Infratil Limited · NZX:IFT
Infratil — Investor Day (March 2017)
28 slides from Infratil's investor day presentation, Mar 29, 2017
Slide 1: Infratil Investor Day
Infratil Investor Day March 29, 2017
Slide 2: Topics
Topics Section 1. US Power and Renewables Markets Section 2. Demand Drivers, Business Model, and Plan Section 3. Progress Check-In, Opportunities, and Challenges 2
Slide 3: Longroad Energy – Business Overview
Longroad Energy – Business Overview • Strategy focused on the decarbonization of the US market by participating in the development and services segments of the US utility scale wind and solar markets • Rationale – >100 GW market opportunity – Long-term development cycle – Growing presence of institu
Slide 4: Key Personnel
Key Personnel Longroad is the core team that established and managed First Wind and sold it to SunEdison and TerraForm Power in January 2015 for an enterprise value of $2.4 B Qualifications Job Scope Paul Gaynor - CEO SunEdison: EVP Global Utility Development SunEdison: Delivered 2.1 GW in 2015 deve
Slide 5: Section 1: US Power and Renewables Markets
Section 1 US Power and Renewables Markets
Slide 6: US Power Market Primer
US Power Market Primer 189 No federal energy policy Investor Owned >200 Power Utilities >1,100 GW Marketers 10 Regional installed Transmission Nearly 3,000 capacity Organizations Public Utilities 50 & Cooperatives separately 7,658 regulated Deregulated (traded) and >4 million power states vertically
Slide 7: US Power Generation
US Power Generation Infratil Investor Day 2017 7
Slide 8: US Power Generation: Winners and Losers
US Power Generation: Winners and Losers Renewables +385% Natural Gas +116% -35% Coal Infratil Investor Day 2017 8
Slide 9: US Renewables Generation
US Renewables Generation 2016 • ~9% share of all generation • ~65% of all new installed capacity Infratil Investor Day 2017 9
Slide 10: What We Are Playing For…
What We Are Playing For… • 147 GW Wind and Solar Growth – 108 GW wind and utility solar – 22 GW distributed solar – 17 GW residential solar Infratil Investor Day 2017 10
Slide 11: Tax Credits - Unique Feature of US Renewables
Tax Credits - Unique Feature of US Renewables • In place since 1986, allows non-individual taxpayers to monetize tax benefits from wind and solar projects against income tax • Historically funded by financial institutions, corporates, and strategics with large taxable income; individual tax payers n
Slide 12: Section 2: Demand Drivers, Business Model, and Plan
Section 2 Demand Drivers, Business Model, and Plan
Slide 13: Demand Driver ① Renewable Portfolio Standards
Demand Driver ① Renewable Portfolio Standards RPS Standard RPS Goal Proposed Increase 90% by • 29 states 2050 • Utilities’ obligations to 50% by 100% by 2035 purchase defined 2030 100% by 1 GW by percentage of their load TBD 2020 40% by from renewable resources 2040 • State leadership holding 100% b
Slide 14: Demand Driver ② Federal Tax Credits
Demand Driver ② Federal Tax Credits • Expired and re-instated 8 times since inception • Longest ever extension was put in place at end of 2015 • Phase out of both ITC and PTC • Renewal unlikely • Tax reform could impact deals and depth of market Infratil Investor Day 2017 14
Slide 15: Demand Driver ③ Cost
Demand Driver ③ Cost • Wind LCOE: ↓66% since 2009 • Solar LCOE: ↓85% since 2009 Infratil Investor Day 2017 15
Slide 16: Demand Driver ④ Corporate PPAs
Demand Driver ④ Corporate PPAs • Corporate PPAs accounted for 50% of announced wind PPAs in 2016 • Active broker, bi- lateral, and business to business procurement activity • Longroad staff experienced in originating corporate PPAs Infratil Investor Day 2017 16
Slide 17: Attractive Asset Class for Long-Term Owners
Attractive Asset Class for Long-Term Owners Investment Feature Wind Solar (Typical) Asset Life (years) 30+ 30-35+ Construction risk No No PPA term (years) 12-25 15-25 Counterparty credit At least investment grade At least investment grade Operating costs Highly predictable with turbine 20 year warra
Slide 18: Market Opportunity - Sizing the Business Plan
Market Opportunity - Sizing the Business Plan 100 GW of development opportunities in attractive asset class $45 B investment potential for permanent equity investors Infratil Investor Day 2017 18
Slide 19: Business Model and Strategy
Business Model and Strategy Initial Investment Capital Late stage capital • Early to mid-stage • Continue greenfield investment • Maintain flexible timing of sell downs, allowing the development spending on and M&A activity business model to adapt to market conditions organic development • Project c
Slide 20: Operating and Asset Management Platform
Operating and Asset Management Platform Project Performance and Wind and Solar Site Operations Enterprise Support Commercial Asset Management WTG and Solar Data Resource Spare Part Commercial Full Accounting Panel/Inverter/ Monitoring, Assessment and Environment Project Level Supply Chain Asset & Ri
Slide 21: Section 3: Progress Check-In, Opportunities, and Challenges
Section 3 Progress Check-In, Opportunities, and Challenges
Slide 22: Progress Check-In
Progress Check-In • Team: 23 core members in place in development, origination, transmission and interconnection, construction, permitting, solar resource, wind resource, project finance, legal, and M&A. Additional resources to be added as milestones achieved, i.e. closed projects • Board: Fully in
Slide 23: Portfolio Map (excludes M&A)
Portfolio Map (excludes M&A) Infratil Investor Day 2017 23
Slide 24: Opportunities to Leverage the Platform
Opportunities to Leverage the Platform • Growing and aging renewables fleet; – > 120 GW installed capacity at end of 2016 – Ownership changes likely, tax investors not natural long-term owners after tax benefits expire – Potential to acquire, optimize operations and capital structure, then monetize
Slide 25: Opportunities to Leverage the Platform (cont’d)
Opportunities to Leverage the Platform (cont’d) • Storage – Develop in connection with solar and wind opportunities – Today economics and needs make Hawaii the only practical candidate • Third party services – Increasing participation in asset ownership by institutional investors – Typically do not
Slide 26: Challenges
Challenges • PPA market competition – Procurement process on nearly all PPAs, driven by corporate purchasing departments, public utility commissions, and consumer advocates – Sponsors aggressive on capex and opex assumptions – Requires discipline in developing only the best sites and limiting develo
Slide 27: Challenges (cont’d)
Challenges (cont’d) • Federal tax reform – To be undertaken immediately after health care reform – New administration and Republicans pushing for corporate tax reform, which would very likely include a lowering of the corporate tax rate, among other things – Lower corporate tax rate would have a dir
Slide 28: Thank you !!
Thank you !! 28