Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Day (December 2011)
111 slides from Wesfarmers's investor day presentation, Dec 8, 2011
Slide 1: ASX cover letter: Investor Site Tour
8 December 2011 The Manager Company Announcements Office Australian Securities Exchange Dear Sir, Wesfarmers Chemicals, Energy and Fertilisers Investor Site Tour The following presentation is to be given at a Wesfarmers Chemicals, Energy and Fertilisers Investor Site Tour on 8 December 2011. Yours f
Slide 2: Wesfarmers Chemicals, Energy & Fertilisers Investor Site Tour
Wesfarmers Chemicals, Energy & Fertilisers Investor Site Tour 8 December, 2011
Slide 3: Agenda
2 2 Agenda Item Presenter Time 1 Introduction Tom O’Leary, Managing Director 11.00 2 Chemicals Ian Hansen, CEO Chemicals 11.30 3 Fertilisers Darryl Dent, GM Fertilisers 12.00 4 Kleenheat Gas Graham Smith, GM Kleenheat Gas 12.30 Q&A 13.00 Lunch 13.15 Safety Briefing 13.45 CSBP Tour (Group 1), KHG Tou
Slide 4: 1. Introduction
1. Introduction Tom O’Leary Managing Director, WesCEF
Slide 5: WesCEF Organisational Structure: Operating Businesses
4 4 WesCEF Organisational Structure Operating Businesses Tom O’Leary Managing Director Graham Smith Julian Andrews Ian Hansen Darryl Dent GM, Kleenheat GM, Business CEO, Chemicals GM, Fertilisers Gas Development Australian Australian Gold Ammonia/AN QNP (50%) Air Liquide WA Vinyls Reagents (75%) Kle
Slide 6: WesCEF Organisational Structure: Support Functions
5 5 WesCEF Organisational Structure Support Functions Tom O’Leary Managing Director Liane Unewisse Alex Willcocks* Sam Torrens Jane Harries Julian Andrews Ross Martelli GM, Health, Mgr, GM, Human CFO, Finance & GM, Business GM, Technical Safety & Communications Resources Business Support Development
Slide 7: WesCEF Leadership Team
6 6 WesCEF Leadership Team Tom O’Leary Managing Director Liane Jane Harries Alex Willcocks Ian Hansen Graham Smith Julian Andrews Unewisse Ross Martelli Darryl Dent CFO, Finance CEO, GM, Kleenheat GM, Business GM, Health, GM, Human GM, Technical GM, Fertilisers & Business Chemicals Gas Development S
Slide 8: WesCEF Objective
UY] Wesfarmers Chemicals, Energy & Fertilisers WesCEF Objective Develop a portfolio of successful and innovative industrial businesses that deliver satisfactory shareholder returns and continually strengthen our reputation for the management of health, safety and the environment.
