Meridian Energy Limited · NZX:MEL
Meridian Energy — Investor Day (November 2017)
107 slides from Meridian Energy's investor day presentation, November 2017
Slide 1: 2017 Investor Day
2017 INVESTOR DAY. MERIDIAN ENERGY LIMITED MANAGEMENT PRESENTATION
Slide 2: Welcome and Goodbye
WELCOME AND GOODBYE. MARK BINNS. Meridian Energy Limited Investor Day November 2017 2
Slide 3: Introduction
INTRODUCTION. NEAL BARCLAY. Meridian Energy Limited Investor Day November 2017 3
Slide 4: Today
Also attending Today. Neal Barclay Richard Griffiths Geoffry Sams CEO Designate Strategic Asset Transmission Our customers Manager Specialist Strategic asset Transmission Chris Moller Paul Chambers management Chair CFO Mike Roan Mat Bayliss Grant Telfar Wholesale Asset Maintenance Strategic Advisor Mar
Slide 5: Our Customers
OUR CUSTOMERS. NEAL BARCLAY. Meridian Energy Limited Investor Day November 2017 5
Slide 6: Value of our customers
Value of our customers. RETAIL SEGMENT PROFITABILITY Historical earnings growth • Source of earnings growth in the low $74M $75M $64M demand growth New Zealand market $39M $21M Vertical integration • Provides wholesale market hedge against 2013 2014 2015 2016 2017 Financial Year ended 30 June spot m
Slide 7: Value of our customers
Value of our customers. Sources of shareholder value Strong Customer free cash growth in flow NZ Capital Low Long term Customer manage- capital sustainable platform ment needs business review High Potential Income Growth High free Powershop Medium Progressive franchise ordinary DPS cash flow term new
Slide 8: Customer brand strength
Customer brand strength. High level of awareness relative to market share, authentically sustainable Source: Evaluating Brand Performance December 2016 (Meridian – Clarity Insight) Meridian Energy Limited Investor Day November 2017 8
Slide 9: Customer growth
FY2017 NZ RETAIL SALES EXCL. TIWAI Customer growth. • High residential awareness, underweight Residential 24% residential position 35% Small/medium business • Additional load from back-to-back agreements Agricultural • Growth aspirations in all segments including 15% Corporate/large business commeri
Slide 10: Australian scale
Australian scale. AUSTRALIAN CUSTOMERS • Aspiration to significantly grow Australian 100,524 customer base 77,970 • Needs to be backed by more generation 48,208 • PPA process is well advanced 13,426 • Direct generation investment possible 2014 2015 2016 2017 under the right commerical terms Financial
Slide 11: Powershop UK
Powershop UK. • Powershop platform and brand franchised to nPower • 14,000 nPower ICP’s through energy only soft launch • Dual fuel functionality by January 2018 • White label offers launched • Customer uptake dependent on nPower’s sales and marketing • Exploring mainland Europe opportunities with nP
Slide 12: Our approach to innovation
Our approach to innovation. Systematic approach • Significant review and analysis of new technology and customer changes • Selective scope • Test and trial approach, quick start and stop (if needed), low investment • Global insights from three ‘natural labs’ Meridian Energy Limited Investor Day Novem
Slide 13: Innovation in NZ
Innovation in NZ. • Separate software development business with international focus • Significant Meridian digital investment creating a quality customer experience • Powershop is a true native digital business, well placed for transformation • SmartHome and Smart Tariffs recent examples to go to mark
Slide 14: Innovation in Australia
Innovation in Australia. A more disruptive market than New Zealand • Powershop is well positioned • Powershop helping customer participation in neighbourhood generation and community energy projects • Both through tariff redistribution • And initiatives incentivising customers to reduce consumption M
Slide 15: The political scene (New Zealand)
The political scene. New Zealand AVERAGE RESIDENTIAL ELECTRICITY COST c/kWh • Positive on the new Government’s proposals, plenty of detail to engage on • Conversion of the Government car fleet to 28.6 28.1 28.8 27.8 electric by 2025/26 will strengthen EV takeup 26.9 • Meridian is highly supportive of
Slide 16: The political scene (Australia)
The political scene. Australia • Market is slow to commit to new renewables due to the lack of coherent energy policy • Electricity is highly politicised, with significant potential developments in the near term: • VIC Government reponse to Thwaites Review on re-regulation • COAG Energy Council meeti
Slide 17: Summary
Summary. • Greater focus on our customers • To realise potential growth in multiple countries • With continued discipline on cost management and customer innovation • While protecting shareholder value in our core business • Enduring commitment to sustainability, staff wellbeing, process safety and c
