Genesis Energy Limited · NZX:GNE
Genesis Energy — HY18 Earnings Presentation
39 slides from Genesis Energy's earnings presentation, Feb 14, 2018
Slide 1: HY18 Result Presentation
HY18 Result Presentation 14 February 2018 Marc England – CHIEF EXECUTIVE Chris Jewell – CHIEF FINANCIAL OFFICER GENESIS ENERGY LIMITED
Slide 2: Agenda
AGENDA Key Financial Highlights Performance Operational and Outlook Strategic Update HY18 RESULT PRESENTATION 2
Slide 3: 1. Key Highlights
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Slide 4: HY18 key highlights
HY18 key highlights — positive start to FY18 as our diverse portfolio, acquisitions and strategy deliver results Strong financial performance Delivering business outcomes • EBITDAF up 28% to $200m, 15% excluding acquisitions • Strong wholesale performance with generation volumes up 25%, • NPAT down
Slide 5: 2. Financial Performance
2. Financial Performance
Slide 6: HY18 financial highlights
HY18 financial highlights — strong financial performance in variable market conditions FINANCIAL HIGHLIGHTS $ MILLIONS HY17 HY18 200 173 156 149 129 95 82 83 37 37 43 28 23 27 EBITDAF NPAT Underlying Earnings Operating Costs Free Cash Flow Capital Expenditure Interim Dividend + 28% -24% + 14% + 16%
Slide 7: HY18 EBITDAF waterfall
HY18 EBITDAF waterfall — 28% EBITDAF growth driven by strong underlying performance and FY17 acquisitions HY18 vs HY17 EBITDAF $ MILLIONS Favourable Unfavourable 5 4 4 7 2 7 2 19 25 200 156 HY17 EBITDAF Generation Kupe Kupe LPG Pricing Lines costs Reduced Investment Other HY18 EBITDAF margin acquisi
Slide 8: Segment performance
Segment performance — Strong H1 for Wholesale and Kupe with Customer prioritising growth investment Customer Wholesale - LPG distribution business acquisition benefit offset by investment - Strong performance as Genesis’ diverse portfolio responds to market in growth conditions EBITDAF down $6 milli
Slide 9: Operating expenses
Operating expenses — underlying expenses down 1%, before acquisitions, investment in growth and carbon OPERATING EXPENSES1 OPERATING EXPENSE BRIDGE $ MILLIONS Favourable Unfavourable $ MILLIONS 176 173 3 142 144 149 14 7 6 173 138 137 149 2 HY14 HY15 HY16 HY17 HY18 HY17 LPG Investment in 3 Carbon Ot
Slide 10: Cash flow
Cash flow — operating cash flow up 57% and free cash flow up 37% in line with EBITDAF growth OPERATING CASH FLOW FREE CASH FLOW1 $ MILLIONS $ MILLIONS 199 129 165 163 114 136 127 92 95 83 HY14 HY15 HY16 HY17 HY18 HY14 HY15 HY16 HY17 HY18 Significantly up reflecting higher EBITDAF, reduction in coal
Slide 11: Capital expenditure
Capital expenditure — disciplined approach as capital reallocated to support growth segments CAPITAL EXPENDITURE1 CAPITAL EXPENDITURE1 $ MILLIONS $ MILLIONS 82 24 47 44 40 8 27 58 44 5 40 39 22 FY14 FY15 FY16 FY17 FY18 YTD FY14 FY15 FY16 FY17 FY18 YTD Wholesale Customer Kupe Technology & Digital Sta
Slide 12: Capital structure
Capital structure — net debt has reduced by $52m with improving debt metrics NET DEBT AND NET DEBT/EBITDAF SOURCES OF FUNDING 1,210 5.0 31 DECEMBER 2016 31 DECEMBER 2017 1200 1,158 4.5 100 100 966 4.0 190 1000 905 831 3.5 310 3.1 193 800 anticipated 3.0 193 3.3 30 Jun18 range 2.9 2.9 2.5 600 2.6 290
Slide 13: Dividends
Dividends — continued growth in dividends with a 8.6% gross yield1 and outperformance of TSR relative to peers DIVIDEND & PAYOUT HISTORY 120% 2017 TOTAL SHAREHOLDER RETURN 82 82 83 80 100% 2017 closing share price: $2.52 64 87% 87% 72% 29.2% 80% 77% 64% 50 25.1% 60% 22.0% 40% 20% 0 0% Jan Feb Mar Ap
Slide 14: 3. Operational and strategic update
3. Operational and strategic update
Slide 15: Customer segment highlights
