Infratil Limited · NZX:IFT
Infratil — Investor Day (2011)
15 slides from Infratil's investor day presentation, 2011
Slide 1: NZ Electricity Sector Long Term Outlook: Implications for TrustPower
NZ ELECTRICITY SECTOR LONG TERM OUTLOOK IMPLICATIONS FOR TRUSTPOWER INVESTOR DAY 2011 1
Slide 2: TrustPower: a strong company in a positive sector
TrustPower: a strong company in a positive sector • Consistent record of adding value with new projects • Asset management – 99.8% hydro start reliability – Low NZ generation SIB capex (stable at less than $10m, cf depreciation $30m) • Retail – Class leading Costs to Serve $82 per customer (incl all
Slide 3: The Investment Space
The Investment Space • Market structure now sustainable - set to deliver efficient and resilient outcomes for NZ • Price path - Moderately increasing but the envy of the world in resilience to carbon • We are currently harvesting the ‘low hanging fruit’ • Plant retirements likely (high fixed cost in
Slide 4: Supply and demand balance
Supply and demand balance NI Winter Capacity Margin (MW) 1,600 With possible new Capacity 1,400 Projects will be With Likely new 1,200 developed if market Capacity 1,000 prices are adequate With Committed new plant 800 Without 600 Retirements 400 NI WCM Standard 200 With 0 Retirements 2009 2010 2011
Slide 5: New entry costs around $100/MWh rising to $120/MWh
New entry costs around $100/MWh rising to $120/MWh North Island Base Load Equivalent Costs NZ $/MWh Exchange rates= US0.62 Euro=0.51 CO2 =$30/t HVDC price=$40/kW WACC=9.2% $140 $130 Backup and loss factor $120 $110 CO2 30$/t $100 $90 Fuel $80 $70 $60 HVDC Charge $50 $40 O&M and royalties $30 $20 Cap
Slide 6: Robust project pipeline, but wind competitiveness declines
Robust project pipeline, but wind competitiveness declines $MWh "Long Run Marginal Cost" of new generation projects ($/MWh) 150 140 Gas baseload Coal Lignite bounded by gas or coal – with $40/t carbon Wind Geothermal Hydro 130 Co-generation 120 110 100 90 80 70 60 50 40 30 20 10 0 10 20 30 40 Cumula
Slide 7: Wind Competitiveness
Wind Competitiveness • Mature technology • Modest price falls possible with lower cost manufacturing • Globally we believe the massive deflation from Chinese industrialisation is moderating - Environmental and labour costs are rising • Commodity prices while volatile, seem well supported by strong d
Slide 8: The Best Sites Go First
The Best Sites Go First • TPW’s Mahinerangi stage 1 • 12 machines • Low cost site • Low cost connection – Local 33 kV to Dunedin customers – Made locally consumed locally • Ahead of budget and ahead of schedule 8
Slide 9: Wind site scarcity and rising backup costs
Wind site scarcity and rising backup costs • Rising wind proportion lowers revenues on a windy day and increases wind firming costs - On an equivalent ‘sell a firm baseload contract’, wind faces increasing firming costs - GWAP/TWAP for wind expected to fall to 90% or lower for strongly correlated si
Slide 10: Market Price Volatility and North Island Generation Revenue Factors
Market Price Volatility and North Island Generation Revenue Factors North Island Generation Factors and Price Volatility 90% 145% NI Pricing Premium top 80% 25%: (LHS) 135% 70% Hydro with 60% 125% weekly peaking: Revenue Factor 50% (RHS) 115% 40% Run of River 30% 105% with daily peaking 20% 95% 10%
Slide 11: Market Price Volatility and South Island Generation Peaking Factors
Market Price Volatility and South Island Generation Peaking Factors South Island Generation Factors and Price Volatility 80% 150% SI Pricing 70% 140% Premium Top 25% (LHS) 60% 130% 50% Flexible Hydro Revenue Factor 40% 120% (RHS) 30% 110% 20% Run of River with daily 100% peaking 10% 3 year rolling a
Slide 12: Forecast of long run marginal cost
Forecast of long run marginal cost Long Run Marginal Cost ($/MWh) 140 High cost renewable 120 Mid Cost $/MWh (real Jan 2011 $) renewable 100 Low cost renewable 80 60 40 20 0 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 12
Slide 13: Electricity Price Scenarios
Electricity Price Scenarios 14.0 Electricity Prices (Real c/kWh) Year ahead 12.0 contract prices 10.0 Spot Price Real Jan11 c/kWh 8.0 High cost 6.0 Middle carbon 4.0 and renewable cost 2.0 Low cost 0.0 2000 2005 2010 2015 2020 2025 Year Ended March 13
Slide 14: TPW - little downside and good upside exposure
TPW - little downside and good upside exposure • Existing assets benefit from underlying rising prices - NZ Generation EBITDAF increases 25% for a $20/MWh rise in wholesale price • Project optionality very high - Projects are NPV positive and have timing flexibility - Hydro projects and hydro capaci
Slide 15: Moving to a Mixed Private/Public Model
Moving to a Mixed Private/Public Model • Why? - Cost efficiency - Capital efficiency - Pricing efficiency • Government ownership blunts investment discipline, it blunts risk assessment and it blunts pressure on costs and it subtly evolves toward retail pricing distortions - It can also limit the abi