GDF Suez SA (OTCPK:GDSZF) Q4 2014 Earnings Conference Call Feb 26, 2015 1:45 AM ET
Gérard Mestrallet
Good morning, ladies and gentlemen. Thank we for fasten us here during a domicile in Gaz de France. we commend a bid that this represents for you, though also to acquire all a other participants who are connected by write or internet.
So, we am unequivocally happy to be with we this morning to benefaction a 2014 Annual Results and also a opinion for a entrance years, along with Isabelle Kocher, Deputy CEO and Chief Operating Officer who will benefaction also with Valery Pierre, Deputy CFO in assign of a Financial Communications. we am also gratified to broach Judith Hartmann, here, Judith Hartmann will turn a CFO on March, on a 15th of March.
And, so, to illustrate now, a categorical messages that we wish to communicate today. we would contend resilience and reaction. First, resilience in 2014′s results. All a targets and indications we had for 2014 have been achieved notwithstanding well-developed inauspicious conditions, drought in Brazil and chief outages in Belgium. You all know about.
Some pivotal figures. Revenues are tighten to €75 billion. EBITDA reaches €12.1 billion homogeneous to $12.5 billion during normal was in France, so and 2%. The stream handling income is organically during over 8% practiced from French continue and tariff replenish and we mount during €7.5 billion.
The net repeated income is adult 6% on a same basis, reaching €3.4 billion, during normal continue conditions in France that is line with a guidance. And a money upsurge from operation reaches tighten to €8 billion, carrying been shabby by a impact of a dump in oil and gas prices on domain cost, on exchange and this domain cost should retreat over 2015, 2016.
The net debt is during €27.5 billion. The debt has continued to diminution for a fourth year in a row. The resilience of a 2014 financial accounts is in fact a outcome of, we will say, 4 categorical drivers.
First, a organic growth, a organic enlargement in all a 5 business lines during a call level, incompatible continue and tariff recouping in France, so a business is strong, good and sound. And secondly, a quicker achievements on a opening program, we know that we have a module called Perform 2015 and with an incremental net grant of €400 million. On a bottom line, we achieved a Perform 2015 designed aim one year in advance.
Three, a diminution in a DA, following a vital decisions of impairments we took final year per European businessman assets.
And fourth, a critical improvements on a financial results, both in volume and also in terms of cost of debt. This was a initial message.
The second pivotal message, discerning and clever greeting to tackle oil and prices headwinds in 2015. Of course, you’ll all have in mind that brands, prices have strongly declined by around 45% given a center of final year, though also a NBP gas prices on a European market, a gas prices also started to dump early in 2013 and now they are trade 20% subsequent their level.
Even if this pierce should in a center tenure assistance a GDP enlargement and afterwards a activities around a world, we have immediately to catch successive startle in a short-term.
The oil and gas cost drops representing 2015 a strike of around €900 million during a EBITDA turn compared to 2014 and around €350 million during a bottom-line. So, we have to catch this impact on tip of a diseased marketplace conditions we were already awaiting in a categorical bequest era businessman activities.
So this is a reason for that we have enacted a discerning greeting devise along dual categorical drivers, initial transformation on cost and synergies within all a business lines for €250 million in EBITDA in 2015 and a same in 2016.
And €2 billion on CapEx with a €400 million cut generally in scrutiny and a €1.6 billion of MA shifted from 2015, to after on. And this discerning greeting devise comes of march in serve to a Perform 2014 targets. So, all these actions enables us to announce a following guidance.
Stability of net repeated income organisation share in 2015 approaching in a operation of €3 billion to €3.3 billion, change money equation over 2014, 2015 with a immeasurable net CapEx module of €6 billion to €7 net billion per year in normal over a period, and of march a acknowledgment of a multiplication routine and over 2015 we design plain enlargement prospects adult from 2016.
The aptitude of a business denote formed on geographical and business diversification along with a discerning greeting devise we have been means to exercise demonstrates a reduction of a Group. Hence, we endorse and a Board reliable unequivocally strongly a multiplication routine over 2014, 2016 with a 55% to 75% payout ratio on a net repeated income organisation share with a smallest of €1 per share, 100% payable in money and we insist in any circumstances.
So, before relocating to a subsequent slide, we would like to prominence that a well-spoken transition in a tip supervision era has been good approaching and starts to be implemented as charity prominence on a Group devise with a appointment of Isabelle as Deputy CEO and she is Operating Officer carrying supervision on a 5 operational branches today.
I would like now to rise a devise on a subsequent slide. We have a transparent tellurian devise discussed, authorized and strongly corroborated by a Board and a supervision committee. First, as we know, we are expanding in fast-growing markets to be a benchmark appetite player.
We accelerate a developments. We are positioning ourselves all along a value sequence both fluctuating a operation of a activities. They have been extended to healthy gas infrastructures, preference by a Board final year and also extended to appetite use business. And entering new markets, new countries, new frontiers.
We sojourn however resourceful both in terms of MA or existent superiority and bend around some of a countries of businesses. For example, final year, we motionless to sell a resources in Panama and Costa Rica.
