 2 4 6 8 10 12 14 16 18 20 22 uur
MW
15 dec 0531 juli 05
Total net Off-take from Elia grid slightly decreased to 78,9 TWh in 2005 from 80,6 TWh in 2004
This is mainly due to :
• mild weather in 2005• increase of :
- local generation- renewables, mainly wind
Maximum Net Off-take
2005 Dec 15th 12,8 GW 17.45-18 2004 Jan 27th 12,4 GW 17.45-18
Minimum Net Off-take
2005 July 31th 5,9 GW 6.30-6.452004 Aug 8th 6,3 GW 2.30-2.45
2. Evolution of tariffs since 2001
Since 2001, decrease of transmission tariffs for all types of clSince 2001, decrease of transmission tariffs for all types of clientsients
Tariffs for use of the grid and tariffs for ancillary services:comparison 2001 - 2006
0
2
4
6
8
10
12
14
16
2001 2002 (Q4)
2003 (Q2 toQ4)
2004 2005 2006(*)
2001 2002 (Q4)
2003 (Q2 toQ4)
2004 2005 2006(*)
2001 2002 (Q4)
2003 (Q2 toQ4)
2004 2005 2006(*)
2001 2002 (Q4)
2003 (Q2 toQ4)
2004 2005 2006(*)
On the 380/220/150 kV netw ork At transformer output to the 70/36/30 kVnetw ork
On the 70/36/30 kV netw ork At transformer output to medium voltage
€/M
Wh
Annual power System management Ancillary services Loss compensation
(*) Hypothesis: the concerned client is supposed not to have a local production
0
20
40
60
80
100
120
140
160
180
Vlaanderen F D NL UK
>41 GWh (63/70kV)>41 GWh (150kV)
European comparison 2004 tariffs
European comparison transmission cost per type of clientEuropean comparison transmission cost per type of client
Flanders
Benchmark 2004 with neighbouring countries
Source : Flemish government : Comparative study industrial transmission costs 2004
Breakdown 2005 Energy cost
Transmission cost is a small part of client’s total energy costTransmission cost is a small part of client’s total energy cost
TransmissionEnergy Distribution Federal levies & taxes (direct & indirect)
Residential client3.500 kWh, 12 kVA
1.300 kWh night
Midsize industrial client2-10 GWh, 500-2.500 kW
4.000h / year
Large industrial client50-70 GWh, 10.000kW5.000-7.000h / year
Source : CREG (1) 18 out of the 24% relates to VAT (2) Not subject to VAT
69%62%
32%
22%
8%
15%
13%36%24%(1)
10% 9%(2) (2)
3. Elia in a European context
Total energy exchanges 2004-55,074 GWh
Netherlands
4,430 GWh
2,221 GWh
France
6,750 GWh
Luxembourg
1,373 GWh
2,366GWh
2005 2004Direction Exchanged Exchanged ChangeF B 6,750 GWh 7,591 GWh -11,08%B F 2,221 GWh 1,180 GWh 88,22%NL B 4,430 GWh 4,630 GWh -4,32%B NL 5,074 GWh 4,053 GWh 25,19%Lux B 2,366 GWh 2,381 GWh -0,63%B Lux 1,373 GWh 1,577 GWH -12,94%Total 22,214 GWh 21,412 GWh 3,75%
Belgium Max. (MW)
2006 est. North SouthNet offtake Elia-grid 05 North South Total 06 Total 05
Winter 1.344 3.300 12.447 10,80% 26,51% 37,31% 29,30%
Summer 1.257 2.300 11.044 11,38% 20,83% 32,21% 24,10%
% of openingMax. import cap. (MW)
Since Nov 05, one of Europe’s most interconnected networkSince Nov 05, one of Europe’s most interconnected network
Significant increase of the capacity between France and BelgiumSignificant increase of the capacity between France and Belgium
1. Avelin (France) – Avelgem (Belgium) 380 kV
• Adding of second line adds Min 700 MW ; Max 1000 MW
• € 1 million EU grant
2. Release of capacity from historical contract
• as decided by French, Dutch and Belgian Regulators
3. Chooz (France) – Monceau (Belgium) 220 kV
• Preparations works started
4. Moulaine (France) – Aubange (Belgium) 380 kV
• Works in France included in MOU which was signed with Belgium
Max capacity (winter) : 4.300 MW when all projects commissioned
This major increase of access to neighbouring This major increase of access to neighbouring competitive wholesalemarkets should compensate future increase of transmission tariffmarkets should compensate future increase of transmission tariff due todue to•• investment charges not driven by an increase in demandinvestment charges not driven by an increase in demand•• potential decrease in auctioning revenues (used to lower tariffpotential decrease in auctioning revenues (used to lower tariffs)s)
Capacity increase with France: major progress
SinceNov 2005
2H 2006
To be defined
SinceJan 2006
4. Explicit auctioning at F and NL borders