Slide 18: NZ Wholesale Markets
NZ WHOLESALE MARKETS. MIKE ROAN. Meridian Energy Limited Investor Day November 2017 18
Slide 19: Overview
Overview. • “New Zealand is a world leading example of a well functioning electricity market…” 2017 NZ Energy Policy Review – International Energy Agency • “….strong improvement across the three key outcomes of competition, reliability and efficiency…” 2017 Electricity Authority Annual Report Meridian
Slide 20: Key market reforms
Key market reforms. 2008 ‘dry year’ and subsequent Ministerial Review ASX Commences – April 2011 • Liquidity ASX – standardised forward market Pole 3 Commissioned – May 2013 Pole 3 – improved market flexibility & risk management • NZ-wide competition emerges Financial Transmission Rights (FTRs) FTRs
Slide 21: ASX forward market
ASX forward market. The forward market is very effective • Liquidity exceeds initial targets • Monthly products provide ability to hedge $#!"& "#!"' %'! seasonal shapes (and enhance liquidity) "#! "!! • Meridian has sold over 100MW on ASX in (! various quarters &! $! • Others use this market to hedge
Slide 22: Over the Counter (OTC) market
Over the Counter (OTC) market. OTC market emerged following ASX "& • Used for short term hedging '! • Brokered and bilateral (direct) %! • Products are typically bespoke $! • Large hedging transactions (i.e. 10MW +) #! ! • Unit outage hedges "& "& "& "& "& "& #! • Shaped retail hedges $! • Specific r
Slide 23: Financial Transmission Rights (FTRs)
Financial Transmission Rights (FTRs). • Instrument that manages price risk between nodes • Meridian is one of the largest participants • Should not be a surprise with our South Island hydro generation and distributed ■ Contact customer base ■ OMF ■ Other • FTRs are effective baseload products ■ Merid
Slide 24: 20 years of spot market trading
20 years of spot market trading. • Spot market prices provide an index for most contracts • Efficiency and reliability of these prices builds support for contracting • Enabling changes to offers/bids as close to real time as possible improves price formation • Spot market is the central market • Spot m
Slide 25: Summary
Summary. • Wholesale markets are competitive and effective • The addition of ASX, OTC and FTR markets in particular drive greater competition • Meridian participates in all markets to manage its portfolio • The Electricity Authority is acknowledged internationally as an effective market operator Image
Slide 26: Managing Our Portfolio
MANAGING OUR PORTFOLIO. GUY WAIPARA. Meridian Energy Limited Investor Day November 2017 26
Slide 27: Overview
Overview. Generation and sales portfolio • Bowtie framework • Modified to cover observed behaviour • Optimising real time hydro dispatch 2017 review • Statistics • Managing risk and storage Image: Lake Pūkaki and Genesis Energy’s Tekapo B station, June 2017 • “Hindcast” results • What did we learn? M
Slide 28: Bowties
Bowties. Whole of NZ construct • Demand (including demand response) • Supply (including plant reliability) • Hydrology • A simplified regional transmission system Our objective • To find the portfolio or contract position that delivers the maximum revenue, with the minimum distribution, across the hyd
Slide 29: Reflecting market behaviour
Reflecting market behaviour. Impact of contract positions • Observations are that parties’ behaviour is affected by their respective contract positions • Have developed our models to include the best information we have on our and others’ contract positions • Still includes an opportunity cost of wate
Slide 30: Next evolution
Next evolution. The bowtie neck has a reasonable range • So there are a number of “optimal” contract Maximise revenue positions • Doing more work to test what position(s) deliver improvements in mean revenues while Minimise risk minimising variability • Early results look like we have more capacity
Slide 31: Moving closer to real time
Moving closer to real time. How we adjust the portfolio to reflect near-term GENERATION AND CONTRACTED SALES GWH conditions • Even with what may look like a conservative portfolio, we can find ourselves long generation (first half of 2017) 7,029 6,285 6,435 or short generation (second half of 2017) 5,9
Slide 32: Within a week, up to real time
Within a week, up to real time. Hydro optimisation continues right up to real time • Waitaki is block dispatched • Optimising lake levels across the chain means you can get the best water to wire efficiency (remember Ep = mgh?) What we have achieved • Developed in-house tools to optimise hydro product
Slide 33: 2017 in Review
2017 IN REVIEW. Meridian Energy Limited Investor Day November 2017 33
