Genesis Energy Limited · NZX:GNE
Genesis Energy — Investor Day (November 2018)
73 slides from Genesis Energy's investor day presentation, November 2018
Slide 1: Investor Day November 2018
Investor Day November 2018
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Genesis Energy Limited (‘Genesis Energy’) for information purposes only. The information in this presentation is of a general nature and does not purport to be complete nor does it contain all the information required for an investor to evaluate an i
Slide 3: Investor Day Agenda
Investor Day Agenda 8:00 – 8:30 Welcome breakfast 8:30 – 9:00 Overview of the day Marc England • Customer platform • Nigel Clark 9:00 – 10:30 Business update • Wholesale market • Shaun Goldsbury • Kupe (with Beach Energy) • Andre Gaylard 10:30 – 11:00 Morning tea, including business intelligence dem
Slide 4: Key messages
Key messages Genesis Energy Limited Investor Day November 2018 4.
Slide 5: Genesis is accelerating the pace of change
: Genesis is accelerating the L | pace of change, powered by people, culture and agile processes GENESIS ENERGY LIMITED genesis
Slide 6: Our investment proposition of strong yield is underpinned by growth
Our investment proposition of strong yield is underpinned by growth NZX 50 / ASX 100 YIELD COMPARISON EBITDAF DIVIDEND CENTS PER SHARE & YIELD $ MILLIONS Dividends (CPS) Net Yield % Mean 90th Percentile 75th Percentile 25th Percentile 16.6 16.9 12% 16.0 16.4 GNE 350-370 10% 10% 361 13.0 9% 345 335 3
Slide 7: Genesis is powered by a great team
Genesis is powered by a great team… Aligning Continuing Valuing around our strong diversity of strategy to health and people and succeed safety focus ideas together Genesis Energy Limited Investor Day November 2018 7.
Slide 8: Supported by energised and inspiring leaders
… supported by energised and inspiring leaders Directors Barbara Chapman Doug McKay Paul Zealand Joanna Perry Tim Miles Maury Leyland James Moulder Executive team Marc England Chris Jewell Tracey Hickman Nigel Clark James Magill Nicola Richardson Matthew Osborne Chief Executive Chief Financial Offic
Slide 9: Our ways of working make us safe, fast and flexible
Our ways of working make us safe, fast and flexible 10% increase in 125 people velocity over last Squads have engaged in 18 six months allowing completed up to 60 squads aligned to for better sprints four tribes predictability of cost and benefit realisation Genesis Energy Limited Investor Day Novem
Slide 10: Our diversity and culture drive our successful strategy delivery
Our diversity and culture drive our successful strategy delivery Commitment to being an Engagement and confidence in Wellbeing and safety is more inclusive and diverse employer business success on the rise than just a responsibility 38% of employees have bought nearly Two thirds of GENDER MIX $1 mil
Slide 11: Our purpose is to reimagine energy to put control in our customers' hands
Our purpose is to reimagine energy to put control in our customers’ hands Fuels Brands Platform Genesis Energy Limited Investor Day November 2018 11.
Slide 12: Genesis in numbers
Genesis in numbers Genesis Energy Limited Investor Day November 2018 12.
