Strategy Update Final 15-11-2005

8/6/2019 Strategy Update Final 15-11-2005

1/50

BG Group WIP

Gas and power in Italy: a market primer

and business development opportunities


2/50

2

Contents

Work plan

Italian market European benchmarking

Italian market analysis

Gas market value chain margins


3/50

3

Work plan





4/50

4

The first days has been spent on understanding market

structure and public data availability, afterwards we have

focused on margins quantitative analysis

Weeks 17-21 24-28 31-4 7-11

Italian market international

benchmarking: market size,

liberalization and cost prices

Italian market assessment:

supply/demand projections, market

structures and recent trends

Value chain quantitative analysis:

Data gathering

Value chain prices identification

Value chain margins identification

Kick-off

14-11 meeting: Italian market European

benchmarking

Italian market assessment Italian gas market value chain

margins definition

14-19

Final presentation hand in

Work plan

1

2

3

28-11 meeting: First evidences on:

Italian market European benchmarking Italian market assessment Data availability


5/50

5

To assess the Italian Gas & Power market, we have used a

three steps approach

Analysis scheme

Identification of Italian market

potentials with respect to main

European Countries

Identification of Italian market

structure, trends and main players

role

Identification of main players

margins for importers, wholesalers

and retailers

9 1%

82 %8 0%

64 %

10 %

91 %

65 %

50 %40 %

25 %

9%

35 %

50 %60 %

75 %

166,3

80,6

102,0

24,05

19,71

17,23

14,85

19,39

17,23

4,34

2,16

2,38

Gas value chainmargins definition:

main players bottom-up analysis

Italian market analysis:supply/demand projections, market

structures and recent trends

Italian market Europeanbenchmarking: market size, liberalization

and cost prices

321


6/50

6

Contents

Work plan





7/50

7

Italy is one of the largest European gas & power markets, with a substantial weight in gas. Market growth is expected

to be higher than Western European average, being the second most growing market just after Spain. LNG Focus: Italian gas market highly depends on imports LNG has still a small share of voice with respect to

pipelines. The Spanish market already imports over 95% of total imported gas by LNG.

Market concentration: on the upstream - both in the gas and the power market - former monopolists still enjoy some of the highest

market shares in Europe (ENI 65% - ENEL 50%) being the most concentrated market after France.

on the downstream Italian power and gas market shows higher competition with respect to European

counterparts, especially on the gas market. Main national and international players are entering in the market.

Market prices: Gas market: Italy shows the highest households prices and some of the higher for industrial customers (both

Germany and France have higher prices).

Power market: Italian market shows the highest price for both households and industrial users .

Considering consumer trends, there are evidences of a lower switching rates (~ 15% in the power market) of Italiancustomers with respect to other European countries.

Legal framework: Italy has some of the more strict unbundling requirements in both gas and power market, ensuringa clear and developed legal framework.

Logistic: a natural born hub, Italy - and especially Brindisi benefits from lower distance with respect to main African,North African and Middle East harbors.

Executive summary


8/50

8

513

477

280

234215

Italy is one of the largest European gas & power markets,

with some of the most interesting growing rates

Gas & power domestic consumption (2004)

Power [TWh]Gas [Bcm]

98

8679

45

27

UK Germany Italy France Spain UKItalyFrance SpainGermany

2004-2000

CAGR (%) 0,3% 2,0% 3,1% 3,0% 12,7%2004-2000

CAGR (%) 1,8% 1,4% 2,1% 1,5% 5,5%

Source:AEEG, UCTE, BP, EIA

Average Western Europe expected CAGR till 2010: ~ 1,8%

Average Italian expected CAGR till 2010: 2.6%

Average Western Europe expected CAGR till 2010: ~ 1,1%

Average Italian expected CAGR till 2010: 2.1%


9/50

9

Italian gas market highly depends on imports LNG has

still a small share of voice with respect to pipelines

Gas market structure- imports (2004)

LNG share on total imports [%]Imports on total consumption [%]

Source:AEEG, IEA

100%95%

89%85%

15%

UK2)Germany1) ItalyFranceSpain

95,0%

10,5% 9,0%

0,0% 0,0%

UKItalyFranceSpain Germany

1) Also exports gas for 10% of total consumption

2) Also exports gas for 13% of total consumption

Total

consump-

tion (BCM)27 45 86 79 98


10/50

10

On the upstream, Italian power market is still highly

concentrated, whereas on the downstream shows higher

competition

Power market concentration (2004)

Retail supply: # of players with market share> 5%Market share on generation [%]

