Agl Energy Limited · ASX:AGL
Agl Energy — H1 2019 Earnings Presentation
53 slides from Agl Energy's earnings presentation, Feb 7, 2019
Slide 1: 2019 Half-Year Results Presentation
2019 Half-Year Results Presentation
Slide 2: Results Highlights and Business Update
1 Results Highlights and Business Update Brett Redman, Managing Director & CEO 2 Financial Results Damien Nicks, Interim CFO 3 Market Update and Outlook Brett Redman, Managing Director & CEO
Slide 3: Results Highlights and Business Update
Results Highlights and Business Update Brett Redman Managing Director & CEO
Slide 4: Safety Customers People
Safety Customers People Total Injury Frequency Rate Quarterly Net Promoter Score Employee Engagement Index (per million hours worked) (advocates less detractors) (%) Jun-15 Jun-16 Jun-17 Jun-18 Dec-18 10.9 76 70 62 6.2 5.5 3.8 5.4 4.7 4.1 4.3 3.1 3.1 No 2.4 3.3 (16.9) survey (18.2) (18.1) taken 2.0
Slide 5: Assisting customers
Reduced electricity prices for household and small business customers across all states Assisting customers Standing offer discounts rewarding loyalty; debt relief program helping the vulnerable Ongoing investment in key AGL assets for efficient and reliable generation and supply Building trust Emph
Slide 6: 1H19 results summary
1H19 1H18* Change Statutory Profit after tax ($m) 290 616 ▼ 53% Negative fair value movement of net sold electricity derivatives due to rising Statutory EPS (cents) 44.2 93.9 ▼ 53% forward electricity prices Underlying EBITDA ($m) 1,157 1,084 ▲ 7% Higher wholesale electricity Underlying EPS (cents)
Slide 7: FY19 Strategic Priorities
FY19 STRATEGIC PRIORITIES Growth Transformation Social Licence Accelerate growth to meet Reposition, refresh and Meet and exceed rising evolving customer needs reinvigorate AGL community expectations ~$1.9b of new energy supply projects ~$400m of digital transformation Actions to support vulnerable
Slide 8: Optimise existing portfolio for performance and value
1. Optimise existing 2. Evolve and expand 3 . Create new portfolio for performance core energy market opportunities with and value offerings connected customers BROWN COAL BLACK COAL GAS RENEWABLES & DISTRIBUTED ENERGY+ DATA STORAGE ENERGY DELIVERING FOR OUR CUSTOMERS Solar, wind, Upgrades for LNG i
Slide 9: Winning the battery build-out; securing the best options in pumped hydro
Winning the battery build-out Securing the best options in pumped hydro Live and proposed government battery schemes present opportunity for rapid growth AGL capability to deliver residential battery solutions to be in place at 1 July 2019 AGL offering will assist customers in extracting value from
Slide 10: Price reductions, customer assistance and new offerings
Price reductions, customer Reduction in customers on Focused on listening and assistance and new offerings non-discounted standing offers improving customer processes Customer affordability Electricity customer accounts Ombudsman complaints by offer (%) Reduced Consumer electricity tariffs across al
Slide 11: Churn spread to rest of market increased to 6.4 ppts
Churn spread to rest of market Customer acquisitions and Customer accounts up slightly increased to 6.4 ppts retentions remain elevated despite intense market activity Customer churn Acquisitions and retentions Consumer customer accounts ('000) ('000) 30% 26.0% 23.8% 24.0% 20.1% 20.2% 1,117 1,113 99
Slide 12: Digital transformation and customer experience
Core investment starting to Transitioning from Continual focus on customer deliver real value analogue to digital experience and engagement Digital registrations ('000) Foundational capability Built reliable foundations scalable for 1,185 92% digital sales increase since 1H17 1,074 growth and operat
Slide 13: Thermal plant outages and availability; generation mix
Thermal plant outages and availability Generation mix (GWh) (capacity weighted) Increased investment to reduce future outages, increase Increased output from hydro and wind reflects resilience of AGL availability, improve flexibility and deliver more value in future portfolio 25,000 100% 20,000 80%
Slide 14: Energy policy impasse holding back pace and scale of investment decisions
