Meridian Energy Limited · NZX:MEL
Meridian Energy — Non-Deal Roadshow (December 2016)
29 slides from Meridian Energy's roadshow presentation, Dec 1, 2016
Slide 1: Powering today, protecting tomorrow
Powering today, protecting tomorrow Manapōuri power station, Fiordland National Park MERIDIAN ENERGY LIMITED retail roadshow presentation
Slide 2: About Meridian
DECEMBER 2016 About Meridian New Zealand’s largest generator Using purely renewable sources Seven hydro stations (86% of Meridian's total production in the 2016 financial year) Flexible plant New Zealand’s largest storage Long life assets Low operating cost Benchmark operational efficiency Low capital
Slide 3: About Meridian
DECEMBER 2016 About Meridian Seven wind farms in Australasia (14% of Meridian’s total production in the 2016 financial year) New Zealand’s biggest wind farm developer and operator (60% of installed capacity) More than a decade of construction and operational experience Successfully developed without
Slide 4: About Meridian
DECEMBER 2016 About Meridian A retailer to around 275,000 homes, farms and businesses throughout New Zealand Offering choice through two different brands Converted 87,000 Australians to great kiwi customer service so far About to franchise Powershop in the UK to npower (one of the big six retailers in
Slide 5: New Zealand market
DECEMBER 2016 New Zealand market wholesale retail 5 1 19 139 31 29 2m Source: Meridian segment disclosures MERIDIAN ENERGY LIMITED retail roadshow presentation 5
Slide 6: How we make money
DECEMBER 2016 How we make money wholesale retail +$779m -$124m +$327m -$312m -$479m +$630m including cover contracts INTERNATIONAL +$34m OPERATING COSTS -$205m = FY16 EBITDAF $650m Source: Meridian segment disclosures MERIDIAN ENERGY LIMITED retail roadshow presentation 6
Slide 7: Your power price
DECEMBER 2016 Your power price TYPICAL MERIDIAN RESIDENTIAL BILL 15% Energy 30% Transmission and distribution 14% Metering 5% Government levies and GST Retail service costs and margin 36% Source: Meridian MERIDIAN ENERGY LIMITED retail roadshow presentation 7
Slide 8: Your returns so far
DECEMBER 2016 Your returns so far TOTAL SHAREHOLDER RETURN 50% Share price increase Dividend yield 40% 37% 33% 30% 28% 13% 11% 20% 12% 10% 24% 22% 16% 0% 2014 2015 2016 Financial year ended 30 June Source: Bloomberg, Meridian MERIDIAN ENERGY LIMITED retail roadshow presentation 8
Slide 9: Our share price
DECEMBER 2016 Our share price PERFORMANCE SINCE LISTING Meridian share price 90% 70% 50% 30% 10% -10% -30% -50% Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct 13 13 14 14 14 14 14 14 15 15 15 15 15 15 16 16 16 16 16 As at Thursday 1 December 2016 Source: Bloomberg MERIDI
Slide 10: Our share price and the relevance of bond rates
DECEMBER 2016 Our share price and the relevance of bond rates PERFORMANCE SINCE LISTING Meridian share price US 10 Year Govt Bonds 90% 70% 50% 30% 10% -10% -30% -50% Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct 13 13 14 14 14 14 14 14 15 15 15 15 15 15 16 16 16 16 16 A
Slide 11: Recent share price decline
DECEMBER 2016 Recent share price decline PERFORMANCE SINCE 7 SEPTEMBER 2016 50% 40% 30% 59% 20% 10% 0% -8% -11% -9% -12% -10% -10% -15% -20% Meridian US 10 Year NZX 50 Contact Mercury Genesis NZ Govt Property Bonds As at Thursday 1 December 2016 Source: Bloomberg MERIDIAN ENERGY LIMITED retail roads
Slide 12: Where does that leave us
DECEMBER 2016 Where does that leave us Share price $2.60 at 1 December 2016, down 1% since 1 July 2016 FY17 gross dividend yield1 8.9% ordinary and special dividends FY17 total shareholder return1 7.4% assuming share price does n0t change FY17 Enterprise value to EBITDAF2 12.0x valuation multiple So
Slide 13: What will happen…who really knows?
