Contact Energy Limited · NZX:CEN
Contact Energy — Investor Presentation (February 2021)
32 slides from Contact Energy's investor presentation, Feb 15, 2021
Slide 1: Tauhara investment and capital management plan
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Tauhara investment and capital management plan
Slide 2: Important notice
This presentation has been prepared by Contact Energy Limited (the Company) in relation to an offer of new shares in the Not an offer Company (New Shares) by way of: This presentation is not a prospectus or product disclosure statement or other offering document under New Zealand or Australian law o
Slide 3: Disclaimer
Disclaimer Any indications of, or guidance or outlook on, future earnings or financial position or performance and future distributions are also None of the Company, Macquarie Capital (New Zealand) Limited (acting through Macquarie Securities (NZ) Limited and its forward-looking statements. All such
Slide 4: Contents
1 Executive summary 5-6 2 Investment thesis 7-16 3 Funding strategy 17-21 4 Summary 22 5 Key risks 23-26 6 Summary of placement agreement 27 7 International offer restrictions 28-31 8 Glossary of key terms 32 4
Slide 5: Clear pathway to long-term value creation
Contact sees a clear pathway to long-term value creation, with significant investment opportunities in our core markets and in line with our unique capability What New Zealand is in the early stages of a decades-long transformation from reliance on fossil fuels to renewable electricity. This transfo
Slide 6: Well-positioned to put capital to work in areas of core competence
Well-positioned to put capital to work in Contact’s areas of core competence 1 2 3 NZAS update Tauhara geothermal investment approved Offer forms part of the funding • ~4 year term agreed with Meridian, ending 31 • Committed to investment in a 152MW low carbon renewable programme which will support
Slide 7: Contact is where it wants to be
Contact is where it wants to be The market Contact’s positioning • NZAS agreement provides medium term Capital structure certainty. • Refreshed capital structure provides the flexibility to fund to support • Near term demand strength and higher gas growth ambitions. growth and carbon prices underpin
Slide 8: Disciplined capital allocation will continue to be important
Disciplined capital allocation will continue to be important 1 Investment 2 in renewable supply 3 Maintaining demand-supply 4 balance key Decarbonisation growth opportunities 8 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 9: Strong wholesale electricity market fundamentals to 2024
Strong wholesale electricity market fundamentals to 2024 • Forward market pricing is strongly signalling new build. The next four years allows for time for: Post 2024, NZAS could extend NZAS exits which is • We believe the market will respond with or without • Rational wholesale market PPAs to be ag
Slide 10: Geothermal is a low-cost indigenous fuel
Geothermal energy is a low-cost and indigenous fuel that has been harnessed by New Zealanders for generations. It is uniquely reliable, with geothermal power stations in New Zealand typically achieving capacity factors of 95%, compared to typical load factors of between 30 – 50% for hydro and wind p
Slide 11: Geothermal operating and development experience
Operational experience on the world’s second longest electricity producing geothermal field (Wairakei, since 1958). Capability in construction management, consenting and stakeholder engagement. We have maintained a dedicated, internationally-recognised, subsurface team to lower the cost of operation
Slide 12: New Zealand's premium renewable project
New Zealand's premium renewable project Estimated forward capital Low carbon resource Estimated MW Estimated plant capacity expenditure (cash)¹ 0.05T of C02e/MWh (net export to grid) factor/ $580m (Gas CCGT ~9x more, Gas Peaker ~11x 152.5MW annual generation more) 96% / ~1,300GWh Estimated cash cost
Slide 13: Contact's expertise to expand production at Tauhara
Contact’s expertise to expand production at Tauhara Tauhara field already producing with Te Huka. 90MW equivalent of fuel already secured during appraisal drilling, which is beyond expectations for this stage of the project. Core experienced team that built Te Mihi. Project readiness Fixed price EPC
Slide 14: Balance sheet flexibility to invest in NPV positive projects
Balance sheet flexibility to invest in NPV positive projects if market conditions are supportive Decision gates for major capital spend on this pipeline align well with when Contact will have a clearer view of demand post 2024 and when new demand sources will need to be committing to PPAs and capita
Slide 15: Introduction to capital investment pipeline
Introduction to capital investment pipeline Wairakei consenting considerations Indicative timeline Battery value pools Consenting and community In addition to managing North Island reserves to effectively Consents on the Wairakei Field expire in 2026 – increase HVDC flow in the event of a NZAS exit,
Slide 16: Wairakei optionality
Contact is targeting Wairakei optionality to allow for investments to be sized and timed to meet market demand Wairakei optionality (GeoFuture) Geothermal generation profile (GWh per annum) We are developing a Estimated $1.3b investment in new geothermal development flexibility in future investment
