Maintaining growth momentum
GOGC (Georgian Oil and Gas Corporation) Group Investor Day 2018
David Oniani, Advisor, Strategic Projects and Funding
Omar Ogbaidze, Advisor, Investor Relations
London ∙ 12 October 2018
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66/139/206 GOGC’s Mission & Strategy
GOGC aims to maintain profitable growth by pursuing the following strategies
Expanding and diversifying business lines through
investment in energy projects in Georgia, in particular
TPP projects
Participate in the construction and development of TPPs, including the
ongoing construction of second Gardabani CCPP
Plans to develop an underground natural gas storage project
Further developing its natural gas transportation
network
Further rehabilitation and development of natural gas transportation
network
Building new capacities to deliver natural gas to free industrial zones in
Poti and Kutaisi
Locating and attracting new energy sources to the
market
Arrangements with SOCAR or other counterparties to secure less
expensive, reliable sources of energy
Commitment to the development of the renewable energy source.
GOGC invested in first in Georgia Kartli Wind Power Plant project,
which is operational since 2016
Diversify business by entering into already established and closely-
associated sectors of the industry with growth higher than GDP but
financial profile matching GOGC’s
GOGC holds the exclusive right to manage the Government’s interests
in various crude oil and natural gas exploration projects in Georgia, with
back-in rights in few of them, should promising opportunity come along.
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66/139/206 GOGC’s Overview
Key Facts
100% state owned national energy champion
GOGC has the National Oil Company status in Georgia
GOGC is 100% State owned through Partnership Fund
Ownership of Georgia’s strategic gas and oil pipelines
Formed in 2006 by consolidating Georgian state-owned oil and gas infrastructure assets
Optimally positioned to capitalise on growing European demand for oil and gas from the Caspian Basin due to Georgia’s strateg ic location
GOGC is Georgia’s contract counterparty in major international energy trade agreements and transit consortia
Benefits from predominantly long term fixed price purchase and onsale contracts
Stable predictable off-take in growing domestic gas market
Limited FX exposure with most revenues and costs denominated in, or linked to, US$
Limited exposure to commodity price risk
Emerging player in power generation market since commissioning of Gardabani CCPP in September 2015
Georgia Oil and Gas Infrastructure
The Main Gas Pipeline System (MGPS)
‒ Operated by the Georgian Gas Transportation Company
(GGTC - a 100% state-owned entity) under the pipeline
rent agreement, supplies gas to the domestic market
‒ Supplies Russian gas to the Armenian market via NSGP,
the North-South Gas Pipeline section of the MGPS
The Western Route Export Pipeline (WREP)
‒ Operated by British Petroleum (BP)
‒ Delivers oil from Baku to the Supsa terminal in Georgia
‒ No maintenance or capex commitments for GOGC
MGPS Gas Pipeline 100% Owned by GOGC
WREP Oil Pipeline 100% Owned by GOGC
South Caucasus Gas Pipeline
Baku-Tbilisi-Ceyhan Oil Pipeline
Turkey Armenia Azerbaijan
Russian Federation
Georgia
Black Sea
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66/139/206 Key Credit Highlights
Strong Government Support and
“NOC” Status
100% owned by the Georgian Government through PF and mandated to ensure the continuity and security of gas
supply in Georgia
Fulfils a strategic role in the country and is an important contributor to the Georgian economy, representing
approximately 0.2% of Georgia’s GDP
Operates in Georgia’s stable macro environment with limited exposure to commodity price volatility
Strong Position within a Growing
Market
Profitable and diversified gas supply business secured by long term contracts at predominantly fixed prices
Stable tariff income from gas and oil transportation activities as the owner of MGPS and WREP
Strong performance of the newly created electricity generation segment
Predictable Margins and
Attractive Financial Profile
Predictable margins in natural gas supply activities and limited exposure to natural gas market prices due to long-term
contracts with predominantly fixed prices
Strong start in the electricity generation segment representing 29.1% of revenues in the year 2016
Limited FX exposure with all revenues and expenses being denominated, or linked to, US$
Flexibility with capex spending - keeping it low and targeted
