Meridian Energy Limited · NZX:MEL

Meridian Energy — FY2022 Earnings Presentation

47 slides from Meridian Energy's earnings presentation, Aug 24, 2022

  1. Slide 1: 2022 Annual Results Presentation

    2022 Annual Results Presentation 24 AUGUST 2022

  2. Slide 2: Highlights

    Highlights *250 GWh in Memorandums of Understanding, 50 GWh contracted (annual volumes) **Earnings before interest, tax, depreciation, amortisation, changes in fair value of hedges, impairments and gains or losses on sale of assets 2 4 A U GUST 2 0 2 2 2 0 2 2 A N N UAL R E S UL TS PR E SEN TATION 2

  3. Slide 3: Our people

    Our people  Decreasing injury rate with 13 non-serious lost Workforce measures time injuries in FY22 90% FY22 FY21  NZ top quartile staff engagement despite 72% 78% challenging employment market 60% 48% 48% 30% 32% 30% Total recordable injury frequency 18% per 200,000 hours Employees Contractors T

  4. Slide 4: Our strategy

    Our strategy 2 4 A U GUST 2 0 2 2 2 0 2 2 A N N UAL R E S UL TS PR E SEN TATION 4

  5. Slide 5: Harapaki update

    Harapaki update  $53 million (13%) increase in total project capital costs from the original $395 million announced in February 2021 to $448 million  First power milestone of mid 2023 and full power by mid 2024 both remain on schedule  Additional civil costs to maintain overall programme against

  6. Slide 6: Renewable development pipeline

    Renewable development pipeline  Deep pipeline of 2.3 GW (5.4 TWh) of development options  1.1 GW secured, 1.2 GW in advanced prospects, further battery site acquired  North Island focus, flexibility on South Island options maintained 2 4 A U GUST 2 0 2 2 2 0 2 2 A N N UAL R E S UL TS PR E SEN TAT

  7. Slide 7: New Zealand customers

    New Zealand customers  Continued sales volume growth (6% in total) New Zealand retail sales volumes GWh  Mass market and C&I volumes together have more 4,500 FY22 FY21 +10% than doubled in the last three years 4,000  Expecting future growth to moderate 3,500  Core platform transformation complet

  8. Slide 8: NZAS contract termination - mitigation

    NZAS contract termination - mitigation Current swaption  235 GWh Nova swaption signed in December 2021  17 MW Ngāwhā geothermal PPA from 2024  Greater reliance on existing smelter demand response (250 GWh)  150 GWh Contact swaption signed in August 2022 Clutha Upper Waitaki Lines Project  Proje

  9. Slide 9: NZAS contract termination - mitigation

    NZAS contract termination - mitigation North Island battery  Currently tendering for 100 MW/200 MWh capacity battery  Consent expected by September 2022, construction starting in 2023, completion now in 2024  Construction of a utility scale solar farm (75 MW, ~$100m), consents lodged in early 202

  10. Slide 10: NZAS contract termination - mitigation

    NZAS contract termination - mitigation Green hydrogen  Woodside and FFI have entered final stage negotiations to be lead developer  Final responses, followed by final selection in late 2022  Potential final investment decision by late 2024 Data centre  University of Otago announced as an anchor

  11. Slide 11: NZAS contract termination - mitigation

    NZAS contract termination - mitigation 2 4 A U GUST 2 0 2 2 2 0 2 2 A N N UAL R E S UL TS PR E SEN TATION 11

  12. Slide 12: New Zealand policy and regulation

    New Zealand policy and regulation Emissions Reduction Plan  Released in May 2022, it sets out how NZ will meet its first emissions budget for 2022-2025  Requires additional emissions reductions of 4%  Plan targets transport and energy emissions  Supported by $2.9B of funding from the Government’

  13. Slide 13: New Zealand policy and regulation

    New Zealand policy and regulation Resource management reform  Reform programme risks renewable projects needing to clear a higher consenting hurdle  Gentailer CEs have collectively written to Ministers outlining issues that need addressing, supported by Concept Consulting advice Low carbon commitm

  14. Slide 14: New Zealand policy and regulation

    New Zealand policy and regulation Transmission Pricing Methodology (TPM) Meridian's NZ transmission costs $M  New TPM to take effect from 1 April 2023 140 Meridian actual Transpower  High Court dismissed Manawa’s application for a 120 116 Meridian actual estimate judicial review in June 2022 100 a

  15. Slide 15: Financial performance

    Financial performance 2 4 A U GU S T 2 0 2 2 2 0 2 2 A N N U AL R ES U L T S P R ES EN T A T I ON 15

  16. Slide 16: EBITDAF

    EBITDAF1  FY22 EBITDAF +2.5% on FY21 (continuing EBITDAF movement $M operations) 750  Strong retail sales performance in New Zealand +3 0  Q3-Q4 drought conditions again in FY22 +28 -4 -10  5% growth in operating costs  7% growth in operating cash flows 650 709 692 Cash flow from operating acti

  17. Slide 17: Dividends

    Dividends  Final ordinary dividend declared of 11.55 cps Dividends declared CPS (+3%), 76% imputed Ordinary dividends Special dividends 25  Brings FY22 full year ordinary dividend declared to 4.88 17.4 cps (+3%), 79% imputed 20 4.88 2.44 17.40  Represents 86% payout of free cash flow 15 16.42 16.

