Agl Energy Limited · ASX:AGL
Agl Energy — Investor Day (December 2017)
58 slides from Agl Energy's investor day presentation, Dec 13, 2017
Slide 1: Investor Day, 13 December 2017, Melbourne
13 December 2017 Melbourne
Slide 2: Important information
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 3: Andy Vesey
Andy Vesey
Slide 4: Agenda
1200 - 1245 Lunch and booth interaction 1445 -1530 Customer Markets Update Melissa Reynolds, Chief Customer Officer 1245 - 1330 Strategy and Business Update 1530 - 1615 Capital Allocation through Transition Andy Vesey, Managing Director & CEO Brett Redman, Chief Financial Officer 1330 - 1415 Wholesa
Slide 5: Delivering safety and beyond
Delivering “safety and beyond” Total Injury Frequency Rate Safety comes first because physical and 12 mental wellbeing are fundamental to a Per million hours worked successful workplace 10 We create a supportive environment, 8 where we feel safe to challenge the 6 norm, to speak up, to say what we m
Slide 6: Driving gender equality for sustainable performance
Driving gender equality for sustainable performance TARGETING PAY DISPARITY WOMEN IN SENIOR LEADERSHIP PIPELINE AGL gender pay gap analysis to be undertaken Up 4 ppts to FY19 target: twice yearly 38% in FY17 40% Analysis indicates no material gap exists that cannot be explained by experience, locati
Slide 7: We have refreshed AGL's values
We have Safety and Sustainable refreshed beyond thinking AGL’s values to Inclusive Focused on support our of all what matters ongoing transformation Investor Day | 13 December 2017 7
Slide 8: Strategic imperatives and key objectives; FY18 priority focus areas
STRATEGIC IMPERATIVES & KEY OBJECTIVES FY18 PRIORITY FOCUS AREAS From To Mass Personalised retailing retailing Continuing Renewed Actions to to drive emphasis address safety and on cost Prosper From To affordability in a carbon Operator of Orchestrator diversity discipline constrained large assets o
Slide 9: Preferred option for Liddell
Preferred option Liddell Power Station closed in 2022 and repurposed with series of Work undertaken at Liddell Power Station to enable AGL to operate investments in new, low emissions generation and upgrades to the station beyond 2022 existing generation Extending Liddell’s life by five years to del
Slide 10: NSW Generation Plan stages 1, 2 and 3
Stage Description Projects Cumulative Cumulative capex1 LCOE2 Projects are under construction having already Wind Approved achieved Final Investment Decisions Coopers Gap| 453MW Committed $62/MWh Projects Silverton| 200MW Stage 1 comprises projects required to balance Approved in NSW Generation Plan
Slide 11: Supplementary Information
Supplementary Infc
Slide 12: Levelised cost of energy and portfolio contribution
LCOE ($/MWh, Real Cost $2017) Levelised of Energy and portfolio contribution Weighted levelised cost of energy (LCOE) for an (by technology)1 equivalent level of energy production is lower for 150 replacement than for lifetime extension Liddell Replacement Liddell Life Extension, Portfolio, $83/MWh
Slide 13: NSW project delivery timeline
NSW Project delivery Bayswater Development undertaken during existing outage schedule Liddell Ongoing generation Delivery Progressive trials & pilots Coopers Gap Project delivery Silverton Delivery Solar offtake (NSW) Project delivery 2017 2018 2019 2020 2021 2022 2023 2024 Delivery Approved FID (co
Slide 14: NSW project delivery timeline (Board paper)
NSW Project delivery Project delivery Progressive trials & pilots Liddell Delivery Project delivery Progressive trials & pilots 2017 2018 2019 2020 2021 2022 2023 2024 Delivery Approved FID (conditional1) Offtake approved NSW Generation Plan | Board Paper (3 November 2017) 14 1. Conditional Final In
Slide 15: Richard Wrightson
Richard Wrightson
Slide 16: Key market design issues today
1 Key market design issues today National Energy Guarantee Five-minute pricing 2 Crib Point LNG import jetty Bringing on new supply Barker Inlet Power Station, Firming costs 3 Longer-term perspective Grid-scale batteries Distributed energy orchestration Investor Day | 13 December 2017 16
Slide 17: Electricity system well equipped to meet a dispatchability mechanism
