FY 2006 Consolidated results
Analyst meeting February 16th, 2007
Agenda
Summary Financials 2006 Outlook 2007 Regulatory and legal aspects Highlights 2006
Summary • Financials 2006 - 2006 Results in line with expectations - Increase in dividend to € 1,28 a share
• Outlook 2007 • Regulatory and legal aspects - Update electricity law published on July 20th, 2006 - Update on the process for multi-year tariffs Royal Decree
• Highlights 2006 - Energy Consumption from Elia’s network in 2006 - Energy balance Elia net 2006 - Tariff evolution to the advantage of Elia’s customers - Investments 2006 - Significant increase in energy exchanges - Start of the Belgian Electricity Exchange on November 21st, 2006
Agenda
Summary Financials 2006 Outlook 2007 Regulatory and legal aspects Highlights 2006
Overview of Key IFRS Figures
IFRS Income statement (€ million) Consolidated turnover EBITDA (1) Operating result (EBIT) Financial result Taxes Consolidated net profit Net profit per share (€) Dividend per share (€) Balance sheet (€ million) Total assets Equity Net debt Equity per share (€) Total number of shares (end of period)
2006 2005 711,5 714,2 292,6 295,9 204,0 211,8 (98,3) (93,8) (29,8) (41,5) 75,9 76,5 1,58 1,60 1,28 1,27 31/12/2006 31/12/2005 3.898,1 3.855,8 1.308,6 1.282,7 2.074,9 2.080,1 27,32 26,80 47.898.052
(1) EBITDA = EBIT + depreciation + c hanges in provisions
47.898.052
Change In % -0,4% -1,1% -3,7% 4,8% -28,2% -0,8% -1,3% 0,8% 1,1% 2,0% -0,2% 1,9% 0,0%
2006 Profit and Loss Bottom-up Approach of Elia’s P&L in 2006 (EUR m) Determination of net profit Non tariff
635,6
Av. equity / Av. assets Deviation on ref. equity Equity deviation remuneration D-factor (B)
Costs Tariff
60,0
Surplus
75,9
Net profit
Charges
(1) (2)
94,3
Average RAB 2006 Reference equity (33%) Cost of equity Equity reference remuneration (A)
677,2
OLO of 4,1293%; Beta of 1,0358 and a risk premium of 2,54% Av. Equity =1.295,5 and Av. Assets = 3.790,5
(2)
34,18% 1,18% (3) 3,19% 1,29
Over-depreciation (C)
-8,18
Fair remuneration (A+B+C)
69,94
B/M Decision CREG over 2004
-1,75
Net profit Belgian GAAP
68,19
IFRS reconciliation
Revenues
3.444 1.136 (1) 6,76% 76,82
Net profit IFRS
7,7 75,89
(3) OLO of 4,1293%; deviation rate of 70bp and tax rate of 33.99%
Reconciliation Be GAAP - IFRS IFRS Impact on Equity and Net Profit for year ending 31 December 2006 68,2
1,3
5,1
1.3 (1)
3.4
75,9
Net Profit
(3,4)
2006 Belgian GAAP
Employee Benefits
1.329,5
Elia Re
91,1
Deferred taxes Capitalisation Software
Others
2006 IFRS
20,6
9,8
9,9
7,1
1.307,4
Deferred taxes
Capitalisation hard/software
Elia Re
Others
2006 IFRS
Equity
(160,6)
2006 Belgian GAAP
Employee benefits
Regulatory assets
(1) Mainly relates to reversal goodwill Bel Engineering, inventory valuation, provisions
Regulated Asset Base 2006 Evolution 2006 RAB
3.443
3.444 50 (87)
2005
Average RAB
141
(3)
Depreciation Divestments
3.371
(1) In 2006 Frozen Goodwill has been applied
(1)
Capex
Change in WCR
2006
3.444
Working Capital Requirements 2006 Changes in Working Capital Requirements (EUR m)
(1)
46,4 1,3
2006
(8,1)
(30,0) (60,0)
Inventory & trade debtors <1 year
(1)
Deferred charges and accrued income
Trade creditors & others
Based on Belgian GAAP accounts
Accrued charges & deferred income
Surplus 2006
(50,4)
Total Change in WCR
Breakdown Costs Evolution of Costs between 2006 and 2005 (EUR m) 637,7
635,6 137,8
146,2
116,5
-0,8%
1,5%
-0,6%
98,3 29,8
2006
Ancillary services (reserve energy)
