Credit Update - Presentation to Fixed Income …...Credit Update - Presentation to Fixed Income...
Transcript of Credit Update - Presentation to Fixed Income …...Credit Update - Presentation to Fixed Income...
Société Anonyme de Gestion de Stocks de Sécurité
Credit Update - Presentation to Fixed Income Institutional Investors
December 2015
Edouard Filho – General Secretary and CFO +33(0)1 47 10 06 85
p. 1
p. 2
Agenda
I- SAGESS’ Mission at the heart of France’s oil reserve system
II- Operational Profile
III- Financials
IV- Conclusions and Key Considerations
p. 3
I- SAGESS’ Mission at the heart of France’s
oil reserve system
p. 4
SAGESS’ Strategic Mission
SAGESS, Central Stockholding Entity for France (Dec 28th, 2012 Decree), is a private corporation (“Société Anonyme”), with private shareholders and management, fulfilling a public duty within an extensive regulatory and State-controlled environment
SAGESS’ purpose set at its creation (1988) and unchanged by the 1992 Oil Law:
Tighter control over oil reserves obligation / Availability of supply in case of crisis
Fair competition in the market / Reduced burden of strategic reserves on operators’ balance sheets
SAGESS’ unique mission: stockpiling and managing strategic stocks of crude oil and oil products, the latter being at the disposal of the Government
SAGESS’ strategic role is at the heart of France’s strategic oil reserve system, integrated into a stable and committed international framework for strategic stockpiling (IEA and EU)
SAGESS is rated by S&P “AA negative outlook” (long term) and “A-1+” (short term) in line with the rating of France in October 2015.
As of 1st July 2015, SAGESS manages 12.8 MT Eqpf (Equivalent finished products) of oil products representing 74% of France’s reserve obligation
As the Central Stockholding Entity for France, SAGESS is entrusted with the mission of holding and controlling a major part of France’s Strategic Oil Reserves
p. 5
Oil Reserves Are Strategic for Governments
1974 International Energy Agency (IEA) Treaty (OECD agency) with 26 industrialised countries Reserves set at 90 days of net imports
EU directives (Since December 1968 and amended in 2009) and associated controls/reports Reserves set at 90 days of net imports
Ensuring Ongoing State Support for SAGESS
International
Framework
French
Legislation
Reserve
Management
Systems
Strategic oil reserves obligation since 1925
December 1992 Oil Law, subsequent 1993 decrees and orders, codified in the new Code of Energy and Code of Defence
Reserves set at 29.5% (i.e. 108 days) of inland consumption in line with the European directive
SAGESS designated Central Stockholding Entity for France in Dec. 2012 by decree
Differences in set up, but all under close State supervision: Privately held stocks: UK, Italy
Dedicated “agency”: Germany (EBV)
Government: USA (DoE), Japan (JOGMEC), China (NORC)
Privately held stocks and dedicated “agency”: Holland (COVA), Ireland (NORA), Denmark (FDO), Switzerland (CARBURA), France (SAGESS), Portugal (EGREP), Austria (ELG), Spain (CORES), Belgium (APETRA)
p. 6
Responsibility for France’s Reserves Obligation… …Rests primarily with the oil operators, with a significant and increasing delegation latitude to the central reserve system
Operators
Every oil operator must ensure oil reserve at 29.5% of the quantities released for inland consumption in the previous year
17.3 MT as of July 1st, 2015
Partial delegation of this storage obligation, against fee, to the central reserve system structure (CPSSP / SAGESS), with 2 possible levels of delegation: 56% or 90%, and full responsibility on the remainder
CPSSP (“Comité Professionnel des Stocks Stratégiques Pétroliers”)
Fulfillment of delegated obligation Coverage by additional stocks « lent » by
oil operators (tickets) and by SAGESS stocks
Key decisions: SAGESS purchase and sale plans, fees from operators to recover system costs
Committee without assets or operational activities / Delegation of obligation management to SAGESS
Bank guarantee against fee payment default
Full voting rights for Government representatives
SAGESS (“Société Anonyme de Gestion de Stocks de Sécurité”)
Oil reserve management as exclusive object
Stocks purchase and sale, storage and maintenance
Management of the whole system (“Convention”)
All operating, administrative and debt-servicing costs covered by CPSSP
Can only sell upon State formal request
Cannot sell at loss Rights for Government representatives
to request a second vote
Long term
“Convention” (1)
(1) Evergreen agreement with a 5-year cancellation notice / Convention part of the SAGESS By-Laws, approved by Prime Minister Decree
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SAGESS is at the heart of France’s Reserve obligation…(1/2) …with a growing central coverage and an increasing recourse to SAGESS stocks
