Agl Energy Limited · ASX:AGL
Agl Energy — H1 FY2012 Earnings Presentation
52 slides from Agl Energy's earnings presentation, Feb 24, 2012
Slide 1: 2012 Interim Results
2012 Interim Results 6 Months to 31 December 2011 Michael Fraser, Managing Director and CEO Stephen Mikkelsen, Chief Financial Officer | 24 February 2012
Slide 2: Disclaimer
2 Disclaimer This presentation is not intended as an offer, invitation, solicitation or recommendation with respect to the purchase or sale of any security in the United States or any other jurisdiction. Securities may not be offered or sold in the United States absent registration under the Securit
Slide 3: Agenda
3 Agenda › Result Highlights Michael Fraser › Group Financials Stephen Mikkelsen › Operational Review / Summary Michael Fraser › Supplementary Information IMPORTANT NOTE: This presentation should be read in conjunction with the AGL Energy Limited ASX Appendix 4D for the 6 months ended 31 December 20
Slide 4: Half Year 2012 Highlights
4 Half Year 2012 Highlights Solid base for strong full year result. › Underlying Profit up 3% to $232.9 million › High quality result considering soft demand and lower wind farm development and gas storage fee income › Retail Operating EBIT up $19.8 million (12.5%) › Merchant Operating EBIT up $24.8
Slide 5: Interim 2012 Result
5 Interim 2012 Result Operating performance consistent with delivering strong FY12 result. › Revenue: $3,615.3m 3.6% › Statutory Profit: $117.0m 51.2% FINANCIAL › Underlying Profit: $232.9m 3.0% › Underlying EPS: 50.3 cps 0.8% › DPS: 100% franked (Dec 10: 0% franked) 29.0 cps (Dec 10: 29.0 c
Slide 6: Group Financials
6 Group Financials Stephen Mikkelsen Chief Financial Officer
Slide 7: Profit & Loss (excluding significant items & fair value movements)
7 Profit & Loss (excluding significant items & fair value movements) Clean result and a 3% uplift in Underlying Profit. 6 months to 31 Dec 2011 31 Dec 2010 Change $m Revenue 3,615.3 3,488.0 3.6% Operating EBITDA 438.9 416.0 5.5% Operating EBIT Retail 178.2 158.4 12.5% Merchant 248.8 224.0 11.1% Upst
Slide 8: Group Underlying Profit
8 Group Underlying Profit Retail and Merchant performing well. Merchant Upstream Retail Gas 300 280 28.7 13.0 $ million 260 30.5 (16.9) (15.0) (1.3) 240 (10.7) (9.8) 232.9 (8.0) 226.2 (3.8) 220 YTD Consumer Other Retail Wholesale Development Other Gas storage Other Central Investments Interest & YTD
Slide 9: Retail – Key Financial Metrics
9 Retail – Key Financial Metrics Gross margin improvement drives Operating EBIT improvement (+12.5%). 6 months to 31 Dec 2011 31 Dec 2010 Change $m Electricity Revenue 1,410.2 1,217.9 15.8% Gas Revenue 582.8 588.8 (1.0)% Other Revenue (Fees & Charges) 38.4 31.9 20.4% Total Revenue 2,031.4 1,838.6 10
Slide 10: Retail – EBIT Drivers
10 Retail – EBIT Drivers Strong growth in first half financial performance. 200 6.5 30.5 (1.4) 190 (5.2) (5.6) 2.4 178.2 180 $ million (7.4) 170 160 158.4 150 140 YTD December Gross Margin Other Gross Margin Bad & Doubtful Campaigns & Labour & Depreciation & Other YTD December FY11 Debts Advertising
Slide 11: Retail – Key Operating Metrics
11 Retail – Key Operating Metrics Gross margin per customer tracking well. 6 months to 31 Dec 2011 31 Dec 2010 Change Gross margin excluding fees and charges ($m) 334.9 304.4 10.0% Avg customer numbers (‘000) 3,322.3 3,245.2 2.4% Gross margin per customer $100.80 $93.80 7.5% Gross margin per custome
