WHY EVERYBODY SHOULD HOLD GAZ MÉTROPOLITAIN UNITS RBC Capital Markets Fifth Annual Income Trust Investor Symposium Toronto, January 28, 2003 Table of Contents I. Introduction II. Company Overview III. Why Hold GazMet Units IV. Things to Remember 2 Introduction GazMet: A Unique Breed! Pure regulated utility play with a limited partnership structure Attractive 7.1% distribution yield; 15.1% annualized total return since 1993 Distribution of business income; cash flow ($100 M/year) kept for business growth Units not considered as foreign property in a RRSP General partner management fees limited to $50,000/year Limited responsibility of unitholders Strong ownership 4 Company Overview Mission and Objectives Mission: Transport and distribute natural gas in Québec and the northeastern portion of the United States Pursue non-regulated activities in the energy, water and fibre optics fields Objectives: Financial: Provide stable and predictable return accompanied by growth in value over time Commercial: Provide high-quality energy services at the lowest possible cost 6 Positioning 3rd largest natural gas distributor in Canada #1 natural gas distributor in Québec (97% market share) Sole natural gas distributor in Vermont, United States 7 Corporate Structure HydroQuébec Gaz de France Enbridge 41% 32% 18% Others 9% Noverco 100% General partner GMi Limited partners 77.4% GMCLP Distribution of natural gas • GMCLP • Vermont Gas GMi: GMCLP: TQM: PNGTS: Transportation of natural gas • TQM • PNGTS • Champion 22.6% Public Non-regulated activities • Energy services • Water • Fibre optics Gaz Métropolitain, inc. Gaz Métropolitain and Company, Limited Partnership TQM Pipeline and Company, Limited Partnership Portland Natural Gas Transmission System 8 2002 Highlights Gas Deliveries 1 210.9 Bcf +10.5 System length 1 10,061 Km + 209 (Normalized) Number of customers 1 186,800 + 2,311 Number of employees 1 1,306 Credit Ratings 2 (S&P/DBRS) A/A (1) Québec and Vermont natural gas distribution. (2) Long-term debt. 9 Market Penetration Re s id e n t ia l ma r ke t O ve r al l Q u é be c 11% 16% O n t a r io 62% 37% Canada 50% 32% Source: Statistics Canada. Qu é b e c Co al 1% Na t u r a l gas 16% On t a r io E l e c t r ic it y 20% E l e c t r ic it y 42% O il 41% Co al 6% Na t ur a l gas 37% O il 37% 10 Historical Financial Review In millions of $, CAGR = compounded annual growth rate Rate of Return 14.00% 1992 12.00% 1994 12.00% 1996 Gross Margin 1 10.75% 1998 9.72% 9.67% 2000 2002 381 433 474 481 533 556 1992 1994 1996 1998 2000 2002 CAGR = –3.6% CAGR = +3.9% Funds from Operations Partner's Income 111 124 1992 1994 146 141 144 155 211 1996 1998 2000 2002 1992 CAGR = +3.4% 253 1994 276 1996 232 1998 2 266 286 2000 2002 CAGR = +3.1% (1) Base rate of return on partner's equity allocated to the Québec natural gas distribution activity authorized by the Régie de l’énergie. (2) Before change in non-cash working capital. 11 Why Hold GazMet Units #1: Low Business Risk 97% of revenues regulated Exclusive distribution rights in Québec Attractive performance incentive mechanism generous upside potential and limited downside risk No exposure to: commodity price, temperature, interest rates, transportation and storage costs Market risk mitigated by: natural gas attributes, high conversion costs, need for natural gas in certain industrial processes, take-or-pay contracts with large industrial customers 13 #2: Very High Stability in Cash Distributions Increase in quarterly income distributions from $0.32 to $0.34 per unit starting January 1st, 2003. On an annual basis, the income distributions should reach $1.36, which represents an increase of $0.08 per unit, or 6.3%. $1.40 $1.36* $1.30 $1.25 $1.25 1999 $1.28 $1.28 $1.27 $1.24 2000 2001 2002 2003 Income per unit Distribution per unit * Annualized distribution. 14 #3: Attractive Distribution Yield GazMet offers an attractive distribution yield considering it keeps its free cash flow ($100 M per year) to support its business growth. Current Yield = 7.1% Assuming additional distribution of $100 M of free CF Assuming additional distribution of $100 M of free CF and $30 M in asset depletion Yield = 11.9% Yield = 13.3% ($1.36/$19.05) 15 #4: Long-Term Sustainable Growth In a bull or bear market, GazMet units create value Annualized total return (Feb. 1993 to Dec. 2002) 15.1% 9.2% 8.8% 6.6% GazMet Source: Bloomberg. S&P 500 S&P/TSX TSE Gas & Electric 16 #5: High Quality Credit Ratings GazMet benefits from high quality credit ratings maintained over the years. Long-term debt Commercial paper A A-1 (low) A R-1 (low) 17 #6: Modern and Reliable System GazMet system: One of the most modern of its kind in North America High quality (no more cast-iron pipes) Safe and reliable 18 Things to Remember Things to Remember... Strong and stable business Very high stability in cash distributions Long -term sustainable growth Long-term Low risk / low maintenance investment 20 WHY EVERYBODY SHOULD HOLD GAZ MÉTROPOLITAIN UNITS RBC Capital Markets Fifth Annual Income Trust Investor Symposium Toronto, January 28, 2003