GOGC does not have any significant outstanding debt and has no outstanding long-term debt, other than the 2016
Notes and limited working capital requirements
Attractive and Diversified Asset and
Project Portfolio
Gardabani 1 CCPP completed ahead of schedule, within planned budget and, since commencing operations, strongly
contributing to revenues
Gardabani 2 CCPP being built on experience with the Gardabani 1 CCPP (construction underway, to be commissioned
in 2019), a second gas-fired thermal power plant
Construction of underground gas storage project in Samgori South Dome field
Equity participation in Kartli Wind Power Station LLC which plans to construct the first wind power station in Georgia
with capacity of 20.7 MW
Extending international profile through its involvement in the planning and pre-development stages of both the Euro-
Asian Transportation Corridor (EAOTC) and the Azerbaijan-Georgia-Romania Interconnector (AGRI) projects
Strategically positioned within the Caucasus to serve as a transport corridor for crude oil and natural gas supplies from
neighbouring jurisdictions to the European markets
Georgia holds an attractive geographic position as the shortest connection between the European Union and the
Caucasus and as an integral part of the Caspian-EU transit corridor
Strategic Geographic Location
1
2
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Gardabani 1 CCPP launched in 2015 contributing 10% of Georgia’s power generation
Key Parameters
Guaranteed Capacity Source status granted in June 2015 and effective until 2040
pursuant to which Gardabani TPP LLC is paid an annual fee
In 2017 year revenue from electricity generation was GEL 199,757 million (or 29.7% of
GOGC’s total revenue)
Guaranteed capacity fee mechanism aligns the Gardabani project with GOGC financial
profile
Total investment – Approximately US$218m
Completed two months ahead of schedule
Project Highlights
Natural gas-fired thermal power plant located in Eastern Georgia
Construction completed – July 2015
Efficiency ratio of 55.5% – approximately twice that of existing power plants in Georgia
51% owned by GOGC, with the remaining 49% held by the PF
One of the largest completed power projects in Georgia since independence
Installed capacity of 230 MW; actual capacity – 239 MW
Designed plant life of 25 years
In operation since September 2015, Gardabani 1 CCPP is approximately twice as efficient as
existing power plants in Georgia
Officially Commissioned on 23rd July 2015
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66/139/206 Key Strategic Projects – Gardabani 2 CCPP and UGS
GOGC intends to construct the UGS project to construct an underground gas
storage project in Georgia
Aim is to ensure a guaranteed supply of natural gas in emergency situations,
achieve a balance in the seasonally-affected supply and demand of natural
gas (currently 70-75% in winter and 25-30% in summer) and optimise
GOGC’s natural gas supply and demand activities
Expected to cost approximately U.S.$270 million and to be completed in 2022
GOGC finalized prequalification stage of EPIC tender. EPIC contract
signature is planned in the second quarter of 2019.
Project is planned to be funded by international development banks (KfW and
EIB)
Affordable/ and unprecedented terms of the loan: Maturity of 15 years with 5
year grace period. Annual interest rate significantly below the market
Financing from KfW in the amount of EUR150 mn has already been secured.
EIB loan agreement is expected to be signed in the first half of 2019.
Based on the existing experience and success of Gardabani 1 CCPP, GOGC is
constructing a second CCPP, located adjacent to Gardabani 1 CCPP
Planned installed capacity of 240 MW and the total cost for this project is
expected to be U.S.$170 million
Expected project timeline (2 years), shorter than for Gardabani 1 CCPP due to
similar engineering works, trained staff and project teams in place
Installed capacity and technical characteristics similar or identical to Gardabani 1
CCPP
Infrastructure including roads, water and gas pipelines already in place
Expected cost savings due to sharing of resources and existing know-how
Aim to contribute to further commercial sector energy sales in Georgia and scope
for electricity exports to neighbouring countries
Gardabani 2 CCPP Underground Gas Storage Facility
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Overview of Infrastructure Assets
Gas Transportation
GOGC owns strategic infrastructure facilitating Georgia’s integral role as key transport corridor in international
energy trade, but is mostly not responsible for maintenance and operational costs