  18. Slide 18: New Zealand energy margin

    New Zealand energy margin  $113M customer revenue growth across mass New Zealand energy margin movement $M Physical Financial market and C&I segments 1,200 +$112M -$84M  55% increase in financial contract sales volumes +51 -140 +70 -67  2H generation length again impacted by drought +43 +5 1,000

  19. Slide 19: Operating costs

    Operating costs  Midpoint of the $215M-$220M guidance range Operating cost movement $M  $10M (5%) increase in FY21 operating costs 225 +2 +1 +1  $17M (8%) increase including release of provision on +4 +1 +3 Holidays Act payroll remediation: -7 +5 200  Higher staff costs, including Aus services 

  20. Slide 20: Capital expenditure

    Capital expenditure  Top end of the $165M-$175M guidance range Capital expenditure $M  Consistent level of stay in business capex 200 Stay in business Investment Total 175  Largely consists of system and generation asset enhancement spend 150  Harapaki investment spend of $86M in FY22 102 100 13

  21. Slide 21: Cost guidance

    Cost guidance  Including total cash spend on maintenance and enhancement of generation assets  11%-13% operating cost growth expected in FY23:  Full year of Australia call centre costs (previously eliminated, now revenue recovery)  7% average salary uplift reflecting current cost of living chall

  22. Slide 22: Below EBITDAF

    Below EBITDAF Net profit after tax  8% increase in depreciation following 2021 revaluation $M 664 700  $55M June 2022 revaluation (decrease) 600 500 428  $213M net profit after tax from discontinued operations 339 451 400 ($214M gain on Australia sale) 300 203 415 continuing continuing 175 operat

  23. Slide 23: Debt and funding

    Debt and funding  June 2022 total borrowings of $1,163M Debt maturity profile as at 30 June 2022 $M  Total funding facilities of $1,676M, of which $550M Drawn debt maturing (face value) Available facilities maturing 600 were undrawn 500  All facilities classified under Meridian’s Green Finance Pr

  24. Slide 24: Closing comments

    Closing comments  Portfolio response to NZAS exit is well established  Development pipeline is deep and diverse  Successful exit from Australia  The Government’s first emissions reduction plan commits billions to transport and industrial decarbonisation  Solid July 2022 operating result with si

  25. Slide 25: Questions

    Questions 2 4 A U GU S T 2 0 2 2 2 0 2 2 A N N U AL R ES U L T S P R ES EN T A T I ON 25

  26. Slide 26: Additional information

    Additional information 2 4 A U GU S T 2 0 2 2 2 0 2 2 A N N U AL R ES U L T S P R ES EN T A T I ON 26

  27. Slide 27: Segment results

    Segment results  Flux Federation included in ‘other and unallocated’ segment 2 4 A U GUST 2 0 2 2 2 0 2 2 A N N UAL R E S UL TS PR E SEN TATION 27

  28. Slide 28: Six monthly results

    Six monthly results 2 4 A U GUST 2 0 2 2 2 0 2 2 A N N UAL R E S UL TS PR E SEN TATION 28

  29. Slide 29: Earnings from continuing operations

    Earnings from continuing operations 2 4 A U GUST 2 0 2 2 2 0 2 2 A N N UAL R E S UL TS PR E SEN TATION 29

  30. Slide 30: New Zealand retail

    New Zealand retail Customer sales Average price Total sales North Island South Island Average price ($/MWh) FY18 FY19 FY20 FY21 FY22 ($/MWh) volume (GWh) sales volume sales volume Mass market $117 $114 $114 $123 $127 (GWh) (GWh) Corporate $83 $89 $99 $98 $107 FY22 Residential 1,775 980 745 Small med

  31. Slide 31: New Zealand retail

    New Zealand retail New Zealand customer connections Customers ICP (000) Meridian North Island Meridian South Island Powershop Total 365 400  5% increase in customers since June 2021 291 302 324 347 106 117 89 300 66 74 122 126 119 119 120 Residential, business, agri segment 200  11% increase in re

