Meridian Energy Limited · NZX:MEL
Meridian Energy — FY2012 Earnings Presentation
40 slides from Meridian Energy's earnings presentation, Aug 13, 2012
Slide 1: Annual Results for Year Ended 30 June 2012
MERIDIAN ENERGY LIMITED ANNUAL RESULTS FOR YEAR ENDED 30 JUNE 2012 RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2012 13 AUGUST 2012
Slide 2: Disclaimer
MERIDIAN ENERGY LIMITED 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
Slide 3: Overview of Meridian
MERIDIAN ENERGY LIMITED OVERVIEW OF MERIDIAN Vertically integrated renewable developer, RETAIL ICPs - AS AT 30 JUNE 2012 ggenerator and retailer of electricityy (Source: Electricity Authority) 4% 15% Generates electricity from renewable sources 11% Largest generator in New Zealand – 28% of 23%
Slide 4: Financial Performance
MERIDIAN ENERGY LIMITED FINANCIAL PERFORMANCE Net Profit After Tax (NPAT) was $74.6m compared to $303.1m in FY 2011 GROUP PROFIT – Adjusting Adj ti ffor gain i on sale l off Tekapos Tk 2012 74.6 106.1 Financial Yeear End 30 June ($157.4m), Tekapo generation revenue1 and 2011 219.0 303.1 184.0 NZAS
Slide 5: Influences on Performance – Inflows
MERIDIAN ENERGY LIMITED INFLUENCES ON PERFORMANCE – INFLOWS TOTAL INFLOWS INTO MERIDIAN'S WAITAKI AND WAIAU CATCHMENTS 22,000 Keyy 21,000 1 Hydro Generation Volume 2009 (excluding generation from Tekapo 20,000 10,764GWh1 Hydro Stations) 19,000 $48.53/MWh2 2 Average Wholesale Electricity Sales Price
Slide 6: Influences on Performance – Market
MERIDIAN ENERGY LIMITED INFLUENCES ON PERFORMANCE – MARKET Low demand growth over the last 5 years driven by ICPs CHANGING ELECTRICITY SUPPLIER AS AT 30 JUNE 2012 gglobal economic conditions (SOURCE : ELECTRICITY AUTHORITY) 50 000 50,000 30% High retail churn remains but levelling out 40,000 25%
Slide 7: Operational Highlights
OPERATIONAL HIGHLIGHTS RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2012 13 AUGUST 2012 7
Slide 8: Operational Highlights
MERIDIAN ENERGY LIMITED OPERATIONAL HIGHLIGHTS Unprecedented hydrology conditions well g duringg the yyear managed Underlying1 Retail profitability improved by $5.90 per MWh of contracted sales – Annual ICP growth of 5% (Powershop 43%) – Continue to rebalance portfolio (location and segments)
Slide 9: Operational Highlights (continued)
MERIDIAN ENERGY LIMITED OPERATIONAL HIGHLIGHTS (continued) Employee engagement results improved 3.4% Improved health and safety metrics, metrics which LOST TIME FREQUENCY RATES LOST-TIME (MERIDIAN EMPLOYEE INCIDENTS PER MILLION HOURS WORKED) Meridian Employee Inncidents per Million outperform in
Slide 10: Strategic Focus
MERIDIAN ENERGY LIMITED STRATEGIC FOCUS – Continually improve business performance strategic t t i – Continue to strengthen retail performance focus – Grow value through renewable generation – Develop Meridian’s Australian business market k t – Global economic impacts on customers imperatives – Owne
Slide 11: Financial Summary
FINANCIAL SUMMARY RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2012 13 AUGUST 2012 12
Slide 12: Financial Summary
