Genesis Energy Limited · NZX:GNE
Genesis Energy — Investor Day (November 2023)
58 slides from Genesis Energy's investor day presentation, Nov 30, 2023
Slide 1: Investor Day 2023: Gen35
Investor Day 2023: Gen35 30 NOVEMBER
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Genesis Energy Limited Forward-looking statements in this presentation are not to NZX for the purpose of that information being made available to (“Genesis Energy”) for information purposes only. This disclaimer guarantees or predictions of future pe
Slide 3: Welcome
Welcome Time Mins Section Presenter 9:55 – 10:00 5 Opening Karakia Te Awha Leevey 10:00 – 10:30 30 Gen35 Overview Malcolm Johns Chief Executive 10:30 – 11:10 40 Energy Transition Valuation Rob Koh Equity Research Analyst (Morgan Stanley) 11:10 – 11:25 15 Coffee break 11:25 – 12:55 90 Deep Dive Break
Slide 4: Introducing our new leadership team
Introducing our new leadership team Malcolm Johns Chief Executive BMS Joined as Chief Executive in March 2023. Previously Chief Executive of Christchurch Airport. Has held governance roles in transport, infrastructure and tourism. Edward Hyde Tracey Hickman James Spence Chief Transformation Chief Wh
Slide 5: Gen35 Overview
Gen35 Overview Moving strategic value to financial value through electrification, flexibility, and renewables
Slide 6: Net-zero will shape the energy sector's future
Net-zero will shape the energy sector’s future The electricity sector will decarbonise, grow and become more critical - the transition may be lumpy Electrification creates demand growth, Generation flexibility is the key to Investment in renewables is customer relationships and contracts meet custom
Slide 7: Genesis' capabilities and assets give it a unique role to play
Genesis’ capabilities and assets give it a unique role to play ELECTRIFICATION FLEXIBILITY RENEWABLES OUR STRENGTHS Retail business Flexible assets Renewables growth 490k customers Diversity of generation, Solar JV progressing options and (140k dual fuel customers) fuels and markets relationships to
Slide 8: Market solutions – or – regulatory/policy intervention
Market solutions – or – regulatory/policy intervention The former government felt compelled to solve dry-year risk challenge, but Onslow was an expensive solution Huntly is an existing portfolio that can provide peaking and firming across hours, weeks, seasons or in natural disasters. Energy Securit
Slide 9: Thriving in the long term, means planning for net-zero
Thriving in the long term, means planning for net-zero Genesis to align to Science Based Targets Initiative – net-zero by 2040 SCOPE 1 - GENERATION INTENSITY FORECAST SCOPE 3 EMISSIONS - RETAIL GAS, WHOLESALE GAS, KUPE GAS FORECASTS (PJ) (tCO2/MWh) LPG - FORECASTS (tCO2) 30 0.6 1,500,000 25 0.5 20 0
Slide 10: Gen35: Powering a Sustainable & Thriving Aotearoa
Gen35 Powering a Sustainable & Thriving Aotearoa Our Purpose: People Our Manaaki to customers, & Profit How we invest in the future and & Planet communitttees and team reward our shareholders Being great Kaitiaki, for us and those after us Our Impact: Electrification Flexibility Renewables Our Missi
Slide 11: Planning for three horizons of transition
Planning for three horizons of transition To succeed long-term, near-term focus is on getting future-fit Horizon 1 Horizon 2 Horizon 3 FY24 FY25-28 FY29-35 ‘Getting Future Fit’, ‘Accelerated Transitions’, ‘The Future State’, focused on sweeping our focused on Customer, moving past the transition own
Slide 12: Upstream production revenues dedicated to renewable investment
Upstream production revenues dedicated to renewable investment Renewables investment (TWh) Genesis share of Kupe gas as Gross dividend yield comparisons generation through Unit 5 (TWh p.a.) at 27 November 2023 2.0 2 10% 1.5 1.5 1.0 1 5% 0.5 0.5 0.0 0 0% 2024 2025 2026 2027 2028 2029 2030 2024 2025 2
Slide 13: Genesis is changing as an investment
Genesis is changing as an investment From… To… Limited growth outlook Growth opportunities and high dividend pay out with reliable dividend returns Huntly reliant on fossil fuels, Transition to biomass and battery, used for dry period firming used for firming solar, wind, and hydro 95% renewables by
Slide 14: Championing electric lifestyles
Championing electric lifestyles Moving strategic value to financial value through electrification STEPHEN ENGLAND-HALL CHIEF RETAIL OFFICER © GENESIS ENERGY INVESTOR DAY NOVEMBER 2023
Slide 15: Our brands are strong and well placed to champion electric lives
Our brands are Our brand image amongst residential customers strong and well First to market with placed to champion new technology electric lives for all Recognise and Value their customers and put them first our customers. Most Considered reward their customers Energy Brand in NZ 490k customers Is
