30 Energy markets: Integration, disintegration,, consolidation? GDF SUEZ proposition Gérard Lamarche New York, October 22, 2007 New York Palace Hotel 455 Madison Avenue, New York
31 Energy Markets: Integration, disintegration, consolidation? 1) Key trends in the European gas & power markets 2) GDF SUEZ: creation of a world leader specialized in energy
32 Energy Markets: Integration, disintegration, consolidation? 1) Key trends in the European gas & power markets 2) GDF SUEZ: creation of a world leader specialized in energy
33 1,700 bn capex needed in European power sector by 2030 Increasing energy across the globe
34 World Average 2006 GDP Growth (IMF) 12% China Developing 10% Asia India Russia 8% Africa Middle East 6% USA Latin America 4% Japan World GDP Growth 2006 2% EU 0% 0 20 40 60 80 100 Energy Intensity (kbtu/usd) Bubble size = Total Primary Energy Consumption (2004)
35 Security of supply issues EU 25 59% dependent today, 80% in 2030 90%+ gas reserves: National Oil Companies Access issues Reserves located far from downstream markets Growing role of LNG
Proved reserves (in Tboe) 36 Russia Consumption (in mmboe/d) 360 North America 107 Western Europe East Europe 44 11 Eurasia 1,175-10 -37-24 -4 106-4 China 30-8 Japan 0-6 Central & South America 143 200-4 -11 Rest of Asia Pacific 97-7 Africa Middle East -17 Source: BP Statistical Review 2007. 2006 data.
37 Global warming and climate change Climate change CO 2 generation Future of renewables Future of nuclear Preservation of resources Energy efficiency Network efficiency Re-use and desalination
38 Global warming and climate change EC & govt pressures for competition & lower prices 2007 complete deregulation in EU Increasing pressure to unbundle networks
39 We live in a world where energy will remain expensive Global warming and climate change EC & govt pressures for competition & lower prices
40 $90 Brent - $/bbl 60 Electricity 2008 Base Contract - /MWh Coal - API 2 Weekly Index - $/ton $110 $85 $80 $75 58 56 $105 $100 $95 $90 Global warming and climate change EC & govt pressures for competition & lower prices $70 54 $85 $65 $80 52 $75 $60 50 $70 $55 $65 $50 48 $60 Jan-07 16-Oct-07 Jan-07 16-Oct-07 Jan-07 16-Oct-07
create new priorities for EU utilities 41 Reach for critical size Size matters Economies of scale Strength to finance investments Bargaining power with Nat l Oil Companies Diversification to absorb shocks Global warming and climate change EC & govt pressures for competition & lower prices
create new priorities for EU utilities 42 Reach for critical size Global warming and climate change Gas integration and LNG development Security of upstream supply Long term contracts Ownership of physical assets Upstream hedge against earnings volatility Convergence on gas and electricity EC & govt pressures for competition & lower prices
create new priorities for EU utilities 43 Reach for critical size Gas integration and LNG development Global warming and climate change EC & govt pressures for competition & lower prices Focus on CO2 reduction Develop CO 2 -light portfolios Accelerate growth in renewable energy Participate in momentum for new nuclear in Europe
create new priorities for EU utilities 44 Reach for critical size Gas integration and LNG development Global warming and climate change Focus on CO 2 reduction EC & govt pressures for competition & lower prices Reduce exposure in limited geographical diversification
create new priorities for EU utilities lead to reconfiguring EU gas & power markets 45 Reach for critical size Gas integration and LNG development Super Utilities with cross-eu footprint Acceleration of EU consolidation, e.g. Enel / Endesa Iberdrola / Scottish Power Global warming and climate change Focus on CO 2 reduction EC & govt pressures for competition & lower prices Reduce exposure in limited geographical diversification
create new priorities for EU utilities lead to reconfiguring EU gas & power markets 46 Global warming and climate change Reach for critical size Gas integration and LNG development Focus on CO 2 reduction Utilities competing to acquire upstream gas assets Focus on LNG given location of gas reserves Push to strengthen customer offerings with dual gas / electricity offers EC & govt pressures for competition & lower prices Reduce exposure in limited geographical diversification
create new priorities for EU utilities lead to reconfiguring EU gas & power markets 47 Reach for critical size Gas integration and LNG development Global warming and climate change EC & govt pressures for competition & lower prices Focus on CO 2 reduction Reduce exposure in limited geographical diversification Accelerated organic / external growth in EU and US renewables New nuclear programs in France, Finland, UK
create new priorities for EU utilities lead to reconfiguring EU gas & power markets, 48 Reach for critical size Gas integration and LNG development Global warming and climate change Focus on CO 2 reduction EC & govt pressures for competition & lower prices Reduce exposure in limited geographical diversification No incumbent will keep more than 50% market shares Internationalization
create new priorities for EU utilities lead to reconfiguring EU gas & power markets, strengthening the rationale for GDF SUEZ merger 49 Reach for critical size Gas integration and LNG development Global warming and climate change Focus on CO 2 reduction EC & govt pressures for competition & lower prices Reduce exposure in limited geographical diversification
50 Energy Markets: Integration, disintegration, consolidation? 1) Key trends in the European gas & power markets 2) GDF SUEZ: creation of a world leader specialized in energy
The merger creates a world leader specialised in energy 51 Leader in natural gas in Europe #1 purchaser & supplier #1 transmission & distribution network #2 European storage operator 71 68 2006 revenue billion Main utilities in the world 59 44 39 37 Leader in electricity #5 power producer and supplier in Europe #2 French power producer World leader in IPPs 1 World leader in LNG #1 importer & buyer in Europe #2 LNG terminal operator Leader in the Atlantic basin E.On EDF RwE Enel 1 Tepco (Japon) Notes 1 Enel excluding Endesa 2 Pro forma for the acquisition of ScottishPower 24 20 20 16 15 Centrica Iberdrola 2 Endesa Vattenfall Constellation Energy (US) 13 12 10 Dominion Resources (US) Duke Energy (US) Gas Natural 1 Independent Power Producers
The group has given an aggressive guidance for its development 52 Profitable growth Ambitious synergies Balanced mix of regulated & unregulated activities generating growth and recurring cash flows EBITDA growth of approximately 10% 1 in 2008 EBITDA target of 17bn 1 in 2010 Confirmed potential for operational synergies of approximately 1bn per year in the medium term Optimized capex program Strong financial structure 10bn 2 per year on average over 2008-2010, with capex above 8bn 2 in 2008 Split between approx. 75% development and 25% maintenance capex Financial structure to sustain ambitious strategy of industrial growth Rating target: Strong A 1 Pro forma GDF SUEZ EBITDA 2 Industrial investments (maintenance and development) which mainly relate to organic growth
GDF SUEZ offers a unique and profitable answer to the current challenges in the European Energy markets 53 Creation of a global leader in Energy with powerful assets Acceleration of growth and profitability prospects Clearly identified synergies Dynamic shareholder return Implementation of best practice corporate governance
54 Energy Markets: Integration, disintegration, consolidation?
55 Energy Markets: Integration, disintegration, consolidation?