Slide 1: Meridian Energy Limited 2010 Annual Results
Meridian Energy Limited 2010 Annual Results For year ended 30 June 2010 August 24, 2010
Slide 2: Disclaimer
Disclaimer » This presentation may contain projections or forward-looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. » Actual results may differ materially from those stated in any forward-looking
Slide 3: Agenda
Agenda Meridian Background Results Highlights Group Financials Operational Review Outlook Meridian Energy 2010 Annual Results for year end 30 June 2010 August 24, 2010 3
Slide 4: Achievements this year
Achievements this year » 29% uplift in underlying NPAT, 11% uplift EBITDAF per MWh Generated » 50% reduction in lost time injuries » 219MW of new renewable generation added » 143MW West Wind, Wellington » 70MW Mt Millar wind farm, South Australia » 3 Turbines constructed and commissioned on Ross Isl
Slide 5: Financial Highlights
Financial Highlights Jun 10 Jun 09 % Change Total Group Operating Revenue $ 2,061.9 m $ 1,892.4 m 9% EBITDAF $ 641.7 m $ 512.4 m 25% NPAT $ 184.0 m $ 89.3 m 106% Underlying NPAT* $ 251.9 m $ 195.0 m 29% EBITDAF per MWh of Generation $ 46.29 $ 41.87 11% Dividends Paid $ 353.5 m $ 30.0 m 1,078% » A 25
Slide 6: Group Financial Performance Highlights
Group Financial Performance Highlights $M Jun 10 Jun 09 % Change Total Operating Revenue 2,061.9 1,892.4 9% Energy Related Expenses (743.6) (788.5) ↓ 6% Energy Transmission and Distribution (425.9) (373.0) 14% Employee Expenses (87.3) (76.0) 15% Other Operating Expenses (163.4) (142.5) 15% EBITDAF 6
Slide 7: Key Drivers of EBITDAF
Key Drivers of EBITDAF » Better overall hydrology position, maintaining storage above mean and increasing hydro generation » Underlying national demand remained flat but Tiwai Point back to full production Meridian Group EBITDAF 700 641.7 » Doubling of wind generation with the commissioning of 600 5
Slide 8: Sequential Review of Our Result
Sequential Review of Our Result 1000 39.8 67.7 32.5 217.8 250.6 750 $ M's 500 669.9 641.7 250 0 Generation Retail Margin Wholesale Other Revenue Direct Costs Expenditure EBITDAF Operating Margin Sales Retail and wholesale margins are energy only and exclude transmission expenditure and pass through
Slide 9: Drivers of Net Profit After Tax
Drivers of Net Profit After Tax » Strong EBITDAF performance » Depreciation increased as new generation builds become operational » Two information technology projects were impaired this year ($17m). In both cases it became evident that the course of action chosen was not going to deliver the antici
Slide 10: Capital Expenditure
Capital Expenditure Capital Expenditure 700 600 500 400 $m 300 200 100 0 06/07 07/08 08/09 09/10 10/11 11/12 12/13 Wind Hydro Solar Other Asset refurbishment Projected » Completed West Wind, Ross Island and CalRENEW-1 Solar. Commenced Te Uku » 2009/10 wind expenditure includes the A$191million Mt Mi
Slide 11: Funding
Funding Debt Maturity Profile ($m) $700 $600 125 $500 $400 200 185 156 $300 521 $200 285 20 225 249 $100 141 125 $0 1 Year 2 Years 3 Years 4 Years 5 Years > 5 Years Debt Available Facilities » S&P A2, BBB+ (stable outlook) credit rating retained » Cash and undrawn debt facilities of $740m » Debt inc
Slide 12: Storage, Inflows & Prices
Storage, Inflows & Prices Waitaki Storage (Lake Tekapo + Lake Pukaki) Mean (1979 - 2009 Inclusive) 2008/09 2009/10 Weekly Average Spot Electricity Prices 3000 $200 2500 2000 $150 Storage (GWh) $/MWh 1500 Improved $100 Opening Position 1000 $50 500 $- Jul Nov May Jan Jun Mar Dec Oct Aug Sep Feb Apr 0
Slide 13: Generation
Generation GENERATION VOLUME BY MONTH GENERATION VOLUME BY CATEGORY 1,400 2008-09 2009-10 16,000 1,200 14,000 1,000 12,000 10,000 800 GWh GWh 8,000 600 6,000 400 4,000 200 2,000 2007/08 2008/09 2009/10 Hydro - Manapouri Hydro - Waitaki Wind c r t g p b r l n n y v Ju Ma Oc Ap De Au Se Fe Ja Ma Ju No
Slide 14: Improving our Earnings – Fit for Purpose
Improving our Earnings – Fit for Purpose » During the year we implemented a series of changes to sustainably improve our performance Cost Reduction » Reduced corporate centre headcount » Retail reorganisation focused on reducing cost to serve » Retail revenue leakage reduction programme » Step chang
Slide 15: Wholesale Performance
Wholesale Performance $M Jun 10 Jun 09 % Change Wholesale Revenue 1,048.8 905.7 16% Wholesale Electricity Costs (264.5) (286.3) ↓ 8% Transmission & Levies (98.2) (74.4) 32% Other Wholesale Electricity Costs (10.5) (4.2) 150% Staff and Other Operating Costs (72.8) (51.8) 41% EBITDAF 602.8 489.0 24% E
Slide 16: Retail Performance
Retail Performance $M Jun 10 Jun 09 % Change Retail Revenues 979.7 969.5 1% Electricity Purchase Costs (453.8) (495.0) ↓ 8% Distribution & Levies (321.9) (298.4) 8% Employee & Other Operating Costs (62.2) (61.8) 1% EBITDAF 141.9 114.3 24% EBITDAF per MWh Sold $ 18.52 $ 14.50 28% Fixed Price Electric
