Agl Energy Limited · ASX:AGL
Agl Energy — 1H20 Earnings Presentation
49 slides from Agl Energy's earnings presentation, Feb 13, 2020
Slide 1: Six months ended 31 December 2019
Six months ended 31 December 2019 13 February 2020
Slide 2: Agenda
1 Results Highlights and Business Update Brett Redman, Managing Director & CEO 2 Financial Overview Damien Nicks, CFO 3 Outlook Brett Redman, Managing Director & CEO 4 Q&A
Slide 3: Brett Redman, Managing Director & CEO
Brett Redman Managing Director & CEO
Slide 4: 1H20 financial results highlights
Underlying Profit after tax down 20% as expected, driven by Loy Yang outage, depreciation, market headwinds 1H20 financial results Interim dividend of 47 cents per share declared, consistent with 75% payout ratio policy over full year Energy customer accounts up 36,000; Southern Phone acquisition ad
Slide 5: Safety, Customers, People
Safety Customers People Total Injury Frequency Rate Quarterly Net Promoter Score Employee Engagement Index (%) (per million hours worked) (advocates less detractors) 10.9 70 (11.1) 68 (11.9) 6.2 6.0 5.4 4.7 4.6 4.3 (18.2) (18.1) 3.6 3.5 3.1 2.6 62 2.4 2.0 2.1 (22.5) No survey 1.2 taken FY16 FY17 FY1
Slide 6: 1H20 results summary
1H20 1H19 Change Statutory Profit after tax ($m) 323 290 ▲ 11.4% Lower negative fair value movement due to lower short-term forward electricity prices Statutory EPS (cents) 49.7 44.2 ▲ 12.4% Underlying EBITDA ($m) 1,068 1,157 ▼ 7.7% Decrease in earnings due to Loy Yang A Unit 2 Underlying EPS (cents
Slide 7: Loy Yang Unit 2 outage financial impact
18 May 24 Dec Initial generator failure due to internal electrical short, Initial return to service consequential damage to stator and rotor components 7 June 27 Dec 20 Jan Seven-month timeframe for repairs and material Unit taken offline for boiler repair, leading to Unit returned financial impact
Slide 8: AGL generation sold to pool
AGL generation sold to pool (GWh) $/MWh Investments in removal of bottlenecks from coal supply GWh chain over past two years has driven more efficient 4,500 1H19: 21,233 GWh 1H20: 21,793 GWh 120 operation at AGL Macquarie 4,000 100 3,500 Reduced number of smaller forced outages across thermal fleet
Slide 9: Strategic priorities
STRATEGIC PRIORITIES Growth Transformation Social Licence Accelerate growth to meet Reposition, refresh Meet and exceed rising evolving customer needs and reinvigorate AGL community expectations Core energy customer accounts now up Building a broader base for AGL more Inaugural submission to custome
Slide 10: Growth pathways
Connection Orchestration Trading and Supply Generation Southern Phone Leading Virtual Power Progressing Crib Point Barker Inlet delivered, Bayswater capacity acquisition creates Plant and residential LNG import project and Kwinana Swift acquired, and efficiency upgrade platform for multi- battery pr
Slide 11: Building a loyal and growing customer base
Building a loyal and Improving services and Expanding product growing customer base adding value and geography Energy customer Customer accounts (k) accounts (k) 3,646 3,692 3,728 Customer growth 160 Broadband/mobile 46 36 services in operation 20 Customer accounts up 102,000 in 18 months 505 427 62
Slide 12: Wandoan South project adds to Dalrymple and Maoneng projects
Wandoan South project adds to Dalrymple and Wandoan Battery Offtake agreement Maoneng projects 100 MW, commencing July 2021 Full operational dispatch rights 15-year agreement 15-year energy storage services Agreement with Vena Energy announced 29 January Virtual Power Plant Complements enhanced ener
Slide 13: Peak Energy Rewards being expanded nationally
