Petroleo Brasileiro SA · BMFBOVESPA:PETR3
Petroleo Brasileiro SA — Petrobras - Petroleo Brasileiro — Shareholder Meeting (December 2016)
125 slides from Petroleo Brasileiro SA's shareholder meeting presentation, Dec 30, 2016
Slide 1: Extraordinary General Meeting — Manual for Shareholder's Participation
Extraordinary General Meeting — MANUAL FOR SHAREHOLDER’S PARTICIPATION January 31st, 2017
Slide 2: Index
INDEX Invitation 2 Notice of Meeting 3 Information to use the online vote system 5 Public Power of Attorney Request 7 Items to be discussed in the Extraordinary General Meeting (EGM): I. Disposal of 100% (one hundred percent) of the shares held by Petróleo Brasileiro S.A. -PETROBRAS, of Liquigás Dis
Slide 3: Invitation
INVITATION Date: January 31, 2017 Time: 3 pm Address: Auditorium of the Company’s headquarter at Avenida República do Chile 65, 1st floor, in the city of Rio de Janeiro Extraordinary General Meeting Agenda items: I. Proposal for approval of disposal of 100% (one hundred percent) of the shares held b
Slide 4: Extraordinary General Meeting Call Notice
EXTRAORDINARY GENERAL MEETING CALL NOTICE The Board of Directors of Petróleo Brasileiro S.A. – Petrobras convenes the shareholders of the Company to meet in Extraordinary General Meeting, on January 31, 2017, at 03:00 PM, in the auditorium of the Headquarters Building, at Avenida República do Chile
Slide 5: Shareholder representation and documentation requirements
iv) Copy of the investiture instrument or an equivalent document evidencing the powers of the grantor of the power of attorney, if applicable. It is requested that the shareholders represented by attorneys-in-fact submit, at least three business days in advance, the documents listed above at room 10
Slide 6: User Guide to the Online Voting System
USER GUIDE TO THE ONLINE VOTING SYSTEM Step 1 – Request password for validation of the shareholder a) Access the address https://petrobras.infoinvest.com.br/assembleias/31-01-2017, click “Click here to request remittance of the password” and fill in the data of the form to receive the vote validatio
Slide 7: Step 3 – Remote voting
Step 3 – Remote voting To vote remotely at the AGE [Special General Meeting], access https://petrobras.infoinvest.com.br/assembleias/31-01-2017 and click the “Click here to vote” option. It will be necessary to inform the CPF / CNPJ (punctuation is required), the fund identifier (informed by e-mail)
Slide 8: Public Request for Proxy
PUBLIC REQUEST FOR PROXY Rio de Janeiro, December 29, 2016, Petróleo Brasileiro S.A. – Petrobras invites its shareholders to attend the Extraordinary General Meeting to be held on December 31, 2016, at 3 PM, to deliberate on the agenda included in the Notice of Meeting. To facilitate and encourage t
Slide 9: Presentation to Shareholders Item I – Disposal of Liquigás
EXTRAORDINARY GENERAL MEETING PRESENTATION TO SHAREHOLDERS ITEM I Disposal of 100% (one hundred percent) of the shares held by Petróleo Brasileiro S.A. -PETROBRAS, of Liquigás Distribuidora S.A., to Companhia Ultragaz S.A., a wholly-owned subsidiary of Ultrapar Participações S.A. According to the no
Slide 10: Sale of Petrobras' interest in Liquigás and sale process
The sale of entire interest of PETROBRAS in Liquigás Liquigás, therefore, is strategically in line with the Strategic Plan and PNG 2017-2021. Sale process PETROBRAS structured a disposal procedure, which relied on the participation of strategic investors from the LPG and the Natural-Gas industries a
Slide 11: Acquisition price and adjustments
deposits of 1 (one) day, calculated and published by the Securities Custody and Settlement Clearing House [Central de Custódia e Liquidação Financeira de Títulos] – CETIP and expressed as a percentage per year (for a year of 252 business days) (“CDI”) between the date of execution of the CCVA and th
Slide 12: Representations and warranties
possession, by Liquigás, of the assets which are necessary for continuity of the normal course of its business, free from encumbrances; (ix) maintenance of insurance policies at an adequate amount by Liquigás; (x) tax aspects; (xi) labor aspects; (xii) anti-corruption aspects; (xiii) competition asp
Slide 13: Indemnification rules
Certain limitations apply to the obligation to pay indemnification, which vary depending on the nature of the loss. Losses specifically related to fraud, willful misconduct or bad faith by PETROBRAS, to noncompliance with the anticorruption laws in conducting the administration and/or business and
Slide 14: Legal actions and the Federal Court of Accounts
was not the case, as Liquigás started to integrate the PETROBRAS System after a stock acquisition and sale transaction. Legal Actions and the Federal Court of Accounts -TCU Finally, in relation to the provisional decision of the Federal Court of Accounts Tribunal de Contas da União (TCU), as disclo
