EPH announces its intention to launch the Initial Public Offering of ordinary shares and GDRs of EPIF
12. 4. 2016
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, OR JAPAN OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT
This announcement is an advertisement for the purposes of the UK Prospectus Rules of the Financial Conduct Authority (the “FCA”) and Section 36k of the Czech Capital Markets Act and not a prospectus and not an offer of securities for sale in any jurisdiction, including in or into the United States or in any other jurisdiction, including in or into Australia, Canada or Japan.
The Offering (defined below) and the distribution of this announcement and other information in connection with the Offering in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
Investors should not subscribe for or purchase any securities referred to in this announcement except on the basis of information in the prospectus to be published by EP Infrastructure following approval by the Czech National Bank in connection with, inter alia, the admission to listing of its entire registered ordinary share capital to trading on the Prime Market of the Burza cenných papírů Praha, a.s. (the “Prague Stock Exchange”) and its global depositary receipts (“GDRs”) to the standard segment of the Official List of the United Kingdom Listing Authority and to trading on the main market for listed securities of the London Stock Exchange plc (the “London Stock Exchange”) (“Admission”). The prospectus will, following approval and publication, be available on the website of the Company at http://www.epinfrastructure.cz/en/investors/results-centre.
12 April 2016
EPH announces its intention to launch the Initial Public Offering of ordinary shares and GDRs of EPIF and listing of the ordinary shares on the Prague Stock Exchange and GDRs on the London Stock Exchange
EP Infrastructure, a.s. (“EPIF”or the “Company” and, together with its subsidiaries, the “Group”), a leading energy infrastructure utility in the Slovak Republic and the Czech Republic, today announces that Energetický a průmyslový holding, a.s. (“EPH” or the “Selling Shareholder”) intends to proceed with an initial public offering (the “Offering”) of ordinary shares in EPIF, in the form of ordinary shares (the “Offer Shares”) to be listed on the Prime Market of the Prague Stock Exchange, and of GDRs (the “Offer GDRs, and together with the Offer Shares, the “Offer Securities”) to be admitted to listing on the standard segment of the Official List of the United Kingdom Listing Authority and trading on the main market for listed securities of the London Stock Exchange (subject to satisfying certain eligibility criteria).
EPIF is a leading energy infrastructure utility primarily focused on regulated and long-term contracted activities. The Group operates through four principal segments: Gas Transmission, Gas and Power Distribution, Heat Infra and Gas Storage. Across these segments, EPIF owns and operates strategically important infrastructure assets with high barriers to entry and strong cash flow generation capability. The Group operates primarily in the Slovak Republic and the Czech Republic.
• Gas Transmission. Eustream acts as the sole gas Transmission System Operator (“TSO”) in the Slovak Republic. Eustream’s pipeline is part of the Central Corridor, which is one of the largest and most important piped gas import routes into Europe
• Gas and Power Distribution. EPIF is a leader in the gas distribution market in the Slovak Republic and the second largest distributor and supplier of power in the Slovak Republic
• Heat Infra. EPIF is a leader in heat distribution in the Czech Republic
• Gas Storage. EPIF is a leader in gas storage capacity in the region of the Slovak Republic, Czech Republic and Austria
• A Strong Position in Solid Central European Economies and High Degree of Diversification
- Market-leading positions across all of the Group’s business segments and geographies
- Focus on the Slovak Republic and the Czech Republic, which benefit from strong economic fundamentals, stable EU-compliant regulatory frameworks and growth potential
- A unique combination of assets encompassing several infrastructure segments, thus providing greater diversification and resilience compared to sector peers
• Regulated or Long-Term Contracted Activities
- Regulated activities or long-term contracts translate to predictable and stable business profiles across segments
- Robust regulatory regimes based on EU regulatory framework
• High and Predictable Cash Flows and Cash Flow Conversion
- Predictable cash flows across segments as the majority of revenue is derived from transparent regulatory frameworks or long-term fixed capacity contracts
- High Adjusted EBITDA to cash flow conversion due to a modern and well invested asset base, limited capital expenditure requirements and predictable and stable maintenance costs
• Continued Opportunities for Optimisation and Growth
- Proven track record and continued focus on efficiency gains and business optimisation
- Attractive business development opportunities
• The Offering is expected to include (i) a public offer of the Offer Securities to eligible employees of the Group in the Czech Republic and the Slovak Republic, and (ii) an institutional offering of the Offer Securities in the Czech Republic, the Slovak Republic and in other jurisdictions. The Offer Securities will be offered in the United States to qualified institutional buyers (“QIBs”) in reliance on Rule 144A under the Securities Act, and outside the United States in offshore transactions in reliance on Regulation S under the Securities Act. Each of the Company and the Selling Shareholder will agree to customary lock-up arrangements in respect of the ordinary shares and GDRs for specified periods of time following Admission.
