Agl Energy Limited · ASX:AGL
Agl Energy — FY2003 Earnings Presentation
34 slides from Agl Energy's earnings presentation, August 2003
Slide 1: 2002/03 Full Year Results
2002/03 FULL YEAR RESULTS Greg Martin, Managing Director 1
Slide 2: Key Financial Results
KEY FINANCIAL RESULTS Reported Performance EBITDA $937.2m up 34.6% EBIT $687.3m up 44.2% Profit Attributable to Shareholders $295.0m up 53.6% Operating Cash Flow $542.2m up 57.5% EPS 67.3cps up 30.4% Final Dividend 29cps up 7.0% (18c franked) Underlying Performance Profit Attributable to Shareholder
Slide 3: Major Items of Interest
MAJOR ITEMS OF INTEREST • Pulse Energy - Acquisition and integration - Financial contribution • Regulatory outcomes • Wholesale Gas & Transportation Portfolio • Rationalisation and reconfiguration of business portfolio - Australia - NZ • Power Generation - Hallett & Somerton peaking plants commissio
Slide 4: Financial Performance
FINANCIAL PERFORMANCE 2002/03 FULL YEAR RESULTS 4
Slide 5: Financial Performance
FINANCIAL PERFORMANCE v 2002 2003 Change $m $m % Revenue 3 148.4 4 687.8 + 48.9 EBITDA 696.4 937.2 + 34.6 EBIT 476.6 687.3 + 44.2 NPAT 202.2 339.9 + 68.1 Outside equity interests (10.1) (44.9) Profit attributable to shareholders 192.1 295.0 + 53.6 Less Significant Items (55.0) (25.8) Underlying prof
Slide 6: Segment Analysis
SEGMENT ANALYSIS v EBIT (exc. sig items) 2002 2003 Change $m $m % Energy Networks - Gas 151.3 151.9 + 0.4 - Electricity 60.8 64.0 + 5.3 Energy Sales & Marketing 102.2 196.6 + 92.4 New Zealand 137.6 139.1 + 1.1 Energy Interests 80.8 104.7 + 29.6 Agility 46.5 50.5 + 8.6 Telecommunications (13.5) (0.7)
Slide 7: Financial Performance Indicators
FINANCIAL PERFORMANCE INDICATORS 2002 2003 Change Reported Performance - EPS 51.6c 67.3c + 30.4% - OCF/S 92.5c 123.6c + 33.6% - Total Dividend 52.0cps 55.0cps + 5.8% (35c franked) (34c franked) - Return on Equity 9.6% 11.8% + 2.2 Underlying Performance - EPS 66.4c 73.2c + 10.2% - Return on Equity 12
Slide 8: Significant Items
SIGNIFICANT ITEMS v 2003 $m New Zealand - Asset Sales 63.7 - TrustPower (4.0) - Outside Equity Interests (23.3) Telecommunications - TransACT (17.0) - COMindico (52.5)* Property - Breakfast Point Sale 13.5 - Rehabilitation Provision (5.0) Tax Benefit (Expense) (1.2) TOTAL (25.8) * Equity accounted l
Slide 9: Cash Flow
CASH FLOW 2002 2003 v $m $m Operating Cash Flow 344.3 542.2 + 57.5% Less: net capital expenditure (166.5) (209.9) new investments (51.9) (40.2) dividends paid (198.4) (250.1) (72.5) 42.0 Add: proceeds from sale of investments 5.7 704.8 proceeds from issue of shares 191.4 634.5 Net available 124.6 1
Slide 10: Financial Position
FINANCIAL POSITION v 2002 2003 Change % Funds Employed - Australia ($m) 3 343.3 4 463.5 + 33.5 - New Zealand ($m) 1 482.7 723.6 - 51.2 EBIT* / FE (%) 11.5 13.8 + 20.0 Net Borrowings ($m) 2 484.1 1 977.5 - 20.4 Interest coverage (times) 3.2 3.9 + 21.9 Gearing (D/D+E) (%) 51.6 38.5 Average Interest Ra
Slide 11: Segment Performance
SEGMENT PERFORMANCE 2002/03 FULL YEAR RESULTS 11
Slide 12: Energy Networks
ENERGY NETWORKS v 2002 2003 Change % EBIT ($m) 212.1 215.9 + 1.8 EBIT / FE (%) 10.5 10.6 + 1.0 Volume transported - Gas (PJ) 97.2 97.1 - 0.1 - Electricity (GWh) 3 983 4 034 + 1.3 Customer connections - Gas 860 600 888 600 + 3.3 - Electricity 265 800 272 400 + 2.5 Network Length - Gas (km) 22 800 23