Slide 9: Develop a portfolio of successful and innovative industrial businesses
Develop a portfolio of successful and innovative industrial businesses that deliver satisfactory shareholder returns and continually strengthen our reputation for the management of health, safety and the environment. UY] Wesfarmers Chemicals, Energy & Fertilisers
Slide 10: WesCEF Strategies
7] Wesfarmers Chemicals, Energy & Fertilisers WesCEF Strategies Focus on sustainable Invest in our Execute Foster a culture operations for the businesses’ opportunities that recognises benefit of team STRATEGIES capacity to meet the for growth in existing people are central members, customers needs
Slide 11: WesCEF Objective and Strategies
UY] Wesfarmers Chemicals, Energy & Fertilisers Develop a portfolio of successful and innovative OBJECTIVE — " industrial businesses that deliver satisfactory shareholder returns and continually strengthen our reputation for the management of health, safety and the environment. Invest in our Execute
Slide 12: WesCEF Objective, Strategies and Values
11 «eo Wesfarmers Chemicals, Energy & Fertilisers p a portfolio of successful and innovative industrial businesses that deliver satisfactory shareholder returns and continually strengthen our reputation for the management of health, safety and the environment. Invest in our Execute Foster a culture
Slide 13: Key Milestones
12 12 Key Milestones CHEMICALS & FERTILISERS DIVISION Construction of 30,000t QNP Joint Venture facility Ammonia Tank with Dyno Nobel $142m acquisition $25m investment in Sodium $165m investment in of Australian Cyanide Plant No. 1 Sale of shares in Dyno Ammonia Plant Vinyls Wesfarmers Limited 1987
Slide 14: WesCEF Today
13 13 WesCEF Today QUICK FACTS (At 30 June 2011) • 1,472 employees • 230,000 gas customers • 300 chemical customers • 5,000 farmer customers (serviced through distributors) Chemicals Production Facilities • 18 manufacturing plants CSBP Fertilisers Kleenheat Gas • 4 major hazard facilities Kleenheat
Slide 15: Our People
14 14 Our People • Highly skilled workforce – Engineers, chemists, environmental scientists, health & safety professionals, process operators, technical maintenance skills, finance/IT/procurement/HR professionals • Organisational capability framework – Leadership Development, Talent Management, Core
Slide 16: Financial Performance – EBIT & Return on Capital
15 15 Financial Performance – EBIT & Return on Capital $m Per cent 500 $42m Varanus Island 25 insurance proceeds 450 $25m fertiliser 400 inventory writedown 20 350 Varanus Island Drought impacts on gas disruption AN2 Expansion, return 300 fertiliser sales to more normal growing 15 Reduced LPG condit
Slide 17: Investment History – Capex & EBITDA
16 16 Investment History – Capex & EBITDA $m 600 500 400 300 200 100 0 FY03* FY04* FY05 FY06 FY07** FY08** FY09** FY10** FY11 WESCEF EBITDA excl insurance proceeds WesCEF Capex Energy EBITDA Energy Capex Chems & Ferts EBITDA Chems & Ferts Capex AV Acquisition Energy division earnings restated to exc
Slide 18: Potential AN3 Investment
17 17 Potential AN3 Investment • $550 million investment (excluding capitalised interest) to expand AN production capacity at Kwinana site, subject to final approvals • Environmental approvals in place • Construction of a third nitric acid/ammonium nitrate plant with production capacity of 260,000 t
Slide 19: Health & Safety
18 18 Health & Safety • High quality dedicated divisional health & safety resources • Robust safety compliance systems • Focus on process safety • Expanded team post merger of Energy & Chemicals & Fertilisers divisions
Slide 20: Environment
19 19 Environment Focus on: 7 • Continually improving 6 performance by minimising 5 environmental footprint 4 3 • Adopting new technologies to 2 reduce emissions 1 0 • Utilising recycled water FY07 FY08 FY09 FY10 FY11 CO2e/Manufactured volumes* (tonne/tonne) (Kwinana Water Reclamation Water consumed
