Slide 1: 2014 Annual Meeting
VECTOR LIMITED 2014 Annual Meeting 22 October 2014 Ellerslie Event Centre, Auckland
Slide 2: Disclaimer
VECTOR LIMITED Disclaimer This presentation contains forward-looking statements. Forward-looking statements often include words such as "anticipates", "estimates", "expects", "intends", "plans", "believes" and similar words in connection with discussions of future operating or financial performance.
Slide 3: Michael Stiassny, Chairman
VECTOR LIMITED Michael Stiassny CHAIRMAN 3
Slide 4: Directors
VECTOR LIMITED Directors • Peter Bird • James Carmichael • Hugh Fletcher • Jonathan Mason • Dame Alison Paterson • Karen Sherry • Bob Thomson • Tony Arthur (Future Director) 4
Slide 5: Agenda
VECTOR LIMITED Agenda • Ordinary business • Penrose outage • Chairman’s update • Group Chief Executive’s update • Election of directors • Appointment and remuneration of auditors • Special business • Vector’s constitution • General business • Meeting close 5
Slide 6: Simon Mackenzie, Group Chief Executive
VECTOR LIMITED Simon Mackenzie GROUP CHIEF EXECUTIVE 6
Slide 7: The Penrose outage
VECTOR LIMITED The Penrose outage • Vector recognises the disruption that outages on our networks cause to all our customers • Our joint investigation with Transpower into what caused the incident commenced last week • We are committed to learning the lessons from these events • We will of course be
Slide 8: Industry structure
VECTOR LIMITED Industry structure 8
Slide 9: Auckland's network
VECTOR LIMITED Auckland’s network 9
Slide 10: Penrose Substation
VECTOR LIMITED Penrose Substation 10
Slide 11: Minimising the disruption
VECTOR LIMITED Minimising the disruption “Kinda blown away by how ridiculously good @Vectorltd social media and comms are. I hope they manage to celebrate that in amongst the mess.” - Oct 06, 11:14am “Thanks @Vectorltd for all the updates today, & for being so quick off the mark :) looking forward t
Slide 12: Vector's challenging year
VECTOR LIMITED Vector’s challenging year Days when Vector’s network is prone to wind damage 2.0% Proportion of days in which wind 1.5% speed occurred 1.0% 0.5% 0.0% 60-65 65-70 70-75 75-80 80-85 85-90 90-95 95-100 100-105 105-110 Peak Sustained Wind (km/h) RY89-RY93 RY94-RY98 RY99-RY04 RY05-RY09 RY1
Slide 13: Network investment
VECTOR LIMITED Network investment Reliability • Areas affected by Penrose outage have enjoyed 99.99% reliability over the last 15 years • Incident reduces reliability of the area to 99.98% Investment • Over the last 10 years Vector’s electricity networks have received $1.3 billion in capital expendi
Slide 14: Independent network oversight
VECTOR LIMITED Independent network oversight Vector understands the pivotal position we occupy in the New Zealand and the Auckland economy and we “PA considers Vector to be a high take this responsibility very seriously. performing utility with low Our network investments are reviewed by: expenditur
Slide 15: Conclusions
VECTOR LIMITED Conclusions • This was a freak incident and if customers want a platinum service they will have to pay for it • The cost of energy has been a hot topic both here and internationally with this being further complicated by the impact of new technologies, renewables and economic performa
Slide 16: Michael Stiassny, Chairman
VECTOR LIMITED Michael Stiassny CHAIRMAN 16
Slide 17: Vector's vision and goal
VECTOR LIMITED Vector’s vision and goal VISION: First choice for integrated infrastructure solutions GOAL: Deliver sustainable dividend increases Declared dividend 20 • 2014 fully-imputed full year dividend rises 0.25 16 cents per share to 15.25 cents per share Approximately two thirds of AECT divid
Slide 18: 2014 financial performance
VECTOR LIMITED 2014 financial performance *For a comprehensive definition and reconciliation of this measure to the GAAP measure of net profit refer to page 50 of this presentation. 18
Slide 19: 2014 financial performance