85%

50%40%

30%20%

10%

27%40%

40%

20%

5%

23%20%

30%

60%

Source: DG TREN 2004

UKGermanyItalyFrance Spain

6

5

4

3

1

UK Italy FranceSpain Germany

Largest producer 2nd and 3rd producers Others


11/50

11

The Italian gas market shows a similar structure to power:

high concentration on the upstream, lower on the

downstream

Market structure- gas

Retail supply: top 3 players market share1) [%]Shipping: % of gas controlled by the largest

company [%]

Source: DG TREN 2004

1) On both eligible and non eligible markets

UKGermanyItalyFrance Spain

91%

82% 80%

64%

10%

UK ItalyFrance Spain Germany

# of companies

with market

share >5%1 3 12 4 5

# of companies

with market

share >5%2 6 4 3 0

91%

65%

50%

40%25%

9%

35%

50%60%

75%


12/50

12

On the price side, the Italian market shows some the

highest gas prices

Gas prices [Euro without taxes per 1.000m3

]

Industrial users1)[2005] Households2) [2005]

Source: Eurostat, AEEG

1) Annual consumption of 41.860 GJ and load factor of 200 days (1600 hours)

2) Annual consumption of 83,7 GJ

221

203189

182166

UKGermany ItalyFrance Spain UKGermanyItaly Spain

331

270267

237

201

France


13/50

13

Power prices in Italy are the highest in both industrial and

households segments

Power prices [Euro without taxes per MWh]

Industrial users1)[2005] Households2) [2005]

Source: Eurostat

1) Annual consumption of 2.000 Mwh, maximum demand of 500 kW and annual load of 4.000 hours

2) Annual consumption of 3.500 KWh of which 1.300 KWh is overnight (standard dwelling of 90m2)

84

78

69

5753

UKGermanyItaly France Spain

144

133

102

91 90

UKGermanyItaly SpainFrance


14/50

14

Italian customers seems not very attracted by today new

entrants power offers: treat or opportunity?

Switching estimates since market opening - Power

1) Annual consumption greater than 1Gwh per year

Source: Eurostat

Switching rate among large eligible industrial users1)

50%

35%

22%

18%15%

UK Germany ItalyFrance Spain

Start of the

liberalization

process1999 199919981991 1998


15/50

15

Italy, together with Spain and the UK requires strict

unbundling requirements

Market accessibility Power (2004)

Source: DG Tren 2005

UK

Germany

Italy

France

Spain

Market opening Size of open market

(Twh)Eligibility threshold

Unbundling

Transmission Distribution

100% 500 - Accounting Management Legal

Accounting

70% 275

Non Households

Accounting Management Legal

Accounting Management

79% 225

Accounting Management Legal Ownership


100% 210

Accounting

Management Legal Ownership

Accounting

Management Legal

-

100% 335



-

Non Households


16/50

16

Even on the gas side, Italian market is one of the countries

with the strictest unbundling regulation

Market accessibility Gas (2004)

Source: DG Tren 2005

UK

Germany

Italy

France

Spain

Market opening Size of open market

(Bcm)Eligibility threshold

Unbundling


100% 82 - Accounting Accounting

70% 28 Accounting Management Legal

Accounting

100% 80



100% 20

Accounting

Management Legal

Accounting

Management Legal

-

100% 95


-

Non Households

-



17/50

17

On a logistic point of view, Italy benefits from shorter

average distance to main gas harbors

Brindisi

4,693

555550

8864,206

825

4,686

BioKo Island

(Guinea)

16.401

22.158

18.991

17.794

Damietta

(Egypt)

Bauny Island

(Nigeria)ELNG 1 Trinidad and

Tobago

Greenstream

(Tripoli)Tunisi

(Transmed)

Mildford Heaven4,181

1,9032,1832,999

3,7562,907

4,229

Rovigo

5,063

925920

1,2564,576

1,195

5,056

Panigaglia

4,280

4111,200

1,5363,556

1,475

5,336

Total

32.8181,690

4,5054,870

5,603

5,350

5,597

5,203

38.815

2.2005.4995.779

6.505

6.131

6.503

6.198

Lake Charles

Elba Island

Source: Internet


18/50

18

Contents

Work plan


Italian market analysis: Supply/Demand Projections Actual market liberalization consumer trends

Market structures



19/50


20/50

20

Over the next five years Italian gas demand is expected to

be mainly driven by power generation

Gas market ENI/Ministry of Industry: domestic consumption by segment (Bcm)

SUPPLY/DEMAND PROJECTIONS

Residential and otherPower generation Industrial*

28 29 28 30 28 31 2932 29

3430

34 31 34

23 23 2323

2323

2323

23

2323

2424

24

29 28 3130 33

33 3434

35

3536

3536

35

82 84

8987

+3,4%

+1,1%

+2,1%

80

8691

2004-2010 CAGR

Power generation is

expected to increase in

the light of:

growth of theservices area (a

heavy electricity

user) in the ItalianEconomy

the increasing shareof voice that gas will

have in power

generation

Industrial and

Residential gas

demands are expected

to increase due to a

larger share of voice ofgas with respect to

other energy sources

(such as petroleum and

coal)

+2,3%

2004 2005 2006 2007 2008 2009 2010

8387

9392

80

8993

ENI Min.