• Main Gas Pipeline System (“MGPS”)
• Principal natural gas transportation network within Georgia
• Serves to transit natural gas from Russia to Armenia
• GGTC is the operator of MGPS and is responsible for all costs related to maintenance and operation of the pipeline
• GOGC is responsible for MGPS capex and rehabilitation works
• South Caucasus Pipeline (“SCP”)
• Transports natural gas from Azerbaijan to Turkey and onward to Europe • Owned by a consortium led by BP and SOCAR with BP being the technical
operator and SOCAR the commercial operator • GOGC buys gas from SCP, but is not responsible for any maintenance,
CAPEX or costs related to SCP
Oil Transportation
• Western Route Export Pipeline (Baku-Supsa Pipeline) (“WREP”)
• Transports oil from Azerbaijan to Georgia
• Operated by BP, who is responsible for all capex and maintenance
• In 2017 the volume of oil transported through the Georgian section of WREP was c. 4 m tonnes; BP paid GOGC a tariff of US$0.25 per each barrel of Azerbaijani oil transported through WREP
• BP has committed to invest $150m to modernize sections of the WREP
• Baku-Tbilisi-Ceyhan Pipeline (“BTC”)
• Transports crude oil from offshore oil fields in the Caspian Sea to the Mediterranean Sea
• BTC owned by third-party consortium led by BP and SOCAR GOGC does not receive revenues from BTC, transit revenues are accounted directly to the State budget in the form of a property tax
Ow
ne
d b
y G
OG
C
Ow
ne
d b
y G
OG
C
Black Sea
Georgia
Russian
Federation
Caspian
Sea
Turkey Azerbaijan Armenia
MGPS Gas Pipeline Owned by GOGC SCP Gas Pipeline WREP Oil Pipeline Owned by GOGC Baku-Tbilisi-Cevhan Oil Pipeline
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66/139/206 Trade and Energy Transit Corridor
Key Facts
Georgia’s strategic location facilitates international trade and supports long term growth
EU 20.6%
Turkey 9.8%
Russia 14.2%
China 10.7%
Azerbaijan 7.7%
Ukraine 3.6%
Armenia 9.1%
Other 24.3%
EU 30.4%
Turkey 18.6%
Russia 9.3%
China 7.5%
Azerbaijan 6.8%
Ukraine 5.7%
Armenia 3.0%
Other 18.7%
Strategic East-West Trade Flows and Pipelines
Key Trading Relationships
TURKMEN-
ISTAN
Odessa-Brody-Gdansk Baku-Tbilisi-Ceyhan WREP (Baku - Tbilisi – Supsa)
Burgas-Vlore
Constance-Trieste
Tanker shipments
AZERBAIJAN ITGI
LNG
TAP TURKEY
GEORGIA
TCP
TANAP
KAZAKHSTAN
The EU is Georgia’s main trading partner
Georgian Imports by Country (2016) (%) Georgian Exports by Country (2016) (%)
Source: Geostat
Strategically positioned within the Caucasus region to serve as a transport
corridor for European and global markets and a corridor for East-West trade
‒ In line with EU strategy to reduce reliance on Russian gas
‒ Trans-Anatolian Gas Pipeline (TANAP) underway
‒ Trans-Adriatic pipeline (TAP) project due to commence in 2016
The increase of volumes of natural gas is expected to positively impact
GOGC’s revenues from the gas supply segment
Major regional developments expected to further enhance Georgia’s trade and
transit in the coming years:
‒ Increased transit capacity at Kazakh, Turkmen and Azeri ports
‒ Major upgrades and capacity expansion at Georgia’s Black Sea ports and oil
terminals
‒ Increased coordination within the Silk Wind / One Belt, One Road project
‒ The Baku-Tbilisi-Kars railway system nearing completion
‒ Rail and road infrastructure upgrades in Georgia and neighbouring countries
GOGC as Georgia’s key energy player is expected to benefit from
increased regional interconnection and trade links
Georgia is and is expected to remain the only route for Russian natural gas
supply to Armenia
GOGC owns the MGPS, which transports natural gas from Russia to
Armenia
EUROPEAN
UNION
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Georgia’s strategic location facilitates international trade and supports long term growth
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GOGC TRADING SA GENEVA, SWITZERLAND
Crude Oil
Transportation GOGC Oil Products
Trading
Crude Oil Trading
GOGC
GOGC TRADING SA is a fully owned subsidiary under GOGC’s
control, incorporated in Geneva, Switzerland.
It is an emerging oil and products trading platform that intends to
take over regional and global opportunities in the energy
commodity trading area.
Currently it develops its business activities in close collaboration
with the market’s leading players to enter the crude oil and
petroleum products trading and transportation services. Thanks to
our already developed network of relationships in the banking and
investor community in Switzerland, we can confidently start
securing financing commitments for operations, should attractive
opportunities arise.
