Madrileña Red de Gas FY 2014 Annual Results September 2014
Table of Contents 3 Executive Summary 6 Operating Overview 9 Financial Overview 13 Regulatory Overview 17 Final Remarks 2
Executive Summary � This presentation provides a summary of MRG’s FY2014 financial results, with total revenues of €180,8m and EBITDA of €149,2m, up 2% and 1,9% versus FY2013 � The company operates a natural gas distribution network c.5.500 km long, serving c.839.000 connection points , up 0.5% versus FY2013, distributed over 59 municipalities in the Region of Madrid � Natural gas distribution initiated in two new municipalities within MRG territory during 2014: El Molar and Pedrezuela � Two additional distribution licenses have been granted to MRG in FY2014 for the municipalities of Los Molinos and Soto del Real � MRG successfully completed its bank debt refinancing process in December 2013, with the issuance of two series of � MRG successfully completed its bank debt refinancing process in December 2013, with the issuance of two series of unsecured notes for an aggregated issuance of €775m off its listed EMTN programme � MRG completed its corporate reorganization in December 2013 with the upstream merger of MRG II into MRG � The company has been granted with OHSAS 18001 and ISO 14001 registration endorsing its compliance with best practices in health and safety and environmental management, respectively � MRG maintains its commitment towards the development of natural gas in the Region of Madrid: renewal of fleet with CNG (compressed natural gas) powered vehicles, several agreements with industry associations and Comunidad de Madrid � The new regulatory framework for natural gas regulated activities was enforced by Ministry of Industry, Energy and Tourism (MINETUR) on July 5 2014 aiming to ensure the economic sustainability of the gas system and incentivise growth 3
MRG Corporate Overview Key Corporate events Key Figures 2012-2014 €m YE 30 June � MRG completed the full refinancing of its bank debt in December 2013 with the issuance of two series of notes 300 100% 83% 83% 82% and a revolving credit facility for an aggregate of €825m: 250 80% 177,3 180,8 176,8 200 – €500m due September 2018 150 60% – €275m due December 2023 100 40% – €50m RCF maturing on July 2018 50 0 20% � The upstream merger of MRG II into MRG, completed in FY2012 FY2013 FY2014 December 2013, constituted the last step in the corporate reorganization process of the Group reorganization process of the Group Revenues EBITDA Margin Source: MRG Legal Structure Development of Connection Points (2011-2014) Revenue Breakdown (FY2014) €m YE 30 June ’000 YE 30 June 4,5 180,8 200 22,9 835 839 830 822 153,4 150 700 100 50 500 0 Regulated Other Non-Regulated Total FY2014 300 Remuneration Regulated Revenues 2011 2012 2013 2014 Revenues Source: MRG Source: MRG 4
Table of Contents 3 Executive Summary 6 Operating Overview 9 Financial Overview 13 Regulatory Overview 17 Final Remarks 5
Operating Overview Key Operating Data Units FY2013 FY2014 Change % Connection points # 835.427 839.248 0,5% < 4 bar 835.327 839.148 0,5% > 4 bar 100 100 0,0% Gas distributed GWh 10.164 9.222 (9,3%) < 4 bar 9.386 8.438 (10,1%) > 4 bar 778 783 0,7% Network length km 5.347 5.466 2,2% Municipalities (total) Municipalities (total) # # 57 57 59 59 3,5% 3,5% New municipalities with active CPs # 7 7 - Source: MRG Commentary � MRG operates over 839.000 connection points as of closing of FY2014, with a net growth of 0,5% versus past fiscal year � Network length grew by 2,2% up to c. 5.500 km over the existing 57 municipalities, including 2 in which the network was extended for the first time over recent years � Lower volume of gas distributed during the fiscal year has been driven by warmer temperatures, particularly during the first half of 2014 � Comunidad de Madrid has granted to MRG two new distribution licenses for the municipalities of Los Molinos and Soto del Real, both in the North of the region of Madrid and adjacent to existing MRG territory 6
