Slide 1: 2019 Annual Results Presentation
2019 Annual Results Presentation 26 AUGUST 2019
Slide 2: Highlights
Highlights record NZ hydro 13% Australasian NZ HR diversity & generation customer growth inclusion award fairer, clearer 59% shareholder refreshed brand pricing return and visual identity market leading 26% EBITDAF carbon neutral NPS1 growth Consumer NZ Energy Retailer of the Year Low Carbon Future
Slide 3: Our people
Our people 98% gender pay equity Workforce measures YWCA equal pay award 120% FY19 FY18 Gender Tick accreditation Targeting 40% of women in leadership and 90% 98% 98% senior specialist positions by 2020 77% 78% 60% Diversity and inclusion award at the 2019 NZ HR Awards 45% 42% 30% 35% Nine day work
Slide 4: Our strategy
Our strategy Our purpose: Clean energy for a fairer and healthier world. Our strategy: Champion Grow Support retail Grow overseas the benefits NZ retail. growth and protect earnings. of competitive • Simpler systems our generation • Grow customer numbers in markets. • Reduced cost legacy. Australia,
Slide 5: Our sustainability leadership
Champion Our sustainability leadership the benefits of competitive markets Helping our customers Replaced unfair prompt payment discounts with fairer, clearer pricing Tailored payment plans, LevelPay, hardship Our key sustainability goals: support SDG13 Climate Action. SDG7 Affordable and Helping th
Slide 6: New Zealand demand
Champion New Zealand demand the benefits of competitive markets Underlying demand growth of 0.3% in FY19 Meridian demand forecasts TWh Growth across sectors, lower seasonal 75 full decarbonisation agricultural load (incl. broader conversion efficiency gains) Smelter off-take up 4% in FY19 with 4th 6
Slide 7: New Zealand supply
Champion New Zealand supply the benefits of competitive markets Multiple Pohokura outages coincided with New Zealand lake storage periods of low inflows and thermal outages GWh Actual Average Pohokura outages 4,000 This fuel scarcity pushed wholesale spot and forward electricity prices higher during
Slide 8: New Zealand policy and regulation
Champion New Zealand policy and regulation the benefits of competitive markets TPM Meridian's annual HVDC costs $M Meridian actual EA recently published proposed TPM 120 106 amendments 100 Proposes replacing current HVDC charge EA estimate 80 70 with benefit–based and residual charges EA estimate 60
Slide 9: New Zealand policy and regulation
Champion New Zealand policy and regulation the benefits of competitive markets Zero carbon Zero Carbon Bill at Select Committee Targeting net zero GHG emissions (excluding methane) by 2050 Targeting a gross reduction of methane emissions of 24%- 47% below 2017 by 2050 Establishes a new independent C
Slide 10: New Zealand customers
Grow New Zealand customers New Zealand retail Customer number and sales volume growth Customer sales Customer numbers (ICPs) Sales volume (GWh) Average price ($/MWh) across all segments (except Agri sales) FY19 Headlined by 4% sales growth in both Residential 201,730 1,431 residential and small medi
Slide 11: New Zealand customers
Grow New Zealand customers New Zealand retail Increasing NPS1, declining churn rates NPS - difference to industry average 75 Meridian Powershop 6% lower cost to serve per customer 50 +33 +41 +43 10k Meridian customers migrated to the Flux 25 +6 higher not +2 platform, targeting 50k by December 2019
Slide 12: New Zealand generation
Support retail New Zealand generation and protect our generation legacy Record hydro generation year from 104% NZ average generation price $/MWh inflows and with Ōhau A refurbishment 140 123 Ōhau refurbishment programme going well, 120 $8m more spend ($57m total) 100 83 More modest wind generation 8
Slide 13: New Zealand generation
Support retail New Zealand generation and protect our generation legacy Hawkes Bay wind consent variation Otahuhu ASX futures settlement price submitted, EOI for civil works commenced $/MWh 150 Wind development pipeline of ~2,700 GWh 130 Waitaki 2025 re-consent expected to be lodged early 110 Linger