Slide 13: Diversity of earnings across sectors, fuels and markets
Diversity of earnings across sectors, fuels and markets GROSS MARGIN CONTRIBUTION (FY18) KUPE 20% WHOLESALE 43% CUSTOMER 37% Gas 11% Business Renewable generation 30% Residential electricity 20% electricity 6% Oil 6% LPG 3% LPG 1% Thermal generation 12% LPG 7% Gas 4% Electricity Gas LPG Oil Genesis
Slide 14: Core markets stable or growing
Core markets stable or growing GRID DEMAND GRID DEMAND FORECASTS (GWH) 65,000 4,000 SHOWING SIGNS OF GROWTH (GWH) 60,000 Growth is 3,800 55,000 3,600 forecast in 3,400 Est. 50,000 NZ energy 3,200 45,000 demand 3,000 40,000 2,800 35,000 2008 2024 2004 2005 2006 2007 2009 2010 2011 2012 2013 2014 2015
Slide 15: Electricity markets reflecting tighter capacity margins
…with electricity markets reflecting tighter capacity margins Regulatory Energy and Tiwai 4th review of capacity potline electricity shortages adds to prices showing demand underway RESIDENTIAL ELECTRICITY PRICE (C/KWH) 400 WHOLESALE ELECTRICITY PRICE ($/MWH) NEW ZEALAND WINTER ENERGY 32 350 MARGIN
Slide 16: Fuel markets tightening
…and fuel markets tightening LPG Oil and gas International market exploration to oil prices have moves to be restricted increased net import FORECAST GAS AND LPG PRODUCTION PROFILE NZ LPG IMPORT/EXPORT PARITY PRICING (NZD/T) BRENT CRUDE (USD/BBL) 250 1,800 120 14 1,600 100 200 12 1,400 10 1,200 80 1
Slide 17: Energy transformation is creating opportunities
Energy transformation is creating opportunities ENERGY SEARCH VOLUME TREND NEW ZEALAND CARBON UNITS PRICE 1.4 WIND TURBINE PRICE INDEX 250 $30 $25 200 Desktop search $20 1.2 150 $15 100 $10 1 Mobile search $5 50 $0 0.8 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Dec-15 Dec-20 Dec-14 Dec-
Slide 18: We are performing while transforming
We are performing while transforming Our VISION is to be customers’ first choice for energy management Our PURPOSE is to reimagine energy to put control in our customers’ hands Our STRATEGY is to maximise value through our market position Wholesale & Kupe segment Customer segment • Our integrated fu
Slide 19: A transformed customer platform is delivering growth opportunities
G Ul 2 A transformed customer platform is O delivering growth opportunities GENESIS ENERGY LIMITED genesis
Slide 20: We have created a Customer Platform fit for the future
We have created a Customer Platform fit for the future Our technology platform is built for product innovation • Billing migration completed with zero downtime – common platform for two brands • Greatest range of Azure cloud services in NZ Re-launched Built digital • First in NZ with Azure Massively
Slide 21: Our brand re-launch has helped us regain market leadership
Our brand re-launch has helped us regain market leadership WHEN ASKED, PEOPLE RECOGNISED GENESIS AS: “THE MARKET LEADER” 28 19 17 19 9 +7 PTS +4 PTS +7 PTS NC +1 PT “PUTTING PEOPLE IN CONTROL OF THEIR ENERGY USE” 23 15 11 16 11 +8 PTS +3 PTS +1 PTS +1 PT +1 PT “LEADING THE WAY WITH 28 15 15 13 9 NEW
Slide 22: Our technology platform is built for product innovation
Our technology platform is built for product innovation Our scalable, flexible, modular technology architecture brings speed and cost advantage Our architecture strategy is to integrate …which is transforming our digital capability and customer experience best-in-breed applications … TIME AND COST T
Slide 23: Operational integration maximises value creation across the business
Operational integration maximises value creation across the business LPG CUSTOMER PEOPLE OPERATIONS SYSTEMS Multi-functional One logistics Common platform Centre of operation for both for both brands Excellence brands and all fuels Genesis Energy Limited Investor Day November 2018 23.
Slide 24: Platform investment is delivering a difference and positions us for growth
Platform investment is delivering a difference and positions us for growth >130,000 > 350,000 > 40 % Total unique users for PowerShouts Customers linked to My Account/Energy IQ1 redeemed2 Fly Buys1 GENESIS NPS, PROMOTER SCORE AND INTERACTION NPS DUAL FUEL CUSTOMER GROWTH (UP 5%) AND CHURN (ROLLING 3
Slide 25: Value from residential loyalty, targeted business growth
Value from residential Targeted business loyalty growth Energy IQ Simplicity Service Knowledge Advice Energy Action Management Multi-fuel platform Genesis Energy Limited Investor Day November 2018 25.