Slide 15: Itaú fairness opinion letter (Liquigás)
CONFIDENCIAL São Paulo, 1 de novembro de 2016 Ao Conselho de Administração da PETRÓLEO BRASILEIRO S.A.- PETROBRAS (“Petrobras’’), Prezados Membros do Conselho de Administração da Petrobras, Com relação à potencial transação envolvendo a Uquigás Distribuidora S.A (“Companhia~). empresa que concentra
Slide 16: Itaú fairness opinion letter, continued
Companhia e sem investigações independentes, na exatidao. conteúdo, veracidade, consistência, completude, suficiência e integralidade das informações financeiras, contãbeis, legais, tributárias e outras informações analisadas por nôs ou conosco discutidas pela Petrobras e/ou Companhia. Neste sentido
Slide 17: Itaú fairness opinion letter, continued
Nossa opinião foi elaborada assumindo informações de mercado e é baseada em condições de mercado, econômicas, monetárias e outras condições existentes e efetivas no momento de sua elaboração, bem como nas informações que nos foram disponibilizadas até a presente data, de forma que é válida exclusiva
Slide 18: Itaú fairness opinion letter, continued
ações de emissão da Petrobras ou da Companhia em carteira. Todavia, O ltaú BBA ou sociedades integrantes do seu conglomerado ecof10mico possuem, nesta data, posição vendida de 65.000 ações ordinárias e de 1.874.224 ações preferenciais da Petrobras. Prestamos. de tempos em tempos, no passado, serviço
Slide 19: Itaú fairness opinion conclusion
Baseado no e sujeito ao disposto acima e a outros fatores relevantes por nós considerados, é nossa opinião que, na presente data, o Enterprise Va/ue da Companhia de R$2,861,600,000,00 (doĺs bllhões, oitocentos e sessenta e um milhões e seiscentos mil reais), conforme descrito na Proposta. nos parece
Slide 20: Crédit Agricole fairness opinion letter
To the Board of Directors of Petróleo Brasileiro S.A. November 4th, 2016 Petróleo Brasileiro S.A. Av . República do Chile, 65 Rio de Janeiro 20031-912 Brazil Dear Sirs: We understand that Petróleo Brasileiro S.A. (“Petrobras”) is negotiating the sale of Liquigás Distribuidora S.A. (“Liquigás “ or th
Slide 21: Crédit Agricole fairness opinion, continued
We have assumed, with your consent, that in the course of obtaining necessary regulatory and third party approvals and consents for the Proposed Acquisition, no modification, delay, limitation, restriction or condition will be imposed that will have an adverse effect on Petrobras, Liquigás or any of
Slide 22: Crédit Agricole fairness opinion conclusion
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Offer Price is fair to Petrobras from a financial point of view. This letter was submitted and approved by our internal committees. Yours Faithfully, Banco Crédit Agricole Brasil S.A. Marco Aurélio Ponce Gere
Slide 23: Project Laguna Valuation Memorandum
Project Laguna Valuation Memorandum November, 2016 Global Investment Banking 1
Slide 24: Disclaimer
Disclaimer The present document (the “Document”) has been prepared by Banco Crédit Agricole Brasil S.A. (“CA-CIB” or “Crédit Agricole CIB”) for the exclusive use of Petrobras S.A. (the “Recipient”) in the context of opinion that CA-CIB will give to the Recipient with respect to the fairness from a f
Slide 25: Contents
Contents I. Executive Summary IV. Valuation Analysis A. Methodology B. Summary II. Transaction Overview C. WACC D. DCF – Discounted Cash Flow E. Multiples III. Business Plan Appendices A. Macroeconomic Assumptions B. Financial Statements C. WACC Parameters
Slide 26: Executive Summary
Section | Executive Summary r November, 2016
Slide 27: Executive Summary
Executive Summary • Crédit Agricole CIB has been retained by Petróleo Brasileiro S.A. (“Petrobras” or “Seller”) to provide a fairness opinion regarding the disposal of 100% of Liquigás Distribuidora S.A. (“Liquigás” or the “Company”), a Brazilian Liquefied Petroleum Gas (“LPG”) distribution company:
Slide 28: Executive Summary – methodologies and enterprise values
Executive Summary • When applying the aforementioned methodologies for this specific case, it is important to notice the following: • The DCF methodology was based in managerial information and projections provided to us by Petrobras and its financial advisor. Should those information and projection
Slide 29: Transaction Overview
Section II Transaction Overview
Slide 30: Transaction Overview
Transaction Overview Envisaged Transaction Company Description Geographic Footprint .Liquigás operates in the bottling, distribution and sale of LPG, operating in two business segments: bottled and bulk .Liquigás is a leading player in the LPG distribution sector in Brazil, with presence in 23 of 26
