investor meet - gujarat gas2 disclaimer certain statements included in this presentation contain...

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Gujarat Gas Company Limited

Investor Meet

26 March 2009Mumbai

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Disclaimer

Certain statements included in this presentation contain forward-looking information concerning Gujarat Gas Company Limited (GGCL)’s strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the sectors or markets in which GGCL operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within GGCL's control or can be predicted by GGCL. Although GGCL believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from those set out in the forward-looking statements. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the relevant article on Risk Management included in GGCL’s Annual Report and Accounts 2007. Nothing in these results should be construed as a profit forecast and no part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in GGCL or any other entity, and must not be relied upon in any way in connection with any investment decision. GGCL undertakes no obligation to update any forward-looking statements.

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Agenda

Ownership Structure

Gas Infrastructure & Gujarat’s Economic Profile

GGCL - Business Profile

Financials

Regulation

Human Resources

Way Forward

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GGCL – Shareholding pattern

14.13%

12.23%

8.52%

65.12%

Parent CompanyHolding (BGAPH)

Foreign InstitutionalInvestors

Others

Resident Individuals

Shareholding as on 31st Dec. 2008Market cap as on 13th March 2009. Source: GGCL

Market Capitalisation ~ Rs 16 Billion ($ 320 Mn)

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BG Group

• Expertise across the gas chain

• A rapidly growing gas company with interests across five continents

• Turnover in 2008 was around $24bn (using the avg US$/£exchange rate for the year)

• Operating profit was $10.1bn

• Present in over 25 countries

• Listed on London Stock Exchange

• A FTSE 10 company with a market cap over $50bn

• BG India is a “core asset” for BG Group

A strong parentage

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BG India

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16

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Legend

1 Panna-Mukta-Tapti Fields2 KG-OSN-2004/13 KG-DWN-98/44 MN-DWN-2002/2

5Gujarat Gas Comp. (GGCL)

6 Mahanagar Gas Ltd. (MGL)

Company InformationBG E&P India Ltd

• Jointly operates Panna-Mukta-Tapti fields (BG-30%, RIL - 30% & ONGC - 40%)

• Largest private oil & gas JV • Exploring KG-OSN-2004/1 with ONGC (55%) from NELP-VI Licensing round• Secured two deepwater exploration blocks:

• KG-DWN-98/4 (BG-30%, ONGC-55%, OIL-15%) • MN-DWN-2002/2 (BG-25%, ONGC-75%)

BGIES • Gas/LNG marketing entity and aggregator of domestic supplies

GGCL • India’s largest private CGD company (by volumes); 2008 sales: 1089 mmscm • BG has a controlling equity stake of 65.12%

MGL • India’s largest private CGD company (by customers) • JV with GAIL (49.75%) and State Govt. (0.5%)

BG India

Integrated player with presence in significant Indian marketsPresent across the full hydrocarbon chain

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Agenda

Ownership structure

Gas Infrastructure & Gujarat’s Economic Profile

GGCL - Business Profile

Financials

Regulation

Human Resources

Way Forward

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Advantage Gujarat

• 2nd most industrialized state in India•Population ~ 55 million

• 265 industrial clusters and estates

• 22% of India’s private sector investment

• Vibrant Gujarat• Investment proposed > $ 20 Billion in Surat and

Bharuch districts

• Delhi-Mumbai Industrial Corridor (DMIC)• 38% of proposed freight corridor in Gujarat

•Passes through GGCL areas of operations•Phase I - approved with proposed investment of

$ 90 bn

5% of India’s population - 13% of industrial production & 19.2% of exportsSource : vibrantgujarat.com & indextb.com

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Gujarat – The nerve of DMIC

Pipavav

GGCL Schematics

DMIC

GGCL Areas: Surat, Ankleshwar & Bharuch

GGCL in the heart of DMIC in Gujarat

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Gujarat – the natural gas hub of India

Existing LNG Terminal Proposed LNG Terminal Ultra Mega Power Project (4000 MW)

