Texas cristobal mega transco growth options synergy savings executive summary february 4 2000
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Texas-Cristobal Mega-Transco Growth Options & Synergy Savings Executive Summary February 4, 2000 PowerPoint PPT Presentation


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Texas-Cristobal Mega-Transco Growth Options & Synergy Savings Executive Summary February 4, 2000. PricewaterhouseCoopers LLP PricewaterhouseCoopers Securities LLC. Objectives. This Engagement Evaluates areas of revenue growth

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Texas-Cristobal Mega-Transco Growth Options & Synergy Savings Executive Summary February 4, 2000

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Texas cristobal mega transco growth options synergy savings executive summary february 4 2000

Texas-Cristobal Mega-TranscoGrowth Options & Synergy SavingsExecutive SummaryFebruary 4, 2000

PricewaterhouseCoopers LLP

PricewaterhouseCoopers Securities LLC

1


Objectives

Objectives

  • This Engagement

    • Evaluates areas of revenue growth

    • Examines commercial, strategic, and organizational aspects of each option

    • Provides a preliminary value assessment

    • Provides a preliminary assessment of synergy savings in:

      • Operations & Maintenance (O&M) costs

      • General & Administrative (G&A) costs

  • Broader Objectives

    • To assist Texas in its

      • internal examination of the value of the deal

      • initial discussions and negotiations

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Growth options synergy categories

Growth Options & Synergy Categories

  • Five Growth Options

    • Improve Pricing & Network Utilization

    • Implement Radical Outsourcing and Technology Joint Ventures

    • Acquire Transmission Assets and Performe O&M for Others

    • Develop Merchant Facilities

    • Enhance Rights-of-Way

  • Synergy Savings

    • Lower O&M costs

    • Lower G&A costs

    • Synergies apply to both pipes and wires

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Texas value proposition

Texas’ Value Proposition

  • Texas brings superior commercial, strategic, and organizational expertise to the mega-transco

    • An overall P/E four times that of Cristobal partners

    • A proven track record of creating value

    • Ability to design and commercialize innovative products and services

    • Regulatory knowledge and expertise

    • Successful track record of spinning off businesses

    • Superb organizational and management skills

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Growth option 1 improved pricing network utilization

Growth Option 1 - Improved Pricing & Network Utilization

  • Definition

    Increase electric and gas throughput and profits through innovative pricing and products

  • Preliminary Value

    Potential EBITDA of $42 - $125 MM

  • Timeframe

    40%, 75%, and 100% in years 1, 2, and 3

  • Key Success Factors

    • Optimize realtime gas and electric information

    • Regulatory approval of rates

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Growth option 2 implement radical outsourcing technology joint ventures

Growth Option 2 - Implement Radical Outsourcing & Technology Joint Ventures

  • Definition

    • Adopt radical outsourcing of non-core functions

    • Implement new network technologies by sharing risks with technology innovators

  • Preliminary Value

    • Potential EBITDA of $31 - $50 MM

  • Timeframe

    • 25%, 50%, 75%, and 100% in years 1, 2, 3, and 4

  • Key Success Factors

    • Willingness to strip staffing to strategy, finance, and contracting

    • Ability to implement cutting edge technologies

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Growth option 3 acquire transmission assets and perform o m for others

Growth Option 3 - Acquire Transmission Assets and Perform O&M for Others

  • Definition

    • Acquire other RTOs or transmission assets from utilities

    • Take on O&M responsibilities of others

  • Preliminary Value

    • Potential EBITDA of $53 - $151 MM

  • Timeframe

    • May be slow to develop

    • 25%, 50%, and 75% in years 3, 4, and 5

  • Key Success Factors

    • Aggressive bidding for assets and contracts

    • Utilities’ willingness to sell assets

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Growth option 4 develop merchant facilities

Growth Option 4 - Develop Merchant Facilities

  • Definition

    • Develop new transmission facilities explicitly for open access

    • Decide when and where to build electric or gas transmission lines

  • Preliminary Value

    • Longer term option with little or no potential value in the five year horizon

  • Timeframe

    • Slow to develop

  • Key Success Factors

    • Ability to recongnize new capacity and line siting needs (gas versus electric)

    • Ability to gain rapid regulatory and right-of-way approvals

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Growth option 5 enhance rights of way

Growth Option 5 - Enhance Rights-of-Way

  • Definition

    • Add new energy facilities to existing lines and rights-of-way

    • Site new cable, fiber optic, and telecommunications lines

    • Implement existing rights-of-way for alternative uses such railroad or for tourism

  • Preliminary Value

    • Longer term option with little or no potential value in the five year horizon

  • Timeframe

    • Slow to develop

  • Key Success Factors

    • Ability to recognize implementable alternative uses of existing RoW

    • Ability to gain regulatory approval

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Range of ebitda contributions from growth options

Range of EBITDA Contributions from Growth Options

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Synergy savings operations maintenance

Synergy Savings - Operations & Maintenance

  • Definition

    • Achieve Texas’ level of O&M costs per mile in Cristobal’s gas network

    • “Texasize” the O&M practices in Cristobal’s electric network

  • Preliminary EBITDA Contribution

    • Pipes-to-Pipes$84 MM

    • Pipes-to-WiresN/A

  • Timeframe

    • 50% in year 1, 100% in year2

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Synergy savings general administrative

Synergy Savings - General & Administrative

  • Definition

    • Achieve Texas’ level of G&A costs per mile in Cristobal’s gas network

    • “Texasize” the G&A practices in Cristobal’s electric network

  • Preliminary EBITDA Contribution

    • Pipes-to-Pipes$14 MM

    • Pipes-to-Wires$4 MM

  • Timeframe

    • 50% in year 1 and 100% in year 2

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Total ebitda contributions

$ Million

Months from Approval

Note: Values for growth options are mid points of estimated EBITDA range

Total EBITDA Contributions

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Incremental market value from growth synergy

$ Million

Incremental Market Value from Growth & Synergy

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Incremental market value at 17x ebitda

Incremental Market Value at 17X EBITDA

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Relative contributions of growth and synergies overtime at ebitda x17

Relative Contributions of Growth and Synergies Overtime(At EBITDA x17)

All figures in $ Million

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Conclusions

Conclusions

  • The realization of incremental market value at several multiples of EBITDA is possible only through the participation of Texas in the mega-transco deal

  • The EBITDA contributions from growth options and synergy savings range from $94 million in year 1 to $318 million in year 5

  • At 17 multiple, the incremental market value of growth and synergy savings represent $1.6 billion in year 1 to $5.4 billion in year 5

  • These values represent increments over mega-transco’s preliminary market value of $17 billion of 9% in year 1 and 32% in year 5

  • Additional EBITDA contributions may be realized for other growth options once more information becomes available

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