Two, in Europe, in Europe we are bettering ourselves to a low mutation of a appetite market. We aim comparison enlargement in renewable by partnerships in comparison countries and by many suitable technologies. We are implementing some-more record in a downstream blurb efforts – offers to take adult a hurdles of decentralization and digitalization of a energy.
We are also levering a knowledge to offer solutions to decentralize appetite needs such as district networks, small-scale LNG and biogas. We essay to be personality in a appetite transition in Europe.
However we cruise that this trend is not singular to Europe. Energy transition is picking adult worldwide. It is unequivocally a tellurian trend we have during this condition. It is an irrevocable transformation pushed by a technology, during a same time by revolutions of a digital array and also a renewable revolutions in technologies for wind, for solar, for feverishness and miniaturization of a equipments.
It is also pushed by a inspiration, many of a consumers for some-more decarbonized world. And so, deliberation a expertise, a worldwide appearance and diversity, we convince vast opportunities to emanate value worldwide and to advantage from this tellurian appetite transition.
And afterwards now on Slide 4, as shown by a developments in a final years, both in appetite era and appetite potency and some-more recently in a gas value sequence in China, we repeat that a appetite transition is a worldwide aspiration. The fast-growing markets already encounters an puncture context formed on both environmental and health grounds.
When a CO emissions boost by 2% per year in normal between 2000 and 2012, a enlargement during a same era was 3% in Africa, 4% in a Middle East and even reaching 6%, 7% in India and China. In China in 495 out of a 500 bigger cities, a peculiarity of a atmosphere is subsequent a World Health Organization standards.
And in China, a many fast purpose to freshen a air, to purify a atmosphere is to renovate spark equipments into gas equipments. USA and China, we were not unequivocally concerned and not unequivocally concerned for many, many years and a issues until recently made, as we know a mystic pierce with a meridian agreement sealed final Nov to revoke their CO emission.
One answer to this regard is a clever developments of renewable worldwide. In 2012, 20% of a universe appetite expenditure was entrance from renewable, hydro being a many important. In 2035 appetite era from renewable should be double by three, enlargement is being driven generally by breeze and solar. At a same time, renewable enlargement is changeable from USA and Europe to a rest of a world.
As we see on a chart, between 2014 and 2025, non-OECD countries will paint 60% of a renewable ability added.
First answer renewable, second answer appetite potency services. The second answer relies on appetite potency where we see opportunities worldwide for us. Over a final 4 years we remind we that we done some-more than 10 acquisitions outward Europe within a appetite services business lines, of that Ecova in a US, Keppel and SMP in Singapore for example. With €15 billion of revenues and 90,000 people GDF Suez is a universe personality in appetite potency and this is a flourishing and unequivocally essential business that by a approach is not capital-intensive.
Third, innovation. Innovation in new businesses will minister to obscure CO2 emissions and we are already concerned in a following new innovative businesses, biogas, sell LNG, appetite era by sea currents, appetite storage with a high accessibility batteries and appetite by gas, appetite by hydrogen, intelligent energy, metering expenditure management, remote control, robotics, direct side management. And we wish to be during a forefront of this worldwide appetite transition.
Now we would like to illustrate a devise by a far-reaching operation of achievements of a teams final year by picking some pivotal examples on a Slide 5. First, examples of achievements that will minister to a 2015 growth.
In appetite era we have consecrated final year 4300 megawatt around a globe, mostly in fast-growing markets such as new turbines during Jirau Dam in Brazil already representing half of a turbines, that are in operations and a appetite ability now of Jirau is aloft than a one of an EPA chief plant.
Also a finish COD of a Tarfaya breeze plantation in Morocco, 300 megawatt, a largest breeze plantation in a African continent and also renewable in mature markets.
In a gas value chain, a works have continued in a dual Mexican gas pipelines, out of that Mayakan, Mayakan will work in a entrance weeks, routinely subsequent month. In EP, 3 fields recently started, contributed to a prolongation boost in 2014 that will continue in 2015 and beyond.
In appetite efficiency, we have continued to rise a care positions everywhere mixing blurb successful developments with also acquisitions such as Lahmeyer, an general engineering association Ecova, we already mentioned and by comforts supervision associated transaction in Singapore.
We also have prepared a enlargement for a medium-term. In appetite era over 10,000 megawatts on their construction. They are allocated for 95% in a fast-growing markets and formed from two-thirds on low CO2 glimmer technology.
And these new capacities will be gradually consecrated over this year and subsequent year for a immeasurable majority.
Strong achievements of 2014 were to start a construction of 4.4 gigawatts of new projects that demonstrates a strength of a pipes, a tube of projects.
From example, Mirfa, 1.6 gigawatt devise in a Emirates, a Safi, another thermal devise in Morocco, 1.4 gigawatts, dual gas projects in Peru, 600 megawatts, 300 megawatts of breeze and solar devise in France and Belgium also being built.
We’d like also to discuss that we won an auction in Chile in sequence to yield appetite to a Central System in Chile and for that, we will build an high voltage line collecting a north and a south of Chile that has been an critical success of a Group.
