Genesis Energy Limited · NZX:GNE
Genesis Energy — Investor Day (November 2018)
74 slides from Genesis Energy's investor day presentation, Nov 7, 2018
Slide 1: Genesis Investor Day market release
MARKET RELEASE Date: 7 November 2018 NZX: GNE / ASX: GNE GENESIS INVESTOR DAY For personal use only Genesis Energy hosts its 2018 Investor Day today where it presents an update on its business activities, markets and strategy toward achieving its FY21 target EBITDAF of $400-430m. The Investor Day pr
Slide 2: Investor Day November 2018
Investor Day November 2018 Or personal use only |
Slide 3: Disclaimer
Disclaimer For personal use only This presentation has been prepared by Genesis Energy Limited (‘Genesis Energy’) for information purposes only. The information in this presentation is of a general nature and does not purport to be complete nor does it contain all the information required for an inv
Slide 4: Investor Day Agenda
Investor Day Agenda For personal use only 8:00 – 8:30 Welcome breakfast 8:30 – 9:00 Overview of the day Marc England • Customer platform • Nigel Clark 9:00 – 10:30 Business update • Wholesale market • Shaun Goldsbury • Kupe (with Beach Energy) • Andre Gaylard 10:30 – 11:00 Morning tea, including bus
Slide 5: Key messages
Key messages For personal use only Genesis Energy Limited Investor Day November 2018 4.
Slide 6: Genesis is accelerating the pace of change
For personal USe Only GENESIS ENERGY LIMITED Genesis is accelerating the pace of change, powered by people, culture and agile processes genesis
Slide 7: Our investment proposition of strong yield is underpinned by growth
Our investment proposition of strong yield is underpinned by growth For personal use only NZX 50 / ASX 100 YIELD COMPARISON EBITDAF DIVIDEND CENTS PER SHARE & YIELD $ MILLIONS Dividends (CPS) Net Yield % Mean 90th Percentile 75th Percentile 25th Percentile 16.6 16.9 12% 16.0 16.4 GNE 350-370 10% 10%
Slide 8: Genesis is powered by a great team
Genesis is powered by a great team… For personal use only Aligning Continuing Valuing around our strong diversity of strategy to health and people and succeed safety focus ideas together Genesis Energy Limited Investor Day November 2018 7.
Slide 9: Supported by energised and inspiring leaders
… supported by energised and inspiring leaders For personal use only Directors Barbara Chapman Doug McKay Paul Zealand Joanna Perry Tim Miles Maury Leyland James Moulder Executive team Marc England Chris Jewell Tracey Hickman Nigel Clark James Magill Nicola Richardson Matthew Osborne Chief Executive
Slide 10: Our ways of working make us safe, fast and flexible
Our ways of working make us safe, fast and flexible For personal use only 10% increase in 125 people velocity over last Squads have engaged in 18 six months allowing completed up to 60 squads aligned to for better sprints four tribes predictability of cost and benefit realisation Genesis Energy Limi
Slide 11: Our diversity and culture drive our successful strategy delivery
Our diversity and culture drive our successful strategy delivery For personal use only Commitment to being an Engagement and confidence in Wellbeing and safety is more inclusive and diverse employer business success on the rise than just a responsibility 38% of employees have bought nearly Two third
Slide 12: Our purpose is to reimagine energy
Our purpose is to reimagine energy to put control in our customers’ hands For personal use only Fuels Brands Platform Genesis Energy Limited Investor Day November 2018 11.
Slide 13: Genesis in numbers
Genesis in numbers For personal use only Genesis Energy Limited Investor Day November 2018 12.