Ind.

ENI Min.

Ind.

ENI Min.

Ind.

ENI Min.

Ind.

ENI Min.

Ind.

ENI Min.

Ind.

ENI Min.

Ind.

+3,6%

+1,1%

+2,5%

+2,6%

ENI Min. Ind.

Source: AEEG, SRG, ENI, MAP

* Includes consumption for transport and other chemical uses

ENI Min.

Ind.


21/50

21

Even if the majority of total gas generation is provided by

efficient plants, less efficient machines still accounts for

some 35% of total production

Main gas plant fleet operating in 2004

Source: Enel, MAP

Italian gas plant fleet efficiency and generation [TWh]

Efficiency

less than

30%

Efficiency

between 30%

and 40%

124,5

6,2

6,3

31,4

80,6

Efficiency

between 40%

and 50%

Efficiency

greater than

50%

Main gas

plant fleet

total capacity

Total gas plant feetproduction accounted for

some 127 GWh in 2004

Total gas demand by the

entire gas plant fleet

accounted for some 28 Bcmin 2004



22/50

22

CCGT power plant capacity is expected to grow

substantially over the next five years

Expected CCGT capacity (Greenfield and Repowering)


21.1 21.1 21.1

14.514.514.5

12.6

10.0

6.3

13.9

10.1

6.3

2005 2006 2007 2008 2009 2010

Source: Enel, DKW

Expected total CCGT capacity [TW]

Considering only plants under construction the

new, additional capacity is expected to reach

some 14,5 GW (accounting for some 102 Twh) by

2008, of which: ~ 5,2 Greenfield ~ 9,3 repowering

Considering plants under construction and

planned plants the new, additional capacity is

expected to reach 21,1 GW (accounting for some

147 Twh) by 2008, of which:

~ 8,8 Greenfield ~ 12,3 repowering

Considering only plants

in construction

Considering also planned plants

Comments


23/50

23

Considering only under construction projects, Edison, Enel

and Endesa are going to be the major players

18901890

380

390

780

900

1050

1140

16206260

ACEA

Electrabel

Endesa Edison Enipower TOT

380

750

760

800

11703860

Edison Energia ACEA

Electrabel

EnipowerTOT

80

780

800

9512611

TOT Edison Endesa

Italia

Enel TOT Enel

Share on 2005 new CCGT capacity

2005 new capacity: ~6.250 GW 2006 new capacity: ~3.900 GW



Share on 2007 new CCGT capacity Share on 2008 new CCGT capacity

Tirreno

Power1)

Tirreno

Power1)

EdipowerEdipower AEM

Torino

SUPPLY/DEMAND PROJECTIONS: Plant under construction (Greenfield and Repowering)

Source: Enel, DKW

1) Tirreno Power shareholders: 50% Energia Italia, 30% Electrabel. 15% ACEA


24/50

24

but also considering planned plants, the main players

will remain the same

380

760

800

750

11703860

EdisonEnergia ACEA

Electrabel

EnipowerTOT

160

390

760

780

800

9513841

TOT Edison Endesa

Italia

Enel


2006 new capacity: ~3.900 GW



Share on 2007 new CCGT capacity Share on 2008 new CCGT capacity

Tirreno

Power1)

Edipower

SUPPLY/DEMAND PROJECTIONS: Planned and under construction plants (Greenfield and rep.)

Source: Enel, DKW


Abruzzo

Energia

Ascopiave

250400

400

800

800

44907140

TOT Enel Calenia

Energia

E.ON

Italia

Prod.