Energy policy impasse holding back pace and scale of investment decisions Coopers Gap Wind Farm * 453 MW | $850m Completion FY20 Under development Feasibility Bells Mountain Pumped Hydro Bayswater Power Station upgrade Offtake agreements 250 MW / 8hrs | ~$450m 100 MW | $100m Potential completion FY2
Slide 15: Financial Results
Financial Results Damien Nicks Interim CFO
Slide 16: Statutory to Underlying Profit after tax
Body ($m) text goes here 1H19 1H18* Change • Second level Statutory Profit after tax 290 616 (326) • Third level Fourth Adjust• for level the following after tax items: Caption text here Significant Items: National Assets gain on divestment (37) - (37) Residential solar operations impairment 38 - 38
Slide 17: Underlying Profit after tax ($m)
Underlying Profit after tax ($m) Wholesale Customer Group Central Markets Markets Operations activities 56 12 21 9 (4) 19 (32) (20) 2 3 (22) 91 (14) (29) (25) (17) 537 487* 1H18 Wholesale Wholesale Eco Markets Operating Consumer Consumer Large Other Operating Thermal & Other D&A Investments Centrall
Slide 18: Operating costs
• Small real cost reduction delivers broadly flat nominal outcome in 1H19 • FY19 savings target lowered to ~$60m (real) from ~$120m previously announced • Business optimisation programs to continue to drive lower costs from FY20 onwards Operating costs (excluding depreciation and amortisation, $m) 1
Slide 19: Comparison of volumes (TWh)
Comparison of volumes (TWh) Generation volumes flat Reduced generation at AGL Loy Yang and AGL Macquarie, increased generation at hydro and wind assets Consumer customers sales down 0.2 TWh 6.9 6.7 Lower average customers numbers and lower average consumption due to changed customer mix 5.0 4.7 Larg
Slide 20: Comparison of gross margin ($m)
Consumer customers down $32m Comparison of gross margin ($m) Impacts of customers switching to lower priced products, 955 and lower average volumes 885 12 228 260 Large Business customers down $8m 20 Decline in volumes and lower energy margin rates 67 10 Eco Markets up $57m 997 1,088 Compliance cost
Slide 21: Comparison of volumes (PJ)
Comparison of volumes (PJ) 100.3 Consumer customers sales down 1.5 PJ 89.8 Lower average consumption as a result of changing customer 34.2 mix and milder weather 32.7 Large Business customers sales down 11.6 PJ 21.6 10.0 Continued tight market conditions and loss of customers 44.5 47.1 Wholesale cus
Slide 22: Comparison of gross margin ($m)
Comparison of gross margin ($m) Consumer customers up $12m 411 391 Rate improvements through disciplined price management 139 127 Large Business customers down $12m Decrease in volumes due to tight market conditions and loss 11 of customers 23 Wholesale up $21m Increased contracted rates to Wholesal
Slide 23: Operating cash flow; sources and uses of cash
Operating cash flow Sources and uses of cash in period ($m) ($m) 1H19 1H18* 1,200 Underlying operating Underlying EBITDA 1,157 1,084 cash flow Equity accounted income and onerous Divestments (24) (23) 700 contracts Net finance costs Movements in other assets/liabilities and (34) (26) non-cash items
Slide 24: Capital expenditure and investment outlook
Capital expenditure and investment outlook ($m, accruals basis) Other growth – Majority of Crib point investment in 1,039 2H19, $16m spent 1H19 Other sustaining – Gas and business unit spend 778 Systems development- Final year of major CXT and PT3 investment, $78m spent in 1H19 ~670 ~690 Renewables
Slide 25: Significant headroom remains; subordinated notes available to call in June 2019
Significant headroom remains; subordinated notes available to call in June 2019 Debt maturity profile ($m) Investment grade credit rating and 800 metrics Moody’s Baa2 credit rating with stable outlook 600 More than $1.26b of cash and undrawn debt facilities 23.5% gearing (net debt to net debt plus a
Slide 26: Market Update and Outlook
Market Update and Outlook Brett Redman Managing Director & CEO
Slide 27: NSW forward electricity prices
NSW Flat Swap Price $/MWh Forward prices have rallied in past six months: 100 Lower non-AGL hydro generation due to lower storage levels 90 Delay in renewables projects coming online 80 Higher thermal fuel input costs Tight supply/demand conditions 70 Forward curves remain in backwardation due to: 6