Main activities will extend beyond Georgia and instead focus on
the markets of Black Sea, Mediterranean, Caspian Sea and other
areas of interest globally.
In our process to move to a full scale commodity trading business, we enter in various partnership agreements with established
market players; We are currently being advised and managed by SCCF – the biggest Commodity Trade Finance service provider on
the Swiss market.
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Georgia’s strategic location facilitates international trade and supports long term growth
Recently it has successfully established crude oil transportation corridor from the Caspian basin thru Georgia by partnering
with major off-takers of crude oil from Turkmenistan. These volumes were moved to international markets via different
modes of transportation including pipelines, railway tank cars and ships.
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66/139/206 We have delivered strong financial results
Revenue
671.6 million Gel
+37.9 million Gel, +6.0%
EBITDA
243.1 million Gel
+53.7 million Gel, +28.3%
Net Profit
220.4 million Gel
+ 142.4 million Gel, +182.2%
Covenant Ratio
0.89x Net Debt / EBITDA
2.17x in 2016
633.6
671.6
189.5
243.1
29.9%
36,2%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
100
200
300
400
500
600
700
2016 2017
Revenue EBITDA EBITDA Margin
0
50
100
150
200
250
300
350
400
Gas Supply Pipeline Rental Electricity Generation Oil Transportation Upstream Activities
2016 2017
Resilient Revenue and EBITDA Generation Revenue Breakdown by Segment
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66/139/206 Historical performance
EBITDA Margin by years Revenue & EBITDA by years (GEL mln)
Net Operating Cash Flow & CAPEX by years (GEL mln) Revenue breakdown by years
0
50
100
150
200
250
300
350
400
2013 2014 2015 2016 2017
Net Operating Cash Flow CAPEX
0
50
100
150
200
250
300
350
400
Gas Supply Pipeline Rental Electricity Generation Oil Transportation Upstream Activities
2013 2014 2015 2016 2017
34% 33%
25%
31% 36%
2013 2014 2015 2016 2017
326 360
498
631 672
111 119 126 196
243
0
150
300
450
600
750
900
2013 2014 2015 2016 2017
Revenue EBITDA
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66/139/206 We diversified business by adding power generating segment
GOGC is a diversified energy company operating across five segments
Exclusive buyer under the South Caucasus Pipeline transit arrangements
Gas sales through SOCAR to the social sector of the domestic wholesale market
Gas
Supply
Rents MGPS out to GGTC for a fee based on transported volumes
Coordinates development and rehabilitation of existing infrastructure
Involved in the development of the regional Caspian and Black Sea transit routes
Pipeline Rental
Electricity generated at the Gardabani 1 since operations began in September 2015
Two revenue components: Tariff and Guaranteed capacity fee
Electricity
Generation
Rents out WREP oil pipeline to BP for a tariff payment based on transit volumes Oil
Transportation
56.5
%
29.7
%
2.7%
Sells State share of oil and gas under PSAs
Limited E&P operation
Upstream
Activities 2,1%
13
% of sales revenue
8.9%
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66/139/206 Gas supply activities
Georgia gas market overview – three distinct segments
(1)
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Overview
Power Sector
Household
Sector
Commercial
Sector
Relative Market Size
2011A (mcm)
629
522
631
Total = 1,782
2018F (mcm)
539
920 1003
Total = 2,463
2023F (mcm) 520
1,076 1,250
Household Sector
Power Generation Sector
Commercial Sector
Total = 2,705
Sector is characterized by significant fluctuations in gas consumption, due to the
climate and periodic shut downs of the largest hydro power plant in the country
Gas consumption is expected to stay flat or even reduce in longer term due to the
construction of more efficient thermal power plants and commissioning of large
hydro plants
Household Sector has approximately 1,000,000 customers
Gasification projects supported by the Georgian Government significantly
increased number of connected customers in recent years
As a result the household consumption was growing by double digits,
reflecting the increasing number of connected households
Moderate growth is expected in the commercial sector
Development of industrial zones at black see coast will require additional
gas volumes
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66/139/206 Eurobonds
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Transaction highlights