Slide 12: Retail – Key Operating Metrics
12 Retail – Key Operating Metrics Operating expenditure to gross margin ratio. 6 months to 31 Dec 2011 31 Dec 2010 Change $m Operating costs (166.8) (157.0) 6.2% Depreciation and amortisation (28.3) (20.9) 35.4% Less fees and charges 38.4 31.9 20.4% Net operating expenditure (156.7) (145.9) 7.4% Gro
Slide 13: Merchant – Key Financial Metrics
13 Merchant – Key Financial Metrics Electricity and eco-markets drive Operating EBIT improvement (+11.1%). 6 months to 31 Dec 2011 31 Dec 2010 Change $m Operating EBITDA 287.7 258.2 11.4% D&A (38.9) (34.2) 13.7% EBIT Energy Portfolio Management (EPM) Wholesale Electricity Gross Margin 178.6 149.9 19
Slide 14: Merchant – EBIT Drivers
14 Merchant – EBIT Drivers Good growth in first half. 270 20.1 (1.3) (0.8) 260 28.7 250 0.1 248.8 (16.7) (5.3) 240 $ Million 230 224.0 220 210 200 YTD December Wholesale Wholesale Gas Eco-markets Merchant Business Power Other YTD December FY11 Electricity Operations Customers Development FY12 Key Dr
Slide 15: Underlying Operating Cash Flow
15 Underlying Operating Cash Flow Cash flow temporarily impacted by new C&I system. 6 months to 31 Dec 2011 31 Dec 2010 Change $m Operating EBITDA 438.9 416.0 Total working capital movements (249.3) (259.6) Net finance costs paid (37.8) (25.3) Income tax paid (121.6) (75.0) Other (2.4) (30.1) Statut
Slide 16: Operational Review
16 Operational Review Michael Fraser Managing Director & CEO
Slide 17: Safety & People
17 Safety & People Continued drive to restore safety performance. › Key safety statistics » 2.0 million hours worked » 5 Lost Time Injuries Lost Time Injury Frequency Rate » 12 Total Injuries January 2008 - December 2011 › Key people initiatives 6.0 » Improving employee and contractor 5.0 safety 4.0
Slide 18: Customer growth - 100,000 customers in six months
18 Customer growth - 100,000 customers in six months NSW leads growth in AGL customer base. Incremental Customer Numbers - National 120,000 › 100,419 net customer growth across all states Incremental customers 100,000 » 80,166 new dual fuel customers 80,000 60,000 › AGL increases gap in national chu
Slide 19: NSW growth – Electricity customer acquisition
19 NSW growth – Electricity customer acquisition Organic growth strategy ahead of required “run rate”. › Current success rates confirm AGL on track to NSW Electricity Customer Numbers grow NSW electricity customer base to between 600,000 customer numbers 800,000 and 900,000 by June 2014 550,000 › Fu
Slide 20: NSW growth – Electricity customer acquisition
20 NSW growth – Electricity customer acquisition Low cost to acquire creates significant shareholder value. › Average acquisition cost per customer - $172 » Amount amortised over life of contracts - $164 › High proportion of new customers entering into fixed-term contracts (84%) › Capitalised cash o
Slide 21: Retail Operations & Customer Service
21 Retail Operations & Customer Service Continued focus on core operations. Share of total Ombudsman complaints continues to decrease % of total complaints Market share 35 › AGL share of customer complaints continues to 30 decrease, well below natural market share AGL % of total complaints 25 › Impr
Slide 22: Merchant – Generation: Operational performance
