Contact Energy Limited · NZX:CEN
Contact Energy — Investor Presentation (October 2009)
22 slides from Contact Energy's investor presentation, Oct 27, 2009
Slide 1: ASX cover note: Contact Energy presentation to investors
For personal use only To Company Announcements Office Facsimile 1300 135 638 Company ASX Limited Date 27 October 2009 From Bill Hundy Pages 22 Subject CONTACT ENERGY PRESENTATION TO INVESTORS Attached herewith is a copy of an announcement released to the NZX by Contact Energy today. Origin Energy ho
Slide 2: New Zealand's leading integrated energy company: Presentation to Investors
For personal use only New Zealand’s leading integrated energy company Presentation to Investors October 2009
Slide 3: Disclaimer
Disclaimer For personal use only This presentation may contain projections or forward looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in an
Slide 4: Contact is a diversified energy company across New Zealand
Contact is a diversified energy company with generation and customers located throughout New Zealand For personal use only • 600,000 customers (electricity, gas, LPG) • On average generates approx. 26% of NZ’s generation output from 9 power stations: – 50% Natural Gas – 35% Hydro – 15% Geothermal •
Slide 5: Overview of New Zealand electricity generation
Overview of New Zealand electricity generation For personal use only • The New Zealand electricity generation market comprises roughly between 50% - 55% hydro generation, 10% other renewables, and the remainder, thermal • The majority of hydro generation is in the South Island © Contact Energy Limit
Slide 6: New Zealand's gas market
New Zealand’s gas market For personal use only • The major owners of gas in New Zealand are: – Shell (48% Pohokura, 50% Kapuni, 84% Maui) – OMV (26% Pohokura, 10% Maui) – Todd (26% Pohokura, 50% Kapuni, 6% Maui, 100% McKee and Mangahewa) – Origin (100% Rimu / Kauri and TAWN) – Greymouth (100% Ngator
Slide 7: Electricity demand
Electricity demand For personal use only • Electricity demand has been growing at around 2% p.a. over the last 10 years • Residential demand has grown despite price increases which have averaged 5% p.a. over the last 10 years • The recession has resulted in a period of relatively flat demand; growth
Slide 8: The electricity sector is dominated by integrated generator / retailers
The electricity sector is dominated by integrated generator / retailers For personal use only Rio Tinto supply • A high level of integration between generation and retail customer bases • Three of Contact’s competitors are state owned • Generation and retail are unregulated Mighty Meridian Genesis C
Slide 9: Electricity spot market operation
Electricity spot market operation For personal use only • New Zealand operates a “gross pool” – all generation sales and retail purchases must be made through the spot market • The dominant dynamic in the market has been hydro volatility and the consequent requirement for thermal generation to provi
Slide 10: Overview of current transmission issues
Overview of current transmission issues For personal use only • New Zealand’s transmission system has seen limited investment for 30 years Wairakei to • Transpower is engaged in a major transmission Albany upgrades upgrade. Major approved upgrades include: 2012 - 14 – the lines from Wairakei to nort
Slide 11: Wholesale electricity prices
Wholesale electricity prices For personal use only • Previously, North and South Island spot prices were closely linked • Volatility in the past (pre 2008) has been largely driven by hydrology • Following the decommissioning of pole 1 there has been an increase in the volatility between the islands
Slide 12: Transmission constraints
Transmission constraints Contact’s ability to leverage its geographic and fuel diversity has depended on the HVDC and gas flexibility For personal use only • In the past Contact has been able to rely on the HVDC to move hydro generation north in times of high inflows and storage • When inflows were
Slide 13: Portfolio enabled strong performance despite wholesale price volatility
Despite volatility in wholesale prices Contact’s portfolio enabled the company to perform well irrespective of weather conditions For personal use only • Due to hydro conditions the electricity dry years price in New Zealand can fluctuate • The effects of the loss of pole 1 of the HVDC and the loss
Slide 14: New wind and/or hydro generation expected required by about 2018
Wind and/or hydro generation is expected to be required by about 2018 with geothermal filling the gap until then For personal use only • The requirement for new generation over the next decade will be driven by two major factors: – The growth in demand – long term average for New Zealand has been 2%
Slide 15: Long-term energy prices
Long-term energy prices For personal use only • Despite the recent economic challenges the fundamental drivers of long term electricity prices remain the same • In the absence of significant new and accessible gas reserves, wind and hydro remain the likely sources of new generation, once available g
Slide 16: NZ Emission Trading Scheme: What it means for Contact
NZ Emission Trading Scheme (ETS) – What it means for Contact? For personal use only • To meet its Kyoto Protocol obligations the Government introduced a Greenhouse Gas ETS at the end of 2008 • The Government is now in the process of revising the legislation. Key amendments: – Commencement date delay
Slide 17: Contact's underlying value proposition: superior set of options
Contact’s underlying value proposition is the leverage the business obtains from its superior set of options, particularly geothermal and peaking plant For personal use only • Electricity demand has been flat over the past year • Peak demand has continued to grow despite the recession. Which will be
Slide 18: Contact's strategic initiatives are progressing well
Contact’s strategic initiatives are progressing well For personal use only • Projects to restore flexibility back into the portfolio are on track for commercial operation in mid-2010 – Stratford peakers (200 MW, $250m): Adds flexible generation capacity. Replaces New Plymouth with new technology fas
Slide 19: Capex programme
Capex programme For personal use only • Two major committed CAPEX projects under way • Stratford Peaker • Tauhara Binary • The Ahuroa gas storage facility is also planned to be constructed during the 2009/10 financial year and is in the committed capex for the purposes of the graph • The chart below
Slide 20: Contact is in a strong financial position
Contact is in a strong financial position For personal use only • Net debt as at 30 June 2009 was $1.1bn – Net debt to net debt plus equity was 27% • Extended and added to bank credit facilities – As at 30 June 2009 Contact’s committed credit facilities totalled $685m, all of which was available • O
Slide 21: Conclusion
Conclusion For personal use only • A challenging year Weather extremes, transmission constraints, portfolio inflexibility • $600 million of construction underway Portfolio flexibility initiatives The first of a series of new geothermal projects - in operation in mid-2010 • Well positioned for growth
Slide 22: For personal use only
For personal use only © Contact Energy Limited October 2009 New Zealand's leading integrated energy company 21
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