• The Offering is expected to be completed in Q2 2016, subject to market conditions
• Citigroup Global Markets Limited, J.P. Morgan Securities plc, Société Générale and UniCredit Bank AG, London Branch are acting as Joint Global Coordinators and Joint Bookrunners, WOOD & Company Financial Services, a.s. as Joint Lead Manager and Domestic Offering Coordinator and UniCredit Bank Czech Republic and Slovakia, a.s. as the Employee Offer Manager
Shareholder Structure and Use of Proceeds
The Group is currently controlled by EPH, a leading Central European energy group, which holds 100% of the Group’s registered capital and voting rights and will receive all of the net proceeds from the Offering. EPH is committed to remaining a long-term investor in EPIF and intends to retain majority ownership of the Group. Through the Offering, EPH will raise the profile of the Group and provide the Group with greater flexibility for its financing strategy in the future. EPH intends to use most of the net proceeds from the Offering to buy back its own shares held by Biques Limited, a passive financial investor in EPH.
Commenting on today’s announcement, Daniel Křetínský, Chairman of the Supervisory Board of EPIF, said:
“In EPIF we have created a leader in energy infrastructure in Central Europe, bringing together some of the strongest EPH assets in one integrated Group. With its key role in gas transport for European markets and its market-leading positions in the energy sectors of the Slovak Republic and Czech Republic, EPIF’s aim is to generate strong and stable revenues in the coming years. As a founder of EPIF, my intention is to ensure attractive and sustainable dividend payments for all our shareholders, based on our high quality assets and the growing economies in the region “
Tomáš David, CEO of EPIF, said:
“We operate a portfolio of modern, well-invested and long-lived infrastructure assets which are of vital importance to the European energy market. Our strong market positioning is reflected in the long-term nature of our contracts with customers and our resilient financial performance. As a result of our stable and predictable cash flow generation, we are well-placed to provide an attractive dividend yield to our shareholders whilst being able to pursue value-creative projects associated with our current asset portfolio and acquisitions that deliver synergies or offer attractive returns.”
Citigate Dewe Rogerson (London) +44 (0)20 7638 9571
David Westover +44 (0)20 7 282 2886
Sandra Novakov +44 (0)20 7 282 1089
Cook Communications (Prague)
Joe Cook +420 602 683 230
Petra Kallista +420 736 418 889
Michal Procházka +420 734 865 377
The Group recorded sales and net profit in 2015 of EUR 3,265.2 million and EUR 622.7 million, respectively. It generated Adjusted EBITDA of EUR 1,433.5 million and a cash conversion ratio after tax of 66%. As of 31 December 2015 the total consolidated assets of the Group were EUR 9,709.8 million.
Although the Company does not give any assurance that it will distribute any dividend or, if distributed, as to the amount of any such dividend (which may vary from year to year), the aim of the Company is to follow the guidelines below in relation to dividend payments (subject to a change in circumstances):
• 2015 Dividend Payment. In respect of the fiscal year ended 31 December 2015, the Company intends to distribute a dividend of approximately EUR 365 million in 2016.
• Targeted Dividend Growth. In the subsequent fiscal years until 2020, the Company aims to grow the dividend per share by 3 per cent. per year.
