Meridian Energy Limited · NZX:MEL

Meridian Energy — 1H FY21 Earnings Presentation

47 slides from Meridian Energy's earnings presentation, Feb 24, 2021

  1. Slide 1: 2021 Interim Results Presentation

    2021 Interim Results Presentation 24 FEBRUARY 2021

  2. Slide 2: Highlights

    Highlights 13% growth in 6% growth in New NZ residential prices Australian customer Zealand customer at 8-year low1 numbers numbers Nationwide EV consistent interim 13% NZ electricity charging network dividend sales volume growth announced process heat NZAS extended exit 23% Aus electricity electrif

  3. Slide 3: Sustainability focus

    Sustainability focus Environmental Social Emissions halved by KidsCan 2030 Kākāpō Forever Forests Power Up Certified renewable community fund energy Process heat Energy hardship electrification Governance Integrated reporting TCFD, CDP GHG emissions Green finance 2 4 F E B R UARY 2 0 2 1 2 0 2 1 I N

  4. Slide 4: Progress on strategy

    Progress on strategy Champion Optimise Grow Strategic initiative Competitive markets Trading & asset management Retail Sustainability Re-consenting Generation Climate action Financing Flux  Growth in NZ and Aus retail  2025 Waitaki reconsent  Sustainability leadership businesses Highlights progre

  5. Slide 5: Financial performance

    Financial performance 2 4 F EB R U A RY 2 0 2 1 2 0 2 1 I N T ER IM R ES U L T S P R ES EN T A T I ON 5

  6. Slide 6: Dividends

    Dividends  Interim ordinary dividend declared of 5.70 cps, Interim dividend declared CPS Ordinary dividend Special dividend Total 86% imputed, unchanged from 1H FY20 10  Dividend reinvestment plan under consideration, 8.14 8.14 7.77 7.82 no decision made yet 8 2.44 2.44 2.44 2.44 5.70 6 4 5.33 5.3

  7. Slide 7: New Zealand energy margin

    New Zealand energy margin  Customer and sales volume growth across all New Zealand energy margin movement $M Physical Financial segments 800 -$44M -$14M  Lift in both mass market and corporate average 700 pricing +29 +27 -9 -131  Reduced physical generation 600 +40 +130 -142  Financial contract,

  8. Slide 8: New Zealand customers

    New Zealand customers  6% sales volume growth in residential and 14% in Customer sales Average price Total sales ($/MWh) volume (GWh) North Island sales volume South Island sales volume small medium business (GWh) (GWh) 1H FY21  4% higher mass market average sales price Residential 848 463 385  M

  9. Slide 9: New Zealand generation

    New Zealand generation  7% lower generation in 1H FY21 Combined catchment inflows  Despite above average inflows in 1H FY21, low GWh starting storage and lower than average inflows 2,000 actual spill month average since October 2020 have reduced generation 702 640 1,449 1,491 968 933 1,132 1,500 

  10. Slide 10: Australian customers

    Australian customers  3% growth in electricity customers and 8% growth Powershop Australia net customer changes in gas customers in 1H FY21 6,000 electricity gas  Acquisition rates impacted by introduction of default market offers and COVID-19 5,000  Those impacts, combined with lower market gas

  11. Slide 11: Australian energy margin

    Australian energy margin  Higher electricity and gas sales offset by lower Australian energy margin movement $NZ M Physical Financial average prices 90 -$4M -$1M  Improved hydro generation from the end of the 80 +3 multi-year drought; total physical generation 6% 70 +8 -19 +4 higher than 1H FY20 6

  12. Slide 12: Operating costs

    Operating costs  Operating costs flat compared to 1H FY20 Adjusted operating costs1 Total 31 December 2019 $143m Total 31 December 2018 $135m $M Interim Final half-year Total  Modest growth in Australia and Flux spend, offset 350 266 by lower NZ asset maintenance ↑ 300 258 261  FY21 operating cos

  13. Slide 13: EBITDAF

    EBITDAF  Second highest level of interim EBITDAF1 in 1H FY21 Group EBITDAF movement $M  9% lower than the 1H FY20 record earnings 500  Lower transmission costs reflect lower WACC based charging in the new Regulatory Control -58 0 +24 -2 Period 400 -6 -1  2H FY21 has started with relatively dry c

  14. Slide 14: Below EBITDAF

    Below EBITDAF  3% decrease in depreciation  $63M increase in NPBT1 from fair value of Underlying npat $M Interim Final half-year Total electricity hedges from termination of several 400 hedges and rising forward electricity prices ($6M 333 350 317 decrease in 1H FY20) 300  $25M increase in NPBT f

  15. Slide 15: Markets and regulation

    Markets and regulation 2 4 F EB R U A RY 2 0 2 1 2 0 2 1 I N T ER IM R ES U L T S P R ES EN T A T I ON 15

