Gas Tariff Deficit in Spain. Regulatory Measures Takenbgc.bg/upload_files/Presentation of GasNatural...

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Brussels, 11th December 2012

Gas Tariff Deficit in Spain.Regulatory Measures Taken

2nd Meeting of the UNECE Gas Centre Task Force Grou p on Gas Market and Regulation

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Contents

1. Spanish Gas System

2. Demand evolution in Spain

3. Cost evolution in Spain

4. Measures taken to control Gas Tariff Deficit

5. Measures for increasing demand

Spanish Gas System

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Spanish Gas SystemInfrastructures

5Source: Enagas

6+1 LNG Terminals, pipelines connections with Alger ia, Portugal and France and new underground storages

Planta

Musel

● 13 different origins, by GN and LNG● None of them is more than 40%

● 32 active trading companies

● High degree of liberalization

● High degree of competition

The Spanish Gas System is one of the safest and most competitive

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Spanish Gas SystemCompetitiveness and security

Sourcing origins

Market share by sales volume of natural gas in the retail marketSource: CNE. 2011 Retail Market Report

Retail market volumen share

Source: CNE. Sourcing 2011

Source:CNE

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RemunerationModel

RemunerationModel

Tolls and Fees Model

Tolls and Fees Model

CollectionModel

CollectionModel

Spanish Gas SystemCollection Model

CAPEX & OPEXReasonable IRRCAPEX & OPEXReasonable IRR

DistributionDistribution

TransportationTransportation

RegasificationRegasification

UGSUGS

TransitTransit

On estimated demandNo “ship or paid”

On estimated demandNo “ship or paid”

DistributionDistribution

TransportationTransportation

RegasificationRegasification

UGSUGS

Other CostsOther Costs

Fix

ed /

Var

iabl

eLo

ng T

erm

/ S

hort

Ter

mIn

teru

mpi

bilit

y

The objective is the TOTAL COST RECOVERY trough DEM ANDThe objective is the TOTAL COST RECOVERY trough DEM AND

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Spanish Gas SystemCollection Model

What is not recovered one year,

it is included in the remuneration of the next year

for the calculation of the new tariffs

INCOMESINCOMES EXPENSESEXPENSESINCOMESINCOMES EXPENSESEXPENSES

Demand evolution in Spain

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Different patterns in different periodsDifferent patterns in different periods

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Demand evolution in Spain

Gas natural demand (TWh)

Power Generation ConventionalTotal

2004-2008

Commitment cycle generation based on economic and environmental efficiency

2008-2012

Steadily decrease gas participation in generation mix

due to economic turnover, and domestic coal and

renewable policies

Source: Ministerio de Industria, Energía y Turismo for “X Edition of Finantial Analisys of Energy Sector”. Club Español de la Energía

Equivalent operating hours (1 year = 8.760 hours)

Strong decrease of average use of combined cycles

Accelerated development of renewable energyAccelerated development of renewable energy

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Demand evolution in SpainRenewable energy impact

Power Generation ConventionalTotal Development higher than expected in Renewable Energy Plan (PER)

NATURAL GAS(power generation)

NATURAL GAS(power generation)

RENEWABLE ENERGYRENEWABLE ENERGY FOTOVOLTAIC ENERGYFOTOVOLTAIC ENERGY THERMOSOLAR ENERGYTHERMOSOLAR ENERGY

Prevision 2011Actual 2011 Prevision 2010Actual 2011 Actual 2011 Prevision 2010 Prevision 2010Actual 2011

Installed Capacity (MW)

Different patterns, in different periodsDifferent patterns, in different periods

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Demand evolution in Spain

Power Generation ConventionalTotal

Source: Ministerio de Industria, Energía y Turismo for “X Edition of Finantial Analisys of Energy Sector”. Club Español de la Energía

Gas natural demand (TWh)Central Scenario, Low level

Considered in Mandatory Planning 2012-2020

Consumption level of 2008 (historical annual maximu m) will not be reached until 2020

Cost Evolution in Spain

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Evolution investments according to 2008-2016 Mandatory PlanningEvolution investments according to 2008-2016 Mandatory Planning

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Costs evolution in SpainInvestments

With an average increase in demand for natural gas of 3% was envisaged an investment plan of 1.050 M € / year

Source: Ministerio de Industria, Energía y Turismo for “X Edition of Finantial Analisys of Energy Sector”. Club Español de la Energía

Material Investment in gas natural sector (M€)

GWh/d

Winter Winter Winter Winter Winter Winter Winter Winter Winter Winter

Maximum Capacity Maximum Transportation

Evolution of the security marginEvolution of the security margin

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Costs evolution in Spain Security margin gas system

Source: Ministerio de Industria, Energía y Turismo for “X Edition of Finantial Analisys of Energy Sector”. Club Español de la Energía

Infrastructure is underused and gas system has a security margin above 27%

Load factor regasification plants

in 201135%

Retribution (M€) Annual Demand (TWh)

Evolution total costs regarding with the gas demandEvolution total costs regarding with the gas demand