Slide 16: Championing 500k electric lives
Championing 500k electric lives Building our customer relationship to be the trusted partner through the transition WHERE Home Business WE PLAY Residential Business, Commercial & Industrial GROW CREATE EXPAND CORE VALUE TRANSITION RELATIONSHIP VALUE VALUE HOW WE Increasing our margin Helping our cus
Slide 17: Getting more value from our electric core
Getting more value from our electric core STRONG EFFICIENT BALANCE + + BRANDS CORE DEMAND • Use our strong brand equity to win • Streamlining our operations • Targeting customers with preference & trust • Optimise our core through the right demand profile • Grow share of margin and maintain digitisa
Slide 18: An efficient Retail business that's Future Fit
An efficient Retail business that’s Future Fit Our initial focus is to simplify our retail business To deliver a step-change in Retail OPEX1 We are Retail & Technology OPEX1 FY24 – FY28 1. Focus on fewer, more 180 170 153 impactful things 160 23 14 2 pulling 140 24 120 (32) 61 100 56 LPG $m three 80
Slide 19: Maximising value through the transition
Maximising value through the transition Gas/LPG will continue to provide value for Genesis, now and into the future Churn is 8 ppts lower Average annual energy consumption We are the largest is 61% higher in dual fuel customers in dual fuel customers residential gas retailer in New Zealand Annualise
Slide 20: Leveraging our Gas/LPG portfolio to transition to electric future
Leveraging our Gas/LPG portfolio to transition to electric future Our Gas/LPG customers provide a direct avenue for electrification & decarbonisation The greatest reduction of emissions for the average NZ consumer is to electrify emission-intensive assets An example: Electrifying gas heating and hot
Slide 21: EV's are a big growth area
EV’s are a big growth area Unlocking value and sharing it with our customers Total Customers on EV Customer Profiles (comparing EV consumption profiles) Energy EV Plan Our FY24 goal is 1 Non-EV 8,000 to double our Energy EV Plan 0.8 customers on an EV Sync Consumption (KWh) Energy EV Plan 0.6 6,000
Slide 22: What we're changing
What we’re changing From… To… Total Retail and Technology Total Retail and Technology operating expenditure1 $170m operating expenditure1 $153m by FY28 Brand preference Brand equity ICP growth orientated Margin growth orientated EV growth and EV growth 100 MW of assets with demand flexibility Dual f
Slide 23: Huntly Portfolio
Huntly Portfolio Moving strategic value to financial value through flexibility TRACEY HICKMAN CHIEF WHOLESALE OFFICER 23. 29 NOVEMBER 2023
Slide 24: Huntly Investor Day: link to video
Huntly Investor Day: link to video © GENESIS ENERGY INVESTOR DAY NOVEMBER 2023
Slide 25: Decarbonisation increases volatility and dependence
Decarbonisation increases volatility and dependence Hours The increasing need for flexibility will create value in the provision of firming and peaking products Weeks Risk Years • Growth of intermittent renewables increases market volatility management • Peak capacity issues remain a challenge • Lac
Slide 26: Genesis provides flexibility for NZ, delivering value today
Genesis provides flexibility for NZ, delivering value today Using flexible plant and fuel to respond to hydrology/wind and price volatility • Huntly flexibility enables responsiveness to changing market 40% GENERATION VARIANCE VS AVERAGE conditions, and benefits from both wet and dry periods 30% Gen
Slide 27: Huntly Portfolio can deliver future flexibility needs
Huntly Portfolio can deliver future flexibility needs Genesis will invest in more flexible plant and fuels and provide peaking and firming products Current Timeframe Horizon 1 and 2 Horizon 3 State Minutes / HLY U5 / Additional Battery(s) batteries HOURS U6 Thermal Capacity plant constraints improve
Slide 28: Huntly is the natural home for grid scale batteries
Huntly is the natural home for grid scale batteries Hours Flexibility across minutes and hours Weeks Years • Physical space at Huntly site now for up to 400 MW / 800 MWh; more land available in time • 250 MW connection capacity from retired Disruptions Rankine • Broad portfolio value - price arbitra
Slide 29: Gas flexibility is valuable in the transition
Gas flexibility is valuable in the transition Hours A sector issue that has yet to be unlocked Weeks Years GAS SUPPLY FLEXIBILITY Disruptions • Supply for electricity • Supply side generation expected to reduce to mid-2030s • KS9 drilling: first gas + (e.g., contractual flexibility) • Demand side ex