Slide 31: Brazilian LPG Industry Model
Transaction Overview Brazilian LPG Industry Model PRODUCERS Petrobras Refineries1: 12 Private Refineries2: 1 Petrochemical Plants3: 3 Producers Importers DISTRIBUTORS Total of 19 distributors Leading Players Market Share4 SALES CHANNELS RESELLERS END USERS Domestic User (Bottled) END USERS Large com
Slide 32: Market Segments – Bottled and Bulk
Transaction Overview Market Segments -LPG distribution operates under “Bottled” and “Bulk” market segments in Brazil Bottled Bulk DOMESTIC INDUSTRIAL AND COMMERCIAL Product / Supply Client Profile Market Volume (mm tons) – 2015 Market Historical Growth Considerations Bottled Bulk DOMESTIC INDUSTRIAL
Slide 33: Business Plan
Section III Business Plan 11 November, 2016 Confidential
Slide 34: Business Plan – Main assumptions and methodology
Business Plan Main assumptions and methodology .Liquigás Business Plan provided by Petrobras for the period comprised between 2016 and 2030 including but not limited to the following documents available in the virtual data room (“VDR”): • dados_itau.xlsx • Projeto Laguna_Relatório Final_Rev_DIP CONT
Slide 35: Business Plan – Main assumptions and methodology
Business Plan Main assumptions and methodology The company business plan has been provided by Petrobras for the 2016-2030 period General .Projections were forecasted considering Liquigás Business Plan for 2016-2030 period .Projections of Liquigás are in real terms, we applied market consensus inflat
Slide 36: Business Plan – Main assumptions and methodology
Business Plan Main assumptions and methodology 14 November, 2016 Confidential Business Plan Main assumptions and methodology SG&A estimates were based on Liquigás business plan Liquigás Business Plan assumes a constant workforce in the projections with a real wage increase of around 1.0% annually Co
Slide 37: Projections Summary: Volumes and Market Share
Business Plan Projections Summary: Volumes and Market Share • Gas Sale Volume was estimated by the management based on Bulk and Bottled expected market share • Bulk volume is expected to increase more than Bottled (CAGR of 2.2% vs 0.7%, respectively) within the 2016-2030 period due to a higher incre
Slide 38: Projections Summary: Prices and Revenues
Business Plan Projections Summary: Prices and Revenues • Bottled prices are expected to remain constant in real terms during the projected period and Bulk prices are expected to have a slightly real increase • Net Revenues are projected to increase above inflation mainly due to market share gains Ne
Slide 39: Projections Summary: COGS
Business Plan Projections Summary: COGS • COGS per m³ of both segments are expected to remain constant in real terms over the 2016-2030 period • The growth in the total costs is caused by volume increase and inflation COGS of Bottled LPG Segment (BRL MM) 2015A 2016E 2017E 2018E 2019E 2020E 2021E 202
Slide 40: Projections Summary: SG&A and EBITDA
Business Plan Projections Summary: SG&A and EBITDA • Liquigás SG&A’s most significant items are personnel expenses and freight. Personnel expenses were projected considering a flat workforce and a real wage increase of around 1% • Others expenses are formed by advertisement, water, electric energy,
Slide 41: Projections Summary: CAPEX and Working Capital
Business Plan Projections Summary: CAPEX and Working Capital • Capex was projected by the management aligned with Company’s growth strategy. Most relevant investments for Liquigás are: refurbishment of operating units, replacement of bottles and growth capex • Liquigás main working capital requireme
Slide 42: Valuation Analysis
Section IV Valuation Analysis A. Methodology B. Summary C. WACC D. DCF – Discounted Cash Flow E. Multiples
Slide 43: Valuation methodologies
• The DCF method, which reflects the intrinsic value of the company, was used to value Liquigás, as we believe it to be the most relevant method • The DCF model was based on Liquigás business plan without synergies • Sensitivities run on WACC and perpetuity growth rate • WACC calculated at 12.55% in
Slide 44: Valuation Analysis – Summary
Section IV Valuation Analysis A. Methodology B. Summary C. WACC D. DCF – Discounted Cash Flow E. Multiples
Slide 45: Valuation Summary – Enterprise Value
Valuation Analysis Summary – Enterprise Value (as of December 31st, 2015) Liquigás Total Enterprise Value – BRL million Comments Offer Implied EV @ BRL 2,800 MM Discounted cash flow Trading Multiples Transaction Book Value Implied EV/EBITDA 2015A Implied EV/EBITDA 2016E Implied EV/EBITDA 2017E BRL1,
Slide 46: Valuation Summary – DCF Enterprise Value