Slide 14: Diversity of earnings across sectors, fuels and markets
Diversity of earnings across sectors, fuels and markets For personal use only GROSS MARGIN CONTRIBUTION (FY18) KUPE 20% WHOLESALE 43% CUSTOMER 37% Gas 11% Business Renewable generation 30% Residential electricity 20% electricity 6% Oil 6% LPG 3% LPG 1% Thermal generation 12% LPG 7% Gas 4% Electricit
Slide 15: Core markets stable or growing
Core markets stable or growing For personal use only GRID DEMAND GRID DEMAND FORECASTS (GWH) 65,000 4,000 SHOWING SIGNS OF GROWTH (GWH) 60,000 Growth is 3,800 55,000 3,600 forecast in 3,400 Est. 50,000 NZ energy 3,200 45,000 demand 3,000 40,000 2,800 35,000 2008 2024 2004 2005 2006 2007 2009 2010 20
Slide 16: Electricity markets reflecting tighter capacity margins
…with electricity markets reflecting tighter capacity margins For personal use only Regulatory Energy and Tiwai 4th review of capacity potline electricity shortages adds to prices showing demand underway RESIDENTIAL ELECTRICITY PRICE (C/KWH) 400 WHOLESALE ELECTRICITY PRICE ($/MWH) NEW ZEALAND WINTER
Slide 17: Fuel markets tightening
…and fuel markets tightening For personal use only LPG Oil and gas International market exploration to oil prices have moves to be restricted increased net import FORECAST GAS AND LPG PRODUCTION PROFILE NZ LPG IMPORT/EXPORT PARITY PRICING (NZD/T) BRENT CRUDE (USD/BBL) 250 1,800 120 14 1,600 100 200
Slide 18: Energy transformation is creating opportunities
Energy transformation is creating opportunities For personal use only ENERGY SEARCH VOLUME TREND NEW ZEALAND CARBON UNITS PRICE 1.4 WIND TURBINE PRICE INDEX 250 $30 $25 200 Desktop search $20 1.2 150 $15 100 $10 1 Mobile search $5 50 $0 0.8 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Dec
Slide 19: We are performing while transforming
We are performing while transforming For personal use only Our VISION is to be customers’ first choice for energy management Our PURPOSE is to reimagine energy to put control in our customers’ hands Our STRATEGY is to maximise value through our market position Wholesale & Kupe segment Customer segme
Slide 20: A transformed customer platform is delivering growth opportunities
For personal USe Only GENESIS ENERGY LIMITED A transformed customer platform is delivering growth opportunities genesis
Slide 21: We have created a Customer Platform fit for the future
We have created a Customer Platform fit for the future For personal use only Our technology platform is built for product innovation • Billing migration completed with zero downtime – common platform for two brands • Greatest range of Azure cloud services in NZ Re-launched Built digital • First in N
Slide 22: Our brand re-launch has helped us regain market leadership
Our brand re-launch has helped us regain market leadership For personal use only WHEN ASKED, PEOPLE RECOGNISED GENESIS AS: “THE MARKET LEADER” 28 19 17 19 9 +7 PTS +4 PTS +7 PTS NC +1 PT “PUTTING PEOPLE IN CONTROL OF THEIR ENERGY USE” 23 15 11 16 11 +8 PTS +3 PTS +1 PTS +1 PT +1 PT “LEADING THE WAY
Slide 23: Our technology platform is built for product innovation
Our technology platform is built for product innovation For personal use only Our scalable, flexible, modular technology architecture brings speed and cost advantage Our architecture strategy is to integrate …which is transforming our digital capability and customer experience best-in-breed applicat
Slide 24: Operational integration maximises value creation
Operational integration maximises value creation across the business For personal use only LPG CUSTOMER PEOPLE OPERATIONS SYSTEMS Multi-functional One logistics Common platform Centre of operation for both for both brands Excellence brands and all fuels Genesis Energy Limited Investor Day November 2
Slide 25: Platform investment is delivering a difference
Platform investment is delivering a difference and positions us for growth For personal use only >130,000 > 350,000 > 40 % Total unique users for PowerShouts Customers linked to My Account/Energy IQ1 redeemed2 Fly Buys1 GENESIS NPS, PROMOTER SCORE AND INTERACTION NPS DUAL FUEL CUSTOMER GROWTH (UP 5%
Slide 26: Energy IQ and multi-fuel platform
Value from residential Targeted business loyalty growth For personal use only Energy IQ Simplicity Service Knowledge Advice Energy Action Management Multi-fuel platform Genesis Energy Limited Investor Day November 2018 25.
