PGN S S BUSINESS PRESENTATION 2005 RESULTS Remarks By: Widyatmiko Bapang Corporate Secretary Mangatas Panjaitan Head of Accounting & Budget Division Jakarta April 6, 2006
Agenda I. PGN s Core Businesses a. Existing Transmission & Distribution Pipe Line b. Transmission Networks Expansion c. Distribution tion Networks Expansion II. Operational and Financial Results III. Ensuring Security of Supply IV. Going Outside The Pipelines
I. PGN s Core Businesses
Existing Core Business Distribution 2% Gas Retail customers Transmission Gas Purchase and Sales Agreements Upstream supplier 100% Gas PGN 98% Gas Industrial customers Upstream supplier Gas PGN Gas Large offtakers (Power, Petchem) GSPA GSA GTA Supply Side Gas Sales & Purchase Agreement (GSPA) - - Long-term, Fix price in US$ - Take-or-pay volumes End User Gas Sale Agreements (GSA) - Short-term, Price in US$ - Take-or-pay volumes Transport Third Party s Gas PGN does not own the gas Long-term Gas Transmission Contract (GTA) - Minimum ship-or-pay volumes - Tariffs in US$ 1
PGN s Upcoming Transformative Integration Current New Model Post 2006 Result Structure Upstream Gas Transportation PGN Distribution PGN Transmission 8 Cities Grissik - Duri Grissik - Sing Industry and Small Customers Caltex S pore IPPs No connection between transmission and distribution Lacking synergies Projects offer only stand-alone alone value and returns Upstream Gas Transportation PGN Distribution PGN Transmission 12 Cities Duri - Medan SSWJ Phase I& II Grissik - Duri Grissik - Sing Industry and Small Customers IPPs Caltex S pore Over 60% of distribution volumes to be provided by 3 new PGN transmission projects Strong commercial and IRR synergies Emphasizes increasing volumes to underutilized, higher return distribution 1a
Pricing Dynamics Promote Gas Demand Growth Fuel oil price by average has increased 126% in October 2005, hence, has created a stimulus to utilize more natural gas High international oil prices (above US$60/bbl) increased the burden on the Government to keep the subsidy in place US$/MMBTU 20.00 16.00 12.00 PGN Gas Tariffs vs. Oil Price 14.49 12.95 11.96 10.73 Government emphasize on increasing gas usage:» Reduce oil subsidy» Increase revenue from oil export» Environmental benefits (Blue Sky Policy) 8.00 5.00 4.00 0.00 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Crude Oil International MOPS + 15% HSD Subsidised Price HSD Unsubsidised Price PGN Average Sales Price Natural gas price has become more competitive and stable than fuel oil 2
a. Existing Transmission and Distribution Pipeline
Existing Distribution Networks MEDAN MEDAN SBU SBU III III 123 123 BATAM BATAM SBU SBU III III 80 80 PEKANBARU PEKANBARU SBU SBU III III 75 75 PALEMBANG PALEMBANG SBU SBU I I 1 1 JAKARTA JAKARTA + + BOGOR BOGOR SBU SBU I I 503 503 CIREBON CIREBON SBU SBU I I 8 8 SURABAYA SURABAYA & & Surrounding Surrounding Areas Areas SBU SBU II II 242 242 3
Existing & Planned Transmission Networks DURIMEDAN (Preparation) DURIMEDAN (Preparation) SSWJ SSWJ PHASE PHASE II II (Under (Under Construction) Construction) 520 520 EAST EAST KALIMANTAN KALIMANTAN CENTRAL CENTRAL JAVA JAVA (License (License Tendered Tendered by by Government) Government) 700 700 1000 1000 Medan Dumai Singapura Duri Sumatera Grissik Pagardewa Kalimantan Sulawesi Irian Jaya (Papua) GRISSIK GRISSIK DURI DURI (Operational) (Operational) 430 430 Jakarta Semarang Surabaya GRISSIK SINGAPORE (Operational) GRISSIK SINGAPORE (Operational) 377 377 Java SSWJ SSWJ PHASE PHASE I I (Under (Under Construction) Construction) 460 460 4
b. Transmission Networks Expansion
PGAS Role in Fueling Domestic Growth (South Sumatra-to to-west Java Transmission Pipelines) 5
PGAS Role in Fueling Domestic Growth (Duri Dumai Medan Transmission Pipelines) 6
c. Distribution Networks Expansion
PGN s Role in Fuelling the Dometic Growth (West Java Distribution Network Expansion Update) 7
Capital Expenditure Outlook Update Capex Forecast for Licensed Projects (US$mn) 970 34 93 27 124 467 318 205 246 22 12 6 71 16 352 107 76 47 88 161 8 12 24 242 4 2004 2005 2006 2007 2008 2009 SSWJ Phase I SSWJ Phase II West Java Distribution Duri-Dumai-Medan Capex US$492 mio Capex US$619 mio Capex US$216 mio Capex US$538 mio Note: : estimated capex in 2006 Incrementally growing capex program to support integration and medium-term growth 8
II.. Financial and Operational Results
