Meridian Energy Limited · NZX:MEL
Meridian Energy — FY2016 Earnings Presentation
32 slides from Meridian Energy's earnings presentation, October 2016
Slide 1: Powering today, protecting tomorrow
Powering today, protecting tomorrow MERIDIAN ENERGY LIMITED annual results roadshow presentation
Slide 2: Disclaimer
OCTOBER 2016 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 t
Slide 3: About Meridian
About Meridian MERIDIAN ENERGY LIMITED annual results roadshow presentation
Slide 4: About Meridian
OCTOBER 2016 About Meridian Vertically integrated renewable generator, retailing electricity to 357,000 customers in New Zealand and Australia New Zealand’s largest generator from purely renewable sources Seven hydro stations HVDC LINK (STATE OWNED) Flexible plant with New Zealand’s largest storage
Slide 5: Our strategy
OCTOBER 2016 Our strategy Focus on what is material to shareholder value Maintaining an Protecting and open market in maximising our which we can generation asset compete and wholesale effectively position Better energy future Developing Growing retail value opportunities by making things for earning
Slide 6: Progress on strategy
OCTOBER 2016 Progress on strategy Maintaining an TPM 2 issues paper confirms beneficiaries pay nd open market in NZ political focus on practical consumer issues which we can compete 31 retail brands make up a competitive NZ market effectively Firming RET position, some doubts target will be met by 2020
Slide 7: Progress on strategy
OCTOBER 2016 Progress on strategy Protecting and Lower Waitaki allocation plan amendments maximising our agreed generation Exposure to NZAS reduced through back-to- asset and back arrangements with other generators wholesale position Genesis swaption extension provides greater flexibility and improve
Slide 8: Markets we operate in
Markets we operate in MERIDIAN ENERGY LIMITED annual results roadshow presentation
Slide 9: New Zealand market
OCTOBER 2016 New Zealand market 5 Major generators 1 Transmission grid operator 29 Distribution businesses 31 Electricity retail brands 2 Million consumers MERIDIAN ENERGY LIMITED annual results roadshow presentation 9
Slide 10: New Zealand market
OCTOBER 2016 NATIONAL DEMAND New Zealand market GWh 45,000 year on +2.6% +0.3% year Unseasonal warm autumn and -1.7% -0.9% change winter temperatures have slowed 40,000 demand growth 2H FY16 flat V 1H FY16 Growth remains correlated to 35,000 (temperature adjusted) increasing population and positive e
Slide 11: New Zealand market
OCTOBER 2016 New Zealand market BENMORE ASX FUTURES SETTLEMENT PRICE $/MWh 2018 high 2017 2017 and 2018 ASX prices have lifted 95 2016 +5% in +12% in a year during the 2016 financial year 85 storage a year Seems likely future wholesale prices 75 will be more volatile in peak and dry 65 periods 55 Hig
Slide 12: Transmission pricing
OCTOBER 2016 Transmission pricing Meridian’s submission on transmission pricing methodology (TPM) proposal is strongly supportive of what is a more durable and fairer approach As expected there are divergent views; generally those in the upper North Island will see price increases, rest of the count
Slide 13: Tiwai Point smelter
OCTOBER 2016 LME SPOT ALUMINIUM PRICE 2% Tiwai Point smelter USD/tonne 1,800 depreciation since June 2015 Trading environment for the aluminium 1,700 industry remains difficult 1,600 Chinese capacity curtailments have not been sufficient to fully compensate for 1,500 the slowdown in demand growth 1,400
Slide 14: Australian market
OCTOBER 2016 NEM DEMAND Australian market TWh 300 Modest demand growth in FY2016 280 -2.3% -2.6% +1.6% +0.0% largely driven by new LNG production 260 AEMO forecasts suggest flat 240 consumption over the next 20 years 220 Market is still reluctant to commit to 200 new renewables despite the lift in LG
Slide 15: The UK
OCTOBER 2016 The UK Franchise licence agreement with RWE npower signed in November 2015 Will take the Powershop service platform and brand to the UK without Meridian carrying market exposure Staged delivery of electricity, smart meter integration, gas and dual fuel and white label offerings Two year
Slide 16: 2016 performance
2016 performance MERIDIAN ENERGY LIMITED annual results roadshow presentation
Slide 17: Highlights
OCTOBER 2016 Highlights 1Earnings before interest, taxation, depreciation, amortisation, changes in fair value of hedges and other significant items 2Net profit after tax adjusted for the effects of non cash fair value movements and one-off items 3Movement in share price during the year plus total divid
Slide 18: Financial performance