144,0
Raw materials, Services & Other goods
117,2 18,3
18,5 88,5
138,9
5,2% 4,8% -28,2%
Personnel Expenses Others
84,1
Depreciation
93,8
Financial charges
41,5
Taxes
2005
Non - Tariff Revenues Breakdown of Non â&#x20AC;&#x201C; Tariff Revenues in 2006 and 2005 (EUR m) 94,3
63,2
62,6 113,3%
11,6 13,7 6,4
2006
29,4
International revenues
12,4
Fixed assets own construction capitalised
45,7%
9,4
Telecom & third party services
-46,7%
12,0
-6,5%
2005
Others
Tariff Revenues Breakdown of Tariff Revenues in 2006 and 2005 (EUR m) 677,2
685,7 3,2%
28,5
134,8
-10,3%
150,3
49,8
25,8%
39,6
-0,9%
467,3
29,4
463,2
60,0
Connection tariffs Tariffs for ancillary services Tariffs out of previous surpluses
Tariffs for grid use
34,7
2006
2005
Increase of recorded difference between approved budget and reality mainly due to international revenues
13,3
14,1
Shortfall on costs
46,7
20,6
Surplus revenues (tariff & non-tariff)
Deviation from Budget 2006 Sources of surplus over budget at the end of 2006 (EUR m)
10,1
3,2
60,0
Adjustments to the regulated profit
Total Surplus
35,1
11,6
Surplus regulated revenues
s nos ae R
Access and balancing fees
Surplus international & other income Auctioning fees North Auctioning fees South 3rd party services ETSO fees to receive
Shortfall in charges Purchase ancillary services ETSO fees to pay
RAB adjustment
Overview treatment of surpluses Overview of allocation and use of total surpluses In millions of EUR
Surpluses
2004
2005
2006
2007
Surplus 2003 Bonus 2003 Used Total 2003
134,6 3,2
25,4
36,4 3,2 -39,6 0,0
36,4
36,4
-36,4 0,0
36,4
Surplus 2004 Bonus 2004 Used Total 2004 Surplus 2005 Bonus 2005 Surplus 2006 Used Totaal 2005 Surplus 2006 Used Totaal 2006 Total Surplus Total to reverse
137,8 119,0 3,5 122,5 35,1 2,3 3,8 41,2
-25,4 0,0
28,0 -28,0 0,0
9,8 3,5 -13,3 0,0
7,4
2008
2009
2010
134,6 3,2 -101,4 36,4
9,8
23,8
23,8
23,8
9,8
23,8
23,8
23,8
27,7 2,3 3,8
-7,4 0,0 56,2
56,2 357,7
56,2 56,2
119,0 3,5 -41,3 81,2 35,1 2,3 3,8 -7,4 33,8
33,8
56,2
Total
(1)
56,2 0,0 56,2 80,0
23,8
23,8
23,8
207,6
About EUR 130m available for future tariff reductions beyond 2007 (1) To be allocated by CREG in decision B/M over 2006
Financial Debt Position Elia benefits from a strong credit rating Standard & Poor’s rating: Long Term:
A-
Outlook:
Stable
2.129,5
2.119,8 2.000 1.500
200,0
40,0
996,3
996,0
883,5
883,5
2005
Net debt 2.074,8 2.080,1 Leverage (D/D+E) 61,9% 62,4% EBITDA / Gross interest 3,0 3,2 Net debt / EBITDA 7,1 7,0 Average cost of debt 4,8% 4,5% % Fixed of gross debt 74,7% 72,4%
31/12/2006
31/12/2005
Unused Credit lines European Investment Bank Commercial Banks : Short term
0
Shareholders' loans
2006
250,0
1.000 500
€ millions
Eurobonds
Banks LT
European Investment Bank
Amount (€ m) 85 570
Interest rate Euribor + 5 bp To be negotiated
Dividend Policy Elia’s dividend policy ensures a steady dividend 2,05
2,1
(1)
89,60%
In EUR
1,6
1,27
1,17
1,27
89,90%
1,28
90,00% 85,00%
1,1 80,00%
80,91%
0,6
79,26%
77,59%
75,00%
0,1 -0,4
2002
2003 Dividend
2004
2005
2006
70,00%
Pay-out ratio
• Small increase in dividend to € 1,28 per share • Pay-out ratio over 2005 Belgian Gaap result is 89,9% (80,8% under IFRS) (1) Contains exceptional dividend of EUR 0,88
Agenda
Summary Financials 2006 Outlook 2007 Regulatory and legal aspects Highlights 2006
Outlook 2007: RAB Evolution 2007 RAB as approved by CREG
3.598
3.476
2006
Average RAB
3.495
74 (88)
(5)
141
Depreciation
Divestm. & Decomm.