As we know, we preference a developments in partnership while being many of a time a developer, a operator, and a categorical shareholder. And a net share of a Group on a sum of this devise averages around 40%. In a gas value chain, we have followed signatures of long-term LNG agreements with Asian players. We started a construction of a Cameron liquefaction devise in a US, that is one of a dual usually projects carrying got a full authorisation and a full needing from a American authorities.
And we are operative on studies for 4 re-gasification terminals in Asia. The final example, to illustrate a joining to turn a personality in a transition on purify appetite is a Kathu solar park in South Africa, where we will rise 100 megawatt clever solar plant along with a storage system.
Let me remind we that South Africa is for us a new nation where we started to build a initial devise reduction than dual years ago. And we have now 4 projects underneath construction. And we are a initial private appetite writer in South Africa.
All these developments highlights a clever doing of a devise geared towards enlargement with a immeasurable amounts of projects during several stages of development.
Now let me give we an refurbish on a chief activity in Belgium. First, Tihange 1, following a agreement resolved in Mar 2014 with a supervision and also EDF that is also a co-shareholder. a law has been voted by a legislature fluctuating from 40 years to 50 years a time life of Tihange 1.
And now a prolongation works are ongoing, and tighten to 25% of a CapEx have been spent so far. So good painting of a new mood existent in Belgium vis-à-vis a nuclear. After 5 months of outage, Doel 4 has been restarted final December, interjection to a unequivocally active routine in terms of remade turbine blades.
We have practical serve 50 measures for all a chief facilities. Doel 3, Tihange 2, a restart is targeted by a 1st of Jul theme of march by a capitulation to a decondition of a Belgian Nuclear Safety Authority that will decide. And theme also to a endless investigate works we are conducting.
I’ll remind we that a impact of a outage during EBITDA and net repeated income Group share levels is around €40 million stream for both plants. Doel 1 and 2, a new supervision has motionless to extend a lifetime of a plants by 10 years and also to 50 years.
The legislature of ministers have authorized a law devise and it will be submitted to a parliament. And a Group is now assessing a mercantile and authorised conditions of such extension.
We design to take a preference before finish 2015. We are in tighten tie with a supervision and of march a preference will also count on a outcome of a negotiations underneath chief contributions for a whole swift given a bound chief grant being now confiscatory.
During a winter we have blending a Belgian business and we will continue to foster a best accessibility for a reactors in a future. On a chief contribution, we have introduced a correspondence to a EU foe supervision in Sep 2014 while a other authorised actions are still pending.
I give now a building to Isabelle and afterwards Valery on a sum of a 2014 formula and 2015 outlook.
Isabelle Kocher
Thank you, Gerard. So, effectively we will give we now a tellurian viewpoint on 2014 results. As highlighted before, we have been means to grasp all a objectives in 2014 in a year that was though not so easy. So we are gratified with these formula even, of march we stay unequivocally mobilized for a following; a Group reached an organic enlargement practiced for a continue and tariff replenish in France of 2.4% and 8.2% respectively EBITDA in high level.
Valery will shortly go into many some-more sum on a EBITDA and COI enlargement and by business slide. You will see that all a businesses though appetite Europe supposing a stronger and organic enlargement and generally that this organic enlargement compensated and some-more than compensated a problems we still face in Europe and creates us positive in a ability to grow a Group serve and to continue to renovate a company’s profile.
The net repeated income Group share landed tighten to a tip finish of a range, €3.1 billion, €3.5 billion, practiced to Jun 14 for Doel 3 and Tihange 2 extended outage. Thanks to an additional alleviation of a financial results. The fact that enlargement sum are revoke than final year is due to fake effects and generally in fact a unusually prohibited meridian we gifted in France, that is a boost to be reversible.
We gifted a same kind of materialisation on a money generation, that in fact doubled in organic and reversible impact, initial of all a impact we already gifted during EBITDA turn as we mentioned, though also proxy effects. We have aloft operative collateral mandate due to sea cost. These margins will impact associated to a hedging routine is approaching to retreat on expiry of hedges over 2015 and 2016.
Later on this presentation, we will speak about a money era for a entrance years and we will see that we design an volume of money era above these 2014 level. With honour to 2014, notwithstanding these non-recurring diminution of CFFO we managed to emanate some change piece coherence for a entrance dual years on a behind of singular net CapEx €3.9 million and in sole few MA operations.
We always pronounced that we intend to be resourceful and to take a time deliberation a 3 year era for this MA program. We also released an hybrid bond for €2 billion and we managed disposals of €3 billion during a tip finish of operation given we have been means to seize engaging opportunities for this ordering program. We intend to use these change piece coherence in a entrance years.
Now, Valery will now give into some-more sum on a 2014 formula and afterwards we will rise what we design for 2015.
Valery Perrier
Thank you, Isabelle and good morning to everyone. Now, we have a slide, we are on a Slide 10. Let’s now demeanour during a EBITDA and COI enlargement year-on-year. And we will note this immediately that a organic outcome on EBITDA and COI is certain by €300 million and €600 million, incompatible a continue and a tariff replenish occurred in 2013.
Now, before we go into a sum of a organic drivers, let me usually prominence a following effects during a EBITDA level. First, Forex impact of reduction €0.2 million, rather softened than guided a year ago, due to a weakening of a euro in H2.
