Agl Energy Limited · ASX:AGL
Agl Energy — FY2018 Earnings Presentation
54 slides from Agl Energy's earnings presentation, Aug 9, 2018
Slide 1: FY18 Full-Year Results
FY18 Full-Year Results 9 August 2018
Slide 2: Results Highlights and Business Update
1 Results Highlights and Business Update Andy Vesey, Managing Director and CEO 2 Review of Operations and Financial Results Brett Redman, CFO 3 Market Update and Outlook Andy Vesey, Managing Director and CEO
Slide 3: Results Highlights and Business Update
Results Highlights and Business Update Andy Vesey Managing Director and CEO
Slide 4: Safety and Women in Senior Leadership Pipeline
Total Injury Frequency Rate (per million Women in Senior Leadership Pipeline (%) hours worked) 10.9 42 38 33 33 34 5.4 4.7 4.1 4.3 3.6 3.3 2.7 2.0 1.2 FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 Employees Contractors AGL Macquarie employee TIFR and contractor TIFR data included from FY15 (post
Slide 5: Strong financial result
AGL developing $2b-plus of electricity generation 1 Strong financial result 2 projects throughout Australia, more than any other company, to improve affordability and reliability $1,587m $1,023m Business optimisation plan to target $120m operating 3 cost reduction in FY19 and return to FY17 operatin
Slide 6: Prosper in a carbon-constrained future
Strategic Imperatives Key Objectives From… To… From… To… From… To… Mass Personalised Operating Orchestrating High Lower Leading in and growing retailing retailing large large and emissions emissions existing into new assets small assets technology technology markets… markets Prosper in a carbon-cons
Slide 7: Churn spread to rest of market increased to 5ppts from 4ppts
Churn spread to rest 25% increase in acquisitions Total customer numbers of market increased and retentions; customers broadly flat despite to 5ppts from 4ppts heavily engaged intense activity Customer Churn Acquisitions and Retentions Consumer Accounts ('000) 30% 2,500 ('000) 2,230 24.0% 25% 19.7%
Slide 8: Growing adoption rates consistent with connected customers' desire for digitisation and personalisation
Growing adoption rates consistent with connected customers’ desire for digitisation and personalisation Digital customer interactions vs. call volumes Digital IDs ('000) Digital billing (%) 18 16 14 1,074 50 12 42 746 833 34 Millions 10 8 FY16 FY17 FY18 FY16 FY17 FY18 6 Customers with digital IDs up
Slide 9: New $50m relief program for Staying Connected customers
New $50m relief program for Staying Connected Customers on standing offers reduced to 12% of the customers: customer base through proactive AGL outreach Cancels debt aged more than 12 months and offers dollar matching on other debt repayments 15% 12% Extends Affordability Fund to create Energy 23% 2
Slide 10: AGL total generation output (TWh)
AGL total generation output (TWh) 50 Strength of portfolio offsets availability impacts of ageing assets 40 Independent reviews of key plants demonstrated they are performing well for their age profile 30 Continuous improvement plans for outage management and asset management in place 20 Committed t
Slide 11: Projects under development represent more than 1,000 new construction jobs
Projects under development represent more than 1,000 new construction jobs In addition to approved projects already Coopers Gap Wind Farm* under development: 453 MW | $850m Completion FY19/20 Key project milestones reached for Crib Point in June 2018 ahead of final investment decision Continued asse
Slide 12: Targeting return to FY17 levels by FY21
Targeting return to FY17 levels by FY21 Operating costs excluding depreciation and amortisation ($m) 39 30 34 26 51 93 1,569 (59) (85) (4) 1,490 1,364* 1,364 New Energy, regulatory, Benefits include: Market activity, Loy Yang transition, incremental CXT benefits, IT transformation Reduced channel an
Slide 13: Review of Operations and Financial Results
Review of Operations and Financial Results Brett Redman CFO
Slide 14: FY18 financial summary
Body text goes here FY18 FY17 Change • Second level • ThirdProfit Statutory level after tax ($m) 1,587 539 194% • Fourth level Caption text here Statutory EPS (cents) 242.0 80.5 201% Underlying Profit after tax ($m) 1,023 802 28% Underlying EPS (cents) 156.0 119.8 30% Underlying cash flow fr
Slide 15: Year-on-year movement in Underlying Profit after tax $221m
Year-on-year movement in Underlying Profit after tax $221m Wholesale Customer Group Central Markets Markets Operations activities 130 (98) (3) (33) (57) (18) (11) (119) 16 668 (101) (9) (65) (79) 1,023 802 FY17 Wholesale Wholesale Eco Markets Operating Consumer Consumer Business Other Operating Ther
Slide 16: Comparison of volumes (TWh)