Slide 17: Equity funding to support investment programme
Complementing conventional debt funding and potential hybrid debt instruments, Contact intends to access equity funding to support investment programme Medium-term capital investment programme The equity funding strategy balances the high value our (uncommitted) shareholders place on dividends with
Slide 18: Change to dividend policy
Change to dividend policy provides clarity to investors across the Tauhara build phase and through Contact’s investment programme, while improving dividend tax efficiency New distribution policy Expected ordinary dividend Balance sheet capacity post equity raise Assuming EBITDAF of $480m Ordinary 35
Slide 19: Interim dividend and ordinary dividends
Ordinary dividends (cps) Declared Interim dividend for 1H21 of 14 cents per share 39 39 • Interim dividend of 14 cents per share (1H20 16 cents per share) is imputed to 64% or 9 cents per share for qualifying shareholders. 32 This represents a pay-out of 64% of 1H21 operating free cash flow per shar
Slide 20: Offer size and structure
Contact is seeking to raise up to NZ$400 million (Equity Raise) in new equity via a: • NZ$325 million underwritten placement (Placement); and • NZ$75 million non-underwritten retail offer with the ability to accept oversubscriptions at Contact’s discretion (Retail Offer). Offer size Offer structure
Slide 21: Placement and retail offer timetable
Placement Date1 Trading halt commences and bookbuild undertaken Monday, 15 February 2021 Announcement of results of Placement and trading halt lifted Expected to be 12:00pm NZDT (10:00am AEDT) Tuesday, 16 February 2021 ASX settlement Thursday, 18 February 2021 NZX settlement Friday, 19 February 2021
Slide 22: Summary
• Contact believes it has the best projects, with the lowest firmed LRMC and that bringing these projects to market is in the best interests of the company and New Zealand. • With New Zealand entering a generation build phase, our high quality projects are expected to support shareholder returns thr
Slide 23: Key risks
This section outlines the key risks which Contact has identified in connection with the Offer. These risks may affect the future operating and financial performance of Contact and its share price. Like any investment, there are risks associated with an investment in Contact shares. Please note that
Slide 24: Key risks
Key Risk Details Energy market oversupply leads to low wholesale electricity prices and reduces earnings. Potential key contributors to oversupply include: • The potential closure of the Tiwai aluminium smelter in the future. The smelter currently takes around 13% of national electricity production.
Slide 25: Key risks
Key Risk Details • The nature of Contact’s business means that Contact and some of its workers and contractors can be exposed to hazardous materials, heavy machinery and dangerous plant. There is the potential for an incident or accident to occur at one of Contact’s sites which results in serious in
Slide 26: Key risks
Key Risk Details • The Tauhara project carries construction and project-related risks that Contact considers normal for this type of investment. These risks include the risk of accident or other health and safety event, supply-chain risks, errors in the design, geotechnical conditions varying materi
Slide 27: Summary of placement agreement
Contact has requested that the Underwriters underwrite the Placement and the Underwriters have agreed to do so. This means that the Underwriters will subscribe at the relevant offer price for any New Shares that are not subscribed for under the Placement in accordance with the terms of the Placement
Slide 28: International offer restrictions
The Company as well as its directors and officers may be located outside Canada and, as a result, it may not be possible for purchasers to effect service of process within Canada upon the Company or its directors or officers. All or a substantial portion of This document does not constitute an offer
Slide 29: International offer restrictions
Certain Canadian income tax considerations. Prospective purchasers of the New Shares should consult their own tax adviser with IRELAND respect to any taxes payable in connection with the acquisition, holding, or disposition of the New Shares as any discussion of The information in this document does
Slide 30: International offer restrictions
PEOPLE’S REPUBLIC OF CHINA Notification under Section 309B(1)(c) of the SFA – In connection with Section 309B of the SFA and the Securities and Futures The New Shares may not be offered, sold or delivered, or offered or sold or delivered to any person for reoffering or resale or (Capital Markets Pro
Slide 31: International offer restrictions
THE UNITED ARAB EMIRATES Abu Dhabi Global Market The New Shares have not been offered and will not be offered to any persons in the Abu Dhabi Global Market ("ADGM") except on The United Arab Emirates (excluding the Dubai International Financial Centre and the Abu Dhabi Global Market) the basis that
Slide 32: Glossary of key terms
Term Explanation Term Explanation C&I Commercial and Industrial New Zealand Aluminium Smelters NZAS CFD Contract for difference Operating free cash flow is a non-GAAP cash measure Earnings before interest, tax, depreciation, amortisation, that represents the amount of cash Contact has available Oper
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