Agl Energy Limited · ASX:AGL
Agl Energy — H1 FY2016 Earnings Presentation
46 slides from Agl Energy's earnings presentation, Feb 10, 2016
Slide 1: FY16 Interim Results
FY16 Interim Results Half Year ended 31 December 2015 Andy Vesey Managing Director and CEO Brett Redman Chief Financial Officer Date 10 February 2016
Slide 2: Agenda
FY16 Interim Results | 10 February 2016 2 Agenda 1 2 3 4 Results Group Operational Supplementary highlights financials review / information Outlook Andy Vesey Brett Redman Andy Vesey IMPORTANT NOTE: This presentation should be read in conjunction with the AGL Energy Limited Financial Results ASX Rel
Slide 3: FY16 Interim highlights
FY16 Interim Results | 10 February 2016 3 FY16 Interim highlights Underlying Profit up $73 million with Underlying EPS up 17%. › Statutory Loss of $449 million › Underlying Profit of $375 million up 24% » Higher electricity generation volumes (7 TWh) added $36 million » Higher wholesale electricity
Slide 4: Strategy update
FY16 Interim Results | 10 February 2016 4 Strategy update Strategic roadmap delivering results. Organise for Drive productivity Unlock growth transformation and value › Exiting gas exploration and › Leverage market › Investment in renewables production opportunities and customer value strategy › Tar
Slide 5: Digital capability and customer experience
FY16 Interim Results | 10 February 2016 5 Digital capability and customer experience Digital strategy and investment is transforming the customer journey. Mobile App › Solar Command feature officially launched in mobile App today » Real time solar production, consumption and health check for your so
Slide 6: Targeted investments in new capability
FY16 Interim Results | 10 February 2016 6 Targeted investments in new capability Investing in new initiatives to grow business in carbon constrained future. Sunverge investment announced today › Emerging leader in demand response management for premises based energy storage › Early mover advantage f
Slide 7: Powering Australian Renewables Fund
FY16 Interim Results | 10 February 2016 7 Powering Australian Renewables Fund AGL to lead new innovative renewable investment funding. › New vehicle to develop 1,000 MW+ of large-scale Renewable Energy Target renewable generation for $2-3 billion 35 ~5,000 MW required » Seeded with AGL’s large-scale
Slide 8: Group Financials
FY16 Interim Results | 10 February 2016 8 Group Financials Brett Redman Chief Financial Officer 2
Slide 9: Interim FY16 result
FY16 Interim Results | 10 February 2016 9 Interim FY16 result Key metrics. Financial Results and Key Metrics 1H16 1H15 Change Statutory (Loss)/Profit ($m) (449) 308 246% Underlying Profit ($m) 375 302 24% Statutory EPS (cps) (66.5) 48.6 237% Underlying EPS (cps) 55.6 47.7 17% Statutory opera
Slide 10: Statutory Profit to Underlying Profit reconciliation
FY16 Interim Results | 10 February 2016 10 Statutory Profit to Underlying Profit reconciliation Volatility of non-cash items highlights value of focus on Underlying Profit. $m 1H16 1H15 Change Statutory (Loss) / Profit (449) 308 757 Adjust for the following after tax items: Significant items Restr
Slide 11: Underlying Profit
FY16 Interim Results | 10 February 2016 11 Underlying Profit Underlying Profit up 24.2% on prior period. Underlying EPS up 16.6%. $m 1H16 1H15 Change Revenue 5,601 5,183 8.1% Operating EBITDA 885 735 20.4% Operating EBIT Energy Markets 1,196 993 20.4% Group Operations (437) (355) 23.1% New Energy (8
Slide 12: Group Underlying Profit drivers
FY16 Interim Results | 10 February 2016 12 Group Underlying Profit drivers Market opportunities maximised in the first half of FY16. 600 Energy Markets 31 6 500 126 5 3 400 (82) 375 (15) (9) 40 (32) 302 $ million 300 200 100 0 1H15 NPAT Consumer Wholesale Wholesale Gas Energy Group New Energy Invest