Comparison of volumes (TWh) Generation volumes flat Reduced generation at AGL Macquarie offset by increased generation at Loy Yang Consumer customers sales down 0.1 TWh 13.9 13.8 Lower average consumption per residential customer due to changed customer mix 11.2 9.8 Business customers sales down 1.4
Slide 17: Comparison of portfolio margin ($m)
Consumer customers down $33m Comparison of portfolio margin ($m) Price increases due to higher wholesale market prices 1,906 Impacts of increased market activity 1,471 36 452 Business customers down $4m 485 40 46 Decline in volumes due to loss of two large customers 141 Eco Markets down $95m 2,217 C
Slide 18: Comparison of volumes (PJ)
Comparison of volumes (PJ) 229.8 Consumer customers sales up 1.4 PJ 58.5 180.0 Volumes increased due to higher market volume revisions related to the prior year 59.9 61.6 Business customers sales down 29.3 PJ Significant decrease in volumes sold due to the loss of large 32.3 customers driven by tigh
Slide 19: Comparison of portfolio margin ($m)
Comparison of portfolio margin ($m) Consumer customers down $57m 729 Price increases due to higher gas commodity costs 673 Impacts of increased market activity 250 Business customers down $14m 307 Significant decrease in volumes sold due to loss of large 46 customers and tight market conditions 60 W
Slide 20: Operating cash flow and use of cash in period
Operating cash flow Use of cash in period ($m) FY18 FY17 ($m) FY18 FY17 Underlying EBITDA 2,226 1,852 Net cash provided by operating activities 2,134 891 Equity accounted income and onerous Capital expenditure (720) (503) (33) (34) contracts Gain on divestments - (23) Proceeds from divestments 202 2
Slide 21: Sustaining capex expected to reduce in outer years consistent with maintenance cycles
Sustaining capex expected to reduce in outer years consistent with maintenance cycles Capital expenditure and investment outlook ($m, accruals basis) 1,030 778 655 679 483 484 411 442 FY18 actual FY19 budget FY20 plan FY21 plan Sustaining capex Customer Experience Transformation ERP upgrade (PT3) Ba
Slide 22: Already underway and/or approved by AGL Board
More advanced Powering Australian Renewables Fund Customer Experience Transformation PT3 (ERP upgrade) WA retail gas entry Already underway and/or approved by AGL Board NEM re-investment: Barker Inlet Power Station NEM re-investment: Newcastle Power Station Crib Point LNG import jetty Further NEM re
Slide 23: Capital allocation principles
Capital allocation principles FY18 outcome FY19 outlook 1. Maintain balance sheet strength consistent with Baa2 credit rating to enable optimal Strong liquidity position maintained Ample headroom response to opportunities as they emerge Gearing ratio of 21.8% Hybrid re-financing in June 2019 2. Main
Slide 24: Market Update and Outlook
Market Update and Outlook Andy Vesey Managing Director and CEO
Slide 25: The fall in electricity forwards has been substantial compared with fuel input proxies
Comparative fall in commodity prices vs. new renewable project development The fall in electricity forwards has been substantial 10% compared with fuel input proxies, reflecting anticipated impact of renewables build 5% Impact of new renewables generation represents 0% small proportion of total dema
Slide 26: Falling pool prices will gradually be reflected in customer prices
Falling pool prices will gradually be reflected in customer prices based on contract structures Consumer customers sales Standing tariffs change annually by state but competitive pricing in the market is already reflective of lower wholesale price outlook 13.8 Impacted by wholesale market curve chan
Slide 27: AGL's gas strategy is about mitigating supply uncertainty
Victorian gas supply forecast (Gippsland AGL’s gas strategy is about mitigating supply uncertainty and Port Campbell) and providing significant optionality to the AGL portfolio to benefit customers: 500 Continued uncertainty in supply underpins the need 450 for LNG imports to deliver a flexible sour
Slide 28: National Energy Guarantee
National Energy Guarantee AGL supports the National Energy Guarantee to provide certainty in relation to energy policy Policy certainty is key to encouraging further generation supply investments, to place downward pressure on electricity prices ACCC report into retail electricity pricing AGL acknow
Slide 29: Underlying Profit after tax expected to be $970 million to $1,070 million
Underlying Profit after tax expected to be $970 million to $1,070 million Wholesale Markets earnings to peak as electricity market prices begin to decline Eco Markets to deliver improved result on FY18 as PARF projects increase production Market activity and affordability actions driving impacts in
Slide 30: Questions?
