Agl Energy Limited · ASX:AGL
Agl Energy — H1 FY2008 Earnings Presentation
50 slides from Agl Energy's earnings presentation, Feb 29, 2008
Slide 1: 2008 interim results
AGL Energy Limited For personal use only 2008 interim results 6 months ended 31 December 2007 29 February 2008
Slide 2: Disclaimer
2 Disclaimer For personal use only The information in this presentation: • Is not an offer or recommendation to purchase or subscribe for securities in AGL Energy Limited or to retain any securities currently held. • Does not take into account the potential and current individual investment objectiv
Slide 3: Agenda
3 Agenda For personal use only Result overview Michael Fraser, MD & CEO Group financials Stephen Mikkelsen, CFO Operational review Michael Fraser, MD & CEO Outlook & way forward Michael Fraser, MD & CEO Supplementary information NOTE This presentation should be read in conjunction with the AGL Energ
Slide 4: Result Overview
4 Result Overview For personal use only On track to deliver FY08 EBITDA and NPAT guidance Victorian Gas Spot Price • $471.3m operating EBITDA, up 14.1% on pcp 45 • $372.9m operating EBIT, up 14.9% on pcp 40 • $182.8m underlying NPAT, down 6.5% on pcp 35 Financial $/MWh • Interim Dividend of 26 cps f
Slide 5: Result Overview – Financial
Result Overview – Financial 5 (excluding significant items & fair value movements) For personal use only 6 months to Pro forma1 Change $m 31 Dec 2007 31 Dec 2006 % Revenue 2,833.8 2,224.4 27.4 Operating EBITDA 471.3 412.9 14.1 Operating EBIT 372.9 324.5 14.9 Net finance costs (94.4) (28.1) - Underly
Slide 6: Group financials
6 For personal use only Group financials Stephen Mikkelsen Chief Financial Officer
Slide 7: Profit & Loss
Profit & Loss 7 (excluding significant items & fair value movements) For personal use only 6 months to Pro forma Change 31 Dec 2007 31 Dec 2006 % $m Revenue 2,833.8 2,224.4 27.4 Operating EBITDA 471.3 412.9 14.1 Operating EBIT Retail 134.8 136.6 (1.3) Merchant 238.9 197.6 20.9 Energy investments (Ga
Slide 8: Significant Items
8 Significant Items1 For personal use only 6 months to 31 Dec 2007 $m Gain on disposal on investment in AlintaAGL 123.7 Impairment of property, plant & equipment (42.7) Impairment of research & development assets (5.4) Impairment of Chile assets (37.0) Phoenix Change program one-off costs (10.4) St
Slide 9: Operational Cash Flow Summary
9 Operational Cash Flow Summary1 For personal use only 6 months to 31 Dec 2007 $m EBITDA 471.3 Equity accounted associates & joint ventures (net of dividends received) (6.9) Net finance costs (91.9) Tax paid (57.9) Working capital (109.4) Operating cash flow 205.3 Stay In Business (SIB) capex (10.7)
Slide 10: Capital Management
10 Capital Management For personal use only Modest debt refinancing requirements $m Active program underway to reduce debt by Debt maturing within 12 months 759.5 approximately $600 to $700 million in order to return ratio of FFO1 to interest expense to 5x. Less: Undrawn facilities (mature Oct 09) (
Slide 11: Retail – Key Financial Metrics
11 Retail – Key Financial Metrics Focus on margin management For personal use only (Pro forma) (Pro forma) 6 mths to 6 mths to $m 12 mths to 6 mths to Dec 2007 Jun 2007 Jun 2007 Dec 06 Revenue 2,335.1 3,808.0 2,093.7 1,673.4 Cost of Sales (2,082.6) (3,354.8) (1,914.5) (1,440.3) Gross margin 252.5 45
Slide 12: Retail – EBIT Drivers
12 Retail – EBIT Drivers For personal use only • 1HFY07 normalisation – refer footnotes 1 & 2 on prior slide. Issue identified and adjusted in AGK accounts early 2HFY07. • Acquired businesses – SunGas & Powerdirect – see supplementary slides. • Electricity gross margin (excluding acquired businesses
Slide 13: Merchant – Key Financial Metrics
13 Merchant – Key Financial Metrics For personal use only 6 months to Dec 2007 Pro forma Change $m Dec 06 % Wholesale Energy EBITDA Merchant Power 151.3 99.3 52.4 GEAC 16.0 15.3 4.6 Wholesale Gas 27.3 33.6 (18.8) Energy Services 18.6 9.4 97.9 Upstream Gas EBITDA PNG 84.0 100.7 (16.6) CSM 16.2 6.1 16