France Obligation Coverage (in Eqpf) SAGESS’s Increasing Importance
France Obligation Fulfilment: 17.3 MT (in Eqpf) as of July, 1st 2015
Oil Operators
Own Stocks 3.8 MT
CPSSP
Tickets 0.7 MT
SAGESS 12,8 MT
For each category Gasoline Distillates (Diesel oil
Heating oil) Jet fuel Heavy fuel oils
29.5% of the previous
calendar year’s volumes
released for inland
consumption
19
747231
4750
2221
0%
25%
50%
75%
100%
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Operators Tickets SAGESS
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
198
7
198
8
198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
Crude oil Jet Distillates Gasoline
National obligation breakdown
SAGESS stocks evolution (KT)
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SAGESS is at the heart of France’s Reserve obligation…(2/2)
SAGESS’ stocks have reached a ceiling in 2014 at 13.1 Mt fpeq with a
predictable decrease in the forthcoming years:
Decrease of the national obligation as a consequence of the decrease in
national consumption:
National consumption: -0,7 % in 2013 and -2,1 % in 2014
National obligation: 17,8 Mt in 2013, 17,7 Mt in 2014 and 17,3 Mt in 2015
Stabilisation of compulsory storage tickets to CPSSP at an historical low
level, as a result of inventory streamlining by the operators.
Outstanding compulsory storage tickets to CPSSP:
January 2013 : 1780 Kt Eqpf
January 2014 : 1170 Kt Eqpf
January 2015 : 815 Kt Eqpf
As a consequence, SAGESS stocks level marginally decreased in 2015, still representing 74% of France strategic stocks.
…with a growing central coverage and an increasing recourse to SAGESS stocks
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Current strategic reserve system maintained and possibly
strengthened:
Stability and criticality of International, EU and National frameworks
Update of Energy and Defence Codes in 2012 to include EU Directive recommendations
SAGESS and CPSSP’ public service role fulfilled at the satisfaction of all stakeholders
EU 2009 Directive on emergency oil stocks regime, aligned with IEA framework
Regulatory Stability No foreseeable changes to the oil stockpiling laws that would affect SAGESS’ creditworthiness
Recommendation to create a “Central Stockholding Entity” by country: SAGESS
has been nominated as the CSE for France on Dec 28, 2012 by decree
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II- Operational Profile
p. 11
A Stable and Oil Industry Representative Shareholding Structure
SAGESS is a private corporation (“Société Anonyme”) and has private shareholders and management
All SAGESS’ shareholders must be “customs authorised” oil operators:
International oil companies (TOTAL, ExxonMobil, Shell, BP, ENI) and their subsidiaries
Hypermarkets (Carrefour, Auchan, Intermarché, Leclerc, …)
Other importers/distributors (Bolloré, Dyneff, Picoty, …)
35 shareholders by September 2015
Share in capital adjusted annually in proportion of shareholders previous year releases for inland consumption
Shares can be transferred only with the government’s prior approval
SAGESS is a private company owned by most of the players in the oil sector
SAGESS shareholders in 2015 (% of shares)
Source: Cie as of September 24, 2015
50,0
34,0
16
%
Oil Operators
Hypermarkets
Independants
34
12,59,4
7,58,1
28,5
%
Total Marketing France
SIPLEC
Esso S.A.F
CARFUEL
SCA Pétroles et dérivés
Source: Cie as of September 24, 2015
p. 12
SAGESS’ Activities: Oil Stocks management
Purchase and sale of oil products systematically carried out through a tendering process
Most oil industry players are invited (refiners, traders, French and international)
Stock Acquisition
Policy
Storage Policy
Quantity/ Quality Controls
SAGESS is responsible for its storage management
Localisation plan is endorsed by the French State
Stocks are mainly kept in France and, subject to the French State’s agreement, abroad
SAGESS stocks are spread in 93 third party sites (8 refineries, 84 depots and 1 underground salt caverns storage in Manosque)
SAGESS only owns one storage plant of 33,000m3 in Chasseneuil du Poitou (not operated by SAGESS)
Product quantities and qualities are regularly checked and stocks are periodically rotated
All products upgraded with latest specification changes
Products in Stock
Stocks are made up of gasolines, diesel oil/heating oil, jet fuel and of crude oil
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SAGESS is Run by an Experienced Management
CEO François Martin, joined SAGESS in January 2015. He spent his career, with the Mobil group and then with TOTAL group. He has occupied various managerial positions in the marketing and distribution activities in France and internationally.
