Meridian Energy Limited · NZX:MEL
Meridian Energy — Debt Investor Presentation (June 2018)
29 slides from Meridian Energy's debt investor presentation, June 2018
Slide 1: Retail Bond Offer Presentation June 2018
MERIDIAN ENERGY. RETAIL BOND OFFER PRESENTATION JUNE 2018. Joint Lead Manager Joint Lead Manager Co-Manager Co-Manager
Slide 2: Important notice
Important notice. The offer of debt securities by Meridian Energy Limited (Meridian or the Issuer) is made in reliance upon the exclusion in clause 19 of schedule 1 of the Financial Markets Conduct Act 2013 (FMCA). The offer of Meridian’s fixed rate bonds, maturing on 27 June 2025 (“2025 Bonds”), is
Slide 3: Agenda
Agenda. About Meridian • The business • Generation assets • Financial highlights • The NZ industry • Political scene • Current strategic focus • Growth opportunities • Risk management • Key financial metrics • Funding • Credit rating The offer • Key terms, dates and process Investment highlights MER
Slide 4: Meridian
Meridian. Over $7bn total market capitalisation, listed in FY2017 RETAIL SALES EXCL TIWAI 2013, and 51% Government owned Residential • Generation solely from renewable sources Small/medium 24% • The biggest of five vertically integrated retailer business 35% generators in the NZ market Agricultural
Slide 5: Meridian
Meridian. New Zealand’s largest generator, with all production from purely renewable sources • Seven big hydro stations – flexible plant with the country’s largest storage • Typically hold a long generation position to manage variable hydro inflows • With low operating costs and capital needs • Five
Slide 6: Financial highlights
Financial highlights. Five successive years of earnings and operating cash flow growth EBITDAF1 OPERATING CASH FLOW $653M $470M $650M $452M $618M $433M $440M $584M $585M $416M $477M $322M 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 Financial Year ended 30 June Source: Meridian Financ
Slide 7: Earnings
Earnings. FY18 Interim Result • $25M (7%) decrease in EBITDAF from: Business specific changes EBITDAF $M • Higher business sales 585 618 650 653 • Higher corporate sales, lower average price from timing of a large customer signing 318 299 294 317 • Some cost expansion to support this customer growth
Slide 8: The New Zealand industry
The New Zealand industry. Source: Electricity Authority, Meridian wholesale retail 5 main 1 transmission 1 large industrial 29 distribution 35 retail 2 million generators grid owner user businesses companies consumers (all listed) (state owned) (Rio (various (5 major (41TWh pa) Tinto/Sumitomo owners
Slide 9: NZ demand
NZ demand. Little demand growth in the last 7 years ANNUAL DEMAND CHANGE SINCE 2010 • + Economic growth +1.8% • + Positive net migration +1.2% +1.1% • - Industrial and manufacturing closure • - Warmer than average temperatures • - Growing impact of technology and -0.6% -0.8% efficiency gains -1.5% -
Slide 10: New Zealand political scene
New Zealand political scene. Positive government policy development • Conversion of the government car fleet to electric by 2025/26 is positive • Establishment of an independent Climate Change Commission • Target of 100% renewable generation by 2035 • Winter energy payment support to superannuitants
Slide 11: Australian political scene
Australian political scene. National energy guarantee • State support is mixed • Further analysis on multiple fronts • Deadline for final agreement is mid 2018 ACCC report • Preliminary report has concerns about national electricity market operation and affordability • Final report with reform recom
Slide 12: Strategic focus
Strategic focus. Champion benefits of Support retail growth & protect competitive markets, our generation legacy, through through • Demonstrating the contribution of hydro to the 100% renewable • Competing vigorously aspiration • Leadership in sustainability • Maintaining a best in class in NZ and A
Slide 13: Sustainability is what we do
Details of Meridian’s GENERATION sustainability framework are in Meridian’s 2017 Integrated RETAIL Report, which can be found MARKETS online at GROWTH www.meridianenergy.co.nz Sustainability STRATEGY is what we do Financial Assets and technology People and expertise Relationships and reputation RESO
Slide 14: Growth opportunities