Second, operation impact of reduction €0.2 million, of that reduction €0.3 million from disposals and €0.1 million from acquisitions. And then, we have unequivocally comfortable continue and gas storage recoupment in 2013 in France impacting a Energy Europe and a infrastructure business line for €0.8 billion year-on-year.
Excluding these effects, EBITDA is adult by €0.3 as we mentioned and besides, what we have already explained on a EBITDA, it is value highlighting one takeaway during a COI level. DA reduced by €0.4 billion mostly due to a impacts.
Now, COI is therefore adult by some-more or reduction 8% notwithstanding astonishing chief outages and unequivocally inauspicious hydro in LATAM, in LATAM and some-more privately in Brazil.
Now, let’s go on to Slide 11. And we will go into unequivocally low dive within any business line and prominence a categorical organic drivers of 2014 EBITDA contra 2013. I’ll start by a initial mainstay of Energy International.
Now, within Energy International, all geographies were adult year-on-year solely Brazil and Australia. In Brazil, we suffered from a unequivocally bad hydrology, already highlighted during a finish of a H1. As mentioned in a initial multiplication 2014, we conduct to recompense partial of a €300 million hydro impact, interjection to auspicious thermal dispatch and an altogether net seller position on a second semester.
The full year impact from hydrology is now estimated during reduction €200 million, that means an alleviation of €100 million in H2. Besides this effect, a activity benefited from a acceleration outcome practical underneath BPA and several managerial actions ensuing in a tighten to reduction €100 million outcome on Brazil including a Jirau plant.
In Australia, a spark plant suffered from outages while marketplace conditions were remained flattering challenging. Now in North America, we benefited for unequivocally certain continue in Q1 enhancing a appetite era activity however, partially homogeneous by revoke normal margins on LNG, bucket diversions.
In a UK, we benefited from poignant aloft achieved spreads and from non-recurring upsize in retail. In Thailand, formula were unequivocally good. The opening was flattering clever and due to a new Gheco-One plant, that had a unequivocally good bucket cause and a unequivocally good potency and we have softened a margins to a industrial clients.
And finally in Chile, opening has been unequivocally certain also, interjection to softened margins and good operational opening during TCL sum with a commissioning of a Mejillones storage LNG tank in Feb final year.
Now, I’ll pierce to a subsequent mainstay that is Energy Europe and on Energy Europe, besides continue in France that resulted of an impact of €540 million and chief outages in Belgium of €215 million negative, some relocating adult both equipment to €0.8 billion. Energy Europe has been impacted by generally dual points.
First point, a reduction €550 million from a appetite era business. The approaching diminution and achieved undisguised prices that went from €52 per megawatt hour to €47 per megawatt hour in 2014.
The revoke volumes of a French hydro prolongation given a very, unequivocally good 2013 year. And a diminution approaching also on a spreads. Now, a second point, there has been a reduction €200 million outcome on a downstream activities generally gas.
Now, all these dual points were partially compensated by 3 items, initial item, and €200 million, interjection to a supply and trade activity. A poignant bid on a opening devise as we can see on a bottom of a slip and to a certain year-on-year impact on supplies quite a sustenance taken in 2013 on a we Love Green LNG terminal. Now included, as we know, during a EBITDA level.
Now let’s pierce on to a third column, Global Gas and LNG. In pre-production reached €55.5 million barrels homogeneous to oil. Exceeding a aim we had set during €55 million. And adult by 3.6 million barrels contra final year benefiting from a approaching restart of North and a approaching and a approaching commissioning of EP gas fields such as Juliet, Amstel and Gudrun.
Now a LNG activity showed significantly aloft volumes diverted to Asia and Europe in 2014 with 142 cargos sole and when we review a 142 contra 2013, 2013 was during 87. And of which, 75 to Asia contra 2013, 57 to Asia and partially compensated by revoke margins on a bucket diversions and revoke of tariff from Egypt.
In addition, as approaching a business line benefited from a certain era provisions, as we have already mentioned, that are now as we know enclosed in a EBITDA level. Finally, in 2014, a extreme dump in oil and gas prices shabby a business line B3G by around reduction €100 million in 2014.
Let’s pierce to infrastructures business. As already mentioned, a amiable continue and we can see on a initial retard within a orange side, a amiable continue in France impacted a placement activity. Excluding this outcome of a amiable continue a infrastructure business line posted a clever organic enlargement of tighten to 7% during a EBITDA level.
Now interjection to a many softened than approaching enlargement of a gas storage and tariff increases for regulated activities. The gas storage activity a usually businessman activity within a infrastructure bend has been beneficiated from astonishing improvements with an boost in ability reservations. This is a outcome of both aloft winter summer spreads and a auspicious trail in terms obligations imposed by a regulator in France.
I’ll pierce to a final mainstay that is Energy Services and a use activity benefited from several new acquisitions and Mr. Mestrallet mentioned already and from a continual blurb enlargement that enables to entirely homogeneous a finish of a impact of these banishment co-generation feeding tariffs representing some-more or reduction reduction €50 million in EBITDA in 2014.
