Contact Energy Limited · NZX:CEN
Contact Energy — Non-Deal Roadshow (October 2009)
21 slides from Contact Energy's roadshow presentation, October 2009
Slide 1: New Zealand's leading integrated energy company
New Zealand’s leading integrated energy company Presentation to Investors October 2009
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: Contact is a diversified energy company with generation and customers throughout New Zealand
Contact is a diversified energy company with generation and customers located throughout New Zealand • 600,000 customers (electricity, gas, LPG) • On average generates approx. 26% of NZ’s generation output from 9 power stations: – 50% Natural Gas – 35% Hydro – 15% Geothermal • 25% of electricity ret
Slide 4: Overview of New Zealand electricity generation
Overview of New Zealand electricity generation • The New Zealand electricity generation market comprises roughly between 50% - 55% hydro generation, 10% other renewables, and the remainder, thermal • The majority of hydro generation is in the South Island © Contact Energy Limited October 2009 New Ze
Slide 5: New Zealand's gas market
New Zealand’s gas market • The major owners of gas in New Zealand are: – Shell (48% Pohokura, 50% Kapuni, 84% Maui) – OMV (26% Pohokura, 10% Maui) – Todd (26% Pohokura, 50% Kapuni, 6% Maui, 100% McKee and Mangahewa) – Origin (100% Rimu / Kauri and TAWN) – Greymouth (100% Ngatoro, Turangi and Kaimiro
Slide 6: Electricity demand
Electricity demand • Electricity demand has been growing at around 2% p.a. over the last 10 years • Residential demand has grown despite price increases which have averaged 5% p.a. over the last 10 years • The recession has resulted in a period of relatively flat demand; growth is expected to transi
Slide 7: The electricity sector is dominated by integrated generator / retailers
The electricity sector is dominated by integrated generator / retailers Rio Tinto supply • A high level of integration between generation and retail customer bases • Three of Contact’s competitors are state owned • Generation and retail are unregulated Mighty Meridian Genesis Contact River TrustPowe
Slide 8: Electricity spot market operation
Electricity spot market operation • New Zealand operates a “gross pool” – all generation sales and retail purchases must be made through the spot market • The dominant dynamic in the market has been hydro volatility and the consequent requirement for thermal generation to provide certainty • Hydro g
Slide 9: Overview of current transmission issues
Overview of current transmission issues • New Zealand’s transmission system has seen limited investment for 30 years Wairakei to • Transpower is engaged in a major transmission Albany upgrades upgrade. Major approved upgrades include: 2012 - 14 – the lines from Wairakei to north of Auckland – a repl
Slide 10: Wholesale electricity prices
Wholesale electricity prices • Previously, North and South Island spot prices were closely linked • Volatility in the past (pre 2008) has been largely driven by hydrology • Following the decommissioning of pole 1 there has been an increase in the volatility between the islands particularly over the
Slide 11: Transmission constraints
Transmission constraints Contact’s ability to leverage its geographic and fuel diversity has depended on the HVDC and gas flexibility • In the past Contact has been able to rely on the HVDC to move hydro generation north in times of high inflows and storage • When inflows were low the thermal genera
Slide 12: Despite volatility in wholesale prices Contact's portfolio performed well
Despite volatility in wholesale prices Contact’s portfolio enabled the company to perform well irrespective of weather conditions • Due to hydro conditions the electricity dry years price in New Zealand can fluctuate • The effects of the loss of pole 1 of the HVDC and the loss of gas flexibility can
Slide 13: Wind and/or hydro generation expected to be required by about 2018
Wind and/or hydro generation is expected to be required by about 2018 with geothermal filling the gap until then • The requirement for new generation over the next decade will be driven by two major factors: – The growth in demand – long term average for New Zealand has been 2% but this is constrain
Slide 14: Long-term energy prices
Long-term energy prices • Despite the recent economic challenges the fundamental drivers of long term electricity prices remain the same • In the absence of significant new and accessible gas reserves, wind and hydro remain the likely sources of new generation, once available geothermal options are
Slide 15: NZ Emission Trading Scheme (ETS) – What it means for Contact?
NZ Emission Trading Scheme (ETS) – What it means for Contact? • To meet its Kyoto Protocol obligations the Government introduced a Greenhouse Gas ETS at the end of 2008 • The Government is now in the process of revising the legislation. Key amendments: – Commencement date delayed 6 months to 1 July
Slide 16: Contact's underlying value proposition is leverage from its superior set of options
Contact’s underlying value proposition is the leverage the business obtains from its superior set of options, particularly geothermal and peaking plant • Electricity demand has been flat over the past year • Peak demand has continued to grow despite the recession. Which will benefit Contact’s new 20
Slide 17: Contact's strategic initiatives are progressing well
Contact’s strategic initiatives are progressing well • Projects to restore flexibility back into the portfolio are on track for commercial operation in mid-2010 – Stratford peakers (200 MW, $250m): Adds flexible generation capacity. Replaces New Plymouth with new technology fast-start efficient gas
Slide 18: Capex programme
Capex programme • Two major committed CAPEX projects under way • Stratford Peaker • Tauhara Binary • The Ahuroa gas storage facility is also planned to be constructed during the 2009/10 financial year and is in the committed capex for the purposes of the graph • The chart below shows Contact’s commi
Slide 19: Contact is in a strong financial position
Contact is in a strong financial position • Net debt as at 30 June 2009 was $1.1bn – Net debt to net debt plus equity was 27% • Extended and added to bank credit facilities – As at 30 June 2009 Contact’s committed credit facilities totalled $685m, all of which was available • Over subscribed retail
Slide 20: Conclusion
Conclusion • A challenging year Weather extremes, transmission constraints, portfolio inflexibility • $600 million of construction underway Portfolio flexibility initiatives The first of a series of new geothermal projects - in operation in mid-2010 • Well positioned for growth Excellent growth oppo
Slide 21: © Contact Energy Limited October 2009 New Zealand's leading integrated energy company
© Contact Energy Limited October 2009 New Zealand's leading integrated energy company 21