Transcript Consolidated Infrastructure Group

Consolidated
Infrastructure
Group Limited
Diversified capabilities, strength to deliver
CIG: Building the World
Around Us
Corporate Profile
February 2013
Introduction to CIG
• African company building Global businesses. Consolidated Infrastructure Group
(CIG) is headquartered in Johannesburg. CIG is a publicly listed company with
three subsidiaries focused on Power (CONCO) and Mining (Building Materials)
and Waste Management (AES)
• Pan-African business model with a solid financial track record. CIG is an
operational company successfully navigating the “headwinds” and leveraging the
“tailwinds” that come with doing business in Africa. Our 2012 Annual Results
were stellar with revenues of R1.6 B (up 7%), EBITDA of R225MM (up 20%) and
HEPS of R1.15 (up 15%)
• Our growth strategy - CIG 2018. Management has crafted a 5-year strategy
focused on three key areas:
1) Strategic growth of subsidiaries
2) Transformative investments
3) Formation of Pan-African growth engine
** Transaction in process, CIG will own 30.5%
2
CIG is a Pan-African Operating
Company
Consolidated
Infrastructure Group
Limited
CIG is listed on the
Johannesburg Stock
Exchange (ticker CIL)
CIG International*
100%
Consolidated
Power Projects
(“CONCO”)
100%
CONCO O&M**
100%
Building Materials
31%
Angola
Environmental
Serviҫos (“AES”)
• Presence across 18
• Operations and
• Operated out of South
• Based in Luanda,
African countries,
Saudi Arabia
• High voltage EPC
contractor for
transmission
infrastructure
• A market leader
• Founded in 1986
Maintenance company
for generation and
transmission assets
• Focused on S.Africa
Renewable Energy
projects
• Launched in August
2012
Africa
• Produces products for
the housing sector
(roof tiles, bricks,
aggregates)
• Has performed well in
a flat construction
market
Angola
• Offers waste
management services
to Oil & Gas sector
• Reached agreement
for ~30% stake in 2012,
acquisition pending
• Founded in 2005
* Based out of Mauritius, all CIG International subsidiaries report to CIG International
** Currently incubating in CONCO, will be stand alone company
3
Africa presents problems and
opportunities, especially infrastructure
Infrastructure is an obvious problem…
World Bank says
$93 Billion needed annually for new Infrastructure in
Africa (~15% of GDP) and lack of infrastructure hinders Africa GDP growth
by
200bps per year
…but opportunities abound
5.2% GDP growth over the next 5 years, 40% urbanization
growth 2010 - 2020
CEO survey: Most attractive
opportunities Other
Property
2009 Electric Power consumption
kWh per capita
9,117
8%
14% 30% Infrastructure
17%
Consumer
31%
4,532
Current
382
2020
504
Natural
resources
2,206 2,445 2,826
121
African workers
MM people
511
Africans SSA Brazil MENA World RSA OECD
CEO survey: Biggest country
African electricity
challenges Inflation
connectivity
On-grid
Burea8%
ucracy 21%
40%
47%
60%
24%
Funding
InfraOff-grid
structure
SA National Development Plan for 2030
40,000
20,000
95
Pctg elec.