Peak Energy Rewards being expanded nationally Original trial with 8,000 customers in NSW supported by Arena, AEMO and state government AGL now expanding program to customers in all NEM states following successful rollout into Victoria Up to 1 million customers will have access to the no-cost program
Slide 14: Barker Inlet power station
210 MW reciprocating engine power station based alongside AGL Torrens near Adelaide Construction completed to $295m budget and trading dispatch occurred in December 2019 Construction completed with TIFR of 0.8 Full operational handover occurred on 28 January 2020 Closure of Torrens A units to occur
Slide 15: Bushfire emergency response
Customers AGL people Community Our sites More than 173,000 Many Southern Phone Commitments of up to Strong AGL generation customers impacted employees in Moruya ~$4m including up to performance during by fires impacted ~$3m customer relief crisis Targeted debt waivers Paid leave for employees Donati
Slide 16: Executive team
Managing Director & CEO Chief Operating Officer Chief Customer Officer EGM, Future Business & Technology Brett Redman Markus Brokhof Christine Corbett Simon Moorfield Joined AGL 2007 Joins AGL 2020 Joined AGL 2019 Joined AGL 2016 Chief Financial Officer General Counsel EGM, People & Culture EGM, Cor
Slide 17: Financial Overview: Damien Nicks, CFO
Financial Overview Damien Nicks CFO
Slide 18: Statutory to Underlying Profit after tax
($m) 1H20 1H19 Change Statutory Profit after tax 323 290 33 Adjust for: National Assets gain on divestment - (37) 37 Residential Solar operations impairment - 38 (38) Proceeds from Yandin wind farm development rights - (5) 5 Perth Energy acquisition costs 7 - 7 PARF partial impairment 10 - 10 Loss o
Slide 19: Underlying Profit after tax bridge
Underlying Profit after tax ($m) Operating costs Gross margin Other and D&A (50) (18) 43 (28) (26) (6) (4) 537 (80) 51 13 432 1H19 Wholesale Wholesale Gas Eco Markets Consumer Consumer Gas Other gross Operating costs D&A Net finance Income tax 1H20 Electricity gross margin gross Electricity gross gr
Slide 20: Electricity volumes and portfolio margin
Comparison of volumes (TWh) Comparison of portfolio margin ($m) Generation volumes up 0.6 TWh Increased generation at AGL Macquarie, offsetting decreased generation at AGL 955 864 Consumer customers up $43m Loy Yang due to Unit 2 outage and lower Lower transfer price reflecting generation from Victo
Slide 21: Gas volumes and portfolio margin
Comparison of volumes (PJ) Comparison of portfolio margin ($m) 89.8 382 84.5 344 Consumer customers down $28m 32.7 Consumer customers 139 Lower volumes, automatic discounts sales down 0.5 PJ for standing offer customers, and 32.2 Lower market volumes despite 111 customers switching to lower priced c
Slide 22: Operating costs
Year-on-year reductions still expected in FY20, excluding operating costs of newly acquired companies Operating costs (excluding depreciation and amortisation, $m) 3 5 5 4 12 15 (32) (8) 764 763 768 1H19 Prior year Reduction in Plant Investment in Product and Insurance, Other costs 1H20 Perth Energy
Slide 23: Cash flow and cash conversion
($m) 1H20 1H19 Cash conversion Underlying EBITDA 1,068 1,157 Equity accounted income and onerous 1,400 120% (18) (24) contracts Movements in other assets/liabilities 1,200 100% 4 (34) and non-cash items Working capital – margin calls 156 (146) 1,000 80% $ million Working capital – other (11) (74) 80
Slide 24: Sources and uses of cash, share buy-back
1H20 sources and uses of cash ($m) Operating cash flow Record for a first half Sustainability Linked Loan September execution of $600m, Net change in borrowings 5-year syndicated facility replacing other facilities Share buy-back Share buy-back update 51% complete to date; Significant sustaining 16.