• Distribution of Cash Not Used for Financing of Growth Opportunities. In the period from 2016 to 2020, to the extent the Company does not identify suitable growth opportunities it intends to pay out cash available for distribution generated in excess of the targeted dividend payments described above every two years.
• Long-term Dividend Policy. In the long run, subject to potential investments in growth opportunities considered by the Company to be prudent and value creative, the Company intends to pay out any cash available for distribution in the fiscal years after 2020.
EPIF is a leading energy infrastructure utility primarily focused on regulated and long-term contracted activities. The Group generates the majority of its Adjusted EBITDA in the Slovak Republic and Czech Republic, where its principal operations are located.
EPIF operates through four principal segments: Gas Transmission, Gas and Power Distribution, Heat Infra and Gas Storage.
The Group’s Gas Transmission Business consists solely of Eustream. Eustream is the owner and operator of one of the major European gas pipelines and is the only gas TSO in the Slovak Republic. The transmission network of Eustream is part of the Central Corridor which is one of the largest (based on volume of gas transmitted in 2015) and the most important piped gas import routes into Europe. Eustream is one of the largest natural gas transporters within the EU, accounting for up to a third of the total gas transporting capacity from Russia to Western Europe, and for more than 20 per cent. of Europe’s total piped gas import capacity. The transmission capacity of Eustream’s system is approximately 80 bcm in the East-West direction. The total transported volume for the year ended 2015 was 55.8 bcm as compared to the total amount of gas consumed within the EU which was 426.3 bcm, according to Eurogas initial estimates.
EPIF’s Gas and Power Distribution business consists of the gas distribution division, the power distribution division and the supply division. The power distribution division distributes electricity in the central Slovak region and the Group undertakes those activities through the SSE Group. The gas distribution division distributes natural gas within the territory of the Slovak Republic and undertakes those activities through SPP – distribúcia, a.s. (“SPPD”). Its network provides access to natural gas to 2,234 villages, towns and cities, which are home to 94 per cent. of the Slovak population (source: National Report 2014, Regulatory Office for Network Industries). In 2014, SPPD also distributed approximately 98 per cent. of the total amount of gas distributed in Slovakia (source: National Report 2014, Regulatory Office for Network Industries). The supply division primarily supplies power and natural gas to end-consumers. These activities are undertaken by EPIF through EP ENERGY TRADING, a.s. (“EPET”) in the Czech Republic and through Stredoslovenská energetika, a.s. (“SSE”), in Slovakia. EPET and SSE also purchase and sell power, including sales in the wholesale market of electricity generated by the Group in its Heat Infra Business and purchases of electricity and natural gas to supply customers as part of the division’s supply activities.
EPIF’s Gas Storage business owns and operates natural gas storage facilities in the Czech Republic and Slovakia. It conducts its activities through subsidiaries Nafta a.s. (“NAFTA”) and SPP Storage, s.r.o. (“SPP Storage”) and associate Pozagas, a.s. (“Pozagas”). The total capacity of the storage facilities operated by the Gas Storage business (including Pozagas) as of 31 December 2015 was 3,766 million cubic metres as measured at 15° C. NAFTA also conducts certain oil and gas exploration and production activities through its exploration and production division.
EPIF’s Heat Infra Business owns and operates three large-scale cogeneration plants in the Czech Republic and also owns and operates, through its 73.8 per cent. owned subsidiary, Pražská Teplárenská (“PT”), the most extensive district heating system in the Czech Republic, which supplies heat to the City of Prague. The Group is the largest heat supplier in terms of heat supplied to final consumers in the Czech Republic, supplying 4.4 TWh (15.9 PJ) of heat for the year ended 31 December 2015, 4.3 TWh (15.6 PJ) of heat for the year ended 31 December 2014 and 5.3 TWh (18.9 PJ) of heat for the year ended 31 December 2013. EPIF is one of the lowest cost providers of heat in the Czech Republic and it consistently charges lower heat tariffs than the national average (with the exception of PT, which had a 2014 tariff slightly higher than the average). The heat generated in the Group’s cogeneration power plants is supplied mainly to retail customers through well-maintained district heating systems. EPIF also recently acquired Budapesti Erömü Zrt. (“BERT”), which is a leading heat producer in the Budapest area that delivered approximately 1.8 TWh (6.3 PJ) of heat in 2015. EPIF was also the second largest provider of ancillary power services in terms of electricity generated in the Czech Republic (reported by the Czech Energy Regulatory Office) for the year ended 31 December 2015.
