Genesis Energy Limited · NZX:GNE
Genesis Energy — FY2020 Earnings Presentation
40 slides from Genesis Energy's earnings presentation, Aug 20, 2020
Slide 1: FY20 Full Year Results Presentation
FY20 Full Year Results Presentation 20 August 2020 Marc England – CHIEF EXECUTIVE OFFICER Chris Jewell – CHIEF FINANCIAL OFFICER GENESIS ENERGY LIMITED
Slide 2: Agenda
AGENDA 1 Year in Review 2 Financial Performance and Guidance 3 Strategy Update and Outlook 4 Supplementary Information Genesis Energy Limited FY20 Full Year Result Presentation 2.
Slide 3: 1. Year in Review
1. Year in Review GENESIS ENERGY LIMITED
Slide 4: Results at a glance
Results at a glance EBITDAF 1 m Retail $ ➢ Genesis’ residential gross customer churn down 3.5 ppt to 24.1% and net churn down 1.6 ppt to 14.8% ➢ Continued Retail momentum - netbacks up in all fuels, Electricity up 7%, Gas up 10% and LPG up 10% NPAT ➢ Customers choosing to purchase more than 1 fuel g
Slide 5: Earnings
Earnings — EBITDAF of $356m, gross dividend yield1 of 8% remains near top of peers EBITDAF2 GROSS DIVIDEND YIELD COMPARISON WITH PEERS AND LONG-TERM BOND YIELDS Meridian Mercury Contact $ MILLIONS Genesis US 10-Year Govt Bonds NZ 10-Year Govt Bonds 12% 8% Gross Dividend 10% Yield 8% 360 369 356 6% 3
Slide 6: Continued momentum in building value within residential category
Continued momentum in building value within residential category — Our dual fuel strategy is helping to deliver loyalty and drive churn down RESIDENTIAL ELECTRICITY SALES VOLUMES (GWh) & NETBACK 1 ($/MWh) RESIDENTIAL CUSTOMER GROSS3 CHURN DOWN 3.5 ppt, NET CHURN DOWN 1.6 ppt (ROLLING 12 Sales Volume
Slide 7: Optimising the business portfolio in a competitive market
Optimising the business portfolio in a competitive market — Our volume / value mix has increased on two of three fuel types, business volume now around 50% of portfolio BUSINESS ELECTRICITY SALES VOLUMES (GWh) & NETBACK ($/MWh) Sales Volume Netback BUSINESS DUAL FUEL CUSTOMERS UP 7%, CHURN DOWN TO 6
Slide 8: Analytics & insights are driving customer engagement and performance
Analytics & insights are driving customer engagement and performance GROWING CUSTOMER ENGAGMENT DATA, INSIGHTS & SURVEYS ALLOW US TO SHAPE ADDING VALUE TO BOTH CUSTOMER THROUGH ENERGYIQ DIGITAL EXPERIENCES TO CUSTOMER NEEDS AND THE BUSINESS Power Shout 8 delivered 2.1m Based on completed profiles, w
Slide 9: Customer centricity is key to service excellence
Customer centricity is key to service excellence — Digitising our operations has driven cost to serve & cost to deliver lower AN INCREASINGLY DIGITAL AND AUTOMATED SERVICE CONTINUES TO REDUCE LPG COST TO DELIVER1 CONTINUES TO BE OPTIMISED, DOWN 4% ON FY19 COSTS Fuel Cost ($/t) Cost to Deliver ($/t)
Slide 10: 2nd lowest January to June North Island hydro sequence
2nd lowest January to June North Island hydro sequence in 95 years — Our generation portfolio proves adaptive to both low and high priced wholesale market conditions LOW NORTH ISLAND INFLOWS & TEKAPO PLANT OUTAGES CONSTRAIN PRODUCTION GWAP1($/MWh) DOWN 21% TO $114, BUT REMAINED ELEVATED GNE Storage
Slide 11: Wholesale Segment impacted by hydro conditions & high fuel costs
Wholesale Segment impacted by hydro conditions & high fuel costs — Hydro generation down 18% year on year, thermal fuel cost up 7%, but commences decline, down 3% on HY20 LOW INFLOWS AND PLANT OUTAGES CONSTRAIN HYDRO GENERATION: THERMAL GENERATION UP 12%, PORTFOLIO FUEL COST UP 20% TO $52/MWh: ➢ Tot
Slide 12: 1P Reserve Upgrade at Kupe, significant Tekapo investment underway
33% 1P Reserve Upgrade at Kupe, significant Tekapo investment underway — Planned maintenance and Kupe development work, positions assets well to deliver future value FORCED OUTAGES AT 0.5% KUPE RESERVE UPGRADES AND INVESTMENT IN GENERATION ASSETS Monthly EAF Monthly FOF ▪ Kupe reserves updated, 1P r
Slide 13: 2. Financial Performance
2. Financial Performance GENESIS ENERGY LIMITED
Slide 14: FY20 financial highlights