The electricity system is relatively well equipped to meet a dispatchability mechanism 2019 NEM – forecast extreme day capacity reserve 16,000 14,000 Demand/capacity (MW) 12,000 10,000 8,000 6,000 4,000 2,000 0 NSW QLD SA VIC 10 PoE residential estimate 10 PoE business esimate plus minimum reserve l
Slide 18: AGL's positioning relative to a dispatchability mechanism
AGL’s positioning relative to a dispatchability mechanism reflects its generation footprint by state 2019 AGL – forecast extreme day capacity reserve 4,500 4,000 Demand/generation (MW) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 NSW QLD SA VIC 2019 AGL 10 PoE 2019 AGL dispatchable generation Source: A
Slide 19: Emissions mechanism will support new renewables projects
Emissions mechanism will support development of new renewables projects Estimated AGL emissions intensity for consumer market customers 14,000 0.80 Mass-market demand/generation (GWh) Carbon intensity (tonnes CO2-e/MWh) 12,000 0.70 0.60 10,000 0.50 8,000 0.40 6,000 0.30 4,000 0.20 2,000 0.10 0 - New
Slide 20: Ability to run for high prices critical to insurance products
Ability to run for high prices critical to selling insurance products Start-up times by energy source 120 100 Generator output (MW) 80 60 40 20 0 0 5 10 15 20 25 30 35 40 Time elapsed (minutes) Coal generation Open-cycle gas turbine Battery Reciprocating engine Source: AEMO for South Australian mark
Slide 21: Feasibility study under way for FY19 decision
Feasibility study under way for FY19 decision Why it makes sense Victorian gas market reliant on production from declining Gippsland basin East Coast gas market restricted to four main producers, not all of which are actively selling to other wholesale participants Domestic gas being priced at premi
Slide 22: Gas price setter and pool price by state
Victoria Queensland 50% 50% $100 $100 40% 40% $80 $80 30% $60 30% $60 20% $40 20% $40 10% $20 10% $20 0% $0 0% $0 1-Jan-10 1-Jul-11 1-Jan-13 1-Jul-14 1-Jan-16 1-Jul-17 1-Jan-10 1-Jul-11 1-Jan-13 1-Jul-14 1-Jan-16 1-Jul-17 New South Wales South Australia 50% 50% $100 $100 40% 40% $80 $80 30% $60 30%
Slide 23: Construction set to begin early in 2018
Construction set to begin early in 2018 calendar year Improved efficiency, reducing AGL total gas usage Dual fuel operations driving down fixed cost of gas haulage and swing Option to running on diesel caps cost of gas for generation Step change in reliability through multiple newer units, improving
Slide 24: Five key considerations in estimating costs
Five key considerations go into estimation of costs Diversity of Concentration of Flexibility of Ability to Development renewable renewables in existing portfolio, contract of new assets resources state including insurance (gas peaking plant (source and (e.g. wind in South generation and products wi
Slide 25: Renewables integration: wind curtailment case study
Five potential areas of impact across the system; renewables integration most interesting Wind curtailment case study: North Brown Hill, 11 October 2017 Renewables 120 integration 100 Generation output (MW) Capacity 80 Frequency 60 control Approximately 236 MWh of wind generation curtailed 40 Price
Slide 26: Virtual Power Plant and distributed energy aggregation
Virtual Power Plant in South Australia is about leading and learning Aggregation of distributed energy assets and the dynamics of the NEM Distributed energy assets Flexibility of control Overall shape of system include aggregation of supply of decentralised assets demand may flatten, (e.g. solar gen
Slide 27: Portfolio well positioned for changes
Our portfolio is Key energy supply We are making well positioned projects will aid sure we are for changes on portfolio efficiency prepared for the near-term horizon and flexibility longer-term market transition Investor Day | 13 December 2017 27
Slide 28: Supplementary Information
Supplementary Infc
Slide 29: Renewable generation certificate surrenders
Renewable generation certificate surrenders by type: Australia-wide 40,000 35,000 30,000 Certificates (thousands) 25,000 20,000 15,000 10,000 5,000 - 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Onwards Large-scale Existing small-scale Current T
Slide 30: Melissa Reynolds
Melissa Reynolds
Slide 31: Customer Markets strategy
1 Customer Markets strategy 2 Affordability, market context and pricing 3 Customer Experience Transformation progress and targets Investor Day | 13 December 2017 31