Slide 21: Community Engagement
20 20 Community Engagement • Ongoing investment in the communities in which we operate – Youth Focus – The Salvation Army – The Clontarf Foundation – WA Country Cricket • Stakeholder forums & facility tours
Slide 22: 2. Chemicals
2. Chemicals Ian Hansen Chief Executive Officer
Slide 23: Overview
22 22 Overview Six Businesses • Ammonia • Ammonium Nitrate (AN) • Queensland Nitrates - 50% ownership • Australian Gold Reagents (AGR) Sodium Cyanide - 75% ownership • Australian Vinyls (AV) – ModWood
Slide 24: Business Propositions
23 23 Business Propositions Value proposition • Reliable, competitive local supplier of quality products & services • Reputable, responsible manufacturer & distributor • Product development & technical service provider (AV, ModWood) Competitive proposition • No 1 or strong No 2 in geographic market
Slide 25: CSBP Kwinana
24 24 CSBP Kwinana Ammonia AN Sodium Cyanide
Slide 26: Ammonia / Kwinana Integration
25 25 Ammonia / Kwinana Integration Ammonia sales Air Ammonia Plant to nickel industry Nitric Acid Water Plant Natural AN Solution AN Solution Gas Plant sales for explosives Prilling AN Prill sales Plant for explosives Fertiliser UAN liquid fert Production NP compound fert Air Sodium Caustic Cyanide
Slide 27: Ammonia Business
Wesfarmers Chemicals, Energy & Fertilisers Ammonia Business yas
Slide 28: Ammonia Pricing
27 27 Ammonia Pricing US$/t Nominal 900 800 700 600 500 400 300 200 100 0 Ammonia FOB Yuzhny (Fertecon) Source: Fertecon
Slide 29: Ammonia Business
28 28 Ammonia Business • 225,000 tpa plant commissioned in 2000 – Replaced 1960s 110,000 tpa plant • Debottlenecked to 250,000 tpa • 40,000 tonne import/export terminal • External customers - nickel industry (80,000 tpa) • Internal uses – Ammonium Nitrate (240,000 tpa) – Sodium Cyanide (36,000 tpa)
Slide 30: Ammonia Business
29 29 Ammonia Business • Import 120,000 tpa, increasing to 240,000 tpa subject to AN3 expansion • Main input – natural gas • Ammonia globally traded commodity – 130 million tonnes produced annually (80% of use in fertilisers) – Approximately 20 million tonnes annual deep sea trade • Historically CSB
Slide 31: Ammonium Nitrate Business
30 30 Ammonium Nitrate Business
Slide 32: WA Iron Ore Production
31 31 WA Iron Ore Production Tonnes (m) 800 700 600 500 400 300 200 100 0 Source: AME Group Actual Forecast (AME Group)
Slide 33: Ammonium Nitrate
32 32 Ammonium Nitrate • 200,0001 tpa AN plant commissioned in 1996 – Replaced 1960s 120,000 tpa plant • Debottlenecked to 275,0001 tpa • Duplicate commissioned in 2008 increasing production to 550,0001 tpa • Manufacture Nitric Acid, AN solution (ANsol) & AN prill • ANsol used in Flexi-N (fertiliser
Slide 34: Ammonium Nitrate
33 33 Ammonium Nitrate • Sole Western Australian (WA) producer • Import competition from overseas & eastern Australia • ANsol & AN prill sold to explosives sector – Explosives companies or mining houses that supply AN as ingredient to explosives companies • Volumes being driven by investment in WA i
Slide 35: Queensland Nitrates
34 UY] Wesfarmers Chemicals, Energy & Fertilisers
Slide 36: Queensland Coal Production
35 35 Queensland Coal Production mtpa 300 250 200 150 100 50 0 2006 2007 2008 2009 2010 2011F 2012F 2013F 2014F 2015F Actual Forecast (Wood Mackenzie) Source: Agricultural Bureau of Agricultural and Resource Economics and Sciences (ABARES) , Wood Mackenzie
Slide 37: Queensland Nitrates
36 36 Queensland Nitrates • Integrated Ammonia/ Nitric Acid/ Ammonium Nitrate/ Prill • 180,000 tpa plant commissioned in 2000 • Project financed • Debottlenecked to 220,000 tpa, now targeting 227,000 tpa • Requires purchased ammonia to produce additional AN • Supports Bowen Basin coal industry • Nat
