nkt cables: Outlook 2006 Presentation to Analysts May 24, 2006

Transcription

1 nkt cables: Outlook 2006 Presentation to Analysts May 24,

2 Others Denmark 16% 20% Asia 10% employees Eastern Europe 27% 27% Germany Others Trolley Wire / OPGW 11% 11% 33% High/ Medium Voltage 45% Low Voltage 2

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4 Vision nkt cables is creating value for its customers by providing solutions with cables Strategic direction Customer focus Low cost Partnership with key customers Energy Cables - HV (cables, accessories, installation, projects) - MV (cables, accessories, service) - LV (cables, service) Trolley wire I will talk about the Power Utility Market Europe + China 4

5 Power Utilities Industry Development 5

6 OPGW- /OPPC- Installation OPGW- /OPPC- Accessories OPGW /OPPC OPPC- Termination Units 110 kv kv 30 kv 500 kv 30 kv 500 kv Generation The way of energy across nkt cables products from Generation/Transmission/Distribution to consumer 110 kv kv 10 kv 30 kv 1 kv HV Accessories up to 500 kv HV Cables up to 500 kv MV Cables 10 kv 30 kv 1 kv Cables Cabinets Cable Accessories and Boxes 10 kv - 36 kv 6

7 Range of nkt cables Products for Power Utilities and Industries 500 kv 345 kv 245 kv 110kV 72 kv 36 kv 24 kv 12 kv 1kV 7

8 Drivers for the development of Transmission & Distribution around the world Europe Americas Asia/Pacific Make the EU internal market work by completing missing grid links Deregulation in USA Meet growth demands by creating the infrastructure Middle East & Africa Improve quality of supply Define market conditions from Lisbon to Vladivostock Creating the infrastructure in Latin America Encouragement of renewable generation Create cost reflective tariffs & develop proper regulatory mechanisms 8

9 Network Expansion - Priority Investment Areas 100% Cable Partial Cables possible 9

10 Expansion opportunities in Distribution network 000 km of LV network Percent underground Netherlands UK Germany Denmark Belgium Norway Italy France Portugal Spain Austria Estimated that between 1.5-4% of the network is undergrounded each year Source: European Commission 10

11 Security of supply - Generation and Transmission Generation Competition Fuel (gas, nuclear, renewable) Construction costs Emissions impact Future wholesale price? Capacity reserve margin Recent construction costs 800MW CCGT Spain 400m 750MW clean coal Germany 800m 700MW hydro Iceland 800m 800MW nuclear Finland 1500m Source PIE Transmission Current level of import capacity Length of line Cost of interconnection (OHL or cables) Time to get planning approval/construct Financing if merchant interconnector Form of regulation (including cross border) Network access/capacity allocation or auction Construction costs 100km OHL 100km OHL/partial cabling 100km cable 70m m 300m 11

12 System reliability Recent blackouts ( ) Weather related: 1999 France, 2005 Southern USA/Germany Non-weather: 2003 NE-USA/Canada, Italy, Sweden/Denmark, UK, Netherlands All blackouts were transmission-based No problem with generation adequacy Systems were not stressed prior to blackouts Limited exchange of real time data Monitoring through nkt cables Solutions! Operational procedures unable to deal effectively with cross border trade No automatic coordinated response to emergencies No one responsible for the big picture but utilities have little defence if the lights go out. 12

13 Industry Structure (T&D) Key issues in Europe EC wants transmission to be fully independent of generation and supply but this is not the case in a number of Member States (Austria, France, Germany, Greece, Ireland, Scotland) and system operation is not independent of system ownership in many countries. Some independent transmission companies are publicly quoted (National Grid in UK, REE in Spain, Terna in Italy), others are 100% state owned (SvK in Sweden, Tennet in the Netherlands, Energidk in Denmark), others partially state owned (REN in Portugal). In US, a few independent transmission companies are emerging (ITC, Trans- Elec) Distribution and supply have not yet been unbundled in some countries (Austria, France, Germany, Ireland, Greece) but in some (e.g. UK) ownership of the two businesses has been separated and there are stand alone distribution businesses (United Utilities, Central Networks, CE Electric). 13