Questions?
Slide 31: Supplementary Information
Supplementary Information
Slide 32: Statutory Profit to Underlying Profit reconciliation
($m) FY18 FY17 Change Body text Profit Statutory goes here after tax 1,587 539 1,048 • Second Adjust for thelevel following after tax items: • Third Items Significant level • Fourth level Active Stream gain on divestment (29) - (29) Caption text here Sunverge impairment 27 - 27 (Gain)/loss on fair v
Slide 33: Underlying profit and loss summary
($m) FY18 FY17 Change Body text goes here Revenue 12,816 12,584 2% • Second Gross marginlevel 3,795 3,216 18% • Thirdcosts Operating level(excluding depreciation & amortisation) (1,569) (1,364) 15% • Fourth Underlying level EBITDA 2,226 1,852 20% Caption text here & amortisation Depreciation (558) (
Slide 34: Electricity portfolio margin movement
Network and other cost of Costs of Revenue sales generation 86 33 65 288 (11) (111) 122 (90) (176) (54) 335 (52) 1,906 1,471 FY17 Consumer Business Wholesale Group Consumer Consumer Business Business Fuel costs Generation Depreciation Net Portfolio FY18 customers customers customers & Operations net
Slide 35: Gas portfolio margin movement
Network and other Wholesale Revenue cost of sales costs 138 27 (174) 137 (74) 9 22 (28) (1) 729 673 FY17 Consumer Business Wholesale Gas & Consumer Consumer other Business Business Gas purchases Haulage, storage FY18 customers customers Eco Markets network costs cost of sales customers customers oth
Slide 36: Wholesale Markets
($m) FY18 FY17 Change Body text Electricity Wholesale goes here gross margin 2,217 1,549 43% • Second Wholesale level Gas gross margin 432 302 43% Third level Eco •Markets gross margin 47 145 (68)% Fourth level Gross •margin 2,696 1,996 35% Caption text here Operating costs (excluding depreciation &
Slide 37: Customer Markets
($m) FY18 FY17 Change Body text goes Consumer here Electricity gross margin 452 485 (7)% • Second Consumer level Gas gross margin 250 307 (19)% • Third Business level gross margin Electricity 36 40 (10)% • Fourth Business levelmargin Gas gross 46 60 (23)% Caption text hereServices gross margin New E
Slide 38: Group Operations
($m) FY18 FY17 Change Body Grosstext goes here margin 206 222 (7)% • Second Operating level costs (excluding depreciation & amortisation) (716) (673) 6% • Third level Underlying EBITDA (510) (451) 13% • Fourth Depreciation level & amortisation (414) (363) 14% Caption text here Underlying EBIT Therma
Slide 39: Centrally Managed Expenses and Investments
($m) FY18 FY17 Change Body text Managed Centrally goes here Expenses: • Second level Underlying EBITDA (281) (222) 27% Third level & amortisation •Depreciation (32) (26) 23% Underlying EBIT (313) (248) 26% Investments: Underlying EBITDA 33 17 94% Depreciation & amortisation - - - Underlying EBIT 33
Slide 40: Generation output by asset
GWh FY18 FY17 Change Body Asset text goes here AGL Macquarielevel • Second – Bayswater 13,917 14,370 (3)% AGL Macquarie – Liddell 7,627 8,589 (11)% • Third level AGL Loy Yang 14,998 13,924 8% • Fourth level AGL Torrens 2,596 2,669 (3)% Caption text here SA wind 1,360 1,167 17% VIC wind 1,197 1,035 1
Slide 41: Generation asset capacity and carbon intensity
Capacity Carbon intensity FY18 sent out Asset State Type Status (MW) (tCO2e/MWh) generation (GWh) AGL Macquarie - Bayswater NSW Coal Owned 2,640 0.94 14,627 AGL Macquarie - Liddell NSW Coal Owned 2,000 0.97 8,137 AGL Loy Yang VIC Coal Owned 2,210 1.29 15,517 Total coal 6,850 38,281 AGL Torrens SA Ga
Slide 42: Equivalent Availability Factor