Slide 34: 2017 key statistics
INFLOWS, GENERATION, STORAGE 1H FY17 (GWH) 2017 key statistics. 5,665 7,029 First half FY17 1,919 Inflows Physical generation Storage (period end) • Inflows 96% of average MERIDIAN'S WAITAKI STORAGE 1H FY17 (GWh) 3,000 • Generation 3% above FY16 2,000 1,000 • $44/MWh average generation price 0 Average
Slide 35: Managing risk
Managing risk. GENESIS SWAPTION VOLUMES Commercially Weekly energy (GWh) 30 • Called the Genesis Swaption between June and 25 20 August 2017 15 10 • Were able to delay calling this as we had better 5 0 offers available earlier on 19 Jun 17 26 Jun 17 03 Jul 17 10 Jul 17 17 Jul 17 24 Jul 17 31 Jul 17 0
Slide 36: Storage management
Theoretical storage energy balance Storage management. Even at the end of the dry period • Portfolio could still be covered with minimal risk of hitting the bottom of Pūkaki • At 21 July still 1ox more likely to spill (34 sequences) than to even use contingent storage (3 sequences) Source: Meridian
Slide 37: A "Hindcast" comparison
A “Hindcast” comparison. What is a Hindcast? • A comparison of what occurred with what perfect competition would have delivered Why is it important? • Provides an analytical framework to test whether the market has delivered an efficient outcome for consumers • Is a good proxy for a regulatory test an
Slide 38: Engaging with stakeholders
Engaging with stakeholders. Transpower • Engaged early to discuss hydrology, water values and plans • Considered a change to contingent storage – but decided to put off until a review was completed • Reviewing their security of supply policy Electricity Authority • Engaged early as above • Received s
Slide 39: What did we learn from this year?
What did we learn from this year? Market maturity • Continued to learn and evolve over dry year experiences “Assumptions are • The improved liquidity in the ASX and OTC markets helped manage risk the termites of Stakeholder engagement • No such thing as engaging too early. There is relationships.” •
Slide 40: Strategic Asset Management
STRATEGIC ASSET MANAGEMENT. RICHARD GRIFFITHS. Meridian Energy Limited Investor Day November 2017 40
Slide 41: Content
Image: Meridian’s Benmore power station Content. • Approach and philosophy • Our 20-year asset management plan • Expenditure forecasts • Major projects • Process safety • Benchmarking Image: Meridian’s Aviemore power station Meridian Energy Limited Investor Day November 2017 41
Slide 42: Asset management principles
Asset management principles. We are committed to: • Protecting the value of Meridian’s assets • Maintaining the safety, performance and capability of these assets over their projected economic life, and • Meeting our asset management obligations in a manner that is demonstrably world class Performan
Slide 43: Strategic asset management plan
Strategic asset management plan. Major turbine and generator works set the primary timing of the 20-year plan Meridian Energy Limited Investor Day November 2017 43
Slide 44: Strategic asset management plan
Strategic asset management plan. Long-term commitment to the Structural Safety Evaluation Programme Meridian Energy Limited Investor Day November 2017 44
Slide 45: Strategic asset management plan
Strategic asset management plan. Control systems, excitation & protection replacements are best fit Meridian Energy Limited Investor Day November 2017 45
Slide 46: Strategic asset management plan
Strategic asset management plan. Fit other projects in at optimum timing Meridian Energy Limited Investor Day November 2017 46
Slide 47: Strategic asset management plan
Strategic asset management plan. Waitaki Stage II, civil works, contingent works Meridian Energy Limited Investor Day November 2017 47
Slide 48: Strategic asset management plan: current plan
Strategic asset management plan. Current plan Meridian Energy Limited Investor Day November 2017 48
Slide 49: Hydro capital expenditure forecast
Hydro capital expenditure forecast. $M INDICATIVE HYDRO CAPITAL EXPENDITURE 50 40 30 20 10 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 Source: Meridian Excludes Stage II Waitaki generator refurbishment – a 10-year programme, as yet unconfirmed
Slide 50: Waitaki refurbishment
Waitaki refurbishment. Overview • Waitaki was first commissioned in 1935 and is the final power station on the Waitaki River • Reliability and performance is important for managing consent flows • Annually generates ~$30m in energy revenues Capital Deferral Enabling Works (complete) • Stator cleaning o
Slide 51: Waitaki refurbishment
Waitaki refurbishment. Dam Safety Upgrades (complete) • Repairs to left bank abutment • River bank erosion protection works • Piezometers upgraded • Uplift drainage upgraded and extended Dam Safety Upgrades (work in progress) • Inundation protection of the Hornell Gallery • Manifolding of the uplift