Valuation Analysis Summary – DCF Enterprise Value (as of December 31st, 2015) DCF Enterprise Value Breakdown (BRL MM) 17.7 986.4 ( + ) NPV Cash flows ( + ) NPV Terminal Value ( + ) Associates Total Enterprise value¹ Enterprise Value’s sensitivity based on DCF (BRL MM) .Central value of Enterprise Va
Slide 47: Valuation Analysis – WACC
Section IV Valuation Analysis A. Methodology B. Summary C. WACC D. DCF – Discounted Cash Flow E. Multiples
Slide 48: WACC
Valuation Analysis WACC WACC = (USD, Nominal) (+) INFBR Cost of Debt After Taxes Cost of Equity Legend: D – Net Debt (Target Structure)1 E – Equity (Target Structure)1 KD – Marginal cost of debt in USD of Liquigás estimated based on Petrobras’ bonds t – Brazil Marginal Corporate Tax Rate (long term)
Slide 49: Valuation Analysis – DCF
Section IV Valuation Analysis A. Methodology B. Summary C. WACC D. DCF – Discounted Cash Flow E. Multiples
Slide 50: DCF – Discounted Cash Flow
Valuation Analysis DCF – Discounted Cash Flow Discounted Cash Flow ... ... ... ... ... ... ... ... ... ... Terminal Value Calculation Perpetuity Cash Flow WACC Perpetuity Growth Discount Factor Terminal Value BRL448 MM 12.55% 4.4% 0.180 BRL 986 MM Free Cash Flow (BRL MM) 2016E 2017E 2018E 2019E 2020
Slide 51: Valuation Analysis – Multiples
Section IV Valuation Analysis A. Methodology B. Summary C. WACC D. DCF – Discounted Cash Flow E. Multiples
Slide 52: Multiples – Trading Comps
Valuation Analysis Multiples Trading Comps (as of December 31st, 2015) .We selected global LPG peers for our analysis .We selected 2017E EV/EBITDA multiples and applied to Company’s 2017E EBITDA as it is the best representative of Company’s profitability going forward Company Country Mkt Cap EV Net
Slide 53: Trading Comps Details
Valuation Analysis Multiples Trading Comps Details Other (1) Net Revenues • AmeriGas Partners, L.P. is a holding company that operates as a retail propane distributor in the United States, serving approximately two million residential, commercial, industrial, agricultural, wholesale and motor fuel c
Slide 54: Trading Comps Details
Valuation Analysis Multiples Trading Comps Details Net Revenues 1,699 EBITDA 83 Net Debt/EBITDA 2.1x Services (1) >1% LPG Sales and Distribution 100% (1) • Siamgas and Petrochemicals Public Company Limited is a Thailand-based company engaged in the trading business of LPG and related petroleum produ
Slide 55: Trading Comps Details
] Valuation Analysis Multiples Trading Comps Details Company Key Financials (USD MM 2015) Revenues Breakdown (2015) Description Others LPG Distribution Net Revenues 1% 9%Chemicals • Ultrapar Participacoes S.A. (Ultrapar) is a Brazilian holding company that engages in services, commercial and industr
Slide 56: Multiples – Transaction Comps
Valuation Analysis Multiples Transaction Comps .We selected transactions involving LPG companies in the Brazilian Market 1 Oct-11 Repsol Gas Brasil SA Brazil Ultragaz Participações Ltda 100% 50 47.85 10.19x Aug-04 Agip Liquigás Brazil Petrobras 100% 1,424 2,071.23 12.06x Supergasbras 3 Jul-04 Brazil
Slide 57: Transaction Comps Details
Valuation Analysis Multiples Transaction Comps Details Target Company Target Description Transaction Description • Repsol Gás Brasil (Repsol) is a LPG company that operates in the Brazilian bottled LPG with 1% of market share in 2011 • In October 2011, Ultragaz Participacoes Ltda, a unit of Ultrapar
Slide 58: Appendices
Appendices A. Macroeconomic Assumptions B. Financial Statements C. WACC Parameters
Slide 59: Macroeconomic Assumptions
Appendices Macroeconomic Assumptions Macroeconomic assumptions 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E Inflation Brazil (IPCA) % 6.4% 10.7% 7.0% 4.9% 4.4% 4.4% 4.4% 4.4% 4.4% 4.4% 4.4% 4.4% 4.4% 4.4% 4.4% 4.4% 4.4% USA (CPI) % 1.6% 0.1% 1
Slide 60: Appendices – Financial Statements
Appendices A. Macroeconomic Assumptions B. Financial Statements C. WACC Parameters
Slide 61: Liquigás Financial Statements – Assets
Appendices Liquigás Financial Statements Assets (BRL MM) 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E Cash and equivalents 13 13 96 101 107 113 120 128 135 143 152 161 170 180 190 201 212 Accounts receivable 174 203 230 243 257 272 289 306 325
Slide 62: Liquigás Financial Statements – Liabilities
Appendices Liquigás Financial Statements Liabilities (BRL MM) 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E Suppliers 91 79 100 108 114 120 127 135 143 152 161 170 180 190 200 212 223 Revolver Debt 0 0 18 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Short-term
Slide 63: Liquigás Financial Statements – Income statement
Appendices Liquigás Financial Statements Income statement (BRL MM) 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E Net revenues 2,978 3,296 3,831 4,050 4,287 4,536 4,810 5,102 5,411 5,731 6,081 6,424 6,800 7,185 7,588 8,027 8,479 Annual growth n.