FY20 financial highlights — EBITDAF of $356m, controllable operating expense and capital expenditure held flat KEY FINANCIAL COMPARISONS1 FY19 FY20 1,240 1,247 $ MILLIONS 369 356 311 308 251 250 178 168 17.05 cps 17.20 cps 89 89 59 64 53 46 2 3 4 5 5 EBITDAF NPAT Underlying Earnings Controllable Ope
Slide 15: Dividends
Dividends — A final dividend of 8.675 cps declared, resulting in a full year dividend of 17.20 cps, representing a 8% gross yield 1 FY16 TO FY20 DIVIDEND CENTS PER SHARE & PAY-OUT HISTORY 2 Dividends (CPS) % of Free Cash Flow --- % of Normalised FCF • The total FY20 dividend has been increased to 17
Slide 16: FY20 EBITDAF
FY20 EBITDAF — EBITDAF down $14m versus prior year, a strong Retail result offset by reduced hydro generation and a planned 30-day statutory Kupe outage FY16 TO FY20 EBITDAF1 FY20 vs FY19 EBITDAF $ MILLIONS $ MILLIONS Favourable Unfavourable 24 369 1 360 356 335 333 24 15 369 356 FY16 FY17 FY182 FY1
Slide 17: Segment EBITDAF
Segment EBITDAF FY19 TO FY20 RETAIL EBITDAF • Retail result improved by continued Residential momentum, offset by $ MILLIONS 1 softer B2B margins from competitive markets and COVID-19 demand 36 impacts 12 1 • Wholesale result was impacted by dry hydro conditions lowering renewable generation and rep
Slide 18: NPAT & Underlying Earnings
NPAT & Underlying Earnings — Decrease in NPAT and Underlying Earnings FY19 TO FY20 NPAT Unfavourable Favourable • Increased DDA relates to the June 2019 increase $ MILLIONS in valuation of generation assets, partly offset by increase in Kupe reserves 7 11 8 • The movement in Fair Value adjustments i
Slide 19: Controllable operating expenses
Controllable operating expenses — Continued drive for efficiency, operating expenses down $1.2m FY16 TO FY20 CONTROLLABLE OPERATING EXPENSES1 FY20 CONTROLLABLE OPERATING EXPENSES SPLIT $ MILLIONS 12% LPG distribution acquisition & increased share in Kupe JV Retail 38% 15% Wholesale 261 Kupe 251 250
Slide 20: Capital expenditure
Capital expenditure — Total capital expenditure was $89m, deferral of some projects due to COVID-19 FY16 TO FY20 CAPITAL EXPENDITURE1 • Stay in business capex (SIB) was $69m. Significant maintenance $ MILLIONS 2 2 projects includes: 89 89 80 • Tekapo Intake Gate Installation ($11m), Tekapo Turbine O
Slide 21: Capital structure
Capital structure — Net Debt/EBITDAF at 3.1 with forecast decline in FY21, and net debt flat at $1,247m • S&P reaffirmed BBB+ credit rating in January 2020 FY16 TO FY20 NET DEBT AND NET DEBT/EBITDAF RATIO1 • S&P have also stated that the BBB+ credit rating is not impacted 1,240 1,247 5.0 by the anno
Slide 22: FY21 Guidance
FY21 Guidance — Guidance for FY21 EBITDAF is $395 million to $415 million • We continue to target the strategic goal of $400+ million EBITDAF in FY21 • FY21 EBITDAF guidance is $395 million to $415 million subject to normal hydrological conditions, any material events, one-off expenses or other unfo
Slide 23: 3. Strategy Update and Outlook
3. Strategy Update and Outlook GENESIS ENERGY LIMITED
Slide 24: Doing what we said we would do
Doing what we said we would do In 2016 Genesis set out a pathway to a targeted $400m+ EBITDAF in FY21, this underpinning a yield plus growth investor proposition Key contributors to EBITDAF growth have been: ✓ LPG distribution business acquisition & synergies, $20-25m ✓ Additional 15% Kupe stake & p
Slide 25: Future-gen strategy will maximise value as NZ transitions to a low carbon future
Future-gen strategy will maximise value as NZ transitions to a low carbon future Future-gen will build further on Genesis’ commitment that by 2025 it will not use any coal to generate electricity in normal market conditions, with the intention to phase out coal use completely by 2030 Economically di
Slide 26: Tiwai closure will release significant energy into lower South Island
Tiwai closure will release significant energy into lower South Island Transmission constraints will limit energy travelling north toward key load centres until upgrades completed NEW ZEALAND ELECTRICITY DEMAND / SUPPLY (TWh) UPPER Upper NORTH ISLAND Retail market Geographical North Island diversity
