Q3 2011 Enagas SA Earnings Conference Call
Oct 25, 2011 AM CEST
Thomson Reuters StreetEvents Event Transcript
E D I T E D V E R S I O N
ENG.MC - Enagas SA
Q3 2011 Enagas SA Earnings Conference Call
Oct 25, 2011 / 08:00AM GMT
==============================
Corporate Participants
==============================
* Antonio Llarden
Enagas SA - President and CEO
* Diego de Reina
Enagas SA - CFO
==============================
Conference Call Participants
==============================
* Pablo Cuadrado
Bank of America Merrill Lynch - Analyst
* Javier Garrido
JP Morgan - Analyst
* Carolina Dores
Morgan Stanley - Analyst
* Gonzalo Sanchez
BPI - Analyst
* Manuel Palomo
Citi - Analyst
* Jorge Alonso
Societe Generale - Analyst
* Virginia Sanz
Deutsche Bank - Analyst
* Fernando Murillo
La Caixa - Analyst
==============================
Presentation
------------------------------
Unidentified Corporate Representative [1]
------------------------------
Good morning. Welcome to the conference call for results of Enagas corresponding to the third quarter of 2011. So the results published this morning before the markets opened are always available on our web page, enagas.es.
So Doctor M, Mr. Antonio Llarden, President of Enagas, will direct the conference. So we're expecting a duration of about half an hour. And then we'll open a turn of questions, which we'll try to respond to in the greatest possible detail. Thank you very much for your attention. And I'll give the floor to Mr. Antonio Llarden.
------------------------------
Antonio Llarden, Enagas SA - President and CEO [2]
------------------------------
Good morning, ladies and gentlemen. And thank you very much for your attention. In this conference call presenting the results I'll structure my presentation in two areas. First of all, results for Enagas for the first nine months of this year and then I'll give you our forecast for the closure of the financial year.
Two months before ending 2011 and looking at the positive progress in our results, we are prepared to confirm that Enagas will actually even beat slightly objectives marked down at the beginning of the financial year.
So I'd like to underline that in spite of the difficult economic environment this is the fifth consecutive year in which Enagas is going to meet all its commitments, planned and announced, within our strategic plan which we approved in 2007.
So I'll comment on the most relevant figures. EBITDA grew 11.3% on the first nine months of 2010, reaching EUR654.7m. This growth has been possible thanks on the one hand to the increase in the asset base for the Company, to the integration of Gaviota since January 1, 2010, and strict control of operating costs which in homogenous terms were up only 0.28%.
So considering the impact of the acquisition of Gaviota on its own, from the beginning of 2011 EBITDA would have grown about 9%, in line with the objectives marked out for the end of the year.
On the other hand, Enagas has consolidated proportionally 40% of the balance sheet of the Mexican plant Altamira. Its proportional consolidation in terms of results will take place in the fourth quarter of this year.
The average cost of debt of Enagas at the end of the third quarter, this is accumulated, was 2.82%, a very similar level to the financial costs for last year, 2011, and below 3.3% envisaged on our annual objectives.
So these factors have made it possible for net profit to reach EUR270.8m, which is 6.2% over what was reached the same period for the previous financial year. These results are on the right track to guarantee achievement of the objectives of Enagas 2011, which is a growth of EBITDA of 10% and of a net profit of 5%.
So bearing in mind the caution in the hypothesis we used and the positive contribution of the stake of Altamira in the last quarter, we could say that these objectives are slightly conservative.
We also have got new investments to the sum of EUR534m. And we've got also up and running assets to the amount of -- to the sum of EUR549m. So with healthy investment and assets up and running up to September, plus the acquisition of Altamira, we can most likely beat the objectives in both areas.
In the financial area the highlights of the first nine months were as follows. So net financial debt of Enagas at September 30 reached EUR3.325m -- sorry, EUR3.32b. Now, this figure is slightly higher than the debt at the end of 2010, as a consequence of the proportional integration of 40% of the debt corresponding to Altamira to the sum of EUR86m.
The average cost of the debt -- of the Company's debt at the end of the third quarter was 2.82%. As I said, without doubt one of the lowest figures for non-financial companies in IBEX 35. So following this financial policy set down by Enagas at September 30 we have a structure for our debt at fixed rate 68%.