22 Merchant – Generation: Operational performance Plant performance continues at high levels. Commercial Availability / Start Reliability (%) 1. Commercial availability is used to measure 100.0 Torrens Island performance, and represents the percentage of times the plant is available to operate when
Slide 23: Upstream Gas – Creating long-term value
23 Upstream Gas – Creating long-term value AGL 2P reserves now stand at 2,176 PJ. › Total Bowen Basin 2P reserves up 90 PJ and 3P reserves up 331 PJ AGL share of gas reserves As at 31 Dec 11 As at 30 Jun 11 Change PJ 2P 3P 2P 3P 2P 3P Gloucester (100%) 669 832 669 832 - - Moranbah (50%) – Bowen Basi
Slide 24: Development Projects
24 Development Projects Project pipeline to augment growth and lower risk profile. › Macarthur wind farm on track for completion Q3FY13 › Hallett 5 and Oaklands Hill wind farms currently generating and expected to be fully commissioned Q3FY12 › Diamantina power station, approximately 240 MW capacity
Slide 25: Carbon tax legislation
25 Carbon tax legislation Introduction of carbon tax expected to be earnings accretive for AGL. › AGL has invested heavily in preparation for a low carbon environment » Generation fleet average emissions intensity 56% below NEM (excluding Loy Yang A) » Expanded pipeline of low-emission gas and renew
Slide 26: Summary
26 Summary First half of FY12 has laid a solid foundation for a strong full year. › Retail continues to perform well » Good growth in margins » Strong growth in customer numbers » Step improvement in customer service › Merchant Energy performs very well despite lower wind farm development fees › Ups
Slide 27: Outlook 2012
27 Outlook 2012 Further improvements expected in the second half of FY12. › Previous guidance of Underlying NPAT for FY12 of $470m to $500m confirmed subject to normal trading conditions › First half delivers foundation for strong full year result › Continued growth in Retail contribution › Growth i
Slide 28: Further Information / Contacts
28 Further Information / Contacts A range of information on AGL Energy Limited including ASX & Media Releases, Presentations, Financial Results, Annual Reports and Sustainability Reports is available from our website: www.agl.com.au Alternatively, contact: INVESTORS MEDIA John Hobson Nathan Vass Hea
Slide 29: Supplementary Information
29 Supplementary Information
Slide 30: Electricity Sales Volume
30 Electricity Sales Volume 6 months to 31 Dec 2011 31 Dec 2010 Change GWh Consumer VIC 2,372 2,476 (4.2%) SA 1,435 1,6471 (12.9%) NSW 2,327 1,859 25.2% QLD 1,447 1,577 (8.2%) Consumer Total 7,581 7,559 0.3% C&I VIC 2,841 3,147 (9.7%) SA 2,332 1,731 34.7% NSW 2,583 2,736 (5.6%) QLD 1,347 1,545 (12.8
Slide 31: Gas Sales Volume
31 Gas Sales Volume 6 months to 31 Dec 2011 31 Dec 2010 Change PJ Consumer VIC 15.5 17.7 (12.4%) SA 1.4 1.5 (6.7%) NSW 13.9 14.6 (4.8%) QLD 1.5 1.6 (6.3%) Consumer Total 32.3 35.4 (8.8%) C&I VIC 12.5 13.6 (8.1%) SA 4.5 4.0 12.5% NSW 14.0 20.5 (31.7%) QLD 7.3 7.2 1.4% C & I Total 38.3 45.3 (15.5%) Wh
Slide 32: Retail – Consumer Key Indicators
32 Retail – Consumer Key Indicators 6 months to 31 Dec 2011 31 Dec 2010 Change Electricity Volume (GWh) 7,581 7,559 0.3% Avg. Consumer Accounts ('000) 1,951.5 1,877.0 4.0% Revenue ($m) 1,410.2 1,217.9 15.8% Gross Margin ($m) 217.5 200.0 8.8% Gross Margin 15.4% 16.4% (1.0ppts) Gross Margin per custom