Slide 27: Meaningful progress with our product-led strategy
We’ve made meaningful progress with our product-led strategy For personal use only Energy Management Energy Plans Knowledge Advice Action Time of use MyAccount Products Fixed/Variable 2 years ago Contract/Uncontracted PowerShouts Energy IQ Electricity insights Solar My Plan - Electricity forecast Ba
Slide 28: Focusing on enhancing loyalty
Focusing on enhancing loyalty For personal use only FY19 will deliver product differentiation at scale GENESIS CUSTOMER CHURN RATE (BY MONTH, ALL FUELS)1 Bottle Gas 30% Monitoring Launch Electricity Monitoring Launch Power Energy IQ Shout I Launch Power 25% Shout III Power Move to the Shout II Move
Slide 29: Continued progress on optimising residential segment value
Continued progress on optimising residential segment value For personal use only OUR APPROACH TO REDUCING “STANDSTILL COST” – GENESIS RESIDENTIAL INDEXED CUSTOMER LIFETIME VALUE2 – GENESIS RESIDENTIAL 110% 400 350 2 101 1 $$$ 55 105% 300 $$ 31 250 364 348 $ Customers (000) 100% 200 150 95% 100 50 90
Slide 30: Dual brand strategy
Dual brand strategy For personal use only Critical to enabling mass market strategy ~6% of total ICP churn is between brands1 • Market Role: Market leader that brings to life the future • Market Role: Challenger with attitude. Nimble of energy and has deep, valuable customer relationships enough to
Slide 31: Focus on growing business volume
BUSINESS SALES TEAM COVERAGE Focus on growing business volume FY17 FY19 For personal use only Early signs that investment is paying off BUSINESS BILLED VOLUME 4,000 35,000 3,500 30,000 3,000 Monitoring 25,000 Electricity & Gas GWh 2,500 LPG tonne 20,000 2,000 Bottled gas Electricity & Gas monitoring
Slide 32: Targeted growth through differentiation
Targeted growth through differentiation For personal use only Agriculture and hospitality are our initial focus AGRICULTURE HOSPITALITY Complements our An under-served but Retail profile valuable segment Heavy use of LPG Heavy use of LPG within specific within specific segments segments Genesis Gene
Slide 33: Brand identity critical to growth
Brand identity critical to growth For personal use only Putting our energy into your business OUR CUSTOMER VALUE PROPOSITION BRAND METRICS: BUSINESS CUSTOMERS 80% Genesis Customers Genesis Customers Simple 51% - 54% 90% - 85% Make energy simple by providing multiple fuels, at multiple 60% Non Custom
Slide 34: Growth in the customer segment
Growth in the customer segment For personal use only Growth in the customer segment will deliver $20-30m incremental EBITDAF RESIDENTIAL BUSINESS INCREMENTAL EBITDAF FROM FY19 - FY21 $14-21M INCREMENTAL EBITDAF FROM FY19 - FY21 $6-9M Volume Customer Growth Value Customer Value Volume Growth Cost Red
Slide 35: How we think about Energy Management
How we think about Energy Management For personal use only ACTIVITIES WITHIN AN ENERGY MANAGEMENT VALUE CHAIN Electricity forecast Electricity insights Usage breakdown Bottled gas monitoring Home comparison My Energy Plan Knowledge Advice Energy Hub Business consultancy Solar monitoring Energy audit
Slide 36: Our diverse generation portfolio ensures stability
For personal USe Only GENESIS ENERGY LIMITED Our diverse generation portfolio ensures stability and benefits from market volatility genesis
Slide 37: Risks impact the wholesale electricity market