From year 2006, From year 2006, FranceFrance--BelgiumBelgium interconnection capacities interconnection capacities are also are also auctionedauctioned, on a , on a yearly, monthly and daily basisyearly, monthly and daily basis
• RTE and ELIA jointly determine the capacities which are auctioned taking into account security rules
• First results
• Low prices on the south border compared to the north border confirm favorable impact of increased commercial capacity
•• Demand increased at Dutch border, especially for the Demand increased at Dutch border, especially for the direction direction B-NL with auctioning prices of about with auctioning prices of about € 4-5/MWh on average
• Next steps
• Jointly operated auction office foreseen mid 2006
• Auctioning of daily capacity will be transferred to Belpex at the start of market coupling
5. Acquisition 70 kV network IMEA
• Acquisition in line with Elia’s objective to acquire networks not yet in ownership
• Provide electricity supply to major large industrial clients located near Port of Antwerp
• Assets mainly relates to 55.4km underground cables, 9 70kV stations and 26 transformers
Dutch border
Port of Antwerp
Flanders
6. Belgian Power Exchange (Belpex)
• Constitution on July 7th, 2005
• Shareholdership: 3 TSOs (F,NL,B) and 2 Px (F,NL); Elia = 60%
• Two main activities :
1. VPP’s : intermediary role for daily deliveries (since 1/1/2006)
2. Day-ahead power exchange with market coupling F-B-NL- Spot market for electricity on the next day
Maximum use of capacity between F-B-NL
Increase liquidity and transparency on Belgian market
Enlarged convergence of prices between F-B-NL
Lower risks for the participants as energy and capacity are allocated simultaneous
- Start foreseen : Q3 2006License & Market rules approved by Minister of Energy Jan 12th
Waiting for Waiting for ““green lightgreen light”” from Ffrom F--NLNL--B RegulatorsB Regulators
Questions &
Answers
Investors Relations – Contact detailsBert Maes
Tel: + 32 (0)2/546.72.39Mail: [email protected]: http://www.elia.be
Analyst meeting
22 maart 2006
FY 2005 Consolidated results
Agenda
Annexes
Elia System Operator
Elia Asset(1)
99.99%
Elia Re 05/02/2002
HGRT12/2001
BEL Engineering26/12/2003
100% 100%
Licensed System Operator
Network Owner
(1) 1 share Publi-T, 1 share Electrabel (2) Includes 0,54% Employee shareholdership
• Engineering consultancy firm mainly involved in the design and project management of electricity network-related infrastructure
• Captive reinsurance company
• “Holding des Gestionnairesde Réseaux”
• Shareholder of French-based electricity power exchange Powernext
Elia: A Single Economic Unit
22.17%
Suez/ Electrabel Publi-T Publipart
27.45% 2.55%30.00%
Freefloat
40,00% (2)
Update on Elia group & Shareholdership
• Belgian power exchange
Belpex07/07/2005
60%
Very Successful IPO
25,00
26,00
27,00
28,00
29,00
30,00
31,00
32,00
33,00
Juni2005
Juli2005
Aug2005
Sep2005
Okt2005
Nov2005
Dec2005
Pric
e (€
)
0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
Volu
me
(In m
)
IPO
• Demand 10x oversubscribed• > 100,000 private investors• +7.8% first trading day• Employee offering: 5x oversubs.
2005 (june 20th-dec 31st)
• Performance: +18,9% • Average volume: 125,585• Free float velocity: 109.44%• Market cap: € 1.5bn
2006 Auctioning results South border
2006 Auctioning F-B
-0,020,080,180,280,380,480,580,680,78
Jan 06 Feb-06 Mar-06
€ / M
Wh Year
MonthDay
2006 Auctioning B-F
-0,020,080,180,280,380,480,580,680,78
Jan 06 Feb-06 Mar-06
€ / M
Wh Year
MonthDay
Period Direction Cap. auct. Participants Price / MWhYear 2006 F B 1298 MW 17 0.76 €
B F 799 MW 9 0.11 €Month Jan F B 1450 MW 15 0.22 €
B F 520 MW 6 0.35 €Month Feb F B 1450 MW 16 0.22 €
B F 400 MW 7 0.41 €Month Mar F B 849 MW 13 0.31 €
B F 300 MW 7 0.33 €
Results yearly and monthly auctioning South border
2006 Auctioning results North border
2006 Auctioning NL-B
-0,4
0,6
1,6
2,6
3,6
4,6
5,6
Jan 06 Feb-06 Mar-06
€ / M
Wh Year
MonthDay
2006 Auctioning B-NL
-0,4
0,6
1,6
2,6
3,6
4,6
5,6
Jan 06 Feb-06 Mar-06
€ / M
Wh Year
MonthDay
Results yearly and monthly auctioning North border
Period Direction Cap. auct. Price / MWhYear 2006 B NL 328 MW 4.70 €
NL B 328 MW 0.11 €Month Jan B NL 313 MW 3.49 €
NL B 313 MW 0.57 €Month Feb B NL 313 MW 5.51 €
NL B 313 MW 0.90 €Month Mar B NL 313 MW 1.44 €
NL B 313 MW 0.35 €