  16. Slide 16: New Zealand wholesale prices

    New Zealand wholesale prices Pohokura gas delivery PJ actual forecast 80  Wholesale electricity market continues to price in gas 60 supply concerns 40 75  Notably OMV’s December 2020 announcement of 72 53 68 58 20 lower 2021 forecast Pohokura delivery 39 0  Following Rio’s 9 July 2020 contract te

  17. Slide 17: New Zealand demand

    New Zealand demand  Demand decline of 1.2% in 2020 Annual national consumption (Sep 2020) Year on  Alert Level 4 drove a short, sharp decline in GWh -628GWh year +283GWh change national demand 16,000 +2.2% -4.2% 14,212  Subsequently, demand returned to more average 12,930 -379GWh levels 12,000 -4

  18. Slide 18: Renewable development - Harapaki

    Renewable development - Harapaki 41 turbines x 4.3 MW mid 2024 final commissioning 176 MW initially funded through bank 542 GWh p.a. (P50 yield) facilities 145m tip height 260 jobs on site (peak) $395m capital investment 36 months construction time 23 km roading ~$35m EBITDAF p.a.1 232 km cabling $1

  19. Slide 19: Renewable development - Australia

    Renewable development - Australia Hume battery  A 20MW battery energy storage system co-located with existing Hume power station  Development approval now granted by NSW Government  Grid connection and land tenure progressing  Potential investment decision in FY21 Rangoon  Proposed 130MW wind f

  20. Slide 20: New Zealand policy and regulation

    New Zealand policy and regulation UTS  In December 2020, the EA confirmed a final decision relating to 3-27 December 2019  The EA found a confluence of factors led to a highly unusual period of wholesale market operation  The EA is expecting to release a preliminary ‘actions to correct’ paper for

  21. Slide 21: New Zealand policy and regulation

    New Zealand policy and regulation TPM  Transpower confirmed NZAS contract extension will not affect its development of the new TPM  New TPM expected to be in place by April 2023 with transitional cap on charges Climate Change Commission’s draft report  Ambitious and necessary emissions targets 

  22. Slide 22: NZAS extended exit announcement

    NZAS extended exit announcement Revised NZAS contract no termination right (except terminal force majeure) 400MW NZAS termination right with 6 months notice (terminal FM also applies) 172MW 14 Jan 1 Jan 1 Jan 1 Jan 31 Dec 2021 2022 2023 2024 2024 Meridian portfolio response Swaption CUWLP final desi

  23. Slide 23: Flux

    Flux  E.ON have announced it intends to close its Powershop UK business during the 2021 calendar year, through npower, a client of Flux Federation  Settlement terms with npower to be finalised  78% of Meridian customers either migrated or about to commence migration onto Flux  Meridian customer

  24. Slide 24: Closing comments

    Closing comments  Customer growth continues in New Zealand and Australian markets  New Zealand relatively high wholesale prices reflecting below average hydro storage and continuing gas supply concerns  Australian wholesale prices reflecting weaker electricity demand and gas oversupply  January

  25. Slide 25: Additional information

    Additional information 2 4 F EB R U A RY 2 0 2 1 2 0 2 1 I N T ER IM R ES U L T S P R ES EN T A T I ON 25

  26. Slide 26: Debt and funding

    Debt and funding  December 2020 total borrowings of $1,679M Debt maturity profile as at 31 December 2020  Committed bank facilities of $755M, of which $M Drawn debt maturing (face value) Available facilities maturing $525M were undrawn 600 500  $200M of commercial paper issued on an 150 400 uncom

  27. Slide 27: Capital expenditure

    Capital expenditure  Consistent level of stay in business capex Stay in business capital expenditure $M Interim Final half-year Total  Largely consists of system and generation asset 80 enhancement spend 70 60  Total capex for 1H FY21 of $41M 50 48 47 48 45  Expecting FY21 Group capex of between

  28. Slide 28: Segment results

    Segment results  Flux Federation and Powershop UK included in ‘other and unallocated’ segment 2 4 F E B R UARY 2 0 2 1 2 0 2 1 I N TE RIM R E S UL TS PR ES EN TATI ON 28

  29. Slide 29: New Zealand retail

    New Zealand retail New Zealand customer connections Customers ICP (000) 400 Meridian North Island Meridian South Island Powershop Total  3% increase in customers since June 2020 277 302 324 333 291 96 89 300 66 74 59 119 119 120 121 Mass market segment 115 200  6% increase in residential volumes 1

  30. Slide 30: New Zealand hydrology

    New Zealand hydrology Meridian’s combined catchment inflows Inflows GWH 9,000  1H FY21 inflows were 105% of average  January 2021 inflows were 84% of average 6,000 3,000 Storage  Meridian’s Waitaki storage as of 31 December 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2