Corporate Services Senior VP and CFO Edouard Filho joined SAGESS in July 2010. He was previously in charge of Worex Controllers Department and General Secretary. He spent close to 30 years with ExxonMobil, either in France or abroad
Logistics Senior VP Daniel Bonocori joined SAGESS in April 2013, with an experience in managerial, operational, economic & finance, technical (oil & construction) functions as well as in control and audits in national and international bodies.
The Board of Directors is composed of 13 members from the Oil Industry (the mandate is given for a 5-year period that can be renewed). Three State representatives attend with consulting and second vote rights. One State Commissioner introduced in 2006 with veto right on Manosque pipeline matters
A “Logistic Committee”, a “Financial Committee” and a “CSR Committee” assist SAGESS management and the Board in operational, key financial and CSR matters respectively
An Audit Committee was created in 2009 as a consequence of the European directive on transparency to assist the Board with an oversight of the financial information and a review the efficiency of the internal control system
SAGESS is periodically audited by auditors of the shareholders
Board of Directors and
“Comités”
Experienced Management
Long experience in the oil industry
Corporate Social Responsibility Initiatives of SAGESS
A sustainable development charter was signed at the initiative of SAGESS’s management in February 2012
The annual action Plan is reviewed and approved by SAGESS CSR Committee and SAGESS Board of Directors
Review by SAGESS CSR Committee of the CSR annual report, the related KPI’s and their monitoring
Publication in April 2015 of an updated Code of Business Conduct with a reinforcement of anti-corruption practices: shared with all SAGESS employees and suppliers
Annual publication of SAGESS CSR reports:
Presentation of SAGESS annual CSR plan
Annual update of reporting procedures
Publication of the annual CSR indicators on SAGESS activities
Duty in public service mission
Equity in employment
Sustainable development
Code of business conduct
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Environmental policy
Corporate Social Responsibility Rating
Unsolicited rating by VIGEO (extra-financial rating agency) every 2 years (latest
November 2015)
SAGESS classified among “Specific Purpose Banks & Agencies” panel sector
SAGESS: active performer in 3 out of 5 criteria
SAGESS: Global score: 64 /100 - Ranking 4 /15 (13 points increase vs 2013)
p. 15
« Sagess overall CSR
performance is
considered advanced
in absolute terms and
improve significantly
since the last review
in 2013 » Source: Vigeo rating - Nov-2015
p. 16
III- Financials
p. 17
Full Cost Recovery Principle SAGESS and CPSSP are by Law self sustaining entities, which sets aside any cost recovery issue
Pay a monthly fee to the CPSSP (€/T released for inland consumption)
Quarterly update to cover all CPSSP costs
Provide bank guarantee against fee payment default
Remunerates operators for tickets on a monthly basis
Covers SAGESS costs
Operators CPSSP SAGESS
Pays:
Storage rentals
Products upgrade
Products controls
Insurance
Other operating and exceptional costs
Overheads
Financial charges
Recovers on a monthly basis all costs
Perceives monthly fees
Stockists
Other Suppliers
Financial Markets and
Banks
SAGESS and CPSSP are linked by a long term “Convention” which guarantees the full cost
recovery principle:
Convention part of the SAGESS By-Laws, approved by Prime Minister Decree
Evergreen agreement with a 5-year cancellation notice
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SAGESS Profit & Loss Account
Full cost recovery from CPSSP (Law and CPSSP / SAGESS “Convention”)
Stocks booked at acquisition cost:
Accounting value €4,456m (end December 2014)
Market value € 6,284m (end December 2014)
If stocks requested to be sold by government:
Market price transaction
SAGESS guaranteed to receive at least the stock weighted average cost (if market price lower than SAGESS weighted average cost, CPSSP will compensate SAGESS by raising an extra fee from the operators)
Profit from sales are booked to reserves
99% of borrowings is based on variable rates (end December 2014)
Preferential tax regime – No corporate income tax
SAGESS cannot make a loss (but can make a profit) and is exempt from corporate taxes
€m Year End 2013 Year End 2014
Cost recovery from CPSSP
Petroleum Products sales
318
6
361
2
