Investor Meet 26 March 2009 Mumbai Disclaimer Certain statements - - PDF document

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Investor Meet 26 March 2009 Mumbai Disclaimer Certain statements - - PDF document

1 Gujarat Gas Company Limited Investor Meet 26 March 2009 Mumbai Disclaimer Certain statements included in this presentation contain forward-looking information concerning Gujarat Gas Company Limited (GGCL)s strategy, operations, financial


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Gujarat Gas Company Limited

Investor Meet

26 March 2009 Mumbai

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Disclaimer

Certain statements included in this presentation contain forward-looking information concerning Gujarat Gas Company Limited (GGCL)’s strategy, operations, financial performance or condition,

  • utlook, growth opportunities or circumstances in the sectors or markets in which GGCL operates. By

their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within GGCL's control or can be predicted by

  • GGCL. Although GGCL believes that the expectations reflected in such forward-looking statements

are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from those set out in the forward-looking statements. For a detailed analysis of the factors that may affect our business, financial performance or results of

  • perations, we urge you to look at the relevant article on Risk Management included in GGCL’s

Annual Report and Accounts 2007. Nothing in these results should be construed as a profit forecast and no part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in GGCL or any other entity, and must not be relied upon in any way in connection with any investment decision. GGCL undertakes no obligation to update any forward-looking statements.

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Agenda Ownership Structure Gas Infrastructure & Gujarat’s Economic Profile GGCL - Business Profile Financials Regulation Human Resources Way Forward

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GGCL – Shareholding pattern

14.13% 12.23% 8.52% 65.12% Parent Com pany Holding (BGAPH) Foreign Institutional Investors Others Resident Individuals

Shareholding as on 31st Dec. 2008 Market cap as on 13th March 2009. Source: GGCL

Market Capitalisation ~ Rs 16 Billion ($ 320 Mn)

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BG Group

  • Expertise across the gas chain
  • A rapidly growing gas company with interests across five

continents

  • Turnover in 2008 was around $24bn (using the avg US$/£

exchange rate for the year)

  • Operating profit was $10.1bn
  • Present in over 25 countries
  • Listed on London Stock Exchange
  • A FTSE 10 company with a market cap over $50bn
  • BG India is a “core asset” for BG Group

A strong parentage

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BG India

5 1 6 2 3 4

Legend

1 Panna-Mukta-Tapti Fields 2 KG-OSN-2004/1 3 KG-DWN-98/4 4 MN-DWN-2002/2 5Gujarat Gas Comp. (GGCL) 6 Mahanagar Gas Ltd. (MGL)

Company Information

BG E&P India Ltd

  • Jointly operates Panna-Mukta-Tapti fields

(BG-30%, RIL - 30% & ONGC - 40%)

  • Largest private oil & gas JV
  • Exploring KG-OSN-2004/1 with ONGC

(55%) from NELP-VI Licensing round

  • Secured two deepwater exploration blocks:
  • KG-DWN-98/4 (BG-30%, ONGC-

55%, OIL-15%)

  • MN-DWN-2002/2 (BG-25%, ONGC-

75%)

BGIES

  • Gas/LNG marketing entity and aggregator
  • f domestic supplies

GGCL

  • India’s largest private CGD company (by

volumes); 2008 sales: 1089 mmscm

  • BG has a controlling equity stake of 65.12%

MGL

  • India’s largest private CGD company (by

customers)

  • JV with GAIL (49.75%) and State Govt.

(0.5%)

BG India

Integrated player with presence in significant Indian markets Present across the full hydrocarbon chain

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Agenda Ownership structure Gas Infrastructure & Gujarat’s Economic Profile GGCL - Business Profile Financials Regulation Human Resources Way Forward

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Advantage Gujarat

  • 2nd most industrialized state in India
  • Population ~ 55 million
  • 265 industrial clusters and estates
  • 22% of India’s private sector investment
  • Vibrant Gujarat
  • Investment proposed > $ 20 Billion in Surat and

Bharuch districts

  • Delhi-Mumbai Industrial Corridor (DMIC)
  • 38% of proposed freight corridor in Gujarat
  • Passes through GGCL areas of operations
  • Phase I - approved with proposed investment of