Slide 33: Customer numbers
33 Customer numbers Customer Numbers 31 Dec 2010 30 Jun 2011 31 Dec 2011 Movement (‘000) Electricity New South Wales 422,681 467,980 556,982 89,002 Queensland 361,803 349,770 354,645 4,875 South Australia 475,329 467,769 463,513 (4,256) Victoria 645,618 639,238 637,505 (1,733) 1,905,431 1,924,757 2,
Slide 34: Retail – Market Churn
34 Retail – Market Churn 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 NSW Electricity - Market NSW Gas - Market VIC Electricity - Market VIC Gas - Market SA Electricity - Market SA Gas - Market QLD Electricity - Market QLD Gas - Market »
Slide 35: Retail – Cost to Serve
35 Retail – Cost to Serve 6 months to 31 Dec 2011 31 Dec 2010 Change Net operating expenditure 156.7m 145.9m 7.4% Net operating cost per customer account $47.14 $44.97 4.8% Cost to grow/retain 48.8m 38.5m 26.8% Cost to grow per account acquired/retained1 $67.75 $81.21 (16.6%) Cost to serve 107.9m 10
Slide 36: Retail – Weather
36 Retail – Weather Volume demand characterised by warm winter temperatures. › Winter months » Victoria August 2011 3rd warmest average maximum temperatures on record, July and August 1 - 2°C above average » South Australia July and August 2011: 1 - 3°C above average, 4th warmest August since 1950 (
Slide 37: Merchant – C & I Key Indicators
37 Merchant– C & I Key Indicators 6 months to 31 Dec 2011 31 Dec 2010 Change Electricity Volume (GWh) 9,103 9,159 (0.6%) C & I Accounts ('000) 19.8 17.9 10.6% Revenue ($m) 939.9 905.3 3.8% Gross Margin ($m) 29.5 30.9 (4.5%) $ / MWh $3.24 $3.37 (3.9%) 6 months to Gas Volume (PJ) 38.2 45.2 (15.5%) C &
Slide 38: Merchant – Generation: Wind Farm
38 Merchant – Generation: Wind Farm › Hallett 5 and Oaklands Wind Farm commenced operation during FY12 and will be fully commissioned in Q3 FY12 › Availability lower at Hallett 2 due to constraints for noise control. This has been corrected late in December and availability will return to normal lev
Slide 39: Merchant – Hydrology
39 Merchant – Hydrology › 52.6% of hydro capacity is linked to drought resistant Kiewa Scheme › Dartmouth is fully operational with a current capacity of 151MW. Irrigation releases are expected to be minimal and the dam is expected to remain at its current levels over summer › Eildon has had high in
Slide 40: Merchant – Electricity Hedging: Policy
40 Merchant – Electricity Hedging: Policy › AGL Risk Management Policy is set by the Board and establishes the requirements for the management of wholesale risk › Clearly defined and approved commodity and transaction limits › Counter party credit limit tier allocation › Market price risk is contain
Slide 41: Merchant – Wholesale Electricity Prices
41 Merchant – Wholesale Electricity Prices › Forward prices increased in all regions from May 2011 onwards, with most of the uplift seen in Q3 and Q4 Calendar year 2012 › These price increases reflected increased confidence in the Clean Energy Future bills being passed into legislation, taking effec
Slide 42: Merchant – Electricity Hedging: Position
42 Merchant – Electricity Hedging: Position Physical Financial Satisfying Financial Risk Limits Unhedged load must be limited Range of profit outcomes from so that potential downside unhedged load exposed to variable cannot result in an NPAT below wholesale market prices. this level as modelled in w
Slide 43: Upstream Gas – Key Financial Metrics