Risks impact the wholesale electricity market For personal use only Spot prices rise to reflect wind volatility, low inflows and reduced gas production WHOLESALE ELECTRICITY PRICE WEEKLY AVERAGE ($/MWH) 400 Gas constrained and dry 350 People don’t value earthquake insurance...until 300 there’s an ea
Slide 38: Renewable volatility drives price volatility
Renewable volatility drives price volatility For personal use only Low hydro storage and increasing wind exposure increases need for dispatchable capacity with energy storage NZ CONTROLLED STORAGE AND RISK CURVE (GWH) 250 WIND GENERATION IN NEW ZEALAND (MW) 4,000 200 3,500 3,000 150 2,500 2,000 100
Slide 39: Thermal firming is market critical
Thermal firming is market critical For personal use only Rankines able to capture high prices caused by scarcity of firming capacity and stored energy HYDRO AND GAS FIRMING WIND FIRMING 22/10/20181 28/6/20181 Below average hydro storage and gas Above average hydro storage but high demand Energy stor
Slide 40: We have proven the ability to operate Unit 5 flexibly
We have proven the ability to operate Unit 5 flexibly For personal use only Combined with more flexible gas portfolio drives enhanced value UNIT 5 PERCENTAGE OF TIME OFF RECENT UNIT 5 OPERATION 450 100% 400 95% 350 90% 300 85% 250 80% 200 75% 150 70% 100 65% 50 60% 0 Oct 15 to Sep 16 Oct 16 to Sep 1
Slide 41: Creating flexibility today
Creating flexibility today For personal use only Our ability to optimise resources across markets creates value Helps maximise Kupe production Contracts to take during the 100% of gas from summer, which Kupe increases oil and LPG production First contract signed, and STRATEGIC FOCUS targeting deals
Slide 42: Rankines add value even when not operating
Rankines add value to Genesis even when not operating For personal use only In addition to profitable running, there are three core value streams from Rankine availability Swaptions Provides a Ability to clear shadow (Or other maximise use price for insurance-like of hydro alternative products) stor
Slide 43: Our emissions are largely hedged through to 2025
Our emissions are largely hedged through to 2025 For personal use only We are also investigating longer term hedging options CARBON HEDGE POSITION $6 $9-14 $15-20 $17-22 $17-22 $19-24 $20-25 $20-25 NZ Units as % of potential exposure Short-hedging has been successful to date For longer term hedging,
Slide 44: Most carbon costs are recovered directly
Most carbon costs are recovered directly For personal use only Only a small portion of costs are not included as a direct pass through into prices/contracts INDICATIVE SPREAD OF CARBON EXPOSURE ACROSS MARKETS LPG sales Recovery – 100%, via pricing of LPG Wholesale gas sales Recovery – 100%, Genesis
Slide 45: Cost recovery of generation burn varies
Cost recovery of generation burn varies For personal use only Ability to fully recover cost of carbon supported by dry weather and under supplied market Over supply Under Supply Increased Good Better flexibility in gas Wet 70%-85% 85%-95% position and Unit 5 recovered recovered flexibility will impr
Slide 46: Integrated portfolio provides flexibility
Integrated portfolio provides flexibility For personal use only We have options to respond to a wide variety of market conditions Genesis Energy Limited Investor Day November 2018 45.
