the e&c scene opportunities & challengesecrisponsor.org/npresentations/mi2-4.pdf ·...
TRANSCRIPT
THE E&C SCENE – OPPORTUNITIES & CHALLENGES Pierroberto Folgiero, Group CEO Milan ECRI Sponsors Meeting, 6th June 2013
June 2013 1
2 June 2013
Group Overview
Industry Trends
Group Strategy & Risk Management
*overall value of the Habshan 5 project, MT share is 50% **referred to Tecnimont Group
GROUP OVERVIEW: Facts & Figures
Focus on Oil&Gas Petrochemicals Fertilizers
Flexible Business Model offering advanced skills in Licensing, Engineering Services, EP (Engineering & Procurement), EPC (Engineering, Procurement & Construction)
Ø Zero Incident Target Safety Culture US$4.7bn*
The largest gas treatment plant ever awarded in Abu Dhabi (UAE) on a Lump Sum Turn Key (LSTK) basis
3 June 2013
Total Recordable Incident Rate: 0.05** vs 0.38 industry benchmark
Energy & Ventures
Engineering & Construction
Technology & Licensing
GROUP OVERVIEW: Global & Technological Leadership
*management estimate **Research by Primary Consulting Company
in Licensing hydrogen technology (with single train capacity up to 180,000 Nm3/h) and in licensing Sulphur Recovery and Tail Gas Treatment Technology (with design capacity of single train up to 1,500 t/d)
Awards in 2012 Long standing client relationships €2.6bn
Well recognized
position
4
World ranking in EPC onshore Revenues**
+700 Individual Patents
#13
30%
Market share in polyolefins* (#1 worldwide as per capacity installed in the last 6 ys), including a 40% in LDPE (Low Density PolyEthylene)
50%
35%
Market share in licensing urea plants technology (#1 worldwide)*
Market share in licensing urea granulation technology (#2 worldwide)*
June 2013
5
EXTENSIVE INTERNATIONAL PRESENCE: Our Employees
About 4,500 employees as of December 31, 2012, half of which are employed outside Italy
Presence in about 30 countries with 45 operating companies
EMPLOYEES BY COMPETENCE At 31/12/12
Overall 4,470
Engineering 2,255
Operations 933
Other Technical area 422
Commercial 123
Staff 737
EMPLOYEES BY COUNTRY At 31/12/12
Total 4,470
Italy 2,037
Rest of Europe 487
Asia 1,898
South America 46
Africa 2
Group presence
June 2013
6 June 2013
Group Overview
Industry Trends
Group Strategy & Risk Management
Source: Source BP Energy Outlook 2030, year 2012
Btoe
GAS DEMAND
+2,6%
• Stable expected growth for Gas demand
• Asia Pacific and Middle East driving growth, but Europe and Eurasia will continue to be the main consuming areas
GAS LIQUEFACTION DEMAND
Bcm
•Gas liquefaction to grow faster than gas consumption due to international price differences in gas supply and to the higher flexibility granted by LNG
GAS DEMAND
Gas demand growing fast with a shift towards Asia Pacific and Middle East
7 June 2013
Source: Analysis by a Primary Consulting Company based on market reports (Wood Mackenzie; GDF Suez; FACTS; Morgan Stanley; Platts; Macquarie)
Mtons/year
FERTILIZERS DEMAND PETROCHEMICALS DEMAND
+9,2%
Industrial petrochemicals demand acceleration will be initially driven by higher operating rates in existing plants and limited capacity growth
Shale gas expected to impact the geographical mix thanks to lower feedstock cost
Global demand for fertilizers expected to grow at a slow but steady rate
High expected growth in South East Asia will lead to high capacity investment in the area
Mtons/year +1,7%
+4,6%
FERTILIZER AND PETROCHEMICALS DEMAND
Demand for Fertilizers to Grow Steadily, while Demand for Petrochemicals to Firmly Recover from Recent Slowdown
8 June 2013
Source: Market reports, IFA - data elaborated by a Primary Consulting Company
Source: Deutsche Bank Petrochemicals Yearbook 2011 e JP Morgan 2011 – other Market reports – data elaborated by a Primary Consulting Company
MARKET OUTLOOK
Addressable Market for Maire Tecnimont by Geography (2013-2017)
North America
$131bn
South America
$69bn
Middle East
$95bn
SE Asia $58bn
India $24bn
Australia $90bn Africa $136bn
Europe $27bn
CIS & Turkey
$81bn
9 June 2013
Source: Public sources, analyst / industry reports, O&G journal, company websites and IFA (Ammonia / Urea), elaborated by a Primary Consulting Company :
10 June 2013
Group Overview
Industry Trends
Group Strategy & Risk Management
STRATEGIC INITIATIVES DRIVING CHANGE
Strategic Priorities
Enhance and Develop Technology Driven Business
Reduce EPC Risk Positioning
Develop Engineering Services Revenues
Expand Geographic Footprint
Align Organization and pursue Group Synergies
“One Company”
1
2
3 4
5
11 June 2013
1) Enhance and develop Technology driven business
Grow license driven model and extend Fertilizer offer to technology engineering and critical items procurement. Pursuit of
small equity investments on case by case basis, initially in the Fertilizer sector.
2) Reduce EPC risk positioning
Greater selectivity of projects and well calculated construction risk profile. Focus on value at the expense of volume.
