AGL Energy Limited · ASX:AGL
AGL Energy — Macquarie Equities Conference - Sydney 2011
25 slides from AGL Energy's conference presentation, May 4, 2011
Slide 1: Focus on delivery excellence
Focus on delivery excellence Macquarie Equities Conference f - Sydney Michael Fraser, Managing Director and CEO | 4 May 2011
Slide 2: Disclaimer
2 Disclaimer sc a e The information in this presentation: › IIs nott an offer ff or recommendation d ti to t purchase h or subscribe b ib for f securities iti ini AGL Energy Limited or to retain any securities currently held. › Does not take into account the potential and current individual investme
Slide 3: Complex market requires strategic optionality
3 Complex Co p e market a et requires equ es strategic st ateg c optionality opt o a ty › Continued sharp increases in electricity prices forecast › Uncertainty surrounding carbon tax › Significant retail competition › Soft domestic wholesale gas market conditions › Increasing internationall d deman
Slide 4: The Integrated Strategy
4 The e Integrated teg ated Strategy St ategy Managing risk and improving returns. AGL’s integrated strategy provides access to multiple profit pools and balances risk between upstream supply of energy and our customers’ demand for energy. energy Upstream supply Customer demand UPSTREAM SUPPLY O Own
Slide 5: Benefits of The Integrated Strategy
5 Benefits e e ts oof The e Integrated teg ated Strategy St ategy Providing options to access multiple profit pools. Develop Develop Build Match Self supply gas wind farms (mainly supply and customer reserves to self peak) demand demand to supply g generation across retain all portfolio margin oc in
Slide 6: Wholesale electricity market continues to soften
6 Wholesale o esa e electricity e ect c ty market a et continues co t ues to soften so te Influences on future wholesale prices. › Sufficient base load capacity across markets FY11/12 NSW Swap Prices › 9,000 MW wind/other renewables by p $65 2020 $60 › Peak demand continues to grow faster $55 than u
Slide 7: Weak spot prices for both renewables and gas
7 Weak ea spot prices p ces for o both bot renewables e e ab es and a d gas LREC spot price Victorian spot gas $10 2.00 $100.00 REC Penalty y Average Monthly Demand (PJ) $9 1 80 1.80 $90.00 Maximum Monthly Demand (PJ) $80.00 $8 1.60 $70.00 $7 365 Day Moving Average Daily Gas Price 1.40 ($/GJ) $60.00
Slide 8: Retail Market Churn
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% Retail Ju ul-04 Aug-04 » 4 May 2011 Sep-04 » AGL External Oc ct-04 Noov-04 Deec-04 Jan-05 Feb-05 Ma ar-05 Appr-05 Maay-05 Jun-05 Ju ul-05 eta Market Aug-05 Sep-05 Oc ct-05 Noov-05 Deec-05 Jan-06 Feb-06 Ma ar-06 C u SA Electricity - Market Appr-06 NSW Electric
Slide 9: AGL pursues organic NSW growth strategy
9 AGL G pu pursues sues organic o ga c NSW S growth g o t strategy st ategy NSW electricity market churn is on the rise. › Channels to market: » Aggregators » Outbound telemarketing » Door-to-door field sales » Comparison sites » Inbound calls » Online self-service NSW Pending Churn up ~40% on 2010
Slide 10: Online capability launched
10 Online O e capability capab ty launched au c ed Easier to do business with AGL. › AGL launched online capability – 4 April › First of major retailers to deliver fully integrated online processing › Key functionality: » Sign-up with AGL » Arrange next day move move-in in » Bills delivered electron
Slide 11: Retail – Improving Core Operations
11 Retail eta – Improving p o g Core Co e Ope Operations at o s Strong working capital management. Aged Unbilled Accounts – improving across all categories 3,500 3,000 › Aged g unbilled customers at historically y low Number of accountts 2,500 levels 2,000 » Zero unbilled mass market customers 1,500
Slide 12: Retail – Improving customer service
12 Retail eta – Improving p o g customer custo e service se ce Industry outperformance. AGL churn much lower than industry 21 › AGL market churn continues to outperform p 19 Market churn (%) industry 17 15 » AGL churn 4.5 ppts below industry average M 13 11 › Effective AGL retention activity continu
Slide 13: NSW – Unaligned generation
13 NSW S –U Unaligned a g ed ge generation e at o Able to support AGL’s NSW retail growth strategy. Entity Capacity % of Region Macquarie Generation 4,839 28.8 Snowy Hydro 2,516 15 Delta Coastal 2,588 15.4 NSW Generation Capacity Total 9,943 59.2 › Unaligned generation accounts for nearly 60% of ins