Slide 47: New Zealand's unique seasonal demand challenge
New Zealand’s unique seasonal demand challenge Demand is highest in winter, when southern inflows are the lowest For personal use only SEASONAL STORAGE CHALLENGE 4,000 400 Storage or generation with flexible fuel 3,500 350 sources need to address market challenges • 2,000 GWh more energy is needed i
Slide 48: NZ's hydro storage is too small to manage droughts
NZ’s hydro storage is too small to manage droughts For personal use only Even with 4 times the relative storage and with EU interconnector, Norway is still only 98% renewable NEW ZEALAND HYDRO BY GWH NORWAY HYDRO BY GWH 30,000 140,000 120,000 25,000 100,000 20,000 80,000 15,000 60,000 10,000 40,000
Slide 49: Deep energy storage is a big challenge
Deep energy storage is a big challenge For personal use only There are limited options available to store 3,000 GWh of energy 5 more hydro 140 Tesla Powerwalls 10 million 45kg LPG 80% of the potential schemes the size per household bottles (plus some Huntly coal stockpile of Lake Taupo ($2m per hous
Slide 50: Portfolio delivers value from flexibility and reliability
Portfolio delivers value from flexibility & reliability For personal use only Likely renewable builds have a different role in the market to thermal generation Thermal Thermal Geo- Wind & Generation Role (Gas) (Coal) Hydro thermal Solar Batteries Baseload Runs 24/7 ⃝ Daily Flex Can turn it o
Slide 51: High renewable penetration will have challenges
High renewable penetration will have challenges For personal use only If you just overbuild renewables, price rises 20% on average and becomes much more volatile MONTHLY PRICE VOLATILITY ANNUAL PRICE VOLATILITY $500 $250 $400 $200 Annual Price ($/MWh) Monthly Price ($/MWh) $150 $300 $100 $200 $50 $1
Slide 52: Our portfolio spans a range of sub-markets
Our portfolio spans a range of sub-markets For personal use only Changes to value, volume and cost will change opportunity over time Wholesale Portfolio Resource Today 2022-2030 2030+ Falling cost of wind technology Electrification of transport and Most value exists from energy and new builds expect
Slide 53: Contracts are an increasingly important part of our portfolio
Contracts are an increasingly important part of our portfolio For personal use only It’s not about who owns what assets, it’s about where you get your electricity from SOURCES OF GENERATION VOLUMES FOR PORTFOLIO IN FY18 4,500 • Genesis doesn’t need to invest our own 4,000 capital and operate assets
Slide 54: Maximising value as NZ transitions to a low carbon future
We are maximising value as NZ transitions to a low carbon future For personal use only Securing low cost Flexibility from fuels and Creating flexibility from renewable electricity working towards a existing assets. transition from coal Weekly and seasonal flex Genesis Energy Limited Investor Day Nov
Slide 55: The Kupe stake and fuel contract position
vA ¢) For personal USe Only GENESIS ENERGY LIMITED = The Kupe stake and fuel contract position provide commercial upside genesis
Slide 56: Kupe - Beach Energy Limited
KUPE For personal use only Beach Energy Limited ABN20 007 617 969 Genesis Energy Limited Investor Day November 2018 55.
Slide 57: Compliance Statements
COMPLIANCE STATEMENTS For personal use only Disclaimer Reserves disclosure This presentation contains forward looking statements that are subject to risk factors associated Beach prepares its petroleum reserves and contingent resources estimates in accordance with the with oil, gas and related busin
Slide 58: Beach Energy Portfolio
BEACH ENERGY PORTFOLIO EXPANDED FOOTPRINT WITH FIVE PRODUCTION HUBS For personal use only AND SIGNIFICANT GAS PROCESSING INFRASTRUCTURE FY18 Pro forma production1 Bass Basin Cooper Taranaki Basin Basin 26.8 MMboe Otway Basin Perth Basin FY18 2P reserves2 Perth Basin Cooper Basin 313 MMboe Otway Basi
Slide 59: Our vision, purpose and values
OUR VISION, PURPOSE AND VALUES For personal use only Our vision We aim to be Australia’s premier multi-basin upstream oil and gas company Our purpose To deliver sustainable growth in shareholder value Our values Our values define us, guide our actions, our decisions and our words Safety Safety takes
Slide 60: New Zealand - Kupe Gas Project
NEW ZEALAND – KUPE GAS PROJECT KEY GROUP CASH FLOW CONTRIBUTOR For personal use only Activities to enhance value 5 year contribution to Beach1 • Expected to generate ~10% of Beach’s 6-11% free cash flow over the next 5 years • Successful FEED and subsequent execution of Kupe inlet • Key variables to
Slide 61: Operational excellence
OPERATIONAL EXCELLENCE DELIVERY OF VALUE THROUGH SAFE, RELIABLE AND EFFICIENT OPERATIONS For personal use only HSE and Process and Performance People risk technology Beach Energy Limited ABN 20 007 617 969 Genesis Energy Limited Investor Day November 2018 60.