Slide 13: Energy Markets – key financial drivers
FY16 Interim Results | 10 February 2016 13 Energy Markets – key financial drivers Higher generation and disciplined price management. Consumer Market Wholesale Markets 1,250 5 6 1,196 1,200 12 19 126 1,150 1,100 $ million 1,050 11 0 29 993 (5) 1,000 950 900 850 800 1H15 Consumer Consumer Gas Consume
Slide 14: Consumer - key metrics
FY16 Interim Results | 10 February 2016 14 Consumer - key metrics Investment in digital and customer value capability positively impacting metrics. $m 1H16 1H15 Change Average customer numbers (‘000) 3,708 3,741 (0.9%) Cost to Serve per customer account $37 $38 (2.6%) Cost to Grow per account acquir
Slide 15: Transformation – Opex targets
FY16 Interim Results | 10 February 2016 15 Transformation – Opex targets 85% of cost reductions now identified. 1,600 36 10 1,500 1,460 - 34 1,404 1,400 1,370 (102) (68) $ million 1,300 1,200 1,100 OPERATIONAL 1,000 FY15 CPI M&A Reduction FY16 CPI M&A Reduction FY17 Normalised Forecast Target › Th
Slide 16: Operating cost savings
FY16 Interim Results | 10 February 2016 16 Operating cost savings On track to deliver $170 million target in FY17. 1H16 FY16 Total $ million Actual Target Target Group Operations 18 49 77 Maintenance optimisation 9 21 29 Procurement 10 22 29 Labour and contractor 4 11 13 Other 1 4 6 Additional gener
Slide 17: Capital expenditure and asset sales
FY16 Interim Results | 10 February 2016 17 Capital expenditure and asset sales Targets are on track for delivery in FY17. Sustaining capital expenditure › Capital expenditure: targeting $100 million (real) sustaining capital expenditure 500 $100m reduction less CPI reduction over FY16-FY17 395 390 4
Slide 18: Transformation – Working capital
FY16 Interim Results | 10 February 2016 18 Transformation – Working capital Significant progress towards $200 million target working capital reduction. 1H16 FY16 FY17 $ million Actual Target Target Optimise coal stockpile at AGL Macquarie 32 2 21 > 1H16 favourability driven by additional generation
Slide 19: Underlying operating cash flow
FY16 Interim Results | 10 February 2016 19 Underlying Operating cash flow Strong operating cash flow reflecting quality earnings. 1,100 Underlying operating cash flow before interest and tax 1,000 15 36 26 150 (43) 900 879 (30) (11) (18) 866 (6) $ million (14) 800 (118) 700 600 1H15 Cash Carbon bene
Slide 20: Debt structure
FY16 Interim Results | 10 February 2016 20 Debt structure Elimination of project finance debt simplifies structure. › Proceeds from the Macarthur Wind Farm sale partially used to repay $315 million of AGL Loy Yang senior debt › Enabled debt restructure to remove security over AGL Loy Yang assets and
Slide 21: Operational Review
FY16 Interim Results | 10 February 2016 21 Operational Review Andy Vesey Managing Director and CEO 3
Slide 22: People and safety
FY16 Interim Results | 10 February 2016 22 People and safety Consistent results in key safety and engagement measures. Safety Total injury frequency rate (rolling 12 months) › TIFR was 3.0, a 31% improvement from June 2015. 10 AGL Macquarie Excluding Macquarie, AGL performed 24% favourable to 8 June
Slide 23: Wholesale electricity prices
FY16 Interim Results | 10 February 2016 23 Wholesale electricity prices Forward curves continued to strengthen in both NSW and VIC. › The NSW and VIC forward curves continued to strengthen and rallied higher towards year end driven by: » Increased demand due to QLD LNG plants coming on line and with
Slide 24: Gas portfolio