VECTOR LIMITED 2014 financial performance 1,400 1,279.2 1,258.9 1,200 2013 2014 1,000 800 $Million 600 426.2 366.6 339.2 400 298.6 206.2 171.3 146.9 151.9 200 0 Revenue Net Profit Operating Capital Expenditure Dividend Paid Cash Flow -1.6% -16.9% -14.0% +13.6% +3.4% 19
Slide 20: Well positioned to continue to grow
VECTOR LIMITED Well positioned to continue to grow Auckland households Smart meters 800,000 800,000 675,555 700,000 600,000 600,000 505,888 500,000 400,000 369,394 400,000 245,477 200,000 300,000 200,000 114,272 - 100,000 1996 2001 2006 2013 2016 2021 2026 0 Actual Auckland Council forecast 2010 201
Slide 21: Outlook
VECTOR LIMITED Outlook • A challenging year ahead, with regulatory pricing adjustments relating to prior periods and changes to our allowable returns • Expected continued fall in demand for electricity per capita • Comfortable with consensus estimates for adjusted EBITDA for the 2015 financial year
Slide 22: Simon Mackenzie, Group Chief Executive
VECTOR LIMITED Simon Mackenzie GROUP CHIEF EXECUTIVE 22
Slide 23: Strategic focus
VECTOR LIMITED Strategic focus GOAL: Deliver sustainable dividend increases AREAS OF STRATEGIC CUSTOMER DISCIPLINED OPERATIONAL REGULATORY PEOPLE AND FOCUS GROWTH EXCELLENCE OUTCOMES SAFETY FOCUS INNOVATION 23
Slide 24: Meeting the challenge
VECTOR LIMITED Meeting the challenge Customers want: How we are delivering: • Value • Pioneering solar solutions, battery • Efficiency storage, energy management and • Reliability electric vehicles. • Choice and flexibility • Enhancing communication via • Minimal disruption upgrades to our website a
Slide 25: Vector delivers real value to customers
VECTOR LIMITED Vector delivers real value to customers • Vector’s electricity distribution prices have dropped two years in a row • After stripping out inflation our electricity distribution prices have fallen over recent years • Over the same period other external CUSTOMER charges have increased FO
Slide 26: Disciplined growth
VECTOR LIMITED Disciplined growth Bottle swap and technology business emerged from the identification of customer demand. Bottle swap • Delivers convenience and better health and safety outcomes • Outlets rise from 380 at acquisition to just under DISCIPLINED 800 in three years GROWTH Technology • S
Slide 27: Vector's energy solutions
VECTOR LIMITED Vector’s energy solutions Our solutions will be: • Tailored to meet customer needs and choices DISCIPLINED • Accessible and GROWTH affordable • Smart, feature rich and worry free • Sufficiently flexible to accommodate technological change We know energy and how to deliver it 27
Slide 28: Vector's storm response
VECTOR LIMITED Vector’s storm response • Vector remains among the lowest cost providers in the country • We deliver high standards of reliability on our networks • Constantly working to improve performance: OPERATIONAL • Improved maintenance techniques EXCELLENCE • New network agreements streamline
Slide 29: Regulation – the quest for an equitable regime
VECTOR LIMITED Regulation – the quest for an equitable regime Unrecovered allowable revenue 2013-2015 due to inflation forecasting errors 70.0 60.0 $Millions 50.0 40.0 30.0 20.0 10.0 REGULATORY - Vector EDB 1 EDB 2 EDB 3 EDB 4 EDB 5 EDB 6 EDB 7 EDB 8 EDB 9 EDB 10 EDB 11 EDB 12 EDB 13 EDB 14 EDB 15 O
Slide 30: Forecasting errors expensive
VECTOR LIMITED Forecasting errors expensive • The Commerce Commission does not recognise Power usage per Vector the trend of declining consumption per residential connection point connection 8,000 • The actual volume of electricity transported 7,800 across our network fell short of the regulator’s f
Slide 31: Difficult to advocate for incremental capex
VECTOR LIMITED Difficult to advocate for incremental capex • Proposals for cost of capital contrary to a position held for a considerable period of time • Proposed weighted average cost of capital would reduce regulated business EBITDA by $12 million per annum • Electricity network price adjustments
