Boosting Performance February2020 in a Changing Environment presentation.pdf · preparation of the...
Transcript of Boosting Performance February2020 in a Changing Environment presentation.pdf · preparation of the...
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February 2020Boosting Performance in a Changing Environment
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DisclaimerThis presentation and its contents are confidential and may not be reproduced, redistributed,published or passed on to any person, directly or indirectly, in whole or in part, for any purpose. Ifthis presentation has been received in error, it must be returned immediately to NJSC Naftogaz.(the “Company”).
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Summary
key uncertainties resolved in a positive way: the Big Achievements
low price market
low gearing
focused pipeline of projects to take advantage of new opportunities
spending management
Well-positioned to benefit from changing
environment
Pulling levers to manage through gas
price downturn
Balancing act between growth
and profitability
lower operating expenditure
capital discipline
transformation activities
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Naftogaz at a glance, 2019
78% share in total gas production in Ukraine
89.6 bcmgas transit viaUkrainian GTS
Gas imports by the group
7.2 bcm
7%contribution to Ukraine’s GDP
Royalty paid by the group
UAH 32.2 bn55,078employees
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Macroeconomic stabilization supports Ukraine’s growthKey macroeconomic indices in Ukraine
131
87.5 92.3113 131
150
24.9
43.3
12.4 13.7 9.84.1
15.8
24.0 27.1 28.2 27.723.7
Inflation, %GDP growth, USD bn
UAH/USD exchange rate
2019 2014 2015 2016 2017 2018
2019E2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018
NBU interest rate, %
2019 2016 2017 2018
22.0
15.512.5
16.018.0 18.0
16.5
11.0
Sources: Ukrstat, NBU, IMF
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Naftogaz: key figuresFinancial Highlights, UAH (mln) FY 2017 FY 2018 FY 2019 (1)
Revenues 227,478 256,312 218,545Operating profit 60,545 26,397 86,044Adjusted EBITDA(2) 83,945 87,497 62,261CAPEX 16,995 30,595 33,565Total Assets 723,124 603,712 598,048Cash position 23,093 14,224 78,016Net Debt/Adjusted EBITDA 0.43 0.48 0.68 (3)
bcm
15.5 14.9
1.11.2
16.616.1
2018 2019
Ukrnafta Ukrgasvydobuvannya Total
Gross Gas Production Volumes(1) These are preliminary unaudited results of the Group’s operations
for 2019. These results include Gas Transit and Gas Transmission results that will be shown as discontinued operations. Final audited results could differ significantly from the figures stated above.
(2) Adjusted EBITDA is net profit/(loss) for the period, adjusted to exclude the effects of income tax expense/(benefit), finance costs, finance income, share of after-tax results of associates and joint-ventures, net foreign exchange loss, depreciation, depletion, and amortization, impairment of property, plant and equipment, provisions, and non-refundable VAT, arbitration income, and arbitration expense recognised as a result of the Gas Transit and Sales Arbitration
(3) Net Debt/Adjusted EBITDA for 2019 is calculated as Total Debt less Cash (adjusted for cash received in December 2019 per results of transit arbitration).
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2017 2018 2019F
2017 2018 2019F
2017 2018 2019F
Integrated gas is the key part of Naftogaz business following the unbundling
227.62017
Revenues
256.42018
218.52019F
83.92017
87.52018
62.32019F
Adjusted EBITDA
CAPEX
17.02017
30.62018
33.62019F
Integrated gas
89.1 108.5 90.2
39.1 43.933.4
13.724.7 26.9
Gas transit and gas domestic transmission
Other segments and unallocated items
2017 2018 2019F
2017 2018 2019F
2017 2018 2019F
2017 2018 2019F
2017 2018 2019F 2017 2018 2019F
98.7 97.2
87.0 39.8 50.7 41.3
41.4 36.326.8
3.4
7.3
2.1
1.82.8
2.2 1.5
3.14.5
UAH bn
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Ukraine’s gas market is half-way through to full liberalization
billion cubic meters (bcm)
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Traders boosted gas reserves anticipating gas transit interruption
Sources: Naftogaz and Ukrtransgaz
billion cubic meters (bcm)
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Gas transit deal removed risks and created price pressure
Gazprom’s gas exports, mcm/d
Sources: pipeline operators; TurkStream – estimated; eegas.com, Powernext
Three main routes delivered just 9.72 bcmin January
Gas price at TTF, EUR/Mwh
-25%
TurkStreamdelivered 1 bcm+ to Turkey and Bulgaria
European gas demand fell due to warm weather and withdrawals from UGS instead of pipeline exports
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Extra gas in Ukraine’s storages creates additional price pressure and opportunities
Gas stocks in Ukraine’s UGS facilities, bcm
0
2
4
6
8
10
12
14
16
18
20
21
13.814.7
16.219.02.20
21.901.11.19
10.219.02.19
17.201.11.18
Oct Nov DecJan Feb Jan FebMar Apr May Jun Jul Aug Seputg.ua
Historic low
Heating season 2018/2019