Slide 26: We've made meaningful progress with our product-led strategy
We’ve made meaningful progress with our product-led strategy Energy Management Energy Plans Knowledge Advice Action Time of use MyAccount Products Fixed/Variable 2 years ago Contract/Uncontracted PowerShouts Energy IQ Electricity insights Solar My Plan - Electricity forecast Battery Storage Launched
Slide 27: Focusing on enhancing loyalty
Focusing on enhancing loyalty FY19 will deliver product differentiation at scale GENESIS CUSTOMER CHURN RATE (BY MONTH, ALL FUELS)1 Bottle Gas 30% Monitoring Launch Electricity Monitoring Launch Power Energy IQ Shout I Launch Power 25% Shout III Power Move to the Shout II Move to the Future I Dual F
Slide 28: Continued progress on optimising residential segment value
Continued progress on optimising residential segment value OUR APPROACH TO REDUCING “STANDSTILL COST” – GENESIS RESIDENTIAL INDEXED CUSTOMER LIFETIME VALUE2 – GENESIS RESIDENTIAL 110% 400 350 2 101 1 $$$ 55 105% 300 $$ 31 250 364 348 $ Customers (000) 100% 200 150 95% 100 50 90% 0 Jan-18 Mar-18 Jun-
Slide 29: Dual brand strategy
Dual brand strategy Critical to enabling mass market strategy ~6% of total ICP churn is between brands1 • Market Role: Market leader that brings to life the future • Market Role: Challenger with attitude. Nimble of energy and has deep, valuable customer relationships enough to deliver to customers w
Slide 30: Focus on growing business volume
BUSINESS SALES TEAM COVERAGE Focus on growing business volume FY17 FY19 Early signs that investment is paying off BUSINESS BILLED VOLUME 4,000 35,000 3,500 30,000 3,000 Monitoring 25,000 Electricity & Gas GWh 2,500 LPG tonne 20,000 2,000 Bottled gas Electricity & Gas monitoring 15,000 1,500 Electric
Slide 31: Targeted growth through differentiation
Targeted growth through differentiation Agriculture and hospitality are our initial focus AGRICULTURE HOSPITALITY Complements our An under-served but Retail profile valuable segment Heavy use of LPG Heavy use of LPG within specific within specific segments segments Genesis Genesis Energy Energy Limi
Slide 32: Brand identity critical to growth
Brand identity critical to growth Putting our energy into your business OUR CUSTOMER VALUE PROPOSITION BRAND METRICS: BUSINESS CUSTOMERS 80% Genesis Customers Genesis Customers Simple 51% - 54% 90% - 85% Make energy simple by providing multiple fuels, at multiple 60% Non Customers Non Customers 9% -
Slide 33: Growth in the customer segment
Growth in the customer segment Growth in the customer segment will deliver $20-30m incremental EBITDAF RESIDENTIAL BUSINESS INCREMENTAL EBITDAF FROM FY19 - FY21 $14-21M INCREMENTAL EBITDAF FROM FY19 - FY21 $6-9M Volume Customer Growth Value Customer Value Volume Growth Cost Reduction Cost Reduction
Slide 34: How we think about Energy Management
How we think about Energy Management ACTIVITIES WITHIN AN ENERGY MANAGEMENT VALUE CHAIN Electricity forecast Electricity insights Usage breakdown Bottled gas monitoring Home comparison My Energy Plan Knowledge Advice Energy Hub Business consultancy Solar monitoring Energy audit Energy related assets
Slide 35: Our diverse generation portfolio ensures stability and benefits from market volatility
. Fg Our diverse generation portfolio = ensures stability and benefits a from market volatility GENESIS ENERGY LIMITED genesis
Slide 36: Risks impact the wholesale electricity market
Risks impact the wholesale electricity market Spot prices rise to reflect wind volatility, low inflows and reduced gas production WHOLESALE ELECTRICITY PRICE WEEKLY AVERAGE ($/MWH) 400 Gas constrained and dry 350 People don’t value earthquake insurance...until 300 there’s an earthquake Low 250 Dry w
Slide 37: Renewable volatility drives price volatility