RoU in ProgressUnder ConstructionCommissioned

Gas PipelinesEstablished CGDsNew CGDsMajor SEZs

GSPL Transmission pipeline

GAIL HBJ

GAIL DUPL

Dahej LNG

Hazira LNGPipavav

Mundra

GGCL Schematics

GSPL pipelineslegends

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Agenda

Ownership structure

Gas Infrastructure & Gujarat’s Economic Profile

GGCL - Business Profile

Financials

Regulation

Human Resources

Way Forward

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Vision

“We make natural gas the safe and preferred energy solution”

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Strategy

Moving up the value chain

• Grow retail market

• Develop CNG business

• Develop new applications

Building materiality

• Geographic expansion

• Exploring alliances

Management Strategy

GGCL Schematics

Strategy aligned with regulatory framework

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Sales mix (by volume)

Year 2008

Dom & Comm7%

Bulk13%

CNG8%

Retail72%

1089 mmscm

Source: GGCL

Largest private sector CGD operator in India - by volume

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Industrial retail segment

Profile

Grodrivers

Dispersed customer base across diverse industry sectorsLow volume (< 50,000 scmd) high margin: large number of customersLow probability of gas-on-gas competition

Gas off-take risk mitigated by ToP liability clauseMargin risk mitigated by gas cost pass-through clauseCredit Risk mitigated by security deposits / bank guarantee

RiskProfile

Geographical expansions and network extensionsCaptive Power demand

wth

Core business segment driving growth

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Industrial retail customer profile

46%

18%

8%

6%6%

11%

29%

5%

23%

0

25%

50%

75%

100%

Textiles Chemical Dyes &Intermediate

Pesticides Pharmaceutical Glass &Ceramics

Others Total

Power

Liquid FuelSolid Fuel

48%

Source: GGCL

Demand from textile and chemical industry remained firm

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CHP (Mwe)

140

187

234

326 326

0

50

100

150

200

250

300

350

2004 2005 2006 2007 2008

1 Mwe ~ 5000 scmd

Mw

e

Source: GGCL

Sustained focus on CHP

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Distribution volumes

447526

657781 783

91

48

57

60 72

200

217

327

143

21

47

70

344

285

0

200

400

600

800

1000

1200

1400

2004 2005 2006 2007 2008

Ind Ret CNG Dom/Com Bulk

813

mm

scm

1088

695

1196

Source: GGCL

1089

CAGR of 17.6% in retail marketsAdded more than 26000 households and 23500 vehicles in 2008