So lastly, the end of the third quarter for Enagas we have financial availability of EUR2.27b which is essential to ensure the financing and attractive cost for our investment plan.
Just stop for a second. So, definitively and in spite of the difficult moment we're going through economically, the results that we present today show that we're in an excellent position to meet our objectives laid down for FY 2011 and advance positively in our strategic plan for 2010 to 2014.
Once we've -- now we've set out the results for the nine -- for the first nine months of the year and the forecast of the closure of 2011, I can comment on one or two interesting questions which have to do with our business, Enagas.
First of all, looking at the regulatory aspect, we should remind you that first of all we are -- our activity is within the gas sector, which is deregulated with a high level of competition and a good standard of service. So, final prices for gas are fixed in the international market. And returns obtained by Enagas as a transporter and operator of the system are reasonable and similar to what has been obtained by companies -- comparable European companies. So for 2011, as we had expected, we've had no major regulatory change in the gas sector.
So looking at 2012 it seems that the priorities in energy are in area of energy from the -- for the new government will come -- that comes out of the [re-election] results will define the energy mix for the next 15 to 20 years. So this will give us the national energy plan which -- definitely for 2012 to 2020 as well as getting rid of our deficit in -- for the -- on electricity rates.
So we continue to move forward successfully, taking priority action we need for our projects. At the moment approximately 80% of the investment planned for the strategic plan 2010-2014 is up and running in construction or on a -- at a fairly advanced phase of processing, with the declaration on environmental impact having been obtained.
So the investments made by the Company, investments up and running, the advance in authorizations and acquisitions made, reaffirm our objectives for investment for our strategic plan 2010-2014 which means an investment on average of EUR700m annually over this period.
In the area of asset acquisitions, core business assets from third parties, we've got one or two major landmarks to mention. We've obtained the latest permit we needed to acquire 100% of the ownership of the underground storage in Gaviota, which has meant integration and [conduction] of assets -- of the -- incorporation of the assets into the -- our P&L for 2011.
Also through the National Energy Commission, CNA and the regulatory board for energy in Mexico, CRE, for the -- we -- the acquisition of 40% of the plant of Altamira. This will contribute positively to our profit and loss account for the fourth quarter this year.
So, lastly, we've signed with Regional Canaria de Energias the contract for purchase for which Enagas will acquire from its industrial partners in the Canary Islands its stake of 41.94% in the company Gascan. So this acquisition will be made effective once we've got the right authorizations at administrative level.
Our financial discipline, strategic discipline and our broad know-how of the business will continue to be the basis for analysis of possible opportunities for acquisition which will come up or regulated assets or assets which perhaps not regulated may have ensured -- contracts ensured in the medium and long term, as in the case of Altamira. So in this case these assets have to meet three conditions, which we've always demanded, which fit in with our core business and our objectives for debt and profitability.
So in spite of the current economic climate, which is very complicated, Enagas has managed to adapt well to this new environment. And we continue to maintain all our objectives for financial policy and growth in our results and dividends.
Our solid financial policy base of assets, which is really the fruit of our constant investment effort and rigorous control of operating costs, financial costs, allow us to confirm the objective growing in profit at least 7% on average for the period 2010-2014, and pay our shareholders 56% payout for the financial year 2011 and 70% from the year -- from 2012 onwards. Enagas will make this growth compatible in investments and results with the sustainable development of the Company, preserving environmental resources and looking after the relationships with their stakeholders.
Also conscious of the interest of investors and shareholders in the aspects related to social responsibility of companies and see sustainability in Enagas, we've made particular effort in this area over the last few years. So in this sense I'm happy to tell you that this commitment has allowed the Company to reach leadership in the utilities sector at world level in the Dow Jones Sustainability Index, making us one of the 19 leading companies all over the world so -- in this sector.
So this is confirmation that we've had over the month of September. This was -- came out on the press also. But I think it's good for us to underline this as one of the key landmarks for this third quarter in the broad area of governance and the work of the Company in the relationship to sustainability and the environment.
So definitely the results we present today put us in a very good position to be able to beat yet again, and for the fifth year running, the objectives marked down as regards growth in profit and investments in spite of our very difficult economic and financial situation at this moment. Also not just in Spain but in Europe and the rest of the world.