Slide 52: Manapōuri transformers
Manapōuri transformers. Overview • Manapōuri commissioned in 1967 • Underground power station • Generates ~$250m per annum Main Unit Transformers • T2, T3 and T4 were replaced in 2015 following failure of the oil coolers • T1, T5, T6, T7 currently being manufactured by Wilsons • All four will be del
Slide 53: Ōhau chain upgrade programme
Ōhau chain upgrade programme. Overview • Ōhau chain comprises Ōhau A, B & C • Controls flow from Lakes Pūkaki & Ōhau • Collectively generate ~$220m pa Programme • $48m business case approved in October 16 • Programme extends through to 2023 Image: Meridian’s Scope comprises: Ōhau A power station • Ōh
Slide 54: Process safety
Process safety. Overview • Meridian initiated a review of its process safety risks in 2014 • Lockheed Martin and Scottish Power were engaged in 2015 to facilitate risk bowtie workshops and undertake a gap analysis • Meridian established a programme to implement the recommendations • In 2016 a ramp-d
Slide 55: Process safety
Process safety. Key Workstreams: • Develop Risk Bowties for all sites and integrate into AMP • Undertake an Alarm Management and rationalisation programme • Undertake a Risk Management review • Review the Plant Change Control process • Process safety Training and Awareness programme • Review the man
Slide 56: Benchmarking results
Benchmarking results. International Benchmarking • Meridian compares very favourably against international peer group in respect to both Composite Service Level (function of Plant Availability and Forced Outage duration) and Unit Cost Of Production • Manapōuri is a leading performer in the large hyd
Slide 57: Operational Maintenance
OPERATIONAL MAINTENANCE. MAT BAYLISS. Meridian Energy Limited Investor Day November 2017 57
Slide 58: The Waitaki scheme
The Waitaki scheme. Some facts • Eight hydro stations in the Waitaki Scheme • Tekapo A and B are owned by Genesis Energy • The six hydro stations from Lake Pūkaki to Waitaki, owned by Meridian Meridian Energy Limited Investor Day November 2017 58
Slide 59: The Waitaki scheme
The Waitaki scheme. Meridian Energy Limited Investor Day November 2017 59
Slide 60: Hydroelectric power
Hydroelectric power. Meridian Energy Limited Investor Day November 2017 60
Slide 61: Hydro Asset Maintenance
Hydro Asset Maintenance. How we are organised • Engineers, trades staff, technicians, operators, maintenance planners • Dedicated maintenance teams for three asset portfolios • Ōhau Chain, Mid-Waitaki and Manapōuri • Including graduates and apprentices, 70 staff in three locations • Augmented by contr
Slide 62: Performance
Performance. Hydro plant performance measures • Availability (% of time) • Operational Unit Cost $/MWh • Forced Outage Factor (% of cap) • Forced Outage Count (# events) Maintenance process measures • Multiple live measures • Extensive use of maintenance management system (Maximo) • Targets reset an
Slide 63: Health and safety
Health and safety. Our Approach • Lead role in industry collaboration forums (StayLive, EEA etc) • Safety & Sustainability Board Committee • Dedicated H&S team reporting to MaP GM • Competent workforce, strong safety culture • Incident reporting and investigation • Safety performance of contractors
Slide 64: Community
Community. Our Community Engagement Strategy • Significant footprint in multiple small rural communities • Goodwill important when operating large assets, lakes and rivers • Multiple engagement mechanisms & channels • Power Up – Meridian community fund • Community sponsorships • Staff involvement • Co
Slide 65: Twizel
Twizel. History • Built in 1968 as a temporary service town • Saved from demolition in 1983 • Today is the largest town in the MacKenzie Meridian Source: Electricity Authority • Large employer in the area, now including a retail call centre • Direct contributor to the community Image: Twizel, late 1
Slide 66: Managing Transmission
MANAGING TRANSMISSION. GEOFFRY SAMS AND JON SPILLER. Meridian Energy Limited Investor Day November 2017 66
Slide 67: Getting energy to customers
Getting energy to customers. Meridian’s power stations • 2,762MW installed capacity • 32% of New Zealand’s generation • 89% located in South Canterbury and Southland Meridian’s customer base • 280,000 customers all across New Zealand • Connected through 29 lines networks • Geographically distant fro
Slide 68: Transmission backbone
Transmission backbone. The transmission system is robust • Transpower backbone consists of high voltage (220-110kV) AC transmission lines • North and South Islands connected via 350kV HVDC link between Haywards in Wellington and Benmore in South Canterbury • Transpower’s investments in the following