Endesa

Italia

ASM

Brescia

Edison

380

390

780

900

1050

1140

16206260

ACEA

Electrabel

Endesa Edison Enipower TOT

2005 new capacity: ~6.250 GW

Tirreno

Power1)Edipower AEM

Torino


25/50

25

Considering the expected demand and capacity, most of

the gas plants in operation in 2004 could be out of the

market by 2010

Gas demand for power generation and Italian plant fleet (2010)

Source: MAP

Gas demand for power generation: expected

supply/demand balance [TWh]

166,3

80,6

102,0

Efficient plants

oparting in 2004

capacity

New plants under

construction

expected capacity

by 2010

Expected 2010

power produced

by gas

The expected gas demand forpower generation could be

lower than expected CCGT

plants capacity by 2010,

considering:

the most efficient plants as

of 2004

the expected under

construction plants by 2010

Exceeding

capacity for

16,3 TWh



26/50

26

Power demand is expected to be mostly driven by the

service segment

Power market -domestic consumption by segment (TWh)


Source: ENEL

5 5 5 5 5 6 6 6

164 164 164 167 170 173176 179

74 82 8386 90

93 97101

6870 70

7172

7374

75

2002 2003 2004 2005 2006 2007 2008 2009Agriculture

Services

Industry

Households

321311 322329 337

345353 362

2002-2009CAGR

+1,14%

+1,26%

+4,74%

+1,43%

+2,18%


27/50

27

A part from Spain, there is an evident correlation between

economic structure and power consumption

Economy structure and power consumption (2003)


Share of service on GDP [%] Share of service segment on total power demand [%]

Source: World Bank , International Energy Agency

UK Italy Spain

31%30%

29%

26%25%

UK ItalySpainGermanyFrance

73%

72%

70%

69%

67%

GermanyFrance


28/50


29/50

29

On gas supply side the main incumbent has still a dominant

role, mainly due to a strong control on market imports

ACTUAL MARKET LIBERALIZATION- CONSUMER TRENDS

Source: EC, Eurostat, annual reports, DG Tren 2004, press articles

Customer trends

10% of churn among

industrial customers

No switch among

residential ones

According to Antitrust

limited competition is due

to the strict control by Eni

on import capacity

No standardized

distribution network

codes/tariffs mentioned

as another reason for no

switch at residential level

Competitive intensity

In October 2001 Eni carried out a first gas release

program of ~5 Bcma for 10 years to 4 Italian players :

Edison, Energia, Dalmine Energie, Plurigas (Milan,

Brescia and Genova municipalities as main

shareholders) In September 2004 Eni was obliged by Antitrust to a

second gas release for ~2 Bcma for 4 years to ~30

players By 2007 Eni should to sell 20% of its pipelines Eni still enjoys -directly or indirectly- control on Italian

imports Edison is the only other incumbent with access to

domestic production Enel has access to direct import not via Eni, some

foreign entrants have direct access to import such as

Gaz de France and Gas Natural Major international utilities such as Enel, GDF, Gas

Natural and E.ON are buying distribution companies to

get access to their customer base British Gas, Exxon Mobil, Gas Natural and BP have

projects for LNG terminals Shell and ERG are projecting a new LNG plant in Sicily

which is supposed to be ready by 2010 Amga is involved in the realization of a LNG offshore in

the Tyrrhenian Sea (realized by the SPV OLT Offshore)

Liberalization effectiveness

100% of the market is liberalized

(domestic consumption)

85% of import (as percentage of

total demand) with Eni as major

shipper (65%)

Regulator's role

Dispute settlement Network access conditions

establishment (incl.

transmission and distribution

fees)

Unbundling of the network

AccountingManagement

Legal

ownership

AccountingManagement

Legal

ownership



30/50

30

While in electricity the incumbent shared its market power

with few new entrants well-connected to national players

Customer trends ~15% of churn among industrial

customers

According to Enel switch rate is

driven by dual fuel offer and

quality of service

Competitive intensity Entrants Generation/Supply:

2001: Edison/Italenergia - JV ofEDF, FIAT and financial institutions

2001 Elettrogen: Endesa (E) 2002: Edipower/Eurogen - JV of

Edison, Atel, municipal utilities and

banks

2003 Interpower now Tirreno Power

JV of Electrabel and ACEA, plusEnergia (CIR) and Verbund plus

some municipal utilities In April 2004 the power exchange

started operations Projects, Trading/Wholesale:

EGL, E.ON, BKW Industrial entrants:

CIR, Dalmine EDF and AEM Milano close the Edison

takeover

Liberalization effectiveness ~80% of the market is liberalized

(domestic consumption)

~18% of import capacity (as

percentage of domestic production)

Regulator's role

Dispute settlement

Network access conditionsestablishment (incl. transmission

and distribution fees)

Unbundling of the network

Accounting

Management

Legal

ownership

Accounting

Management

Legal

ownership


* Including customers having effectively changed of supplier

Source: EC, Eurostat, DG Tren report, annual reports

ACTUAL MARKET LIBERALIZATION- CONSUMER TRENDS


31/50

31

ENI still enjoys large market shares in all phases

ENDESA

Energia

HERA

Edison

Enel

Eni

Gas [Bcm] Power [GWh]

9.394

56.00

22.9034.00

56.90

9.376.90

9.35

16.25

34.556

8.104.90

6.70

11.60

37.306

0,26 0,32

1,762,08

2.022

7.395

11.515

Import/Production Wholesales Retail Total (retail +wholesales)

1,60

0,80 0,83

1,62

MARKET STRUCTURE: Incumbents

N.A. N.A. N.A. N.A.