So thank you very much for your attention. We invite you to ask as many questions as you'd like and the Board of Enagas and myself will be answering with the maximum interest. Thank you very much.
==============================
Questions and Answers
------------------------------
Operator [1]
------------------------------
(Operator Instructions). First question Pablo Cuadrado, Bank of America Merrill Lynch. Please go ahead.
------------------------------
Pablo Cuadrado, Bank of America Merrill Lynch - Analyst [2]
------------------------------
Good morning to everybody. I have three questions and very quick, all of them. The first question would be regarding the regulation. You said during your conference call that you're not expecting great changes. I wanted to -- you to explain further if at the end of the year they regularly will be able to review the framework established beginning of '08 for transferred assets, taking into account elections right around the corner.
Maybe it would -- it is normal to think there will be no changes. But could you please confirm for transferred assets if there is going to be changes in the new framework.
The next question would be regarding the national energy plan. Through the year once again we've received several pieces of information. There's been talk with the municipal government to give shape to the energy plan through 2020. And now with the elections the situation may change once again. How do you expect the changes to be on this -- for -- on this front?
And the third question, very briefly, looking at the CapEx and at the OpEx and the forecast for 2014 and the targets, could you please give us some more details for 2012? What would be the numbers you expect for 2012? Would that be close to the EUR700m CapEx? And -- or do you expect changes, fluctuations upwards or downwards, for next year?
------------------------------
Antonio Llarden, Enagas SA - President and CEO [3]
------------------------------
Good morning, Pablo Cuadrado. Thank you very much for your questions. Now, regarding the first question, yes, correct, I can confirm that regarding the transportation assets regulation which, you're right is -- was due to finish at the end of the year and the regulator could introduce certain modifications to the framework.
However, it was confirmed at the beginning of the year and it's been maintained, according to our sources. There is consistency in this sense. No changes are forecast on the transportation regulation, because broadly it's considered to be correct. And in the framework of other, more complex, problems in the energy arena the regulator decided not to introduce significant changes to the framework. So I can confirm what you are saying yourself. We are not expecting any changes on the regulation for this fiscal year.
True, there will be a new government shortly. And there will be a new economic policy. And we will see whatever we -- is interesting on the --as relates energy. But right now we're not expecting any changes in the regulation.
The second question, the timing for the national energy plan, well, I have two comments on that. Yes, there is a first draft that we've also commented already. I think it was during the second conference, the second quarter conference this year. And the draft is being discussed and worked on the ministry of industry with all regional communities. I think there is a meeting planned in the next few days.
And my personal opinion is that I'm positive that with the elections already around the corner I don't think the energy plan is going to be passed this -- in this mandate. Because once they have the final draft normally it is commented on the Parliament. The Parliament is no longer in office right now. So most certainly the energy plan will start -- will be implemented next year.
But for -- as regards next year I think it's really hard for me to give you a specific date. Personally I think the new government will take its time. And this makes sense. It needs to assess the value received and once again it may need to contact the stakeholders. But I think that for 2012, 2020 the energy plan based on the current draft could be passed I think at the end of the second half of 2012. But that's just my personal opinion.
And finally, regarding 2012, I must say that with all the data we have available right now including the draft for the energy plan, the setbacks, drawbacks and advantages in the investments and some novelties such as Altamira or Gaviota, right now our forecast for the strategic plan 2010-2014, our forecast is that we can perform on the global number we gave you. Maybe not the 3.5%, but we could perform on 95% of the plan, maybe. Those are the numbers we are working on right now.
And for 2012, even though we are not still fine-tuning the budget for next year, I can say that the investment number most likely based on the information we have today will be in line with the average for this period. Thank you very much.
------------------------------
Operator [4]
------------------------------
Next question by Javier Garrido from JP Morgan. Please go ahead.
------------------------------
Javier Garrido, JP Morgan - Analyst [5]
------------------------------
Good morning. I had several questions. The first is regarding the plan to build a regasification plant in the Port of Huelva. Can you explain to us the implications for Enagas in terms of CapEx, and the impact it would have on the CapEx, whether building the plant is already considered in your projects and your plans, since it's a long-term project? In short, what would be the impact in the mid-long term if the project actually comes through?