It was a final step of a doing of a new law for co-generation in France and Italy and this impact is now totally behind us. Now Energy Services continued to grow during a unequivocally high gait by blurb successes, by acquisitions and conduct to serve urge a profitability by reaching a year in advance, a 2015 targets that was during 5% EBIT margin. So we reached a small bit above 5% EBIT domain already in 2014.
Now finally, as we can see on a immature blocks subsequent this slide, a Perform 2015 transformation devise continues to broach opposite all a business lines. The opening for 2014 has exceeded a initial expectations with a €0.7 billion net grant during EBITDA. When we contend net, it’s over a acceleration outcome generally practical in a Energy Europe, as we can see €390 million business line and a corporate level.
Now let me pierce to Slide 12. Okay, a slip 12 is a net repeated income stands during €3.1 billion benefiting from revoke DAs and from a unequivocally clever guilt supervision improving a financial results. This has partly mitigated some inauspicious operation trends we already mentioned to we on a prior slide.
Now, incompatible continue and tariff recoup, a net repeated income organisation share increases by 6% year-on-year. The net income organisation share stands during €2.4 billion compared to reduction €9.6 billion final year given a estimable turn of impairments we have booked.
Now compared to a net repeated income organisation share, a net income organisation share has benefited from €0.9 billion in terms of collateral gains, that was some-more or reduction compensated by some unequivocally specific impairments generally in a UK. As being challenged by a disastrous impact on mark-to-market by reduction €0.3 billion and by reduction €0.4 billion of a Belgian chief grant that during this theatre is not taxation deductible deliberation Electrabel SA forecasted results.
Let me pierce on to a Perform 2015 slide. The bid done so distant during all levels of a association were unequivocally significant. We have achieved a 2015 accumulative aim of €0.9 billion during a net repeated organisation share one year in advance. Although we had increasing this aim already one year ago. So in 2014, we requisitioned a clever enlargement grant during a EBITDA turn of €0.9 billion, interjection to improvements on both revenues and costs.
If we remember a opposite impact measures before cost acceleration as we already mentioned. Of that inflation, net EBITDA grant stands during €0.7 billion. The plant delivered tighten to as we can see on a small chart, €0.4 billion during net repeated income organisation share turn that is superb deliberation that we had primarily approaching gain impact of some-more or reduction €0.2 billion for 2014.
Now we design that by finish 2015, a accumulative impact of a Perform 2015 devise should be good over €1 billion accumulative and we design 2015 to be a transition year over that a Group should continue to advantage from a movement sum by Perform 2015 in pushing operation performance.
Let me pierce to a clever change piece and let’s now speak about a debt supervision and successful change piece optimization. Our cost of debt stands during 3.1% during finish 2014. This reflects a success, a transparent success of a guilt supervision initiatives and given a unequivocally low turn reaches of today, we do not design a component change in a normal cost of sum debt going forward.
I’ll remind we that a cost of debt is a brew of debt during corporate turn and that during a turn of a sum subsidiaries in rising markets and apparently a seductiveness rates in some rising markets are many higher. So, it is unequivocally an average. And I’ll remind we that a bond emancipation form is good widespread and that a normal infancy of a net debt stands above €9.
Last, we contend a net debt-to-EBITDA ratio good subsequent a 2.5 turn that we had set as a cap. Now Isabelle will take over to news a 2015 outlook. Thank you.
Isabelle Kocher
Thank you, Valery. We’ll now pierce to 2015, starting with a many critical eventuality given final summer that is of march is what in oil prices descending from $110 a tub in Jul to as we know reduction than $50 per tub by year end. And given then, a brent rebounded rather though 2015 brazen during roughly $65 per tub is though distant subsequent a 2014 normal that was tighten I’ll remind we $100.
So this delayed though consequences also on other line and especially, translated also in a diminution of :LNG prices in Asia, since, as we know LNG sales to Asia are mostly oil indexed and we see that in a red line it is on a left-hand side of a graph in a middle.
So these gas prices in Asia fell from €45 per megawatt hour to reduction than or roughly let’s contend €20 per megawatt during year end. So we see that it is together in fact to a oil prices evolutions.
And in fact after dual years of unusually high prices and we mentioned that several times, gas prices in Asia were in Jan some-more or reduction in line with European gas prices good subsequent cost of transportation. Since afterwards a LNG prices in Asia rebounded partly and follow-up prices seem to prove a on-going boost identical to a one we see for a brent.
We also celebrated a slight diminution in gas prices in Europe, that is a blue line given LNG cargos formerly divided to Asia went behind for some of them to Europe. But this diminution is some-more marginal, brazen prices advise that a gas prices in Europe will stabilise among €22 per megawatt hour, unequivocally tighten to a normal turn of final year that was roughly €21.
Furthermore, as European gas prices diminution to a obtuse border than oil prices, we beheld that a gas to oil widespread has reduced significantly over a era as roughly €2 per megawatt hour and it was 9 of 10 final Jul and it is a certain component in this predicament prolonged scale.
Now, if we pierce to appetite prices on a right-hand side of this slip and that was 16. The new enlargement of general cost shows a following. In Europe, Belgium and French prices have been impacted small bit late 2014 on a behind of this dump of commodity prices, oil gas, though also coal.
