Meridian Energy Limited · NZX:MEL
Meridian Energy — Investor Day (December 2010)
24 slides from Meridian Energy's investor day presentation, Dec 8, 2010
Slide 1: Investor and Analyst Day: Wind Energy – Powering New Zealand's Renewable Future
Investor and Analyst Day Wind Energy – Powering New Zealand’s Renewable Future 8 December , 2010 1
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 s
Slide 3: Meridian Energy
Meridian Energy » New Zealand’s largest electricity generator, supplying one third of the nation’s power » Our customer load is split between RTANZ Tiwai Point facility (40%) and 200,000 customers - Business & Rural customers (35%), Residential (23%) and Powershop (2%) » We generate our New Zealand
Slide 4: Meridian's strategy
Meridian’s strategy Improve our commercial performance Lift our customer game Improving and sustaining the profitability of our Delivering a profitable, differentiated offering to business by optimising and co-ordinating our customers that transforms the way they think about, buy generation, wholesa
Slide 5: Global growth in wind energy >25% CAGR
Global growth in wind energy >25% CAGR Source: GWEO 2010 5
Slide 6: …which is expected to continue
…which is expected to continue Global Cumulative Wind Power Capacity Source: GWEO 2010 6
Slide 7: Significant wind penetration is possible and proven
Significant wind penetration is possible and proven » New Zealand current has 4% wind penetration (GWh basis) 7
Slide 8: Wind power capacity is growing rapidly in both Australia and New Zealand
Wind power capacity is growing rapidly in both Australia and New Zealand Cumulative Wind Power Capacity in Australia and New Zealand 1999-2009 MW 2500 2000 1500 1000 500 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 New Zealand Australia Source: Global Wind Energy Council 8
Slide 9: Wind is becoming an increasingly relevant component of New Zealand's energy mix
Wind is becoming an increasingly relevant component of New Zealand’s energy mix New Zealand Electricity Generation History & Forecast Annual Generation in New Zealand - 1969 to 2009 plus Forecast Committed Generation to 2030 70,000 70,000 60,000 60,000 Otahuhu Whirinaki 50,000 50,000 Stratf ord GT A
Slide 10: Competitiveness of typical generation technologies showing unit cost components
Competitiveness of “typical” generation technologies showing unit costs components Source: Meridian, Options Choices Decisions 2009 10
Slide 11: Significant wind penetration is possible in the New Zealand electricity system
Significant wind penetration is possible in the New Zealand electricity system » System cost of wind is driven by » additional generation capacity required for when the wind does not blow » the opportunity cost of maintaining additional operational reserves due to the inability to accurately forecas
Slide 12: Wind development – challenges and opportunities
Wind development – challenges and opportunities » Challenges » Consenting – Potential for higher barriers (cumulative or regional effects) » Market demand – Post GFC demand growth has flattened » FX rates – Volatility of NZD/USD and NZD/EUR affects purchasing cost of turbines and timing of investmen
Slide 13: Commercial investment criteria
Commercial investment criteria » Fully costed DCF based evaluation, Assumptions Key driver using revenue scenarios and risk Turbine cost Effectiveness of supplier analysis around key drivers relationship and negotiations Civil costs Experience and completeness of » Inclusion of project contingencies
Slide 14: Drivers of cost of energy from a wind farm
Drivers of cost of energy from a wind farm Project Life Cost of Capital Capital Cost Project Cost Total Transmission Annual Cost O&M Cost Cost of Energy Turbine Design Energy Produced Wind Speed and Characteristics 14
Slide 15: Longer term drivers of wind turbine costs
Longer term drivers of wind turbine costs » Technology improvements » Direct drive – efficiency and weight » Reliability and efficiency – control systems, component design » Grid integration, power quality » Economies of scale » Turbine size(2.3MW – 3MW - ??) » Manufacturing » New sources of low cos
Slide 16: Meridian's wind development strategy
Meridian’s wind development strategy » Develop a variety of options » Geographic diversity » Connection – grid vs embedded » Scale » Identify ways to reduce costs and improve yield » Build relationships with turbine suppliers » Access to technical intellectual property » Smart yield assessments and
Slide 17: We believe we are successful because we focus on the following areas
We believe we are successful because we focus on the following areas » Insightful wind prospect identification » Deep understanding of resource and technology fit » Lifetime value based assessment of technology » Aspire to excellence in stakeholder and community engagement » Comprehensive and comple
Slide 18: Developing a wind project is a complex integration of issues
Developing a wind project is a complex integration of issues » The Site » Resource All are integrated, value is created » Consent through focus on integration of the whole package » Transmission » Lifecycle costs » Operations 18
Slide 19: Meridian has a significant track record in developing wind projects
Meridian has a significant track record in developing wind projects » Competitive strengths across key wind development processes (find, evaluate, design, consent, procure and construct) » Hydro competitive strength is in access to the resource (stakeholder relationships and consenting processes) Pr
Slide 20: Meridian is exporting this capability offshore
Meridian is exporting this capability offshore » Primary focus on Australia » Existing knowledge of market through prior investments (Southern Hydro) and development experience » Established beachhead business with one operating, one construction and one advanced permitted development project » Abil
Slide 21: Future offshore focus
Future offshore focus » Australia » CEO appointed, expanding team » Executing Macarthur wind farm (440MW) » Developing Mt Mercer wind farm (130MW) » Developing additional greenfield wind farm options » Expanding US option portfolio » Appointed Chairman » Developing solar project options » Investigat
Slide 22: Portfolio management
Portfolio management » Wind and hydro form a complimentary renewable generation partnership » The fast start nature of hydro allows us to respond to the intermittent nature of wind » An increasingly strong transmission grid enables these synergies to work effectively » As our wind portfolio increase
Slide 23: Wind asset management is a current area of focus
Wind asset management is a current area of focus » Meridian has a strong track record in hydro asset management » Condition monitoring and reliability engineering » Extracting additional value from assets through O&M practices » We are transitioning this capability to Wind » Currently OEM provided s
Slide 24: Meridian has an extensive forward development plan in wind
Meridian has an extensive forward development plan in wind » Significant pipeline of well developed, commercially attractive projects » Table below excludes other generation technologies in Meridian’s pipeline Capacity Development Project Type Status (MW) Macarthur (VIC) Wind 440* • Permitted, closi