Alliances and consortia with construction companies (versus traditional subcontractor schemes). Cooperation with large
scale players based upon distinctive capabilities
3) Develop Engineering Services revenues
Technology–driven commercial proposition differentiates the company from traditional generalist market players. Increased
emphasis on engineering services to compensate, at EBITDA level, for decreasing EPC volumes
4) Expand geographic footprint
Enter untapped markets, taking into account local content requirements and leveraging on leading technological capabilities
5) Align organization and pursue Group synergies
‘One Company’ initiative to increase commercial effectiveness, review of organizational structure and process optimization
to lower G&A expenses
“centralize what you must, but decentralize what you can”
Roadmap for the regionalization of Commercial Presence has started with the first countries: Sud America and Russia&CIS
STRATEGIC INITIATIVES DRIVING CHANGE
12 June 2013
DOWNSTREAM BUSINESS OVERVIEW
PRODUCTS
TYPICAL VOLUMES*
MARGINS*
RISK
*Illustrative
Maire Tecnimont De-Risking Strategy: more projects with less risks
DIRECT LICENSE PDP € 1-10m VERY HIGH DOUBLE DIGIT LOW
BASIC € 1-10m HIGH DOUBLE DIGIT LOW
FEED € 4-15m HIGH DOUBLE DIGIT LOW
DETAILED ENGINEERING SERVICES € 10-40m MID DOUBLE DIGIT LOW
EP € 50-250m LOW DOUBLE DIGIT MEDIUM
EPC € 0.3-4bn SINGLE DIGIT HIGH
LICENSING PROCESS DESIGN
EXECUTION DRIVEN TECHNOLOGY DRIVEN
ENGINEERING PROCUREMENT CONSTRUCTION
SECTOR VALUE CHAIN
13 June 2013
GOLDEN RULES
LESSONS LEARNED: Latin America
Multiple exceptional events of great magnitude occurred simultaneously
Stronger criteria for “exceptional event” detection and risk management enhancement
Several large projects in the same country and with similar risk profile
New portfolio management strategies (higher granularity of projects, backlog diversification, increased geographical spread)
Regionalization of the organization aimed at achieving Client proximity and local sub-contractor integration
Difficult interaction with local content both in term of Client relationship and local sub-contractor knowledge
Rigid rules of engagement on execution risks based upon analytical calculation and remuneration of construction risks. Focus on EP contractual scheme
Weak quantification of execution risks since the commercial phase
SHORTCOMINGS
14 June 2013
LatAm Plants are all in operation in accordance with the performance requirements
Enterprise Risk Management (ERM) to gradually and structurally integrate the ERM approach with the key processes and Group performance management.
The Enterprise Risk Management is aimed at identifying, assessing, monitoring, mitigating and managing the company’s risks & opportunities (portfolio approach), leveraging also on a strong interaction with the Project Risk Management processes and procedures.
ENTERPRISE RISK MANAGEMENT
15 June 2013
• Strategy and processes
• Organization and Accountability
• Methodologies
• Controls and Reporting
• Data & Systems
ERM infrastructure
• Board, to supervise risks with a structured approach
• Top Management to assess the strength/weaknesses of the Business Plan
• Middle Management to fast respond to deviations from targets
Supports
16 June 2013
ENTERPRISE AND PROJECT RISK MANAGEMENT
» Enterprise-wide view based on common methodology
» Cross risks (e.g. financial risks, industry trends, Business Partners, supply chain, etc.)
» Single project view
» Focus on project risk events (e.g. Physical/Site)
Based on a value-driven approach, the Enterprise Risk Management (ERM) focuses on risks “that really matter” at enterprise level, providing a consolidated and shared picture of top risks that could affect Group’s strategic objectives and expected results.
The ERM integrates the project risk management view by addressing both relevant specific projects risks as well as cross-company risks
NOT OVERLAPPING BUT INTEGRATION
FOCUS
Project 1
Project 2
Project 3
Oil & Gas
Project 1
Project 2
…
PetChem
…
Power …
MAIRE TECNIMONT
Project Risk Management
Enterprise Risk Management
Strategic Plan
17
POLITICAL & LAW
INVESTMENT
PROFITABILITY
SITE ACCESSIBILITY
PERMITS OBTAINMENT
LICENCE/TECHNOLOGY
FEED QUALITY
ESTIMATING
PROJECT DESIGN
PROCUREMENT
& SHIPPING
EXECUTION
QUALITY
HUMAN RESOURCES
PERFORMANCE
HSE
CLIENT TECHNICAL STANDARDS
LOCAL REGULATIONS
SUBSURFACE CONDITIONS
INFLATION
SECURITY
EXCHANGE RATES
Each risk should be allocated to the party best positioned and capable to manage it
CLIENT EPC CONTRACTOR
PROJECT RISK MANAGEMENT
June 2013
PROJECT RISK MANAGEMENT
Proposal preparation Proposal review & submission Execution Phase
Preparation of Risk Register in accordance with identified risk categories in order to evaluate risk status
Divisional risk review: • Ownership assignment • Risk Reduction: mitigation,
transfer, acceptance, avoidance
Contingency allocation: • Montecarlo simulation to
calculate the appropriate level of contingency
Risk Committee: • Review risk evaluation &
contingency cover
CEO approval
Proposal Submission
Quarterly risk reassessment meeting: • Ownership assignment • Risk Reduction • Montecarlo simulation to evaluate project
contingency is sufficient to cover the risks during remaining duration of project
Close out report: • Major events occurred during
project execution with impact on contingency
• Actions taken resulting in risk reduction
• Lessons learned
Risk Reduction
RIS
K L
EVEL
t Contingency covers 75% of remaining risk
100%
18 June 2013