Slide 28: Renewable requirements under different policies
Renewable requirements under different policies LGC spot prices trading at three-year lows and NEM renewable capacity (MW) forward prices in backwardation due to “Fast change” 35,000 scenario expectation of 2020 LRET being met 30,000 Irrespective of future of LRET, AGL expects renewables will contin
Slide 29: East Coast gas demand vs. supply (PJ)
East Coast gas demand vs. supply (PJ) Domestic conventional gas production continues to decline with future supply shortfalls forecast 700 Increasingly expensive and uncertain tranches 600 of gas need to be developed 500 Market is short capacity and will need daily and seasonal demand variation to b
Slide 30: Underlying Profit after tax expected to be $970 million to $1,070 million
Underlying Profit after tax expected to be $970 million to $1,070 million Tracking towards mid-point of guidance range Strong portfolio performance offsetting impact of increased operating expenditure, coal plant outages Second half impacted by: Lower gas volumes due to seasonality and lower Large B
Slide 31: 2019 Half-Year Results Presentation
2019 Half-Year Results Presentation
Slide 32: Supplementary Information
Supplementary Information
Slide 33: Group financial performance
($m) 1H19 1H18* Change Body text goes here Revenue 6,337 6,450 (2)% • Second Gross marginlevel 1,921 1,842 4% Operating • Thirdcosts level(excluding depreciation and amortisation) (764) (758) 1% Underlying EBITDA • Fourth level 1,157 1,084 7% Depreciation Caption text here and amortisation (295) (27
Slide 34: AGL has adopted AASB 9 Financial Instruments and AASB 16 Leases and restated 2018
AGL has adopted AASB 9 Financial Instruments and AASB 16 Leases and restated 2018 comparative figures to reflect the adoption of these new standards. The table below summarise the adjustments recognised against each individual line item within the Group Financial Performance statement and the Summar
Slide 35: Costs of generation
Network and other cost of Costs of Revenue sales generation 32 5 1 121 (10) (33) 96 83 (87) (68) (46) (24) 955 885* 1H18 Consumer Large Business Wholesale Group Consumer Consumer other Large Business Large Business Fuel costs Generation Depreciation & Net Portfolio 1H19 customers customers customers
Slide 36: Network and other cost of sales
Network and other Wholesale Revenue cost of sales costs 11 2 18 26 (2) (68) 25 (104) 112 391 411 1H18 Consumer Large Business Wholesale Gas Consumer network Consumer other Large Business Large Business Gas purchases Haulage, storage & 1H19 customers customers & Eco Markets costs cost of sales networ
Slide 37: Wholesale Markets
($m) 1H19 1H18* Change Body text goes Wholesale here Electricity gross margin 1,088 997 9% • Second Wholesale level Gas gross margin 261 240 9% Eco •Markets gross margin Third level 67 11 509% Fourth level Gross •margin 1,416 1,248 14% Operating Caption costs (excluding depreciation and amortisation
Slide 38: Customer Markets
($m) 1H19 1H18* Change Body text goes Consumer here Electricity gross margin 228 260 (12)% • Second Consumer level Gas gross margin 139 127 9% Large Third levelElectricity gross margin • Business 12 20 (40)% • Fourth Gas Large Business levelgross margin 11 23 (52)% Caption Fees, text here and other
Slide 39: Group Operations
($m) 1H19 1H18* Change Body Grosstext goes here margin 81 109 (26)% • Second Operating level costs (excluding depreciation and amortisation) (355) (340) 4% • Third level Underlying EBITDA (274) (231) 19% • Fourth Depreciation level and amortisation (231) (206) 12% Caption text here Underlying EBIT T
Slide 40: Centrally Managed Expenses and Investments
($m) 1H19 1H18 Change Body text Managed Centrally goes here Expenses: • Second level Underlying EBITDA (131) (131) - Third level and amortisation •Depreciation (11) (14) (21)% Underlying EBIT (142) (145) (2)% Investments: Underlying EBITDA 18 16 13% Depreciation and amortisation - - - Underlying EBI
Slide 41: Generation by asset (GWh)
GWh 1H19 1H18 Change Body Asset text goes here AGL Macquarie – Bayswater 6,790 7,497 (9)% • Second level AGL Macquarie – Liddell 3,900 3,358 16% • Third level AGL Loy Yang 6,883 6,951 (1)% • Fourth level AGL Torrens 1,142 1,411 (19)% Caption text here SA wind 743 732 2% VIC hydro 688 368 87% VIC win