access vs
70% in 2010
39,000
Add’l MW
needed
Capacity
from RE
Maintenance
Backlog R39
Billion
4
CIG is leveraging “tailwinds” while
navigating “headwinds”
CIG will continue to leverage positive trends…
▪ Shortage of skills: Lack of skills necessary to
▪ Africa growth story: Drive for commodities,
support our core businesses has led to the
planning/launch of a Skills Academy and
enhanced focus on retention
urbanization and flat returns in developing
world spurring growth along with investments
in infrastructure
▪ Focus on sectors we service: Power, Mining
and Oil & Gas leading current and future
growth in Africa benefitting our core
businesses, along with push for sustainability
▪ Africa heterogeneity: Diversity across Africa
favors companies with scalable core platforms,
proven ability to partner with local
stakeholders and ability to find synergies
between verticals
▪ Rise of African companies: As countries
continue to grow, so do local companies,
providing CIG additional acquisition targets
well suited to management strengths (e.g.,
“corportization” and support of strong
technical management)
▪ Dependence on commodity cycle: While
unavoidable given Africa countries’
dependence on commodities, presence across
sectors and geographies lessens the risk
▪ Foreign invasion: Presence of Asian and
European competitors has increased pressure
but years of African commercial and
operational experience and a robust network
has served CIG well
▪ Sovereign risk and localization: Risk addressed
by CIG business model built on Pan-African
subsidiaries, local hiring and hedging of
currency risks
…while navigating negatives
5
Core Business: Services to Africa infrastructure
sector has significant “tailwinds”
Development of Africa’s
commodities requires
infrastructure
Power
Transmission
Renewable
Energy
Fossil
Generation
Roads
Telecom
Rail
Broader M&A
opportunities
for CIG in infra
services
Water & Waste
Pipelines
Infrastructure provides
platform for more
exploration, industry and
individual productivity
6
In 2012, CIG navigated market
hurdles and gained efficiencies
2010 - 2012 CIG annual results
1,230
1,446
1,553
+7%
 While revenue gains were 7%, CIG
subsidiaries implemented
efficiency gains leading to EBITDA
and HEPS increases of 20% and
16%, respectively
+20%
 CONCO delivered the bulk of
Group’s results at 82% and 80% of
revenue and EBITDA, respectively
Revenue
ZAR MM
EBITDA
ZAR MM
152
89
187
100
225
115
Fully diluted
HEPS
ZAR cps
2010
2011
2012
+15%
 D/E ratio increased from 10% to
32% due to successful note
program
 Current ratio improved from 1.48
to 2.64
7
Group made significant progress
against 2012 strategic priorities
Priority
• Strategic focus on “Big 5”
Progress
Details
• Maintained edge in SA
• Multiple projects in Ghana and Kenya
• Small project wins in Angola, Nigeria,
KSA
• AES investment in Angola
• Renewables
• Despite delays, positively positioned
for Windows 1 and 2
• Increased staff to execute additional
projects efficiently for customers
• O&M making progress
• Investment in
Infrastructure and Energy
• Added capacity to invest
• After AES, advancing on a pipeline of
M&A and project opportunities
• Deliver more solutions
• Business Development at CONCO fully
staffed and performing well
• Kicking off procurement initiative
• Budding partnerships with financiers
8
CIG aims to have a broader and deeper
footprint by 2018
ILLUSTRATIVE
CIG head offices
CONCO main hubs
CONCO O&M hubs
CIGenCo hubs
AES
Building Materials
Other acquisitions
• CIG and CONCO manage SA business
•
•
out of SA and International business
out of Mauritius
Hubs in Big 5 countries plus the East
African Community
Subsidiaries leverage footprint to
access new markets
* Does not illustrate local presences in regions, International offices for other companies
9
Prioritized Big 5 + 1 will provide CIG with a
solid base for revenue in the future
Overview of Big 5 + 1 Business Potential
South Africa
Nigeria
Angola
• Home base for CIG
• Largest country in Sub Saharan
• Most populous country in Sub
• Until recently, the fastest growing
Africa by GDP (est. $402B in 2012)
• Estimated aggregate growth to 2016
tops all but Nigeria in SSA ($118B)
• Recently announced initiatives to
increase infrastructure spend
favorable for CIG (e.g., SA
Renewables, maintenance backlog)
Saharan Africa (152MM people)
• Oil based economy
• Estimated growth potential (8%
CAGR, $131B aggregate) leads SSA
• Recent attempts at reform can
unlock significantly more potential
• Privatization of power sector offers
significant prospects
country in Africa
• Oil based economy with substantial
potential for mining industry
• Historical underinvestment in
infrastructure offers immense
opportunity
• CIG has made real progress in
Angola recently (CONCO, AES)
Ghana
Saudi Arabia
East Africa Region
• One of the fastest growing countries
• Largest economy in MENA,
• Kenya, Ethiopia, Tanzania, Uganda
in SSA (11% CAGR)
• Recent oil discoveries have
accelerated growth prospects
• Stable governance situation makes
for attractive business environment
• Capable skill base, especially
engineers
• CONCO has sizeable market share
accounting for 20% of regions
growth to 2016 ($193B aggregate)
• Power investments growing at 8%
CAGR
• After 3 years of investment, CONCO
received first order
• Additional opportunities in O&M,
water, etc.