Slide 14: Merchant – EBIT Analysis
14 Merchant – EBIT Analysis For personal use only 6 months to Pro forma Change Dec 2007 $m Dec 2006 % Revenue from Retail Business Electricity 953.4 547.5 74.1 Gas 222.0 194.4 14.2 External Revenue Generation revenue 126.8 25.0 407.2 Oil liftings revenue 98.0 123.8 (20.8) ActewAGL1 116.0 80.0 45.0 H
Slide 15: Merchant – EBIT Drivers
15 Merchant – EBIT Drivers For personal use only • Merchant Power increased contribution of $49.1 million driven by increased generation volumes, ongoing wind farm development fees & an actively managed hedge portfolio. • Energy Services increased contribution of $8.2 million driven by benefits from
Slide 16: Operational review
16 For personal use only Operational review Michael Fraser Managing Director & CEO
Slide 17: The Integrated Strategy
17 The Integrated Strategy For personal use only Building a world class customer focused energy company Gas Renewable Thermal Production Generation Generation • Drive retail economies of scale and enhance Upstream Supply customer service capability Capturing value & growth Capturing value & growth T
Slide 18: Retail - Capability Building
18 Retail - Capability Building For personal use only Project Phoenix is a four-year program which will deliver a whole-of-business customer management & billing platform. At completion, AGL will hold world class competitive market capability, at industry-leading cost to serve. • Capture full synerg
Slide 19: Retail – Investing in the Brand
19 Retail – Investing in the Brand For personal use only Leveraging latent value in the AGL brand • Align advertising with sales - AGL is lifting our investment in brand marketing to be consistent with our market position. - We are driving sales activity to maintain market leadership. • Integrated a
Slide 20: Retail - Driving Cost Efficiencies
20 Retail - Driving Cost Efficiencies For personal use only Reducing cost to grow and cost to serve 6 months to Dec 2007 Pro forma Change Dec 2006 % Net Operating Expenditure (Excl. QLD Customer Amortisation) $m 106.1 96.6 Net Operating Costs per Mass Market Account (average across 6 months) $33.37
Slide 21: Retail – Account Billing Data
Retail – Account Billing Data 21 (as at 31 Dec 07) For personal use only Gas Electricity Dual Fuel VIC Customer accounts 488,900 636,900 17,900 SA Customer accounts 8,400 443,300 117,900 NSW Customer accounts 751,300 251,600 323,400 QLD Customer accounts 72,800 452,900 - Total accounts (Net) 31 Dec
Slide 22: The Integrated Strategy
22 The Integrated Strategy For personal use only Building a world class customer focused energy company Gas Renewable Thermal Production Generation Generation • Drive retail economies of scale & enhance Upstream Supply customer service capability. Capturing value & growth Capturing value & growth Th
Slide 23: Merchant – Power Generation
23 Merchant – Power Generation For personal use only Diversity across Renewables & Gas Operational Torrens Island Power Station • Delivered ~60% increase in portfolio capacity on acquisition 2 July plus WUGS gas storage agreement & 300 PJ, 10 year GSA. • Continued strong plant performance: increased
Slide 24: Merchant – Upstream Gas
24 Merchant – Upstream Gas For personal use only Securing & monetising gas QGC1 QGC 3.00 • LNG project adds material upside to AGL investment. 2.50 2P reserves $/GJ • No change to 540 PJ, 20 year GSA with 200 PJ option (100 PJ +172% already exercised). 2.00 • No change to domestic gas marketing agre
Slide 25: PNG
25 PNG For personal use only Non core – considering divestment options • Adding value to gas. - Gas focus has moved to LNG Project - Working toward imminent FEED decision • Oil production continues natural decline - Development drilling activity to increase over next 12 months • FY08 expected produc