Capex
(1)
Change in WCR
2007
3.537
(1) Approved budget 2007 start with RAB which is € 32m higher than ACTUAL RAB (€3.444m) as of year-end 2006
Outlook 2007: CAPEX Breakdown CAPEX
CAPEX 2005-2009 (IPO) € 800 m
CAPEX 2007 € 141m
4%
10% 22%
19%
29%
24%
44%
48%
Replacements
Driven by interconnections with neighbours
Driven by internal consumption
Driven by import levels & generation localisation
Outlook 2007: Fair remuneration Determination of net profit 2007 by the regulator (Belgian GAAP)
Average RAB 2007 Reference equity (33%) Cost of equity Equity reference remuneration (A) Av. equity / Av. assets Deviation on reference equity Equity deviation remuneration D-factor (B)
CREG 3.537 1.167 (1) 6,05% 70,6 34,29% 1,29% 2,72% (2) 1,2
Over-depreciation (C)
-8,2
Fair remuneration (A+B+C)
63,6
B/M Decision CREG over 2006
-
Net profit as set by regulator
63,6
(1) (2)
• For the tariff 2007, the regulator accepted the principle that financial debt must not be deducted from the working capital requirements • D-factor is calculated according to the CREG formula • Decommissioning is applied for 2007 budget • Elia filed proceeding at Court of Appeal in december 2006 against bonus malus decision 2005
OLO of 3,4230%; Beta of 1,0330 and a risk premium of 2,54% OLO of 3,4230%; deviation rate of 70bp and tax rate of 33.99%
Agenda
Summary Financials 2006 Outlook 2007 Regulatory and legal aspects Highlights 2006
Update on legislation Electricity law of April 29, 1999 was adjusted on June 1st, 2005 and additionally adjusted on July 20th, 2006. Most important changes are : the date for the introduction of multi-annual tariffs for the transmission system, which is fixed at 1 January 2008; a European benchmark, on the basis of comparable system operators, designed to define fair returns and depreciations for the transmission system operator; an objective indexing formulae for the costs, directly controlled by the system operator, and set out in the Royal Decree following advice given by the regulator; the reform of the federal regulator into three departments (administration, market's technical operation and monitoring prices and accounts) headed by a chairman.
Update process R.D. multi-year tariffs
• Process was formally started up on August 16th, 2006 by Minister of Energy who sent letter to Regulator (CREG) • Formal meetings between • CREG and Elia were held on September 18th and 22nd • Cabinet, CREG & Elia on November 15th, 2006 and January 15th, 2007
• Discussion between cabinets of government expected to start soon.