Yet both prices continue to be significantly shabby by country-specifics such as regulation, fuel brew and supply and direct change and it is quite loyal for a Belgium chief fleet.
In a UK, appetite prices has declined recently along with a diminution in gas prices, heating therefore purify and dim spreads. Outside Europe, we notice that a applicable appetite prices for a general multiplication such as basel prices in Australia and thick spreads in a US on a eco marketplace in sole are been invested by a new change in commodity environment.
So overall, a dump in brent prices has had consequences on other commodities. Of course, these prices can rebound, though this conditions reinforces a devise to grow in non-merchant activities such as appetite services, regulated infrastructures and long-term engaged appetite era in and outward Europe. Keeping a partial of EBITDA unprotected to commodity prices during reduction than 50% as it is today.
Now, what are a consequences of this dump in commodity prices for a Group. we am on Slide 17. What is in particular? The bearing of GDF Suez’s activities to oil and gas prices by business line.
For a Group, a many critical impact of oil and gas cost dump is of march on EP and LG activities. For EP, a Group has a prolonged oil and a gas in fact prolonged European gas bearing by a EP production. The gas prolongation accounts some-more or reduction for two-thirds of a sum and discordant to oil prolongation is hedged brazen on a dual to 3 year basis.
So a impact of a dump in oil and gas cost is generally due to oil for this EP activity given European gas as we mentioned didn’t decreased significantly and due also to a hedges we usually mentioned. It is – this impact is poignant during EBITDA level. It is some-more singular during net repeated income organisation share turn due to a fact that these activities compensate a lot of taxes due also to a fact that, as we know we have a minority seductiveness of 30% in this EP business.
For LNG, a Group has a prolonged position by a oil indexed LNG sales, generally to Asia that is compensated by a brief position from a oil indexed LNG sourcing. Yet a new change in prices might lead to reduced event for mark arbitrage and so to revoke margins for a LNG business. But it is generally a volume outcome given as we mentioned we are – during a same time a prolonged though also a brief position on oil for this business. And this sum with a impact from a renegotiation of a supply cost for Yemen should lead to a slight diminution in LNG margins in 2015 contra 2014.
The EBITDA from LNG supply and sales is by a approach widespread opposite 3 business lines as we can see in dim blue in this draft 17. So a 3 business lines are tellurian gas and LNG, Energy International and Energy Europe. Since historically, these supply contracts were meant to sell LNG to a US to Europe and to Asia.
I seize this event to give we an overview of a form of bearing we have in a businesses some-more globally during Group level. For international, for Energy International, a biggest partial of a activity is as we know, long-term engaged that is good part, nevertheless, a US a Australia and a UK businesses are unprotected to businessman appetite prices, we have over a past dual 3 years significantly reduced this bearing by these businessman activities in these markets by a ordering program. In 2014, EBITDA associated to appetite activities and these businessman activities is now singular to reduction than 30% in BI activities and this volume will continue to diminution in a entrance years.
For Energy Europe, a vital bearing is on basel prices of course, they were during a finish of 2014 during above €40 per megawatt hour in Belgium and in France and afterwards a achieved form appetite prices continued to intersect with these marketplace prices during a setting of €15 to €16 and substantially some-more €16 now as indicated final year.
The thermal prolongation is widespread business with low bucket factors hence not unprotected we would contend per se to a change in commodity prices and a new diminution of European gas prices is not sufficient to change a consequence sequence that is to contend to make that gas can reinstate spark in a consequence sequence since, as we mentioned spark prices also decreased significantly in this period.
So what we wish is that a destiny CO2 routine during European turn will assistance gas to reinstate spark though it is not nonetheless a box for a moment. Our Energy Europe activities are also unprotected to a oil to gas widespread to a midstream gas business. We have been handling a oil to gas widespread by invariably renegotiating a long-term gas agreement with retailer over a final years.
We will of march pull we this renegotiation cycle. To get this array lower, if a widespread is tighten to zero, nevertheless, we pull we a devise to pierce to a full marketplace indexation as we trust downstream marketplace will continue to be driven by adult European adult gas prices.
And finally, with honour of a rest of a activities, a infrastructure activities are not supportive to oil and gas prices as French gas networks are regulated and as storage activity are generally volumes-driven. The same for appetite services, we didn’t notice any change in clients function associated to a diminution of these line prices.
So, all in all, as we go to a financial impact from a dump of oil and gas prices presumption for a prices during as of 31 of Dec 2014, we design a sum EBITDA impact of around €900 million as Gérard mentioned, many of that from EP and during net repeated income turn in sum for EP and LNG businesses, we design an impact on net repeated organisation share 2015 of around €350 million compared to 2014.
A few difference now on a discerning greeting devise we have launched to lessen immediately a impacts from a oil and gas cost dump and an painting also of a normal annual money equation of 2014 – 2016. Quick greeting devise first, we are implementing actions during both OpEx and CapEx level.
We design EBITDA to advantage from roughly €850 million per year from these actions in 2015 and in 2016. We reduced EP CapEx by roughly €0.4 billion cumulated over a dual years and we change MA CapEx by time ensuing in additional CapEx resources over 2015 2016 era for €1.6 billion in total. So we have reacted quickly. All these equipment are on tip of a Perform 2015 module that will of march be followed in parallel.
