Meridian Energy Limited · NZX:MEL
Meridian Energy — 1H FY24 Earnings Presentation
43 slides from Meridian Energy's earnings presentation, Feb 28, 2024
Slide 1: 2024 Interim Results Presentation
2024 Interim Results Presentation 28 FEBRUARY 2024 Turbine construction at Meridian’s Harapaki wind farm
Slide 2: Key points
Key points Discussions are ongoing with NZAS on a potential contract beyond 2024. These discussions are complex, and outcomes are uncertain. Meridian will update the market when discussions with NZAS are completed *EBITDAF is a non-GAAP measure of earnings before interest, tax, depreciation, amortis
Slide 3: Financial performance
Financial performance Open Country Dairy's Awarua facility, near Invercargill 2 8 FE B R UAR Y 2 02 4 2 02 4 I N TE R I M R E S ULTS PR E S E N TATI ON 3
Slide 4: Dividends
Dividends § Interim ordinary dividend declared of 6.15 Dividends declared cps (80% imputed), 2.5% increase from 1H CPS Interim dividend Final dividend Special dividends Total FY23 25 § Dividend reinvestment plan will apply to this 20 19.34 17.40 17.90 interim dividend at 0% discount 2.44 16.90 15 11
Slide 5: EBITDAF
EBITDAF § EBITDAF of $443M, 4% higher than 1H FY23 EBITDAF movement $M § $70M (12%) higher retail contracted sales revenue 500 § Higher generation revenue and supply costs from +2 +5 higher wholesale spot prices 450 -2 -2 -16 § $18M gain on close outs of forward hedge +31 positions ($51M gain in 1H
Slide 6: Energy margin
Energy margin1 § +12% growth (+$70M) in retail sales revenue Energy margin movement $M physical -$22M financial +$54M 1,200 § Financial contract, spot generation and hedging revenues all reflected higher 1,000 wholesale prices +514 -606 § Those higher prices increased costs in the 800 +321 -268 port
Slide 7: Retail
Retail § Sales volume growth in small medium Customer sales Average 2 Total sales North Island South Island price volume sales volume sales volume business (+1%), agricultural (+9%), large ($/MWh) (GWh) (GWh) (GWh) business (+6%) 1H FY24 Residential 947 530 417 § Residential sales volume decreased -
Slide 8: Generation
Generation § -4% lower physical generation Average generation price $/MWh § Inflows 95% of average in 1H FY24, following 140 113 127 120 a relatively dry winter and wet spring 100 101 93 § Waitaki storage has tracked below average 80 60 51 since late November 2023; 93% of average 40 at 31 January 20
Slide 9: Operating expenses
Operating expenses § Operating expenses $16M (13%) higher than Operating costs Interim Final half-year Total 282 $M ↑ 1H FY23 300 276 249 § Growth in 1H FY24 from workforce and 195 223 143 200 186 ↑ remuneration increases, rates uplift, higher 122 126 137 ICT project and contractor spend, insurance
Slide 10: Capital expenditure
Capital expenditure § Capital expenditure of $163M in 1H FY24 Capital expenditure (NZ operations) $M Interim Final half-year Total § Expecting lower FY24 capital expenditure of 500 370 between $345M and $370M (previously ↑ $420M-$445M) 400 346 345 § $70M to $75M of stay in business capex 300 207 175
Slide 11: Below EBITDAF
Below EBITDAF § $11M increase in NPBT3 from fair value of energy Net Profit after tax (continuing operations) $M Interim Final half-year Total hedges from changes in forward electricity prices 500 451 415 ($5M decrease in 1H FY23) 300 188 § $13M decrease in NPBT from fair value of 175 306 95 treasur
Slide 12: Debt and funding
Debt and funding § December 2023 total borrowings of $1,391M6 Debt maturity profile as at 31 December 2023 $M 600 Drawn debt maturing (face value) Available facilities maturing § Total funding facilities of $1,986M, of which 125 $601M were undrawn 400 § All facilities classified under Meridian’s Gre
Slide 13: Business update
Business update Construction at the Ruakākā Battery Energy Storage System near Whāngarei 2 8 FE B R UAR Y 2 02 4 2 02 4 I N TE R I M R E S ULTS PR E S E N TATI ON 13
Slide 14: Customers
Customers § Developing a new approach to retail § Energy landscape is evolving quickly § Technology rapidly creating new options for customers to interact with energy § Transformation with accelerated electrification and a digital first retail environment Meridian has built New Zealand's second larg
Slide 15: Process heat electrification
Process heat electrification § Process heat volume expanded to 891GWh of MoU and contracted load § Partnership with Open Country Dairy to replace its existing coal boiler with a 13MW electric boiler at their Awarua facility near Invercargill § Includes a 27MW demand flexibility agreement § Fonterra