On April 19, 2016, GOGC returned to the international bond markets
On April 19, 2016, GOGC successfully priced a US$250 million 6.750% Reg S / 144A bond due 2021 and in parallel executed “any and all” cash tender of its
existing US$250 million notes due 2017;
The transaction benefited from a high scarcity value as the first international bond offering from Georgia since October 2013 and achieved the lowest ever coupon
from the country;
As demonstrated by the impressive participation ratio of 78.6% (US$196.5mm notional), the majority of existing investors took advantage of the opportunity to
swap their exposures into the new 5-year benchmark offering, underlining their confidence in GOGC’s credit;
GOGC implemented a carefully crafted and comprehensive marketing strategy, covering over 42 investors in New York, Boston, Los Angeles and London, and
the success of the roadshow was underlined by the positive performance of bonds from Georgia, which tightened by 30bps from the announcement to the pricing
of the transaction;
On the back of the positive feedback from the roadshow and strong tender participation, GOGC launched its $250mm 5 year transaction with an initial price talk of
‘low to mid 7s’;
A rapidly building orderbook, which garnered over $592mm of total interest from 84 accounts, allowed GOGC to release an official price guidance of ‘7.25% area’
and later price at the tight end of the guidance with a yield of 7.00% and a spread over mid-swaps of 579bps, an improvement of 25bps compared to the inaugural
offering in 2012;
The deal size of $250mm was capped by the Government approval and limited the amount of new money, however, GOGC was still able to expand its investor
base with more than 50 new accounts participating in the orderbook;
The transaction allowed GOGC to extend the maturity of its liabilities in a cost effective way by taking advantage of the currently favorable market conditions and
minimized the refinancing risk when the remaining notes mature next year.
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66/139/206 Pro-forma financials and covenants
Revenue and EBITDA Generation (GEL mln) Revenue break up (GEL mln)
Two major projects will ensure growth in terms of revenue, EBITDA and EBITDA margin
NET DEBT/EBITDA Ratio Projections
(1)
16
0
1
2
3
4
5
6
Net Debt/EBITDA
2017 2018 2019 2020 2021 2022 2023
617
836 836 861 987 1034
157 172 283 294
421 498
0150300450600750900
10501200
2018 2019 2020 2021 2022 2023
Revenue EBITDA
353 368 411 438 518 530
191 268
344 341 338 335
0
200
400
600
800
2018 2019 2020 2021 2022 2023
Gas Sale Electricity Sales Oil Sales Oil Transit Gas Transportation UGS revenue
26% 24%
34% 34% 43%
48%
2018 2019 2020 2021 2022 2023
EBITDA Margin by years
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66/139/206 Summary of projected financial performance
(GEL mln) 2019 2020 2021 2022 2023 Income Statement Revenue 716 836 861 987 1034 EBITDA 172 283 294 421 498
Margin% 24% 34% 34% 43% 48% Operating Income 248 367 382 521 600 Interest Income 4 4 5 5 6 Interest Expenses 46 46 55 55 55 Balance Sheet Cash and Equivalents 507 655 557 728 967 Total Assets 2 187 2 629 2 783 3 058 3 272 Short Term Debt - - - - - Long Term Debt 1 037 1 281 1 294 1 307 1 236 Cash Flow Funds Flow from Operations 177 288 299 426 503 Capex 141 309 280 136 40 Dividends -27 -24 -63 -63 -94
Free Cash Flow 36 -21 19 290 463 Ratios Gross Debt/EBITDA 6.0x 4.5x 4.4x 3.1x 2.5x Net Debt/EBITDA 3.1x 2.2x 2.5x 1.4x 0.5x
EBIT/Gross Interest Expense 2.4x 4.8x 4.2x 6.0x 7.3x
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66/139/206 Wrap up
On August 24, GOGC signed a EUR 150 million promotional loan with KfW for the construction of the first underground gas
storage facility in Georgia
The remaining portion of the funding to be secured within the next 12 months with EIB
Construction of Gardabani 2 (second thermal power plant) is on track to be completed in the second half of 2019. Fully funded
with GOGCs net operating cash inflows and reserves
Shifts in EBITDA structure. In year 2017 40 % of total EBITDA was generated by Gardabani 1. In 2019-2020 estimated 55% of
EBITDA will be generated by power plants.
Diversified business with growing exposure to electricity generation in medium term natural gas storage GOGC contributed to
the improved stability of cash flows.
From 2019 and beyond GOGC expects growing volumes of cheaper natural gas from Shah Deniz-2, which will significantly
improve gas business margins
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