Slide 38: Sodium Cyanide
Sodium Cyanide Uy] Wesfarmers Chemicals, Energy & Fertilisers
Slide 39: World Gold Mine Production
38 38 World Gold Mine Production Tonnes 3,000 2,900 2,800 2,700 2,600 2,500 2,400 2,300 2,200 2,100 2,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F2012F Actual Forecast (GFMS/ BAML) Source : GFMS – Gold Survey 2011 and Bank of America Merrill Lynch
Slide 40: Sodium Cyanide (SCN)
39 39 Sodium Cyanide (SCN) • Used in the extraction of gold • Unincorporated joint venture established in the 1980s between CSBP, AIDC & Coogee Chemicals • Current ownership CSBP (75%), Coogee Chemicals (25%) • Australian Gold Reagents (AGR) management & sales company • CSBP operates as sales agent
Slide 41: Sodium Cyanide (SCN)
40 40 Sodium Cyanide (SCN) • 20,000 tpa solid SCN plant commissioned in 2002 • Debottlenecked to 32,000 tpa (solid) • Strong market demand – WA solution product (30% strength) – Other markets solid product (98% strength) • Export markets include West Africa, South East Asia & South America • Key raw
Slide 42: Australian Vinyls
41 UY] Wesfarmers Chemicals, Energy & Fertilisers Australian Vinyls
Slide 43: Australian Vinyls
42 42 Australian Vinyls • Purchased by CSBP in 2007 • Only Australian based PVC resin producer (Laverton, Victoria) • 145,000 tpa capacity, 65% - 75% of Australian market • Produces & sells locally made PVC to extruders • Also trades specialty chemicals & caustic soda • Margin dependent on differenc
Slide 44: PVC Challenges
43 43 PVC Challenges Asian PVC/VCM Spread 350 300 250 200 150 100 50 0 Jul 2004 Jan 2005 Jul 2005 Jan 2006 Jul 2006 Jan 2007 Jul 2007 Jan 2008 Jul 2008 Jan 2009 Jul 2009 Jan 2010 Jul 2010 Jan 2011 Jul 2011 Jan 2012 PVC - VCM Spread in USD/t Annual Average Spread in USD/t Annual Average Spread in AUD
Slide 45: ModWood
44 44 ModWood • ModWood produces wood/plastic composite decking • Inputs: Sawdust; recycled milk bottles; additives • Uniform properties, minimal maintenance, environmentally friendly • Premium product, hard wearing • Introduction of “natural grain” range in 2010 has seen continued growth • $7 milli
Slide 46: Outlook
45 45 Outlook • Small businesses supplying non-resource sector are challenged – PVC – ModWood, small but strong growth • Ammonia (WA) business affected by gas price outlook • Larger businesses supplying the resource sector have a strong outlook with expansion opportunities available – Ammonium Nitra
Slide 47: 3. Fertilisers
3. Fertilisers Darryl Dent General Manager
Slide 48: Market Overview - WA Agriculture
47 47 Market Overview - WA Agriculture • Broadacre cropping dominant • Low sheep numbers post drought • Nutrient deficient soils • Winter rainfall reliant • Small beef, dairy & horticulture sectors
Slide 49: Market Overview - Consolidation
48 48 Market Overview - Consolidation Total Agricultural Businesses (WA) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2006 2007 2008 2009 2010 Source: ABS as at 30 June Note: CSBP estimates that there are a total of 8,000 farmer customers in WA as at 2010
Slide 50: Market Overview - Crop Yields
49 49 Market Overview - Crop Yields WA Grain & Oilseeds Production (000s tonnes) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2000/01A 2001/02A 2002/03A 2003/04A 2004/05A 2005/06A 2006/07A 2007/08A 2008/09A 2009/10A 2010/11E*2011/12F* Source: ABS, ABARES * ABARES Estimate/ Forecasts
Slide 51: Market Overview - Global Fertiliser Pricing
50 50 Market Overview - Global Fertiliser Pricing US$/t 1,400 1,200 1,000 800 600 400 200 0 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Urea (FOB Middle East) DAP (FOB US Gulf) Potash (FOB Vancouver) Ammonia (FOB Middl
Slide 52: Market Overview - Economics of Fertilisation
51 51 Market Overview - Economics of Fertilisation Fertiliser Prices relative to Agricultural Commodity Price Index** 400 350 300 250 200 150 100 50 0 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Urea Price / Grain Inde
