PRESENTATION TO DDF. 8 April Allan Bødskov Andersen (Group Treasurer & Head of IR) Kristian Borbos (Lead IR Manager)

Transcription

1 PRESENTATION TO DDF 8 April 2014 Allan Bødskov Andersen (Group Treasurer & Head of IR) Kristian Borbos (Lead IR Manager)

2 Disclaimer Certain statements in this presentation are based on the beliefs of our management as well as assumptions made by and information currently available to the management. Forward-looking statements (other than statements of historical fact) regarding our future results of operations, financial condition, cash flows, business strategy, plans and future objectives can generally be identified by terminology such as targets, believes, expects, aims, intends, plans, seeks, will, may, anticipates, continues or similar expressions. We urge you to read our annual report available on our website at for a discussion of some of the factors that could affect our future performance and the industry in which we operate. Should one or more of these risks or uncertainties materialise or should any underlying assumptions prove to be incorrect, our actual financial condition or results of operations could materially differ from that described herein as anticipated, believed, estimated or expected. These statements are not guarantees of future performance and involve certain risks and uncertainties. Therefore, actual future results and trends may differ materially from what is forecast in this annual report due to a variety of factors, including, but not limited to, changes in temperature and precipitation levels; the development in oil, gas, electricity, coal, CO2, currency and interest rate markets; changes in legislation, regulation or standards; renegotiation of contracts; changes in the competitive environment in DONG Energy s markets; and security of supply. DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

3 Appropriate capital for the asset base Debt financing DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

4 Strategy 2020 Group TRANSFORM BUSINESS EBITDA Growth Legacy DKK 20bn TRANSFORM ENERGY SYSTEM CO 2 intensity gco 2 /kwh CREATE FINANCIAL VALUE ROCE excl. writedowns > 10% ROCE incl. writedowns 6.8% DKK 9.6bn -0.9% 0.5% -7.9% DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

5 Asset base influencing the desired capital structure DONG Energy's asset base: Long-lasting assets (20-40 years) Inherent operational risks (eg. oil & gas production) Significant commodity price exposure In addition, DONG Energy is pursuing a growth strategy with sizeable capex requirements Offshore wind gross capacity (GW) 10 4x Oil and gas production ('000 BOE/day) 2x DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

6 Capital base Asset base with long lifetime is financed and matched with a conservative capital base with long tenors: Equity Hybrid capital Senior unsecured (both bonds and loans) Capital base 2013 (DKKbn) Capital base influenced by capital structure targets: Minimum rating of BBB+/Baa1 FFO/Adjusted net debt of 30% Avg. time to maturity: 10.2y Strong commitment to capital structure targets 2 Capital base 2013 Equity Hybrid Bank loans Bonds Mortgage loans and other DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

7 Credit metrics below requirements in 2012 Earnings under pressure in 2012 following primarily challenges on the gas market in Continental Europe Combined with an ambitious capex programme, credit metrics declined Financial Action Plan launched in February 2013 to strengthen the capital structure and provide the necessary capital base for pursuing the strategy towards 2020 Credit metrics FFO/Net debt and RCF/Net debt Significant decline Rating agencies' requirements DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

8 Utility industry experiencing a negative rating trend Rating agencies have in recent years adopted a more negative view on power and gas companies: Conventional generation under pressure from declining demand and growth of renewables Oil/gas spread impacting midstream gas players Political risk in certain countries Utilities no longer perceived as a defensive sector Agencies have tightened their ratio requirements EU power demand and renewable supply (TWh) 3,000 2, % +78% Power demand Renewables supply Ratings migration large Utilities (Moody's EMEA) DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

9 DONG Energy response Financial Action Plan Update 1 Divest DKK 10bn of non-core assets Divestments of DKK 14.4bn (EV) in Selective farm-down of core assets Farm-down in London Array sales price DKK 5.8bn Farm-down in Westermost Rough buyers commit DKK 4.5bn 3 Reduce costs by DKK 1.2bn Cost savings of DKK 1.4bn in Restructure Energy Markets Significant cost reductions and renegotiation of gas contracts Turnaround achieved already in 2013 (EBITDA of DKK 0.3bn) 5 Inject equity of at least DKK 6-8bn Equity injection of DKK 13bn completed on 20 Feb DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