Agenda
Summary Financials 2006 Outlook 2007 Regulatory and legal aspects Highlights 2006
1. Energy Consumption in Elia’s balancing zone Injected energy Elia's balancing zone per month GWh/month 9.000
Total Energy consumption in Elia’s balancing zone increased to 89,4 TWh in 2006 from 86,9 TWh in 2005
25,0
8.000 20,0
7.000
This is mainly due to :
6.000 15,0 5.000 °C 4.000 10,0 3.000
• Increase in industrial activity (2006 GDP growth of 3%) • Larger take-off from residential clients • More extreme temperatures
2.000
5,0
Severe winter months Hot summer months
1.000
0
0,0 Jan
Feb
Maart
Energy2005
April
Mei
Energy 2006
Juni
Juli
Aug
Av. temperature 2005
Sept
Okt
Nov
Dec
Av. temperature 2006
2. Energy Balance Elia net 2006 (in GWh)
Import France:
Export 10.636
France:
1.981
Luxemburg:
2.479
Luxemburg:
1.697
Netherlands:
5.604
Netherlands:
5.018
Total:
8.696
Total:
18.719
Net import: 10.023
Consumption Elia net
Net production (= Gross production â&#x20AC;&#x201C; ancillaries) Power plants: From DSOâ&#x20AC;&#x2122;s: Local production: Total:
72.618 39
Direct clients:
28.145
Distribution:
57.780
Pumps: Total:
6.480 79,137
Net losses: 1.539
1.696 87.621
3. Evolution of tariffs since 2001 Since 2001, decrease of transmission tariffs for all types of clients Tariffs for use of the grid and tariffs for ancillary services: comparison 2001 - 2007 16 14 12
8 6 4 2
On the 380/220/150 kV netw ork
At transformer output to the 70/36/30 kV netw ork
On the 70/36/30 kV netw ork
System management
Ancillary services
2007 (*)
At transformer output to medium voltage
(*) Hypothesis : the concerned client is supposed not to have a local production
Annual power
2006 (*)
2005
2004
2003 (Q2 to Q4)
2002 (Q4)
2001
2007 (*)
2006 (*)
2005
2004
2003 (Q2 to Q4)
2002 (Q4)
2001
2007 (*)
2006 (*)
2005
2004
2003 (Q2 to Q4)
2002 (Q4)
2001
2007 (*)
2006 (*)
2005
2004
2003 (Q2 to Q4)
2002 (Q4)
0 2001
â&#x201A;Ź/MWh
10
Loss compensation
Infrastructure Losses System Services Non related TSO
Finland
Estonia
Denmark West
Denmark East
Voltage level 400-220 kV
Belgium
Sweden
Spain
Slovenia
Slovak Rep
Romania
Portugal
Poland
Norway
Netherlands
Lithuania
Italy
Ireland
Hungary
Greece
Great Britain
Germany
France
Czech Republic
Austria
ETSO European comparison 2005 tariffs Voltage level 400-110 kV
30
25
20
15
10
5
0
Breakdown 2006 Energy bill Transmission cost is a small part of clientâ&#x20AC;&#x2122;s total energy cost
Residential client
Midsize industrial client
Large industrial client
3.500 kWh, 12 kVA 1.300 kWh night
2-10 GWh, 500-2.500 kW 4.000h / year
50-70 GWh, 10.000kW 5.000-7.000h / year
(2)
5% 15% 23%(1)
Transmission
(2)
9% 14%
9%
57%
Energy
10% 5%
77%
76%
Distribution
Federal levies & taxes (direct & indirect)
Source : CREG (for residential clients) + computed by Elia based on 2005 breakdown (for industrial clients) (1) 18 out of the 23% relates to VAT (2) Not subject to VAT
4. Investments 2006 Upgrade interconnection Monceau – Chooz (F) van 150 tot 220kV • Phase shifting transformer Monceau: in service as of January 2007 • Optimalisation interconnection flow with France • Adds to border capacity, mainly in the summer • Investment of about € 10m
Investments 2006 Underground cable 150kV Koksijde – Slijkens and extension HV-station Koksijde • Reinforce reliability of network in coast region: closing of “coastal loop” • Connection offshore wind farm up to 900 MW • In service as of May 2006 • Investment of about € 48m