Slide 69: HVDC Pole 3
HVDC Pole 3. 1400 HVDC transfer capability (2011 - 2017) Pole 3, Control upgrade, 1200MW 1200 Pole 2, 700MW 1000MW Overload 1000 Transfer [MW] capacity Investment in the HVDC link has greatly improved 800 Meridian’s generation flexibility 600 Usable capacity • Following the decommissioning of Pole 1
Slide 70: Constraint management
Constraint management. Meridian has a number of tools and processes to manage transmission constraints • Simulations from power system modelling • Historical event analysis • Knowledge capture of constraints and outages Power System We also manage exposure through a number of Modelling Software mark
Slide 71: Catalyst for transmission investment
Catalyst for transmission investment. Two primary drivers • Meridian perceives the biggest possible catalysts of change to the transmission system as: • Potential Tiwai Point smelter shutdown • Potential Huntly Rankine unit retirement Image: NZAS aluminium smelter at Tiwai Point • Both these scenari
Slide 72: Potential Tiwai Point smelter shutdown
Potential Tiwai Point smelter shutdown. Three significant restrictions • If an exit of the Tiwai Point smelter occurs, a number of transmission constraints have been identified by Transpower that would impede energy transfer across the transmission system: • 1. Southland export constraint • 2. HVDC no
Slide 73: 1. Southland export constraint
1. Southland export constraint. Source: Transpower’s 2016 SSF Constraints can be managed while investment programme is completed • A potential Tiwai Point smelter exit will release an additional 5,000GWh of energy into the market • This generation is predominately supplied from our Manapouri power s
Slide 74: Southland improvements
Southland improvements. Project ready to initiate following a smelter announcement • Transpower have a fully costed and approved project to resolve the Southland export issue; the Clutha Upper Waitaki Lines Project1: • Two sections already commissioned • Three years to complete remaining two section
Slide 75: 2. HVDC north export constraint
2. HVDC north export constraint. Image: Transpower’s Pole 3, Benmore Current HVDC capacity is sufficient to manage greater transfer to North Island • HVDC capacity has been substantially increased • Current peaking capacity of 950MW has only been utilised 2% of the time • Any potential Tiwai Point sme
Slide 76: 2. HVDC improvements
2. HVDC improvements. Increasing usable capability • Transpower have started detailed investigation into undersea cable replacement project • Current cable asset end of life between 2023-2025 • Installing a fourth cable would increase HVDC capability to 1,400MW and could increase usable capacity to
Slide 77: 3. Lower North Island transfer constraint
3. Lower North Island transfer constraint. Source: Transpower’s 2016 SSF Current transmission issues • Limited transfer from Bunnythorpe through to Whakamaru • Limits lower North Island and Taranaki generation into the upper North Island No planned improvements Wellington export limits based on Tara
Slide 78: Huntly Rankine unit retirement
Huntly Rankine unit retirement. Investigation is underway • A separate issue is the potential decommissioning of Huntly Rankine units • There is sufficient generation in the market to cover demand into the upper North Island • 94% of upper North Island generation is currently sourced from outside regi
Slide 79: Auckland import
Auckland import. Investment project underway • Transpower currently working through the Waikato and Upper North Island Voltage Management Investigation • Longlist option consultation has been completed • Lower cost short-term options likely to be Source: Transpower’s 2016 SSF preferred such as serie
Slide 80: Summary
Summary. Meridian is well placed to manage its portfolio through future uncertainty • Transmission upgrades are more critical for lower South Island and reduce as you move north • Key projects are well developed • Flexibility of storage will allow Meridian to manage lost energy during investment pha
Slide 81: Energy Efficiency
ENERGY EFFICIENCY. GRANT TELFAR. Meridian Energy Limited Investor Day November 2017 81
Slide 82: Forecasting demand
Forecasting demand. What is the problem “Missing” demand • Very poor data on energy usage • Demand has been flat for some time • Traditional econometric modelling approach has ! increasingly struggled to explain demand outcomes 1998-2008: small residuals GDP Population (error in fit) using standard ma
Slide 83: Usage as at 2008
