Meridian Energy Limited · NZX:MEL
Meridian Energy — H1 FY2015 Earnings Presentation
34 slides from Meridian Energy's earnings presentation, Feb 18, 2015
Slide 1: Meridian Energy 2015 Interim Results Presentation
MERIDIAN ENERGY LIMITED 2015 INTERIM RESULTS PRESENTATION for the six months ended 31 December 2014
Slide 2: Disclaimer
Disclaimer The information in this presentation was prepared by Meridian Energy with due care and attention. However, the information is supplied in summary form and is therefore not necessarily complete, and no representation is made as to the accuracy, completeness or reliability of the informatio
Slide 3: Key financial points
Key financial points Interim financials well ahead of last year Operating cash flow +13.2% EBITDAF +20.9% Underlying NPAT +38.3% Capital projects completed Mt Mercer and Mill Creek wind farms Generation control system Total generation volumes +6.1% 271GWh of new wind production Higher winter inflows th
Slide 4: Key market points
Key market points NATIONAL DEMAND Modest demand growth in 2014, up GWh 3,800 1.3% 3,600 3,400 Retail competition remains fierce 3,200 3,000 2,800 Aluminium prices and currency rates 2,600 are assessed as having a positive Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Range (2009-2013) 2011 2012 201
Slide 5: Capital management
Capital management Lift in dividend policy to 75%-90% of free cash flow (from 70%-80%) In addition, targeting a progressive return of a further $625m over next 5 years, starting in August 2015 Mechanism for this additional return will be considered on an ongoing basis Ordinary interim dividend of 4.8
Slide 6: Regulatory issues
Regulatory issues The Electricity Authority is expected to publish a transmission pricing options paper in the next few weeks A second issues paper is due in June 2015 Currently the proposed changes will mean lower transmission charges to consumers and downward pressure on retail prices Uncertainty
Slide 7: Projects
Projects Major projects completed on time and under budget Mt Mercer will eliminate half a million tonnes of carbon emissions annually Mill Creek completion means that Wellington wind can now power 100,000 homes New generation control system monitors 50,000 data points around our assets Other projec
Slide 8: Powershop Australia
Powershop Australia Over 30,000 customers in Victoria at the end of January 2015 Leverages existing NZ technology and call centre investment Business run out of Melbourne and Wellington Customers serviced out of Masterton Anticipating NSW launch this quarter MERIDIAN ENERGY LIMITED RESULTS PRESENTAT
Slide 9: New Zealand retail
New Zealand retail Arc metering business sold and programme commenced to replace remaining 125,000 legacy meters New Meridian website launched, improved customer join, move and bill estimate functionality Aggressive residential competition has seen a small decline in customer connections More succes
Slide 10: New Zealand retail
New Zealand retail Annual demand up 1.3%, last 6 months up 2.9% on prior period Reduced fuel purchase obligations mean that thermal generators are able to reduce output The forward market has risen across all quarters, which may benefit commercial and industrial pricing No network-wide energy price i
Slide 11: Financial performance
Financial performance FINANCIAL PERFORMANCE AGAINST PRIOR YEAR $M 600 6 months to 31 December 2014 500 480 447 6 months to 31 December 2013 400 324 300 268 217 192 200 169 159 112 124 117 117 115 107 107 83 100 61 67 0 Energy Trans- Operating EBITDAF NPAT Underlying Operating Investment Dividend Mar
Slide 12: Earnings