Source: AEEG


32/50

32

Eni is fully balanced between own gas supply and demand,

whereas

Eni gas supply/sales portfolio 2004 (bcm)

Supplypo

rtfolio

Gassales

Direct import Production Storage changes

56,9 Bcm

45.2010.80

-0.90

Wholesalers Final Gas users ~ 34,0 bcm

Thermoelectric Industrial

15.2

11.5

7.30

Residential

22,90

Own supply - sales

Total own supply

56,9 BcmTotal demand

Source: Company Annual Reports

0

Balancing


33/50

33

Enel is a net buyer in the Italian wholesalers gas

market and

Enel gas supply/sales portfolio 2004 (bcm)

Supplypo

rtfolio

Gassales


9,37

0,00 0,15



4.12

2.402.78

Residential

6,90

Own supply - sales

-6,70

9,2 BcmTotal own supply

16,2 BcmTotal demand


Balancing


34/50

34

also Edison is a net buyer in the Italian wholesalers

gas market

Edison gas supply/sales portfolio 2004 (bcm)

Supplypo

rtfolio

Gassales


6,80

1,300,24



5,07

1,360,28

Residential

4,90

Own supply - sales

-3 ,26

~7.9 BcmTotal own supply

~11,6 BcmTotal demand


Balancing


35/50

35

Among new entrants, Gaz de France is the unique fully

integrated on the gas chain

BP

Tractabel/ACEA

E.On (Thuga)

Gas natural

Gaz de France

Gas [Bcm] Power [GWh]

Import/Production Wholesales Retail Total (retail +wholesales)

0,75 0,76

0,08

0,83

1,46

0,70

1,74

2,44

0,46 0,530,05

0,57

0,17 0,30 0,000,30

0,08 0,080,01

0,09

1.347,00

5.569,00

MARKET STRUCTURE New Entrants

N.A.

N.A.

N.A.

Source: AEEG


36/50

36

Former monopolists still enjoys both large market share

and market power on the upstream phases

December 2004 data

MARKET STRUCTURE


Source:Autorit per lenergia elettrica e per il Gas, Annual report 2004

Power Gas

Market share on shipping %Market share on generation %

Tirreno Power1)

50

Others

Endesa

Enel

65

Eni

Enel

Edison gas

Plurigas

Others

12

10

56

Edison

18

9

3

13

Eni Power

7

Energia

2


37/50

37

Power generation is mainly provided by using natural gas:

its share of voice is expected to further increase

Power generation by source (2003 )

MARKET STRUCTURE BACKUP

Fonte:Autorit per lenergia elettrica e per il Gas, Annual report 2004, Antitrust

1) Includes Eolic, Geothermic, Waste and other combustibles

Power generation

Share on power generation %

40

Others1)

Hydro

Natural

Gas

Oil22

13

12

Solid

13 Natural Gas is expected to furtherincrease its share of voice in

power generation:

A total capacity of over 14.5

GW is expected by 2008

Additional project accounting

for 6,6 GW are planned by

2008


38/50

38

whereas on downstream competition is increasing

Final customers sales, December 2004 data

MARKET STRUCTURE

Source :Authority per lenergia elettrica e per il Gas, Annual report 2004

2) Plurigas, Energia, Blumet, GDF, Italcogim, Ascotrade, Energia e Servizi, ASMEA, Napoletana Gas Clienti


Enel

Power Gas

Market share %Market share %

Main competitors

56

Other minor

players

Enel 8

Eni

43

Edison

Hera

Other Minor Players

2

26

32

3 GENCOs

(Ex Enel) Edipower Tirreno Power1)

Endesa

99 Players2) with ~1%

market share

12

12

F l t l th t h f b th k t


39/50

39

Few players control the upstream phase of both markets,

whereas after the liberalization a new layer of intermediates

has developed

Italian Gas and Power structure (2004)

MARKET STRUCTURE


Source :Autorit per lenergia elettrica e per il Gas, Annual report 2004

Gas Power

Gas

storage

0,1

Grid

losses

(1)