Usage as at 2008. $ ,**/% costs in real terms (2017$) '+!2** NZ household usage # '+0*" 1** # • Very poor data on energy usage '+12" '03" -** ',+." 11/ 3,/ • BRANZ HEEP study (2002-2005) last '/," ,,/ comprehensive nationwide survey ',,," 31/ '21" -1/ " +!11/ • Insights: '+/0" 01/ • Electrical heati
Slide 84: Usage as at 2008
Usage as at 2008. # $ *((-% NZ non-household usage • Even worse data " " " *!0,* )!0*- )!1// • BRANZ HEEP plus 2005 Treasury study are both " +!((1 " )!.0, useful • Insights: " +!/)- " ,1) " .!1-, • NZ business use a lot of motors (motive and " .(+ " -+1 pumping) " -!*.0 " *(- " )1* • Combined light
Slide 85: What has changed?
What has changed? 8'0 7'0 6'0 4'5 4'0 3'5 NZ households ! " technology #%$$% 3'0 5'0 changes driving 2'5 • Kiwis love buying appliances 4'0 savings 2'0 2000(02 !# 2004(08 !# 3'0 1'5 20013(17 !# • TV efficiency has improved dramatically 2'0 1'0 2017 $& - ) % * 1'0 0'5 • 2017 lighting efficiency reflects s
Slide 86: How we use energy now
How we use energy now. indoor temperatures Efficiency is only one part of the puzzle up • Greater efficiency does not necessarily mean a no clear change in reduction in overall consumption, e.g: external temperatures • NZ houses appear warmer than they were 15 years ago (not hard) • Replacing an incande
Slide 87: Better efficiency potential?
$'"" Better efficiency potential? $""" NZ households technology driven #'"" efficiency potential • Increase seen in potential household efficiency steadily increasing #""" related savings since 2002 • Hot water shown least improvement '"" • Scale of implied savings ~500MW of new wind Source: $""$ $""% $""
Slide 88: Where to now?
Where to now? Improved demand forecast !" “Missing” demand • Including efficiency potential alongside other better explained !" economic variables dramatically improves model ! • But early days! Careful of monkeys & typewriters $" " 1991-2017: Efficiency " GDP Population potential including efficiency res
Slide 89: Climate Variability and Change
CLIMATE VARIABILITY AND CHANGE. DR JEN PURDIE. Meridian Energy Limited Investor Day November 2017 89
Slide 90: We rely on the timely arrival of our fuel
We rely on the timely arrival of our fuel. We forecast and plan on different time scales: • Days to weeks: • plan generation and offers into the market to use intermittent wind and to move water through the river chain Image: Genesis Energy’s Tekapo • Months to years: B station • plan generation and c
Slide 91: Our fuel is variable
Our fuel is variable. & • Our fuel arrival varies from year to year % • It’s arrival is anticorrelated with electricity demand $ # • We have limited ability to store it " • We have to plan the number of customers/contracts ! that we take on ahead of time • We can offset some of our fuel variability w
Slide 92: Predictability – short term
Predictability – short term. Weather forecast Quantified half-hourly rainfall and wind forecast Inflow forecast Offer into electricity market Meridian Energy Limited Investor Day November 2017 92
Slide 93: Predictability – medium term - cycles
Predictability – medium term - cycles. Summer El Nino rainfall anomaly (%) Summer La Nina rainfall anomaly (%) El Nino – Southern Oscillation (ENSO) • Periodical variation in winds and sea surface temperatures over the tropical Pacific Ocean • 2-5 year cycle • Significant impact on our inflows and wind
Slide 94: Predictability – medium term – snow melt
Predictability – medium term – snow melt. Snowmelt contributes half of our summer inflows • in the Waitaki catchment • Difficult to measure in a mountainous catchment • Several high-altitude measurement sites • A snowpack simulation model estimates GWh stored as snow • Useful in spring/summer inflow for
Slide 95: Predictability – long term climate change
Predictability – long term climate change. The climate is changing • Glaciers are retreating • Seasonal snow is disappearing • Sea level has risen by 20cm in the past century Image: Upsala glacier, Argentina • A 1 metre sea level rise is predicted to make 15 million Image: Mt Hood, Washington people
Slide 96: Climate change - local changes
Climate change - local changes. • Warming trend at local climate stations • Snow and ice recession in our headwaters Ice loss Images: Glacial retreat at Mt Cook National Park – Tasman Glacier 1 deg C warming since 1930 Hermitage annual average temperature 1930-2017 Meridian Energy Limited Investor D
Slide 97: Climate change – local changes
Climate change – local changes. • Annual rainfall and inflow totals have not changed significantly over the 90 years of record… • but the seasonality of our rainfall and inflows has changed significantly over the past 90 years Hermitage at Mt Cook February rainfall 1930-2017 • Autumns have become up to
Slide 98: What can we expect in the future?