Slide 14: Australian market
Grow Australian market overseas earnings Renewables are dominating new build Coal generation capacity in NEM generation Nameplate Surprising Federal election result likely to see GW 25 Remaining coal NSW QLD VIC more cautious policy settings DMO1 and VDO2 both came into effect on 1 20 July, more pri
Slide 15: Australian customers
Grow Australian customers overseas earnings Electricity customer acquisitions Powershop Australia net customer changes Change in recommenced in FY19, following customers +4,000 electricity gas development of improved wholesale +3,500 position +3,000 Traction with Victorian gas, following launch +2,5
Slide 16: Australian generation
Grow Australian generation overseas earnings NSW drought conditions impacting hydro Australian generation generation GWh FY19 5 year average 400 Repairs and upgrades at both wind farms 363 361 350 impacted availability 300 225GWh of PPA offtake in FY19 250 225 203 200 179 162 168 150 100 83 50 24 0
Slide 17: UK customers
Grow UK customers overseas earnings Tough trading conditions in the UK for electricity retailers Growth from 25,000 to 75,000 Flux customers in FY19 Sainsbury's white label soft launched in April 2019 26 AUGUST 2019 2019 ANNUAL RESULTS PRESENTATION 17
Slide 18: Financial performance
Financial performance 26 AUGUST 2019 2019 ANNUAL RESULTS PRESENTATION 18
Slide 19: Dividends
Dividends Final ordinary dividend declared of 10.72 Dividends declared CPS cps, 86% imputed Ordinary dividends Special dividends Total 25 Brings FY19 full year ordinary dividend 19.20 21.30 18.23 18.38 18.91 4.88 declared to 16.42 cps, 86% imputed 20 4.88 5.35 4.88 4.88 Represents 75% payout of free
Slide 20: New Zealand energy margin
New Zealand energy margin Customer and sales volume growth across New Zealand energy margin movement $M Physical Financial all segments (except Agri sales) 1,700 +$91M +$74M Upward price pressure in corporate +633 -587 1,500 contrasted with downward pressure in residential 1,300 Financial contract,
Slide 21: Australian energy margin
Australian energy margin Gas sales and hydro generation have lifted Australian energy margin movement $NZ M Physical Financial physical margin 180 +$18M +$14M As in NZ, higher wholesale prices have lifted 160 140 +52 -38 financial contract, spot generation and 120 hedging revenues +25 -14 118 100 Up
Slide 22: Operating costs
Operating costs Refurbishment spend on Te Āpiti wind farm Operating costs Total FY19 $282m Total FY18 $259m $M and Ōhau hydro stations FY19 FY18 120 Stable NZ promotional spend, supporting 99 customer acquisition 100 91 96 Higher staff, retail and asset maintenance 80 84 costs in Australia, supporti
Slide 23: EBITDAF
EBITDAF Record level of EBITDAF in FY19, +26% on Group EBITDAF movement $M FY18 900 FY20 wholesale prices are not expected to +3 -4 +32 -23 repeat FY19 levels 800 +164 838 Scheduled HVDC outages in FY20 will weigh on NZ earnings 700 Group EBITDAF 666 New Zealand 600 $757M 500 EBIT DAF 3 0 Jun NZ ene
Slide 24: Below EBITDAF
Below EBITDAF 3% increase in depreciation from previous revaluations and GSP purchase Underlying npat $M June 2019 revaluation (+$1B) will increase 333 350 future depreciation costs 300 $5M impairment on Mt Millar 233 250 221 $58M increase in NPBT1 from fair value of 209 206 200 electricity hedges f
Slide 25: Capital expenditure
Capital expenditure Consistent level of stay in business capex Capital expenditure $M Investment Total Largely consists of system and generation 250 Stay in business 235 asset enhancement spend Currently expecting FY20 Group capex of 200 between $70M and $80M 150 188 $50M to $55M of stay in business
Slide 26: Debt and funding
Debt and funding June 2019 total borrowings of $1,470M Debt maturity profile as at 30 June 2019 $M Available facilities maturing Committed bank facilities of $1,948M, of 800 Drawn debt maturing (face value) which $572M were undrawn Net debt of $1,461M, down 4% from FY18 600 Net debt to EBITDAF at 1.