Customer segment highlights — growth in LPG, B2B and EOL, with NPS improving NPS AND PROMOTER SCORE LPG SALES VOLUMES 40% PJ GE-Rolling 12M (KT) EOL-Rolling 12M (KT) ICP count 8 70,000 30% 7 60,000 6 50,000 20% 5 40,000 4 30,000 10% 3 2 20,000 0% 1 10,000 0 0 Jul-17 Jun-17 Apr-17 May-17 Nov-17 Jan-1
Slide 16: Brand refresh
Brand refresh — new Genesis brand launched focused on leading the way to a new energy future 78% 68% of New Zealanders believe of New Zealander’s the brand relaunch makes believe that the brand Genesis seem more relaunch says something innovative than other new about Genesis1 energy providers1 2 5%
Slide 17: Residential
Residential — Continued progress on optimising residential segment for value GE SEGMENT VALUE MIX1 GE RESIDENTIAL VALUE MIX1 30% 100% 90% 25% 80% 20% 70% 15% 60% 50% 10% 40% 5% 30% 20% 0% 10% segment 1 segment 2 segment 3 segment 4 segment 5 0% Low High Feb-17 Sep-17 Jan-17 Dec-17 Jun-17 Aug-17 Apr-
Slide 18: Energy IQ
Energy IQ — a significant step forward in achieving our Energy Management vision • Agile environment delivering energy management solutions at pace • Three new features delivered, including Electricity Forecast, an exclusive Genesis Energy innovation • Services developed with customers, first in the
Slide 19: Energy Online
Energy Online — 2nd largest tier 2 retailer with >100,000 connections TIER 2 RETAILERS1 EOL GROWTH 106,506 100,492 105,000 100,000 72,577 63,411 95,000 90,000 44,289 27,229 23,372 85,000 20,156 18,882 80,000 75,000 Mar-17 Aug-17 Apr-17 Nov-17 Jan-17 Feb-17 Jul-17 Sep-17 May-17 Jun-17 Oct-17 Dec-17 B
Slide 20: LPG
LPG — significant organic growth with integration of new distribution business complete ORGANIC GROWTH COMPOSITION LPG DISTRIBUTION EXPANSION • Expanding new distribution capability Customer Numbers Duel LPG only to match existing customer base by investing in new depots and delivery contractors • T
Slide 21: Bad debt
Bad debt — 10% improvement in bad debt expected in FY18 BAD DEBT % TO REVENUE (ROLLING 12 MONTHS) 1 6% reduction in December 2016 December 2017 DSO2 for Genesis 0.44% Brand 17 16 0.42% Days Days 0.40% 0.38% Genesis Energy Online 0.36% 0.34% 69% 91% 0.32% 0.30% Drastic drop in medically JAN-17 JUN-17
Slide 22: Generation & Wholesale segment highlights
Generation & Wholesale segment highlights — diverse portfolio creating value in volatile market conditions GENERATION & GWAP1 GWAP/TWAP HY17 HY18 2173 1.55 Historic 2017 1.50 1625 1697 1.42 1485 96.2 1.17 1.03 1.04 1.07 1.10 1.01 1.01 0.99 1.06 1.02 1.01 1.03 0.98 53.4 + 46.3% + 4.5% + 80.2% Thermal
Slide 23: Wholesale market performance
Wholesale market performance — consistent results in a volatile market GENERATION & WHOLESALE PERFORMANCE HY18 Deferred hydro generation realised, Gross margin maintained in low Unit 5 and Tekapo outages limit gross margin, Swaption demand limits long low swaption demand and profitable demand period
Slide 24: Rankine units supporting market during dry months
Rankine units supporting market during dry months — 90% of Rankine output in 2017 was bought by other retailers & spot customers RANKINE OUTPUT GWh 250 200 150 100 50 - Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Genesis customers Other retailers/spot customer
Slide 25: Strategic priorities help lift GWAP/TWAP ratios
Strategic priorities help lift GWAP/TWAP ratios — active trading decisions have driven $5-7 million of extra value in 2017 PRICE RESPONSIVENESS VS BASE-LOAD PLANT • GWAP/TWAP1 ratio lift is driven by plant Rankine MW Rangipo MW NI Price availability, water values, flexible fuel, 250 $120 spot tradin
Slide 26: Kupe segment highlights
