Contact Energy Limited · NZX:CEN
Contact Energy — Non-Deal Roadshow (June 2022)
42 slides from Contact Energy's roadshow presentation, Jun 21, 2022
Slide 1: International Roadshow
International Roadshow For personal use only Europe, London / June 2022 We’re ready to drive New Zealand’s decarbonisation: 1
Slide 2: Disclaimer and important information
Disclaimer and important information For personal use only While all reasonable care has been taken in compiling this presentation, EBITDAF, free cash flow and operating free cash flow are financial measures that are “non-GAAP (generally neither Contact nor any of its directors, employees, sharehold
Slide 3: Presenters
Presenters For personal use only Mike Fuge Chief Executive Officer Mike Fuge was appointed CEO in September 2019 and joined Contact in February 2020. Mike was previously the chief executive of Refining New Zealand and has a long history in the energy sector, both in New Zealand and internationally.
Slide 4: Why invest in Contact?
Why invest in Contact? The investment opportunity in our core market is large and in line with our unique capability which will deliver cash For personal use only flow growth ultimately flowing through to dividends. <IR> ESG CREDENTIALS Strong balance sheet to support growth with clear Shares offer
Slide 5: Agenda
Agenda For personal use only 1 Introduction: New Zealand electricity market 6-7 Market fundamentals 8 - 17 2 Contact’s business and value drivers 18 - 26 1/Distinctive capabilities 27 - 30 2/Development pipeline 31 - 34 3/Leading New Zealand’s thermal generation 35 - 38 transition 5
Slide 6: New Zealand electricity market
For personal use only New Zealand electricity market 6
Slide 7: New Zealand enjoys a reliable, affordable and environmentally sustainable electricity system
New Zealand enjoys a reliable, affordable and environmentally sustainable electricity system For personal use only Competitive Regulated monopolies Competitive Spot 4 electricity pool 1 29 8 2.2 Major generators National Distribution Retailers Million consumers transmission businesses over 50k conne
Slide 8: Market fundamentals: Price setting
Market fundamentals: For personal use only Price setting 8 8
Slide 9: Supply fundamentals
Supply fundamentals For personal use only Hydro schemes are mostly run-of-river, with flows into key catchments weighted to summer, while demand is winter biased. Clutha Waitaki Manapouri Taupo Average annual generation of 3,900 GWh Average annual generation of 7,000 GWh Average annual generation of
Slide 10: Supply fundamentals
Supply fundamentals For personal use only Thermal generation costs sets the opportunity cost of storable renewables National annual supply (TWh) 43.0 Flexible thermal 7.3 production is required 1.8 2.0 Major thermal Sources 5TWh generators of flexibility per annum Contact: “Dry year”: gas and diesel
Slide 11: Fuel supply and pricing impacts
Fuel supply and pricing impacts For personal use only Longer-term the market is reacting to these price signals and adding new capacity Aluminium prices higher Wholesale and futures electricity pricing ($/MWh) Short-term external factors that (+$1,183/t, up 35%). can influence the market Changes as
Slide 12: Market fundamentals: demand outlook
Market fundamentals: demand outlook For personal use only 12 12
Slide 13: Carbon reduction opportunity
Carbon reduction opportunity For personal use only With high renewable penetration, electricity is the solution to reducing carbon emissions, not the problem. Greenhouse gas emissions by sector Paris agreement target, Mt CO2e Our future energy profile 52 Renewable Total 2 electricity as % of electri
Slide 14: Climate change and regulation
Climate change and regulation For personal use only Bi-partisan support for the New Zealand regulatory framework is being adapted to deliver on this societal imperative. Potential electricity demand impact Potential renewable generation impact Potential wider electricity sector impact Net zero New F
Slide 15: Government support for decarbonisation
Government support for decarbonisation For personal use only The Government has recently released its first Emissions Reduction Plan An economy wide plan to meet New Zealand’s net zero emissions target by 2050. It includes specific actions government will undertake, as well as policies and strategie
Slide 16: New Zealand in the early stages of decades-long transformation to renewable electricity
New Zealand in the early stages of decades-long transformation from reliance on fossil fuels to renewable electricity For personal use only Key drivers of decarbonisation The Climate Change Commission expects electricity demand Key drivers to grow to meet climate targets Electricity demand, TWh1 Inc
Slide 17: Electrification needs will require renewable energy sources as demand increases
Electrification needs will require renewable energy sources as demand increases For personal use only 107 Additional demand expected beyond electrification Electricity demand (TWh) 17 The aspiration to replace thermal Hydrogen New data centre build 8 75 generation with Several credible data centre o
Slide 18: Contact's business and value drivers
Contact’s business For personal use only and value drivers 18
Slide 19: Our assets
Our assets For personal use only 2017 - 2021 generation by station and type (five-year average) Where we are 8.6TWh Tauhara (168MW) 1,400 Under construction Expected online second half 2023 Average 3,774GWh generated Roxburgh (320 MW) 1,669 3,252GWh Te Huka (28 MW) 185 Ohaaki (44 MW) 313 Poihipi (55
Slide 20: How we add value
How we add value For personal use only 576k We generate We trade We innovate We sell and serve Hydro total customer connections Clyde Roxburgh Connections by energy type (k) May-22 417 416 436 Jun-21 Jun-20 Geothermal Te mihi Wairākei 71 69 65 65 51 26 Tauhara (under construction) Electricity Natura
Slide 21: How we manage risk
How we manage risk A range of flexible fuels and “virtual generators” allows for effective risk management and fuel substitution For personal use only opportunities in a market with significant daily, seasonal and annual variations in supply and demand. National demand and supply fluctuation Contact