Slide 13: Agility
2002 2003 Change % EBIT ($m) 46.5 50.5 + 8.6 Assets under management - Gas Transmission 9 300km 9 500km + 2.2 - Gas Distribution 26 000km 26 400km + 1.5 - Electricity Distribution 7 100km 7 200km + 1.4 - Peaking Generation - 330MW AGL + related projects 3rd Party projects • 6th Stage RBP looping • M
Slide 14: Energy Sales & Marketing
ENERGY SALES & MARKETING 2002 2003 Change % EBIT ($m) 102.2 196.6 + 92.4 Energy Volume sold - Gas (PJ) 110.5 155.2 + 40.5 - Electricity (GWh) 15 976 21 208 + 32.7 Sales Revenue ($m) 2 022.4 3 106.7 + 53.6 Customer Numbers* - Gas 1.4m 1.4m - Electricity 1.7m 1.7m EBIT / Sales (%) 5.1 6.3 * Including
Slide 15: ES&M Underlying Business Performance
ES&M UNDERLYING BUSINESS PERFORMANCE Gas Electricity • Primarily NSW • SA, Vic and NSW • Volumes up in retail, • Volumes up in all states, down in wholesale including NSW • Revenues up overall • Revenues up overall Financial contribution impacted by: • SA wholesale contract costs from January 2003 •
Slide 16: Mass Market Competition
MASS MARKET COMPETITION • Gas -market churn 3.4% for FY 2003 NSW • Electricity - market churn 3.9% for FY 2003 SA • Gas - market due to open in 2004 • Electricity - market opened Jan 2003, market churn 0.7% to June 2003 • Gas - market opened Oct 2002, market churn 6.3% to June 2003 Vic • Electricity
Slide 17: JV & Other Part-Owned Energy Investments
JV & OTHER PART-OWNED ENERGY INVESTMENTS AGL Interest 30% 50% 50% 100% EBIT contribution $16.4m $44.4m $12.8m $7.3m up 1% up 3% up 33% • Increased effective • Capital Region • Saudi Contract interest in Goldfields retail energy Price average up Gas Pipeline to 48% arrangements but strong margin • Ot
Slide 18: New Zealand Segment
NEW ZEALAND SEGMENT 2002 2003 Ø AGL 66% interest EBIT $132.8m $135.9m Ø All business units performing well contribution (exc. signif. items) 2002 2003 Ø AGL 20.5% interest EBIT $4.8m $6.0m Ø Exited investment in June 2003 contribution (exc. signif. items) Ø Contribution from 1st half only 2002/03 FU
Slide 19: NGC Holdings Limited
NGC HOLDINGS LIMITED v • Asset sales successfully undertaken: - Retail gas - Power generation • Operating Cash Flow up140.8% • Capital return now NZ$525m • Market leading positions in: - Metering - LPG - Gas transportation AGL’s principal NZ investment … 2002/03 FULL YEAR RESULTS 19
Slide 20: Enhancing the Business Platform
ENHANCING THE BUSINESS PLATFORM 2002/03 FULL YEAR RESULTS 20
Slide 21: Pulse Energy Integration
PULSE ENERGY INTEGRATION • Combined AGL Vic. customer base: – 1.3 million • Contiguous footprint with pre - existing operations • Access to Bass Strait Gas • Tracking to expectations - strong Melbourne initial contribution CBD • Now fully integrated into ES&M Gas only Electricity only Dual Fuel Ceme
Slide 22: Wholesale Gas Portfolio
WHOLESALE GAS PORTFOLIO • Gas and transportation contracts collectively worth around $4.5 SURAT/ BOWEN 340 PJ billion • 1 408 PJ over 15 years COOPER 505 PJ • Supply flexibility to all key markets • Long term certainty from GIPPSLAND 563 PJ diversified and market-competitive gas supplies Competitive