Investments 2006
• Additional transformer 150kV Harenheide (Brussels) and Zaventem
• Strengthen electricity supply in North of Brussels and region Zaventem • Underpins economical development of the region • Investment of about € 13m
• Additional transformer 150kV Eupen • Reinforces reliability of network and underpins economical development of region Eupen • Investment pays off optimal after putting in service underground cable 150kV Lixhe – Battice • Investment of about € 4,5m
5. Significant increase in energy exchanges Major increase in exchanges with F and NL; Export +8,4% to 8,696 GWh & Import +31,9% to 18,719 GWh Belgium
Max. import cap. (MW)
% of opening
2006
North
Winter
1.344
3.300
12.343
10,89% 26,74%
Summer
1.257
2.300
11.145
11,28% 20,64%
5,604 GWh
South
Max. (MW) Net offtake Elia-grid 06
Total 06
Total 05
37,62% 31,92%
29,30% 24,10%
Total energy exchanges 2005-6
1,981 GWh
10,636 GWh
South
Netherlands 5,018 GWh
France
North
2,479 GWh 1,697 GWh
2006 2005 Direction Exchanged Exchanged Change 57,6% F B 10,636 GWh 6,750 GWh -10,8% B F 1,981 GWh 2,221 GWh 13,3% NL B 5,018 GWh 4,430 GWh 10,4% B NL 5,604 GWh 5,074 GWh 4,8% Lux B 2,479 GWh 2,366 GWh 23,6% B Lux 1,697 GWh 1,373 GWh Total 27,415 GWh 22,214 GWh 23,4%
Luxembourg
Border Optimalization and Capacity increases Increase and Optimalization of the border capacity with neighbouring countries France and the Netherlands: in line with programme
1. 2.
Reinforcement of Avelin – Avelgem Release of capacity from historical contract •
3.
Chooz (France) – Monceau (Belgium) 220 kV •
4.
7.
Will further optimize utilization of maximum border capacity NL
Phase shifter in 380kV station Zandvliet •
Jan 2007 Jan 2007 1Q 2007 2008
Will further optimize utilization of maximum border capacity NL
Moulaine (France) – Aubange (Belgium) 220 kV •
Since Jan 2006
Will further optimize utilization of maximum border capacity FR
Two Phase shifters in 380kV station Van Eyck (Kinrooi) •
6.
Will further optimize utilization of maximum border capacity
Phase shifter in 220 kV station Monceau •
5.
as decided by French, Dutch and Belgian Regulators
Since Nov 2005
2010
Second circuit 220 kV will be installed
Max capacity (winter) : 4.300 MW when all projects commissioned
6. Belgian Power Exchange (Belpex)
• •
Order book opened on November 20th, 2006 at 6 PM
•
20 diversified participants (suppliers, traders, producers) from 6 countries (NL,CH,UK,FR,BE,DE)
•
In 2006 average daily volume was following average electricity prices : - Belix - Belix peak (8am-20pm) - Belix off-peak (20pm-8am)
•
First fixing on November 21st, 2006 at 11 AM with an exchanged volume of 24.098 MWh
13.312 MWh with the €45,69/MWh €59,19/MWh €32,19/MWh
Market coupling induced an average export volume of 2.438 MWh and an average import volume of 2.896MWh
Belpex volume growth since launch
Daily average power prices: Belpex, APX, Powernext 120
110
100
90
â&#x201A;Ź/MWh
80
70
60
50
40
30
20 17-Sep
1-Oct
15-Oct
29-Oct
12-Nov
26-Nov
APX
Belpex
10-Dec
24-Dec
Powernext
7-Jan
21-Jan
4-Feb
FR-BE-NE TLC Congestion Overview
Border
Belgian-French border Constrained
Belgian-
Constrained
2%
Dutch border
F ≠ B ≠ NL
Unconstrained
F ≠ B = NL
16 %
Unconstrained F = B ≠ NL
17 % F = B = NL
65 %
Questions & Answers Investors Relations – Contact details Bert Maes Tel: + 32 (0)2/546.72.39 Mail: bert.maes@elia.be Website: http://www.elia.be
FY 2006 Consolidated results
Analyst meeting February 16th, 2007