Slide 64: Liquigás Financial Statements – Cash flow
Appendices Liquigás Financial Statements Cash flow (BRL MM) 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E Operational cash flow 265 263 266 276 298 308 332 362 386 405 443 480 520 541 577 Net income 185 171 191 206 228 257 274 295 312 323 354 382 414 427 4
Slide 65: Appendices – WACC Parameters
Appendices A. Macroeconomic Assumptions B. Financial Statements C. WACC Parameters
Slide 66: WACC Parameters
Appendices WACC Parameters 7.3% 7.2% 7.1% 7.0% 6.9% 6.8% 6.7% 6.6% 2.8% 2.7% 2.6% 2.5% 2.4% 2.3% 2.2% 2.1% 2.0% 20-Apr 20-May 20-Jun 20-Jul 20-Aug 20-Sep 20-Oct 20-Apr 20-May 20-Jun 20-Jul 20-Aug 20-Sep 20-Oct Equity Market Risk premium 6 month Equity Market Risk premium Risk free rate 6 month Risk
Slide 67: Presentation to Shareholders Item II – Disposal of PetroquímicaSuape and CITEPE
EXTRAORDINARY GENERAL MEETING PRESENTATION TO SHAREHOLDERS ITEM II Disposal to GRUPO PETROTEMEX, S.A. DE C.V. (“GRUPO PETROTEMEX”) and to DAK AMERICAS EXTERIOR, S.L. (“DAK”), subsidiaries of Alpek, S.A.B. de C.V. (“Alpek”), of 100% (one hundred percent) of the shares held by Petróleo Brasileiro S.A.
Slide 68: Strategic fit and sale process
In addition, the Strategic Plan and the PNG 2017-2021 defined as one of their business portfolio optimization strategies, to cease its participation in the petrochemical company. The sale of the entire interest of PETROBRAS in the Companies, therefore, is strategically in line with the Strategic Pla
Slide 69: Stock purchase agreement and representations and warranties
When the process of negotiation with GRUPO PETROTEMEX and DAK, and the internal process of approval of the transaction by the Executive Office and the Board of Directors of PETROBRAS were finalized on 12/28/2016, PETROBRAS and GRUPO PETROTEMEX, S.A. DE C.V. and DAK AMERICAS EXTERIOR, S.L., executed
Slide 70: Indemnification by Petrobras
PETROBRAS in the CCVA; (iii) any acts, events, omissions or claims, including existing claims disclosed or existing claims of a civil nature, occurred or originated previously (including) to the date of closing, even if its effects only materialize after such date, provided that they have not been d
Slide 71: Inapplicability of article 253; legal actions and TCU
Inapplicability of article 253 of Brazilian Corporations Law -LSA Let it also be stressed that article 253 of Law No. 6.404/76 does not apply to this case, considering the current position of the Brazilian Securities and Exchange Commission -Comissão de Valores Mobiliários (“CVM”) on the subject, to
Slide 72: Crédit Agricole fairness opinion letter
To the Board of Directors of Petróleo Brasileiro S.A. November 4th, 2016 Petróleo Brasileiro S.A. Av . República do Chile, 65 Rio de Janeiro 20031-912 Brazil Dear Sirs: We understand that Petróleo Brasileiro S.A. (“Petrobras”) is negotiating the sale of Liquigás Distribuidora S.A. (“Liquigás “ or th
Slide 73: Crédit Agricole fairness opinion, continued
In connection with our review, we have not assumed any responsibility for lndependent verification of any of the foregoing information and have relied on its being complete and accurate in all material respects. We have assumed, with your consent, that in the course of obtaining necessary regulatory
Slide 74: Crédit Agricole fairness opinion conclusion
This letter is confidential and its content may not be disclosed to any person without our prior consent and it is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent. Based upon and subject to the foregoing, i
Slide 75: Evercore fairness opinion letter
G5 EVERCORE Privileged & Confidential November 17, 2016 Petróleo Brasileiro S.A Avenida República do Chile, 65 -22nd Floor 20031-912 Rio de Janeiro -RJ -Brazil Dear Sirs, We understand that Petróleo Brasileiro S.A. (“Company” or “Petrobras”) received a binding offer dated August, 31 2016 (“Binding O
Slide 76: Evercore fairness opinion, continued
G5 EVERCORE Privileged & Confidential adjustment to December 31, 2015 audited financials carried out in our Valuation Memorandum reflected a condition precedent for Closing (as indicated in the Binding Offer and also in the draft versions of the SPA, that we were provided), which was that PQS’ outst
Slide 77: Evercore fairness opinion, continued
G5 EVERCORE performance of the Target. We express no View as to any such financial projections or the assumptions on which they are based. We have assumed, that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the Transaction will be obtained wi
Slide 78: Evercore fairness opinion signatures