And the second question would be regarding the purchase of Altamira. I would like to know if it has had any impact on the P&L account for the third quarter in terms of cost of financing. Did it have an extraordinary impact? I don't know if closing the financing has an additional cost. If there is a non-specific cost that you would like to mention.
And finally a very general -- generic question, in terms of value and the demand the last nine months has been weak and the economic outlook is not buoyant. I would like to know your opinion regarding how a bad economic outlook for two years could have an impact on the regulator when approaching the investment plan. Or do you think this would have an impact at all on the pressure that the regulator would have from the commercials to change the framework? Thank you very much.
------------------------------
Antonio Llarden, Enagas SA - President and CEO [6]
------------------------------
Thank you very much, Mr. Javier Garrido, and I will answer you now. First, the plant in Huelva, clearly as part of our investment plan we do not have investments planned on this plant. However, if the plant actually becomes a project and if it's connected at the end with the main network nationally, then maybe we would have to expand on the national network. Or we would have to give more capacity to one of connection units.
But it's not in our plans right now. But if it's done, yes, it would mean a complementary investment, although it's -- we have not considered it in our plan yet.
Regarding Altamira, I must confirm that there has been no impact on the P&L account or the financial cost for the third quarter. As I said before, if necessary this will be included on the fourth quarter when we have all the documentation readily available. In any case, it will be a positive impact on the results. And this seems to be logical. However, right now there is no specific impact in financial cost or otherwise.
And finally, regarding the gas volume, I'm going to share with you certain figures that are more updated that what you have on your -- the presentation because clearly the presentation is on the third quarter of the year. So I can share with you the accumulated data as of yesterday which is the data with the most granularity we have right now.
Global consumption of gas as of October 24 would have gone down compared to last year by 5.3%. But there are two figures here. The negative 5.3% is due to a decrease in gas for electric generation of 16% and an increase of gas for industrial use of 0.5%. This 0.5%, (inaudible) meaning it -- bearing in mind the standard temperatures are not the ones we've had this year, which have been very soft and we just for [levelability] it would be a 4.4% increase.
These are real data as of yesterday. Compared to data from other European countries, I don't have those data updated as for today. But I have those data as at the end of the first quarter and in certain cases with an end-of-year estimate already.
So what -- paradoxically Spain is doing better than the rest of countries in this sense. The estimate for Germany by the regulator for the end of year is a decrease in consumption compared with last year of 10%. Italy has a similar demand to last year's. The UK for the first half of the year the decrease in demand was down 14%. France, we would be in at around 10%, 15% down in demand. And Belgium 15% less approx.
So these numbers, which are way lower in Europe, are due to the fact -- are due to the weather. This has been a very mild year in terms of weather. So the weight of domestic -- of households is very important for them. More so than in Spain. And that's why they have a starker decrease in demand. So the decrease in Spain needs to be put in this framework.
Now, regarding your next question, would this have an impact on the regulator in the long term? Well, it's not right for me to say this but I think I can say this. This is a very strict, well-planned Company and we are ahead of the curve a year and a half already. We have reduced our -- in our investment plan -- we reduced our investment plan to be in line with a evolution of demand lower than our initial forecast. So it does not seem likely that in the next two, three years our investment plan would be different.
Now, forecast that we can make starting 2015 are a different thing. As indicated in the energy plan, in the draft and with the vision that we have on demand right now, of course, investment after 2015 would not be very important or significant because we would not need a large volume of investment in our concepts.
In any case, we would continue to invest in certain areas for security -- to secure the supply and have easy access lines and to support as well the renewable sector.
I must say, as well, that my best outlook right now, my own personal opinion is that the demand is going to go down slightly a little bit. I think we will end the year with 4% decrease compared to last year, basically due to the decrease in demand for gas for electricity which will be slightly below 16% at around 13% probably. And gas for electricity more so than the weather has had an impact this year.
And the carbon has had the most impact, actually. The coal. We can -- we were going to finish the year where the electricity generation from coal will be at around 19%, when a couple of years ago I think we were at around 10% -- 8% to 10%. So at this point we are generating pretty much double of the electricity from coal more than two years ago. So, I think this has had an impact on how the electricity generation has decreased from gas. Now, a question that I ask myself, will this trend continue in the next few years, in the next two years? I cannot answer, and it certainly does not befit me.