Slide 25: Climate scenario modelling
Modelling several scenarios including a "1.5 degree Modelling scenarios limit" scenario aligned with Paris Agreement goals Current Australian policy Extended scenario timeline compared with settings approach 2019 report from 2030 to at least 2040 Use of comparable and verifiable data: Intergovernmen
Slide 26: Brett Redman, Managing Director & CEO
Brett Redman Managing Director & CEO
Slide 27: Electricity and LGC price outlook
First half impact Updated outlook Electricity flat swap price ($/MWh) – FY21 100 90 NSW Electricity spot prices Forward prices 80 QLD resilient year to date continuing to trend SA 70 but still down on average downward VIC 60 50 Nov-19 Oct-19 Apr-19 Jul-19 Mar-19 Jan-19 Jun-19 Aug-19 Dec-19 Jan-20 Fe
Slide 28: Gas and coal price outlook
First half impact Updated outlook Victorian gas price observations ($/GJ) Cost of re-contracting still 12 unfavourable to legacy contracts 10 8 Lower customer demand Crib Point remains compelling : 6 resulting in reduced use of Subject to environmental approval 4 higher-priced contracted gas and fin
Slide 29: Serving Australian households, expanding
Serving Australian Expanding Flexible diverse Growing geographic households product offering asset portfolio presence AGL is now connected Broadband, mobile Modern gas generation Expansion in Western to more than 27% of and batteries added at Barker Inlet (SA) and Australia via Perth Energy Australi
Slide 30: FY20 Underlying Profit guidance
Underlying Profit after tax expected in upper half of $780 million to $860 million range Impact of the Loy Yang Unit 2 unplanned outage within the forecast $80 million to $100 million range Higher depreciation expense from recent investment in plant, systems and growth Offset partially by strong gen
Slide 31: Six months ended 31 December 2019
Six months ended 31 December 2019 13 February 2020 31
Slide 32: Supplementary Information
Supplementary Information
Slide 33: Underlying profit summary
($m) 1H20 1H19 Change Revenue 6,312 6,337 (0)% Gross margin 1,836 1,921 (4)% Operating costs (excluding depreciation and amortisation) (768) (764) 1% Underlying EBITDA 1,068 1,157 (8)% Depreciation and amortisation (375) (295) 27% Underlying EBIT Wholesale Markets 1,295 1,398 (7)% Customer Markets 1
Slide 34: Generation by asset and type
GWh 1H20 1H19 Change Asset AGL Macquarie – Bayswater 6,900 6,790 2% AGL Macquarie – Liddell 5,327 3,900 37% AGL Loy Yang 5,971 6,883 (13)% AGL Torrens 1,182 1,142 4% Barker Inlet 58 - - SA wind 661 743 (11)% VIC hydro 450 688 (35)% VIC wind 621 678 (8)% NSW solar 155 184 (16)% Other gas 119 93 28% N
Slide 35: Capacity and carbon intensity by asset
Capacity* Carbon intensity 1H20 sent out Asset State Type Status (MW) (tCO2e/MWh) generation (GWh) AGL Macquarie - Bayswater NSW Black coal Owned 2,665 0.94 7,150 AGL Macquarie - Liddell NSW Black coal Owned 2,000 0.98 5,592 AGL Loy Yang VIC Brown coal Owned 2,210 1.25 6,177 Total coal 6,875 18,919
Slide 36: Coal supply vs generation outlook
Coal supply vs generation outlook (Mt) 14 12 10 8 6 4 2 - FY19 Actual FY20 Forecast FY21 Forecast FY22 Forecast Contracted coal purchases Additional purchases or stockpile drawdown AGL Macquarie Generation - customer load AGL Macquarie Generation - settled at market AGL Energy FY20 Half-Year Results
Slide 37: Electricity sales volumes
GWh 1H20 1H19 Change Consumer New South Wales 2,779 2,741 1% Victoria 2,043 1,896 8% South Australia 974 953 2% Queensland 1,129 1,125 0% Consumer total 6,925 6,715 3% Large Business New South Wales 2,106 1,990 6% Victoria 1,313 1,270 3% South Australia 527 339 55% Queensland 1,078 1,112 (3)% Large
Slide 38: Gas sales volumes
PJ 1H20 1H19 Change Consumer New South Wales 10.0 11.1 (10)% Victoria 18.8 18.4 2% South Australia 1.7 1.7 0% Queensland 1.3 1.2 8% Western Australia 0.4 0.3 33% Consumer total 32.2 32.7 (2)% Large Business New South Wales 0.6 2.3 (74)% Victoria 4.2 5.1 (18)% South Australia 0.1 0.2 (50)% Queensland