Earnings EBITDAF1 ‘Like for like’ EBITDAF (excluding $M 700 insurance proceeds and IPO costs) 600 increase of 15.4% in 1H FY14 from: 306.6 500 Additional generation from Mill Creek 400 182.3 307.7 317.1 in NZ and Mt Mercer in Australia 300 200 353.3 324.3 Higher residential/SME sales volumes 100 294
Slide 13: Operating cash flow and investment expenditure
Operating cash flow and investment expenditure CASH FLOW FROM OPERATING ACTIVITIES Net cash flow from operating activities $M was $25.3m (13.2%) higher than 1H FY14 500 Reflects the higher energy margin and 400 lower operating costs in 1H FY15 300 166.5 243.8 241.3 186.7 Includes higher income tax pay
Slide 14: Costs
Costs TRANSMISSION COSTS $6.1m (9.1%) decrease in Transmission $M costs in 1H FY15 140 120 Benefiting from lower final costs on HVDC 100 62.6 Pole 3 project 80 60.5 60 42.2 45.7 5% increase in 2015/16 transmission 40 66.7 costs coming 20 42.0 41.0 54.8 60.6 0 2011 2012 2013 2014 2015 $12.6m (10.1%) de
Slide 15: Concluding remarks
Concluding remarks Higher energy margin and lower costs has driven a lift in profits and operating cash flow Inflows into catchments have been consistent, with Lake Pukaki storage (as at 17 Feb) 93% of average. Position is not adversely affecting generation outlook Tiwai Point decision Amended dividend
Slide 16: Additional information
Additional information MERIDIAN ENERGY LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 DECEMBER 2014 18 February 2015
Slide 17: New Zealand retail
New Zealand retail Customer connections NEW ZEALAND CUSTOMER NUMBERS ICP (000) 350 Meridian North Island Meridian South Island Small decline in ICP numbers since June Powershop 300 2014, reflecting aggressive residential 48 250 34 51 55 56 sales activity 200 130 123 114 Residential, SME, Agri segment
Slide 18: Hydrology
Hydrology Inflows for the 6 months to December MERIDIAN'S COMBINED CATCHMENT INFLOWS GWh 2014 were 106% of historical average 14,000 12,000 This reflects comparatively high 10,000 inflows in July and August 2014 8,000 January 2015 inflows were 77% of 6,000 4,000 historical average 2,000 Meridian’s Waita
Slide 19: New Zealand generation
New Zealand generation For the 6 months to December 2014, MERIDIAN'S NEW ZEALAND GENERATION GWh 1,400 Meridian’s New Zealand generation 1,200 was 3.8% higher than the same period 1,000 last year 800 For the 6 months to December 2014, 600 the average price Meredian received 400 for its generation was
Slide 20: Dividends
Dividends DATE AMOUNT IMPUTATION 2015 DIVIDENDS DATE PAID ANNOUNCED CPS % Interim Ordinary Dividend 18 February 2015 15 April 2015 4.80 100% Interim Special Dividend 18 February 2015 15 April 2015 1.40 100% Total Interim Dividend 6.20 100% INTERIM DIVIDENDS DECLARED CPS 7 Ordinary dividend Special d
Slide 21: Movement in EBITDAF HY14 to HY15
Movement in EBITDAF HY14 to HY15 EBITDAF* $M 350 325 +12.6 New Zealand Energy Margin +3.8 +6.1 +$20.0m 300 +7.3 -0.4 -1.9 +13.6 -3.9 324.3 +18.9 275 268.2 250 EBITDAF 31 Contracted Net VAS Net Cost of Spot Exposed Other Market International Other Transmission Staff & Other EBITDAF 31 Dec 13 Sales Pos
Slide 22: EBITDAF and Net Profit After Tax
EBITDAF and Net Profit After Tax HY2015 EBITDAF TO NPAT RECONCILIATION $M 350 300 -116.5 250 -8.3 -0.6 200 -40.8 324.3 150 -43.3 +4.8 +8.3 +14.7 100 -25.5 114.8 117.1 50 - EBITDAF* Depreciation Premiums on Equity Financing Taxation Underlying Fair Value Gain on Sale/ Premiums on Taxation NPAT and El
Slide 23: New Zealand energy margin