$ 90 bn

5% of India’s population - 13% of industrial production & 19.2% of exports

Source : vibrantgujarat.com & indextb.com

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Gujarat – The nerve of DMIC

Pipavav

GGCL Schematics

DMIC

GGCL Areas: Surat, Ankleshwar & Bharuch

GGCL in the heart of DMIC in Gujarat

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Gujarat – the natural gas hub of India

Existing LNG Terminal Proposed LNG Terminal Ultra Mega Power Project (4000 MW)

RoU in Progress Under Construction Commissioned

Gas Pipelines Established CGDs New CGDs Major SEZs

GSPL Transmission pipeline GAIL HBJ GAIL DUPL

Dahej LNG Hazira LNG Pipavav Mundra

GGCL Schematics GSPL pipelines legends

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Agenda Ownership structure Gas Infrastructure & Gujarat’s Economic Profile GGCL - Business Profile Financials Regulation Human Resources Way Forward

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Vision “We make natural gas the safe and preferred energy solution”

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Strategy

Moving up the value chain

  • Grow retail market
  • Develop CNG

business

  • Develop new

applications Building materiality

  • Geographic

expansion

  • Exploring alliances

Management Strategy

GGCL Schematics

Strategy aligned with regulatory framework

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Sales mix (by volume)

Year 2008

Dom & Com m 7% Bulk 13% CN G 8% R etail 72%

1089 mmscm Source: GGCL

Largest private sector CGD operator in India - by volume

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Industrial retail segment

Profile Gro drivers

  • Dispersed customer base across diverse industry sectors
  • Low volume (< 50,000 scmd) high margin: large number of customers
  • Low probability of gas-on-gas competition
  • Gas off-take risk mitigated by ToP liability clause
  • Margin risk mitigated by gas cost pass-through clause
  • Credit Risk mitigated by security deposits / bank guarantee

Risk Profile

Geographical expansions and network extensions Captive Power demand

wth

Core business segment driving growth

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Industrial retail customer profile

46% 18% 8% 6% 6% 11% 29% 5% 23%

25% 50% 75% 100%

Textiles Chemical Dyes & Intermediate Pesticides Pharmaceutical Glass & Ceramics Others Total

Power Liquid Fuel Solid Fuel 48%

Source: GGCL

Demand from textile and chemical industry remained firm

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CHP (Mwe)

140 187 234 326 326 50 100 150 200 250 300 350 2004 2005 2006 2007 2008

1 Mwe ~ 5000 scmd

Mwe

Source: GGCL

Sustained focus on CHP

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Distribution volumes

447 526 657 781 783 91 48 57 60 72 200 217 327 143 21 47 70 3 44 285

200 400 600 800 1000 1200 1400 2004 2005 2006 2007 2008

Ind Ret CNG Dom/Com Bulk 813

mmscm

1088 695 1196 Source: GGCL 1089

CAGR of 17.6% in retail markets Added more than 26000 households and 23500 vehicles in 2008

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Multiple gas sources

Dahej

Hazira

Ankleshwar Bharuch

Surat

River Narmada

Gulf of Cambay

Amboli H A P i

Gujarat

Jhagadia

GGCL Mora

Petronet LNG Kim-Karanj

PMT Gas Vapi New areas

Kosamba Shell LNG Hojiwala

Magdalla GAIL’s HVJ

GAIL Surat GAIL Ank GSPC/ Niko Niko PMT JV CAIRN JV

GSPL pipeline GGCL pipelines Existing LDZ

RLNG

GGCL Schematics

Multiple receiving facilities

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Gas sourcing mix

PMT 76% GA IL 5% C A IRN 11% N IK O 8%

Year 2008

1095 mmscm Source: GGCL

Predominantly indigenous sources 95% at market determined prices

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Agenda

Ownership Structure Gas Infrastructure & Gujarat’s Economic Profile GGCL - Business Profile Financials Regulation Human Resources Way Forward

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Performance in 2008 Growth vs 2007