Slide 30: Biomass through Rankines - a low carbon dry year solution
Biomass through Rankines - a low carbon dry year solution Hours Flexibility across months and years Weeks BIOMASS EXPECTED TO BE COMPETITIVE WITH COAL $400 Generation Cost $/MWh • Genesis will displace coal use as soon as practical $300 Years • Huntly remains the most economic option for dry Costs b
Slide 31: What we're changing
What we’re changing From… To… Coal generation supporting dry years Low carbon flexibility across all timeframes Uncertainty about the future of Huntly Huntly Portfolio Operational constraints A truly flexible generation portfolio Value seen in dry and wet periods Diversified fuel and plant maximises
Slide 32: Renewables growth
Renewables growth Moving strategic value to financial value through renewables CRAIG BROWN GENERAL MANAGER COMMERCIAL DEVELOPMENT © GENESIS ENERGY INVESTOR DAY NOVEMBER 2023
Slide 33: New generation needed for growth and to offset thermal decline
New generation needed for growth and to offset thermal decline Significant portfolio growth proposed beyond future-gen targets New renewables targets (GWh) Indicative portfolio change (GWh) 6000 c. 95% 5500 Renewable 9000 400 c. 80% Renewable 4000 6000 1500 5500 2650 2650 3000 2650 2000 3000 450 280
Slide 34: Global context for renewable energy
Global context for renewable energy • Increasing demand from electrification and ambitious renewable energy targets across the globe • Significant continued investment in renewables across Europe, North America, Asia Pacific • Challenges to global supply chain in recent years impacting project costs
Slide 35: Genesis approach to renewable growth
Genesis approach to renewable growth Leveraging our strengths to access development pipeline and deliver quality projects at pace • Prioritising solar pipeline delivery due to speed to market and cost to develop • Building wind development pipeline for delivery to market in late 2020s • Actively mon
Slide 36: New Zealand's renewable energy pipeline
New Zealand’s renewable energy pipeline Genesis uniquely placed to access pipeline as an off-taker, co-developer and developer Pipeline estimated generation by stage (TWh) 16 40 TWh of sector pipeline, is enough to double New Zealand’s 14 electricity grid and double what is estimated to be required
Slide 37: NZ context and cost to build
NZ context and cost to build Irradiation / resource Proximity to strong transmission / cost to connect Wind • While wind has historically been the lowest cost Suitability variable renewable energy source, it is currently high of land (size and LCOE type) and cost to • Significant lead time in develo
Slide 38: SolarGen Joint Venture and Genesis local position
SolarGen Joint Venture and Genesis local position • FRV Australia is one of the largest solar developers, asset owners and renewable energy platforms in Australia • Was one of the first developers to enter the Australian market with over 800 MW of solar developed • The JV was established to jointly
Slide 39: Lauriston solar project positioning for solar leadership
Lauriston solar project positioning for solar leadership • Target Final Investment Decision: H1 FY24 • Target Commercial Operations Date: H1 FY25 • Size: ~ 60 MW, 90 GWh annually (up from 50 MW / 80 GWh) • Location: Canterbury • Site size: 90 ha • Strong first project with highly experienced deliver
Slide 40: What we're changing
What we’re changing From… To… Renewable growth with market and transition portfolio Displace thermal over time (95% renewable by 2035) Multiple development pathways across timeframes PPAs and deployment of capital above WACC Resourced to displace Resourced to grow Long term focus Short to medium ter
Slide 41: Setting up for success
Setting up for success Business simplification and technology EDWARD HYDE CHIEF TRANSFORMATION AND TECHNOLOGY OFFICER © GENESIS ENERGY INVESTOR DAY NOVEMBER 2023
Slide 42: A transformation towards a focused and simplified business
A transformation towards a focused and simplified business Activity focused on developing capabilities needed to deliver on the strategy and long-term goals ELECTRIFICATION Platform • Digitise core services to drive efficiency • A simpler, faster and cheaper landscape • Ability to leverage world cla
Slide 43: A more focused and efficient technology programme
A more focused and efficient technology programme Opex forecast – Technology ($m) Peak in Digital projects spend due to billing/CRM implementation costs and investment in tech systems Review of Technology budgets for FY24 and FY25 with a focus on executing a smaller number of activities more effecti
Slide 44: Market-leading capability to enable the Retail strategy