Certain Defined Terms
“Adjusted EBITDA” for the Group represents operating profit plus depreciation of property, plant and equipment and amortisation of intangible assets less negative goodwill (if applicable). Adjusted EBITDA is a non-IFRS financial measure used by the management of the Group to report the funds generated from continuing operations.
“Cash conversion ratio” for the Group represents (Adjusted EBITDA – Capital expenditures excluding emission allowances – tax paid)/Adjusted EBITDA. Cash conversion ratio is a non-IFRS financial measure used by the management of the Group to report the degree of transforming Adjusted EBITDA to cash.
These materials are not for distribution, directly or indirectly, in or into the United States (including its territories and possessions, any State of the United States and the District of Columbia). The Offer Securities referred to herein may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended (the “Securities Act”). The Company does not intend to register any of the Offer Securities in the United States.
This announcement does not contain or constitute an offer of, or the solicitation of an offer to buy or subscribe for, Offer Securities to any person in the United States (including its territories and possessions, any State of the United States and the District of Columbia), Australia, Canada or Japan or in any jurisdiction to whom or in which such offer or solicitation is unlawful. The offer and sale of Offer Securities referred to herein has not been and will not be registered under the Securities Act or under the applicable securities laws of Australia, Canada or Japan. Subject to certain exceptions, the Offer Securities referred to herein may not be offered or sold in Australia, Canada or Japan or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada or Japan. There will be no public offer of the Offer Securities in the United States, Australia, Canada or Japan.
This announcement is, and the Offering when made will be, only addressed to and directed at persons in member states of the European Economic Area (“EEA”) who are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC as amended, including by Directive 2010/73/EC) (“Qualified Investors”). In addition, in the United Kingdom, this announcement is addressed to and directed only at, Qualified Investors who (i) are persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”), (ii) are persons who are high net worth entities falling within Article 49(2)(a) to (d) of the Order, or (iii) are other persons to whom this announcement may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”).
This announcement must not be acted on or relied on (i) in the United Kingdom, by persons who are not relevant persons, and (ii) in any member state of the EEA other than the United Kingdom, by persons who are not Qualified Investors. Any investment or investment activity to which this announcement relates is available only to relevant persons in the United Kingdom and Qualified Investors in any member state of the EEA other than the United Kingdom, and will be engaged in only with such persons. Any offer of Offer Securities will be made exclusively on the basis of a duly approved and published prospectus or in accordance with one or more exemptions from the obligation to publish a prospectus. Investors should not purchase any Offer Securities referred to herein except solely on the basis of information in the prospectus intended to be published by the Company in due course in connection with the proposed Offering. The information in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy or completeness. The information in this announcement is subject to change. The Offering timetable, including the publication of the prospectus and the date of Admission may be influenced by factors such as market conditions. There is no guarantee that the Offering and Admission will occur and you should not base your financial decisions on the Company’s intentions in relation to the Offer and Admission at this stage.
