Orsted · OMXCOP:ORSTED
Orsted — Ørsted — Investor Presentation (February 2017)
30 slides from Orsted's investor presentation, Feb 2, 2017
Slide 1: Financial Performance
FINANCIAL PERFORMANCE Marianne Wiinholt, CFO Meet the Management, 2 February 2017 25
Slide 2: Marianne Wiinholt, Chief Financial Officer
Marianne Wiinholt Chief Financial Officer Wind Power Finance • Joined DONG Energy in 2004 Distribution • Prior to assuming position as CFO, & Customer Solutions Marianne was CFO of Distribution & Customer Solutions and, before that, Head DONG Energy of Corporate Finance at DONG Energy Bioenergy • Pr
Slide 3: We are delivering on our IPO guidance
We are delivering on our IPO guidance 2016 EBITDA – Including O&G 2016-2020 capex DKKbn DKKbn 78-91 ~78-91 25.6 20-23 IPO guidance Actual IPO guidance Expected Average expected ROCE Share of regulated EBITDA 2017-2023, % by 20201, % 80-90% 12-14% IPO guidance extended IPO guidance confirmed 1. EBITD
Slide 4: Strong Q4 with EBITDA up 224%
Strong Q4 with EBITDA up 224% Financial highlights Q4 PERFORMANCE HIGHLIGHTS Q4 16 Q4 15 EBITDA – continuing operations EBITDA DKKm 6,310 1,947 224% • Race Bank farm down gain of DKK 2.5bn • Wind Power 5,054 1,693 199% • Higher activity relating to construction contracts for partners re. Burbo Ban
Slide 5: 2016 – Strong profit performance
2016 – Strong profit performance Financial highlights FY PERFORMANCE HIGHLIGHTS FY 16 FY 15 EBITDA – continuing operations EBITDA DKKm 19,109 8,730 119% • Farm down gains from Burbo Bank Ext. and Race Bank (DKK 3.0bn) • Wind Power 11,867 6,151 93% • Higher activity relating to construction contrac
Slide 6: 2016 – Improvement in all financial metrics
2016 – Improvement in all financial metrics Financial highlights FY PERFORMANCE HIGHLIGHTS FY 16 FY 15 Free cash flow – Continuing operations EBITDA DKKm 19,109 8,730 119% • Higher EBITDA • Wind Power 11,867 6,151 93% • Higher divestment proceeds, primarily Burbo Bank Ext., Race Bank and the Danis
Slide 7: WP Q4 2016 – EBITDA tripled
WP Q4 2016 – EBITDA tripled Financial highlights Q4 FINANCIAL HIGHLIGHTS Q4 16 Q4 15 EBITDA DKKm 5,054 1,693 199% EBITDA • Race Bank farm down gain of DKK 2.5bn • Sites incl. O&Ms and PPAs 1,899 1,866 2% • Higher activity related to construction contracts for partners, mainly • Construction contra
Slide 8: WP 2016 – EBITDA at DKK 11.9bn, the high end of the guided range
WP 2016 – EBITDA at DKK 11.9bn, the high end of the guided range Financial highlights FY FINANCIAL HIGHLIGHTS FY 16 FY 15 Power generation EBITDA DKKm 11,867 6,151 93% • New production capacity from Westermost Rough, Borkum Riffgrund 1 • Sites incl. O&Ms and PPAs 5,869 5,965 -2% and to some extent
Slide 9: Low wind energy content – also in Q4
Low wind energy content – also in Q4 Key commentary Yearly WEC Quarterly WEC % % • Full year 2016 WEC was below the range observed during the last 5 years (2011- 2015) of 97-104 • FY 2016 WEC at 93%, 10%-points lower than FY 2015 • At Q3 we guided full year WEC at around 96, based on the expectation
Slide 10: BTP – Results in line with expectations
BTP – Results in line with expectations Financial highlights Q4 FINANCIAL HIGHLIGHTS Q4 16 Q4 15 FY 16 FY 15 EBITDA EBITDA DKKm 115 -118 n.a. 100 283 -65% • Power generation up 20% due to better spreads and lower generation • Heat 172 100 72% 407 346 18% from hydro and wind • Heat generation up
Slide 11: DCS – Strong contribution from renegotiations
DCS – Strong contribution from renegotiations Financial highlights Q4 FINANCIAL HIGHLIGHTS Q4 16 Q4 15 FY 16 FY 15 EBITDA EBITDA DKKm 1,243 362 243% 7,108 2,173 227% • Lump sum from renegotiation of additional long-term gas purchase • Distribution* 223 261 -16% 1,602 1,661 -4% contract of DKK 0.