MERIDIAN ENERGY LIMITED FINANCIAL SUMMARY $ Millions JUNE 2012 JUNE 2011 % CHANGE Wholesale and Retail Energy Margin 729 5 729.5 920 2 920.2 (21%) International and Other Segment Energy Margin 33.7 30.1 12% Group Energy Margin 763.2 950.3 (19%) Dividends and Other Revenue 27.3 42.6 (36)% Energy Rela
Slide 13: NZ Energy Margin (Wholesale and Retail – 2012 Analysis)
MERIDIAN ENERGY LIMITED NZ ENERGY MARGIN (Wholesale and Retail – 2012 Analysis) Contracted Revenue Acquired Net Spot Exposure Generation Costs 2,400 2,200 2,000 302.2 1,800 , 1,600 1,400 1,328.3 $ M'illions 1,200 1,107.7 1 000 1,000 800 373.2 330.6 600 400 729.5 605.3 200 - Retail Wholesale Cost of
Slide 14: NZ Energy Margin (Wholesale and Retail – 2011 to 2012)
MERIDIAN ENERGY LIMITED NZ ENERGY MARGIN (Wholesale and Retail – 2011 to 2012) 1,500 Last Year Adjustments Contracted Revenue Acquired Net Spot Exposure Generation Costs 1,400 1,300 254.6 1,200 1,100 698.8 1,000 $ Millions 900 44.1 560.3 28.1 22.5 4.1 800 253.0 700 920.2 848.0 600 95 729.5 500 400 E
Slide 15: Storage, Inflows and Price
MERIDIAN ENERGY LIMITED STORAGE INFLOWS AND PRICE STORAGE, Record low inflows into our South Island WAITAKI STORAGE CATCHMENT (MERIDIAN STORAGE ONLY) catchments 3,000 2,500 Conservative generation as we responsibly Sttorage (GWh) 2,000 managed storage levels 1,500 1,000 Average wholesale elect
Slide 16: New Zealand Generation
MERIDIAN ENERGY LIMITED NEW ZEALAND GENERATION Hydro generation production fell 2,839GWh (22%) from FY 2011, of which 1,015GWh was ggenerated NEW ZEALAND PHYSICAL GENERATION VOLUMES from the Tekapo assets sold to Genesis 2012 9,790 1,206 Year Ended 30 June 2011 12,629 1,023 Net reduction of 1,82
Slide 17: Retail
RETAIL RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2012 13 AUGUST 2012 18
Slide 18: Improved Retail Performance
MERIDIAN ENERGY LIMITED IMPROVED RETAIL PERFORMANCE When removing the volatility of the wholesale Retail Segment 2012 2011 Change p market and replacingg with a ppurchase pprice of Energy Sales ($m) $1,156.6 $1,029.1 12% $85/MWh, Retail profit (EBITDAF) per MWh of Avg Contracted Sales Price $163.9
Slide 19: Improved Retail Performance (continued)
MERIDIAN ENERGY LIMITED IMPROVED RETAIL PERFORMANCE (continued) Total ICPs of 287,304 at 30 June 2012, 5% up on FY 2011 MERIDIAN ICP NUMBERS 2012 116,580 35,369 122,834 12,521 Growth achieved in a highly competitive market Financial Yeaar Ended 30 June 2011 109,565 21,169 129,651 12,391 and desp
Slide 20: Transmission (HVDC Charges)
MERIDIAN ENERGY LIMITED TRANSMISSION (HVDC Charges) Transmission costs increased $2.5m (3%) from FY 2011 TRANSMISSION COSTS South Island generators continue to pay for an asset 2012 86.7 Financial Year Endded 30 June that brings national benefit 2011 84.2 2010 78.9 Anticipated price increases
Slide 21: Operating Expenditure
MERIDIAN ENERGY LIMITED OPERATING EXPENDITURE Employee and Other operating expenditure was $10.9m ((5%)) lower than in FY 2011 EMPLOYEE AND OTHER OPERATING COSTS Employee expenditure reflected low level of 2012 79.6 147.6 Ended 30 June performance incentives earned 2011 89.5 148.6 Financial Year