Slide 53: CSBP Fertiliser: Our Aim
Uy] Wesfarmers Chemicals, Energy & Fertilisers CSBP Fertiliser Our Aim To be a world class provider of best value nutritional solutions to agriculture in Australia. BEST VALUE WORLD CLASS NUTRITIONAL SOLUTIONS What customers determine Our customers compete globally Products, services and advice they
Slide 54: WA Demand & CSBP Market Share
53 53 WA Demand & CSBP Market Share WA Sales Market Share (%) (Tonnes 000s) 2,000 80% 1,750 70% 60% 1,500 50% 1,250 40% 1,000 30% 750 20% 500 10% 250 0% 0 -10% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total Sales (Imports Calculated) Total Sales (FIFA) Market Share (FIFA
Slide 55: Business Overview
54 54 Business Overview • Established in 1910 – Member of Wesfarmers Group since 1980 • Only major fertiliser supplier in WA until ~ 1990 – Manufacturing focus at that time • Market share erosion during 1990s – Emergence of import-based competitors • Post 2000, market share stabilisation – Strong cu
Slide 56: Business Overview
55 55 Business Overview • Large scale infrastructure – Granular storage & import facilities in key locations – Flexi N (UAN1) import & storage – High capacity despatch facilities • Domestic manufacturing capability – NP2 Granulation, Superphosphate and UAN – Products developed specifically for WA ag
Slide 57: Business Overview
56 56 Business Overview • Market support – Sales staff (40): support distributors; manage key accounts; contract negotiation & service delivery – Agronomic advisory services: product development; soil & plant testing services • Product offering – Over 150 fertiliser products including locally develo
Slide 58: Flexi-N
57 57 Flexi-N % of Total Sales • Innovation to WA Agriculture 30% • Strong market penetration 20% • Utilises existing infrastructure • Growth achieved via importation 10% • Swing capacity for AN production 0% 01/02 00/01 03/04 05/06 07/08 09/10 10/11 99/00 02/03 04/05 06/07 08/09
Slide 59: Infrastructure
58 58 Infrastructure Superphosphate Manufacture Compounds Manufacture Flexi N (UAN) Manufacture Major Distribution Centre Geraldton Major Depot Minor Depot Flexi N Storage Soil and Plant Laboratory Dalwallinu Goomalling Merredin Kwinana Bibra Lake Corrigin Wagin Bunbury Tambellup Esperance Albany
Slide 60: Fertiliser infrastructure and facilities
59 59 Granular and Liquid Import NP Granulation Plant Superphosphate Manufacture Flexi N Manufacture Granular Storage Liquids Storage Customer Service Centre
Slide 61: Kwinana Fertiliser Manufacturing
60 60 Kwinana Fertiliser Manufacturing Raw Materials Manufacture Process Products (Brands) Various NPK Cropping Ammonia, Sulphuric Acid, Fertilisers SMAP, Trace elements, Granulation Plant e.g. Agras, Macropro, MOP, SOP, SOA K-Till, Gran NS Pasture Fertilisers Phosphate Rock, Sulphuric Acid, Trace e
Slide 62: Regenerative Thermal Oxidiser
61 61 Regenerative Thermal Oxidiser • $5 million capital expenditure • Broadening phosphate rock supply options • Construction commenced • Commissioning in January 2012
Slide 63: Key Strategies Update
62 62 Key Strategies Update Business efficiency • Investment in systems consolidation & enhancements Business model • Market share maintained • Further customer segmentation & target marketing
Slide 64: Key Strategies Update
63 63 Key Strategies Update Growth • Logistics & operational efficiencies • Improved pricing analysis & contract management • Implementation of fertiliser use efficiency technologies – Introduction of Fertlogic
Slide 65: Fertlogic
64 64 • Changes traditional fertiliser application methodology • Application by production zone not by paddock • Technology to execute is available but complex • Consolidates & simplifies the end to end process • Maximises fertiliser use efficiency • Developed in partnership with GEOSYStm • Full mar
