Contact Energy Limited · NZX:CEN
Contact Energy — H1 FY2008 Earnings Presentation
25 slides from Contact Energy's earnings presentation, Feb 22, 2008
Slide 1: Interim Financial Results for the six months ended 31 December 2007
Interim Financial Results for the six months ended 31 December 2007 22 February 2008
Slide 2: Disclaimer
Disclaimer This presentation may contain projections or forward-looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in any forward-looking stat
Slide 3: Overview for the 6 months ended 31 Dec 2007
Overview for the 6 months ended 31 Dec 2007 • Pleasing financial performance in challenging conditions: – EBITDAF: $281.9m (2% higher than the prior corresponding period) – underlying earnings: $116.1m (1% lower than the prior period) • Significant progress on strategic initiatives – underpinning lo
Slide 4: Financial Results
Financial Results Key financial information 6 Months Ended 6 Months Ended Variance $Millions 31 Dec 2007 31 Dec 2006 $ % Operating Revenue 1,116.5 995.1 121.4 12% Operating Expenses (834.6) (719.7) (114.9) 16% EBITDAF 281.9 275.4 6.5 2% Depreciation and Amortisation (74.3) (69.2) (5.1) 7% Equity Acc
Slide 5: Key drivers of results
Key drivers of results • EBITDAF: $281.9m (2% higher than for the same period last year) • Underlying earnings: $116.1m (1% lower than for the same period last year) – Key drivers: • Operating revenue (net of electricity purchases) increased by $129.0m (17%) – $71.5m due to the addition of Rockgas –
Slide 6: Reconciliation of Reported Profit to Underlying Earnings
Reconciliation of Reported Profit to Underlying Earnings • Reported profit includes two significant one off items: 6 Months Ended 31 December 2007 – the costs associated with the retirement of New Plymouth power station $Millions – the gain on the sale of the Mokai Reported profit 117.4 geothermal l
Slide 7: Dividends
Dividends Dividends 30 25 20 Cents per Share 15 10 5 0 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05* 2005/06 2006/07 2007/8 Interim (cents) Special and Final * 2005 was a nine month period and has been annualised * 2005 was a nine month period and has been annualised • The Board has resol
Slide 8: Electricity Revenue
Electricity Revenue Hedged and Unhedged Electricity Revenue • Total electricity revenue (net of electricity purchases) increased by $43.2m (or 6.3%) • Wholesale revenue was flat at $306.4m – Generation volumes increased by 5% – Wholesale prices decreased by 6% • Retail revenue (net of electricity pu
Slide 9: Wholesale Electricity Prices
Wholesale Electricity Prices • The early part of the period was characterised by high inflows and relatively low prices resulting in a 6% reduction in wholesale prices compared with the six month period ended 31 December 2006 • Towards the end of the six month period conditions were drier and averag
Slide 10: Generation volumes
Generation volumes Generation by Type Max output 63 MW 7,000 6,000 5,000 Max output 40 MW 2,821 2,693 4,000 GWhs 3,000 997 1,085 2,000 1,000 1,907 1,968 0 31-Dec-06 31-Dec-07 Half Year Ended Contact hydro generation (GWh) Contact geothermal generation (GWh) Contact thermal generation (GWh) • Total g
Slide 11: Gas use in generation
Gas use in generation Volume and average cost of gas for generation 25.0 7 $127.2m $100.9m 6 20.0 5.75 5 Gas purchased for 15.0 4.78 4 generation (PJ) $/GJ PJ 10.0 3 Average cost per GJ for 22.1 2 generation (including 21.1 5.0 transmission) 1 0.0 0 31-Dec-06 31-Dec-07 Half Year Ended • Contact’s av
Slide 12: Wholesale and Retail Gas
Wholesale and Retail gas Wholesale and Retail Gas 60.0 7.0 6.6 50.0 6.0 53.2 47.1 5.0 40.0 $million 36.7 4.0 PJ 30.0 3.4 3.0 2.7 20.0 2.2 2.0 17.8 10.0 1.0 0.0 0.0 31-Dec-06 31-Dec-07 Half Year Ended Wholesale Gas Revenue Retail Gas Revenue Retail volume Wholesale Volume • Wholesale gas revenue was
Slide 13: Operating Expenses
Operating Expenses (excluding retail electricity purchases) Operating Expenses 700.0 $487.2m $609.8m 600.0 65.0 LPG purchases and other Rockgas 500.0 101.0 Other Contact expenses (excl 97.0 400.0 Rockgas) $million 198.5 Gas purchases and 300.0 153.7 transmission Electricity transmission and 200.0 di
Slide 14: Capital and investment expenditure, depreciation and interest expense
Capital and investment expenditure, depreciation and interest expense • Contact incurred $92.2m in capital expenditure during the six months ended 31 December 2007, an increase of $29.6m (47%) over the prior period. Growth capex increased by $27.5m to $59.4m with most of this spent in generation (pr
Slide 15: Gas outlook
Gas outlook • Short term sales in this period have assisted with management of residual take or pay obligations in this financial year • Average gas costs will continue to rise in the second half of the financial year • The recent acquisition of the rights to develop storage will assist in the manag
Slide 16: Short-term outlook
Short-term outlook • The next few months of EnergyHedge reflect current electricity market conditions (dry, hot weather, transmission and generation capacity constraints) which have driven up prices for Q1 and Q2 of 2008 • With market conditions currently favouring the company’s geographic and fuel
Slide 17: Update on key developments
Update on key developments & contact
Slide 18: Energy policy developments
Energy policy developments • During the half year, legislation was introduced to give effect to the Government’s climate change and energy policies • There are two major planks of Government policy: – NZ Energy Strategy – 90% renewable energy by 2025 – Economy-wide Emissions Trading Scheme that sets
Slide 19: Contact has a diversified development portfolio
Contact has a diversified development portfolio • Contact has a range of renewable options, diversified both by fuel type and geography – comparatively low-cost baseload geothermal – major wind site in preferred North Island location • Contact also has options for gas-fired peaking plant to support
Slide 20: Progress on geothermal development
Progress on geothermal development Te Mihi • Construction contract negotiations are currently underway • Resource consent application filed in mid 2007 and “call in” activated by government which replaces local process with a single step board of enquiry process Tauhara • Current focus is on drillin
Slide 21: Progress on Contact's wind and hydro options
Progress on Contact’s wind and hydro options Wind • 550 MW Hauāuru ma raki wind (north-west wind) project in Waikato was announced in October last year: – consents expected to be lodged in calendar 2008 – construction will be phased between 2011 and 2014 • Further wind options being developed Hydro
Slide 22: Stratford Peaker
Stratford Peaker • The New Zealand electricity system will increasingly need flexible plant to support renewables • Contact announced plans for the construction of peaking capacity (up to 300 MW) at the time it announced its Waikato Wind project • Work is proceeding on the key contracts with a view
Slide 23: Development of gas storage
Development of gas storage • On 20 December 2007 Contact and Origin announced that they had combined to acquire the New Zealand assets of Swift Energy • Contact will contribute approximately NZ$54m to the purchase price which will give Contact rights to develop gas storage (part of the consideration
Slide 24: Conclusion
Conclusion • Contact has made significant progress in the execution of its strategy during the first six months of the 2008 financial year • Several key objectives have been met which position Contact very well for the medium term – The call in of the Te Mihi project provides confidence that Contact
Slide 25: Contact
c& contact