FY16 Interim Results | 10 February 2016 24 Gas portfolio Long-term strategic arrangements secured to optimise AGL’s gas portfolio. Queensland sales Queensland Wholesale gas sales › Despite delays in LNG project start-up, AGL continues to secure portfolio optimisation opportunities in FY16 70 Firm Sa
Slide 25: Consumer Market volume
FY16 Interim Results | 10 February 2016 25 Consumer Market volume Consumer electricity demand stabilising with weather and customer mix delivering growth. › The decline in residential electricity demand per customer Change in residential electricity demand per customer (weather adjusted) continues t
Slide 26: Consumer – Sales and Operations
FY16 Interim Results | 10 February 2016 26 Consumer – Sales and Operations Customer Value Strategy combined with targeted operating cost initiatives driving strong customer profitability. › Internal AGL channels contribute close to 80% of total sales and retentions › Customer loyalty and reward part
Slide 27: Group Operations
FY16 Interim Results | 10 February 2016 27 Group Operations Improved generation across the asset portfolio. › Additional generation across the portfolio added $36 million NPAT Generation volumes › Generation increased 7 TWh in 1H16 vs 1H15 » Additional 2 months of AGL Macquarie » Optimised generatio
Slide 28: Natural Gas update
FY16 Interim Results | 10 February 2016 28 Natural Gas update Review of gas assets and exit of gas exploration and production. AGL announced on 4 February 2016 that exploration and production of natural gas will no longer be a core business Key considerations › Fall in global oil prices impacting lo
Slide 29: New Energy
FY16 Interim Results | 10 February 2016 29 New Energy Investing in emerging distributed technologies. Cumulative solar sold (kW) Results progressing 10,000 1H15 1H16 › Residential solar sales in 1H16 increased 2.5 times over 1H15 8,000 6,000 › Commercial solar sales in 1H16 increased four-fold over
Slide 30: Outlook
FY16 Interim Results | 10 February 2016 30 Outlook Underlying Profit expected to be in the upper half of the guidance range. › FY16 Underlying Profit expected to be in the upper half of the guidance range of $650 - $720 million, subject to normal market conditions » AGL maximised opportunities in 1H
Slide 31: Contact information
FY16 Interim Results | 10 February 2016 31 Contact information Website www.agl.com.au Customer Service 131 245 Corporate Information www.agl.com.au/about-agl Investors Media Nicole Rizgalla Kathryn Lamond Investor Relations Manager Media Manager OPERATIONAL phone: +61 2 9921 2691 phone: +61 2 9921 2
Slide 32: Supplementary Information
FY16 Interim Results | 10 February 2016 32 Supplementary Information 4
Slide 33: Electricity sales volume
FY16 Interim Results | 10 February 2016 33 Electricity sales volume GWh 1H16 1H15 Change Consumer New South Wales 2,933 2,862 2.5% Victoria 1,892 1,958 (3.4%) South Australia 1,309 1,234 6.1% Queensland 1,174 1,157 1.5% Consumer Total 7,308 7,211 1.3% Business New South Wales 2,020 1,701 18.8% Victo
Slide 34: Gas sales volume
FY16 Interim Results | 10 February 2016 34 Gas sales volume PJ 1H16 1H15 Change Consumer New South Wales2 11.7 13.0 (10.0%) Victoria 18.9 18.5 2.2% South Australia 1.8 1.7 5.9% Queensland 1.4 1.4 - Consumer Total 33.8 34.6 (2.3%) Business New South Wales 12.4 16.7 (25.7%) Victoria 12.1 14.8 (18.2%)
Slide 35: Customer numbers
FY16 Interim Results | 10 February 2016 35 Customer numbers Customer numbers 31 Dec 2015 30 Jun 2015 Change (‘000) Consumer Electricity New South Wales 818 806 12 Victoria 633 646 (13) South Australia 417 422 (5) Queensland 391 387 4 Total Consumer Electricity 2,259 2,261 (2) Consumer Gas New South
Slide 36: Consumer Market – key indicators