Slide 27: Closing comments
Closing comments FY19 result had market tailwinds however execution was good Customer growth in all geographies underpinned by high satisfaction New Zealand gas market remains tight, further planned field outages in 2020 Major HVDC outages planned between January and April 2020 will reduce available
Slide 28: Additional information
Additional information 26 AUGUST 2019 2019 ANNUAL RESULTS PRESENTATION 28
Slide 29: Segment results
Segment results Flux Federation and Powershop UK included in ‘other and unallocated’ segment $M Wholesale Retail Australia Other & unallocated Inter-segment Total 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Contracted sales 524 435 654 629 152 124 - - - - 1,330 1,188 Cost to supply c
Slide 30: Six monthly results
Six monthly results $M 1H 2H Total 2019 2018 change 2019 2018 change 2019 2018 change Contracted sales 631 580 51 699 608 91 1,330 1,188 142 Cost to supply customers (1,002) (692) (310) (1,022) (601) (421) (2,024) (1,293) (731) Net cost of hedging 72 17 55 58 (1) 59 130 16 114 Generation spot revenu
Slide 31: New Zealand retail
New Zealand retail New Zealand customer connections Customers ICP (000) Meridian North Island Meridian South Island Powershop Total 302 4% increase in customers since June 2018 350 276 291 275 277 300 74 66 56 56 59 250 116 117 115 119 119 200 Residential, business, agri segment 150 100 104 102 103
Slide 32: New Zealand hydrology
New Zealand hydrology Meridian's combined catchment inflows Inflows GWh 14,000 FY19 inflows were 104% of average 12, 000 July 2019 inflows were 125% of average 10,000 8,000 6,000 4,000 Storage 2,000 Meridian’s Waitaki storage at 30 June 2019 0 Financial 2005 2006 2007 2008 2009 2010 2011 2012 2013 2
Slide 33: New Zealand generation
New Zealand generation New Zealand generation Volume GWh Hy dro Wind FY19 generation was 8% higher than FY18, 16,000 14,000 1,422 1,456 1,341 1,244 1,263 with higher hydro and lower wind 12, 000 10,000 generation 8,000 6,000 11,911 12,251 11,974 11,265 12,326 4,000 2,000 Price 0 2015 2016 2017 2018
Slide 34: Australian retail
Australian retail Australian customer connections Customers Electricity Gas 13% growth in electricity customers since 140 23 120 June 2018 100 97 97 110 22,612 gas customers by June 2019 80 78 60 48 40 20 Sales volume 0 2015 2016 2017 2018 2019 1% growth in electricity sales volume in FY19 Financial
Slide 35: Australian generation
Australian generation Australian generation Volume GWh Wind Hy dro FY19 generation was 25% higher than FY18 800 203 700 28 Includes 203GWh of seasonal generation 600 500 from GSP hydro assets 400 300 553 FY19 wind generation was 5% lower than 519 519 510 525 200 100 FY18 0 2015 2016 2017 2018 2019 F
Slide 36: FY19 EBITDAF
FY19 EBITDAF Movement in EBITDAF $M New Zealand energy margin +$164M 1,500 1,400 +633 -680 1,300 1,200 1,100 1,000 900 800 +32 +3 -4 -23 +85 +13 -1 838 +89 700 +25 600 666 500 EBITDAF 30 Retail Wholesale Generation Cost to Net cost of Virtual asset Other market Australian Other Transmission Employee
Slide 37: EBITDAF to NPAT
EBITDAF to NPAT FY19 EBITDAF TO NPAT RECONCILIATION $M 900 800 838 -276 700 600 -17 500 -83 -129 400 300 333 -5 -2 +17 -4 339 200 100 EBITDAF Depreciatio n and Premiums paid on Net finance costs Tax Underlying Net ch ange in fair Lo ss o n sale of Premiums paid on Tax NPAT amortisation electricity o
Slide 38: Energy margin
Energy margin Defined as Revenues received from sales to customers net of A non-GAAP financial measure distribution costs (fees to distribution network companies representing energy sales revenue less that cover the costs of distribution of electricity to energy related expenses and energy customers
Slide 39: New Zealand energy margin
