Meridian Energy Limited · NZX:MEL
Meridian Energy — H1 FY2015 Earnings Presentation
41 slides from Meridian Energy's earnings presentation, Feb 18, 2015
Slide 1: Cover letter to ASX Market Announcements
N oD, t meridian 18 February 2015 Company Announcements Office ASX Market Announcements Exchange Centre Level 6 20 Bridge Street Sydney NSW 2000 AUSTRALIA Dear Sir/Madam Meridian Energy Limited (MEZCA) Please find attached the media release, analyst presentation and investor letter related to Meridi
Slide 2: Meridian delivers higher earnings
For personal use only Meridian delivers higher earnings 18 February, 2015 Meridian Energy delivered a solid interim result for the six months to 31 December 2014, with higher earnings compared to the same period last year. Meridian was ahead of the same period last year on all financial measures wit
Slide 3: Dividends, capital management and outlook
For personal use only The initial step is an immediate amendment to the dividend policy to increase the percentage of free cash flow paid out on average from 70%-80% to 75%-90%. All other elements of the dividend policy remain unchanged. In addition, Meridian intends to return $625m to shareholders
Slide 4: 2015 Interim Results Presentation
For personal use only MERIDIAN ENERGY LIMITED 2015 INTERIM RESULTS PRESENTATION for the six months ended 31 December 2014
Slide 5: Disclaimer
Disclaimer The information in this presentation was prepared by Meridian Energy with due care and attention. However, the For personal use only information is supplied in summary form and is therefore not necessarily complete, and no representation is made as to the accuracy, completeness or reliabi
Slide 6: Key financial points
Key financial points Interim financials well ahead of last year For personal use only Operating cash flow +13.2% EBITDAF +20.9% Underlying NPAT +38.3% Capital projects completed Mt Mercer and Mill Creek wind farms Generation control system Total generation volumes +6.1% 271GWh of new wind production H
Slide 7: Key market points
Key market points NATIONAL DEMAND Modest demand growth in 2014, up GWh For personal use only 3,800 1.3% 3,600 3,400 Retail competition remains fierce 3,200 3,000 2,800 Aluminium prices and currency rates 2,600 are assessed as having a positive Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Range (20
Slide 8: Capital management
Capital management Lift in dividend policy to 75%-90% of For personal use only free cash flow (from 70%-80%) In addition, targeting a progressive return of a further $625m over next 5 years, starting in August 2015 Mechanism for this additional return will be considered on an ongoing basis Ordinary i
Slide 9: Regulatory issues
Regulatory issues The Electricity Authority is expected to For personal use only publish a transmission pricing options paper in the next few weeks A second issues paper is due in June 2015 Currently the proposed changes will mean lower transmission charges to consumers and downward pressure on reta
Slide 10: Projects
Projects Major projects completed on time and For personal use only under budget Mt Mercer will eliminate half a million tonnes of carbon emissions annually Mill Creek completion means that Wellington wind can now power 100,000 homes New generation control system monitors 50,000 data points around o
Slide 11: Powershop Australia
Powershop Australia Over 30,000 customers in Victoria at For personal use only the end of January 2015 Leverages existing NZ technology and call centre investment Business run out of Melbourne and Wellington Customers serviced out of Masterton Anticipating NSW launch this quarter MERIDIAN ENERGY LIM
Slide 12: New Zealand retail
New Zealand retail Arc metering business sold and For personal use only programme commenced to replace remaining 125,000 legacy meters New Meridian website launched, improved customer join, move and bill estimate functionality Aggressive residential competition has seen a small decline in customer c
Slide 13: New Zealand retail
New Zealand retail Annual demand up 1.3%, last 6 months For personal use only up 2.9% on prior period Reduced fuel purchase obligations mean that thermal generators are able to reduce output The forward market has risen across all quarters, which may benefit commercial and industrial pricing No netwo
Slide 14: Financial performance