Growth opportunities. New Zealand AVERAGE RESIDENTIAL ELECTRICITY COST • Low growth in a highly competitive market c/kWh • Retail electricity price increases have been less than inflation, not expected to change 28.6 28.8 • Underweight residential position may provide 27.8 28.1 future load growth 26
Slide 15: Growth opportunities
Growth opportunities. Australia • Potential retail growth off the back of recently acquired new physical and virtual generation (incl. power purchase agreements) • Dual fuel offering will support further uptake in Victoria • Unlikely to build new generation in the current environment UK • Powershop
Slide 16: Risk management
Risk management. Meridian operates an active risk management programme Key risks include: • Tiwai • Adverse hydrological conditions • Catastrophic events • Plant failure • Use of and access to water • Legislative and regulatory risks Details of Meridian’s risk management structure are in Meridian’s
Slide 17: Tiwai Point smelter
Tiwai Point smelter. 12% of New Zealand’s total annual demand • CfD contract with Meridian on NZAS perpetual 12-month termination right • International aluminium is recovering, LME prices up 12% in the last year • Meridian’s modelling suggests smelter is currently making healthy cash profits • Addit
Slide 18: Key financial metrics
Key financial metrics. 30 Jun 30 Jun 30 Jun 31 Dec EBITDAF1 SUMMARY GROUP BALANCE 2015 2016 2017 2017 $M SHEET $M $M $M $M 650 653 618 585 Total Assets 7,661 8,538 8,683 8,694 Total Liabilities 2,913 3,488 3,588 3,761 299 294 318 Equity 4,748 5,050 5,095 4,933 317 Debt 1,076 1,214 1,192 1,366 RATIOS
Slide 19: Funding
Funding. DEBT MATURITY PROFILE AS AT 31 DECEMBER 2017 • Total borrowings as at 31 December 2017 of $1,366M $M • Committed bank facilities of $685M of which 194 $375M were undrawn as at 31 December 2017 • Minimum headroom required in addition to 460 forecast requirements is $200M 363 235 183 5 • 2018
Slide 20: Credit rating and bond covenants
Credit rating and bond covenants. Meridian targets a long term credit rating of BBB+ S&P Global Ratings BBB+/Stable • Rating supported by strong market position as New Zealand’s largest electricity generator • Modest capital expenditure over the medium term absent any compelling investment propositi
Slide 21: The Offer
The Offer. MERIDIAN ENERGY LIMITED | 2018 Retail Bond Offer 21
Slide 22: Key terms of the offer
Key terms of the offer. Issuer Meridian Energy Limited Description of the Unsecured unsubordinated fixed rate bonds Debt Securities The 2025 Bonds are guaranteed by various subsidiaries of Meridian, that are Guarantee members of the Guaranteeing Group General corporate purposes, including the partia
Slide 23: Key terms of the offer (continued)
Key terms of the offer (continued). Issuer Meridian Energy Limited Application has been made to NZX to quote the 2025 Bonds on the NZX Debt Listing Market under the code MEL050 Issue Credit Rating BBB+ (S&P Global Ratings) The Trust Documents contain the following financial covenants: (a) EBITDA / I
Slide 24: Key dates and offer process
Key dates and offer process. Date 11 June (Monday) Offer opens 11 – 13 June Roadshow – Wellington, Auckland, Dunedin and Christchurch (plus conference call) 15 June (Friday) Offer closes – bids due 2pm 15 June (Friday) Allocations and rate set 27 June (Wednesday) Issue date 28 June (Thursday) Expect
Slide 25: Investment highlights
Investment highlights. MERIDIAN ENERGY LIMITED | 2018 Retail Bond Offer 25
Slide 26: Investment highlights
Investment highlights. • New Zealand’s largest hydro generator and wind • Strong credit metrics supporting BBB+ credit farm operator rating • 100% renewable, low operating cost generation • Modest capital expenditure over the medium term • Vertically integrated generation and retail operations • Cro
Slide 27: Questions?
Questions? MERIDIAN ENERGY LIMITED | 2018 Retail Bond Offer 27
Slide 28: Disclaimer
Disclaimer. The information in this presentation was prepared by Meridian Energy with due care The information contained in this presentation should be considered in conjunction and attention. However, the information is supplied in summary form and is with the company’s financial statements, which
Slide 29: Thank you
Thank you.
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