Natural Gas The Fuel of the Future? Dr. Klaus Homann CEO, RWE Transportnetz Gas GmbH DrKW Lunch London, October 14, 2004
Gas Will Not Be The Dominant Fuel. But it Will Play a More Important Role. Growth projections for the European gas market to 2020 Sales volumes in billion kwh + 2.4 % 4.294 4.399 + 14.9 % 5.057 + 9.9 % 5.560 + 5.3 % 5.857 + 3.7 % 6.076 2000 2001 2005 2010 2015 2020 2 Source: Eurogas, EU 15
Development of European Gas Supply and Demand MMmt OE/a 900 800 700 600 Minor producers Netherlands contracted Norway Russia contracted Algeria contracted Other external UK Netherlands assumed prolongations Other Europe Russia assumed prolongations Algeria assumed prolongations DEMAND (non weather cor rected) 500 400 300 200 100 0 1990 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 20 19 2021 2023 2025 3
Ample gas reserves as potential for supply to Europe proven reserves in bcm Norway 1.250 Russia 48.140 T&T 600 UK 760 Other Europe 3.210 Central Asia 7.420 Venezuela 4.160 Iraq 3.110 Iran 23.000 Nigeria 3.500 Algeria 4.520 Libya 1.310 Egypt 1.000 Other Middle East 26.410 Pipeline LNG 4
Growth Projections For The European Gas Market to 2020 Three reasons for growing demand: Possible counterdevelopments: Sustainable reductions in greenhouse emissions after Kyoto Protocol Uniform global implementation of the Kyoto Protocol is uncertain Mediumterm lower contribution by nuclear energy because of political decisions Fundamental trend towards reduction in energy intensity for electricity and heat generation Increased use of natural gas for electricity generation, also partially replacing traditional energy sources coal and oil Politically motivated withdrawal from nuclear energy is countryspecific and not likely across Europe as a whole 5
Gas Will Remain a Volatile Market. Therefore We Rely on Our Vertically Integrated Business Model RWE is an integrated gas player with presence in all parts of the value chain Equity Gas Import, Transportation, Sales, Distribution and Power generation 26 bn kwh 1) 549 bn kwh Natural hedge RWE Dea RWE Energy RWE Innogy RWE Power 1) does not include equity oil production of 58 bn kwh 6
RWE s Gas Business: Activities Around Europe MITGAS Spreegas KBGaz T&E KRI RWE Gas Polska RWE Gas Nederland RWE Haarlemmermeer Gas (vorm. NBH) The Netherlands Kamien Pomorski Miedzyzdroje Szczecin Poznan ZŁotów Trzemeszno Warsaw Dortmund Essen Poland RWE Obragas rhenag Bad Kreuznach Germany Worms Dettingen PP Prague Czech Republic Gbely Slovakia Austria Budapest Hungary Transgas 8 Czech regional utilities Nafta DDGÁZ FÖGÁZ TIGÁZ 7
RWE ranks among the Top European Gas Players: Facts & Figures 2003 Gas Business RWE Dea RWE Energy RWE Innogy RWE Group Gas reserves in bn kwh 860 860 Gas production in bn kwh p.a. 26 26 Storage capacity in bn m 3 1.9 4.6 6.5 Pipelines in km 92,000 92,000 Customers in million 1) 8.6 1.9 10.5 Sales volume in bn kwh 2) (to end customers) External revenues in bn 1.2 3) appr. 500 6.4 49 1.0 549 8.6 1) incl. shareholdings > 20% 2) incl. shareholdings > 20%; including shareholdings > 50%: 286 bn kwh 3) incl. oil revenues 8
With Transgas, RWE is on Firm Footing in European Gas Transit Business Significant position in transit of Russian natural gas to Europe Shtockmanovskoje Europe Yamal Europe Transit volume (incl. imports): 54 bn m 3 p.a.* Urengoy Direct longterm contractual relations with Gazprom (34% of Gazprom exports) Construction of alternative transport systems (Yamal II and Baltic Sea pipeline) fairly improbable (lacking profitability and financing) MEGAL Transgas WAG TAG SOL Bulgaria/Macedonia HAG Northern Lights Progress Srebelinka/Izmail Soyuz Potential conflict with the Ukraine is being averted RWE s position in the European gas transport business is secured over the long term Production field Pipeline is working Pipeline is planed *excluding imports: 43 bn m 3 9
Dominant Position in Czech Gas Import, Transmission, Storage and Trading Highpressure inland system branches off transit system and transports gas for delivery to the GDCs and six direct customers Transgas provides virtually 100% of Czech gas demand Longterm import contracts with Gazprom and Norwegian gas producers, peak contracts with VNG and Wingas Current regulatory system (effective as of 1 January 2002) provides earnings stability Statistics Length of inland system 1,184 km Underground storage facilities with total available capacity of 3.2 Bcm 10
Dominant Position in Czech Gas Supply through eight Gas Distribution Companies The eight GDCs are involved in the purchase, sale, marketing and distribution of natural gas to end consumers Networks are still being extended to supply growing gas demand Industrial customers represent the majority of revenues (59%) followed by households (30%) and business customers (11%) Current regulatory system provides earnings stability SCP PP VCP ZCP STP SMP JCP JMP Majority owned by RWE Majority owned by others 11
Our Czech Gas Business A Successful Acquisition Key 2003 figures of Transgas and Gas Distribution Companies (in million) Revenue 1,887 EBITDA 492 Operating result 371 ROCE 11.1 % Value Added 38 Our Czech Gas activities achieved positive value added 3 years earlier than planned 12
Gas Will Be Driver For Our Growth As No. 6 in Europe, No. 2 in Germany, No. 3 in the UK and one of the leading gas companies in CEE countries, RWE already has a strong exposure to gas. By internationalization, we have strongly reduced our dependence on the German gas business (50 % of gas sales). Together with electricity, gas ranks highest among our three core businesses in terms of future fillin acquisitions in our European core markets (particularly in CEE countries). 13