Slide 26: Merchant – Wholesale Gas Portfolio
26 Merchant – Wholesale Gas Portfolio For personal use only • Considerable portfolio flexibility: ACQ ‘up & down’, MDQ, ToP & flexible delivery points. • Rolling buy long / sell short portfolio strategy. • Pricing mechanism & flexibility ensures ongoing competitiveness. • Independent analysis sugges
Slide 27: Outlook & way forward
27 For personal use only Outlook & way forward Michael Fraser Managing Director & CEO
Slide 28: The Integrated Strategy – Generation & Gas
28 The Integrated Strategy – Generation & Gas For personal use only 95 MW Brown Hill On schedule & on budget, due for completion 2HFY08 (Hallett SA) wind: 140 MW Bogong (Vic) hydro: Ahead of schedule & on budget, due for completion 1HFY10 71 MW Hallett Hill (SA) wind: In construction, due for comple
Slide 29: A Carbon Effective Portfolio
29 A Carbon Effective Portfolio For personal use only Both the current & potential AGL generation portfolios are well positioned to deliver material benefits in a carbon constrained environment • AGL modelling indicates that under either permit allocation for disproportionate loss or no permit alloc
Slide 30: Financial Outlook
30 Financial Outlook For personal use only • On track to deliver FY08 guidance: - Operating EBITDA $830 to $875 million. Financial outlook - Underlying NPAT $3301 to $3601 million. • Total FY08 annual dividend 52 to 55 cents per share, fully franked. • Modest (calendar 2008) refinancing requirements
Slide 31: Strategic Priorities & Conclusion
31 Strategic Priorities & Conclusion For personal use only • Continued, disciplined roll out of integrated strategy: - Medium term targets: Strategic ▪ ~1,500 to 2,000 PJ of upstream gas. priorities ▪ ~5,000 to 6,000 MW of generation. ▪ ~4 to 5 million customers . • Reshaping asset portfolio to maxi
Slide 32: Further Information / Contacts
32 Further Information / Contacts For personal use only A range of information on AGL Energy Limited including ASX & Media Releases, Presentations, Financial Results as well as historical ‘The Australian Gas Light Company’ Scheme Booklets, Annual Reports, Sustainability Reports, Presentations and Fi
Slide 33: Supplementary information
33 For personal use only Supplementary information
Slide 34: Energy Investments
34 Energy Investments For personal use only 6 months to Pro forma Change $m Dec 2007 Dec 2006 % EBITDA ActewAGL 15.2 11.3 34.5 Elgas 9.9 8.9 11.2 GasValpo 12.3 12.5 (1.6) AlintaAGL1 13.6 2.7 n/a Investments Other 2.5 2.7 (7.4) Total EBITDA 53.5 38.1 40.4 Gas Valpo depreciation (2.9) (2.9) - Total EB
Slide 35: Reconciliation
35 Reconciliation Statutory Cash flow to Operational Cash flow For personal use only 6 months to $m Statutory net cash provided by operating activities 111.1 Deduct: receipts from NEMMCO deposits replaced by guarantees (238.3) Add: Futures margin calls 332.5 Operating cash flow 205.3
Slide 36: Balance Sheet
36 Balance Sheet For personal use only As at Pro Forma $m 31 Dec 2007 31 Dec 2006 Current assets 3,576.8 1,386.7 PPE and oil and gas assets 2,331.4 1,686.2 Other non current assets 4,291.0 2,967.7 Total Assets 10,199.2 6,040.6 Current liabilities 2,053.4 927.3 Total debt 2,390.9 1,700.4 Other non cu
Slide 37: Fair Value Reconciliation
37 Fair Value Reconciliation For personal use only Net Assets $m 31 Dec 2007 30 Jun 2007 Change Electricity derivative contracts 1,407.2 3,965.3 (2,558.1) Oil derivative contracts (117.3) (21.8) (95.5) Interest rate swap and foreign currency contracts 18.3 9.7 8.6 1,308.2 3,953.2 (2,645.0) Change in
Slide 38: Capital Expenditure
38 Capital Expenditure For personal use only 6 months to Dec 2007 SIB Discretionary Total $m Merchant Energy 6.0 92.01 98.0 Retail Energy 0.8 32.22 33.0 Corporate Other 3.9 2.6 6.5 Total 10.7 126.8 137.5 1. Includes $26.2 million Bogong, $25.4 million Hallett 2 (Hallett Hill) Wind Farm, $16.9 millio