Consistent Operational Growth (2005) Distribution Volume (In mmscf/d) 7% Throughput Growth (In mmscf/d) Transmission Volume 27% Throughput Growth 262 287 308 366 475 602 2003 2004 2005 2003 2004 2005 Throughput Volume Distribution Volume Growth YOY 2004 to 2005 + 7% growth Commercial operations of Batam & Pekanbaru Distribution Network in Feb 2005 First gas in to Riau Andalan Pulp & Paper (RAPP) in March 2005 Additional gas from Ellips Jatirarangon (Okt 2004) Transmission Volume Growth Grissik-Duri: 328.33 mmscfd (2004) vs. 359.83 mmscfd (2005) (increased by 11%) Grissik-Singapura 92.08 mmscfd (2004) vs. 176.78 mmscfd (2005) (increased by 92%) Higher throughput volume of Grissik Singapura has became the main driver for the growth of the transmission business 9
Strong 2005 Earnings (In Billion IDR) Forex Gain / Loss Gain Rp 52 bio 2003 2004 2005 22% Loss Rp 242 bio Loss Rp 90 bio 3596 4458 5434 40% 40% 14% 56% 56% 82% 82% 1231 1555 2175 824 1081 1229 832 998 1552 509 474 862 Revenues EBITDA Operating Expense Operating Income Net Income 2003 2004 2005 10
Balance Sheet Items 2004/2005 2004 2005 % CHANGE 2004-2005 Balance Sheet Structure: Cash and Cash Equivalents*) 3,787 3,992 5% Fixed Assets 6,068 7,109 17% Others Assets 1,185 1,473 24% Total Assets 11,040 12,575 14% Debt 6,175 6,384 3% Other Liabilities 997 1,171 17% Minority Interest 562 694 23% Equity (Including Gov. Project Fund) 3,305 4,326 31% Total Equity and Liabilities 11,040 12,575 14% *) Cash and Cash Equivalents Include short term investment Exhange rate December 31, 2005 Rp 9.830 per 1 USD, December 31, 2004 Rp 9.290 11
2004-2005 2005 Financial Snapshot (Expressed in Billion Rupiah Except otherwise stated) Profit and Loss Summary 2004 2005 % CHANGE 2004-2005 Revenue 4,457,870 5,433,740 22% EBITDA 1,554,964 2,174,548 40% EBIT 997,833 1,552,281 56% Net Profit 474,338 862,013 82% EPS 108 192 77% Balance Sheet Summary Total Debt 6,174,967 6,384,093 3% Cash and cash equivalent 3,786,998 3,992,385 5% Minority Interest 562,203 694,154 23% Net Debt 2,387,969 2,391,708 0% Book Value (BV) 3,305,043 4,325,733 31% Share Price 1,900 6,900 263% No of Share Issued (mn) 4,379 4,486 2% Dividend Yield 2.9% 1.4% -51% Market Capitalization 8,320,620 30,953,088 272% Enterprise Value 10,708,589 33,344,796 211% Ratios Debt Ratio 65% 60% Debt/ Equity (X) 1.9 1.5 Debt/ EBITDA 3.97 2.94 12
PGAS Performance I. PGAS Share Ownership Composition per March 20, 2006; - GOI: 59,79% (including DPP I convertion reaching 56,943,305 shares) - Public : 40,21% (including MSOP I & II convertion reaching 125,487,500 shares) II. Market Capitalization per March 20, 2006 was IDR 45 trillion & the third biggest market cap in Jakarta Stock Exchange EPS in 2004 &2005 160 120 80 40 0 Q1 1H Q3 FY 2004 2005 Performance of PGAS vs IHSG PGAS vs JCI MOVEMENT December 15, 2003 - March 20, 2006 11,000 10,000 9,000 PGAS Closed per 20/03/06 Rp. 9,750,- JCI Closed per 20/03/06 1,330.113 1,900 1,700 PGAS 8,000 7,000 6,000 5,000 1,500 1,300 1,100 JCI 4,000 3,000 2,000 900 700 1,000 500 15/12/2003 13/04/2004 02/08/2004 25/11/2004 18/03/2005 07/07/2005 24/10/2005 17/02/2006 20/03/2006 PGAS JCI 13
III.. Ensuring Security of Supply
Transmission Growth Profile 2,000 1,800 1,600 1,400 1,200 1,000 (mmscfd) Transmission Volume ~25% CAGR Duri - Medan S Sumatra - West Java P II S Sumatra - West Java P I 800 600 ~20% CAGR Grissik Singapore 400 200 Grissik Duri 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Key Drivers Grissik - Singapore S Sumatra - W Java Duri - Medan East - West Java Transmission growth through 2009 is from approved projects currently under engineering and development 14
Total Estimated Distribution Volumes Distribution Volumes () Source 2005 2006E 2007E 2008E 2009E 2010E T O T A L SBU REG I 171.46 329.96 551.06 722.22 797.68 853.16 Total Average Weighted Purchased Price (US$/MMBTU) 2.58 3.10 3.32 3.43 3.45 3.49 T O T A L SBU REG II 88.46 179.85 174.17 230.00 365.00 380.00 Total Average Weighted Purchased Price (US$/MMBTU) 2.50 2.64 2.66 2.82 2.85 2.88 T O T A L SBU REG III 47.77 67 104 172 297 352 Total Average Weighted Purchased Price (US$/MMBTU) 2.52 2.60 2.78 3.14 3.42 3.52 T O T A L PGN 308 577 829 1124 1460 1585 Total Average Weighted Purchased Price (US$/MMBTU) 2.55 2.90 3.11 3.26 3.30 3.35 15