Slide 23: Power Generation Strategy
POWER GENERATION STRATEGY Two distinct elements: • Positions of vertical integration - where appropriate • Investments in power generation Benefits: • Earnings diversification • Portfolio diversification • Additional growth opportunities Another plank in AGL’s business platform ... 2002/03 FULL YEAR
Slide 24: Peaking Power Generation
PEAKING POWER GENERATION Somerton (Vic) • Peaking operation • 150 MW • Gas fired Hallett (SA) • Peaking operation • 180 MW • Gas/distillate fired Benefits: • Enhancing the retail electricity business • Wholesale electricity risk mitigation Further investment as demand grows ... 2002/03 FULL YEAR RES
Slide 25: Loy Yang Power
LOY YANG POWER • Conditional Share Sale Agreement signed 3 July 2003 • AGL investment of $200m for 35% stake • Lowest cash operating cost base load generator in the NEM • 40 plus years fuel supply Loy Yang investment is aligned with AGL strategy: • Increased investment in important part of energy ch
Slide 26: Reconfiguring the Portfolio
RECONFIGURING THE PORTFOLIO 2002/03 FULL YEAR RESULTS 26
Slide 27: 2002/2003 Portfolio Activities
2002/2003 PORTFOLIO ACTIVITIES Australia: • Sale of Southern Cross Energy (WA) $11.9m • Breakfast Point property sale $13.5m • T’comms writedown & equity-accounted losses $(69.5)m New Zealand: • Disposal of NGC retail gas & power generation NZ$735m • Disposal of TrustPower investment NZ$150.1m Good
Slide 28: Managing the Portfolio
MANAGING THE PORTFOLIO Core Related Non-Core Australia D SOL RT • AGL Energy Networks • WA Power PA • TransACT LD • Energy Retail Generation T SO • Elgas / HCE R PA • Energy Wholesale • Property • Agility • COMindico • ActewAGL • APT New Zealand & Other LD LD SO SO • NGC Gas • TrustPower (NZ) • NGC
Slide 29: Managing the Portfolio
MANAGING THE PORTFOLIO Core Non-Core Australia LD T SO R PA • AGL Energy Networks • WA Power Y Generation STL • Energy Retail MO OLD S • Energy Wholesale • Property • Agility • COMindico • Energy Investments - ActewAGL, APT, Elgas / HCE • TransACT New Zealand & Other • NGC Gas Transportation • NGC M
Slide 30: Delivering Through People
DELIVERING THROUGH PEOPLE 2002/03 FULL YEAR RESULTS 30
Slide 31: Last Year's Commitments
LAST YEAR’S COMMITMENTS • Delivering Maximum Returns – Integrating Victorian acquisition ü • Completing Energy Platforms – Assessing further opportunities ü • Redefining the Portfolio – Divesting non-core businesses ü • Enabling Change – Leveraging IT capability ü 2002/03 FULL YEAR RESULTS 31
Slide 32: This Year's Priorities
THIS YEAR’S PRIORITIES • Performance – Focus on enhancing businesses within AGL’s core asset portfolio • Platforms – Power generation investments that fit with strategy • People – Retail capability and organisational effectiveness 2002/03 FULL YEAR RESULTS 32
Slide 33: AGL Icon Retires
AGL ICON RETIRES John Fletcher • Joined AGL on 17 September 1979 • 16 Years as AGL’s CFO • Admired and respected by AGL colleagues and broader financial community 24 years of dedication to AGL ... 2002/03 FULL YEAR RESULTS 33
Slide 34: 2002/03 Full Year Results
2002/03 FULL YEAR RESULTS Greg Martin, Managing Director 34