Slide 22: EBITDAF to NPAT
MERIDIAN ENERGY LIMITED EBITDAF TO NPAT 500 450 400 228.2 350 300 250 $ Millionns 476 6 476.6 200 82.5 15.2 150 68.6 68 6 60.1 44 6 44.6 1.2 100 23.6 15.2 50 106.1 74.6 - EBITDAF Dep & Amort Net Finance Premiums on Taxation Underlying 1 Fair Value Non-cash Other Effect of Taxation NPAT 30 June 2012
Slide 23: Fair Value Movements
MERIDIAN ENERGY LIMITED FAIR VALUE MOVEMENTS To manage risk we enter into a range of financial instruments FAIR VALUE MOVEMENTS 2012 53.4 Accounting standards only allow hedge accounting Financial Year Ended 30 June 2011 (103.4) if specific conditions are met, this creates earnings 2010 (38 2) (
Slide 24: Reprioritisation of Investments
MERIDIAN ENERGY LIMITED REPRIORITISATION OF INVESTMENTS Programme of rationalising non-core investments continues – I JJune 2012 M In Meridian idi sold ld itits shareholding h h ldi iin Whisper Whi Tech’s T h’ European E joint j i t venture t – This follows on from the sale of the Right House busi
Slide 25: Funding
MERIDIAN ENERGY LIMITED FUNDING Standard & Poor’s A2, BBB+ (stable outlook) credit DEBT MATURITY PROFILE AS AT 30 JUNE 2012 ratingg maintained 2017+ 562 30 493 Cash and undrawn debt facilities of $611.5m 2016 157 50 including cash of $214.4m as at 30 June 2012 2015 135 150 Calendder Year ($426 6
Slide 26: Capital Investment
MERIDIAN ENERGY LIMITED CAPITAL INVESTMENT The Macarthur development in Australia has p spend dominated capital p in 2012 600 INVESTMENT EXPENDITURE 2 42 Capital spend in 2013 will include completion of 500 20 9 the Macarthur wind farm and the commencement 42 35 43 400 7 off construction t ti of
Slide 27: New Zealand Development Pipeline
MERIDIAN ENERGY LIMITED NEW ZEALAND DEVELOPMENT PIPELINE Meridian has a diverse pipeline Mill Creek C k wind i d farm f (60MW) ddevelopment l t showing strong economics and supporting North Island retail growth Maungaharuru The Hunter Downs Irrigation scheme was granted resource consent in Nov
Slide 28: Australian Operations
MERIDIAN ENERGY LIMITED AUSTRALIAN OPERATIONS Construction of the Macarthur wind farm ((420MW),) in a joint j venture with AGL, pprogressing g g to plan Foundations now complete on all 140 turbines, full commissioning i i i expectedt d JJuly l 2013 Macarthur pre-interest income of A$58m per ye
Slide 29: Australian Development
MERIDIAN ENERGY LIMITED AUSTRALIAN DEVELOPMENT Mt Mercer wind farm is advancing through investment review and is showingg veryy attractive economics Early site assessments of future potential wind and solar l options ti continues ti Meridian is trialling the Powershop offering in the Australia
Slide 30: NZAS Disclosure
MERIDIAN ENERGY LIMITED NZAS DISCLOSURE Meridian Energy has been approached by Pacific Aluminium Pty Ltd, a business unit of Rio Tinto Ltd, the majority shareholder of New Zealand Aluminium Smelters Ltd (NZAS), to discuss potential changes to the electricity l i i contract withi h the h smelter l
Slide 31: Additional Information