OCTOBER 2016 Financial performance FINANCIAL PERFORMANCE AGAINST PRIOR YEAR Financial Year ended 30 June 2016 $M 1,200 Financial Year ended 30 June 2015 1,009 1,000 954 800 650 618 600 452 440 471 467 400 248 238 247 233 209 185 200 128 123 85 59 0 Energy Trans- Operating EBITDAF NPAT Underlying Ope
Slide 19: Dividends
OCTOBER 2016 Dividends DIVIDENDS DECLARED Final ordinary dividend of 8.40 cps, CPS Ordinary dividends Special dividends 25 90% imputed 20 18.23 18.38 Brings FY2016 full year ordinary 15 13.01 5.35 4.88 dividend to 13.50 cps, 88% imputed 2.00 10 5% growth Represents 83.1% payout of free cash 5 11.01
Slide 20: Wholesale and generation
OCTOBER 2016 Wholesale and generation Stay in business capital spend inside the annual $65m envelope Consent extensions gained for Central Wind and Maungaharuru wind options Record level of total New Zealand generation (Tekapo adjusted) Generation from both the Manapōuri station and the total wind p
Slide 21: Retail
OCTOBER 2016 Retail Segment EBITDAF up +$13m (+23%) in FY2016 Growth in Meridian residential, SMB and agri sales volumes (+2%) and average price (+3%) Growth in Powershop sales volumes (+3%) Decline in Meridian corporate and industrial sales volumes from time- MERIDIAN RETAIL METRICS FY2016 FY2015 o
Slide 22: Earnings
OCTOBER 2016 ENERGY MARGIN Earnings $M 1,200 +6% ‘Like for like’ EBITDAF (excluding $5m 1,000 FY2015 insurance proceeds) increase of 800 +$37m (+6%) in FY2016 from: 600 954 1,009 1H +6% 916 924 2H +5% 400 763 + Higher residential/SMB/agri sales 200 volumes and average prices in NZ 0 +$16m 2012 2013
Slide 23: Costs
OCTOBER 2016 OPERATING COSTS Costs $M Retail segment Wholesale Corporate/Elims +3% 300 International IPO Costs 1H +8% Operating costs have increased +$10m 227 246 237 238 248 2H +1% 18 25 35 (+4%) in FY2016 200 49 44 44 42 1H FY2016 +$9m, 2H FY2016 +$1m 100 94 79 79 80 against prior year 86 88 90 91
Slide 24: Below EBITDAF
OCTOBER 2016 NET PROFIT AFTER TAX Below EBITDAF $M 350 Net finance costs flat as higher floating 300 -25% rate borrowings were offset by post 250 hedging interest rates 200 150 295 Negative change in fair value of treasury 100 230 247 185 1H -11% 2H -38% instruments reflecting declining forward 50 75 int
Slide 25: Funding
OCTOBER 2016 DEBT MATURITY PROFILE AS AT 30 JUNE 2016 Funding $M 500 Available facilities maturing Drawn debt maturing (face value) Total borrowings as at 30 June 2016 of 400 $1,214m, up $138m from 30 June 2015 300 Net debt1 as at 30 June 2016 of $1,168m, 200 70 357 175 409 up +$123m (+12%) from 30
Slide 26: Funding metrics
OCTOBER 2016 NET DEBT/EBITDAF Funding metrics TIMES 2.0 Net debt/EBITDAF is the principal 1.5 metric underpinning S&P credit rating 1.0 1.8 1.8 1.6 1.7 S&P calculation of net debt/ 0.5 EBITDAF includes numerous 0.0 adjustments to reported numbers June 2013 June 2014 June 2015 June 2016 Borrowings ar
Slide 27: Concluding thoughts
OCTOBER 2016 Concluding thoughts Started FY2017 with high storage and strong generation Expect greater volatility in wholesale prices during peak and dry periods Delivering on Powershop UK initiative NZAS price increase from 1 January 2017 and perpetual right of termination commences (with 12- month
Slide 28: Latest operation information
Latest operation information MERIDIAN ENERGY LIMITED annual results roadshow presentation
Slide 29: Market data
OCTOBER 2016 NATIONAL DEMAND Market data GWh 4,000 3,800 National electricity demand in August 3,600 2016 was 1.1% higher than the same 3,400 month last year 3,200 3,000 Demand in the last 12 months was 0.1% 2,800 2,600 lower than the preceding 12 months Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov D
Slide 30: Meridian hydrology
OCTOBER 2016 MERIDIAN'S TOTAL CATCHMENT INFLOWS Meridian hydrology GWh 2,500 current year August 2016 monthly inflows were 76% 2,000 of historical average 1,500 To date this financial year inflows are 1,000 120% of historical average 500 Meridian’s Waitaki catchment storage 0 2003 2005 2007 2009 2011 2
Slide 31: Meridian generation
OCTOBER 2016 MERIDIAN'S NEW ZEALAND GENERATION Meridian generation GWh 1,400 1,200 Meridian’s New Zealand generation in 1,000 August 2016 was 9.7% higher than the 800 same month last year 600 To date this financial year Meridian’s 400 New Zealand generation is 8.2% higher 200 than the same period las
Slide 32: Meridian retail
OCTOBER 2016 MERIDIAN'S NZ CUSTOMER CONNECTIONS Meridian retail ICPs ('000) 300 current year 250 Meridian’s New Zealand customer 56 57 200 connection numbers increased during 103 103 150 August 2016 100 Retail sales volumes in August 2016 50 116 116 decreased by 4.5% compared to August 0 Jul Aug Sep