Equivalent Availability Factor – by year Equivalent Availability Factor – by plant 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% FY14 FY15 FY16 FY17 FY18 AGL Loy Yang AGL Macquarie - AGL Macquarie - Liddell AGL Torrens Bayswater AGL Loy Yang AGL Macquarie -
Slide 43: Coal supply vs generation outlook
Coal supply vs generation outlook (Mt) 12 10 8 6 4 2 0 FY17 Actual FY18 Actual FY19 Forecast FY20 Forecast FY21 Forecast Contracted coal purchases Stockpile drawdown or additional purchases AGL Macquarie Generation - customer load AGL Macquarie Generation - settled at market AGL Energy FY18 Full-Yea
Slide 44: Electricity sales volumes
GWhtext goes here Body FY18 FY17 Change Consumer • Second level New South Wales 5,543 5,566 (0)% • Third level Victoria 3,856 3,638 6% • Fourth level South Australia 1,944 2,093 (7)% Caption text here Queensland 2,425 2,591 (6)% Consumer total 13,768 13,888 (1)% Business New South Wales 4,415 4,769
Slide 45: Gas sales volumes
PJ FY18 FY17 Change Body text goes here Consumer • Second New level South Wales 20.9 19.8 6% Victoria • Third level 33.2 32.6 2% South •Australia Fourth level 3.3 3.5 (6)% Queensland Caption text here 2.4 2.6 (8)% Western Australia 0.1 - 100% Consumer total 59.9 58.5 2% Business New South Wales 6.6
Slide 46: Customer accounts
(‘000) 30 Jun 2018 30 Jun 2017 Change Body text goes Consumer here Electricity • Second New level South Wales 823 807 2% Victoria • Third level 658 638 3% South •Australia Fourth level 367 388 (5)% Queensland Caption text here 372 404 (8)% Total Consumer Electricity 2,220 2,237 (1)% Consumer Gas New
Slide 47: Customer Markets key metrics
FY14 FY15 FY16 FY17 FY18 Body Grosstext goes margin ($) here 697m 737m 797m 792m 702m • Second Net operatinglevel costs ($) (365)m (416)m (398)m (413)m (527)m Third level EBIT• ($) 332m 321m 399m 379m 175m Fourth Gross •margin level per customer account ($) 187 198 216 217 192 Caption text here Net
Slide 48: Consumer electricity and gas metrics
FY18 FY17 Change Body text goes here Electricity • Second Volume level (GWh) 13,768 13,888 (1)% • Third Average level Consumer accounts (‘000) 2,240 2,243 (0)% • Fourth Revenue ($m) level 4,145 3,810 9% Caption Grosstext here ($m) margin 452 485 (7)% Gross margin (%) 10.9 12.7 (1.8)ppts Gross margin
Slide 49: Business electricity and gas metrics
FY18 FY17 Change Body text goes here Electricity • Second level Volume (GWh) 9,752 11,198 (13)% • Third level Revenue ($m) 1,615 1,550 4% • Fourth level Grosstext Caption margin here ($m) 36 40 (10)% Gross margin (%) 2.2 2.6 (0.4) ppts Gross margin per MWh ($) 3.7 3.6 3% Gas Volume (PJ) 32.3 61.6 (4
Slide 50: Debt facilities
Debt facility ($m) Limit Usage Maturity Body text goes Subordinated here notes* 650 650 FY19 Revolving • Second level facilities bilateral 371 0 FY20 Syndicated revolving facility 400 0 FY21 • Third level A$600m medium-term notes 600 600 FY22 • Fourth level Revolving bilateral facility 75 0 FY22 Cap
Slide 51: Debt maturity profile
800 600 ($m) 400 200 0 FY21 FY32 FY19 FY20 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 Bond Debt Drawn Bank Debt Undrawn Bank Debt Hybrid Notes AGL Energy FY18 Full-Year Results | 9 August 2018 51
Slide 52: Half-year and full-year segment history
Body ($m) text goes here 1H14 FY14 1H15 FY15 1H16 FY16 1H17 FY17 1H18 FY18 • Second Wholesale Marketslevel external revenue 885 1,729 1,014 2,481 1,630 3,518 1,966 4,860 2,454 4,944 • Third Customer level Markets external revenue 4,299 8,501 4,071 8,006 3,878 7,438 3,752 7,334 3,907 7,696 • Fourth G
Slide 53: 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 54: 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