Slide 14: NSW – AGL adding peak generation capacity
14 NSW S – AGL G add adding g pea peak generation ge e at o capac capacity ty Final investment decision on Dalton expected in 1H FY12. › Intermediate/Peaking gas plant » Permitting site for up to 1,500 MW » Initially capacity of 500 500-750 750 MW › Planning application lodged and construction tende
Slide 15: NSW – Newcastle Gas Storage Facility
15 NSW S – Newcastle e cast e Gas Storage Sto age Facility ac ty Final investment decision expected in 1H FY12. › Infrastructure supply bottlenecks emerging in NSW › Management of peak gas demand (daily and hourly): » Peak supply during high demand » Supports development of peaking power stations »
Slide 16: Renewable Energy Certificates (REC) Obligations
16 Renewable e e ab e Energy e gy Certificates Ce t cates (REC) ( C) Obligations Ob gat o s Policy certainty provides long-term growth opportunity. › Split between Large and Small Scale AGL RET Liability Renewable Energy Scheme from 31 REC (million) December 2010 9.0 › Since the scheme split, the LR
Slide 17: Renewable Energy Certificates (REC) obligations
17 Renewable e e ab e Energy e gy Certificates Ce t cates (REC) ( C) obligations ob gat o s Surplus continues to suppress REC prices. › AGL’s REC obligations covered to 2014/15 Forecast Industry LRET Balance LREC (million) › Future wind farm developments timing 40 33 subject to recovery of REC price
Slide 18: Upstream Gas
18 Upstream Upst ea Gas Integrated strategy creates growth opportunity. AGL Long-term Gas Supply Contracts AGL Long-term Gas Supply Contracts 300 250 200 PJ pa a 150 2P Equity Future self supply opportunities Reserves Current 2P Future Future 38% Supply Target Supply 100 50% Contracts Contracts 62%
Slide 19: Upstream Gas
19 Upstream Upst ea Gas Creating future value. › Gloucester received NSW Planning g commission approval pp › Galilee – 3 production core/test holes over next six months › Hunter – first reserves booked AGL share of CSG reserves As at 31 Dec 10 PJ 2P 3P Gloucester (100%) 669 832 Moranbah (50%) 372 70
Slide 20: Bowen Basin/Moranbah Gas Project (MGP)
20 Bowen o e Basin/Moranbah as / o a ba Gas Project oject (MGP) ( G ) ATP1103 low-risk, high-value gas play. › AGL 50%; Shell/PetroChina (Arrow) 50% ((operator) p ) › Shell/Petro China proposing LNG Project » Initially 2-train, 8 Mtpa facility on Curtis Island, Gladstone » Timing of FID late-2012/ea
Slide 21: Gloucester Gas Project
21 Gloucester G ouceste Gas Project oject Stage 1 approval granted. › NSW Planning Pl i approved: d » 110 wells » Central p processing g facility y » Gas transmission pipeline » 15 MW power generator facility » Development by 2016 › Hydrogeological drilling program completed and monitoring commenced
Slide 22: Silver Springs Underground Gas Storage Project
22 Silver S e Springs Sp gs Underground U de g ou d Gas Storage Sto age Project oject On target for first storage early-FY12. › Remaining 50% of Wallumbilla LPG plant and Silver Springs to Wallumbilla pipeline » Acquired on 8 April 2011 » Pipeline required to transport QGC gas to storage project › F
Slide 23: Strong growth pipeline
23 Strong St o g growth g o t pipeline p pe e Strategic depth and optionality. Project j Nominal Capacity p y Location Type yp Project j Status Hallett 4 132 MW SA Wind Committed - Under Construction Oaklands Hill 67 MW VIC Wind Committed - Under Construction Hallett 5 52 MW SA Wind Committed - Unde
Slide 24: Disciplined capital management
24 Disciplined sc p ed capital cap ta management a age e t Utilising spare balance sheet capacity. › Asset sales proceeds of $3.2bn (2009) » Resulted in under-leveraged balance sheet › $886m syndicated bank loan refinancing Debt Maturity Profile » To be completed prior to FY11 results $ million » St
Slide 25: Summary
25 Su Summary a y › Building B ildi optionality ti lit iinto t portfolio tf li › Strong growth in Retail contribution in 2H11 expected › Accelerated growth in NSW electricity customers on target › Nil contribution from Loy Yang expected in FY11 (FY10: $45.1 million) › FY11 Underlying Profit guidance
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