------------------------------
Operator [7]
------------------------------
Next question will be from Carolina Dores from Morgan Stanley. Please go ahead.
------------------------------
Carolina Dores, Morgan Stanley - Analyst [8]
------------------------------
Good morning to everyone. My question has to do with possible future positions. You're studying -- looking at investments, outside Spain, or do you think there are more opportunities to obtain asset -- investments in Spain?
------------------------------
Antonio Llarden, Enagas SA - President and CEO [9]
------------------------------
Thank you very much for the question. I think the acquisitions policies for third parties, something I talked about the -- back in 2007, well, I marked down what could be the framework. And we've complied strictly with this over the last couple of years since we were able to. So, you know this framework. So, I won't repeat this. But, I think we are actually studying the possibility in Spain of this.
The core business for us in Spain at this moment is -- there isn't much of it in the area of transport. This is something that we're looking at. But, at the moment, when the time comes, we'll see if there are possibilities. But, outside Spain, I would say that there's not an asset that would be of interest to us.
But, I'm -- to make the most of your question to mention that the Portuguese government has given us a deadline for possible privatization of REN in Portugal. And I should tell you that this is -- we yesterday afternoon in fact -- we talked to an organization -- granted to us through the Portuguese government, thanked them for thinking about us as a possible interested investor but also telling them that looking at the way things have been posed, it's not actually of interest to us in this first phase of determination of interest.
The Portuguese government was interested in possible investors in finding out what possible price we might be talking about, what amount of shares, but also in terms of synergies and industrial plan what could take place. (technical difficulty) we're thinking that there's not really any possible synergy in this area in that the company, the way it's set up at the moment is fundamentally based on electricity, so about 70% in fact. And we really couldn't contribute synergies or a major industrial plan there.
So, we declined to take part in this process because one of the conditions that was required was something that we couldn't provide and really wasn't of any specific interest to us. So, I think we -- there's nothing new to say there. But, thank you very much indeed for your question.
------------------------------
Operator [10]
------------------------------
Next question, Gonzalo Sanchez from BPI.
------------------------------
Gonzalo Sanchez, BPI - Analyst [11]
------------------------------
So, I have a question on operating costs. In the nine months of this year in comparable terms, you're up -- these are up 0.8% as opposed to the first -- we want to look at what the prospects are for the rest of the year and see why there's this major difference.
So, another question on Gascan, which -- what implications would this have in the investment plan for Enagas, have you considered this? And will there be any more investments before 2014 that would make a difference?
------------------------------
Antonio Llarden, Enagas SA - President and CEO [12]
------------------------------
Sorry, didn't quite get those figures there in the question. The first question will be answered by Mr. Gonzalo Sanchez (sic), who's the Chief Financial Officer. Thank you, Diego.
------------------------------
Diego de Reina, Enagas SA - CFO [13]
------------------------------
Thank you. Yes, in effect, we've had a slight change in our growth of expenditure. This is -- was from the first quarter due to stock rotations at the end of the previous financial year where looking at cost containment for operating cost (inaudible) and the financial year, once we brought in Gaviota and at around 2% of growth in OpEx. So -- operating expenditures.
So, using these figures as a reference point in the third, we've got 0.8% cost up for OpEx. I think our growth is growing --- our cost is growing about 6%. So, we're maintaining this same tone more or less as in previous years as regards a rise in margin and growth in income -- growth in income and growth in operating cost also.
Okay. So, on the second question, Gonzalo, we've in this third quarter reached an agreement for our stake in Gascan. Unfortunately, we hadn't anticipated this in our energy plan when we wrote this out at the end of 2009. But, we have brought in a first forecast. And I have to say that there was -- if everything goes well, we will have investment in 2013, 2014 for this plant.
So, on the initial figure for -- in the energy plan -- sorry, plan for investment for Enagas 2010-2014, over this initial figure that we had at the end of 2009, what we've had is we've had things happening which have slightly adjusted our forecast, things that we hadn't really anticipated, like this, for example, would be brought in. So, I can't give you a fine adjustment there because we're still doing that at the moment. I could say it better at the moment. This investment would be an investment to add for into 2013-2014 within our energy plan. Thanks very much.