Market

size

80,2

=

-0,9

79,3Residential and

Commercial

27,5

Industrial

22,6

Power

generation

29,2

Network losses

22,7 TWh

Residential

+ SOHO

150,7 TWh

Eligible Market

(Industry and Services)

129,1 TWh

Market

size

333,2

=

-22,7

279,8

29,7 TWh

pumping, self-

consumption

Eni

65%

Enel

12%

Edison

10%

Plurigas

5%

Others

8%

Enel

50%

Edipower

18%

ENI

7%

Endesa

9%Others

16%

Domestic

Production

13,0

Imports

67,2

Net imports

45,6 TWh

Generation, net of internal

usage 286,6 TWh

Wholesalers, LDC's sales companies

79,3 (110,4 including intra-trades)

Wholesalers, Traders

129,1 * TWh

Acquirente Unico

150,7 TWh


40/50

40

On the gas market, over the last year players shifted

towards a fully integrated model

MARKET STRUCTURE

1) Acquisitions group of three municipalities (AEM Milano, ASM Brescia and AMGA Genova) 2) Including intra-wholesalers trades

Source: Autorit per lenergia elettrica e per il Gas, Annual report 2004

113,9

7,6

12,3

76,7

17,3

Whole market Minor

w holesalers

Fully

integrated

Up stream

integrated

Dow n stream

integrated

Eni

70%

Enel

21%

Gas wholesalers volumes2 (Bcm, 2004)

67%

6%

11%

16%

GDF 3%


Plurigas 5%

Gas Natural

1%

Over the last year, players are shifting towards a fully integrated model:

Gas Natural by moving upstream

110,8

7,1

14,7

71,8

17,2

Whole market Minor

w holesalers

Fully

integrated

Up stream

integrated

Dow n stream

integrated

GDF 2%

Eni

67%

Enel

31%

6%

13%

16%

65%


41/50

41

MarketingWholesalesNetwork +

LDCImport

In 2003 13 wholesalers enjoyed sales > of 0,5 bcm and just

3 of them were fully integrated, whereas

MARKET STRUCTURE BACKUP


Source: Autorit per lenergia elettrica e per il Gas, Annual report 2004

110,8

7,1

14,7

71,8

17,2

Whole

market

Minor

wholesalers

Fully

integrated

Up stream

integrated

Down

stream

integrated

GDF 2%

Eni

67%

Enel

31%


Fully integrated: Eni (including Italgas and Fiorentina

Gas Clienti) Enel and GDF(including Italcogim)

Up stream integrated: Edison, Dalmine

Energia, Energia, Plurigas1

Down stream integrated: Asmea,Hera, AEM Trading, AEM Energia,

Blu Gas, Estgas, Blumet

Gas wholesalers with sales >0,5 Bcm (2003)

3

3

7

65%

6%

13%

16%


42/50

42

in 2004 17 wholesalers had sales > of 0,5 bcm and five of

them are now fully integrated

MARKET STRUCTURE BACKUPSource: Autorit per lenergia elettrica e per il Gas, Annual report 2004


113,9

7.6

12.3

76.7

17.3

Wholemarket

Minorwholesalers

Fullyintegrated

Up streamintegrated

Down streamintegrated

Eni

70%

Enel

21%


67%

7%

11%

16%

GDF 3%

Plurigas 5%

Gas Natural

1%

Fully integrated: Eni (including Italgas and Fiorentina Gas

Clienti) Enel, GDF(including Italcogim and Italtrading), Gas

Natural and Plurigas

Up stream integrated: Edison,

Dalmine Energia, Energia and Energas

Down stream integrated: Asmea,

Hera, Amga Commerciale,

Ascotrade, AEM Energia, Blu Gas,Estgas, Blumet

Gas wholesalers with sales >0,5 Bcm (2004)

5

4

8


LDCImport


43/50

43

Between 2003 and 2004, the number of wholesalers with

sales > 2 TWh increased from 16 to 23

MARKET STRUCTURESource: Autorit per lenergia elettrica e per il Gas, Annual report 2004

1) Total sales 2004 > 1TWh

2) Sales < 2 TWh

3) Sales > 2 TWh

Fully integrated: Enel, Acea, AEM Milano, AEM Roma,

AEM Torino, ASM Brescia and ACEA

Up stream integrated :Edison,

Energia, Eni, Endesa

Wholesalers:EGL, EDF, Dalmine,

Energetic Source,

Electra Italia, ...