Slide 16: Renewable construction
Renewable construction Harapaki wind farm § 20 turbines commissioned § On track for full power in September 2024, inside the $448M capital budget Ruakākā Battery Energy Storage System § First battery containers arrived last month § Completion expected in last quarter of 2024, at the $186M capital bu
Slide 17: Renewable development pipeline
Renewable development pipeline § Joint venture signed with NZ Windfarms to repower and extend the Te Rere Hau wind farm § Final investment decision expected in Q2 2025, project completion expected in Q4 2027 § Mt Munro wind farm consent in progress, project completion expected in mid 2027 § Ruakākā
Slide 18: Renewable development pipeline
Renewable development pipeline § 4.9GW (11TWh) of development options § 2.1GW secured, 2.8GW in advanced prospects 28 FE B RU ARY 20 24 20 24 I N T E RI M RE SU L T S PRE SE N T AT I ON 18
Slide 19: Energy policies from the new coalition government
Energy policies from the new coalition government Energy policy § Cease work on Onslow pumped hydro § Repeal offshore oil and gas exploration ban § Net Zero by 2050 reiterated with doubling of renewable electricity included Climate change § Stop the current review of Emissions Trading Scheme § Maint
Slide 20: Energy policies from the new coalition government
Energy policies from the new coalition government Hydrogen and other fuels § Plan for transitional low carbon fuels including hydrogen infrastructure § A Hydrogen National Policy Statement to be introduced to provide investment certainty Resource Management Act (RMA) reform § Repeal Natural and Buil
Slide 21: Transmission costs
Transmission costs § Transpower submitted its next 5-year work plan proposal (RCP4, 2025-2030) to the Transpower’s Transpower’s proposed proposed annual annual transmission transmission costs for Meridian costs for Meridian Commerce Commission in November 2023 $M § In December 2023, the Commerce 125
Slide 22: NZAS termination – portfolio response
NZAS termination – portfolio response NZAS contract termination portfolio response 14 JAN 2021 1 JAN 2022 1 JAN 2023 1 JAN 2024 31 DEC 2024 NZAS contract May 21 Investor Day August 21 Annual Results Feb 22 Interim Results August 22 Annual Results Feb 23 Interim Results August 23 Annual Results Feb 2
Slide 23: Closing comments
Closing comments § Higher customer sales again underpinned the financial result § Decarbonisation of agricultural processing is gaining momentum § Construction projects progressing on time and budget § Waitaki catchment reconsenting application submitted § Mt Munro wind and Ruakākā solar consent lod
Slide 24: Questions
Questions Elver trap and transfer in the Waitaki Valley 2 8 FE B R UAR Y 2 02 4 2 02 4 I N TE R I M R E S ULTS PR E S E N TATI ON 24
Slide 25: Additional information
Additional information 2 8 FE B R UAR Y 2 02 4 2 02 4 I N TE R I M R E S ULTS PR E S E N TATI ON 25
Slide 26: Segment results
Segment results § Flux Federation included in ‘other and unallocated’ segment $M Wholesale Retail Other & unallocated Inter-segment Total 1H FY24 1H FY23 1H FY24 1H FY23 1H FY24 1H FY23 1H FY24 1H FY23 1H FY24 1H FY23 Contracted sales 296 226 670 600 - - - - 966 826 Cost to supply customers (1,334)
Slide 27: Change in presentation of realised energy hedge balances
Change in presentation of realised energy hedge balances § From a change in interpretation of NZ IFRS 9 § Previous income statement treatment was as revenue or expenses (hedge energy sales or purchases) § Realised energy hedge balances now included in the net change in fair value of energy hedges §
Slide 28: Retail
Retail Customers New Zealand customer connections ICP (000) 500 Meridian North Island Meridian South Island Powershop Total § 2% increase in customers since June 2023 400 365 363 372 347 324 300 117 117 121 89 106 Residential, business, agri segment 200 120 122 126 125 127 § 1% decrease in residenti
Slide 29: Hydrology
Hydrology Inflows Meridian's combined catchment inflows GWh 9,000 § 1H FY24 inflows were 95% of average § January 2024 inflows were 118% of average 6,000 3,000 Storage § Meridian’s Waitaki storage at 31 December 0 Financial 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2
Slide 30: Generation
