Contact Energy Limited · NZX:CEN

Contact Energy — 7th Australia-New Zealand Climate Change and Business Conference (July 2011)

15 slides from Contact Energy's conference presentation, Aug 3, 2011

  1. Slide 1: ASX cover note: Contact Energy presentation

    For personal use only To Company Announcements Office Facsimile 1300 135 638 Company ASX Limited Date 3 August 2011 From Helen Hardy Pages 15 CONTACT ENERGY – PRESENTATION TO THE 7TH AUSTRALIA-NEW ZEALAND Subject CLIMATE CHANGE AND BUSINESS CONFERENCE Attached herewith is a copy of an announcement r

  2. Slide 2: Certainty and stability in the energy market

    Certainty and stability For personal use only in the energy market Presentation to the 7th Australia-New Zealand Climate Change and Business Conference Dennis Barnes, CEO Contact Energy © Contact Energy Limited July 28, 11 Document title 1

  3. Slide 3: Contact Energy – one of NZ's leading listed companies

    Contact Energy – one of NZ’s leading listed companies For personal use only • Integrated generator retailer • Total assets of ~$5.2 billion • Around 79,000 shareholders • ~24% market share of generation • ~25% market share of customers • NZs largest buyer of natural gas • National staff of ~1,100 ©

  4. Slide 4: Generation developments and options: gas availability is an important consideration

    Generation developments and options: gas availability is an important consideration in the sequencing of new investment… For personal use only © Contact Energy Limited 1 August 2011 3

  5. Slide 5: Market conditions mean prices are below what is needed to support new investments

    …market conditions mean prices are below what is needed to support many new investments For personal use only © Contact Energy Limited 1 August 2011 4

  6. Slide 6: Compounded by sluggish demand and warmer temperatures

    …compounded by sluggish demand and warmer temperatures For personal use only 12 months to date (GWh) Growth rate YTD (% p.a.) The New Zealand na,onal 2011 2010 2009 1 year 2 year average temperature in June North Island 24,812 24,610 24,642 0.8% 0.3% was 10.0°C (1.5°C above the South Island 1971‐200

  7. Slide 7: Inputs into delivered energy prices are increasing

    …in an environment where inputs into delivered energy prices are increasing For personal use only • Transpower’s capital expenditure programme to reinforce the grid over the next 5 years will cost ~$3.8 billion+ • These costs will be recovered from Transpower customers and will increase delivered en

  8. Slide 8: New build generation costs are higher than current market prices

    …and a reality that new build generation costs are higher than current market prices For personal use only © Contact Energy Limited 1 August 2011 Document title 7

  9. Slide 9: NZ energy markets need conditions that provide certainty

    As a result, NZ energy markets need conditions that provide certainty… For personal use only • There are plenty of factors in the energy market we can’t control …so the things we can control (e.g. policy and regulatory settings) need to provide reasonable certainty for investors • Investors will ada

  10. Slide 10: The ETS is a key policy to get right

    …the ETS is a key policy to get right For personal use only • Other countries will continue (in one way or another) to implement policies that lead to a reduction in emissions • The NZ ETS is helpful in institutionalising a price on emissions, but real change requires a carbon price sufficient to en

  11. Slide 11: Need for certainty isn't just an ETS issue

    Need for certainty isn’t just an ETS issue… For personal use only • Yes energy market issues are complex, but let’s not overcomplicate solutions • Incremental improvement is fine, but we need to avoid the temptation to continually dabble • Plenty of examples of policy/regulatory change in energy and

  12. Slide 12: Developments in water policy are heading in the right direction

    Developments in water policy are heading in the right direction… For personal use only • LAWF process appropriately considering key issues around governance, allocation and quality • Particularly for allocation, an approach that defines limits, and the processes to allow transfers, is a sensible one

  13. Slide 13: We risk turning capital away from the electricity market

    …but we risk turning capital away from the electricity market For personal use only • UTS – ex post price setting creates uncertainty and perverse incentives • Scarcity pricing – settings should create a risk envelope that participants can work within (and that’s it) • Metering – risks jeopardising

  14. Slide 14: Conclusions

    Conclusions For personal use only • Current market demand and hydrology conditions mean current prices are well below the long run cost of generation • There is significant new investment in strengthening the electricity transmission system • The generation mix in New Zealand is evolving • Market se

  15. Slide 15: Thank you

    Thank you For personal use only © Contact Energy Limited 1 August 2011 14

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