Heating season 2019/2020
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Important achievements:positive arbitration outcome
$2.1 bn
$2.9 bn
Compensation from Gazprom, incl. interest
─ compensation received through offset in February 2018
+over $80 bn of Gazprom’s claims
to Naftogaz fully dismissed
─ compensation received in cash in December 2019 following attachment of Gazprom’s assets in EU
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2020 2021 2022 2023 2024
6540 40 40bcmbcm bcm bcm bcm
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Important achievements: unbundling and gas transit deal
Transit deal: stable revenues, cost reduction, more security
No gas war occurred
Guaranteed transit revenues in 2020-2024 thanks to ship-or-pay clause
Gas prices collapsed by 25% over 1.5 months
Gas transmission tariffs decreased by 2-4 times for Ukrainian consumers
Ukraine is now directly connected with EU gas network
minimum
$7.2bn
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Priorities going forward: operating efficiency
Pulling levers to manage through gas price downturn
Lower operating expenditure
Capital discipline
Transformation activities
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Naftogaz is well positioned with low gearing
(*) Total pledge of assets (gas in storage) and proceeds from future sales – USD 2.2 bln
Weighted Average Interest Rate
Total Debt, $bn
Debt Structure, February 2020
8%
7%
17%
0% 5% 10% 15% 20%
USD
EUR
UAH
Eurobonds
300 199 469 65 1041 0 500
300 199 134 65 371 1069
335 669 500 1504
2020 2021 2022 2023 2024 2025 2026
Debt Repayment 2020-26
State-owned banks
Total, in $mn
0
1
2
3
FY 2016 FY 2017 FY 2018 FY 2019
Unsecured$1.5bn
60%
Secured$1.0bn
40%
2.62.1 2.0
2.5
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Upstream: focused brownfield strategy, new opportunities
Brownfield redevelopment
Unconventional resources
New exploration
effort
Naftogaz objectives Partnership considerations
Maximize value of depleted brownfield reserves
Optimize costs and increase profitability
Develop evaluation criteria for cost efficiency and brownfield performance
Partner requirements – proven track record, operational efficiency, excellence, willingness to invest
Contract type – Production Enhancement (PEC)
Commercialize Naftogaz' and Ukraine's tight gas resources
Efficiently scale up Build technological capability
Partner requirements – proven track record, technological excellence, readiness and ability to scale in Ukraine
Contract type –Risk Service Contracts (RSC)
Share risks and invest in resource base development
Ensure sustainable production increase through greenfield development
Optimize capital commitment Build exploration capacity
Partner requirements – proven track record, significant capital exposure, readiness to scale up in Ukraine
Contract type – Production Sharing Agreement (PSA)
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2
3
Status
Announced competition for two UGV deposit clusters in the Western region; participant qualification stage
UGV acquired 4 greenfield sites, 2 of which will be developed by Vermilion (Canada); draft agreements submitted to CMU
Preparing tender documentation; looking for partners
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Naftogaz prioritizes UN Sustainable Development Goals
compliance with OECD principles majority of Supervisory
Board Members are independent directors 0 tolerance to
corruption
Environmental Social Governance
reasonable natural resource management negative impact
reduction energy efficiency
& renewables footprints disclosure
and reporting biodiversity responsible
procurement
educational projects enhanced
environmental and health safety infrastructure
maintenance contribution to local
budgets through royalty
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EBRD supported and supervised corporate governance reform in Naftogaz
Supervisory Board with a majority of independent members in place is yet to be fully empowered with authority to:
Approve strategy Approve financial plans Appoint and remove Executive Board members
Clare SpottiswoodeChair, Independent director
Bruno LescoeurIndependent director
Amos HochsteinIndependent director
Ludo Van der HeydenIndependent director
Yuliia KovalivState representative
Nataliya BoykoState representative
Supervisory Board Members
2/3 of the Board are independent members
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121UAH bn2019
14%
2014
-97
-33
74
41
-53
110
57
-56
139
82
121
69
-30-17
48
1
-15
-87
20
2015 2016 2017 2018 2019
+163
-52
Naftogaz is the largest net contributor to the state budget
From the ‘black hole’ to the biggestpayer of taxes and dividends for the state as the sole shareholder
POSITIVE EFFECT ONTHE STATE BUDGET,UAH bn
of revenues to the state budget in 2019
Every seventh hryvnia was contributed by Naftogaz
Taxes and dividends paid to the state budget by NaftogazDirect subsidies provided by the government to low-income consumersRecapitalization of Naftogaz from the state budget