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Since 2005, the costs of regulated activities increased by 65.8%

Source: Ministerio de Industria, Energía y Turismo for “X Edition of Finantial Analisys of Energy Sector”. Club Español de la Energía

TanksCapacity

x3

New UGS in

2012

Costs evolution in SpainDemand vs Costs

Evolution total costs regarding with the gas demandEvolution total costs regarding with the gas demand

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Stable regulation allowing sector sufficiency with moderate increases in access fees until 2008

Source: PwC for “XIV Encuentro Especializado. La gran cita anual del sector”. Sector Gasista Español

TotalCosts

M€

Gas Demand

(TWh)

CAGR 02-07 CAGR 08-12

+11%

+10%

-5%

+7%

Gas Demand

Total costs

Costs evolution in SpainDemand vs Costs

Retribution (M€) Annual Deficit % Tolls

18Source: Ministerio de Industria, Energía y Turismo for “X Edition of Finantial Analisys of Energy Sector”. Club Español de la Energía

Costs evolution in SpainTolls and Deficit

Since 2005, tolls have increased on average 50%, but is insufficient to meet the costs due to fall i n demand

Demand Reduction

Underused Infrastructure

Toll Increase

Measures taken to control Gas Tariff Deficit

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Measures taken to control Gas Tariff Deficit

Approved measures affect the causes of the deficit, allowing financial balance system, with moderates tolls

Real Decreto-Ley12/2013

Real Decreto-Ley12/2013

Orden IET/849/2012Orden IET/849/2012

PipelinesPipelines

Regasification Plants

Regasification Plants

Underground Storage

Underground Storage

Incomes IncreaseIncomes Increase

Expenses DecreaseExpenses Decrease

DelayedPaymentsDelayed

Payments

● Freezing investments and hibernation of facilities

� Musel: Financial compensation, but not amortization .

� Not new regas plants authorizations on peninsula

� Not new transport pipelines authorizations, unless those pipelines linked to international connections.

� Retribution of pipelines giving attention to an are a of influence according with the real demand

● Changing the compensation system for the UGS

� No payment of provisional compensations

� Not accumulate more than one annuity the same year

� Commissioning certificate delayed until injection / extraction nominal capacities are proved

� Operation and Maintenance Contracts are conditional21

Measures taken to control Gas Tariff Deficit

Real Decreto-Ley 12/2013Real Decreto-Ley 12/2013

Expenses DecreaseExpenses Decrease

Delayed PaymentsDelayed

Payments

Pipes LNG

Pipes LNG

UGSUGS

● Toll increase of 5%

● Remove Incentives pipeline capacity to hire short-term

● Limit the possibility of interruptibility

● Eliminate the possibility of a specific fee

● Phase out the “raw material” toll

● Modify the compensation system for the UGS

� Increase amortization term investment :10 → 20 years

� Make economic and technical audits of installations

Incomes IncreaseIncomes Increase

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Measures taken to control Gas Tariff Deficit

Orden IET / 849 / 2012Orden IET / 849 / 2012

Delayed PaymentsDelayed

Payments

UGSUGS

Limitation on costs increase (M€) by application RDL 13/2012Limitation on costs increase (M€) by application RDL 13/2012

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Measures taken to control Gas Tariff DeficitImpact on deficit

Accumulated deficit could be eliminated in 2017 with moderated tolls increases

Measures Impact

Measures Impact

Measures Impact

Costs 2012 out measures

Cost 2012 with

measures

Increaseout

measures

Increaseout

measures

Costs 2015 Costs 2017

Accumulated

Annual

Source: PwC for “XIV Encuentro Especializado. La gran cita anual del sector”. Sector Gasista Español

Measures for increasing demand

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Measures for increasing demand

Approved measures affect the causes of the deficit, allowing financial balance system, with moderates tolls

Real Decreto-Ley12/2013

Real Decreto-Ley12/2013

Orden IET/849/2012Orden IET/849/2012Promoting Demand

Increase

PipelinesPipelines

Regasification Plants

Regasification Plants

Underground Storage

Underground Storage

Incomes IncreaseIncomes Increase

Expenses DecreaseExpenses Decrease

DelayedPaymentsDelayed

Payments

Strengthen Distribution

Growth

Strengthen Distribution

Growth

Strengthen International

Transit

Strengthen International

Transit

Promoting New UsesPromoting New Uses

Limitation on costs increase (M€) by application RDL 13/2012Limitation on costs increase (M€) by application RDL 13/2012

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Measures for increasing demandStrengthen Distribution Growth

Penetration of natural gas in Spain Retail market volumen share

Development of the distribution business Will provide net gas system incomes

Domestic sector (%)

Source:

Average Domestic Client Contribution

+ Tolls Incomes

−System Costs(distribution retribution

Net Contribution82 (€/client/year)

Current Penetration

27%

ObjectivePenetration

60%

7,2

16,0

+ 8,882 M€ / 1M clients

Houses with gas (millions)

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INCOMESINCOMES EXPENSESEXPENSES

Thank you

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