Gas Natural's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Gas Natural, Inc. (EGAS)

Q1 2012 Earnings Call

May 08, 2012 PM ET


Rafael Villaseca – CEO


Manuel Palomo – Citigroup

Fernando Garcia – Espirito Santo

Avinash Kant – D.A. Davidson & Co

Andrew Abrams – Avian Securities

Alberto Gandolfi – UBS

Carolina Dores – Morgan Stanley



Good morning. Welcome to the presentation of results of the first quarter 2012 Gas Natural Fenosa. As usual, the presentation will be given by Mr. Rafael Villaseca, CEO together with the Financial Manager Mr. Álvarez and Mr. Antonio Basolas, Director of Strategy and Development.

After the presentation we'll have a debate or a question-and-answer period for the people in the room and the people who have followed this remotely on the internet or who want to ask questions on the telephone. I'll pass the floor to Mr. Villaseca.

Rafael Villaseca

Good morning everyone. Good morning to those of you who've logged in from afar? We're going to analyze our three monthly or quarterly results and answer your questions. These are the six points of the presentation. I will start with the highlights. Continue with the growth of international operations which is being really very good. We'll talk about the Spanish regulatory issues, financials and an analysis of the operations. And then we will have a series of questions and get your questions and answers.

If you go to highlights for the quarter, we could simplify in these four figures. Our net income after taxes 407 million euros, a growth of 5.2%. EBITDA has remained the same 1,300 million in spite of the situation, had it not been that big a situation been what's it's been, it would have increased. Investments have gone down by 4.7% and the net debt has gone down by almost 8%. We think these results of growth are presentable if we bear in mind the investments that we've made in the last 12 months as regards to previous year and the impact of the royal decree act 13, 2012 including the first package of measures that the government introduced as regards the electric tariff deficit. So we believe it's very acceptable, these results are very acceptable. It's been a poor performance of the electric industry in Spain. It's been a good international result especially in international gas operations and a continuity and the reduction of expenses especially, financial expenses.

I would like to also underline the shareholder remuneration policy which was approved by the AGM which is in line with the strategic plan objectives and will mean a payout of 62%. As you know was approved by the AGM and a yield per dividend of 6.2% which means that the interim dividend pay will be 360 and then there will be a script of 461 script dividend and this was done last year and it was very successful.

If we go into one of the most notable areas which is the growth of international operations, I would like to tell you from these charts that first of all the international activities of the company, generally had 42% of EBITDA. Not just that but at the end of the day that 42% EBITDA internationally grew as regards the previous year by more than 32% which is what we wanted and our policy was based on Latin American operations and especially all international operations on the natural gas market. So this continues to have weight. International activities have a lot of weight in our mix and is in line with our strategy and that's one of the cases of our success.

Within international activities, I would like to highlight international gas sales which have grown really very spectacularly or quite spectacularly. We're one of the most important payers on the liquid gas market, that is part of our strategy, has been for a long time and we are still firmly supporting it. In our first quarter our sales to international customers has gone up by 44%. It's interesting to see that they've grown very strongly in Europe, 64% and in the rest of the world by about 34%. Success in Europe has to do with the setting up of commercial agencies of our own reaching out to customers short and medium term strategies, the strengthening of growth in Europe. And we have to point out here as regards to international operations, two operations that we've finalized this year.

One is in Paris, Eau de France; we've got practically half of the market that came out. That was put on sale on offer. A 1,000 gigawatt hour yearly. It’s a contract which guarantees a significant amount, critical masses to allow us to operate in such an important market as Paris.

The second project you know is a supply contract, two BCMs in Puerto Rico where we have quite a significant presence with our regasification plant and our combined cycle plant. Mono increased through two BCMs for the gasification of the island. That's had to do with the policy that I referred to later which is a policy of flexibility in the procurement portfolio, support of logistics, expansion in new markets in activities with final customers and all this means that almost 30% of the gas that we sell, we sell on the international markets so we continue to be one of the most important players in this line of business which we'll show continue most positively in the future.

We've also got to underline in South America, the gas distribution has been positive, the EBITDA has grown by 3.5%. Sales 1.7% in spite the fact that in some countries due to very special reasons, the year hasn’t been so good. The new customers grown by 4% with a generalized growth throughout the area the region, especially Mexico where we we're approaching 5% with a star project of gasification of the capital city Mexico. So EBITDA as I said 146 million has grown by 3.5%.

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