BUILT ON SOLID FOUNDATIONS
INVESTOR PRESENTATION MAY 2011
This presentation may contain forward-looking information within the meaning of applicable securities laws. Such forward-looking information reflects the intentions, plans, expectations and opinions of the management of Gaz Métro inc. (GMi), in its capacity as General Partner of Gaz Métro Limited Partnership (Gaz Métro), and acting as manager of Valener Inc. (Valener) (the management of the manager) and is based on information currently available to the management of the manager and assumptions about future events. Forward-looking statements can often be identified by words such as “plans,” “expects,” “estimates,” “forecasts,” “intends,” “anticipates” or “believes,” or similar expressions, including the negative and conjugated forms of these words. Forward-looking statements involve known and unknown risks and uncertainties and other factors beyond the control of the management of the manager. A number of factors could cause the actual results of Valener and Gaz Métro to differ significantly from the results discussed in the forward-looking statements, including, but not limited to, with respect to Valener and Gaz Métro, the decisions rendered by regulatory agencies, general economic conditions, the competitiveness of natural gas in relation to other energy sources, the reliability of natural gas supply, the reliability of electricity supply, the integrity of the natural gas distribution system, exchange rate fluctuations, progress on development projects such as the Seigneurie de Beaupré wind power projects, and with respect to Valener alone, the uncertainty related to future dividend payments, the uncertainty related to Valener’s capacity to finance its share in the development of the Seigneurie de Beaupré wind power projects, and other factors described in the “Risk Factors of the Company” and “Risk Factors of the Partnership" sections of Valener’s Management’s Discussion and Analysis for the year ended September 30, 2010 and in Valener’s and Gaz Metro’s disclosure filings. Although the forward-looking statements contained herein are based upon what the management of the manager believes to be reasonable assumptions, including assumptions to the effect that no unforeseen changes in the legislative and regulatory framework of energy markets in Quebec and the New England states will occur, that no significant event occurring outside the ordinary course of business, such as a natural disaster or other calamity, will occur, that Gaz Métro will be able to continue distributing substantially all of its net income (excluding non-recurring items), that the Seigneurie de Beaupré wind power projects will be completed on schedule and as per specification, and the other assumptions described in Valener’s Management’s Discussion and Analysis for the second quarter ended March 31, 2011, the management of the manager cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of this date, and the management of the manager assumes no obligation to update or revise them to reflect new events or circumstances, except as required pursuant to applicable securities laws. Readers are cautioned to not place undue reliance on these forward-looking statements.
Non-GAAP financial measures In the opinion of the management of the manager, certain “adjusted” indicators, such as adjusted net income and adjusted net income per unit of Gaz Métro provide readers with information it considers useful for analyzing the financial results of both Valener and Gaz Métro. However, these indicators are not standardized in accordance with Canadian generally accepted accounting principles (GAAP) and should not be considered in isolation or as substitutes for other performance measures that are in accordance with GAAP. The results obtained might not be comparable with similar indicators used by other issuers and should therefore only be considered as complementary information.
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FORWARD-LOOKING STATEMENTS
Valener was born on September 30, 2010, as part of the reorganization of Gaz Métro’s public ownership structure.*
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* In response to the new tax rules introduced by the Government of Canada. In this presentation, Gaz Métro refers to Gaz Métro Limited Partnership.
CORPORATE STRUCTURE
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* Indirectly
SOLID FOUNDATIONS
29% INTEREST IN GAZ MÉTRO
Regulated, diversified public utility
$3.6 billion in assets*
Over 320,000 customers
Québec & Northeast US markets
Founded in 1957
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* As at March 31, 2011
FAVOURABLE WINDS
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* Valener’s 29% interest in Gaz Métro X Gaz Métro’s indirect interest of 25.5% in Seigneurie de Beaupré wind power projects = 7.4%
24.5%
INDIRECT INTEREST IN SEIGNEURIE DE BEAUPRÉ WIND POWER PROJECTS
341 MW OF GROSS INSTALLED CAPACITY TO BE OPERATIONAL IN 2013 AND 2014
7.4%
ADDITIONAL INTEREST THROUGH INVESTMENT IN GAZ MÉTRO*
FINANCIAL PROFILE*
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* As at March 31, 2011. ** Since October 1, 2010.
$698 M
TOTAL ASSETS
$75 M COMMITTED CREDIT FACILITY
37.3 M
COMMON SHARES ISSUED AND OUTSTANDING (~ $600 M market cap)
$20 M ADDITIONAL DISTRIBUTIONS FROM GAZ MÉTRO SPREAD OVER THREE YEARS**
EXPERIENCED LEADERS BOARD OF DIRECTORS*
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* All Board members also sit on Gaz Métro inc.’s Board of Directors
Pierre Monahan, Chairman of the Board
Nicolle Forget
François Gervais
Réal Sureau
TO ASSESS AND DECIDE ON STRATEGIC INITIATIVES
PROPORTIONAL REPRESENTATION ON GAZ MÉTRO INC.’S BOARD OF DIRECTORS
Under a 15-year administration and management support agreement, Valener is managed by an experienced team of Gaz Métro professionals.