Slide 32: Our customers are at the centre of everything we do
Our customers are at the centre of everything we do It’s important that I’m dealing with a bigger If I were to look in the company… It gives me peace of mind future, I think service providers would be more focused on the technology side You want a company that’s looking at the present and into the f
Slide 33: Customer Markets strategic priorities
Build long-term sustainable value by helping customers through an increasingly complex energy market Personalised, digital-led customer experiences Prosper in a carbon constrained Lean, low-cost operations future Innovative products and services Build customer advocacy A leading, distinctive custome
Slide 34: Fairness, simplicity and transparency are key
Fairness, simplicity and transparency are key Clear focus on transparency, simplicity and fairness Industry-leading Fairer Way package No fees charges to concession and hardship customers More hardship customers with access to exclusive guaranteed discounts More concessions customers on market offer
Slide 35: Proactive intervention and rewarding loyalty to defend market share
Proactive intervention and rewarding loyalty to defend market share Market activity has driven Increased churn spread Customers accessing competitive 32% increase in to rest of market to market offers up year on year acquisitions and retentions 7ppts from 4ppts Only 14% of customers remain on standi
Slide 36: Investing in capability to drive value and productivity
Investing in capability to drive value, productivity and personalised customer experiences Cultural DNA Enabling Technologies Signature Moments Customer journeys Easy Move Capability streams Self-Service Meter Read Agile @ Scale Energy Insights CX and UX One Touch Pay Human-centred design Simple Sig
Slide 37: Personalised retailer customer experience
MY ACCOUNT REGISTRATIONS MOBILE APP DOWNLOADS MY ACCOUNT & APP INTERACTIONS (MONTHLY AVG,) 24% 366k 21% 986k 184k 563k Oct YTD FY17 Oct YTD FY18 Oct YTD FY17 Oct YTD FY18 Oct YTD FY17 Oct YTD FY18 NET PROMOTER SCORE (DIGITAL) DIGITAL BILLING COMPLAINTS PER ‘000 CUSTOMERS 43% 38% Oct YTD FY17 Oct YTD
Slide 38: Benefits to net operating costs from digital adoption
Benefits to net operating costs as productivity improves with digital adoption and self-service 60% of calls relate to billing, moving and paying Customers with digital ID interact more than non- registered customers Other Digital interactions increase customer awareness, Campaigns reduce bill shock
Slide 39: Home energy management solutions
Home energy management Solar Smart home solutions Command Virtual and community distributed energy Home batteries Energy plus EV charging Peer-to-peer Solar PV EV charging infrastructure assets Free energy days AGL Rewards Managed demand Base Green Energy plans energy Dual fuel power/carbon plans of
Slide 40: Affordability is a key issue
Affordability is a Technology We are defending CXT is delivering We are building key issue: we are investment will market share digital adoption brand leadership addressing it on drive productivity amid and great in the energy multiple fronts and deliver unprecedented customer sector sustainable mar
Slide 41: Brett Redman
Brett Redman
Slide 42: Capex plans, investment opportunity and capital allocation framework
1 Current capital expenditure plans 2 Scale of potential investment opportunity to FY20 3 Capital allocation framework and principles Investor Day | 13 December 2017 42
Slide 43: Prosper in a carbon constrained future
From To Mass Personalised retailing retailing Prosper in a carbon From To constrained Operator of Orchestrator future large assets of large and small assets From To High Lower emissions emissions technology technology Build customer advocacy From To Leveraging Leveraging platforms in platforms in ne
Slide 44: Strong cash flow supports transition to future asset base
Strong cash flow today supports transition to the asset base of the future Legend Current asset base including renewables PPAs Conceptual future asset base Upstream Gas Gas Storage Coal Generation Gas Generation Renewables Renewables PPAs Electricity Storage Customer Generation Note: Renewables PPAs
Slide 45: Transformation investments to FY19 to drive returns from FY20