Slide 62: New Zealand - Kupe Gas Project
NEW ZEALAND – KUPE GAS PROJECT BEACH 50% AND OPERATOR For personal use only 2P reserves by product • Nameplate capacity of the plant is up to 77 (MMboe) TJ/day with excellent reliability (~ 99%) 5 • Kupe developed by three wells 3 30 • Gas exported via pipeline to North Island MMboe distribution net
Slide 63: Kupe Gas Project
Kupe Gas Project For personal use only Settled joint venture focused on enhancing Kupe’s value Economic interests Improved Phase Two Development aligned Collaboration Two distinct projects Engagement Transparency Inlet compression Development well Discussion Genesis Energy Limited Investor Day Novem
Slide 64: Phase II Development - Inlet Compression Project
Phase II Development – Inlet Compression Project For personal use only Development Study underway and aiming for Final Investment Decision in early FY20 Development Study – incorporates Genesis to carry out independent Final Investment Decision – requires basis of design, Front End Engineering due d
Slide 65: Large and diverse fuel book provides options
Large and diverse fuel book provides options and opportunities For personal use only Kupe ownership adds strength to Genesis fuel book FY18 NEW ZEALAND NET LPG SUPPLY FY18 NEW ZEALAND GAS PRODUCTION Genesis LPG production volumes • Diversity of gas supply available with contracts across New Genesis
Slide 66: Long-term Gas Contract Position
Long-term Gas Contract Position For personal use only TAKE-OR-PAY FORWARD GAS PURCHASES1 BENEFITS AND TIMING OF ALTERNATIVE GAS PURCHASE COST2 $7.50 - $8.00 - 40 $8.50 $9.00 $6/GJ $7/GJ $90 35 $8.00 - $80 $9.00 30 $70 25 $60 $8.00 - $9.00 $8.50 - $50 $9.50 PJ 20 $8.50 - $40 15 $9.50 $30 10 $20 $8.50
Slide 67: Top quartile TSR and $400-430m EBITDAF in FY21 remain achievable
@ For personal USe Only GENESIS ENERGY LIMITED ) Top quartile TSR and $400-430m EBITDAF in FY21 remain achievable genesis
Slide 68: Genesis Sustainability Framework launched FY19
Genesis Sustainability Framework launched FY19 For personal use only Caring for our Building strong Powering environment communities New Zealand Putting control in our Emissions Our Communities customers’ hands Water and Wildlife Our People Delivering New Zealand’s energy future Our ambitions includ
Slide 69: Genesis is engaging in public consultations
Genesis is engaging in a number of public consultations For personal use only Policy cohesion is key, underpinned by principles of collaboration and customer-centric approach Our focus is on making thoughtful contributions to meaningful solutions KEY OBSERVATIONS / RECOMMENDATIONS Retail market • Co
Slide 70: The plan is in place to 2021 and beyond
The plan is in place to 2021 and beyond For personal use only Driven by retail growth, optimisation and rolling off of legacy contracts PATHWAY TO FY21 FY21 SENSITIVTIES 430 Extended Dry Sequence 25th P. 10th P. 27 400 Extended Wet Perc. change in 75th P. 90th P. 17 Sequence hydro sequence 15 +/- $2
Slide 71: Sustained earnings and dividend growth
Sustained earnings and dividend growth For personal use only Underpinned by long dated debt book EBITDAF DIVIDEND CENTS PER SHARE & PAYOUT HISTORY1 $ MILLIONS Dividends (CPS) % of Free Cash Flow 400 350-370 16.4 16.6 16.9 130% 16.0 345 361 87% 92% 300 335 333 13.0 91% 308 74% 80% 200 70% Target Divi
Slide 72: Capital investment
Capital investment For personal use only Targeted capital investment underpins an asset portfolio in transition Category Definition Example Priority Criteria Run Stay-in-Business capital Generator maintenance Risk based Grow Capital that drives business growth LPG distribution expansion IRR threshol
Slide 73: How we think about delivering shareholder value
How we think about delivering shareholder value For personal use only Short-term Customer Capital allocation Shareholder outcome priorities Shareholder Growing distributions dividends in real terms over time Management of key uncertainties affecting capital Investment in Disciplined Targeted top all
Slide 74: For personal use only
For personal use only