Slide 66: Fertlogic
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Slide 67: Outlook
66 66 Outlook • Return to more normal seasonal conditions • Full year earnings remain sensitive to seasonal break & farmers’ terms of trade
Slide 68: Sales Profile
67 67 Sales Profile 85% of Sales occur in the December to July period Seasonal Break Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Source: CSBP Sales (6 year average)
Slide 69: Outlook
68 68 Outlook • Return to more normal seasonal conditions • Full year earnings remain sensitive to seasonal break & farmers’ terms of trade • Yield & quality impacts from under fertilisation • Late rains have reduced grain quality & returns • Albeit still strong historic wheat yield predicted
Slide 70: Predicted wheat yields
69 69 Predicted wheat yields Source: Western Australian Agricultural Authority, 2011
Slide 71: Outlook
70 70 Outlook • Return to more normal seasonal conditions • Full year earnings remain sensitive to seasonal break & farmers’ terms of trade • Yield & quality impacts from under fertilisation • Late rains have reduced grain quality & returns • Albeit still strong historic wheat yield predicted • Low
Slide 72: Video
71 Uy] Wesfarmers Chemicals, Energy & Fertilisers Video
Slide 73: 4. Kleenheat Gas
4. Kleenheat Gas Graham Smith General Manager
Slide 74: Production Capability
73 73 Production Capability Kwinana Production Facility LPG Extraction Dampier Dampier to Bunbury natural gas pipeline Kwinana Bypass LPG Valve Production (Open/ Facility Shut) Kwinana LNG Plant Natural Gas (majority is methane) Propane Butane Bunbury
Slide 75: Production Capability
74 74 Production Capability LNG Train 1 LPG Train 1 LPG Train 2 LPG Train 1 Train 2 • Constructed 1987/88 $105 million • Constructed in 2000 $18 million • Gas flow rate 320 – 380 TJ per day • Gas flow rate 500 – 540 TJ per day • LPG content (1989) 1.45 T per TJ (Train 1 & 2) • Production 150,000 ton
Slide 76: Distribution Capability
75 75 Distribution Capability • Established in WA over 50 years ago • Extended through acquisition in the eastern states in the mid 1990s • Distribution infrastructure in each state of Australia • All LPG markets serviced: bulk gas; forklift; residential; autogas; & leisure markets • LPG products di
Slide 77: LPG Market Overview
76 76 LPG Market Overview • Demand for LPG has been flat in the “traditional” market for 10 years • Outlook for traditional market is modest growth – mining, agriculture & the leisure market Total Market LPG Volume Tonnes Excluding Autogas 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,
Slide 78: LPG Market Overview
77 77 LPG Market Overview • Autogas market has been in decline since reversal of State & Federal conversion grants • The autogas market is expected to be difficult, albeit with positive developments from Holden & Ford Total Market Volume Tonnes Autogas 1,200,000 1,000,000 800,000 600,000 400,000 200
Slide 79: LPG Market Overview
78 78 LPG Market Overview Production economics in WA have deteriorated • Whilst natural gas flowing through the • LPG content in the natural gas pipeline, has increased . . . pipeline has declined TJ / per day Tonnes / TJ Gas Flow Rate LPG Content 550 2.50 500 2.00 450 1.50 400 1.00 350 0.50 300 0.0
Slide 80: LPG Business Impact
79 79 LPG Business Impact • This has affected production • And at the same time, gas & gas volumes . . . transport costs have increased Production (Tonnes) Average Gas Feed Costs 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2005
Slide 81: LNG Market Overview
80 80 LNG Market Overview Why LNG? • LNG is a low cost alternative fuel – Cheaper than diesel – Combusts with ~20% less carbon emissions, less particulate matter & lower noise • LNG can increase Australia’s energy diversity & security, whilst reducing the trade deficit – Oil self sufficiency was 54%