Okay. Thank you.
------------------------------
Operator [14]
------------------------------
Next question is from Manuel Palomo from Citi.
------------------------------
Manuel Palomo, Citi - Analyst [15]
------------------------------
Good morning. I have several questions. Well, I think some of my questions have been answered, but there's one thing that hasn't. On regulation, future regulation, at the beginning, regulation of assets was for 10 years in Spain, 75 basis points. And this seems very low. Some of the regulators in neighboring countries like Portugal have separated regulations of the bond, 10-year bond.
I'm wondering if there's something similar has happened in Spain with spreads for the future. 2008, you talked about a financial component of 7.4% and the 10-year bond being affected. I think this is going a bit high. So, what will happen in the regulatory framework and from the point of view of regulation in that area?
------------------------------
Antonio Llarden, Enagas SA - President and CEO [16]
------------------------------
Really in principle, we at this moment don't have any data which would lead us to think that we should be fiddling around with this regulatory element. I think that from the information we here, from rumors, etc., the new government in energy plans will have two major priorities.
First of all, as I commented before, they have to finalize long term what will be the energy mix for the country. This mix, perhaps, is a very generic term, but it's not. It's energy mix means -- this is my opinion, of course, my professional opinion -- that we need to have a very clear idea in our Company of what will happen in the nuclear area, what alternatives we have in Spain for the next 15 years in that area.
We have three perhaps scenarios. And we're going to do the same as in Germany. We're going to shut down our nuclear plants within that maximum period of five to seven years. Are we going to keep those plants going and close them later, or are we going to keep them going and prolong the useful life of these plants?
So, it's important for companies to know what's going to happen there, particularly Enagas, for which path we're going to take, which may seem -- I think the distance leads quite far down road, weren't really sure, though, they're quite, quite similar at the beginning.
So, renewables have a significant weight. We're not arguing against this. But, we need to know what will be the growth rate for renewables over the next five to 10 years, what will be the weight of technologies within this and the impact on rates, on tariffs.
Also, we have to know if we're going to maintain electricity production of 10%, 15%, or 25% through coal with coal-fired plants. So, Manuel, I think this is the key to defining the energy mix the next 15 years. All these questions we need to know, really. Everything else would be additional [curry] on the cake, as it were.
But, we -- so, I can't -- the first thing, the new government of course can't improvise. They'll take time to reach their decisions. But, from this decision, what we have to have in my view is a national energy plan, which is definitive 2012-2020 or 2012 to '22, whatever, because this energy plan will be the fruit of this decision of the new government.
So, another major task we have, which is really quite urgent, is to continue with working against the electricity deficit and for its complete removal finally. I think, for me, we need a consensus between many of the specialists in the companies on the major lines of -- or major approaches for energy production for the future.
So, I think we, the S-GRI gas connection with gas pipeline with France will be very important. So, are we going to -- can we have smart grids, for example? Will we be implementing these? And I think what's happened really from there -- so, for gas compression stations, what will happen there?
So, I think the priorities in energy are what we've outlined. And at this moment, we don't have any other specific information on what a new regulator would be because we have not our elections yet. So, we -- these things are a little bit up in the air. What are we going to -- we're going to have a Robin Hood tax with Italy, or are we going to increase our company tax or whatever? There's nobody at this moment, really, absolutely nobody who can really give you an answer on this. Are we going to do it? Are we not?
So, I think what I can say, what I believe professionally is that the way there are some key lines of approach which must be tackled by the next government, whatever color it turns out to be. These major decisions must be taken. And once we've got these decisions taken, we can move ahead.
So, my conclusion is, honestly, we have no information, no indication that there'll be a major change in payment and taxation on energy production. In the gas sector, we have three different businesses. Each have nuances as regards taxation. But, the regulator has said to us that basically the final result of Enagas is a mix of these three regulatory levels, which we can find in other European countries fairly close to us in terms of production in gas production and volume investments.
So, we're not expecting any major change, at least with the information that we have today. Thank you very much.
------------------------------
Operator [17]
------------------------------
Next question will be by Jorge Alonso, Societe Generale. Please go ahead.