Slide 42: Generation assets: capacity and carbon intensity
Capacity Carbon intensity 1H19 sent out Asset State Type Status (MW) (tCO2e/MWh) generation (GWh) AGL Macquarie - Bayswater NSW Coal Owned 2,640 0.95 7,134 AGL Macquarie - Liddell NSW Coal Owned 2,000 0.95 4,146 AGL Loy Yang VIC Coal Owned 2,210 1.28 7,125 Total coal 6,850 18,405 AGL Torrens SA Gas
Slide 43: Coal supply vs generation outlook (Mt)
Coal supply vs generation outlook (Mt) 14 12 10 8 6 4 2 - FY18 Actual FY19 Forecast FY20 Forecast FY21 Forecast Contracted coal purchases Additional purchases or stockpile drawdown AGL Macquarie Generation - customer load AGL Macquarie Generation - settled at market AGL Energy 2019 Half Year Investo
Slide 44: Electricity sales volumes
GWh 1H19 1H18 Change Body text goes here Consumer New South Wales • Second level 2,741 2,797 (2)% Victoria • Third level 1,896 1,917 (1)% South •Australia Fourth level 953 993 (4)% Queensland Caption text here 1,125 1,242 (9)% Consumer total 6,715 6,949 (3)% Large Business New South Wales 1,990 2,40
Slide 45: Gas sales volumes
PJ 1H19 1H18 Change Body text goes here Consumer • Second New level South Wales 11.1 11.6 (4)% Victoria • Third level 18.4 19.3 (5)% South •Australia Fourth level 1.7 1.9 (11)% Queensland Caption text here 1.2 1.4 (14)% Western Australia 0.3 0.0 100% Consumer total 32.7 34.2 (4)% Large Business New
Slide 46: Customer accounts
(‘000) 31 Dec 2018 30 Jun 2018 Change Body text goes Consumer here Electricity • Second New level South Wales 831 823 1% Victoria • Third level 658 658 0% South •Australia Fourth level 364 367 (1)% Queensland Caption text here 369 372 (1)% Total Consumer Electricity 2,222 2,220 0% Consumer Gas New S
Slide 47: Customer Markets key metrics
1H15 1H16 1H17 1H18* 1H19 Body Grosstext goes margin here ($m) 375 415 394 387 367 • Second Net level operating costs ($m) (215) (215) (204) (255) (272) Third level EBIT• ($m) 160 200 190 132 95 • Fourth level Gross margin per customer account ($) 100 112 107 106 101 Caption text here Net operating
Slide 48: Consumer electricity and gas metrics
1H19 1H18* Change Body text goes here Electricity • Second Volume level (GWh) 6,715 6,949 (3)% Average Consumer • Third level accounts (‘000) 2,218 2,251 (1)% Revenue ($m) level • Fourth 2,030 2,076 (2)% Grosstext Caption margin here ($m) 228 260 (12)% Gross margin (%) 11.2 12.5 (1.3)ppts Gross marg
Slide 49: Large Business electricity and gas metrics
1H19 1H18* Change Body text goes here Electricity • Second Volume level (GWh) 4,711 5,014 (6)% • Third level Revenue ($m) 844 761 11% • Fourth level Gross margin ($m) Caption text here 12 20 (40)% Gross margin (%) 1.4 2.6 (1.2)ppts Gross margin per MWh ($) 2.5 4.0 (38)% Gas Volume (PJ) 10.0 21.6 (54
Slide 50: Debt facilities
Debt facility ($m) Limit Usage Maturity Body text goes Subordinated here notes * 650 650 FY19 • Second Revolving level facilities bilateral 361 0 FY20 Syndicated • Thirdrevolving level facility 400 0 FY21 A$600m medium-term • Fourth level notes 600 600 FY22 Revolving Caption bilateral facility text
Slide 51: Segment revenue and EBITDA history
($m) 1H15 FY15 1H16 FY16 1H17 FY17 1H18* FY18* 1H19 Body text Wholesale goesexternal Markets here revenue 1,014 2,481 1,630 3,518 1,966 4,860 2,454 4,944 2,417 4,071 8,006 3,878 7,438 3,752 7,334 • Second level Customer Markets external revenue 3,907 7,696 3,852 Group 98 190 93 193 312 389 89 175 67
Slide 52: Important notice and definitions
The information in this presentation: Statutory Profit and Underlying Profit: Is not an offer or recommendation to purchase or Statutory Profit is prepared in accordance with the subscribe for securities in AGL Energy Limited or to retain Corporations Act 2001 and Australian Accounting any securitie
Slide 53: Investor relations contacts
James Hall Chris Kotsaris Blathnaid Byrne General Manager, Capital Markets Senior Manager, Investor Relations Group Treasurer Phone: +61 2 9921 2789 Phone: +61 2 9921 2256 Phone: +61 2 9921 2255 Mobile: +61 401 524 645 Mobile: +61 402 060 508 Mobile: +61 424 644 947 Email: jbhall@agl.com.au Email: c