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VALENER’S JEWEL GAZ MÉTRO
GAZ MÉTRO AT A GLANCE
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* Adjusted net income for 2010 fiscal year excludes non-monetary adjustment related to future income taxes
76.0%
10.3%
11.0%
3.5%
4.4%
-5.2% Natural gas distribution in Québec
Energy distribution in Vermont
Natural gas transportation
Natural gas storage
Energy services and other
Corporate affairs and other
$152.6 M adjusted net income*
GAZ MÉTRO STRONG FINANCIAL POSITION*
Assets $3.6 B Debt $1.6 B Debt to total capitalization ratio 59.2% Corporate credit rating (S&P) A- (stable)
Committed credit facility maturing in December 2012 $400 M
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* As at March 31, 2011
GAZ MÉTRO’S ASSETS
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Canada, Regulated
U.S., Regulated
Canada, Non-regulated
>95% of assets are regulated
Gaz Métro’s regulated businesses provide stability
GENERATING REGULATED NET INCOME
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* Based on 2011 rate case parameters for Québec Distribution Activity, i.e. ROE of 9.09% and rate base of $1.8 B
If
Rate Base and/or
Long-term interest rates
Net income
Authorized ROEs linked to long-term interest rates
Regulated assets: assets required to provide service
NET INCOME SENSITIVITY ANALYSIS FOR QUÉBEC DISTRIBUTION ACTIVITY*
GAZ MÉTRO VALENER
1% change in authorized ROE $9.7 M $2.0 M or $0.05 per share
$100 M change in rate base $4.9 M $1.0 M or $0.03 per share
VALENER DIRECTION: GROWTH
VALENER’S GROWTH STRATEGY DIRECTLY LINKED TO GAZ MÉTRO’S STRATEGIC PLAN
GAZ MÉTRO’S STRATEGIC PLAN: FROM NATURAL GAS DISTRIBUTOR TO ENERGETICIST
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Biomethane Natural gas as fuel
Natural gas distribution and transportation
Electricity distribution
Wind power production
Core regulated natural gas activities complemented by prudent and targeted diversification
GAZ MÉTRO’S GROWTH AND ACQUISITION CRITERIAS
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Knowledge of sector
Value creation
Long-term contracts with solid
counterparties
Risk profile maintained
Shared core values
INCREASE NATURAL GAS PRESENCE IN QUÉBEC
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* Statistics Canada, 2008
Strong natural gas supply in North America
=
Favourable competitive position on all markets
Increase market share of natural gas, the cleanest of all fossil fuels. Reduce the oil products’ hold and lower GHG emissions.
12%
34% 30%
42%
41% 43%
45% 21% 25%
1% 4% 2%
Québec Ontario Canada
Coal
Electricity
Petroleum Products Natural gas
ENERGY CONSUMPTION* A unique competitive environment in Quebec
SIGNIFICANT EXTENSION OF NATURAL GAS DISTRIBUTION NETWORK IN VERMONT
US$65 M PROJECT Expected to be operational by 2015
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Vermont Gas Systems, Inc. is a wholly-owned subsidiary of Gaz Métro
ELECTRICITY DISTRIBUTION IN VERMONT
Power purchase agreement with Hydro-Québec for 25 years
GMP seeking regulatory approval for the construction and operation of a 63 megawatt wind generation facility
Vermont electricity distribution market poised for consolidation: 600,000+ population served by 20 electric distributors*
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* Source: Vermont Department of Public Service. Green Mountain Power Corporation is a wholly-owned subsidiary of Gaz Métro.
NATURAL GAS AS FUEL FOR THE TRANSPORTATION INDUSTRY
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Competitiveness over diesel fuel
25% reduction in greenhouse gas emissions
NATURAL GAS AS FUEL FOR THE TRANSPORTATION INDUSTRY
Québec-Montréal-Toronto (A-20/H-401) Corridor
4th most important corridor in North America for freight transportation
Over 48,000 trucks transit on this corridor weekly
Over 35,000 trucks transit between Québec and Montréal weekly
Québec heavy truck fleet:
40,000
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Source : MTQ and association du camionnage du Québec
Gaz Métro Transport Solutions created in 2010
Agreement with Transport Robert for liquefied natural gas (LNG) fuelling
180 LNG trucks ordered by Transport Robert
Liquefaction equipment already in place at LSR plant**. Investments limited to refuelling stations and tanks for transporting LNG.