Generation Volume New Zealand generation GWh Hydro Wind Total 8,000 § 1H FY24 generation was 4% lower than 1H 7,187 779 6,676 7,111 709 7,214 640 6,948 720 FY23, with lower hydro and higher wind 6,000 765 generation 4,000 6,408 6,402 6,574 6,227 5,911 2,000 Price 0 2019 2020 2021 2022 2023 § 1H FY24
Slide 31: 1H FY24 EBITDAF
1H FY24 EBITDAF Movement in EBITDAF $M Energy margin +$31M 1,100 1,000 900 800 +514 700 -742 600 500 +70 +1 +2 +5 +70 400 +119 -1 -2 -2 -16 300 200 425 443 100 0 EBITDAF 31 Retail Wholesale Generation Cost to Net cost of Virtual asset Other Other Hosting Transmission Metering Employee & EBITDAF 31 D
Slide 32: EBITDAF to NPAT
EBITDAF to NPAT 1H FY24 EBITDAF to NPAT reconciliation $M 500 450 400 -164 350 300 443 -10 250 -25 200 -69 +10 -3 +11 -2 150 191 175 100 EBITDAF Depreciation and Premiums paid on Net finance costs Tax Underlying Net change in fair Gain on sale of Premiums paid on Tax NPAT amortisation electricity op
Slide 33: Energy margin
Energy margin Defined as § Revenues received from sales to customers net of distribution § A non-GAAP financial measure costs (fees to distribution network companies that cover the costs of distribution of electricity to customers), sales to large representing energy sales revenue less industrial cu
Slide 34: Energy margin
Energy margin 1H FY24 energy margin $M 2,000 1,750 1,500 +885 -1,045 1,250 1,000 +296 750 -220 +17 500 +258 -3 -5 -355 +389 629 250 +412 0 Mass market C&I sales Financial Generation Cost to supply Cost to supply Hedging fixed Hedging spot Contract close VAS margins Market costs Energy sales contract
Slide 35: Energy margin
Energy margin Energy margin movement $M 1,400 1,200 1,000 +514 -606 800 +70 +1 +41 +29 -34 600 -136 +252 -1 -99 400 598 629 200 0 Energy Mass market C&I sales Financial Generation Cost to Cost to Hedging Hedging Contract VAS margins Market costs Energy Margin 31 sales contract spot revenue supply su
Slide 36: New Zealand energy margin
New Zealand energy margin 1H FY24 1H FY23 Volume VWAP NZD M Volume VWAP NZD M Res, business, agri sales 2,822 $146 412 2,750 $135 371 Corporate and industrial sales 1,984 $130 258 1,920 $119 229 Retail contracted sales 4,806 $139 670 4,670 $128 600 NZAS sales 2,525 2,524 Financial contract sales 1,7
Slide 37: Fair value movements
Fair value movements § Meridian uses derivative instruments to Net changes in fair value of hedges $M manage interest rate, foreign exchange and 500 402 electricity price risk 250 236 31 § As forward prices and rates on these 0 instruments move, non-cash changes to -250 -161 their carrying value are
Slide 38: Segment earnings statement
Segment earnings statement Segment earnings statement Six months ended 31 December 2023 2022 $M New Zealand energy margin 629 598 Other revenue 16 14 Hosting expense (2) - Energy transmission expense (36) (41) Electricity metering expenses (25) (23) Employee and other operating expenses (139) (123)
Slide 39: Underlying NPAT reconciliation
Underlying NPAT reconciliation Underlying net profit after tax Six months ended 31 December 2023 2022 $M Net profit after tax 191 201 Underlying adjustments Hedging instruments Net change in fair value of energy hedges (11) 5 Net change in fair value of treasury hedges 13 (32) Premiums paid on elect
Slide 40: Cash flow statement
Cash flow statement Cash flow statement Six months ended 31 December 2023 2022 $M Receipts from customers 2,044 1,637 Interest received 6 6 Payments to suppliers and employees (1,605) (1,253) Interest paid (38) (33) Income tax paid (104) (92) Operating cash flows 303 265 Purchase of property, plant
Slide 41: Balance sheet
Balance sheet Balance sheet Six months ended 31 December 2023 2022 $M Cash and cash equivalents 221 198 Trade receivables 458 259 Customer contract assets 13 14 Financial instruments 225 291 Other assets 42 48 Total current assets 959 810 Property, plant and equipment 9,031 8,587 Intangible assets 8
Slide 42: Glossary
Glossary Hedging volumes buy-side electricity derivatives excluding the buy-side of virtual asset swaps Average generation price the volume weighted average price received for Meridian’s physical generation Average retail contracted sales price volume weighted average electricity price received from
Slide 43: Disclaimer
Disclaimer The information in this presentation was prepared by Meridian This presentation contains a number of non-GAAP financial Energy with due care and attention. However, the information is measures, including Energy Margin, EBITDAF, Underlying NPAT and supplied in summary form and is therefore