ADDITIONAL INFORMATION RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2012 13 AUGUST 2012 32
Slide 32: Income Statement
MERIDIAN ENERGY LIMITED INCOME STATEMENT $ Millions 2012 2011 2010 2009 2008 Group Energy Margin 763.2 950.3 941.6 785.3 645.4 Dividend and Other Revenue 27.3 42.6 38.7 27.1 25.2 Energy Related Expenses (Non-core) - (10.7) (9.2) (3.3) - Energy Transmission Expense (86.7) (84.2) (78.9) (78.2) (75.3)
Slide 33: Underlying Profit After Tax (Reconciliation)
MERIDIAN ENERGY LIMITED UNDERLYING PROFIT AFTER TAX (Reconciliation) $ Millions 2012 2011 2010 2009 2008 Group Net Profit After Tax 74 6 74.6 303 1 303.1 184 0 184.0 89 3 89.3 128 6 128.6 Net Change in Fair Value of Financial Instruments 68.0 14.2 23.3 32.5 14.3 Net Change in Fair Value of Electrici
Slide 34: Balance Sheet
MERIDIAN ENERGY LIMITED BALANCE SHEET $ Millions 2012 2011 2010 2009 2008 Cash and Cash Equivalents 214.4 368.2 54.4 47.9 71.7 Accounts Receivable and Prepayments 298.1 240.9 199.1 188.2 471.1 Other 58.3 18.1 18.1 30.8 61.9 Current Assets 570.8 627.2 271.6 266.9 604.7 Property, Plant and Equipment 7
Slide 35: Wholesale Segment Performance
MERIDIAN ENERGY LIMITED WHOLESALE SEGMENT PERFORMANCE $ Millions JUNE 2012 JUNE 2011 % CHANGE Energy gy Sales Revenue 1,329.8 , 954.6 39% Energy Related Expenses (567.4) (246.9) (130%) Energy Distribution Expense (23.5) (20.1) (17%) Wholesale Energy Margin 738.9 687.5 7% Dividend and Other Revenue 6
Slide 36: Retail Segment Performance
MERIDIAN ENERGY LIMITED RETAIL SEGMENT PERFORMANCE $ Millions JUNE 2012 JUNE 2011 % CHANGE Energy Sales Revenue 1,156.6 1,029.1 12% Energy Related Expenses (785.4) (448.9) (75%) Energy Distribution Expense (380.7) (347.5) (10%) Energy Margin (9.5) 232.7 2,549% Dividend and Other Revenue 11.6 9.4 23%
Slide 37: International Segment Performance
MERIDIAN ENERGY LIMITED INTERNATIONAL SEGMENT PERFORMANCE $ Millions JUNE 2012 JUNE 2011 % CHANGE Energy Sales Revenue 23 3 23.3 21 8 21.8 7% Energy Related Expenses (0.5) (0.5) 0% International Energy Margin 22.8 21.3 7% Dividend and Other Revenue 26 2.6 - Energy Transmission Expenses (2.0) (1.9) (
Slide 38: Other Segment Performance
MERIDIAN ENERGY LIMITED OTHER SEGMENT PERFORMANCE $ Millions JUNE 2012 JUNE 2011 % CHANGE Energy Sales Revenue 20.9 15.3 37% Energy Related Expenses (10.0) (6.7) 49% Energy Distribution Expense - 0.2 Energy Margin 10.9 8.8 24% Dividend and Other Revenue 7.5 23.2 (68%) Energy Related Expenses (Non-co
Slide 39: Generation Pipeline
MERIDIAN ENERGY LIMITED GENERATION PIPELINE Development Option Stage Capacity Central Wind Investment ready 120MW Maungaharuru Consent held 94MW Mill Creek Consent held 60MW Mt Munro Consent Application Lodged 60MW H Hurunui i C Consultation lt ti 76MW Pukaki ((Gate 18)) Hydro y Consents held 35MW N
Slide 40: Segment Reporting
MERIDIAN ENERGY LIMITED SEGMENT REPORTING We view the business from the perspective of three reportable segments, being Wholesale, Retail and International Meridian Segment Composition New Zealand Wholesale Retail International Other Segments Unallocated Wholesale Meridian Retail Australia Energy fo