Renewable volatility drives price volatility Low hydro storage and increasing wind exposure increases need for dispatchable capacity with energy storage NZ CONTROLLED STORAGE AND RISK CURVE (GWH) 250 WIND GENERATION IN NEW ZEALAND (MW) 4,000 200 3,500 3,000 150 2,500 2,000 100 1,500 1,000 50 500 0 0
Slide 38: Thermal firming is market critical
Thermal firming is market critical Rankines able to capture high prices caused by scarcity of firming capacity and stored energy HYDRO AND GAS FIRMING WIND FIRMING 22/10/20181 28/6/20181 Below average hydro storage and gas Above average hydro storage but high demand Energy storage (coal or gas stora
Slide 39: We have proven the ability to operate Unit 5 flexibly
We have proven the ability to operate Unit 5 flexibly Combined with more flexible gas portfolio drives enhanced value UNIT 5 PERCENTAGE OF TIME OFF RECENT UNIT 5 OPERATION 450 100% 400 95% 350 90% 300 85% 250 80% 200 75% 150 70% 100 65% 50 60% 0 Oct 15 to Sep 16 Oct 16 to Sep 17 Oct 17 to Sep 18 8 O
Slide 40: Creating flexibility today
Creating flexibility today Our ability to optimise resources across markets creates value Helps maximise Kupe production Contracts to take during the 100% of gas from summer, which Kupe increases oil and LPG production First contract signed, and STRATEGIC FOCUS targeting deals Allows more ON SUMMER
Slide 41: Rankines add value to Genesis even when not operating
Rankines add value to Genesis even when not operating In addition to profitable running, there are three core value streams from Rankine availability Swaptions Provides a Ability to clear shadow (Or other maximise use price for insurance-like of hydro alternative products) storage hedges Genesis Ene
Slide 42: Our emissions are largely hedged through to 2025
Our emissions are largely hedged through to 2025 We are also investigating longer term hedging options CARBON HEDGE POSITION $6 $9-14 $15-20 $17-22 $17-22 $19-24 $20-25 $20-25 NZ Units as % of potential exposure Short-hedging has been successful to date For longer term hedging, we are investigating
Slide 43: Most carbon costs are recovered directly
Most carbon costs are recovered directly Only a small portion of costs are not included as a direct pass through into prices/contracts INDICATIVE SPREAD OF CARBON EXPOSURE ACROSS MARKETS LPG sales Recovery – 100%, via pricing of LPG Wholesale gas sales Recovery – 100%, Genesis receive the credits Re
Slide 44: Cost recovery of generation burn varies
Cost recovery of generation burn varies Ability to fully recover cost of carbon supported by dry weather and under supplied market Over supply Under Supply Increased Good Better flexibility in gas Wet 70%-85% 85%-95% position and Unit 5 recovered recovered flexibility will improve our ability to rec
Slide 45: Integrated portfolio provides flexibility
Integrated portfolio provides flexibility We have options to respond to a wide variety of market conditions Genesis Energy Limited Investor Day November 2018 45.
Slide 46: New Zealand's unique seasonal demand challenge
New Zealand’s unique seasonal demand challenge Demand is highest in winter, when southern inflows are the lowest SEASONAL STORAGE CHALLENGE 4,000 400 Storage or generation with flexible fuel 3,500 350 sources need to address market challenges • 2,000 GWh more energy is needed in 3,000 300 winter tha
Slide 47: NZ's hydro storage is too small to manage droughts
NZ’s hydro storage is too small to manage droughts Even with 4 times the relative storage and with EU interconnector, Norway is still only 98% renewable NEW ZEALAND HYDRO BY GWH NORWAY HYDRO BY GWH 30,000 140,000 120,000 25,000 100,000 20,000 80,000 15,000 60,000 10,000 40,000 5,000 20,000 ,000 ,000
Slide 48: Deep energy storage is a big challenge
Deep energy storage is a big challenge There are limited options available to store 3,000 GWh of energy 5 more hydro 140 Tesla Powerwalls 10 million 45kg LPG 80% of the potential schemes the size per household bottles (plus some Huntly coal stockpile of Lake Taupo ($2m per house) sort of generator)