and Rwanda account for $71B of
SSA’s growth to 2016
• Recent oil finds in region
• Ethiopia fastest growing country
• Rwanda leads SSA in governance
• EAC allows for movement of goods,
people; potential for regional office
• Evaluating Kenyan IPPs
10
Strategic plan will be implemented over the
next 5 years
Current phase
Overview of CIG Growth Horizons
Strengthen
platform
Priorities
Timing
Strategically
diversify
Institutionalize
Pan-African
competence
− Launch subsidiary
− Focus on offering and
− Leverage ME presence
growth strategies
− Build platform for
acquisitive growth
and investments
− Entrench presence in
priority markets
− Establish funding,
network, governance
and org structure
required to support
growth aspirations
geographic
diversification for
subsidiaries
− Make and integrate
acquisitions which
expand exposure
across infrastructure
related sectors and
clients
− Invest in resources to
manage growth
for additional growth
− Fully integrate
acquisitions into CIG
culture
− Establish strong
shared service
platform to enhance
cross-portfolio
optimization,
integration and value
extraction
2012
2013 to 2015
2015 to 2017
11
Strategy has management focus on 3
key areas
1
Strategic
growth of
subsidiaries
2
Transformative
investments
3
Formation of
Pan-African
growth engine
Examples to
follow
• Accelerate growth by applying strategic, operational
and financial levers to navigate market conditions
and outperform competition
• Seek and acquire infrastructure companies and
projects which can significantly enhance the value of
the group, strategically and financially
• Build a group support structure which extends reach,
adds management capacity to subsidiaries and
properly “corporatizes” new investments; making the
whole greater than the sum of its parts
12
Strategic Growth
1
CONCO did well in Window 1 of the RE
programme
South Africa planned capacity allocation*
Solar
Wind
Overview of SA RE Round 1 results
MW 1,416
782
591
75
Solar = 1450 MW
634
516
Wind = 1850 MW
Capacity awarded CONCO awarded
* SA government has increased planned capacity for all sources to 4.4GW from 3.7GW
Source:SA Renewable Energy documents
13
Strategic Growth
1
Decision to pursue RE will continue to
deliver for CONCO
•5 of 8 Round 1 wind projects
•Did not focus on solar
•~R800MM in projected revenue from Window 1
•Great footing with Window 2
•Launched O&M as a true independent service provider. Gaining
ground as customers realize we can lower cost and increase
energy yield
•We are seeing the execution and coordination difficulties across
Windows 1 and 2 that we expected given the industry’s infancy
14
Transformative Investments
2
Angolan Oil & Gas Services
offers room for growth
FY2012 – 2021E Projected Angolan oil production
Million barrels per day
2.84
2.89
2.96
2.99
2.96
2.93
2.92
2.85
2.73
 Angola is 2nd largest
African oil producer
2.43
 Important source of
Angola’s GDP
(~46%)
 Substantial
untapped reserves
(~14B barrels)
2012
2013
2014
Source: Business Monitor International
2015
2016
2017
2018
2019
2020
2021
 Deep offshore
discoveries
15
Transformative Investments
2
Oil rigs generate significant
waste for disposal
 Oil based mud, used to
lubricate drills, is a waste
byproduct
 Waste factor: 5% to 0%
 Other waste such as
hazardous, domestic and
medical
 AES manages almost all
waste streams
16
Transformative Investments
2
AES manages waste in 6 steps
Key steps
Collection and
transport
Reception, handling
& storage
MUD
Pre-treatment
Treatment
TDU
Disposal
Recycling/ Reuse
Byproduct
SKIPS
SLOP WATER
LANDFILL
CONTAINERS (CCUs)
INCINERATOR
SOLID WASTE
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Transformative Investments
2
AES strategic roadmap starts with a big
focus on preparing for execution in 2014
Overview of AES 5-year Growth Priorities
Strengthen
platform
Priorities
− Strengthen the core
Execute on growth
opportunities
− Execute efficiently in
Expand the
business
− Focus on returning
business to exploit
Luanda
cash to investors
near term growth
− Strengthen Soyo to
− Execute on product
opportunities
the level of Luanda
and geographic
− Drive business
operations
expansion
development
− Start executing on
− Focus on building
− Build Soyo operations
strategic priorities and
dominance with new
− Begin to explore other
investments
offerings and in new
growth and
− Evaluate geographic
domains
investment
expansion (S.Luanda,
opportunities
international)
Timing
2013
2014 - 2015
2016 - 2017
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