------------------------------
Jorge Alonso, Societe Generale - Analyst [18]
------------------------------
Good morning, everybody. I have two questions. First one is, once we've seen the situation in the markets, do you still consider that the average debt cost is going to be 3.3 %for your -- in your forecasts, or are you going to change your forecasts?
And next question would be, could you give me the working progress number for next -- for the end of the year? What assets have you invested that are not generating EBITDA by the end of 2011? The rest of my questions have been answered. Thank you.
------------------------------
Antonio Llarden, Enagas SA - President and CEO [19]
------------------------------
Thank you very much, Mr. Jorge, for this second question. We were looking for the accounting numbers. Well, first, yes, for 2011, our hypothesis of debt cost was 3.3%. And actually, I think we're going to outperform that number. This is one of the figures that is going to lead us to the very good end-of-year results and actually better than expected.
For the 2012-2014 period, we have not considered 3.3%. But, the average cost of debt for '12, '13, and '14 will be 4% in our plans, clearly way above the 2.8%, 2.9% with which we will be finishing this year. So, yes, in our strategic plan, in our forecast, this has been adjusted.
We actually already introduced this factor last year. And we think it's a reasonable forecast, bearing in mind that it's fixed-rate debt, most of our debt and so forth. But, given the current situation, we thought this would be an appropriate cost for the three remaining years.
Now, regarding the work in progress for the end of the year, approximately, I can't give you the exact figure, but it would be around EUR500m, EUR600m, meaning the work in progress, basically all of it, would be what we would finish with through 2012. It could be slightly above, but this would be the number.
In fact, this is the figure that actually matches the initial forecast in our plans. It would be business as usual. And you may think that I'm stepping ahead, but when we do the conference call in February, of course, in the fiscal year and announcing possible objectives for next year and so forth, most likely, this number, which will have been confirmed by the end of December, will enable me to confirm in February a good number of exploitation assets for 2012. So, roughly, I think that it's around EUR600m right now. Thank you very much.
------------------------------
Operator [20]
------------------------------
The next question will be by Virginia Sanz. Please go ahead.
------------------------------
Virginia Sanz, Deutsche Bank - Analyst [21]
------------------------------
Hello. Good morning. I also had two questions. The first would be regarding the cost expenditure control of the next -- of the last few years that I think is well above expectations. Aren't you afraid that when OpEx standards are reviewed again, the regulator could think current OpEx are very generous and that's why you are outperforming every year?
And my second question would be, could you quantify in any way for next year, out of all the assets that you've bought from third parties, in the full year, what would be the contribution to the net profit? Thank you very much.
------------------------------
Antonio Llarden, Enagas SA - President and CEO [22]
------------------------------
Yes, Virginia, thank you very much. My apologies for the delay, I was looking for the latest accounting data. So, the cost control policy, first, yes, of course, a company in the energy sector with a regulatory, of course, a regulator regularly analyzes costs. There is always a certain risk that if you're efficient your income will be cut down.
However, let's not forget that at the end of the day we have no alternative. The regulator makes you be efficient. If we were lazy and we would say we're not going to be efficient, we had the right income and so forth, we're not going to get worried, this would not guarantee at all. We have evidence throughout all countries. The regulator could say, hey, you're not being efficient enough.
So, more than a risk, I think that we should see it as reality. Regulators review efficiency on a regular basis. If you're not efficient, you -- it's mandatory for you to become efficient. And if you are efficient, yes, part of it may be seen or cut down, but it's part of the business. It's part of the challenge of a regulated company.
It -- you know that they are always going to ask for more efficiency, and if you're an intelligent manager, there will always be an incentive for you in being efficient.
So, truly, I'm not that concerned about this. As President of an energy company, I'm more worried about the financial context, the euro crisis and so forth, things that could affect all companies in terms of financing because I think in this sense we are very transparent with the regulator. We've always been, and I think this works to our benefit. The regulator is perfectly aware of our efficiency, full disclosure. And this efficiency is due to the fact that we've been able to increase the asset base considerably without increasing the cost too much.
Every year, regulators have more experience, of course. And they know perfectly where they can find room for improvement, where they can change the regulation because there is room for profit that is just crazy. And they also know where there is efficiency in the Company and where they can look for efficiency elsewhere. So, from this point of view, Virginia, I am not too concerned.