Slide 12: O&G – Discontinued operations – Strong operational performance
O&G – Discontinued operations – Strong operational performance Financial highlights Q4 FINANCIAL HIGHLIGHTS Q4 16 Q4 15 FY 16 FY 15 EBITDA EBITDA DKKm 2,140 1,700 26% 6,507 9,754 -33% • Strong operational performance across the portfolio • Denmark 262 -108 n.a. -145 1,345 n.a. • Lower exploratio
Slide 13: Hedging of energy prices and FX (continuing operations)
Hedging of energy prices and FX (continuing operations) Accumulated energy and currency exposures Q1 2017 – Q4 20211 Before hedging After hedging DKKbn 52.2 15.6 11.4 5.3 0.7 0.5 0.0 0.0 0.0 -4.4 Outright power Spread (power) GBP USD NOK • The power exposure is almost fully hedged in 2017-2018, and
Slide 14: Low year-end net debt of DKK 3.5bn
Low year-end net debt of DKK 3.5bn Net interest-bearing debt development in 2016 Gross investments per Capital employed per DKKbn Business Unit in 2016 Business Unit in 2016 (continuing operations) (continuing operations) 15.0 9.2 4% 12% 13% 4% 15.0 58.2 DKKbn DKKbn 3.5 9.1 0.4 83% 84% 11.3 Wind Pow
Slide 15: Step down in reported operating profit in 2017 due to one-offs
Step down in reported operating profit in 2017 due to one-offs EBITDA – Continuing operations DKKbn 19.1 15-17 4.3 0.4 2.5 8.7 1.0 0.4 1.1 11.9 6.2 2015 2016 2017 guidance One-offs Gas Distribution Utility Wind Power 39
Slide 16: Strong underlying profit growth continues
Strong underlying profit growth continues Underlying EBITDA1 – Continuing operations DKKbn 15-17 14.4 2.5 7.4 1.1 11.9 6.2 2015 2016 2017 guidance Y/Y growth +18% +95% +4-18% Utility Wind Power 1. Underlying EBITDA adjustments: Lump sum payments from renegotiations, divestment of Danish gas distribu
Slide 17: Financial outlook 2017
Financial outlook 2017 EBITDA in 2017 of DKK 15-17bn – Long-term ROCE extended – Free Cash Flow target reiterated EBITDA (BUSINESS PERFORMANCE) OUTLOOK 2017 RETURN ON CAPITAL EMPLOYED (ROCE) Group DKK 15-17bn Group 12-14% Avg. 2017-2023 Wind Power 13-15% Avg. 2017-2023 BUSINESS UNIT EBITDA DIRECTION
Slide 18: Capital structure
Capital structure • Within the next couple of years we will likely have excess investment capacity compared to the target rating of BBB+/Baa1 (assuming the current build out- plan and farm down strategy in Wind Power and the current dividend policy) • We will utilise the investment capacity to pursu
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Slide 20: Appendix
Appendix 44
Slide 21: Hedging of energy prices and FX (discontinued operations)
Hedging of energy prices and FX (discontinued operations) Accumulated energy and currency exposures Q1 17 – Q4 20211 (DKKbn) 11.2 10.8 6.5 6.3 6.3 4.2 0.0 0.0 0.0 Oil Gas GBP USD -0.2 NOK Before hedging After hedging • Significant long exposure on both gas and oil are now labelled discontinued • Hed
Slide 22: Differences in Business Performance EBITDA and IFRS EBITDA
Differences in Business Performance EBITDA and IFRS EBITDA DKKm FY 2016 FY 2015 EBITDA – BUSINESS PERFORMANCE (BP) 19,109 8,730 BP adjustment in respect of revenue for the year -3,808 1,264 BP adjustment in respect of COGS for the year 1,638 -106 EBITDA – IFRS 16,939 9,888 TOTAL BP ADJUSTMENTS FOR T
Slide 23: Investments
Investments Investments in FY 2016 Gross investments per Business Unit in FY 2016 (DKKm) CASH FLOW FROM INVESTING ACTIVITIES -1,060 Dividends received and capital reduction, reversal -22 4% 13% Purchase and sale of securities, reversed -4,564 Sale of assets and companies reversed -9,104 Wind Power L
Slide 24: Financing strategy
Financing strategy We have a centralised financing strategy All cash flow generated by our subsidiaries as customary for vertically and supports the creditworthiness and rating of horizontally integrated European energy and thus the debt taken up by the Group utilities parent The centralised financi
Slide 25: Currency hedging principles
Currency hedging principles • The purpose of our currency risk management is to reduce the Group’s currency risks over a 5-year horizon • The main principle is to hedge FX exposure once it is deemed relatively certain that the underlying cash flows in foreign currency will materialise • Thus, FX ris
Slide 26: Hedging of FX and power risk in Wind Power
Hedging of FX and power risk in Wind Power Construction and Farm downs – Hedging of FX Commercial Operations – Hedging of FX and power Decision gates 100 • Early hedging of potential large DEVEX items Pre-FID 80 on a 100% basis 75 60 • Hedging of transmission asset divestment and 50 Final Investment
Slide 27: FFO/Adjusted net debt calculation
FFO/Adjusted net debt calculation FFO/ADJUSTED NET DEBT FY 2016 FY 2015 Note: Following the initiated sales process of the O&G EBITDA 19,109 8,730 business and the fact that O&G is presented as asset Adjusted net interest expenses -1,662 -1,441 held for sale and discontinued operations, - Interest e
Slide 28: Debt overview
Debt overview Gross debt and hybrids, Net debt Long term debt maturity schedule Year-end 2016 DKKbn Year-end 2016, DKKbn 12 -62% 10 8 38.4 9.2 6 DKKbn 4 3.5 2 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2025+ EoY 15 EoY 16 Bonds Hybrids Bank loans Other debt Bonds Bank loans 52
Slide 29: Hybrid capital in short
Hybrid capital in short Hybrid capital can broadly be defined as funding • Deeply subordinated and only senior to DONG Energy has made use of hybrid capital to instruments that combine features of debt and common equity maintain our ratings at target level in connection equity in a cost efficient ma
Slide 30: Benefits of hybrid capital
Benefits of hybrid capital Hybrid capital is an attractive form of financing for corporates: Illustrative example – current example • Provides strength to the balance sheet at relatively attractive terms (tax deductible) ASSUMPTIONS • Supportive to credit ratings Pricing for a Hybrid with first call