10 Equity injection completed on 20 February 2014 DKK 11bn from new investors and DKK 2bn from existing minority shareholders The Danish State and the other shareholders have agreed to seek an IPO when conditions are right In a potential future IPO, the Danish State will remain majority shareholder in line with the Political Agreement in Denmark OWNERSHIP PRE EQUITY INJECTION Danish State (81.0%) SEAS-NVE (10.9%) SYD ENERGI (3.5%) Insero Horsens (2.6%) Nyfors Entreprise (1.2%) Galten Elværk (0.9%) OWNERSHIP POST EQUITY INJECTION Danish State (57.3%) Goldman Sachs (18.0%) SEAS-NVE (10.9%) ATP (4.9%) SYD ENERGI (3.5%) Insero Horsens (2.0%) PFA (1.8%) Nyfors Entreprise (1.0%) Galten Elværk (0.6%) DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

11 Strong recovery in 2013 Restoring financial robustness in 2013: Strong operating performance New assets on stream Execution of Financial Action Plan DONG Energy credit metrics Rating agencies' current requirements Equity injection Illustrative Equity injection of DKK 13bn being a central element in adhering to the rating agencies' requirements , incl. DKK 13bn equity injection DONG Energy rating development A- BBB+ BBB BBB- S&P Moody's DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

12 Rationale for maintaining a solid rating Easier and cheaper access to funding More attractive conditions and pricing Faster and more smooth financing process More efficient trading on energy markets Trading in energy markets is normally conducted with financially strong counterparties (banks and large energy companies) Some bond investors only have mandate to invest in rated issuers For frequent bond issuers as energy companies, a credit rating is standard A solid credit rating reduces lenders urge for financial covenants For large long-term trading agreements (e.g. gas agreements), a solid credit rating is close to a prerequisite Absence of a rating (or a solid rating) would limit trading flexibility (line restrictions) and create higher costs for guarantees, deposits and collateral Helps partnership model within offshore wind DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

13 Appropriate capital for the asset base Debt financing DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

14 Funding strategy Diversification of funding sources: Lender types (bank loans and capital market debt) Maturities (smooth maturity profile) Currencies (bonds in EUR and GBP) No financial covenants Financing out of parent company DONG Energy A/S: Optimal terms Avoids structural subordination Transparency and simplicity Uniform documentation Gross debt incl. hybrid capital 2013 (DKKbn) Mortgage loans and other Bonds 52.5% 3.0% Hybrid capital DKK 59.7bn 22.2% 22.3% Bank loans Debt maturity profile 2013 (DKKbn) Expected early redemptions of bank loans Bank loans Bonds DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

15 Presence on debt capital markets EMTN bond programme of EUR 7bn Cost-efficient Flexible Swift access to funding Strengthening of capital structure through hybrid capital Rank between senior debt and equity Share characteristics of both equity and debt Weigh 50/50 in rating agencies' credit ratios Classified as equity in IFRS Coupons tax deductible Credit spread (basis points) DONG Energy 2022 bond Peer bonds (similar maturity) Jan 2013 Apr 2013 Jul 2013 Oct 2013 Jan 2014 Apr 2014 Hybrid capital Principal Coupon Maturity Listing EUR 700m 6.25% Year 3013 Luxembourg EUR 600m 5.5% Year 3005 Luxembourg EUR 500m 4.875% Year 3013 Luxembourg DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

16 Strong liquidity position Strong liquidity reserve (DKK 34.7bn EoY 2013) Liquidity reserve 2013 (DKKbn) Further amplified through equity injection Excess cash partly directed towards early repayment of bank debt Liquid assets 49.9% DKK 34.7bn 50.1% Comm. facilities P&L impact associated with early repayment Value in flexibility for adjusting debt portfolio Committed facilities composed of: Syndicated RCF of EUR 1.3bn (13 banks) Six bilateral facilities All facilities unutilised DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL

17 Q&A Please visit: DEN DANSKE FINANSANALYTIKERFORENING, 8 APRIL