G5 EVERCORE Privileged & Confidential Very truly yours, G5 Consultoria e Assessoria Ltda (“G5 EVERCORE”) By: ____________________________ Corrado Varoli Co-Founder & CEO By: _____________________________ Marcio Santiago Senior Partner Page 4 of 4
Slide 79: Valuation Memorandum of PetroquímicaSuape and Citepe (PQS)
Valuation Memorandum of PetroquímicaSuape and Citepe (PQS) November 17, 2016 Evercore
Slide 80: Disclaimer
PRIVATE AND CONFIDENTIAL MATERIAL Disclaimer G5 Consultoria e Assessoria Ltda. (“G5|Evercore”) has been engaged by Petróleo Brasileiro S.A. together with its affiliates (“Petrobras”) to prepare and deliver a Valuation Memorandum concerning the proposed sale of Companhia Petroquímica de Pernambuco (“
Slide 81: Disclaimer
PRIVATE AND CONFIDENTIAL MATERIAL Disclaimer 11. This Valuation Memorandum (a) does not quantify or express any opinion on any positive or negative effects that may impact PQS, Petrobras or its Affiliates; (b) does not create any liability for G5|Evercore regarding the result of the Transaction; and
Slide 82: Table of Contents
PRIVATE AND CONFIDENTIAL MATERIAL Table of Contents Executive Summary I G5 Evercore Credentials II Industry Overview III Company Overview IV Discounted Cash Flow Analysis V Trading and Acquisition Comparables VI Appendix VII 4
Slide 83: Executive Summary
I Executive Summary
Slide 84: Executive Summary – Proposed Transaction Key Considerations
Executive Summary PRIVATE AND CONFIDENTIAL MATERIAL Executive Summary Proposed Transaction – Key Considerations • On August 31, 2016, Petrobras received a binding offer (“Offer”) to sell its 100% share stakes in Companhia Petroquímica de Pernambuco (“PetroquímicaSuape” or “Suape”) and in Companhia I
Slide 85: Executive Summary – Proposed Transaction Key Considerations
PRIVATE AND CONFIDENTIAL MATERIAL Executive Summary Proposed Transaction – Key Considerations • This Valuation Memorandum also considered the Company as a stand-alone entity, i.e.: • It excluded any potential benefits, impacts, synergies or disynergies that PQS might have with the buyer, be them of
Slide 86: Executive Summary – Valuation Methodologies
PRIVATE AND CONFIDENTIAL MATERIAL Executive Summary Valuation Methodologies • G5 Evercore prepared this Valuation Memorandum based on information provided by PQS and Petrobras, using the following methodologies to derive the Company’s equity value range: • Discounted Cash Flow (“DCF”) Analysis • Pee
Slide 87: Summary of Valuation Methodologies
PRIVATE AND CONFIDENTIAL MATERIAL Executive Summary Summary of Valuation Methodologies (as detailed in the previous and next slides) DCF-derived EV/EBITDA 17E(1) range Offer: $380 ($330/ton) Considerations Considering a range of: • WACC: 10.5% -11.5% (USD real terms) • Terminal Growth: 0.0% • Value
Slide 88: Discounted cash flow analysis as primary methodology
PRIVATE AND CONFIDENTIAL MATERIAL Executive Summary Discounted cash flow analysis was considered to be the only methodology that fully captures PQS’ fundamental equity value, in light of the ongoing ramp-up of its operations and the lack of international traded peers of equivalent size and scope of
Slide 89: G5 Evercore Credentials
II G5 Evercore Credentials
Slide 90: G5 Evercore Credentials – Sell Side
PRIVATE AND CONFIDENTIAL MATERIAL G5 Evercore Credentials Sell Side Advising Advised Advising Abengoa on the sale of transmission assets On the valuation memorandum of Nansei Sekiyu K.K. Exclusive Financial Advisor to BR Properties Board of Directors in the analysis of GP Investments and ADIA non-so
Slide 91: G5 Evercore Credentials – Buy Side
PRIVATE AND CONFIDENTIAL MATERIAL G5 Evercore Credentials Buy Side Restructuring Fund Raising Joint Venture Advised Subsidiary of On the acquisition of 2015 Advising On the acquisition of a minority stake in On its ~R$3.9 billion debt restructuring On its ~R$2.3 billion debt restructuring On the fun
Slide 92: Industry Overview
III Industry Overview
Slide 93: Overview of Polyester Production Chain
PRIVATE AND CONFIDENTIAL MATERIAL Industry Overview Overview of Polyester Production Chain Overview Product Descriptions Purified Terephthalic acid (“PTA”) is obtained from the oxidation of paraxylene with acetic acid, and is used primarily in the manufacture of polyester (either resin called PET, f
Slide 94: Global Polyester Industry Overview
PRIVATE AND CONFIDENTIAL MATERIAL Industry Overview Global Polyester Industry Overview Global Polyester Production Growth (mm ton) • Global PTA production has witnessed strong growth in the period following the 2008 financial crisis with operating rates peaking above 90% levels. The global oversuppl