Transformation investments to FY19 to drive returns from FY20 onwards Current investment scope ($m, approximate) From To 600 Mass Personalised retailing retailing 500 Prosper in a carbon 400 constrained future 300 200 100 Build customer 0 advocacy FY16 FY17 FY18F FY19F FY20F Customer Experience Tran
Slide 46: Investment to date in smart home and distributed energy
Investment to date primarily focused on smart home and distributed energy investments Current investment scope ($m, approximate) 600 500 Prosper in a carbon From To 400 constrained Operator of Orchestrator future large assets of large and 300 small assets 200 100 Build 0 customer advocacy FY16 FY17
Slide 47: Energy supply investments under assessment
Energy supply investments under assessment subject to meeting required rates of return Current investment scope ($m, approximate) 600 500 Prosper 400 in a carbon constrained 300 future 200 From To 100 High Lower emissions emissions 0 technology technology Build FY16 FY17 FY18F FY19F FY20F customer a
Slide 48: Prosper in a carbon constrained future
Expansion into Western Australian gas retail market progressing well: customer acquisitions ahead of plan New Energy: continued opportunity for technology- based investments and partnerships with Prosper global leaders in a carbon constrained Opportunities for further offshore growth at future appro
Slide 49: Investment approved or subject to feasibility
Investment approved or subject to feasibility (approximate, includes capex and equity investments) $590m $475m $468m $444m $450m $390m $200m $195m FY18 approved - FY18 approved - FY19 approved - FY19 approved - FY19 feasibility - FY20 approved - FY20 approved - FY20 feasibility - sustaining growth a
Slide 50: Capital allocation principles and dividend payout
1 2 Maintain balance sheet strength consistent Maintain target dividend payout ratio of with Baa2 credit rating to enable optimal 75 percent of Underlying Profit after tax, response to opportunities as they emerge franked to 80 percent 3 4 Agile Capital approach to drive improved Continued applicati
Slide 51: Significant headroom, no major re-financing until June 2019
Significant headroom remains, with no major re-financing until hybrid call in June 2019 Adjusted funds from operations/net debt Debt maturity profile ($m) 50% ~$0.5b ~$2.5b ~$2.4b 900 head- head- head- 45% room room room 800 40% 700 35% 600 30% 500 25% Internal target range determined by credit rati
Slide 52: Continued assessment relative to risk and uncertainty
Continued assessment and development relative to risk and uncertainty More advanced/requires less risk premium Powering Australian Renewables Fund Customer Experience Transformation PT3 (ERP upgrade) Already underway and/or approved by AGL Board WA retail gas entry NEM re-investment: Barker Inlet Po
Slide 53: Disciplined allocation of capital
Increased premium Investment in new required as products/markets Prosper risk goes up in a carbon constrained Management of key future uncertainties affecting Disciplined capital allocation decisions Investment in allocation of existing business capital at Exploration of potential threshold risks an
Slide 54: Capex plans, capital allocation principles and return on equity
Current capex plans Capital allocation Targeting improved reflect broad principles governing return on equity spectrum of approach to new and 75% payout investment investment and ratio on Underlying opportunities capital management Profit after tax Investor Day | 13 December 2017 54
Slide 55: Supplementary Information
Supplementary Infc
Slide 56: Underlying Profit after tax expected $940m to $1,040m
Positioned for further profit growth in FY18 Wholesale Electricity and Gas improvements to outweigh impact of Underlying Profit after tax reduced Eco Markets expected to be $940 million to Subject to normal trading conditions $1,040 million Subject to any adverse impacts arising from policy and regu
Slide 57: Prosper in a carbon constrained future
Customer Experience Transformation PT3 Program Prosper in a carbon constrained New Energy New Energy New Energy New Energy New Energy future Barker Inlet Power Station NSW Generation Plan Crib Point LNG Import Jetty Silver Springs Storage Expansion Build customer advocacy WA Gas Retail FY17 FY18 FY1
Slide 58: 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