Logistic expenses (265) (303)
Other charges (10) (12)
Financial charges (46) (47)
Net Result 3 1
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SAGESS Summary Balance Sheet By year end 2014, 98% of the total balance sheet is made of stocks financed by borrowings Stocks are fully protected against a fall in oil price, are insured and totally unpledged
€m Year End
2013
Year End
2014
Total Fixed Assets
75 66
Oil Stocks 4,290 4,456
Receivables and Others
130 48
Total
Assets 4,495 4,570
€m Year End
2013
Year End
2014
Net Worth and Provisions
4 5
Borrowings 4,384 4,528
Payables and Others
107 37
Total Liabilities
4,495 4,570
Assets Liabilities
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SAGESS’ Financial Strategy is Highly Transparent and Accountable SAGESS’ financial strategy is reassessed and reviewed by the Board on an annual basis
Raise funds at competitive cost when needed to finance the stocks and the assets
80 to 90% of funds from medium and long term borrowings
Staggered maturities
Diversification of funding sources
Flexibility
Objectives
Current Debt Structure
Risk Management
Bonds, commercial paper (in addition to the €61m CPSSP’s loan)
100% of use of commercial paper program covered by bank credit lines
Bonds represent 87% of total debt by YE 2014 and 92% by September 2015
Short term floating rate debt policy
SAGESS does not use derivatives except interest rate swaps of bond issues (Board prior approval)
No exposure to currencies or oil price
Periodic insurance risk assessment, insurance contracts in place (property
products, environment, third party), high limits and limited deductibles.
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Diversified Funding Sources and strong Liquidity Profile
Total Financial Debt of €4,376m as of end of September 2015 with diversified sources of funding
Bonds accounting for 92% of total debt with a strong diversification of the investor base: €4,025m
A weighted average close to 15% on the four latest 12 year tranches was composed of non-domestic investors
A weighted average close to 60% on the two latest 5 to 7 year tranches was composed of non-domestic investors
CPSSP zero interest loan: €61m
Commercial papers: €290m
Strong liquidity position
Commercial paper program of €1,400m with €290m use by end of September 2015
Undrawn committed bank credit lines up to €900m
Approval by Ministry of energy to sell up to 10% of SAGESS stocks in case of systemic banking crisis (equiv. €630m at December 2014 market price)
Debt structure (September 2015)
A continued diversification of the bond investor base*
Geography Investor Type
85%
6%6%2%
1%
France
Germ.&Aust
Nordics
Benelux
Other
59%
33%
6%2%
Insur. & PF
AM
CB & OI
Banks
* Distribution statistics of SAGESS bond issues realised in Oct-12 & Sept-15
7y
r
Oct
ober
201
2
12yr
Sep
tem
ber 2
015
45%
18%
12%
5%
6%
14%
France
Germ.&Aust
Benelux
Switzerland
UK
Other
49%
32%
12%
7%
AM
Insur. & PF
Banks
CB & OI
92%
7%1%
Bonds
CP
CPSSP loan
p. 22
A demonstrated access to the bond market since 2011: a smooth maturity profile A smooth curve between 2016 and 2027
Demonstrated access to the bond market:
By the end of September 2015:
Bonds represent 92% of Total Debt i.e. €4,025m
7 bonds outstanding with sizes from €500m to €700m
3 latest bond issues:
October 2012: €700m 2019 maturity
March 2013: €600m 2025 maturity
Sept. 2015: €500m 2027 maturity
A smooth maturity profile since 2011:
Progressive construction of a smooth curve over the last 10 years
No redemption peak: an average redemption size lower than €600m per year
A 5.8 year Average debt maturity by end of December 2015
Bond issue Maturity Coupon (%) Total amount (€m)
June 2006* Oct 20th, 2016 4.000 625
October 2010 Oct 21st, 2022 3.125 500
January 2012 Jan 24th, 2017 2.750 500
January 2012 Jan 24th, 2024 4.000 600
October 2012 Oct 22nd, 2019 1.750 700
March 2013 Mar 6th, 2025 2.625 600
Sept 2015 Oct,25th, 2027 1.500 500
Debt Redemption Profile €m (Sept.015)
Outstanding Bonds (Sept. 2015)
* €350m initial issuance, followed by a €275m tap in October 2008
0
100
200
300
400
500
600
700
800
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Comm. Paper Bonds
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Standard & Poor’s Ratings
In October 2015, Standard and Poor’s confirmed, in line with the Sovereign, SAGESS’ long term issuer credit at “AA negative outlook” and the “A-1+” short term issuer credit (€ 1,400m Commercial Paper program was confirmed “A-1+”).
