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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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This presentation is the property of Gas Natural Fenosa. Its content and graphic design are for the exclusive use of its personnel.
©Copyright Gas Natural SDG, S.A.
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