New Zealand energy margin Energy margin is a non-GAAP financial measure Energy margin is defined as: representing Energy Sales Revenue less Energy ₊ revenues received from sales to customers net of Related Expenses and Energy Distribution Expenses distribution costs (fees to distribution network compa
Slide 24: New Zealand energy margin
New Zealand energy margin HY2015 HY2014 VOLUME VWAP VOLUME VWAP NEW ZEALAND ENERGY MARGIN GWh $/MWh $M GWh $/MWh $M Retail Contracted Sales 2,993.4 $101.9 $305.0 2,885.7 $102.9 $296.9 NZAS Aluminium Sales 2,525.4 2,525.4 Sell Side CFDs 606.1 434.4 Wholesale Contracted Sales 3,131.5 $50.6 $158.4 2,95
Slide 25: HY15 energy margin
HY15 energy margin NEW ZEALAND ENERGY MARGIN $M Derivatives acquired to supplement 700 Contracted Sales Spot Exposed Net Cost of Acquired generation and cover Revenue Revenue Generation spot price risks, net of spot revenue $463.4m $7.7m -$17.6m received from those 600 derivatives Fixed price variab
Slide 26: Movement in energy margin HY14 to HY15
Movement in energy margin HY14 to HY15 NEW ZEALAND ENERGY MARGIN $M 550 Contracted Sales Spot Exposed Net Cost of From lower acquired Revenue Revenue Acquired generation volumes Growth in SME +$18.9m -$0.4m Generation and higher wholesale and agri prices business +$7.3m customer base +10.6 -3.3 -3.9
Slide 27: Funding
Funding DEBT MATURITY PROFILE AS AT 31 DECEMBER 2014 Total borrowings as at 31 December 2014 $M 500 of $1,186.9m, up $60.8m from 31 400 December 2013 and up $94.4m from 30 157 June 2014 300 200 Net borrowings (net of cash) as at 31 200 332 264 275 December 2014 of $955.9m, up $82.2m 100 135 157 10 f
Slide 28: Funding metrics
Funding metrics NET DEBT/EBITDAF (S&P VIEW) Net debt/EBITDAF is the principal metric TIMES 2.0 underpinning S&P credit rating 1.8 1.6 1.4 1.2 1.0 S&P calculation of Net debt/EBITDAF 0.8 1.56 1.77 1.71 0.6 includes numerous adjustments to 0.4 reported numbers 0.2 0.0 June 2013 June 2014 Dec 2014 Borr
Slide 29: Fair Value movements
Fair Value movements Meridian uses derivative instruments to CHANGE IN FV OF FINANCIAL INSTRUMENTS $M manage commodity price, interest rate and 150 foreign exchange risk 100 50 93.8 18.6 As forward prices and rates on these 0 53.3 instruments move, non cash changes to -50 -103.5 -25.5 their carrying
Slide 30: Group income statement
Group income statement 6 MONTHS ENDED 31 DEC YEAR ENDED 30 JUNE 2014 2013 2014 2013 SUMMARY GROUP INCOME STATEMENT $M $M $M $M New Zealand Energy Margin 454.9 434.9 891.5 865.1 International Energy Margin 25.3 11.7 31.9 50.7 Other Revenue 16.5 12.7 27.3 29.7 Energy Transmission Costs (60.6) (66.7) (
Slide 31: Group underlying NPAT
Group underlying NPAT 6 MONTHS ENDED 31 DEC YEAR ENDED 30 JUNE 2014 2013 2014 2013 UNDERLYING NPAT RECONCILIATION $M $M $M $M Net Profit after Tax 117.1 116.9 229.8 295.1 Net Change in Fair Value of Financial Instruments (Operational) (0.3) (1.7) 8.4 (51.1) Net Change in Fair Value of Financial Instr
Slide 32: Group cash flow statement
Group cash flow statement 6 MONTHS ENDED 31 DEC YEAR ENDED 30 JUNE 2014 2013 2014 2013 SUMMARY GROUP CASH FLOW STATEMENT $M $M $M $M Receipts from Customers 1.002.4 963.5 2,083.4 2,390.0 Interest and Dividends Received 4.6 4.2 8.5 2.1 Payments to Suppliers and Employees (685.9) (677.9) (1,480.5) (1,
Slide 33: Group balance sheet
Group balance sheet 6 MONTHS ENDED 31 DEC YEAR ENDED 30 JUNE 2014 2013 2014 2013 SUMMARY GROUP BALANCE SHEET $M $M $M $M Cash and Cash Equivalents 231.0 252.4 276.4 382.8 Accounts Receiveable 217.1 180.7 182.7 254.5 Other Current Assets 58.7 95.2 63.5 128.8 Current Assets 506.8 528.3 522.6 766.1 Int
Slide 34: Glossary
Glossary Acquired generation 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 r