  32. Slide 32: New Zealand hydrology

    New Zealand hydrology Meridian's combined catchment inflows Inflows GWh 14,000  FY22 inflows were 99% of average 12,000  July 2022 inflows were 183% of average 10,000 8,000 6,000 4,000 Storage 2,000  Meridian’s Waitaki storage at 30 June 2022 was 0 Financial 2008 2009 2010 2011 2012 2013 2014 201

  33. Slide 33: New Zealand generation

    New Zealand generation New Zealand generation Volume GWh Hydro Wind 16,000  FY22 generation was 7% higher than FY21, with 14,000 1,263 1,244 1,465 1,395 1,285 higher hydro and wind generation 12,000 10,000 8,000 6,000 12,326 12,758 12,271 11,265 11,297 Price 4,000 2,000  FY22 average price Meridia

  34. Slide 34: FY22 EBITDAF

    FY22 EBITDAF Movement in EBITDAF $M New Zealand energy margin +$28M 900 +36 800 -123 +113 +5 +3 0 0 700 -4 -10 -436 +433 600 500 692 709 400 300 EBITDAF 30 Retail Wholesale Generation Cost to supply Net cost of Virtual asset Other market Other revenue Transmission Metering Other EBITDAF 30 Jun 2021

  35. Slide 35: EBITDAF to NPAT

    EBITDAF to NPAT FY22 EBITDAF TO NPAT RECONCILIATION $M 800 600 -293 +20 -2 -81 400 -20 +281 709 -70 -93 451 200 233 0 EBITDAF Depreciation and Premiums paid on Net finance costs Tax Underlying Net change in fair Impairment of assets Premiums paid on Tax NPAT from continuing amortisation electricity

  36. Slide 36: Energy margin

    Energy margin Defined as  Revenues received from sales to customers net of distribution  A non-GAAP financial measure representing costs (fees to distribution network companies that cover the costs energy sales revenue less energy related of distribution of electricity to customers), sales to larg

  37. Slide 37: New Zealand energy margin

    New Zealand energy margin New Zealand energy margin $M 3,500 3,000 2,500 1,757 -2,071 2,000 1,500 525 9 2 1,000 -392 422 -4 -515 654 500 1,022 635 0 Res, SMB, Agi C&I sales Financial Generation Cost to supply Cost to supply Hedging fixed Hedging spot Contract close VAS margins Market costs Energy Ma

  38. Slide 38: New Zealand energy margin

    New Zealand energy margin New Zealand energy margin movement $M 1,300 -69 +36 1,100 -94 +70 +23 +5 +43 -52 0 +502 -436 900 994 1,022 700 500 Energy Margin Res, SMB, Agi C&I sales Financial Generation Cost to supply Cost to supply Hedging fixed Hedging spot Contract close VAS margins Market costs Ene

  39. Slide 39: New Zealand energy margin

    New Zealand energy margin 2 4 A U GUST 2 0 2 2 2 0 2 2 A N N UAL R E S UL TS PR E SEN TATION 39

  40. Slide 40: Funding metrics

    Funding metrics  Net debt/EBITDAF is the principal metric underpinning S&P credit rating  S&P calculation of net debt/EBITDAF includes numerous adjustments to reported numbers;  Borrowings adjusted for the impact of leases  Cash balances adjusted for restricted cash 2 4 A U GUST 2 0 2 2 2 0 2 2

  41. Slide 41: Fair value movements

    Fair value movements  Meridian uses derivative instruments to manage Change in fair value of financial instruments $M interest rate, foreign exchange and electricity 350 281 236 price risk 250 150  As forward prices and rates on these instruments 50 -26 move, non-cash changes to their carrying val

  42. Slide 42: Income statement

    Income statement 2 4 A U GUST 2 0 2 2 2 0 2 2 A N N UAL R E S UL TS PR E SEN TATION 42

  43. Slide 43: Underlying NPAT reconciliation

    Underlying NPAT reconciliation 2 4 A U GUST 2 0 2 2 2 0 2 2 A N N UAL R E S UL TS PR E SEN TATION 43

  44. Slide 44: Cash flow statement

    Cash flow statement 2 4 A U GUST 2 0 2 2 2 0 2 2 A N N UAL R E S UL TS PR E SEN TATION 44

  45. Slide 45: Balance sheet

    Balance sheet 2 4 A U GUST 2 0 2 2 2 0 2 2 A N N UAL R E S UL TS PR E SEN TATION 45

  46. Slide 46: Glossary

    Glossary Hedging volumes buy-side electricity derivatives excluding the buy-side of virtual asset swaps Average generation price the volume weighted average price received for Meridian’s physical generation Average retail contracted sales price volume weighted average electricity price received from

  47. Slide 47: Disclaimer

    Disclaimer The information in this presentation was prepared by Meridian Energy with they are not defined by GAAP or IFRS, Meridian's calculation of these due care and attention. However, the information is supplied in summary measures may differ from similarly titled measures presented by other for

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