Slide 39: Customer churn and accounts
Residential and small business Acquisitions and retentions ('000) Residential and small business customer churn customer accounts ('000) 30% 26.0% 23.8% 24.0% 23.9% 1,117 1,113 21.0% 994 20% 836 18.9% 19.6% 750 17.5% 17.6% 750 758 3,658 3,626 3,646 3,692 3,728 623 15.7% 506 427 10% 367 355 371 330 3
Slide 40: Customer accounts by state
(‘000) 31 Dec 2019 30 Jun 2019 Change Consumer Electricity New South Wales 852 843 1% Victoria 692 680 2% South Australia 362 365 (1)% Queensland 372 373 (0)% Total Consumer Electricity 2,278 2,261 1% Consumer Gas New South Wales 625 630 (1)% Victoria 551 544 1% South Australia 130 130 0% Queensland
Slide 41: Customer Markets key metrics
1H16 1H17 1H18* 1H19 1H20 Gross margin ($m) 415 394 387 367 382 Net operating costs (including fees, charges, recoveries and depreciation and amortisation) (215) (204) (255) (272) (250) ($m) EBIT ($m) 200 190 132 95 132 Gross margin per customer account ($) 112 107 106 101 103 Net operating costs pe
Slide 42: Consumer electricity and gas
1H20 1H19 Change Electricity Volume (GWh) 6,925 6,715 3% Average customer accounts (‘000) 2,271 2,218 2% Revenue ($m) 2,069 2,030 2% Gross margin ($m) 271 228 19% Gross margin (%) 13.1 11.2 1.9ppts Gross margin per average customer account ($) 119 103 16% Gross margin per MWh ($) 39.1 34.0 15% Gas V
Slide 43: Large Business electricity and gas
1H20 1H19 Change Electricity Volume (GWh) 5,024 4,711 7% Revenue ($m) 866 844 3% Gross margin ($m) 18 12 50% Gross margin (%) 2.1 1.4 0.7ppts Gross margin per MWh ($) 3.6 2.5 44% Gas Volume (PJ) 7.1 10.0 (29)% Revenue ($m) 65 108 (40)% Gross margin ($m) 7 11 (36)% Gross margin (%) 10.8 10.2 0.6ppts
Slide 44: Debt maturity profile and credit metrics
Debt maturity profile ($m) Investment grade credit rating and 1,200 metrics Moody’s Baa2 credit rating with stable 1,000 outlook Approximately $1,063m of cash and 800 undrawn debt facilities 25.6% gearing (net debt to net debt plus 600 adjusted equity) 10.1x interest cover 400 42.2% funds from opera
Slide 45: Debt facilities
Debt facility ($m) Limit Usage Maturity Revolving bilateral facilities 200 100 FY20 Revolving bilateral facility 70 0 FY21 Syndicated revolving facility 400 190 FY21 Revolving bilateral facility 75 75 FY22 Australian medium-term notes 600 600 FY22 Revolving bilateral facility 100 0 FY23 USPP 2010 US
Slide 46: Cost centre transfers
During the period, the following cost centre transfers occurred: 1H19 Segment 1H19 1H19 Adjusted 1H20 • Future Business & Technology Reported transfers Adjusted Vs 1H20 and other digital functions from Customer Markets to Operating costs Centrally Managed Expenses Customer Markets (264) 4 (260) (218
Slide 47: Segment revenue and EBITDA history
($m) 1H16 FY16 1H17 FY17 1H18* FY18* 1H19 FY19 1H20 Wholesale Markets external revenue 1,630 3,518 1,966 4,860 2,454 4,944 2,417 5,561 2,368 Customer Markets external revenue 3,878 7,438 3,752 7,334 3,907 7,696 3,852 7,540 3,838 Group Operations external revenue 93 193 312 389 89 175 67 144 62 Other
Slide 48: Important notice and disclaimer
• The material in this presentation is general information about Statutory Profit and Underlying Profit: AGL’s activities as at the date of this presentation. It is provided in summary form and does not purport to be complete. It • Statutory Profit is prepared in accordance with the should be read i
Slide 49: Contact
Contact James Hall Chris Kotsaris Sophia Li General Manager, Corporate Finance Head of Investor Relations (Interim) Group Treasurer (Acting) Phone: +61 2 9921 2789 Phone: +61 2 9921 2256 Phone: +61 2 9921 2092 Mobile: +61 401 524 645 Mobile: +61 402 060 508 Mobile: +61 476 809 190 Email: jbhall@agl.