MRG Key Initiatives MRG Committed to the Development of Natural Gas � MRG has initiated in 2014, after the completion of the construction works to extend its network, the distribution of natural gas in two new municipalities within its territory: El Molar and Pedrezuela � Comunidad de Madrid granted in 2014 to MRG two new administrative authorizations for the distribution of natural gas in the municipalities of Los Molinos and Soto del Real, both located in the northern section of the region and adjacent to current MRG territory � The company initiated in 2014 the process of renewing its fleet with CNG (compressed natural gas) powered vehicles fleet with CNG (compressed natural gas) powered vehicles - It is expected that by 2016 100% of MRG fleet will be powered with CNG - Beside inherent savings in cost of fuel, CNG allows for significant reductions in particles, Nox and CO 2 � MRG maintains its cooperation agreement with Comunidad de Madrid to incentive the replacement programme (Plan Renove de Calderas) of old natural gas boilers, thus enhancing safety and energy efficiency � MRG maintains its close cooperation with Asefosam, the regional association of gas installers, one of the key commercial channels for natural gas expansion, in order to facilitate the access to natural gas to potential new customers in Madrid 7
Table of Contents 3 Executive Summary 6 Operating Overview 9 Financial Overview 13 Regulatory Overview 17 Final Remarks 8
Key Financials Income Statement - €MM Commentary � Total revenues of €181m in FY2014 grew by 2% versus prior 12 month period ending 30 Jun 2013 2014 year, on the back of regulated remuneration (1% growth) and Remuneration 152,0 153,4 Other revenues Other regulated revenues 21,9 22,9 � Growth in Other regulated revenues was primarily driven by Non-regulated revenues 3,4 4,5 volume of periodical inspections to MRG base of connection Variable costs (12,5) (13,0) points, and meters rental Overhead costs (18,4) (18,6) � Non regulated revenues capture reconnection and other EBITDA 146,4 149,2 ancillary services rendered to connection points holders Margin 82,6% 82,5% � Overhead costs have remained broadly flat versus prior year EBIT 111,0 114,7 and in line with MRG efficient operational platform Margin 62,6% 63,5% � Interest expense (1) (67,1) (99,8) Interest expense of c.€100m capture a number of non recurring items related to the bank debt refinancing process recurring items related to the bank debt refinancing process Income tax expense Income tax expense (13,2) (13,2) (4,5) (4,5) completed in December 2013; normalised Net income (i.e. Net Income 30,7 10,3 excluding the post tax impact of one off interest expense) (1) Please refer to Normalisation Analysis on page 11 would have been of c.€59m Source: MRG Cash Flow Statement - €MM Commentary � MRG generated €98m of cash flow available for debt service 12 month period ending 30 Jun 2013 2014 in FY2014; Income tax paid and changes in working capital EBITDA 146,4 149,2 (inclusive of non recurring costs) are the causes of the Income tax paid (9,2) (14,7) reduction in cash flow versus prior year Working capital 2,0 (19,8) � Income tax reflects the temporary tax measures in place until Capex (21,1) (17,1) FY2016 limiting, among other, the deductibility of Goodwill Cash Flow Available for Debt 118,2 97,6 and Network licenses Service � Increased tariff deficit, normalised accounts receivable and Source: MRG payable in FY2014, lower tolls billing in Q2 2014 and non recurring cost (largely one-off fees and expenses incurred in connection with the debt refinancing process) drove change in Working capital 9
Key Financials Balance Sheet - €MM Commentary � Upon the completion of the bank debt refinancing 12 month period ending 30 Jun 2013 2014 Gas distribution licences 713,4 713,4 process in December 2013 the long term debt balance of Net tangible fixed assets 389,3 377,2 MRG captures the on-loan agreements with MRG Total Network Fixed Assets 1.102,7 1.090,5 Finance BV (issuer of outstanding unsecured notes): Goodwill 57,4 57,4 - €500m 3,779% due September 2018 Deferred Tax Asset 23,1 8,0 Other Non-Current Assets 2,0 1,3 - €275m 4,500% due December 2023 � The balance of Subordinated shareholders loans was Current Assets 38,6 40,3 Cash and cash equivalents Cash and cash equivalents 33,4 55,4 fully converted into equity as of September 11, 2013 � Deferred tax liability balance in FY2014 reflects the Total Assets 1.257,1 1.252,9 cancellation of the former interest rate swap hedging Equity 230,5 436,7 floating rate bank debt Subordinated Shareholders Loan 194,0 0,0 Total Shareholders Equity 424,5 436,7 Long Term Debt 784,0 769,0 Deferred Tax Liabilities 15,9 3,5 Other Non-Current liabilities 1,9 2,2 Current Liabilities 30,9 41,4 Total Liabilities & Shareholders’ 1.257,1 1.252,9 Equity Source: MRG 10
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