FY16 Interim Results | 10 February 2016 36 Consumer Market – key indicators Electricity 1H16 1H15 Change Volume (GWh) 7,308 7,211 1.3% Avg. Consumer Accounts ('000) 2,260 2,273 (0.6%) Revenue ($m) 1,980 1,999 (1.0%) Gross Margin ($m) 244 215 13.5% Gross Margin 12.3% 10.8% 1.5 ppts Gross Margin per c
Slide 37: Business Customers – key indicators
FY16 Interim Results | 10 February 2016 37 Business Customers – key indicators Electricity 1H16 1H15 Change Volume (GWh) 6,439 6,393 0.7% Revenue ($m) 826 926 (10.8%) Gross Margin ($m) 17 19 (10.5%) Gross margin per MWh $2.72 $3.04 (10.5%) Gas Volume (PJ) 37.0 44.1 (16.1%) Revenue ($m) 268 323 (17.0
Slide 38: Energy Markets – Operating EBIT
FY16 Interim Results | 10 February 2016 38 Energy Markets – Operating EBIT Higher generation and disciplined price management. $m 1H16 1H15 Change Operating EBITDA 1,244 1,038 19.8% Depreciation and amortisation (48) (45) 6.7% Consumer Market EBIT 200 160 25.0% Electricity gross margin 244 215 13.5%
Slide 39: Group Operations – Operating EBIT
FY16 Interim Results | 10 February 2016 39 Group Operations – Operating EBIT Additional two months of AGL Macquarie and higher depreciation. $m 1H16 1H15 Change Operating EBITDA (272) (229) 18.8% Depreciation and amortisation (165) (126) 31.0% Thermal (338) (279) 21.1% Renewables (37) (40) (7.5%) Na
Slide 40: New Energy – Operating EBIT
FY16 Interim Results | 10 February 2016 40 New Energy – Operating EBIT Investing in emerging distributed technologies. $m 1H16 1H15 Change Revenue 64 64 - Cost of goods sold (34) (33) 3.0% Gross margin 30 31 (3.2%) Operating costs (excluding D&A) (32) (19) 68.4% Operating EBITDA (2) 12 (116.7%) Depr
Slide 41: Wholesale Contracting
FY16 Interim Results | 10 February 2016 41 Wholesale Contracting › AGL’s Wholesale Risk Management Policy (Policy) is approved AGL Energy Expected Electricity Hedge Position by the Board and establishes the requirements for managing All Regions wholesale risk › The Policy clearly defines permitted c
Slide 42: Generation portfolio
FY16 Interim Results | 10 February 2016 42 Generation portfolio Asset Characteristics 1H16 Performance Sent Out Capacity Capacity Carbon Intensity Asset State Type Status Generation Factor (MW) (tCO2e/MWh) (GWh) (%) Bayswater NSW Coal Owned 2,640 0.9 8,977 77% Liddell NSW Coal Owned 2,000 1.0 3,843
Slide 43: Significant items
FY16 Interim Results | 10 February 2016 43 Significant items All consistent with previous announcements. $m Pre-tax Tax Post-tax Restructuring costs (23) 7 (16) Natural gas impairments Camden (32) 9 (23) Gloucester (166) 47 (119) Silver Springs (208) 62 (146) Spring Gully (14) - (14) Moranbah (375)
Slide 44: Debt facilities
FY16 Interim Results | 10 February 2016 44 Debt facilities As at 31 December 2015 Limit Usage $m Current Export Credit Agency Facility 11 11 CPI Indexed Bonds 11 11 Non Current Bank Term Debt 1,060 1,060 Bank Revolver Debt 550 25 Medium Term Notes 600 600 US Senior Notes 338 338 Export Credit Agency
Slide 45: Comparative information
FY16 Interim Results | 10 February 2016 45 Comparative information › AGL has changed the basis for segment reporting to align with its updated organisational structure. The table below summarises the changes to FY15. Refer to ASX announcement on 29 July 2015 for more information. AGL Group 1H15 $ mi
Slide 46: Disclaimer and important information
FY16 Interim Results | 10 February 2016 46 Disclaimer and important information The information in this presentation: › Is not an offer or recommendation to purchase or subscribe for securities in AGL Energy Limited or to retain any securities currently held. › Does not take into account the potenti