Pier Francesco Pinelli
Financial ERG: ERG (100%) ERG Petroli Refining Supply & Logistics Marketing Sarpom Trecate (26%) Raffineria di Roma (28%) Savona plant Trecate depot Priolo logistics RdR logistics (28%) Sarpom logistics (26%) SI.GE.MI (26%) Porto Petroli (9%) Retail (~ 2 000 service stations) Wholesale Shares in 11 reselling / service companies Lubes (blending & sales) ERG Petroleos ERG Suisse 2
Financial ERG Petroli: Mission Achieving the maximum sustainable value creation from the integrated business Retail: guarantee the long term retail network profitability through structural service station improvements; becoming the best in class Italian retailer. Wholesale: consolidate current profitability in key areas, capturing growth opportunities in new products/services, geographic areas and markets. Refining, Supply & Logistics: ensure product availability to the marketing division, pursuing cost reduction and growth opportunities. 3
Financial From Crude Oil To Customers Inland refineries Crude Oil 3.0 mt 2.2 mt Wholesale customers 0.1 mt Utilities & Losses 2.9 mt Finished Products 2.2 mt Retail customers 2.2 mt Cargo Market Logistics 0.7 mt Supply & Sales 4
Financial ERG Petroli Retail Strengths & Opportunities Effective market penetration achieved by the new inthe field commercial organisation Flexibility and adaptability to market changes Increasing deregulation (easier to build new service stations, develop non oil business) Market share growth through partnerships & acquisitions Weaknesses & Threats Structural disadvantage of ERG retail network versus market leaders Increasing deregulation (potential margin erosion in the long term) 5
Financial ERG s Retail strategy Structural Retail Network development Build 50 new service stations by 2010 Modernise 140 service stations Distinctive marketing strategy Delivering a new high impact company brand Image Restyling the entire ERG retail network by June 2008 Focusing on perceived high quality customer service Customer Value Proposition ERG s unique retail approach focused on micro markets Pricing method Local Advertising & Promotion Partnerships & Acquisitions 6
Financial Brand Image Evolution New Image effectiveness based on ERG customer service perceived better than competitors Forceful communication strategy 7
Financial Restyling Service Station (daytime) Overall Investment: Euro 72 m IRR: 10% Timing: 2007-2008 8
Financial Restyling Service Station (nightime) 9
Financial Restyling Kerb pump 10
Financial What Customer Value Proposition How Who Trust Corporate Values ERG Capture customer needs Customer care & innovation ERG Petroli On site high quality customer experience Appeal Comfort Friendly Offer mix Dealers Perceived High Customer Satisfaction 11
Financial Retail Network development Other Kerb pumps Filling st. Service st. Motorways 0,9% 1,4% FORECAST 1,7% 33,4% 39,0% 40,5% 26,3% 26,8% 27,8% 36,4% 30,5% 26,7% 3,0% 2,3% 3,3% 2000 2006 2010 Market Share 6.6% 7.0% 7.8% Total throughput (Kmc) 2,559 2,710 12
Financial ERG s retail pricing method ERG s unique pricing method s main objective is to be transparent and prompt. This means Weekly update in order to follow: Oil products prices (Platts High-CIF Med) Average exchange rate $/ /mc Calculated Price Upper price (adding the entire buffer of + 10/mc) Platt s average Platt s average D = + 11 /mc D = + 11/mc + VAT Price before change Lower price (subtracting the entire buffer of 10/mc) Week 1 Week 2 Week 3 Time Week in which the retail price has changed ERG s short term competitive position protected by a declared buffer of 1 cent/lt 13
Financial Wholesale, Refining, Supply & Logistics: Strategic Objectives Wholesale Consolidate volumes in product short balanced areas (North Western Italy, Rome area) and Sicily Expand in niche markets (LPG, Bitumen, Jet Fuel) Improve lack of coverage of some areas (North East, South East) Increase lubricants profitability Refining, Supply & Logistics Continue to maximise overall ERG Petroli profitability by Ensuring product availability to commercial business units Balancing inland refinery production Reducing logistics costs Optimising use of existing assets 14
Financial ARLUNO Wholesale regional volumes - Refining & Logistic Assets LACCHIARELLA TRECATE ARQUATA 244 97 2007 volumes (KT) GENOVA 95 SAVONA (Fuels&Lube) 964 ROMA 11 43 21 79 49 234 249 North Centre South Gasoil Bitumen LPG Jet Fuel Refinery Logistic assets ISAB 15
Financial Inland Refinery planning 8,0 Total Costs (incl. Depreciation) Crude (kt) 2007 2010 7,0 6,0 5,0 4,0 3,0 2,0 1,0 0,0 3,0 2,9 2,7 2,4 2,7 2006 2007 2008 2009 2010 Total Costs (incl. Depreciation) LS MS HS Total 2,000 600 400 3,000 2,100 650 400 3,150 API 35.2 35.3 34.9 34.8 34.8 %S 0.75 0.79 0.82 0.81 0.79 Yelds (kt) LPG 2007 150 2010 150 Gasoline 600 600 Gasoil 1,400 1,500 Fuel oil 700 750 Total 2,850 3,000 New investment opportunities under development for both refineries 16
Financial ERG Petroleos Current Operations substantially consolidated with (marginally) positive EBITDA attainable Strategic options under development Strengthening through potential partnerships with local logistics and wholesale operators or considering withdrawal 17
Financial Capital Expenditure Profile mln 120 100 97 90 80 60 40 20 0 40 31 56 56 17 16 12 12 40 43 44 44 2007 2008 2009 2010 Restyling Maintain Capacity Development Structural increase of investments generating a return 18
Financial Summary A solid and well integrated asset base Retail Achieve a long term sustainable and efficient business on stand alone basis Retail network development Restyling Distinctive marketing strategy Partnerships & Acquisitions Wholesale Consolidate volumes in product short-balanced areas Capture new business opportunities in niche markets Refining, Supply & Logistics Logistics remains a key advantage Inland refineries continue to guarantee product availability in strategic markets Opportunity to upgrade inland refineries being studied remaining a solid cash contributor for the Group 19