Kupe segment highlights — record production volumes due to acquired 15% and generation demand GAS PRODUCTION (PJ) & PLANT UTILISATION (%) GAS SALES VOLUME (PJ) 30.00 100% 23.0 24.3 24.0 24.3 25.00 95% 6.1 20.00 90% 15.00 13.2 3.8 3.5 3.5 3.4 85% 10.00 5.00 80% - 75% FY14 FY15 FY16 FY17 YTD FY18 HY14
Slide 27: Environmental and social responsibility
Environmental and social responsibility — making a tangible difference for our people, our community and our shared natural resources Commitment to being an inclusive and More than hectares diverse employer NZ families of forest Gender mix assisted in , HY18 supported in Whanganui, the Coromandel th
Slide 28: A coal free electricity future
A coal free electricity future — Genesis believes in a coal free future At Genesis we are taking steps to ensure New Zealand can move to an even more renewable future – we believe in a coal-free future for electricity generation in New Zealand. HY18 RESULT PRESENTATION 28
Slide 29: 4. Outlook
4. Outlook
Slide 30: Dividend reinvestment plan
Dividend reinvestment plan — to be introduced for the HY18 dividend to support growth • To provide capital support for Genesis’ growth strategy, and provide DRP Details a cost effective way for shareholders to reinvest in Genesis’ growth Discount 2.5% strategy Dividend amount 8.3 cpu Price The volum
Slide 31: Market fundamentals outlook
Market fundamentals outlook — continue to be supportive • Electricity demand growth of 1% in 2017 with EV penetration accelerating Customer • Total NZ gas demand down due to industrial however retail growth continues with connections up over 15,500 in past five years • LPG demand growth remains stro
Slide 32: FY18 outlook
FY18 outlook — guidance refined to $350 to $360 million • A positive start to FY18, more challenging conditions in the second half – $12 million FY18 impact of Tekapo B outage (largely weighted to second half), some benefit to be realised in FY19 – First half had significant North Island inflows – K
Slide 33: Appendices
Appendices
Slide 34: Financial statements
Financial statements Income Statement HY18 HY17 Variance Balance Sheet HY18 FY17 Variance ($m) ($m) ($m) ($m) Revenue 1,214.5 965.3 +25.8% Cash and Cash Equivalents 40.6 27.8 Total Operating Expenses (1,015.0) (809.6) +25.4% Other Current Assets 309.5 344.5 EBITDAF 199.5 155.7 +28.1% Non-Current Ass
Slide 35: Reconciliation of EBITDAF to NPAT
Reconciliation of EBITDAF to NPAT Income Statement HY18 HY17 • EBITDAF is a non-GAAP item but is used as a key ($m) ($m) EBITDAF 199.5 155.7 metric by management to monitor performance at a business segment and group level Depreciation, Depletion & Amortisation (103.5) (73.6) Impairment of Non-Curre
Slide 36: Underlying earnings
Underlying earnings Underlying Earnings HY18 HY17 • Underlying Earnings is a non-GAAP item but is used ($m) ($m) Net Profit After Tax 28.4 37.4 as a key metric by management to assess underlying performance by adjusting for items outside Business acquisition costs - 0.8 managements control or items
Slide 37: Debt information
Debt information GENESIS ENERGY DEBT PROFILE Debt Information HY18 FY17 Variance ($m) ($m) ($m) $m Total Debt $ 1,229.1 1,259.8 $300 Cash and Cash Equivalents $ 40.6 27.8 $250 Headline Net Debt $ 1,188.5 1,232.0 -3.5% $200 USPP FX and FV Adjustments $ 25.2 20.5 $150 Adjusted Net Debt1 $ 1,163.3 1,21
Slide 38: Operational highlights
Operational highlights Customer Key Information HY18 HY17 Variance Wholesale Key Information HY18 HY17 Variance EBITDAF ($ millions) 57.2 62.7 (8.8%) EBITDAF ($ millions) 106.4 82.8 +28.5% Netback $80.80 $82.14 (1.6%) Renewable Generation (GWh) 1,697 1,625 +4.5% Electricity Only Customers 342,500 NA
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