What can we expect in the future? Niwa take global climate model (GCM) projections and regionally downscale them to predict what climate changes we can expect in NZ Temperature changes 2055 2090 1 – 2.5 degrees warmer everywhere About 1 - 1.5 degrees warmer everywhere Source: Tait et al 2016, https:
Slide 99: Rainfall changes – annual
Rainfall changes – annual 2055 2090 Wetter in the west and south, and drier in the east and north 5-15% wetter in 10-20% wetter in our catchments our catchments Source: Tait et al 2016, https:// ofcnz.niwa.co.nz 9 9 Meridian Energy Limited Investor Day November 2017 99 Projected annual rainfall chan
Slide 100: Rainfall changes – seasonal
Rainfall changes – seasonal 2055 2055 Source: Tait et al 2016, https://ofcnz.niwa.co.nz Summer rainfall is projected to increase 5-15% in our Winter rainfall is projected to increase catchment headwaters 15-25% Meridian Energy Limited Investor Day November 2017 100
Slide 101: Wind and heavy rainfall
40.00 Wind 35.00 • The frequency of extreme winds over New Zealand is 30.00 likely to; 25.00 GWh 20.00 • Increase in almost all areas in winter 15.00 • Decrease in summer 10.00 5.00 0.00 15-Aug 25-Aug 14-Sep 4-Oct 14-Oct 24-Oct 3-Nov 24-Sep 13-Nov 23-Nov 3-Dec 13-Dec 23-Dec 16-Feb 26-Feb 7-Apr 27-Ap
Slide 102: Drought
Drought • No change to drought frequency is predicted in our catchments over the next 50 years New Zealand median • Approx. 10-12% more time in drought is predicted drought change for the East Coast of the South Island between 1980-99 • An increase of 10% corresponds to about 35 more and 2030-49 day
Slide 103: Snow
Snow • Snow amounts are predicted to decrease and • 50% of Waitaki summer inflows = snow melt snowlines rise under climate change • So future inflows will be lower in summer and • 80-90% of current snow depths by 2040 higher in winter… • 50-80% of current snow depths by 2090 • (but are predicted to be
Slide 104: Summary of predicted changes in climate
Summary of predicted changes in climate. &($"$ ! %*&*#%*)& %*)'#&$%( Recent inflows Older inflows &$$"$ We have seen: %($"$ No significant change to hydro catchment rainfall %$$"$ • ($"$ and inflows over the last 100 years, but… $"$ Significant seasonal shifts in inflow regime %# %# %# %# %# %# %# %# %#
Slide 105: Impacts on Meridian of predicted changes in climate
Impacts on Meridian of predicted changes in climate. Potential Manapouri lake levels 2017-18 with all historical inflows These changes may result in: • Inflow regime better matching demand Manapōuri forecast lake levels under • Higher summer electricity demand (irrigation) and Potential Manapouri lak
Slide 106: Thank you
Thank you.
Slide 107: Disclaimer
Disclaimer. The information in this presentation was prepared by Meridian Energy with This presentation contains a number of non-GAAP financial measures, due care and attention. However, the information is supplied in summary including Energy Margin, EBITDAF, Underlying NPAT and gearing. Because form