SAGESS is included by Standard and Poor’s in the list of the “Government-Related entities” whose rating are equalised with that on France.
“We equalize the ratings on SAGESS with our ratings on France. This reflects our view that there is an “almost certain” likelihood that the French Government would provide timely and sufficient extraordinary support to SAGESS in the event of financial distress” “We consider SAGESS to be a government-related entity (GRE). Under our GRE criteria, we base our ratings approach on SAGESS’:
"Critical" role in France (…) in supporting the country's energy security and fulfilling its legal obligation to stockpile strategic oil reserves according to International Energy Agency (IEA) and UE requirements. SAGESS was recognized on Dec 28, 2012, by State decree, as France’s sole central stockholding entity under the 2009 EU directive (…). In our opinion, SAGESS's strategic mission (…) ensures it receives strong state support.
"Integral" link with the French state. SAGESS is integrated into the government's energy and defense policy and subject to close state supervision and control.
“We believe SAGESS’ legal framework ensures full cost recovery, as all SAGESS’ charges are reimbursed by CPSSP.”
“We also consider that, in case of need, SAGESS could access the emergency funding of the French Treasury (Agence France Trésor) […]. We consider this allows for prompt and ample
State support to SAGESS in the event of financial distress”.
Source: Extracts of S&P research update of October 2nd , 2015.
p. 24
IV- Conclusions and Key Considerations
SAGESS Key Highlights
SAGESS, private company with stable shareholding structure with most of the oil sector players
More than 25 years of experience with a proven track record management and an increased role at the satisfaction of all stakeholders
An immune business model:
Full SAGESS cost recovery by CPSSP, guaranteeing a balanced statement of income
Ministry of energy approval to sell up to 10% of SAGESS stocks in case of systemic banking crisis
No oil price exposure
Highly stable and secured cash flows with full recovery of all operating and financial costs
A €1,828m latent capital gain on stocks as of end December 2014:
Market value €6,284m vs. accounting value €4,456m
Stable legislative environment, with SAGESS official Central Stockholding Entity for France
CSR initiative launched in 2012, with annual publication of CSR report
Highly transparent, responsive and protective financial policy
Active management of debt profile with extended and staggered debt maturity profile
Robust liquidity position through CP program, undrawn committed credit lines and mechanism of emergency stock sale
Demonstrated access to the bond markets since 2001
SAGESS has a “AA (negative outlook)” long term rating (in line with the Sovereign) and a “A-1+” short term rating by S&P
S&P considers SAGESS as a Government-Related entity (GRE), as are 8 others in France, “ which benefit from an ‘almost certain’ likelihood of extraordinary support from the French government in the event of financial distress.”
SAGESS, France Central Stockholding Entity, a corporate with strong assets, secured cash flows and strategic support of French government
p. 25
p. 26
www.sagess.fr
This document was prepared by Société Anonyme de Gestion de Stocks de Sécurité (SAGESS) solely for use at the presentation on December, 2015. This document is not to be reproduced nor distributed, in whole or in part, by any person other than the SAGESS. SAGESS takes no responsibility for the use of these materials by any person.
The information contained in this document has not been subject to independent verification and no representation, warranty or undertaking, express or implied, is made as to, and no reliance may be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein.
Neither SAGESS nor its shareholders, its advisors, its representatives or any other person shall be held liable for any loss arising from any use of this document or its contents or otherwise arising in connection with this document. In the event of any discrepancies between the information contained in this document and the public documents, the latter shall prevail.
This document does not constitute an offer to sell or an invitation or solicitation of an offer to subscribe for or purchase any securities, and this shall not form the basis for or be used for any such offer or invitation or other contract or engagement in any jurisdiction.