43 Upstream Gas – Key Financial Metrics 6 months to 31 Dec 2011 31 Dec 2010 Change $m Operating EBITDA 11.1 27.6 (59.8%) D&A (10.1) (10.3) (1.9%) EBIT Upstream Gas Queensland / South Australia 4.2 17.5 (76.0%) New South Wales 1.0 3.1 (67.7%) Equity Investments (0.1) (0.1) - Sundry (4.1) (3.2) 28.1%
Slide 44: Upstream Gas Interests – Permit Details
44 Upstream Gas Interests – Permit Details Permits Permits Working Working Basin Project Exploration Production Basin Project Exploration Production 2 2 Interest 2 2 Interest (Area km ) (Area km ) (Area km ) (Area km ) PEL 2 (6,708)r - 100% 28.71- ATP 471P (703)r - 100% PEL 5 (401)r - 100% ATP 709P
Slide 45: Operating Cash Flow to Statutory Cash Flow Reconciliation
45 Operating Cash Flow to Statutory Cash Flow Reconciliation 6 months to 31 Dec 2011 31 Dec 2010 Movement $m Operating EBITDA 438.9 416.0 22.9 Equity accounted income (net of dividend received) 8.0 2.9 5.1 Accounting for onerous gas contract (10.4) (10.4) - (Increase) / decrease in receivables (51.3
Slide 46: Energy Investments
46 Energy Investments 6 months to 31 Dec 2011 31 Dec 2010 Change $m EBIT ActewAGL 17.3 17.6 (1.7%) Loy Yang (4.9) 0.4 nm Investments Other - 2.4 na Total EBIT 12.4 20.4 (39.2%) » 2012 Interim Results 6 months to 31 December 2011 » 24 February 2012 » AGL External
Slide 47: Capital Expenditure
47 Capital Expenditure 6 months to 31 Dec 2011 SIB Discretionary Total $m Merchant Energy 33.0 174.4 207.4 Upstream Gas - 81.4 81.4 Retail Energy - 31.5 31.5 Corporate Other 7.0 2.2 9.2 Total 40.0 289.5 329.5 » 2012 Interim Results 6 months to 31 December 2011 » 24 February 2012 » AGL External
Slide 48: Capital Expenditure
48 Capital Expenditure 1H FY12 2H FY12 FY12 $m Actual Forecast Forecast Macarthur 136.4 240 376.4 Dalton 1.1 40 41.1 Newcastle GSF 3.3 45 48.3 Upstream Gas 78.1 90 168.1 SIB 40.0 60 100.0 Other 70.6 85 155.6 Total 329.5 560 889.5 » 2012 Interim Results 6 months to 31 December 2011 » 24 February 2012
Slide 49: Balance Sheet
49 Balance Sheet As at 31 Dec 2011 30 Jun 2011 $m Current assets 2,259.2 2,730.4 PPE, E&E and oil & gas assets 3,652.6 3,400.9 Other non current assets 3,495.2 3,564.4 Total Assets 9,407.0 9,695.7 Current debt - 886.7 Other current liabilities 1,294.2 1,570.4 Non current debt 1,135.7 284.5 Other non
Slide 50: Statutory Profit to Underlying Profit Reconciliation
50 Statutory Profit to Underlying Profit Reconciliation 6 months to 31-Dec-11 31-Dec-10 $m Statutory Profit 117.0 239.6 Adjust for the following after tax items: Significant items - 16.8 Changes in fair value of financial instruments 115.9 (30.2) Underlying Profit1 232.9 226.2 1. Underlying Profit i
Slide 51: Fair Value Reconciliation
51 Fair Value Reconciliation Net Assets (Liabilities) As at $m 31 Dec 2011 30 Jun 2011 Change Electricity derivative contracts (11.1) (89.7) 78.6 Interest rate swap & foreign currency derivative contracts (117.7) (148.5) 30.8 Total net liabilities for derivative contracts (128.8) (238.2) 109.4 Chang
Slide 52: Loy Yang A: Financial Performance
52 Loy Yang A: Financial Performance 6 months to 31 Dec 2011 31 Dec 2010 Change $m Generation Volume (GWh) 7,479 7,677 (2.6%) 1 Average Price ($/MWh) $35.57 $36.60 (2.8%) Generation revenue 266.0 281.0 (5.3%) Other revenue 47.3 41.8 13.2% Expenses (148.7) (146.6) 1.4% Depreciation (62.9) (59.1) 6.4%