Slide 82: LNG Market Overview
81 81 LNG Market Overview LNG Today • Current Markets – Remote Power Generation – Heavy Duty Vehicles (HDV) – Industrial (LPG substitution) • Future Markets – Mine vehicles – Locomotives – Marine
Slide 83: LNG International Developments
82 82 LNG International Developments • US market now fast adopting LNG – Low cost LNG with energy security agenda – 600 Peterbilt 450HP trucks on order with Westport dedicated gas engines – Clean Energy/Chesapeake:150 LNG refueller network – Shell is entering LNG refuelling market & developing minin
Slide 84: Evol LNG Today
«eo Wesfarmers Chemicals, Energy & Fertilisers Evol LNG Today Newman Carnarvon Dariot Sunrise Dam Mt Magnet Kalgoorlie Geraldton Kwinana Kewdale Tarcutta per Park Bunbury ie Aber] = a Koroit Dandenong (third party LNG supply) Possible Future LNG Refuellers
Slide 85: The LNG Journey
84 84 The LNG Journey Crude Oil (Tapis) vs Diesel Price A$/L (HDV Terminal Gate Price incl Road User Charge, excl GST) 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Tapis A$/L HDV TGP Net A$/L
Slide 86: Key Strategies Update
85 85 Key Strategies Update 1. Grow faster than the market & the competition • Progress achieved: – In a “soft” LPG market we have had some good wins in the leisure market & with major accounts – Volumes are steady in the LNG market – Plans advanced to extend geographic footprint in regional Austral
Slide 87: Key Strategies Update
86 86 Key Strategies Update 2. Invest in the business & drive out unnecessary cost • Progress achieved: – Upgrade critical distribution centres & closure of others – Transport & distribution contracts retendered – Distribution channels being optimised 3. Explore opportunities to maximise LPG product
Slide 88: Outlook
87 87 Outlook • LPG production economics have deteriorated but remain profitable • Volume growth in LPG is always challenging, but opportunities remain • Fortunes in LPG will be dependent on LPG content in the pipeline, selling prices (Saudi CP) & the FX rate • Previous guidance of FY2012 earnings d
Slide 89: Questions
Questions eo Wesfarmers Chemicals, Energy & Fertilisers
Slide 90: 5. AN3 Expansion Update
5. AN3 Expansion Update Ross Martelli General Manager, Technical Services
Slide 91: Background
90 90 Background • AN1 commissioned in 1996 • AN2 commissioned in 2008 • Existing capacity is approximately 550,0001 tpa AN 1 In a non-shutdown year
Slide 92: Background
91 91 Background • Third nitric acid/ammonium nitrate plant (NAAN3) = 260,000 tpa AN • Expand the prill plant by 315,000 tpa • Other infrastructure to support the expansion: – 5,000 tonnes of AN bulk storage – Additional AN bulk despatch load out facility
Slide 93: Location of New Facilities
92 92 Location of New Facilities Extend AN Bulk shed by 5,000 Prill Plant 2 upgraded tonnes by 315,000 tpa Import of 120,000 tpa of ammonia Nitric Acid 3 / AN3 Capacity: 260,000 tpa
Slide 94: Key Milestones
93 93 Key Milestones • Pre-feasibility study recommended Kwinana location • FEED1 study completed in February 2011. Detailed engineering commenced - 30% completed in August 2011 • Long lead items ordered in June 2011. Negotiations commenced with engineering & construction contractors in July 2011 (E
Slide 95: Project Risk Mitigation
94 94 Project Risk Mitigation • NAAN3 technology is a copy of existing NAAN1 & 2 plants • Equipment selection & improvements based on 16 years of operation • Long lead items ordered in June 2011 to provide schedule certainty • Prill Plant expansion to be completed prior to NAAN3 to allow for thoroug
Slide 96: Video
95 Uy] Wesfarmers Chemicals, Energy & Fertilisers Video af CSBP Ammonium Nitrate Expansion Project 2008 ls C EW rai amit ING ry Mii? QiNIP MPN a i ieee c)NIF | ; WA