So now money equation over a 2014 – 2016 periods. We design a clever money era during an normal of €9 billion over this 3 year era in average. In light of a discerning greeting devise we have implemented, we are rather addressing a net CapEx pouch to €6 billion to €7 billion per year instead of €6 billion to €8 billion as we contend final year that still allows us for poignant enlargement opportunities.
And this sum with a change piece coherence enables us to endorse a net debt-to-EBITDA ratio of limit 2.5 times. And we remind we that of course, a multiplication routine is confirmed over this 2014, 2016 era during a payout of 65% to 75% practical to a net repeated income organisation share with a €1 per share flow.
Now we will concentration on a approaching evolutions of EBITDA for a Group over 2015 compared to 2014 on slip 19. Assuming normalization of continue conditions in France, holding into comment also a certain Forex as good as organic evolutions of any business line, we have a fast viewpoint with an indicated operation of €11.7 billion to €12.3 billion for EBITDA and this is notwithstanding a enlargement of commodity prices.
Let me usually prominence a few critical drivers over a factors in a denote initial of all, and many importantly this disastrous impact we mostly commented on oil and gas cost enlargement reduction €900 million to lessen these – a greeting devise that sum with a Perform module should capacitate us to save €450 million in EBITDA starting in 2015.
Second, we design a appetite era business in businessman markets to diminution by €400 million in Europe will be impacted by a continual outcome of hedges, rolling off while a US, UK and Australian businessman markets should continue to sojourn underneath pressure.
We design a aloft chief production. Our best estimate, as Gerard mentioned is that we restart Doel 3 and Tihange 2 by 1st of Jul and as we know, Doel 4 already restarted in Dec 2014.
Finally, we design certain contributions of around €450 million from newly consecrated projects generally entrance from a enlargement platforms. What are a categorical risk and opportunities we can discuss for 2015. For Energy Europe first, intensity risk associated to a capitulation of chief authorities in Belgium for a restart of Doel 3 and Tihange 2.
At a same time, we have a certain intensity outcome from renegotiations on a chief grant and on a life time enlargement of Doel 1 and 2 in Belgium and this is of course, clever event for Energy International. The categorical risk and event cause relates to a hydrology conditions in Brazil and intensity ensuing highlight or improvements on Tractebel Energia as good as a series of days of post measure, a regulatory physique in Brazil will allot to Jirau.
For 2015, we have insincere in a superintendence that a hydro conditions would sojourn tensed with no vital alleviation from 2014, nonetheless a full impact of a ongoing stormy deteriorate is nonetheless to be seen. For tellurian gas and LNG categorical risk and opportunities of march are on oil and gas cost enlargement contra brazen during 2014 and a ensuing marketplace conditions for LNG directions and in sole to Asia.
I like now to give we fast a some-more specific refurbish on Brazil in 2014, Tractebel Energia opening was exceedingly impacted by a drought effect. At a finish of H1 we highlighted an impact of around €300 million during EBITDA level. But interjection to a net position in H2 that was approaching thermal dispatch also and supervision actions we managed to revoke this impact.
The full year impact of drought to €200 million and on tip of that, a acceleration embedded in a TPAs and also other opening upsize led to year-on-year boost of €150. So, all in all, Tractebel Energia saw a EBITDA diminution organically by usually we would contend €50 million in so specific year. At Jirau, a check in commissioning sum with high PLE prices had disastrous impact in 2014.
We are gratified to announce a unequivocally fit turbine ramp adult from 11 units consecrated during a finish of H1 final year. So in Jul 2014, to 24 turbines consecrated to-date. For 2015, we design a hydro complement to sojourn underneath highlight nonetheless a border of such highlight has nonetheless to be dynamic as clearly we are usually in a center in fact of a stormy season.
So it’s not over, now reservoirs levels are during 23% contra 35% final Feb in 2014. So a hydro situations sojourn very, unequivocally specific. For Jirau, we design full positive appetite to be reached during Q2 to roughly Jun 2015. Now a some-more finish view, we am on slip 21 on a PL indications for 2015 and also a guidance. Our net repeated income organisation share.
So we see that a superintendence is, as Gerard mentioned, between €3.0 billion and €3.3 billion for 2015. we have already described a EBITDA evolution, we design a DA to rather boost from 2014 turn due to new item commissioning and also aloft EP production. The repeated financial outcome for 2015 is seen in a operation between 1.5, and 1.6.
We will be substantially rather aloft than 2014 generally due to a organisation strategy. We design income taxation between €1.6 billion and €1.8 billion with an underlying taxation rate of 34%. And minority seductiveness should be around €0.7 billion.
Now, we would like to refurbish we on a enlargement dynamics of a activities as primarily presented final year. It was a famous Slide 22. We have taken into accounts a dump in oil and gas prices that as mentioned progressing we’ll wait on 2015 EBITDA for 3 business lines with a tip impact approaching during tellurian gas and LNG multiplication that is partial of a enlargement platform.
So notwithstanding this dump and we trust that it is what is unequivocally engaging in this chart, notwithstanding this dump a COI for a difficulty enlargement platforms is approaching to grow during 5% to 7% over 2014 to 2016 presumption oil and gas brazen cost and finish 2014. Obviously there is an upside if brazen prices were to boost behind to a levels seen final year.