Slide 27: Genesis' portfolio will adapt to Tiwai structural market change
Genesis’ portfolio will adapt to Tiwai structural market change Genesis performs strongly in low or high priced spot market GENESIS PORTFOLIO BY ISLAND (3-YEAR AVERAGE GWh, EXPECTED WHOLESALE PRICE DISTRIBTUTION WITH/WITHOUT GENESIS’ WHOLESALE GROSS MARGIN IMPACT * SOUTH ISLAND LIGHT ORANGE) TIWAI C
Slide 28: Genesis' diverse margin portfolio is well positioned to defend against competitive pressures
Genesis’ diverse margin portfolio is well positioned to defend against competitive pressures With 30% of Genesis’ gross margin not attributable to electricity and only 5% attributable to South Island retail GENESIS GROSS MARGIN CONTRIBUTION (FY20, SOUTH ISLAND RESIDENTIAL ELECTRICITY DEMAND IN LIGHT
Slide 29: Thermal requirement remains post Tiwai closure and transmission upgrades
Thermal requirement remains post Tiwai closure and transmission upgrades Approximately 3,000 GWh pa of dry year support needed by market, above remaining thermal requirement • Electricity supply is set to increase by ~6,000 GWh pa due to Tiwai closure and committed wind farms coming on line • The su
Slide 30: Genesis' gas book declines over transmission upgrade timeframe
Genesis’ gas book declines over transmission upgrade timeframe and untapped demand exceeds electricity decline for gas Declining field production and untapped existing and potential industrial gas demand will help mitigate impact from a Tiwai closure POHOKURA DECLINES REDUCE GAS MARKET SUPPLY OVER T
Slide 31: The Taskforce on Climate-Related Financial Disclosures (TCFD)
The Taskforce on Climate-Related Financial Disclosures (TCFD) Genesis has reported using the TCFD framework in its 2020 Annual Report 1. We set out a comprehensive risk identification and assessment process over the short, medium and long term. Key strategic considerations relate to: Strategy • Buil
Slide 32: Genesis' executive management team
Genesis’ executive management team A talented team dedicated to executing the Company’s strategy and delivering Genesis’ vision, to be first choice for energy management Marc England – Chief Executive Officer Tracey Hickman – Chief Customer Officer • accountable for the overall direction, strategy,
Slide 33: 4. Supplementary Information
4. Supplementary Information GENESIS ENERGY LIMITED
Slide 34: Financial statements
Financial statements1 FY20 FY19 FY20 FY19 Income Statement Variance Balance Sheet Variance ($m) ($m) ($m) ($m) Revenue 2,591.5 2,700.7 (4.0%) Cash and Cash Equivalents 32.5 61.9 Total Operating Expenses (2,235.9) (2,331.3) (4.1%) Other Current Assets 407.0 417.0 EBITDAF 355.6 369.4 (3.7%) Non-Curren
Slide 35: Debt information
Debt information GENESIS DEBT PROFILE Debt Information FY20 FY19 Variance ($m) ($m) $m $350 Total Debt $ 1,367 1,355 $300 Cash and Cash Equivalents $ 32 62 $250 Headline Net Debt $ 1,335 1,293 +3.2% $200 USPP FX and FV Adjustments $ 88 53 $150 Adjusted Net Debt1 $ 1,247 1,240 +0.6% $100 $50 Headline
Slide 36: Operational metrics
Operational metrics Retail Key Information FY20 FY19 Variance Retail Key Information FY20 FY19 Variance EBITDAF ($ millions) 134.0 110.0 +21.8% Retail Electricity Sales (GWh) 6,244 6,067 2.9% Retail Gas Sales (PJ) 7.8 8.2 -4.9% Customers with > 1 Fuel 121,110 117,191 +3.3% Retail LPG Sales (tonnes)
Slide 37: Operational metrics
Operational metrics Wholesale Key Information FY20 FY19 Variance Kupe Key Information FY20 FY19 Variance EBITDAF ($ millions) 164.9 188.6 (12.6%) EBITDAF ($m) 93.8 109.0 (13.9%) Renewable Generation (GWh) 2,344 2,834 (17.3%) Field Production (PJ) 23.2 25.7 (9.7%) Thermal Generation (GWh) 4,461 3,987
Slide 38: Glossary
Glossary RETAIL Brand Net Promoter Score (%) Based on survey question "How likely would you be to recommend Genesis Energy/Energy Online to your friends or family?" Interaction Net Promoter Score (%) Based on survey question "Based on your recent Interaction With GE/EOL, how likely would you be to r
Slide 39: 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
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