Slide 22: Flexible portfolio and electricity sales
Flexible portfolio 1 Electricity sales Operating earnings (EBITDAF) Annual sensitivities For personal use only (i) Long-term channels Continuing operations ($m) Price 103 103 105 111 553 ($/MWh) 1 Electricity revenue: Electricity sales (net of network, 505 4.6 4.6 4.6 4.3 meters costs) for all sales
Slide 23: Our strategy to lead NZ's decarbonisation
Our strategy to lead NZ’s decarbonisation For personal use only Strategic theme Grow Grow renewable Decarbonise Create outstanding demand development our portfolio customer experiences Create New Zealand's leading Attract new industrial Build renewable generation Lead an orderly transition sustainab
Slide 24: We set ambitious measures of success across our strategic themes
We set ambitious measures of success across our strategic themes in May 2021 For personal use only Grow Grow renewable Decarbonise Create outstanding demand development our portfolio customer experiences Create New Zealand's leading Attract new industrial demand Build renewable generation Lead an or
Slide 25: We are best positioned to enable New Zealand's decarbonisation
We are best positioned to enable New Zealand’s decarbonisation For personal use only 2/ New Zealand’s best renewable development pipeline 1/ Distinctive capabilities 3/ Leading New Zealand's thermal Deep understanding of energy applications generation transition Geothermal +2.9TWh Wind 600MW Solar t
Slide 26: 1/ Distinctive capabilities
For personal use only 1/ Distinctive capabilities 26
Slide 27: Contact is a globally significant geothermal operator
Contact is a globally significant geothermal operator For personal use only With executable development options Global geothermal power generation 15,608MW New Zealand's geothermal capacity 44% Top 5 global producers Contact share 44% Mercury Energy Operational 467 431 129 1,027 Contact Energy 3,714
Slide 28: A world class suite of capabilities in geothermal engineering, development and operations
Contact has a world class suite of capabilities in Geothermal Engineering, Development and Operations For personal use only Exploration Development Operations Preliminary Resource Field Plant Exploration Test drilling Operations & maintenance (O&M) survey assessment development construction Underlyi
Slide 29: World-class geothermal resources
World-class geothermal resources For personal use only Contact's costs to deliver geothermal power stations are at the low end of global benchmarks Contact vs. Global geothermal benchmarks Novel techniques to reduce operating and capital costs Contact / Western Energy specific cost savings, $m NZD G
Slide 30: Strategic acquisitions and partnerships to build capability
Strategic acquisitions and partnerships to build capability For personal use only Wind: Roaring40s adds wind development capability Solar: Lightsource BP partnership adds solar development capability Immediate wind development Capability and resourcing to accelerate Contact’s position in grid-scale
Slide 31: 2/ New Zealand's best renewable development pipeline
For personal use only 2/ New Zealand’s best renewable development pipeline 31
Slide 32: Investing to deliver renewable energy
Investing to deliver renewable energy For personal use only Tauhara development key metrics Estimated MW (net export to grid) 168MW Estimated forward capital expenditure (cash)¹ ~$390m Estimated plant capacity factor/ annual generation 95% / ~1,400GWh Low carbon resource* 0.05T of C02e/MWh Total est
Slide 33: Market leading development pipeline
Market leading development pipeline For personal use only To meet expected market demand Geothermal generation potential (TWh p.a.) Potential geothermal development projects 0.2 Current capacity 2.8 3.3 0.3 Tauhara Tauhara 1.4 (168MW) (under construction) Te Huka GeoFutures Tauhara investment (50MW)
Slide 34: Market leading development pipeline
Market leading development pipeline For personal use only To meet expected market demand Land access agreements In the process signed for 600MW, of assessing 425MW Pursuing locations targeting at least Data collection of solar options across New 1000MW potential. underway Zealand Today 2026 Exclusiv
Slide 35: 3/ Leading New Zealand's thermal generation transition
For personal use only 3/ Leading New Zealand's thermal generation transition 35
Slide 36: Decarbonising our portfolio: Leading an orderly transition to renewables
Decarbonising our portfolio: Leading an orderly transition to renewables For personal use only 2021 Thermal review announced Key outcomes of the pillar: • Act on our commitment to ESG, contributing to better outcomes for our communities and the environment ThermalCo discussion paper released 2022 •
Slide 37: Financial strategy
Financial strategy For personal use only Our strategy grows shareholder value by generating cash flows from strategic investments, backed by new demand. Grow our business Generate returns on our capital investments Fiscal discipline to maximise returns Build a pipeline of demand Strategic capital Ge
Slide 38: Appendix
For personal use only Appendix 38 38
Slide 39: Hydrogen - domestic market development
Hydrogen - domestic market development For personal use only Exporting could create immediate economies of scale that will accelerate domestic demand growth Key domestic hydrogen applications Domestic market potential (H2 ktpa) 40 New Zealand is a net importer of “grey” fertiliser. Lower South Islan
Slide 40: Geothermal projects locations
Geothermal projects locations For personal use only Tauhara 168 MW Completion H2 2023 GeoFutures Te Huka Unit 3 Up to 168 MW ~50 MW 40
Slide 41: Geothermal projects – GeoFutures
Geothermal projects – GeoFutures For personal use only Field in operation since 1958 With oldest WRK A&B station to be replace Estimated MW (net export to grid) 168MW Bringing field total ~400 MW` Estimated plant generation 1,400GWh (3.5% of New Zealand’s current generation) 41
Slide 42: Thank you
For personal use only Thank you 42