Q1 2007 Union Fenosa Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

CARLOS MARTINEZ DE ALBORNOZ, CORPORATE GENERAL MANAGER, UNION FENOSA: [Interpreted] Good morning. Firstly thank you all very much for your interest in our first quarter results here at Union Fenosa. We are accompanied here today by the First Deputy Chairman and Chief Executive Officer Mr. Lopez Isla, who will give the presentation, Elias Velasco, the Director and the General Manager for Gas and Generation, Mr. Lopez Cardinete, General Manager for Networks, and myself, Mr. Martinez de Albornoz, Corporate General Manager.

I'm now going to hand over to the First Deputy Chairman and CEO to give you the presentation of our first quarter results, and thereafter we'll have a question and answer round for whoever may like to ask, who has any doubts, or may like to ask a question.

HONORATO LOPEZ ISLA, FIRST DEPUTY CHAIRMAN AND CEO, UNION FENOSA: [Interpreted] Good morning. I would like now to proceed with the presentation of the first quarter results for 2007 here at Union Fenosa.

The structure of the presentation is very similar to that which we've done in the past in each quarter. This time we've considered to -- in our consideration we thought it would be good to just do a quick summary of what Union Fenosa -- of Union Fenosa's position at the current time and given that we've launched our next five year plan, the BIGGER plan, we also wanted to make mention just at the beginning, the activities which this plan is putting in place.

Right. We've repeated this several times, but I believe it's very important to keep repeating it each time we give these presentations. Union Fenosa is an increasingly integrated and increasingly energy based Company. Now, why? Because, as all you will know, we've moved on to supply of energy for our generation with the appropriate mix which we consider rather balanced for future -- for the future, in both distribution gas and electricity.

We're just putting up the presentation at the right page, so if you'll just bear with us for a moment. This will only take a few seconds. Here we are.

We believe that over the last few financial years we have created a solid financial position giving us a foundation to grow in the future, which fits into our BIGGER plan. Here we have some information, a projection into the future of why we believe ourselves to be an integrated energy Company from our gas procurements, coal procurements, with 5b cubic meters, 2.4m tonnes of coal which furthermore meet an important part of our needs of the 45,842 [sic. see presentation] gigawatts, which is our annual generation.

We've also entered into new markets with 51,102 gigawatts of electricity, 18,545 gigawatt hours of gas, meeting the needs of more than 8m customers.

And as you will know, both within ordinary generation, which includes thermic generation and renewable generation, and at both national and international levels, this is, as I said, for our supply and distribution business both here in Spain and abroad.

The supply contract now. We would like to remind you that our main supply comes from our Egypt plant, with almost 30m gigawatt hours, and with more than 20,000 gigawatt hours in Oman and more than 10 in other plants.

Our business is working normally over the last quarter. We have seen normal production in Damietta using slightly less gas than normal. But this is just a small supply problem in the plant where gas is transported to that plant with liquid-gas tankers. We hope that by the third quarter of this year we will have the Sagunto plant in operation, with perhaps slight variations. But we'd expect to build in our most important inner market, from most importantly our combined cycles, at around 22.6 and elsewhere around 14,475.

Thus, if we analyze gas, we can see that clearly, as we said throughout the chain and throughout the business, we have an integrated position which furthermore is entirely operative at this current time.

In terms of generation, here you see the information. At the current time we have more than 10,000 megawatts of generation capacity which, with the exception of the nuclear capacity which is only some 6%, the balance is -- comes with 1m in fuel oil, and these are mainly to support our other plants. And the rest comes from renewables, which includes hydroelectric, coal and combined cycles, leading to in my business -- in my opinion a rather effective balance.

This energy I would like to repeat meets the needs of our customers in Spain. We have about 3.5m customers here in Spain, with billing of around 34,000 gigawatt hours, almost, and a more than acceptable quality of the grid, not only here in Spain but on international levels.

Here you have a graphic showing where our international business is located. It's considerably concentrated geographically, running from Mexico down to Colombia. You can see the information here on the presentation, which I'm sure you will be aware more or less of this information, so I'm not going to go into too much detail.

Here it is obvious that these markets have a great deal of growth potential -- organic growth potential. And of course within our BIGGER plan one of our strategies is to dedicate part of our business to distribution. We are more a distribution business, along with a renewable energy generation business.

And we have a certain balance between those businesses which are regulated, which are distribution businesses both here in Spain and internationally, and with non-regulated businesses with our gas and generation, with 40 something against 50 something in the share of our business, which you can see in the pie-chart here.

It's also well known that our financial position at the current time is solid, and allows us -- and provides us with a low risk profile, and allows us to put into place an ambitious plan, which is the BIGGER plan. Our leverage is around 50% right now, EBITDA debt at around 3, which I believe provides us with a certain comfort zone.

We have a considerable amount of liquidity and almost 70% of our debt is with fixed interest rates, providing us with a certain level of stability in our financial expenses. That's BIGGER. These are the investments -- the activities etc. which are included within the BIGGER plan from the year 2007, for the following five years.

Now, some of these activities are already in place or under way, such as the combined cycles which we're building here in Spain, and are at the point of being terminated. Sagunto, for example, is already in the test phase, and should come into commercial operations between the third and fourth quarters of this year, as should Sabon, around the fourth quarter.

Further, in the first quarter of this year, the Reganosa plant will come into operations, which has been coordinated with the Sabon Group, which cannot function without being supplied by Reganosa, at least they cannot function normally.

We are also increasing our capacity at the Sagunto plant, and we would hope that within our future plans for the gas supply grid we could also expand the Reganosa plant.

In terms of our renewable energy activities, little by little we're increasing our capacity. We have a mini hydroelectric plant which creates around 10 megawatts, but we're hoping to introduce 250 megawatts' worth of supply this year.

We're also in the Algarrobos plant in Panama, which would be around 10 megawatts, which should come into commercial operation within two years. And in Colombia we're at the beginning of the construction phase of 140 megawatts split between various hydroelectric plants which will also be constructed over a period of about two, two and a half years.

Our strategy includes what we call mini hydroelectric plants, but could reach capacities of up to 50 megawatts, but they have the characteristic of being able to use small rivers rather than …