New Zealand energy margin New Zealand energy margin $M 3,000 1,672 -1,599 2,500 2,000 1,500 524 -275 1,000 267 -8 11 -5 1,108 -133 500 209 445 0 Res, SMB, C&I sales Financial Generation Cost to Cost to Hedging Hedging Contract VAS marginsMarket costs Energy Agi sales contract spot supply supply fixe
Slide 40: New Zealand energy margin
New Zealand energy margin New Zealand energy margin movement $M 1,700 +633 -587 1,500 1,300 1,100 -93 +72 -4 +13 -1 1,108 +89 +17 900 944 -4 +29 700 Energy Res, SMB, C&I sales Financial Generation Cost to Cost to Hedging Hedging Contract VAS Market Energy Margin 30 Agi sales contract spot supply sup
Slide 41: New Zealand energy margin
New Zealand energy margin Volume VWAP NZD M Volume VWAP NZD M Res, business, agri sales 3,902 $114 445 3,823 $117 449 Corporate and industrial sales 2,338 $89 209 2,158 $83 180 Retail contracted sales 6,240 $105 654 5,981 $105 629 NZAS sales 5,310 5,011 Financial contract sales 2,240 2,278 Wholesale
Slide 42: Australian energy margin
Australian energy margin FY19 FY18 Volume VWAP AUD M Volume VWAP AUD M Retail electricity sales, net of distribution 553 $158 88 549 $158 87 Retail gas sales, net of distribution 364 $20 7 Financial contract sales 612 $78 48 157 $163 26 Contracted Sales 143 113 Cost to supply electricity customers 5
Slide 43: Funding metrics
Funding metrics Net debt/EBITDAF is the principal metric underpinning S&P credit rating S&P calculation of net debt/EBITDAF includes numerous adjustments to reported numbers; Borrowings adjusted for the impact of finance and operating leases Cash balances adjusted for restricted cash A cash buffer a
Slide 44: Fair value movements
Fair value movements Meridian uses derivative instruments to Change in fair value of financial instruments $M manage interest rate, foreign exchange and 0 electricity price risk -20 -5 As forward prices and rates on these -21 instruments move, non-cash changes to -40 -26 -33 their carrying value are
Slide 45: Income statement
Income statement Financial year ended 30 June 2019 2018 2017 2016 2015 $M New Zealand energy margin 1,108 944 940 941 900 Australia energy margin 118 86 74 68 54 Other revenue 25 22 19 17 25 Energy transmission expense (131) (127) (130) (128) (123) Employee and other operating expenses (282) (259) (
Slide 46: Underlying NPAT reconciliation
Underlying NPAT reconciliation Financial year ended 30 June 2019 2018 2017 2016 2015 $M Net profit after tax 339 201 200 185 247 Underlying adjustments Hedging instruments Net change in fair value of electricity and other hedges (58) 22 76 15 1 Net change in fair value of treasury instruments 63 4 (
Slide 47: Cash flow statement
Cash flow statement Financial year ended 30 June 2019 2018 2017 2016 2015 $M Receipts from customers 3,463 2,765 2,250 2,348 2,348 Interest and dividends received 1 1 2 2 8 Payments to suppliers and employees (2,628) (2,152) (1,596) (1,723) (1,742) Interest and income tax paid (201) (187) (186) (175
Slide 48: Balance sheet
Balance sheet Financial year ended 30 June 2019 2018 2017 2016 2015 $M Cash and cash equivalents 78 60 80 118 69 Trade receivables 292 261 260 194 191 Customer contract assets 20 19 18 - - Other current assets 152 109 91 94 74 Total current assets 542 449 449 406 334 Property, plant and equipment 8,
Slide 49: Glossary
Glossary Hedging volumes buy-side electricity derivatives excluding the buy-side of virtual asset swaps Average generation price the volume weighted average price received for Meridian’s physical generation Average retail contracted sales price volume weighted average electricity price received from
Slide 50: Disclaimer
Disclaimer The information in this presentation was prepared by Meridian This presentation contains a number of non-GAAP financial Energy with due care and attention. However, the information is measures, including Energy Margin, EBITDAF, Underlying NPAT and supplied in summary form and is therefore