220,2

48,2

59,9

60,7

47,9

Top

wholesales

Minor

wholesalers

Fully

integrated

Up stream

integrated

Pure

wholesalers

25 minor wholesalers with 1 TWh < sales < 2 TWh

7

4

12

Power wholesalers with sales >2TWh (2004) Power wholesalers volumes (TWh, 2004)

28%

28%

22%

17%

1) 2) 3)


LDCImport

G di t ib ti t k i hi hl f t d b t


44/50

44

Gas distribution network is highly fragmented but on a

consolidation path, whereas on power Enel has still a

dominant role

MARKET STRUCTURE

Source: AEEG, IEA Natural Gas information 2005, press articles

1) In September 2004 Edison sold its TSO to the private equity fund Clessidra for 168 Mio

2) Future merge in 2005

Transmission SnamReteGas + Edison T&S1

Stogit (Eni) ~ 96% + Edison ~ 4%

480 Players

Main player:

Italgas (Eni) ~ 27%(Major minor players: Enel, GDF-Italcogim,

AEM Milano, HERA)

GRTN / Terna2

and Minor Players

54 Players

Main player

Enel ~ 83%(Major minor players: ACEA Roma,

AEM Milano, AEM Torino)

Gas Power

Storage

Distribution

Before liberalization

in 1999 there were

~ 750 operators


45/50

45

Contents

Work plan





46/50

46

In order to identify gas chain margins, we have used a three

steps process

Margin identification scheme

Margins identification: Gross margin:

selling- purchasing price Storage margin;

gross margin storage cost Working margin:

storage margin- structure costs

Sample clustarization: Import (4 players) Wholesalers (12 players) Retailers (20 players)

Bottom-up analysis of the most important

players1) in the Italian gas market (~ 30

players)

321

ENI

Equity

Equity/Total assets (k)

Equity/ Total assets GAS(k)

Revenues

Total revenues (k)

Gas revenues (K)

Gas selliengprice (c/mc)

Costs

Purchasinggas price(K)

Purchasinggas price(c /mc)

Gross margin(sellingprice- purchasingprice) (c/mc)

Storage cost (c/mc)

Secondmargin(gross marginstorage cost) (c/mc)

Structurecosts (c/mc)

Operational margin(sec ondmargin- structure costs ) (c/mc)

Operational margin(% ons ellinggas price)

P&LEBITDA

EBITDA/TOTAL REVENUES

EBITDA/GASREVENUES

EBITDA GAS(c/mc)

PlurigasHera

Trading

Dalmine

Trading

Edison

Energia

piccolee

medieimprese

Enel

Trade

Operationaldata

Sellinggas volumes (bcm)

58%

Na

47468000

8321000

15,51

6717000

12,74

2,78

0,32

2,46

Na

Na

Na

0,00%

0,00%

0,00%

41,95

17,7%

17,7%

659200

587635

16,49

516147

14,84

1,66

0,26

1,39

0,76

0,63

3,9%

4,17%

4,17%

0,69

3,56

7,4%

7,4%

55455

50165

16,35

60215

14,76

1,58

0,67

0,92

0,10

0,81

5,0%

11,80%

13,05%

2,13

0,31

31,8%

Na

452.773

Na

Na

Na

Na

Na

Na

Na

Na

Na

Na

2,14%

10,09%

1,60

0,40

30,1%

Na

1363190

110817

19,54

102661

18,11

1,44

0,31

1,13

0,09

1,03

5,3%

5,09%

Na

Na

0,57

12,3%

Na

7185331

3054400

18,78

2970439

18,26

0,52

0,30

0,22

Na

Na

Na

1,90%

4,17%

0,78

16,27

Model Margins

7

1,56

2,36

0,42

2,6619,39

0,83

0,86

0,47

17,23

24,05

19,71

17,23

14,85

19,39

17,23

4,34

2,16

2,38

RETAILERSWHOLESALERSIMPORT

Selling

price

Purchasing

price

Storage costsStructure

costs

Operational

margin

100% 89% 2,4% 4,4% 4,27%

Selling

price

Purchasing

price

Storage costsStructure

costs

Operational

margin

% on selling price

100% 82% 1,7% 9,8% 6,48%

Wholesalers margins (c/m3) Retailers margins (c/m3)

1) Players with 2004 gas sales greater than 0,240 bcm accordingly to AEEG 2004 Reports


47/50

47

Considering the entire gas market, average gross margins

are allocated mostly in the downstream part

Import

purchase

price

Import

gross

margin

Import

selling

price

Wholesalers

purchasing

price

Wholesalers

gross

margin

Wholesalers

selling price

Retailers

purchasing

price

Retailers

margin

Final

consumer

average price

24.05

19.71

12.7

17.23

14.72

2.16

2.51

2.02

4.34

RETAILERSWHOLESALERSIMPORT

Average prices by segment (c/m3)