Market-leading capability to enable the Retail strategy Creating a simpler, smarter and faster customer business DESIGN DELIVERY Retail strategy enablement • Continued focus on simplification, automation and digitisation Billing, Customer • Support reduction of c. 200 roles across FY24/25 • Total Re
Slide 45: Technology helping drive a future fit Genesis
Technology helping drive a future fit Genesis First stage focusing on streamlining around core - Less OPEX more impactful Platform Delivery Data Enabling the reduction of around Rationalisation of projects: Improve gross margin per customer 200 retail orientated roles focus on smaller number of thro
Slide 46: What we're changing
What we’re changing From… To… The role of technology not clearly defined Technology playing a key enablement role for Gen35 A large program managing numerous inter-dependencies To a streamlined and focused technology operation Rubiks transformation program A tightly defined Billing / CRM re-platform
Slide 47: Financial planning
Financial planning JAMES SPENCE CHIEF FINANCIAL OFFICER © GENESIS ENERGY INVESTOR DAY NOVEMBER 2023
Slide 48: EBITDAF growth to mid-high $500m's in Horizon 2 (base case)
EBITDAF growth to mid-high $500m’s in Horizon 2 (base case) FY25 EBITDAF around Gen35 base case EBITDAF mid-high $500m’s $500m (base case) Existing portfolio EBITDAF mid-high $400m’s FY24 EBITDAF guidance around $430m FY25-FY28 EBITDAF outlook only Central long-term wholesale price planning assumpti
Slide 49: Gross margin growth from FY24 – FY28
Gross margin growth Kupe Gross Margin ($m) Reduced production from decreasing gas reserves. from FY24 – FY28 100 80 82 Despite falling wholesale price and 60 reducing gas and LPG volumes 40 20 0 2024 FY24 2028 FY28 • Grid scale battery (FY26) • Tauhara geothermal PPA, Lauriston solar PPA + new solar
Slide 50: Opex controlled in inflationary environment
Opex controlled in inflationary environment Peak in Digital projects spend due to Opex forecast over time by segment ($m) billing/CRM implementation costs FY24 vs FY28 Forecast Opex movements ($m) and investment in tech systems 393 381 381 360 361 39 381 30 36 12 10 Increasing 29 361 61 60 55 55 56
Slide 51: A long-term programme of investment planned
A long-term programme of investment planned • New renewable investment programme Total Capex and investment in associates ($m) of $1.1 billion (indicative) through to $400 2030 including: Grid Scale • Solar through FRV JV $350 Battery • Grid Scale Batteries Kupe • Owned new renewables $300 KS-9 $250
Slide 52: Kupe is a valuable asset providing gas + cash flows to finance Genesis' transition
Kupe is a valuable asset providing gas + cash flows to finance Genesis' transition 46% Kupe Joint Venture (EBITDAF and post-tax cash flows - nominal) $120 25 • From FY25 the Offtaker (Genesis) pays for gas Gas Production Profile - 100% of field (PJ) Source: MBIE 'Petroleum Reserves' 2023 • Field dec
Slide 53: Our NZU investments manage ETS risk and offer long term value potential
Our NZU investments manage ETS risk and offer long term value potential • Genesis remains well hedged to ETS price risk as the Units from Carbon Forestry portfolio decarbonises to net-zero 2040. Genesis targets for Net • ETS obligations are met through purchase of carbon units 400,000 Zero emissions
Slide 54: Flexible approach to funding underpins ability to grow
Flexible approach to funding underpins ability to grow Debt/EBITDAF Trend • Our approach to funding growth is flexible including: We will build Balance Sheet Balance Sheet is resilient during 3.5 resilience during FY25 to FY27 Gen35 investment phase • Power purchase agreements (PPA) 3.0 • Strategic
Slide 55: Dividend reset to fund growth
Dividend reset to fund growth Credit metrics not resilient to stress scenarios with Gen35 investment programme at current dividend levels • Updated dividend policy; 14 cps in FY24 with aim to maintain in real terms and grow when appropriate • Funding Growth - greater level of Free Cash Flow (FCF) to
Slide 56: FY28 Scorecard
FY28 Scorecard * to be reported each half year Goal Target FY28 Goal Status * Grow EBITDAF Group EBITDAF ~ $550 million Profitability Debt/EBITDAF Ratio less than or equal to 2.5 Operating Expenditure Operating Expenditure ~ $361 million. Retail and Brand preference Number 1 brand equity in energy m
Slide 57: Compelling investor rationale
Compelling investor rationale From… To… Limited growth outlook Earnings growth and strong yield and high dividend pay out ESG discount applied by investors Leading the decarbonisation journey Expanding OPEX and tech project delays OPEX reduction, clear pathway on tech projects Low capital deployment
Slide 58: Thanks!
genesis Thanks!