DECEMBER 2016 What will happen…who really knows? Direction and pace of US interest rates impacts all sharemarkets Markets have been erratic and unpredictable Markets have reacted to political events such as Brexit and Trump – and not necessarily in the manner anticipated! Will the perception of “Tru
Slide 14: New Zealand is attractive
DECEMBER 2016 New Zealand is attractive Strong democracy with low levels of corruption Ranked the easiest country in the world to do business in by the World Bank Government has shown sound economic management Relatively high economic growth and low national debt levels Powershop App New Zealand mar
Slide 15: New Zealand electricity market is attractive
DECEMBER 2016 New Zealand electricity market is attractive The first fully market-driven structure in the world 12 terawatt hours of new renewable generation delivered since the market was formed Proven the market can solve problems: Avoiding supply disruptions in dry years Te Āpiti wind farm, Manawa
Slide 16: The Meridian story has not changed
DECEMBER 2016 The Meridian story has not changed New Zealand remains an attractive investment destination Electricity market structure is stable Meridian is the largest generator with the best assets The retail market is very competitive Low growth outlook in New Zealand in the short-term West Wind
Slide 17: Meridian – the largest generator
DECEMBER 2016 Meridian – the largest generator 32% of national generation in the 2016 FY16 NEW ZEALAND GENERATION financial year 9% Meridian 6% 100% renewable generation 32% predominately from South Island hydro, Contact 16% with some wind (mainly North Island) Mercury Genesis Very long life and high
Slide 18: The retail market is very competitive
DECEMBER 2016 The retail market is very competitive NATIONAL DEMAND MARKET ICP SWITCHING (ALL RETAILERS) GWh 15% 45,000 13% 40,000 11% 9% 35,000 7% 5% 30,000 2012 2013 2014 2015 2016 Financial Year ended 30 June Industry Move-In Switch Industry Trader Switch 31 retail brands in the market, plenty of
Slide 19: Meridian is competing hard
DECEMBER 2016 Meridian is competing hard RETAIL SALES VOLUMES AVERAGE RETAIL SALES PRICE GWh $/MWh Residential, SMB, Agri Corporate 8,000 110 5,701 5,661 5,754 5,967 5,969 108 6,000 106 4,000 104 2,000 106 106 102 104 103 103 0 100 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Financial Year end
Slide 20: Meridian generates strong cash flows
DECEMBER 2016 Meridian generates strong cash flows FREE CASH FLOW DIVIDENDS DECLARED $M CPS 420 Ordinary dividends Special dividends 25 20 18.23 18.38 400 15 13.01 5.35 4.88 380 416 2.00 398 10 360 376 12.88 13.50 5 11.01 340 0 2014 2015 2016 2014 2015 2016 Financial year ended 30 June Financial yea
Slide 21: Australia
DECEMBER 2016 Australia Hazelwood power station, Victoria, Australia Has been a successful, if opportunistic market for Meridian Decarbonisation means a more volatile market and greater opportunities Timing remains uncertain and discipline is required, however Australia provides option value for Mer
Slide 22: What about the Tiwai Point smelter?
DECEMBER 2016 What about the Tiwai Point smelter? Tiwai Point aluminium smelter, Southland MERIDIAN ENERGY LIMITED retail roadshow presentation 22
Slide 23: Tiwai is the elephant in the room (for some)
DECEMBER 2016 Tiwai is the elephant in the room (for some) An exit will affect the whole sector… some more than others The smelter faces an electricity price increase in effect from 1 January 2017 The smelter’s owners have a perpetual contract termination right also from 1 January 2017 with 12 months
Slide 24: Tiwai is the elephant in the room (for some)
DECEMBER 2016 Tiwai is the elephant in the room (for some) Meridian maintains a strong balance sheet to absorb any short term reduction in profitability Long term, Meridian is in a strong position In the case of closure, supply side adjustment seems likely – on Meridian’s modelling, some thermal plan
Slide 25: What about new technology?
DECEMBER 2016 What about new technology? The cost of grid scale solar in Australia is not yet at parity with wind Grid scale solar in New Zealand is not a near-term prospect High domestic solar takeup in Australia has been driven by subsidies Economics of domestic solar in New Zealand are poor, howe
Slide 26: What about new technology?
DECEMBER 2016 What about new technology? Battery only paybacks are shortening with cheaper and larger batteries, but remain more than 15 years Demand side flexibility (smart grid) remains a better choice for long run cost savings Merits of going off-grid entirely through solar and batteries are still
Slide 27: Final thoughts
DECEMBER 2016 Final thoughts Uncertainties for investors have not eased International events, including interest rate movements, inevitably affect the small New Zealand market Listed New Zealand electricity stocks seem set to offer yields in excess of bank deposits for the medium term Investors views
Slide 28: Questions
Questions Mill Creek wind farm, Ohariu Valley, Wellington MERIDIAN ENERGY LIMITED retail roadshow presentation
Slide 29: Disclaimer
DECEMBER 2016 Disclaimer The information in this presentation was prepared by Meridian Energy with due care and attention. However, the information is supplied in summary form and is therefore not necessarily complete, and no representation is made as to the accuracy, completeness or reliability of