  • Top line

5%

  • Distribution volume - 9%
  • PAT

5%

Profitability sustained

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Revenue growth

6089 7182 9571 12991 114 286 442 21 22 12424

2000 4000 6000 8000 10000 12000 14000 2004 2005 2006 2007 2008

Transmission Non Transmission

6531 7468 9685 12446 13012

Rs Mn

Source: GGCL

Re-emergence of transmission revenues in Q4 of 2008

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Profit growth

478 442 286 638 793 1169 2281 2324 21 22 114 1199

500 1000 1500 2000 2500 2003 2004 2005 2006 2007 2008

Transmission Non Transmission

2303 1455 1313 1235 1116

Rs Mn

Source: GGCL 2345

Profits driven by strong growth in distribution business

PBT

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Capital investment

39 82 60 101 55 87 206 394 1406 740 758 797 104 136 272 222 104

232

200 400 600 800 1000 1200 1400 1600 1800 2003 2004 2005 2006 2007 2008

Non Gas Capex Network Expansion/Upgradation CNG COGEN

Rs Mn

245 580 1602 1035 1345 988 Source: GGCL

Investment – for sustained growth

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Key factors which affected business in 2008

  • Gas supply

– PMT gas reduced by 30% from April ‘08

– GAIL replaces PMT JV as supplier – Term Sheet with GAIL governs current supply

  • Sources aligned with market segments

– GAIL APM & PMT supply to Domestic and CNG segments

– GAIL PMT gas to SMEs (< 50,000 scmd customers) – Non GAIL sources piped to larger customers – rLNG to meet peak customer demand

  • Depreciation of Rupee against USD impacted margins
  • Optimized margins through improved customer mix

Key 2008 challenge: sustaining supply to core markets

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Agenda Ownership structure Gas Infrastructure & Gujarat’s Economic Profile GGCL - Business Profile Financials Regulation Human Resources Way Forward

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Regulations

  • Application filed with PNGRB for authorisation in districts of

Surat and Bharuch

  • Letter from MoPNG confirming authorisation in Surat, Bharuch

and Ankleshwar cities

  • Application filed for Hazira -Ankleshwar pipeline authorisation
  • Submitted “Expression of Interest” with PNGRB for areas in

Kachcch and Bhavnagar

  • Permission received from PNGRB to continue construction in all

the operational areas

High degree of engagement with the PNGRB

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Regulatory framework – cost structure

END CONSUMER TARIFF

Marketing margins (Bad-debts, business risks etc.) Unregulated

Network Tariff Return on Capital Employed – 14% Post tax (Grossed up for pre-tax)

[CE = GFA – Depreciation + WC (20 days opex)] DCF over economic life of the asset

OPEX

Regulated Gas Cost Unregulated Compression charge (CNG) LMC charge (New domestic) Zero LMC (Old domestic) Transmission Tariff Regulated

R R

END CONSUMER TARIFF “Marketing Margins” beyond purview of regulator

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Agenda Ownership structure Gas Infrastructure & Gujarat’s Economic Profile GGCL - Business Profile Financials Regulation Human Resources Way Forward

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HR aligned with business needs

  • 546 employees with a blend of experience and youth
  • Senior Management Team deputed from BG Group
  • Strong HSSE culture – driven by BG Group guidelines
  • Focus on appraisal process, training programmes help maintain

high standards

  • Progressive HR policies towards high employee engagement

and development

  • ESOP introduced for select managerial talent w.e.f 1st Nov 08

Focus on internal talent development

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Human resources pyramid

MD Director General Manager Assistant General Manager Manager Deputy Manager Associate Manager

  • Sr. Engineer

Staff

147 161 245

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Agenda Ownership structure Gas Infrastructure & Gujarat’s Economic Profile GGCL - Business Profile Financials Regulation Human Resources Way Forward

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Potential opportunities

  • New license areas
  • Bid for new areas
  • Explore alliances
  • Grow CNG business
  • Expand sourcing portfolio with term rLNG
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Key challenges

  • Augmenting the gas sourcing portfolio to meet demand

growth

  • Securing regulatory licenses for new areas
  • Growth in a competitive environment

To sustain and grow company’s leadership position among CGDs

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Key messages

  • Positioned to grow gas distribution business in a

regulated environment

  • Robust business model and strategy in place
  • Focus on growth

Strong business performance; Well positioned for further growth

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Q & A Session