Slide 49: Portfolio delivers value from flexibility & reliability
Portfolio delivers value from flexibility & reliability Likely renewable builds have a different role in the market to thermal generation Thermal Thermal Geo- Wind & Generation Role (Gas) (Coal) Hydro thermal Solar Batteries Baseload Runs 24/7 ⃝ Daily Flex Can turn it on/off (or up/down) for
Slide 50: High renewable penetration will have challenges
High renewable penetration will have challenges If you just overbuild renewables, price rises 20% on average and becomes much more volatile MONTHLY PRICE VOLATILITY ANNUAL PRICE VOLATILITY $500 $250 $400 $200 Annual Price ($/MWh) Monthly Price ($/MWh) $150 $300 $100 $200 $50 $100 $- $- Jan Feb Mar A
Slide 51: Our portfolio spans a range of sub-markets
Our portfolio spans a range of sub-markets Changes to value, volume and cost will change opportunity over time Wholesale Portfolio Resource Today 2022-2030 2030+ Falling cost of wind technology Electrification of transport and Most value exists from energy and new builds expected to cap industry dri
Slide 52: Contracts are an increasingly important part of our portfolio
Contracts are an increasingly important part of our portfolio It’s not about who owns what assets, it’s about where you get your electricity from SOURCES OF GENERATION VOLUMES FOR PORTFOLIO IN FY18 4,500 • Genesis doesn’t need to invest our own 4,000 capital and operate assets 3,500 • Our interest i
Slide 53: We are maximising value as NZ transitions to a low carbon future
We are maximising value as NZ transitions to a low carbon future Securing low cost Flexibility from fuels and Creating flexibility from renewable electricity working towards a existing assets. transition from coal Weekly and seasonal flex Genesis Energy Limited Investor Day November 2018 53.
Slide 54: The Kupe stake and fuel contract position provide commercial upside
Z) The Kupe stake and fuel contract ~ position provide commercial upside GENESIS ENERGY LIMITED genesis
Slide 55: Kupe
KUPE Beach Energy Limited ABN20 007 617 969 Genesis Energy Limited Investor Day November 2018 55.
Slide 56: Compliance Statements
COMPLIANCE STATEMENTS Disclaimer Reserves disclosure This presentation contains forward looking statements that are subject to risk factors associated Beach prepares its petroleum reserves and contingent resources estimates in accordance with the with oil, gas and related businesses. It is believed
Slide 57: Beach Energy Portfolio
BEACH ENERGY PORTFOLIO EXPANDED FOOTPRINT WITH FIVE PRODUCTION HUBS AND SIGNIFICANT GAS PROCESSING INFRASTRUCTURE FY18 Pro forma production1 Bass Basin Cooper Taranaki Basin Basin 26.8 MMboe Otway Basin Perth Basin FY18 2P reserves2 Perth Basin Cooper Basin 313 MMboe Otway Basin 1. Pro forma FY18 de
Slide 58: Our Vision, Purpose and Values
OUR VISION, PURPOSE AND VALUES Our vision We aim to be Australia’s premier multi-basin upstream oil and gas company Our purpose To deliver sustainable growth in shareholder value Our values Our values define us, guide our actions, our decisions and our words Safety Safety takes precedence in everyth
Slide 59: New Zealand – Kupe Gas Project
NEW ZEALAND – KUPE GAS PROJECT KEY GROUP CASH FLOW CONTRIBUTOR Activities to enhance value 5 year contribution to Beach1 • Expected to generate ~10% of Beach’s 6-11% free cash flow over the next 5 years • Successful FEED and subsequent execution of Kupe inlet • Key variables to outlook include: comp
Slide 60: Operational Excellence
OPERATIONAL EXCELLENCE DELIVERY OF VALUE THROUGH SAFE, RELIABLE AND EFFICIENT OPERATIONS HSE and Process and Performance People risk technology Beach Energy Limited ABN 20 007 617 969 Genesis Energy Limited Investor Day November 2018 60.