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Multiple gas sources

Dahej

Hazira

Ankleshwar

Bharuch

Surat

RiverNarmada

Gulf of Cambay

Amboli

HAPi

Gujarat

Jhagadia

GGCLMora

Petronet LNG

Kim-Karanj

PMT Gas

Vapi

New areas

Kosamba

Shell LNG

Hojiwala

Magdalla

GAIL’s HVJGAIL Surat

GAIL Ank

GSPC/ Niko

Niko

PMT JV

CAIRN JV

GSPL pipelineGGCL pipelines

Existing LDZ

RLNG

GGCL Schematics

Multiple receiving facilities

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Gas sourcing mix

PMT 76%

GAIL5%

CAIRN11%

NIKO8%

Year 2008

1095 mmscm

Source: GGCL

Predominantly indigenous sources95% at market determined prices

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Agenda

Ownership Structure

Gas Infrastructure & Gujarat’s Economic Profile

GGCL - Business Profile

Financials

Regulation

Human Resources

Way Forward

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Performance in 2008

Growth vs 2007

• Top line 5%

• Distribution volume - 9%

• PAT 5%

Profitability sustained

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Revenue growth

6089 7182

9571

12991

114286442 2122

12424

0

2000

4000

6000

8000

10000

12000

14000

2004 2005 2006 2007 2008

Transmission Non Transmission

65317468

9685

12446 13012

Rs

Mn

Source: GGCL

Re-emergence of transmission revenues in Q4 of 2008

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Profit growth

478 442286

638 793 1169

2281 2324

2122114

1199

0

500

1000

1500

2000

2500

2003 2004 2005 2006 2007 2008

Transmission Non Transmission

2303

145513131235

1116

Rs

Mn

Source: GGCL

2345

Profits driven by strong growth in distribution business

PBT

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Capital investment

39 82 60 101 55 87206

394

1406

740 758 797104

136

272 222 104

232

0

200

400

600

800

1000

1200

1400

1600

1800

2003 2004 2005 2006 2007 2008

Non Gas Capex Network Expansion/Upgradation CNG COGEN

Rs

Mn

245

580

1602

1035

1345

988

Source: GGCL

Investment – for sustained growth

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Key factors which affected business in 2008

• Gas supply– PMT gas reduced by 30% from April ‘08

– GAIL replaces PMT JV as supplier

– Term Sheet with GAIL governs current supply

• Sources aligned with market segments– GAIL APM & PMT supply to Domestic and CNG segments

– GAIL PMT gas to SMEs (< 50,000 scmd customers)

– Non GAIL sources piped to larger customers

– rLNG to meet peak customer demand

• Depreciation of Rupee against USD impacted margins• Optimized margins through improved customer mix

Key 2008 challenge: sustaining supply to core markets

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Agenda

Ownership structure

Gas Infrastructure & Gujarat’s Economic Profile

GGCL - Business Profile

Financials

Regulation

Human Resources

Way Forward

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Regulations

• Application filed with PNGRB for authorisation in districts of Surat and Bharuch

• Letter from MoPNG confirming authorisation in Surat, Bharuchand Ankleshwar cities

• Application filed for Hazira -Ankleshwar pipeline authorisation

• Submitted “Expression of Interest” with PNGRB for areas in Kachcch and Bhavnagar

• Permission received from PNGRB to continue construction in all the operational areas

High degree of engagement with the PNGRB

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Regulatory framework – cost structureEN

D C

ON

SUM

ER T

AR

IFF

Marketing margins (Bad-debts, business risks etc.) Unregulated

Network Tariff

Return on Capital Employed – 14% Post tax (Grossed up for pre-tax)[CE = GFA – Depreciation + WC (20 days opex)]

DCF over economic life of the asset

OPEXRegulated

Gas Cost Unregulated

Compression charge(CNG)

LMC charge(New domestic)

Zero LMC(Old domestic)

Transmission Tariff Regulated

R

R END

CO

NSU

MER

TAR

IFF

“Marketing Margins” beyond purview of regulator

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Agenda

Ownership structure

Gas Infrastructure & Gujarat’s Economic Profile

GGCL - Business Profile

Financials

Regulation

Human Resources

Way Forward

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HR aligned with business needs

• 546 employees with a blend of experience and youth

• Senior Management Team deputed from BG Group

• Strong HSSE culture – driven by BG Group guidelines

• Focus on appraisal process, training programmes help maintain

high standards

• Progressive HR policies towards high employee engagement

and development

• ESOP introduced for select managerial talent w.e.f 1st Nov 08

Focus on internal talent development

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Human resources pyramid

MD

Director

General Manager

Assistant General Manager

Manager

Deputy Manager

Associate Manager

Sr. Engineer

Staff

147

161

245

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Agenda

Ownership structure

Gas Infrastructure & Gujarat’s Economic Profile

GGCL - Business Profile

Financials

Regulation

Human Resources

Way Forward

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Potential opportunities

• New license areas

• Bid for new areas

• Explore alliances

• Grow CNG business

• Expand sourcing portfolio with term rLNG

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Key challenges

• Augmenting the gas sourcing portfolio to meet demand growth

• Securing regulatory licenses for new areas

• Growth in a competitive environment

To sustain and grow company’s leadership position among CGDs

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Key messages

• Positioned to grow gas distribution business in a regulated environment

• Robust business model and strategy in place

• Focus on growth

Strong business performance; Well positioned for further growth

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Q & ASession