Timeline: first deliveries of LNG in summer 2011
Partnering with Canadian National Railway and Westport Innovations to demonstrate performance of LNG as fuel for locomotives
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* 70,000 m3 is equivalent to annual consumption of a school, a large commercial customer or a warehouse ** Gaz Métro’s natural gas liquefaction, storage and re-gasification plant
Annual consumption: 1 truck = 70,000 m3*
180 trucks = 12.6 106m3 or 0.44 Bcf
NATURAL GAS AS FUEL FOR THE TRANSPORTATION INDUSTRY
SEIGNEURIE DE BEAUPRÉ WIND POWER PROJECTS
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Positive siting and environmental characteristics
High quality wind data
Reliable and stable long-term cash flows
Proven and reliable technology
Projected return higher than regulated business
Seigneurie de Beaupré Phase 1
Total installed capacity: 272 MW
Expected commissioning: December 2013
Seigneurie de Beaupré Phase 2
Total installed capacity: 69 MW
Expected commissioning: December 2014
OWNERSHIP AND CONTRACTUAL STRUCTURE
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* Beaupré Éole General Partnership is 51%-owned by Gaz Métro Éole Inc., a wholly-owned subsidiary of Gaz Métro, and 49%-owned by Valener Éole Inc., a wholly-owned subsidiary of Valener
Boralex Inc. Beaupré Éole GP*
Seigneurie de Beaupré Wind Power Projects
50% 50%
100%
Enercon Canada Inc. (Turbine Supply Agreement)
Boralex Inc. (O&M Agreement)
Hydro-Québec Distribution (Power Purchase Agreements)
Hydro-Québec TransÉnergie (Interconnection Agreement)
Séminaire de Québec (Lease Agreement)
Borea Construction, Ulc (Balance of Plant Contract)
Enercon Canada Inc. (Maintenance and Service Agreement)
POSITIVE SITING CHARACTERISTICS
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Projects being developed 60 km north-east of Québec City, on land belonging to Séminaire de Québec
Projects will occupy less than 10% of the Seigneurie de Beaupré 1,600 km2 property
Largest privately-owned land in Canada
Project site near Hydro-Québec transmission lines
20-year lease with Séminaire de Québec Potential for future development
POSITIVE SITING AND ENVIRONMENTAL CHARACTERISTICS
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Private land, uninhabited, located far from any urban or residential area, which minimizes the visual and noise impacts on the community
No commercial or industrial activities. Roads used by forest industry are already in place.
Environmental imprint is virtually non-existent
Environmental decree obtained
Seigneurie de Beaupré Territory: A unique site
HIGH QUALITY WIND DATA
More than five years of high quality wind data collected on the project site. Exceptional wind power potential due to the quality of the wind.
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RELIABLE AND STABLE LONG TERM CASH FLOWS
Strong off-taker:
20-year Power Purchase Agreements with Hydro-Québec (S&P/A+)
Favourable project economics:
~ 34%* Expected capacity factor, above industry average
Bid price based on a formula
20-year firm price with indexation
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* Based on independent wind assessment firms
Strong, stable cash flows over 20 years
PROVEN AND RELIABLE TECHNOLOGY
Enercon, a world leader, in business for more than 25 years. 23 GW of installed power generating capacity in over 30 countries. 15-year maintenance agreement with guaranteed availability of up to 97%.
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SEIGNEURIE DE BEAUPRÉ WIND POWER PROJECTS FINANCING REQUIREMENTS
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* Financed at project level (75% debt and 25% equity, according to industry practice)
2013 2014 Future
Cumulative
Installed capacity 272 MW 341 MW … Total investment $800 M $990 M … Equity requirement* $200 M $248 M … Valener’s equity requirement $49 M $61 M …
NEW HORIZONS: VALUE AND ENERGY VALENER’S VERY ESSENCE
NEW HORIZONS Valener will pursue its own development projects and acquisition strategies, subject to a non-competition undertaking in favour of Gaz Métro.
Restricted activities: Any gas related activities in Québec Transport or distribution of natural gas
in the State of Vermont Generation, transmission or distribution
of electricity in the State of Vermont
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VALENER’S STRATEGY
Valener’s priority is to ensure the sound management of its investment in Gaz Métro and participate in the development of the latter.
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WIND POWER, ANOTHER GROWTH AREA FOR VALENER
24.5% indirect interest in Seigneurie de Beaupré wind power projects. A significant economic interest in one of Canada’s most important wind power projects.
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ENERGY, WHEREVER IT IS FOUND
Over time, Valener will consider opportunities for growth and value creation in the energy sector. The focus will be on renewable, green energies.
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VALENER OUTLOOK FOR DIVIDEND
VALENER’S DIVIDEND
29%
OF GAZ MÉTRO’S STRONG AND STABLE DISTRIBUTIONS
$20 M IN ADDITIONNAL DISTRIBUTIONS FROM GAZ MÉTRO SPREAD OVER THREE YEARS*
$1.00
ANNUALIZED DIVIDEND PER SHARE
6.0% DIVIDEND YIELD** 3.5%** AVERAGE FOR LARGE CAP, GAS AND ELECTRIC UTILITIES1
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* Since October 1, 2010. ** Based on May 20, 2011 closing prices. 1 Canadian Utilities Ltd., Emera Inc., Enbridge Inc., Fortis Inc., and TransCanada Corp.
FORESEEABLE DIVIDENDS
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INVESTMENT PROPOSITION 29% of Gaz Métro’s strong and stable
distributions
$20 M in additional distributions from Gaz Métro over three years
No debt
$75 M credit facility available
Strong cash flows from Seigneurie de Beaupré wind power projects starting in 2014 fiscal year
Strong, foreseeable dividends
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