Slide 61: New Zealand – Kupe Gas Project
NEW ZEALAND – KUPE GAS PROJECT BEACH 50% AND OPERATOR 2P reserves by product • Nameplate capacity of the plant is up to 77 (MMboe) TJ/day with excellent reliability (~ 99%) 5 • Kupe developed by three wells 3 30 • Gas exported via pipeline to North Island MMboe distribution network 22 • Condensate t
Slide 62: Kupe Gas Project
Kupe Gas Project Settled joint venture focused on enhancing Kupe’s value Economic interests Improved Phase Two Development aligned Collaboration Two distinct projects Engagement Transparency Inlet compression Development well Discussion Genesis Energy Limited Investor Day November 2018 62.
Slide 63: Phase II Development – Inlet Compression Project
Phase II Development – Inlet Compression Project Development Study underway and aiming for Final Investment Decision in early FY20 Development Study – incorporates Genesis to carry out independent Final Investment Decision – requires basis of design, Front End Engineering due diligence prior to Fina
Slide 64: Large and diverse fuel book provides options and opportunities
Large and diverse fuel book provides options and opportunities Kupe ownership adds strength to Genesis fuel book FY18 NEW ZEALAND NET LPG SUPPLY FY18 NEW ZEALAND GAS PRODUCTION Genesis LPG production volumes • Diversity of gas supply available with contracts across New Genesis purchases Zealand’s th
Slide 65: Long-term Gas Contract Position
Long-term Gas Contract Position TAKE-OR-PAY FORWARD GAS PURCHASES1 BENEFITS AND TIMING OF ALTERNATIVE GAS PURCHASE COST2 $7.50 - $8.00 - 40 $8.50 $9.00 $6/GJ $7/GJ $90 35 $8.00 - $80 $9.00 30 $70 25 $60 $8.00 - $9.00 $8.50 - $50 $9.50 PJ 20 $8.50 - $40 15 $9.50 $30 10 $20 $8.50 - 5 $9.50 $10 $- 0 FY
Slide 66: Top quartile TSR and $400-430m EBITDAF in FY21 remain achievable
f Top quartile TSR and $400-430m ) EBITDAF in FY21 remain achievable GENESIS ENERGY LIMITED genesis
Slide 67: Genesis Sustainability Framework launched FY19
Genesis Sustainability Framework launched FY19 Caring for our Building strong Powering environment communities New Zealand Putting control in our Emissions Our Communities customers’ hands Water and Wildlife Our People Delivering New Zealand’s energy future Our ambitions include Our ambitions includ
Slide 68: Genesis is engaging in a number of public consultations
Genesis is engaging in a number of public consultations Policy cohesion is key, underpinned by principles of collaboration and customer-centric approach Our focus is on making thoughtful contributions to meaningful solutions KEY OBSERVATIONS / RECOMMENDATIONS Retail market • Competition is working t
Slide 69: The plan is in place to 2021 and beyond
The plan is in place to 2021 and beyond Driven by retail growth, optimisation and rolling off of legacy contracts PATHWAY TO FY21 FY21 SENSITIVTIES 430 Extended Dry Sequence 25th P. 10th P. 27 400 Extended Wet Perc. change in 75th P. 90th P. 17 Sequence hydro sequence 15 +/- $2/MWh 30 10 GWAP change
Slide 70: Sustained earnings and dividend growth
Sustained earnings and dividend growth Underpinned by long dated debt book EBITDAF DIVIDEND CENTS PER SHARE & PAYOUT HISTORY1 $ MILLIONS Dividends (CPS) % of Free Cash Flow 400 350-370 16.4 16.6 16.9 130% 16.0 345 361 87% 92% 300 335 333 13.0 91% 308 74% 80% 200 70% Target Dividend/ Free Cash Flow 3
Slide 71: Capital investment
Capital investment Targeted capital investment underpins an asset portfolio in transition Category Definition Example Priority Criteria Run Stay-in-Business capital Generator maintenance Risk based Grow Capital that drives business growth LPG distribution expansion IRR threshold exceeded At-risk cap
Slide 72: How we think about delivering shareholder value
How we think about delivering shareholder value Short-term Customer Capital allocation Shareholder outcome priorities Shareholder Growing distributions dividends in real terms over time Management of key uncertainties affecting capital Investment in Disciplined Targeted top allocation decisions grow
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