And if this were to happen, enlargement would be between 8% and 10% over a subsequent dual years as we pronounced final year. For a regulated gas infrastructure activities, we still aim a COI enlargement between 3% and 4% per year and for a appetite businessman activities in Europe, we design a stabilization – gradually stabilization over 2015 and 2016.
So, overall, we design net repeated income organisation share to be postulated by a portfolio of activities that is good offset and that will be fueled by a tube of projects and in sole in a enlargement height activities.
I’d like to give we some-more sum and it will be my final words. More sum on a value creation, a projects are means to broach and on Slide 24. So we mostly disclosed a investment routine that is to contend lapse during slightest during and 2%. Here, what we have comparison is to introduce to give we an refurbish on genuine projects over a commissioned. So we’ve spotless all a 36 devise consecrated between 2011 and 2013 totaling tighten to €15 billion of collateral employed, devise for that we have during slightest over full contribution.
The metric we use during a midlife lapse on collateral employed that looks during straight gain of devise half approach by their handling life time. So, of course, and it is unequivocally manifest in this chart, The midlife was a unequivocally widely between a opposite business lines due to a opposite risk lapse profiles of these projects. Of course, a comprehensive levels of ROCE reflects to some border a turn of risk of this devise that we also constraint in a investment criteria by a cost of capital.
So it will not warn we that a ROCE of a regulated infrastructure resources are in line with a regulated gain and revoke than a ones we can grasp when investing internationally such as in LATAM or Asia where we frequently conduct to beget ROCE in a high teens. More generally, for a enlargement platforms that embody Energy International that includes Global Gas and LNG and also Energy Services, we achieved ROCE of in normal 18s.
The EP devise benefited from unequivocally high turn of prices until final Jul it is unequivocally clear, though we see that a devise we managed in Energy Services and in Energy International are also unequivocally satisfactory. And it reinforces a certainty in a long-term devise and in a ability to continue to grow a income further. So we will now palm over to Gerard.
Gérard Mestrallet
Thank you, Isabelle. we am on Slide 25. We interpretation behind in 2010 pivotal indicators to magnitude a environmental and amicable opening and set a medium-term target. The 2014 formula endorse that we are good on lane to grasp a 2015 objectives.
You are good wakeful of a active devise to quarrel opposite meridian change that can be demonstrated on several fields with a design to revoke a CO2 specific emissions by 10% in 2020. 2014 shows an alleviation of 2% compared to 2012 and this is due not usually to enlargement in renewable as a consecrated ability rose by 42% given 2009 interjection to investment via a world.
Over 2.4 gigawatt of renewable ability were consecrated final year out of that over 80% outward Europe. We have released a €2.5 billion immature bond in 2014 during unequivocally good conditions, and this represents a tip volume to-date for a immature bond that we used to account renewable and appetite potency project.
I am advocating for tellurian CO pricing and an alleviation of a CO markets, a actions there are mixed for a Magritte Group entertainment 11 CEOs including now Centrica and also a impasse in a tariff 2015, a 21 discussion and my personal joining during a United Nations newly for instance.
Health and safety, another objective, health and reserve of a employees is a pivotal indicator of a tolerable opening and a Group keeps on shortening a magnitude rate reduction 7% in 2014 contra 2013 in line to strech a desirous design for 2015. we would like to discuss that we have published a initial integrated news late 2014 for non-financial indicators and we are a initial among a CAC 43 index to do so.
Finally, GDF Suez opening have been famous by vital non-financial rating agencies such as Vigeo who comparison a Group in 4 of their indexes.
Now, a word to conclude, a few words, we would say, anticipation, resilience and reaction. Both 2014 formula and 2015, 2016 opinion endorse a resilience of a business model. The discerning greeting devise to tackle a dump in oil and gas prices capacitate volatile 2015 gain with a net repeated income organisation share between €3 billion and €3.3 billion.
We also endorse a transparent multiplication routine over 2014-2016 with a well-balanced money equation with now €6 billion to €7 billion of early normal net CapEx. And also we remind a well-spoken transition in a tip supervision era that has been good approaching and so charity prominence on a Group’s strategy.
I would like also to give we an component of information after a Board we had yesterday. we have motionless to contention to a Board yesterday a fortitude to be voted during a assembly on Apr 28. This fortitude is formed on a element of one share one vote, as available by a Florange law antiquated Mar 29th that establishes double-voting rights solely as good as supposing in a Articles of Association.
So a infancy of a Board has authorized this fortitude and so we will give a building to a shareholders and they will have to opinion during a Shareholders Meeting on Apr a 28th, by a approach a French State has already voiced that it will opinion opposite this resolution.
Let me also remind we that a ensuing turn of a double-voting rights postulated by a Florange law can't surpass a turn of a state appearance during a date of a announcement of a law that was 36.7%. So that will be in any box a limit commission of votes to be postulated to a state.
Now we are prepared with Isabelle and Valery to answer your questions. Move on to ask a initial question. We will start by a room and afterwards we shall take some questions by telephone. Let’s please.
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