Slide 95: Global PET Capacity Landscape
PRIVATE AND CONFIDENTIAL MATERIAL Industry Overview Global PET Capacity Landscape PET Capacity (mm ton) Total: 6.9 21.6% 2.6 8.3% 1.6 5.1% 5.9 18.5% 14.8 46.5% 100% 100% 75% 50% 25% Americas Western Central Africa, India, Middle East Rest of Asia (excl. India) Europe Europe Nan Ya, 405 Alpha PET, 43
Slide 96: Brazilian Polyester Industry Overview
PRIVATE AND CONFIDENTIAL MATERIAL Industry Overview Brazilian Polyester Industry Overview Brazilian Polyester Market Demand Growth (‘000 tpy) • Demand for PTA, PET and DTY continues to grow in the Brazilian market, with growth rates projected to accelerate in the 2020-2024 period • The only local PT
Slide 97: Company Overview
IV Company Overview
Slide 98: Overview of PQS
PRIVATE AND CONFIDENTIAL MATERIAL Overview of PQS Overview •Founded in 2006 and originally included in the Growth Acceleration Program (“PAC”), launched by Federal Government, PQS is South America’s only integrated (PTA-PET) polyester producer and is a wholly-owned subsidiary of Petrobras • PQS in t
Slide 99: Operational Overview – PetroquímicaSuape and Citepe Facilities
PRIVATE AND CONFIDENTIAL MATERIAL Overview of PQS Company Overview Operational Overview PetroquímicaSuape and Citepe Facilities • The PQS complex began operations in 2011 with the start-up of the DTY unit. PTA operations began at the beginning of 2013, with PET line C and B starting up in mid 2014 a
Slide 100: Integration of PQS Operations
PRIVATE AND CONFIDENTIAL MATERIAL Company Overview Integration of PQS Operations1 Ethylene glycol (MEG) PTA 700 ktpy Paraxylene (PX) 50% Intercompany 40% Domestic 10% International Input from Suppliers PQS Product Contingent on completion of Line A Imported Inputs Polymer Line A 240kty Chips 30kty F
Slide 101: Combined Historical Financials
PRIVATE AND CONFIDENTIAL MATERIAL Company Overview Combined Historical Financials1 Net Revenues (R$ mm)1 Gross Profit (R$ mm)1 EBITDA (Exc. Impairment)(1) (R$ mm) 1.638 857 1.005 1.100 633 525 633 603 243 8 44 78 243 52 525 78 857 1.005 844 2012A 2013A 2014A 2015A 2012A 2013A 2014A 2015A 2012A 2013A
Slide 102: Discounted Cash Flow Analysis
V Discounted Cash Flow Analysis
Slide 103: Summary Projections
V.a Summary Projections
Slide 104: Summary Projections for Suape – Macroeconomic Assumptions
PRIVATE AND CONFIDENTIAL MATERIAL Summary Projections for Suape Macroeconomic Assumptions GDP Growth Forecast (%) • Forecast based on Brazilian Central Bank estimates as of December 31, 2015 3,0% FX Rate Forecast (BRL/USD, average of year) • FX projected in real terms as of December 31, 2015 3,90 3,
Slide 105: Projected PTA Volumes and Average Prices
PRIVATE AND CONFIDENTIAL MATERIAL Summary Projections for Suape Projected PTA Volumes and Average Prices PTA Volume Projections (‘000 tons) • With the expansion of M&G’s Corpus Christi, Texas – based unit by year-end 2016, Mexican PTA exports currently destined to both the American and Brazilian mar
Slide 106: Suape Net Revenues and EBITDA
PRIVATE AND CONFIDENTIAL MATERIAL Summary Projections for Suape Net Revenues and EBITDA Projected Net Revenues (US$ million) Domestic International Intercompany Resale Projected EBITDA (US$ million) 2023 and 2024 impacted by transfering of tax benefit (Prodepe) from Citepe to Suape Utilization 2040
Slide 107: Projected PET Volumes and Average Prices
PRIVATE AND CONFIDENTIAL MATERIAL Summary Projections for Citepe Projected PET Volumes and Average Prices PET Volume Projections (‘000 tons) Assumed steady growth in market share, reaching 50% (ex - resin imports) by year-end 2018, principally as a function of eroding competitor M&G’s share Company
Slide 108: Projected DTY Volumes and Average Prices
PRIVATE AND CONFIDENTIAL MATERIAL Summary Projections for Citepe Projected DTY Volumes and Average Prices DTY Volume Projections (‘000 tons) • Moderation of DTY volumes due to: (i) challenging pressure from lower-cost exports originating in Asia; (ii) originally planned price-efficient production me
Slide 109: Citepe Net Revenues and EBITDA (PET and DTY)
PRIVATE AND CONFIDENTIAL MATERIAL Summary Projections for Citepe Net Revenues and EBITDA (PET and DTY) Projected Net Revenues (US$ million) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2040 Domestic International Projected EBITDA (US$ million) • EBITDA decrease in 2023 could be explai
Slide 110: Discounted Cash Flow
V.b Discounted Cash Flow
Slide 111: Discounted Cash Flow Analysis – Initial Methodology