14 Consolidation in Europe A long way to go 6 10 >2,000 14

15 Europe s major electricity players Grid owner * * In Germany 15

16 Industry Structure The Future Transmission will gradually become fully independent of generation/supply (e.g. Terna in Italy, ITC in USA) Merchant transmission lines will develop in Europe (e.g. Greenconnector) Regionalisation rather than globalisation as the dominant paradigm. This in turn will see growth of Asia Pacific players Financing the investment needs in non OECD countries will remain tough due to low capital base and greater operational risks Revival in nuclear power 16

17 Environmental responsibility Pressure on industry to reduce carbon emissions Significant expansion of wind energy which has major implications for grid investment (wind farms often a long way from customers), particularly in Germany and the UK and wind energy has implications for grid security Greater environmental awareness amongst the public (particularly re EMFs and siting of overhead lines) makes approval process for new overhead lines complex and lengthy and opposition groups are now well organised. 17

18 Utilities view of Overhead lines and Cables Acceptance of cables at LV, MV, HV in urban areas but outwardly negative view of EHV cables ( kV) in terms of data on websites, brochures Cable Industry has launched an Underground Marketing Campaign Cables solution more expensive. Investment cost by factor 3 10 at EHV, 2-3 at MV/HV; Lower multiple when life costs considered but reliance on studies limited due to uncertainties over asset lives and repairs/outage costs Inwardly accept EHV cables in exceptional cases (urban, major infrastructure projects and areas of outstanding natural beauty or where visual amenity an overriding factor, but important to prevent floodgates ) XLPE replacing fluid filled in most areas of the world Recognition that cabling solution will add to the regulated asset base 18

19 Reasons for optimism Strong political push within EU for fast tracking of electricity infrastructure investment European Commission has urged TSOs to be more innovative and develop solutions less likely to affect the interests of local population, such as integration of electricity lines in new railway tunnels Dismantling of overhead lines in urban areas and replacement with cables (e.g Stockholm, Vienna, California & New South Wales) freeing up land for redevelopment and housing Track record for XLPE cables at EHV is beginning to emerge and the Track record is Good! 19

20 Developments in nkt cables

21 jan-03 mar-03 maj-03 jul-03 sep-03 nov-03 jan-04 mar-04 maj-04 jul-04 sep-04 nov-04 jan-05 mar-05 maj-05 jul-05 sep-05 nov-05 Metal price development EUR Copper Aluminium Annual average +46% +8% % +11% +60%

22 Revenue e meur Guidance 2006: 600 4,5 bdkk ( ~600 meur) % nominal + 12% organic e Organic growth 3% 7% 9% 12% 22

23 Organic growth (Y/Y) - Quarterly 3% 3% 3% 0% 10% 4% 4% 7% 3% 12% 7% 12% 39% - Annually 3% 7% 9% NKT Cables EBITDA (mdkk) ,2% 6,9% 5,9% 6,1% 6,0% 6,2% 6,1% 5,8% 5,9% 5,7% 5,9% 4,7% 4,7% ,0% 6,0% 5,0% 4,0% Q1-03 Q2-03 EBITDA% Q3-03 Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 Q3-05 Q4-05 Q

24 Development Conclusions 1. nkt cables has grown faster than the market : it has consistently grown more than 1.5 times the market growth in the period and is on track to continue to do so in nkt cables has solved or fixed almost all of its businesses. The remaining underperformers are under investigation or in the works, but the totality is no longer a fundamental threat (less than 10% of the total business) 3. The nkt cables strategy Customer Focus; Competence Centers; Organic Growth by penetrating adjacent markets is working 24

25 Update on the Market After years of stagnation in the major markets, the volume requirements are picking up notably in HV and MV. The reasons are: As explained: Utilities Are Investing This also drives Distribution, as consumers want more choices and thus need more flexibility in their connections to the grid Building Industry: follows the general construction market, with a small upside Railway Industry: High Growth with nkt cables as the market leader even in China 25

26 Organic Growth 2006 The business level in 2006 is enjoying further growth currently estimated at 28% (organic 12%). The main drivers are: nkt cables is winning on the HV side well positioned to take full advantage of the Market Developments nkt cables is benefiting from the market growth nkt cables is in pole position in the Railway business The business levels in UK, Norway, Spain, The Netherlands and Eastern Europe will continue to provide growth opportunities 26

27 Q & A 27