Slide 32: People: diversity and inclusion
VECTOR LIMITED People: diversity and inclusion Employee age Employee gender Employee ethnicity 10% 3% 10% Asian 10% 31% 1% Maori 23% 28% 27% Not recorded 59% PEOPLE AND 69% New SAFETY Zealand 29% European Polynesian 20-29 30-39 40-49 50-59 60+ Female Male Valuing diversity is good business and we ex
Slide 33: People: promoting diversity and inclusion
VECTOR LIMITED People: promoting diversity and inclusion Vector understands the performance of its people is linked to the quality of the working environment. Our key initiatives include: • Establishing a diversity committee to promote initiatives and a council to provide executive support • Paying
Slide 34: Health safety and environment
VECTOR LIMITED Health safety and environment Total recordable injury Vector severity rates frequency rate (TRIFR)* 120 95.25 Vector severity rates* 14.2 14.0 100 14.0 13.8 80 13.6 TRIFR* 13.4 60 13.2 40.13 40 13.0 12.9 12.8 20 12.6 0 12.4 PEOPLE AND Sep-13 Aug-13 Jul-13 Dec-13 Mar-14 Apr-14 Jun-13 O
Slide 35: Campaigns to improve public safety
VECTOR LIMITED Campaigns to improve public safety PEOPLE AND SAFETY Zot the Energy Bot: the face of Vector’s award- All Black Legend Buck Shelford fronted Vector’s winning schools programme winter and summer safety campaigns 35
Slide 36: Our focus
VECTOR LIMITED Our focus We have a great team committed to our core goals and we remain focussed on: • Delivering solutions to meet customer demands across all our businesses • Delivering on the potential of our Technology operations • Meeting the energy needs of a growing population in Auckland, as
Slide 37: Michael Stiassny, Chairman
VECTOR LIMITED Michael Stiassny CHAIRMAN 37
Slide 38: Ordinary business
VECTOR LIMITED Ordinary business 38
Slide 39: Re-election of Karen Sherry
VECTOR LIMITED Re-election of Karen Sherry Proxy Voting For 812,476,620 Against 1,036,338 Abstain 80,675 Discretionary 810,060 Additional discretionary held by the Chairman 1,008,044 39
Slide 40: Re-election of Hugh Fletcher
VECTOR LIMITED Re-election of Hugh Fletcher Proxy Voting For 813,042,545 Against 452,050 Abstain 56,031 Discretionary 839,608 Additional discretionary held by the Chairman 1,021,503 40
Slide 41: Re-election of James Carmichael
VECTOR LIMITED Re-election of James Carmichael Proxy Voting For 812,642,541 Against 912,241 Abstain 21,718 Discretionary 815,616 Additional discretionary held by the Chairman 1,019,621 41
Slide 42: Appointment and remuneration of auditor
VECTOR LIMITED Appointment and remuneration of auditor Proxy Voting For 813,242,080 Against 194,477 Abstain 67,759 Discretionary 815,028 Additional discretionary held by the Chairman 1,092,393 42
Slide 43: Special business
VECTOR LIMITED Special business 43
Slide 44: Vector's constitution
VECTOR LIMITED Vector’s constitution • This special resolution seeks shareholder approval of amendments to Vector’s constitution consistent with the amended Listing Rules • Vector’s constitution was last amended in 2006 44
Slide 45: Vector's constitution
VECTOR LIMITED Vector’s constitution Proxy Voting For 812,738,869 Against 99,459 Abstain 195,479 Discretionary 888,310 Additional discretionary held by the Chairman 1,489,620 45
Slide 46: Voting
VECTOR LIMITED Voting 46
Slide 47: General business
VECTOR LIMITED General business 47
Slide 48: 2014 Annual Meeting
VECTOR LIMITED 2014 Annual Meeting Ellerslie Event Centre, Auckland 22 October 2014 48
Slide 49: Appendix
VECTOR LIMITED Appendix 49
Slide 50: Appendix: GAAP to Non-GAAP reconciliation
VECTOR LIMITED Appendix Vector’s standard profit measure prepared under New Zealand GAAP is GAAP TO Non-GAAP reconciliation net profit. Vector has used non-GAAP profit measures when discussing EBITDA and Adjusted EBITDA 2014 2013 financial performance in this document. The directors and management b
Slide 51: vector.co.nz
vector.co.nz 51