Extra

border

price

Extra

border

import

margin



48/50

48

24,05 19,71

0.42

2.36

1.56

Even taking into account operational costs, retailers still

enjoy larger average margins

19,39

0,83

0,86

0,47

17,23

Wholesalers margins (c/m3)

Selling

price

Purchasing

price

Storage

costs

Structure

costs

Operational

margin

Selling

price

Purchasing

price

Storage

costs

Structure

costs

Operational

margin

Retailers margins (c/m3)

% on

selling

price

100% 89% 2,4% 4,4% 4,27%% on

selling

price

100% 82% 1,7% 9,8% 6,48%

Average prices (c/m3)Source: Company Annual Reports


49/50

49

Main wholesalers details

ENI

Equity


Equity/ Total assets GAS (k)

Revenues

Total revenues (k)

Gas revenues (K)

Gas selling price (c/mc)

Costs

Purchasing gas price (K)

Purchasing gas price (c/mc)

Gross margin (selling price- purchasing price) (c/mc)

Storage cost (c/mc)

Second margin (gross margin storage cost) (c/mc)

Structure costs (c/mc)

Operational margin (second margin- structure costs ) (c/mc)

Operational margin (% on selling gas price)

P&L EBITDA


EBITDA/GAS REVENUES

EBITDA GAS (c/mc)

PlurigasHera

Trading

Dalmine

Trading

Edison

Energia

Enel

Trade

Operational data

Selling gas volumes (bcm)

58%

Na

47 468 000

8 321 000

15,51

6 717 000

12,74

2,78

0,32

2,46

Na

Na

Na

0,00%

0,00%

0,00%

41,95

17,7%

17,7%

659 200

587 635

16,49

516 147

14,84

1,66

0,26

1,39

0,76

0,63

3,9%

4,17%

4,17%

0,69

3,56

7,4%

7,4%

55 455

50 165

16,35

60 215

14,76

1,58

0,67

0,92

0,10

0,81

5,0%

11,80%

13,05%

2,13

0,31

31,8%

Na

452.773

Na

Na

Na

Na

Na

Na

Na

Na

Na

Na

2,14%

10,09%

1,60

0,40

30,1%

Na

1 363 190

110 817

19,54

102 661

18,11

1,44

0,31

1,13

0,09

1,03

5,3%

5,09%

Na

Na

0,57

12,3%

Na

7 185 331

3 054 400

18,78

2 970 439

18,26

0,52

0,30

0,22

Na

Na

Na

1,90%

4,17%

0,78

16,27

Model Margins



50/50

Main retailers details

ENEL

Enel Gas

EDISON

Edison PerVoi

mass market

Hera

Commerciale

Napoletana

gasclienti

(Italgas)

AMGA

Commerciale

2,8%

Na

1 390 615

1 150 801

22,22

953 726

18,42

3,81

0,36

3,45

1,68

1,77

7,9%

7,12%

8,60%

1,91

5,18

13,6%

13,6%

131 761

92 675

28,38

63 447

19,43

8,95

0,45

8,50

7,64

0,86

3,0%

3,10%

Na

Na

0,33

1,72%

1,72%

370 862

370 862

22,3

312 492

19,38

2,89

0,08

2,81

Na

Na

Na

0,82%

1,55%

0,35

1,67

11,9%

11,9%

192 634

111 217

24,28

89 999

19,65

4,63

0,39

4,24

3,56

0,78

3,2%

5,79%

10,03%

2,43

0,46

30,2%

Na

253 580

145 575

22,85

126 206

19,78

3,06

0,37

2,70

1,21

1,48

6,5%

5,75%

11,02%

2,52

0,64

Equity


Equity/ Total assets GAS (k)

Revenues

Total revenues (k)

Gas revenues (K)

Gas selling price (c/mc)

Costs

Purchasing gas price (K)

Purchasing gas price (c/mc)

Gross margin (selling price- purchasing price) (c/mc)

Storage cost (c/mc)

Second margin(gross margin storage cost) (c/mc)

Structure costs (c/mc)

Operational margin (second margin- structure costs ) (c/mc)

Operational margin (% on selling gas price)

P&L EBITDA


EBITDA/GAS REVENUES

EBITDA GAS (c/mc)

Operational data

Selling gas volumes (bcm)

Model Margins

Gas Natural

Vendita

9,0%

9,0%

156 197

135 163

16,23

121 350

14,06

2,16

0,39

1,77

0,44

1,33

8,2%

5,04%

5,83%

0,95

0,83

Strategy Update Final 15-11-2005

Documents

Transcript of Strategy Update Final 15-11-2005