Northern Gas Networks Limited SGBI Seminar

1
Northern Gas Networks LimitedSGBI Seminar

• Basil Scarsella
• Chief Executive Officer

2
Introduction

• Consortium
• Structure
• Overview
• North of England Network
• CKI Investments
• Operating Model
• Conclusion

3
Consortium Structure
SAS Trustee Corporation


100
100
100
100
100
Able Venture

Alpha
Goldia

United
Challenger

S
AS

Profits

Central

Resources

Utilities

Life No.2

Trustee


Ltd.
Profits

Ltd.
Contract
Ltd.

Corporation



Ltd.
Solutions Ltd.






(40)

(19.9)

(15.2)

(15)

(5.8)

(4.1)

Northern Gas Networks Holdings Limited
Northern Gas Networks Limited
Asset Service
Agreement


Asset Service Operator



United Utilities

Operation Ltd.


4
Overview of the Consortium

• 40 - Cheung Kong Infrastructure
• Largest Hong Kong diversified infrastructure
  company
• 3 core businesses energy, materials and
  transportation
• Market capitalisation of c. HK 54 billion
• 19.9 - Hong Kong Electric
• Vertically integrated electricity generation,
  distribution and transmission business
• 38.9 owned by Cheung Kong Infrastructure
• Market capitalisation of c. HK 75.3 billion
• 15.2 - Li Ka Shing (Overseas) Foundation
• Co-ordinates donations towards medical,
  education, cultural and other community welfare
  groups
• Investing in projects with stable cashflow as one
  of the ways to secure future funding for charity
  projects
• Donated HK 5 billion over last 24 years

5
Overview of the Consortium (continued)

• 15 - United Utilities
• Owns and operates regulated electricity, water
  and waste water businesses in North West England
• Offers infrastructure management services in the
  UK and overseas
• Market capitalisation of c. GBP 4.3 billion
• United Utilities has other contracts similar to
  the ASA
• 5.8 - Challenger
• Financial services group that manages and
  administers over AUS 10 billion on behalf of
  over 100,000 Australian investors
• Market capitalisation of c. A1.6 billion
• 4.1 - SAS Trustee Corporation
• Pension fund for many of the government employees
  in the State of New South Wales, Australia with
  net assets of A22.3 billion as at 30 June 2003

SAS Trustee Corporation
6
North of England Network
Population 6.7
million Consumers 2.5
million Employees c.
1100 Length of Network 36,000
km Gas Demand (TWh) 2004 90.5 TWh
7
CHEUNG KONG GROUP
Australia

• Over 180,000 employees

• Active in 42 countries

• Grow infrastructure in countries
• with mature regulatory system

• Stable political and legal
• system

8
Operating Model
NGN
UUCSL
ASA
Chief Executive Officer
Operations Director
Finance Director
HSE Manager
Regulation Director
Head of Finance
Interim Organisational Structure for Safety
Case V 5 - Key Managers Seconded to NGN
Network Operations Director
Head of Commercial
Legal Director Company Secretary
Head of Operations
Manager External Relations
Head of System Control and Planning
Total Headcount 373 (non-operational) Note
Total operations headcount approx 1100
Total Headcount 40
9
Conclusion

• Consortium is excited about owning a gas business
  in the UK and working with a major UK utility in
  United Utilities
• Reliable and safe network will be maintained
• Business will be established as a responsible
  corporate citizen in the region
• Corporate culture of high performance and
  continuous improvement will be developed
• Shareholder value will be delivered
• We will be an integral part of the community and
  UK gas industry

10
United Utilities Operations LimitedSGBI
Seminar

• Chris Wright
• Operations Director

11
Introduction

• Our Business Model
• Background to United Utilities
• Rationale for Gas Network
• Our Key Challenges
• Partnering Win/Win
• Questions and Answers

12
Our Business Model AssetCo/OpsCo Structure
Obligations and responsibilities of Licence
holder retained by NGN UU largely manages field
operation and delivery activities The owner NGN
will be accountable for fulfilling Licence and
Safety Case obligations Asset management and
operational activities will be managed and
delivered for NGN by UU An Asset Services
Agreement defines the relationship between NGN
and UU
13
Who is United Utilities?

• FTSE 100 Company
• UK largest operator of water and wastewater
  systems
• Largest provider of multi utility connections in
  UK
• Manages 140,000km of pipes, sewers and cables in
  North West
• Invested 3.6bn improving environment and
  performance of NW Networks 2000 - 2005
• Employees 17,000 globally
• Operates in 9 countries on 4 continents
• Provides business outsourcing services for
  Vodaphone, MS, DWP
• The UKs largest outsourced utility management
  provider. Managing and maintaining 4 outsourced
  utility managed contracts for Northern Gas
  Networks, Scottish Water, Welsh Water and
  Southern Water.
• Our Telecoms network handles 2.9bn minutes of
  traffic a year

14
Rationale for Gas Network Strategic Fit to UU
15
Key Challenges for United Utilities Operations Ltd

• Manage and maintain the network on behalf of
  Northern Gas Networks by
• Maintain operational safety standards and safety
  case
• Drive operational efficiency and target unit
  price reductions
• Assimilate and transform 1100 staff into a
  performance led culture
• Deliver target costs and KPI on an annual basis
  as part of ASA with NGN
• Renew the ASA with NGN in 8 years
• Make an operating profit for UU

16
The Business Model A Win/Win Focus

• A single end to end process
• Formal defined roles with key deliverables based
  on a formal contractual relationship
• Complementary but targeted objectives building on
  strengths of partners
• CKI world leading Asset Manager
• UU world leading Service Provider
• Longevity of relationship (8 years) to drive out
  long term benefits to consortium

17
Questions and Answers
QUESTIONS ANSWERS