Regarding the second question and adding the different assets and just making the rough calculation here with my team, I cannot give you the exact number. But, I can give you a rough number. Yearly, the new acquisitions in total, new acquisitions of assets that were not specifically included in our investment plan, it would be EUR40m of EBITDA per year. Thank you.
------------------------------
Virginia Sanz, Deutsche Bank - Analyst [23]
------------------------------
Thank you.
------------------------------
Operator [24]
------------------------------
We have one last question by Fernando Murillo from La Caixa. Please go ahead.
------------------------------
Fernando Murillo, La Caixa - Analyst [25]
------------------------------
Good morning. I had a question regarding the settlement for next year. The last number I found is on the yearly report is EUR920m. EUR500m is from the bond from four years ago, and EUR421m is from credit companies. What policy are you considering, refinancing in the capital markets broadly, or what are you planning based on the credit market situation right now? Thank you.
------------------------------
Antonio Llarden, Enagas SA - President and CEO [26]
------------------------------
I'm going to yield the floor to Fernando Murillo (sic), who will answer in detail to you.
------------------------------
Unidentified Company Representative [27]
------------------------------
Good morning, Fernando. Right, we have a plan for refinancing in the next fiscal year. Bearing in mind the situation of markets right now and the likely evolution that we'll have, we are already prepared to -- for this. Specifically, this year, we started to develop a plan to issue commercial paper in Europe. The results are fantastic I think.
And there is a plan approved by the Board up to EUR9b. I think this year we will end up with EUR400b (sic). And for next year, the most likely scenario is that, as part of the settlement from the bank financing, they will be renewed, part of them. But, of course, we will redirect them to the capital markets.
Now, for -- to expand the bond in the long term, and I know that there is a EUR500m up for next June. And this part of the EUR400m, since we still have EUR500m more, I don't think there are any problems. As I said, the response by the markets is excellent, and it all indicates that the road to follow, just like in other corporations, is to reduce the debt finance through financial institutions and having recourse to capital markets.
And I would complement the very good explanation by the CFO saying that this policy as of this year has yielded very good results in terms of debt cost as well. So, from this point of view, this would be our policy for next year.
------------------------------
Unidentified Company Representative [28]
------------------------------
Well, thank you very much, Fernando. I don't know if there are any further questions. Apparently not. Okay. So, thank you very much for your interest, all of you. And in short, for the fifth year in a row, I think we can say that the Company's going to perform with objectives despite the situation and the environment. And our forecast for next year, despite all uncertainties in the financial and economic environment, our forecasts are good.
And from the Investor Relations Department and myself, of course, we are open to meetings, one-on-one meetings and meetings with investors if you want more information. Thank you very much.
------------------------------
Editor [29]
------------------------------
Speaker statements on this transcript were Interpreted on the conference call by an Interpreter present on the live call. The Interpreter was provided by the Company sponsoring this Event.
------------------------------
Definitions
------------------------------
PRELIMINARY TRANSCRIPT: "Preliminary Transcript" indicates that the
Transcript has been published in near real-time by an experienced
professional transcriber. While the Preliminary Transcript is highly
accurate, it has not been edited to ensure the entire transcription
represents a verbatim report of the call.
EDITED TRANSCRIPT: "Edited Transcript" indicates that a team of professional
editors have listened to the event a second time to confirm that the
content of the call has been transcribed accurately and in full.
------------------------------
Disclaimer
------------------------------
Thomson Reuters reserves the right to make changes to documents, content, or other
information on this web site without obligation to notify any person of
such changes.
In the conference calls upon which Event Transcripts are based, companies
may make projections or other forward-looking statements regarding a variety
of items. Such forward-looking statements are based upon current
expectations and involve risks and uncertainties. Actual results may differ
materially from those stated in any forward-looking statement based on a
number of important factors and risks, which are more specifically
identified in the companies' most recent SEC filings. Although the companies
may indicate and believe that the assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate or
incorrect and, therefore, there can be no assurance that the results
contemplated in the forward-looking statements will be realized.
THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION
OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO
PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS,
OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS.
IN NO WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER
DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN
ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S
CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE
MAKING ANY INVESTMENT OR OTHER DECISIONS.
------------------------------
Copyright 2016 Thomson Reuters. All Rights Reserved.
------------------------------