  31. Slide 31: New Zealand generation

    New Zealand generation New Zealand generation Volume GWH Hydro Wind Total 8,000  1H FY21 generation was 7% lower than 1H FY20, 7,029 733 6,546 7,187 779 6,676 5,937 with lower hydro and lower wind generation 6,000 648 621 765 4,000 6,296 5,925 6,408 5,911 5,289 Price 2,000  1H FY21 average price M

  32. Slide 32: Australian retail

    Australian retail Australian customer connections Customers Electricity Gas 200  4% growth in electricity customers since June 38 41 2020 150 141 23 136  8% growth in gas customers since June 2020 100 97 97 110 50 Sales volume 0  23% growth in electricity sales volume in 1H FY21 Jun-17 Jun-18 Jun

  33. Slide 33: Australian generation

    Australian generation Australian generation Volume GWH Wind Hydro Total 600  1H FY21 generation was 7% higher than 1H FY20 500 419  1H FY21 wind generation was 4% lower than 1H 400 367 391 309 305 123 FY20 300 77 113  1H FY21 hydro generation was 47% higher than 1H 200 309 305 296 290 278 100 FY2

  34. Slide 34: 1H FY21 EBITDAF

    1H FY21 EBITDAF Movement in EBITDAF $M New Zealand energy margin -$58M 600 +10 +27 500 +69 -154 400 +24 -8 -2 -2 -6 -1 300 465 200 422 100 0 EBITDAF 31 Dec Retail Wholesale Generation spot Cost to supply Net cost of Virtual asset Other market Australian Other revenue Transmission Metering Employee &

  35. Slide 35: EBITDAF to NPAT

    EBITDAF to NPAT 1H FY21 EBITDAF TO NPAT RECONCILIATION $M 500 450 400 350 -153 300 422 -10 250 0 +10 -42 -27 200 +88 -61 0 0 227 150 156 100 EBITDAF Depreciation and Premiums paid on Net finance costs Tax Underlying Net change in fair Loss on sale of Premiums paid on Tax NPAT amortisation electricit

  36. Slide 36: Energy margin

    Energy margin Defined as  Revenues received from sales to customers net of distribution  A non-GAAP financial measure representing costs (fees to distribution network companies that cover the costs energy sales revenue less energy related of distribution of electricity to customers), sales to larg

  37. Slide 37: New Zealand energy margin

    New Zealand energy margin New Zealand energy margin $M 1,500 1,200 754 -834 900 600 256 -117 1 -10 -4 -171 205 165 300 540 295 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 Margin sales contract sa

  38. Slide 38: New Zealand energy margin

    New Zealand energy margin New Zealand energy margin movement $M 800 +10 +27 +29 -131 600 +40 -23 0 -5 -2 -114 +111 400 598 540 200 0 Energy Margin Mass market C&I sales Financial Generation Cost to supply Cost to supply Hedging fixed Hedging spot Contract close VAS margins Market costs Energy Margin

  39. Slide 39: New Zealand energy margin

    New Zealand energy margin 2 4 F E B R UARY 2 0 2 1 2 0 2 1 I N TE RIM R E S UL TS PR ES EN TATI ON 39

  40. Slide 40: Australian energy margin (AUD)

    Australian energy margin (AUD) 2 4 F E B R UARY 2 0 2 1 2 0 2 1 I N TE RIM R E S UL TS PR ES EN TATI ON 40

  41. Slide 41: Fair value movements

    Fair value movements  Meridian uses derivative instruments to manage Change in fair value of financial instruments $M interest rate, foreign exchange and electricity 150 price risk 100 88 50  As forward prices and rates on these instruments -21 0 move, non-cash changes to their carrying value -50

  42. Slide 42: Income statement

    Income statement 2 4 F E B R UARY 2 0 2 1 2 0 2 1 I N TE RIM R E S UL TS PR ES EN TATI ON 42

  43. Slide 43: Underlying NPAT reconciliation

    Underlying NPAT reconciliation 2 4 F E B R UARY 2 0 2 1 2 0 2 1 I N TE RIM R E S UL TS PR ES EN TATI ON 43

  44. Slide 44: Cash flow statement

    Cash flow statement 2 4 F E B R UARY 2 0 2 1 2 0 2 1 I N TE RIM R E S UL TS PR ES EN TATI ON 44

  45. Slide 45: Balance sheet

    Balance sheet 2 4 F E B R UARY 2 0 2 1 2 0 2 1 I N TE RIM R E S UL TS PR ES EN TATI ON 45

  46. Slide 46: 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

  47. Slide 47: Disclaimer

    Disclaimer The information in this presentation was prepared by Meridian Energy with they are not defined by GAAP or IFRS, Meridian's calculation of these due care and attention. However, the information is supplied in summary measures may differ from similarly titled measures presented by other for

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