Each of Citigroup Global Markets Limited (“Citi”) and J.P. Morgan Securities plc (“J.P. Morgan”) is authorised by the United Kingdom Prudential Regulation Authority (the “PRA”) and regulated by the PRA and the FCA. Société Générale is a French credit institution (bank) authorised and supervised by the European Central Bank (ECB), Autorité de Contrôle Prudentiel et de Résolution (the French Prudential Control and Resolution Authority) and the PRA, regulated by the Autorité des marchés financiers (AMF) and subject to limited regulation by the FCA and the PRA. UniCredit Bank AG, London Branch (“UCB” and, together with Citi, J.P. Morgan and Société Générale, the “Joint Global Coordinators and Joint Bookrunners”) is authorised by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and subject to limited regulation by the FCA and the PRA. WOOD & Company Financial Services, a.s. is authorised and regulated by the Czech National Bank and subject to limited regulation by the FCA and the PRA (the “Joint Lead Manager and Domestic Offering Coordinator”). UniCredit Bank Czech Republic and Slovakia, a.s. (the “Employee Offer Manager” and, together with the Joint Global Coordinators and Joint Bookrunners and the Joint Lead Manager and Domestic Coordinator, the “Banks”) is regulated by the Czech National Bank.
Each of the Banks is acting exclusively for the Selling Shareholder and the Company and no one else in connection with the Offering and will not regard any other person (whether or not a recipient of the prospectus, once published) as a client in relation to the Offering and will not be responsible to any other person for providing the protections afforded to their respective clients or for providing advice in relation to the Offering, the contents of this announcement or any transaction, arrangement or other matter referred to herein.
Apart from the responsibilities and liabilities, if any, which may be imposed on any of the Banks by applicable regulatory regimes, none of the Banks accepts any responsibility whatsoever for the contents of this announcement or for any other statement made or purported to be made by it or any of them or on its or their behalf in connection with the Company or the Offer Securities. Each of the Banks and their respective affiliates accordingly disclaims, to the fullest extent permitted by applicable law, all and any liability whether arising in tort or contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement.
In connection with the Offering, the Banks and any of their respective affiliates acting as an investor for its or their own account(s) may subscribe for or purchase the Offer Securities and, in that capacity, may retain, subscribe for, purchase, sell, offer to sell or otherwise deal for its or their own account(s) in such securities, any other securities of the Company or other related investments and may offer or sell such Offer Securities or other investments in connection with the Offering or otherwise. Accordingly, references in the prospectus, once published, to the Offer Securities being issued, offered, subscribed, sold, purchased or otherwise dealt with should be read as including any issue or offer to, or subscription, purchase or dealing by, the Banks or any of their respective affiliates acting as an investor for its or their own account(s). The Banks do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so. In addition certain of the Banks or their affiliates may enter into financing arrangements (including swaps) with investors in connection with which such Banks (or their affiliates) may from time to time acquire, hold or dispose of the Offer Securities.
None of the Banks or any of their respective affiliates, directors, officers, limited or unlimited partners, employees, advisers or agents accepts any responsibility or liability whatsoever for, or makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company, its subsidiaries or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of this announcement or its contents or otherwise arising in connection therewith.
In connection with the Offering, one or more of the Banks shall be appointed to act as stabilising manager (the “Stabilising Manager”), and it or persons acting on its behalf, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot the Offer Securities or effect other stabilisation transactions with a view to supporting the market price of the Offer Securities at a level higher than that which might otherwise prevail in the open market for a limited period after the issue date. However, the Stabilising Manager is not required to enter into such transactions. Such stabilising, if commenced, may be discontinued at any time without prior notice, and may only be undertaken during a period of 30 days after the announcement of the offer price of the Offer Securities. Save as required by law or regulation, neither the Stabilising Manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted in relation to the Offering.
Certain figures contained in this announcement, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this announcement may not conform exactly with the total figure given.
This announcement may include statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements may be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “plans”, “projects”, “anticipates”, “expects”, “intends”, “may”, “will” or “should” or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward looking statements include all matters that are not historical facts and involve predictions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Group’s current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group’s business, results of operations, financial position, liquidity, prospects, growth or strategies and the industry in which it operates. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance. Save as required by law or regulation, the Company disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this announcement that may occur due to any change in its expectations or to reflect events or circumstances after the date of this announcement.
Each of the Banks and their respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any forward-looking statements contained in the announcement whether as a result of new information, future developments or otherwise.