Distribution Growth Outlook Volume Pasokan Gas Terkontrak (1) 1,800 (mmscfd) 1,600 1,400 1,200 1,000 800 600 400 200 ~25% CAGR ~38% CAGR Gas under negotiation for MOU Gas under MOU Gas under GPA 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Key Drivers Incremental Supply to West Java Market (1) 2003 and 2004 based on actual South Sumatra gas to West Java Market Additional Volumes Required PGN continues to progress in securing significant gas supply growth 16
IV. Going Outside The Pipelines
Coal Bed Methane (CBM) Coal Coal Bed Bed Methane Methane contains contains gas gas methane methane (CH4) (CH4) trapped trapped in in layers layers of of coal coal Indonesia Indonesia has has mammoth mammoth reserve reserve of of CBM CBM especially especially in in the the following following regions: regions: 1. 1. East East Kalimantan Kalimantan Reserves Reserves approximately approximately270 270TCF. 2. 2. South South Sumatra Sumatra Reserves Reserves approximately approximately180 180TCF. With With the the latest latest technology technology approximately approximately 10% 10% --20% 20% coal coal can can be be extracted extracted as as CBM CBM The The amount amount of of CBM CBM that that be be produced produced from from the the Kalimantan Kalimantan and and South SouthSumatra Sumatra basins basins reaches reaches 18.2 18.2 37.2 37.2 TCF TCF with with high high CH4 CH4 composition composition of of 94%-97%. 94%-97%. CBM CBM is is an an alternative alternative gas gas source source that that can can be be carried carried from from East East Kalimantan Kalimantan and and South South Sumatra Sumatra to to Western Western part part of of Java. Java. High High CH4 CH4 has has made made CBM CBM as asthe the best best alternative alternative energy energy that that is is environmental environmental friendly friendly PGN PGN plans plans to to develop develop CBM CBM both both in in East East Kalimantan Kalimantan and and South South Sumatra Sumatra collaborating collaborating with with the the local local regencies regencies and and mining mining operators operators 17
CNG & LNG Transportation Modes CNG on Barge Transportation CNG and Mini LNG technologies is utilized to penetrate market that has lower gas demand CNG on Barge utilized cylinder that is developed from carbon fiber composite reinforcement (CFCR) Mini LNG utilizes conventional LNG technology that has been modified for small scale transportation Potential gas sources include Donggi, Matindok, Bontang & Makapan Potential markets include Makassar, Bali, East Java & Ambon Estimated economical capacity:150 250 mmscfd Mini LNG Marine Transportation CNG Inland Transportation CNG Inland Transportation utilizes truck or train to transport gas in CNG form from city to another. CNG Inland is utilized to transport gas to refueling natural gas stations located in Java 18
Mother Daughter System of Inland CNG Transportation PGN s s Pipelines Gas Distribution Pipeline supplies gas to main refueling station ( Mother station) Aluminium Alloy Mother Station Carbon Fibre Composite CNG Modules Light weight Bullet proof Fire proof Two times smaller than the LPG cylinder Franchise w/ local SOEs or gov t financings Compressor CNG Modules CNG Trucks or Rail Road Gas is compressed in Mother station to become CNG CNG is stored in specially designed tube and transported to refueling stations located far from gas distribution pipelines ( daughter stations) transported utilizing special truck or train CNG from truck / train is distributed to Daughter station Franchise w/ private / local SOEs Remote Residential & Commercial Area Substitute LPG and Kerosene Daughter Daughter Daughter Station Station Station CNG is distributed to Daughter Station to supply gas to consumers Remote Industrial Compound & IPP Power Plant Substitute HSD, LPG Kerosene 19
Gas to Hydrate (GTH) Transportation Mode GTH technology is developed for storage and natural gas transportation, especially for stranded gas from marginal gas fields in Indonesia Stranded gas is gas reserves geographically located far from the transmission pipelines or the volume is excessively low to be transported with pipelines or LNG technology The conversion from gas to hydrate results in volume compression of 150 to 180 times which is viable to be transported Feasibility study shows that GTH technolgy for longdistance transportation is 25 percent cheaper than LNG technology Gas hydrate is a mixture of gas and water that is trapped inside the molecule of water 20
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