PRIVATE AND CONFIDENTIAL MATERIAL Discounted Cash Flow Analysis Initial Methodology Discounted cash flow methodology Projection of the Company’s future cash flows, in real US$ terms, based on the assumptions provided by PQS and Petrobras Projection of unlevered cash flows (FCFF), discounted by
Slide 112: Discounted Cash Flow Analysis – Main Assumptions
PRIVATE AND CONFIDENTIAL MATERIAL Discounted Cash Flow Analysis Main Assumptions Main Fiscal Benefits Repequim Company pays reduced PIS/Cofins rates applicable to acquisition of Paraxylene (PX) (1% until 2015 end, 3% in 2016, 5% in 2017 and 5.6% from 2018 on) and receives a tax credit of 9.25% C
Slide 113: PetroquímicaSuape – DCF Unlevered Free Cash Flow
PRIVATE AND CONFIDENTIAL MATERIAL Discounted Cash Flow Analysis PetroquímicaSuape -DCF Unlevered Free Cash Flow 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2030E 2035E 2040E T. Value (All in US$mm, except where noted) Revenues US$mm 291 322 459 492 540 568 577 599 610 618 618 618 618
Slide 114: Citepe – DCF Unlevered Free Cash Flow
PRIVATE AND CONFIDENTIAL MATERIAL Discounted Cash Flow Analysis Citepe -DCF Unlevered Free Cash Flow 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2030E 2035E 2040E T. Value (All in US$mm, except where noted) Revenues US$mm 263 314 401 472 526 557 572 583 596 601 601 601 601 601 % Grow
Slide 115: Analysis of EV/EBITDA Multiple
PRIVATE AND CONFIDENTIAL MATERIAL Discounted Cash Flow Analysis Analysis of EV/EBITDA Multiple Build up analysis for the EBITDA considered in the EV/EBITDA Multiple Analysis US$mm Enterprise Value US$mm Suape 179.3 Citepe 114.3 Total EV 293.6 NPV Adj. EBITDA 55.1 EV / NPV EBITDA 2017 5.3x 5.3x EV/EB
Slide 116: Trading and Acquisition Comparables
VI Trading and Acquisition Comparables
Slide 117: Peer Group Trading Multiple Analysis
Trading and Acquisition Comparables PRIVATE AND CONFIDENTIAL MATERIAL Peer Group Trading Multiple Analysis (1) Peer Trading Group % of 52-Week High Equity Value USD mm Enterprise Value USD mm Share Price EV/ 31/12/2015 EBITDA (In USD, except for local per share figures) Country Local $ LTM 2016E 201
Slide 118: Peer Group Acquisition Multiple Analysis
PRIVATE AND CONFIDENTIAL MATERIAL Peer Group Acquisition Multiple Analysis 2015 Indorama United States 1mtpy PET Facility located in Decatur, Alabama 460 2014 Indorama Thailand 105ktpy PTA facility Bangkok Polyester N/A 5.3x N/A 2014 Indorama Turkey 130 ktpy facility Artenius 45 5.6x 346 2014 M&G In
Slide 119: Appendix
VII Appendix
Slide 120: Appendix – WACC
PRIVATE AND CONFIDENTIAL MATERIAL Appendix – WACC Long Term Inflation (2.2%)5 Target Capital Structure 10% Debt / 90% Equity8 WACC (US$ real) 11.03% Long Term Inflation (2.2%)5 WACC (US$ nominal) 13.47% Cost of Equity US$ (Ke) 13.93% Target Capital Structure 10% Debt / 90% Equity8 Cost of Debt US$ (
Slide 121: Appendix – Financing Cost
PRIVATE AND CONFIDENTIAL MATERIAL Appendix – Financing Cost Rating Overview Expected Cost of Debt for PQS (USD) • Additionally to 8.5% (USD), was assumed some adjusments to reflect the current leverage capabilities of PQS: • +0.5% due to rating downgrade to benchmark Petrobras (i.e.: “B” area) • +0.
Slide 122: Petroquimica Suape Historical Financial Highlights – Balance Sheet
PRIVATE AND CONFIDENTIAL MATERIAL Appendix Petroquimica Suape Historical Financial Highlights – Balance Sheet Assets Liabilities (R$mm, except where mentioned) 2013 2014 2015 2013 2014 2015 Current Assets Current Liabilities Cash and Equivalents 136 4 8 Suppliers 63.0 95.5 107.4 Accounts Receivable
Slide 123: Petroquimica Suape Historical Financial Highlights – Income Statement
PRIVATE AND CONFIDENTIAL MATERIAL Appendix Petroquimica Suape Historical Financial Highlights – Income Statement Income Statement 2013 2014 2015 (All in R$ mm, except where mentioned) Net Revenues 525 857 1,005 Growth (%) 63.1% 17.4% Cost of Goods Sold (727) (1,001) (1,008) Gross Profit/(Loss) (202)
Slide 124: Citepe Historical Financial Highlights – Balance Sheet
PRIVATE AND CONFIDENTIAL MATERIAL Appendix Citepe Historical Financial Highlights – Balance Sheet Assets Liabilities (R$mm, except where mentioned) 12/2013 31/12/2014 31/12/2015 31/12/2013 31/12/2014 31/12/2015 Current Assets Current Liabilities Cash and Equivalents 241.3 0.2 69.7 Suppliers 52.4 40.
Slide 125: Citepe Historical Financial Highlights – Income Statement
PRIVATE AND CONFIDENTIAL MATERIAL Appendix Citepe Historical Financial Highlights – Income Statement Income Statement 2013 2014 2015 (All in R$ mm, except where mentioned) Net Revenues 78 243 633 Growth (%) 212.3% 160.5% Cost of Goods Sold (84) (240) (674) Gross Profit/(Loss) (6) 3 (41) Gross Margin
Petrobras - Petroleo Brasileiro — Shareholder Meeting (December 2016) on 6ix