Slide 17: Increasing Retail Competition
Increasing Retail Competition » Overall market churn (annual switching) has increased from 9% to 16% from July 2008 to June 2010, with new South Island market entrants and high urban churn rates » Churn is expected to continue at these levels or higher » A more competitive market, with flat near ter
Slide 18: Renewable Generation Options
Renewable Generation Options Project* Indicative Indicative Build Timing Cost Te Uku 2009-11 $200m Central Wind 2011-12 $340m Name Te Uku Size 65 MW, ~240 GWh North Bank Tunnel 2013-18 $1-1.2b Stage Under Construction Hayes 2013+ Up to $1.8b Mokihinui 2013-16 $300m Mill Creek 2012-13 $200m Hurunui 2
Slide 19: Investing in New Generation
Investing in New Generation Challenges » Consent processes – West Wind 2 years, Project Hayes 3 years to date, Mill Creek final decision expected to take 3 years, Mokihinui 2 years to date » Short term demand fluctuation » Highly volatile currency » Market valuation – listed competitors trading at a
Slide 20: West Wind
West Wind » First power in March 2009 and fully commissioned by October 2009 » Generated 568GWh since first power, this would power approximately 66,000 homes » 3 months with capacity factors of 50% or greater, including 55% in October 2009 » Helped keep lights on in Wellington during outage at Hayw
Slide 21: Other NZ New Generation
Other NZ New Generation » Te Uku wind farm – 64.4 MW 28 turbine wind near Raglan » Roads completed with majority of turbine foundations poured » First power expected in Dec 2010, fully commissioned by Feb 2011 » Manapouri Tailrace Amended Discharge » Granted by Environment Southland on 14 July 2010
Slide 22: Overseas Development
Overseas Development » Meridian’s overseas growth strategy is to look regionally for opportunities to grow shareholder value and leverage core competency » Applying core competency in wind in Australia’s supportive regulatory environment » Improving wind procurement scale and broadening our speciali
Slide 23: Innovation
Innovation » A strong portfolio of subsidiaries and business units operating innovatively beyond the standard electricity industry supply chain, at various stages of development » Improved commercial focus is starting to yield results Powershop » Sevenfold customer increase, with 92% customer satisf
Slide 24: Ministerial Review - Package
Ministerial Review - Package » Aimed at improved security of supply and increased level of retail competition » Virtual asset swaps, long term contracts for difference, between Meridian, Genesis and Mighty River Power (MRP) give Genesis and MRP South Island capacity and Meridian North Island capacit
Slide 25: Ministerial Review – Major Impacts on Meridian
Ministerial Review – Major Impacts on Meridian » Transfers of Tekapo assets and virtual asset swaps » Alters Meridian’s ideal portfolio of retail customers » Transfer of Whirinaki » Has some limited ability to improve dry winter risk for Meridian » Scarcity pricing regime » Can potentially impact on
Slide 26: Ministerial Review – Progress to Date
Ministerial Review – Progress to Date » Final elements of the package are under discussion – Tekapo sale price and terms, Waitaki water management agreements, Whirinaki sale price, exact terms of virtual asset swaps » We have engaged openly and effectively with all parties » Most items have been agr
Slide 27: Outlook
Outlook » Year started with Waitaki lake storage at 122% of average » July and August have seen relatively low market prices » We do expect improvement but our projections suggest a likely NZ electricity gross margin slightly below last year (as adjusted for the Tekapo transfer) » Conditions can cha
Slide 28: Supplementary Information
Supplementary Information » Key Financial Ratios » Asset Performance Meridian Energy 2010 Annual Results for year end 30 June 2010 August 24, 2010 28
Slide 29: Key Financial Ratios
Key Financial Ratios Jun 10 Jun 10 Jun 09 Change SCI Target Equity to Total Assets 54.2% 58.2% 59.7% ↓ 1.5% Return on Average Equity 5.6% 3.9% 2.1% 1.8% Underlying Return on Average Equity (excl. 20.1% 19.8% 15.6% 4.2% Revaluation) Net Debt / (Net Debt plus Equity) 27.4% 22.4% 20.9% 1.5% EBITDAF Int
Slide 30: Asset Performance
Asset Performance Target Jun 10 Jun 09 Plant Availability - Hydro 92.7% 91.3% 92.6% Plant Forced Outage Factor 0.34 1.47 0.43 Plant Availability - Wind 95.7% 96.0% 95.6% » Hydro Availability - planned maintenance & refurbishments (7%), forced outages (1.5%) , and Gate 18 repairs (0.2%) » Hydro Force
Slide 31: Meridian Energy Limited 2010 Annual Results
Meridian Energy Limited 2010 Annual Results For year ended 30 June 2010 August 24, 2010