Financial performance FINANCIAL PERFORMANCE AGAINST PRIOR YEAR $M 600 For personal use only 6 months to 31 December 2014 500 480 447 6 months to 31 December 2013 400 324 300 268 217 192 200 169 159 112 124 117 117 115 107 107 83 100 61 67 0 Energy Trans- Operating EBITDAF NPAT Underlying Operating I
Slide 15: Earnings
Earnings EBITDAF1 ‘Like for like’ EBITDAF (excluding $M For personal use only 700 insurance proceeds and IPO costs) 600 increase of 15.4% in 1H FY14 from: 306.6 500 Additional generation from Mill Creek 400 182.3 307.7 317.1 in NZ and Mt Mercer in Australia 300 200 353.3 324.3 Higher residential/SME
Slide 16: Operating cash flow and investment expenditure
Operating cash flow and investment expenditure CASH FLOW FROM OPERATING ACTIVITIES Net cash flow from operating activities For personal use only $M was $25.3m (13.2%) higher than 1H FY14 500 Reflects the higher energy margin and 400 lower operating costs in 1H FY15 300 166.5 243.8 241.3 186.7 Includes
Slide 17: Costs
Costs TRANSMISSION COSTS $6.1m (9.1%) decrease in Transmission For personal use only $M costs in 1H FY15 140 120 Benefiting from lower final costs on HVDC 100 62.6 Pole 3 project 80 60.5 60 42.2 45.7 5% increase in 2015/16 transmission 40 66.7 costs coming 20 42.0 41.0 54.8 60.6 0 2011 2012 2013 2014
Slide 18: Concluding remarks
Concluding remarks Higher energy margin and lower costs has For personal use only driven a lift in profits and operating cash flow Inflows into catchments have been consistent, with Lake Pukaki storage (as at 17 Feb) 93% of average. Position is not adversely affecting generation outlook Tiwai Point deci
Slide 19: Additional information
Additional information For personal use only MERIDIAN ENERGY LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 DECEMBER 2014 18 February 2015
Slide 20: New Zealand retail
New Zealand retail Customer connections NEW ZEALAND CUSTOMER NUMBERS For personal use only ICP (000) 350 Meridian North Island Meridian South Island Small decline in ICP numbers since June Powershop 300 2014, reflecting aggressive residential 48 250 34 51 55 56 sales activity 200 130 123 114 Resident
Slide 21: Hydrology
Hydrology Inflows for the 6 months to December MERIDIAN'S COMBINED CATCHMENT INFLOWS For personal use only GWh 2014 were 106% of historical average 14,000 12,000 This reflects comparatively high 10,000 inflows in July and August 2014 8,000 January 2015 inflows were 77% of 6,000 4,000 historical average
Slide 22: New Zealand generation
New Zealand generation For the 6 months to December 2014, MERIDIAN'S NEW ZEALAND GENERATION For personal use only GWh 1,400 Meridian’s New Zealand generation 1,200 was 3.8% higher than the same period 1,000 last year 800 For the 6 months to December 2014, 600 the average price Meredian received 400
Slide 23: Dividends
For personal use only Dividends DATE AMOUNT IMPUTATION 2015 DIVIDENDS DATE PAID ANNOUNCED CPS % Interim Ordinary Dividend 18 February 2015 15 April 2015 4.80 100% Interim Special Dividend 18 February 2015 15 April 2015 1.40 100% Total Interim Dividend 6.20 100% INTERIM DIVIDENDS DECLARED CPS 7 Ordin
Slide 24: Movement in EBITDAF HY14 to HY15
Movement in EBITDAF HY14 to HY15 EBITDAF* For personal use only $M 350 325 +12.6 New Zealand Energy Margin +3.8 +6.1 +$20.0m 300 +7.3 -0.4 -1.9 +13.6 -3.9 324.3 +18.9 275 268.2 250 EBITDAF 31 Contracted Net VAS Net Cost of Spot Exposed Other Market International Other Transmission Staff & Other EBITD
Slide 25: EBITDAF and Net Profit After Tax
EBITDAF and Net Profit After Tax HY2015 EBITDAF TO NPAT RECONCILIATION For personal use only $M 350 300 -116.5 250 -8.3 -0.6 200 -40.8 324.3 150 -43.3 +4.8 +8.3 +14.7 100 -25.5 114.8 117.1 50 - EBITDAF* Depreciation Premiums on Equity Financing Taxation Underlying Fair Value Gain on Sale/ Premiums o
Slide 26: New Zealand energy margin
For personal use only New Zealand energy margin Energy margin is a non-GAAP financial measure Energy margin is defined as: representing Energy Sales Revenue less Energy ₊ revenues received from sales to customers net of Related Expenses and Energy Distribution Expenses distribution costs (fees to dist
Slide 27: New Zealand energy margin
For personal use only New Zealand energy margin HY2014 HY2013 VOLUME VWAP VOLUME VWAP NEW ZEALAND ENERGY MARGIN GWh $/MWh $M GWh $/MWh $M Retail Contracted Sales 2,993.4 $101.9 $305.0 2,885.7 $102.9 $296.9 NZAS Aluminium Sales 2,525.4 2,525.4 Sell Side CFDs 606.1 434.4 Wholesale Contracted Sales 3,1
Slide 28: HY15 energy margin