Slide 97: Key Project Objectives
96 96 Key Project Objectives • Safety: Zero harm • Budget: Within the approved capital budget – $550 million plus capitalised interest • Schedule: – Prill Plant 2 expansion completion by 31 September 2013 – NAAN3 construction completion by 31 December 2013 – Commissioning Q3 FY2014 – Start up Q4 FY2
Slide 98: 6. Carbon Pricing Update
6. Carbon Pricing Update Julian Andrews General Manager, Business Development
Slide 99: Divisional Overview
98 98 Divisional Overview Greenhouse gas emissions • FY2011 greenhouse gas emissions (Tonnes CO2e 000's) of 2.02 million tonnes CO2e FY11 – 1.86 million tonnes CO2e scope 1 & 2 FY10 – 0.15 million tonnes CO2e scope 3 FY09 • Total emissions stable on FY2010 FY08 – Scope 1 & 2 emissions declined 2.8%
Slide 100: Divisional Overview
99 99 Divisional Overview • CSBP’s nitric acid & ammonia plants in Kwinana account for approximately two thirds of the division’s scope 1 & 2 emissions * On 31 August 2011, Wesfarmers completed the sale of the enGen remote power business
Slide 101: Emissions Intensive Trade Exposed Activities
100 100 Emissions Intensive Trade Exposed Activities • Emissions intensive trade exposed (EITE) status of ammonia, ammonium nitrate & LNG production activities still to be determined – Expected to be eligible for assistance under the Jobs & Competitiveness Program • PVC & sodium cyanide production a
Slide 102: Divisional Impact
101 101 Divisional Impact • Overall cost impact is not expected to be significant in early years – Impact will vary by business – Abatement & energy efficiency initiatives may reduce cost • Current monitoring & reporting systems & processes are being reviewed
Slide 103: Nitrous Oxide Abatement
102 102 Nitrous Oxide Abatement • Nitrous oxide represents 46% of total WesCEF emissions • Abatement catalyst trial commenced February 2011 in nitric acid plant 2 • Installation in nitric acid plant 1 planned for February 2012 • Potential to significantly reduce emissions
Slide 104: Other Initiatives
103 103 Other Initiatives • Continued focus on energy efficiency initiatives • Additional abatement opportunities being reviewed • Review of grants & incentives available under Clean Energy legislative package
Slide 105: 6. Conclusion/ Q&A
6. Conclusion/ Q&A Tom O’Leary Managing Director, WesCEF
Slide 106: WesCEF Outlook
105 105 WesCEF Outlook Considerations for outlook include: • Previously announced adjustments $m 300 250 200 150 100 50 0 FY11 EBIT Insurance Kleenheat Ammonia Loss of enGen FY2012 ($283m) Proceeds impact shutdown earnings (base position) ($42m) ($25-30m) impact ($15m) ($10m) ($196-201m) • enGen gai
Slide 107: WesCEF Growth Opportunities
106 106 WesCEF Growth Opportunities Divisional: step-out expansion • Same sectors; domestic & overseas Chemicals • Potential AN3 expansion to 780,000 tpa – Expected construction completion Q2 FY2014 – Expected production to commence Q4 FY2014 • Move to import parity pricing for ammonia sales • Explo
Slide 108: WesCEF Growth Opportunities
107 107 WesCEF Growth Opportunities Kleenheat Gas • Continued expansion of domestic LNG market – HDV & power generation • Potential LPG plant debottlenecking • Distribution volumes & efficiencies Fertilisers • Continued growth in Flexi-N • Logistical & operational efficiencies • Leveraging fertilise
Slide 109: Questions
Questions eo Wesfarmers Chemicals, Energy & Fertilisers
Slide 110: Wesfarmers Chemicals, Energy & Fertilisers
es Wesfarmers Chemicals, Energy & Fertilisers
Slide 111: For further information
For further information Investors: Media: Luca Pietropiccolo Alan Carpenter Manager, Investor Relations Executive General Manager, & Planning Corporate Affairs Wesfarmers Limited Wesfarmers Limited T: +61 8 9327 4416 T: +61 8 9327 4267 E: pietrol@wesfarmers.com.au E: Acarpenter@wesfamers.com.au