Slide 39: Gas Sales Volume
39 Gas Sales Volume For personal use only 6 months to Dec 2007 Dec 2006 Change PJ % Mass Market VIC 17.3 18.9 (8.5) SA 0.7 0.8 (12.5) NSW 13.8 14.6 (5.5) QLD 1.6 0.0 n/a Mass Market Total 33.4 34.3 (2.6) C&I VIC 17.1 13.8 23.9 SA 3.6 3.6 - NSW 24.0 25.3 (5.1) QLD 7.1 0.0 n/a C & I Total 49.2 42.7 15
Slide 40: Electricity Sales Volume
40 Electricity Sales Volume For personal use only 6 months to Change Dec 2007 Dec 2006 GWh % VIC 2,098 2,174 (3.5) SA 1,457 1,718 (15.2) NSW 1,054 794 32.7 QLD PDA 1,734 - n/a QLD PDA SME 1,043 - n/a Mass Market 7,386 4,686 57.6 VIC 2,929 2,308 26.9 SA 1,294 1,306 (0.9) NSW 3,194 1,797 77.7 QLD 3,87
Slide 41: Retail – SunGas & Powerdirect
41 Retail – SunGas & Powerdirect For personal use only 6 months to Dec 2007 Dec 2006 $m Revenue ($596m Powerdirect, $66.5 SunGas) 662.5 n/a Cost of sales (605.5) n/a Gross margin 57.0 n/a Operating costs (ex. D & A) (17.2) n/a EBITDA 39.8 n/a
Slide 42: Retail – Mass Market Key Indicators
Retail – Mass Market Key Indicators1 42 (includes SME) For personal use only Change 6 months to Dec 2007 Dec 2006 % Electricity Volume (GWh) 7,386 4,686 57.6 Mass Market Accounts ('000) 1,780 1,385 28.5 Revenue ($m) 856.6 577.8 48.2 Gross Margin 141.2 97.61 46.5 Gross Margin % 16.5% 16.9%1 6 months
Slide 43: Retail – C & I Key Indicators
43 Retail – C & I Key Indicators For personal use only Change 6 months to Dec 2007 Dec 2006 % Electricity Volume (GWh) 11,290 5,735 96.9 C & I Accounts ('000) 11.2 11.8 (5.0) Revenue ($m) 762.4 430.8 77.0 Gross Margin ($m) 10.1 13.9 (27.1) Gross Margin % 1.3% 3.2% 12 months to Gas Volume (PJ) 49.2 4
Slide 44: Retail – Weather Impact
44 Retail – Weather Impact For personal use only Heating Degree Days 800 • Milder weather in VIC & SA and cooler 700 weather in QLD compared with prior 600 year. 500 • VIC had a very mild spring (warmer) & the 9th highest December 400 temperatures on record. 300 • SA had above average temperatures 2
Slide 45: Retail – Overall Market Churn
45 Retail – Overall Market Churn For personal use only 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 NSW Electricity - Market NSW Gas - Market VIC Electricity - Market
Slide 46: Merchant - Hydrology
46 Merchant - Hydrology For personal use only Hydro benefiting from good rain & snow • Full discretionary Kiewa Scheme (365MW including Bogong) inflows significantly higher than pcp. • Eildon (135MW) operational, consistent water levels in recent months. • Dartmouth (180MW) not anticipated to be ope
Slide 47: Merchant – Generation Assets
47 Merchant – Generation Assets For personal use only 6 months to Dec 2007 TIPS Somerton Vic NSW QLD Gen Other SA Total $m Hydro Hydro Pool Revenue 99.7 3.6 13.9 1.2 2.3 6.1 126.8 GWh 1,602.1 25.7 188.3 23.7 12.3 142.0 1,994.1 Net revenue $/MWh 62.2 141.0 74.1 50.5 186.6 43.3 63.6 • Pool revenue us
Slide 48: Merchant – PNG Financial
48 Merchant – PNG Financial For personal use only 6 months to Dec 2007 Dec 2006 Change $m % Oil sales (post hedge) 100.1 127.4 (21.4) Tariff / other income 3.8 2.4 58.3 Oil option amortisation (2.1) (3.6) 41.7 Total revenue 101.8 126.2 (19.3) Operating costs (17.8) (25.5) 30.2 EBITDA 84.0 100.7 (16.
Slide 49: Merchant – PNG Metrics
49 Merchant – PNG Metrics For personal use only 6 months to Dec 2007 Dec 2006 Change % Liftings (k bbl) 1,207 1,403 (14.0) Production (k bbl) 1,167 1,235 (5.5) Inventory (k bbl) 63 19 (231.6) Post hedge oil price (US$ / bbl) 72.0 69.3 3.9 Unit operating (cash) expenses (A$ / bbl) 17.2 14.7 (17.0) Un
Slide 50: GEAC Profit & Loss
50 GEAC Profit & Loss1 For personal use only 6 months to Dec 2007 Dec 2006 Change $m % AGL Equity Share of Profit 10.5 9.6 9.0 AGL Loan note interest 5.5 5.7 (5.0) Total Equity Result 16.0 15.32 4.0 • Improvement in spot market & ongoing improvement in contract market. • Recent non-AGL 15% sharehold