HY15 energy margin NEW ZEALAND ENERGY MARGIN For personal use only $M Derivatives acquired to supplement 700 Contracted Sales Spot Exposed Net Cost of Acquired generation and cover Revenue Revenue Generation spot price risks, net of spot revenue $463.4m $7.7m -$17.6m received from those 600 derivati
Slide 29: Movement in energy margin HY14 to HY15
Movement in energy margin HY14 to HY15 NEW ZEALAND ENERGY MARGIN For personal use only $M 550 Contracted Sales Spot Exposed Net Cost of From lower acquired Revenue Revenue Acquired generation volumes Growth in SME +$18.9m -$0.4m Generation and higher wholesale and agri prices business +$7.3m custome
Slide 30: Funding
Funding DEBT MATURITY PROFILE AS AT 31 DECEMBER 2014 Total borrowings as at 31 December 2014 $M For personal use only 500 of $1,186.9m, up $60.8m from 31 400 December 2013 and up $94.4m from 30 157 June 2014 300 200 Net borrowings (net of cash) as at 31 200 332 264 275 December 2014 of $955.9m, up $
Slide 31: Funding metrics
Funding metrics NET DEBT/EBITDAF (S&P VIEW) Net debt/EBITDAF is the principal metric TIMES For personal use only 2.0 underpinning S&P credit rating 1.8 1.6 1.4 1.2 1.0 S&P calculation of Net debt/EBITDAF 0.8 1.56 1.77 1.71 0.6 includes numerous adjustments to 0.4 reported numbers 0.2 0.0 June 2013 J
Slide 32: Fair Value movements
Fair Value movements Meridian uses derivative instruments to CHANGE IN FV OF FINANCIAL INSTRUMENTS For personal use only $M manage commodity price, interest rate and 150 foreign exchange risk 100 50 93.8 18.6 As forward prices and rates on these 0 53.3 instruments move, non cash changes to -50 -103.
Slide 33: Group income statement
Group income statement 6 MONTHS ENDED 31 DEC YEAR ENDED 30 JUNE For personal use only 2014 2013 2014 2013 SUMMARY GROUP INCOME STATEMENT $M $M $M $M New Zealand Energy Margin 454.9 434.9 891.5 865.1 International Energy Margin 25.3 11.7 31.9 50.7 Other Revenue 16.5 12.7 27.3 29.7 Energy Transmission
Slide 34: Group underlying NPAT
For personal use only Group underlying NPAT 6 MONTHS ENDED 31 DEC YEAR ENDED 30 JUNE 2014 2013 2014 2013 UNDERLYING NPAT RECONCILIATION $M $M $M $M Net Profit after Tax 117.1 116.9 229.8 295.1 Net Change in Fair Value of Financial Instruments (Operational) (0.3) (1.7) 8.4 (51.1) Net Change in Fair Va
Slide 35: Group cash flow statement
Group cash flow statement 6 MONTHS ENDED 31 DEC YEAR ENDED 30 JUNE For personal use only 2014 2013 2014 2013 SUMMARY GROUP CASH FLOW STATEMENT $M $M $M $M Receipts from Customers 1.002.4 963.5 2,083.4 2,390.0 Interest and Dividends Received 4.6 4.2 8.5 2.1 Payments to Suppliers and Employees (685.9)
Slide 36: Group balance sheet
Group balance sheet 6 MONTHS ENDED 31 DEC YEAR ENDED 30 JUNE For personal use only 2014 2013 2014 2013 SUMMARY GROUP BALANCE SHEET $M $M $M $M Cash and Cash Equivalents 231.0 252.4 276.4 382.8 Accounts Receiveable 217.1 180.7 182.7 254.5 Other Current Assets 58.7 95.2 63.5 128.8 Current Assets 506.8
Slide 37: Glossary
Glossary Acquired generation volumes buy-side electricity derivatives excluding the buy-side of virtual asset swaps For personal use only Average generation price the volume weighted average price received for Meridian’s physical generation Average retail contracted sales price volume weighted avera
Slide 38: Better energy: Dear Investor
Better energy For personal use only Dear Investor Our interim results for the six months ended 31 December 2014 are now available and show a lift in profits and operating cash flow, which supports an enhanced dividend. of the Pay m e nt lm e nt f in al in st a 4.8 CPS Interim ordinary dividend 1.4 C
Slide 39: From our Chair and Chief Executive
From our Total generation for the six months was up by over 6% on the previous corresponding period, reflecting of the dividend policy remain unchanged. Furthermore, the Board intends to return an additional $625m to shareholders over Chair strong first quarter hydro generation in New Zealand and th
Slide 40: Waitaki – powering on
Waitaki – powering on a third as a spare. The replacement programme is well underway. The first transformer, which was delivered immediately before Christmas, was made operational on 12 January. The The Waitaki hydro power station is Other important works have second transformer is expected to be st
Slide 41: Keeping the lights on
Keeping our commitments and responsibilities The three-year project was delivered on as the largest generator of electricity time and on budget while meeting all of in the country. its performance and testing objectives. the lights on Long gone are the days when we had staff on the ground monitoring