Agl Energy Limited · ASX:AGL
Agl Energy — H1 2006 Earnings Presentation
50 slides from Agl Energy's earnings presentation, Feb 28, 2006
Slide 1: 2006 Half Year Financial Results
2006 Half Year Financial Results 6 months ended 31 December 2005 28 February 2006 1
Slide 2: Agenda
Agenda ¾ Introduction ¾ Half Year in Review - Financial ¾ Group Financial Performance ¾ Segment Performance ¾ Financial outlook ¾ Supplementary Information 2
Slide 3: Introduction
Introduction ¾ Underlying profit after tax from continuing operations up 15.4% ¾ Financial results support payment of interim dividend as per outlook in Scheme Booklet ¾ Improved Retail Energy margins and EBIT in intensely competitive markets ¾ Additional 148,300 high value dual fuel accounts ¾ Low
Slide 4: Half Year Review - Financial
Half Year Review - Financial Continuing (excluding significants) Dec 2005 Dec 2004 Change % EBIT $381.8m $347.0m +10.0 Profit after tax $234.1m $202.9m +15.4 Basic earnings per share 51.3c 44.4c +15.5 Operating cash flow $243.7m $290.0m -16.0 Reported Dec 2005 Dec 2004 Change % Profit after tax $282
Slide 5: Group Financial Performance
Group Financial Performance 5
Slide 6: Profit & Loss (excluding significant items)
Profit & Loss (excluding significant items) Change 6 months to Dec 2005 Dec 2004 % Revenue* 2,132.6 2,006.9 + 6.3 Expenses (1,670.2) (1,581.2) + 5.6 EBITDA 462.4 425.7 + 8.6 EBIT 381.8 347.0 + 10.0 Finance costs (55.1) (51.7) - 6.6 Profit before tax 326.7 295.3 +10.6 Income tax expense (92.6) (92.4)
Slide 7: Significant Items (net of tax)
Significant Items (net of tax) Dec 2005 6 months to $m Equity accounted profits relating to APT entering tax consolidation 4.8 Tax consolidation benefit 50.0 Demerger costs (6.9) Other 0.2 Net significant items 48.1 7
Slide 8: EBIT Contribution by Segment (excluding significant items)
EBIT Contribution by Segment (excluding significant items) Dec 2005 Dec 2004 Change 6 months to $m $m % Networks: Gas 68.1 74.1 -8.1 Electricity 47.7 39.0 +22.3 Agility 31.9 32.2 -0.9 Retail Energy 153.8 141.9 +8.4 Merchant Energy 34.2 19.3 +77.2 Energy Investments 55.5 52.2 +6.3 Property 0.1 - N/A
Slide 9: Cash Flow Summary (continuing operations)
Cash Flow Summary (continuing operations) Dec 2005 Dec 2004 6 months to Change % $m $m EBITDA (includes significant items) 457.6 432.7 + 5.8 Working capital (48.8) (0.7) N/A Equity accounted associates and JV’s (4.2) 3.1 N/A Finance costs (54.5) (57.6) - 5.4 Tax payments (106.4) (87.5) + 21.6 Operat
Slide 10: Financing (continuing operations)
Financing (continuing operations) 6 months to Dec 2005 Dec 2004 Change % Interest expense $55.1m $51.7m +6.6% Interest cover¹ 6.9x 6.7x +0.2x Interest rates at 31 December for 6 months 6.2% 6.3% -0.1 Net debt $2,768.1m $842.1m +228.7% Gearing (D/D+E) (%) 37.2 14.0 +23.2 1 Excluding significant items
Slide 11: Segment Performance
SIAGL Segment Performance 11
Slide 12: Retail Energy - Financials
Retail Energy - Financials Dec 2005 Dec 2004 Change 6 months to $m $m % Total revenue 1,739.0 1,730.6 +0.5 Expenses 1,577.3 1,580.7 -0.2 EBITDA 161.7 149.9 +7.9 D&A 7.9 8.0 -1.3 EBIT 153.8 141.9 +8.4 EBIT / sales % 8.8 8.2 +0.6 Key factors ¾ Solid revenue growth and cost control ¾ Strong EBIT/Sales
Slide 13: Retail Energy - Key Performance Measures
Retail Energy - Key Performance Measures ¾ Maintained leading market position ¾ Intensely competitive market ¾ Continued increase in dual fuel accounts ¾ Warmer H1 than prior corresponding ¾ Increased customer product penetration period 2005 2004 Electricity Variance $m $m Volume (GWh) 10,970 11,399
Slide 14: Retail Energy - Intensely Competitive Market (Annualised Churn Rates)
Retail Energy-Intensely Competitive Market 60% 50% 40% Annualised Churn Rates SA Gas 30% Vic Elec Vic Gas 20% SA Elec 10% NSW Elec NSW Gas 0% May-04 May-05 Mar-04 Mar-05 Nov-03 Nov-04 Nov-05 Jul-03 Aug-03 Sep-03 Oct-03 Dec-03 Jan-04 Feb-04 Apr-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Dec-04 Jan-05 Feb-
Slide 15: Retail Energy - Overall Market Share Maintained
Retail Energy - Overall Market Share Maintained Gas Electricity Dual Fuel Customer accounts + 5,500 - 31,200 + 16,924 Victoria Retail market churn: 21% 21% Customer accounts + 28,300 - 68,700 + 49,636 Retail market churn: 23%* 20%* Customer accounts - 5,300 +65,600 + 81,746 Retail market churn: 4% 7
Slide 16: Retail Energy – Mild Weather Impacts Sales
Retail Energy – Mild Weather Impacts Sales Heating Degree Days 800 700 600 500 Dec-05 400 Dec-04 300 200 100 0 Vic NSW SA 16
Slide 17: Merchant Energy – Financial
Merchant Energy – Financial Dec 2005 Dec 2004 Change 6 months to … $m $m % Segment result - EBITDA Power Assets 30.4 20.3 +49.8 Wholesale and Services 13.8 6.6 +109.1 EBITDA 44.2 26.9 +64.3 D&A 10.0 7.6 +31.6 EBIT 34.2 19.3 +77.2 Key factors ¾ Power Generation (including Southern Hydro) EBIT grew by
Slide 18: Merchant Energy - Operational
Merchant Energy - Operational Power Generation ¾ Southern Hydro Acquisition of Southern Hydro significantly strengthens generation capacity at peak times as well as delivering considerable renewable portfolio benefits. Integration proceeding on course. ¾ Loy Yang Refinancing aligns debt profile
Slide 19: Merchant Energy – Operational (cont)
Merchant Energy – Operational (cont) Wholesale Gas ¾ Sydney Gas 50/50 CSM Joint Venture established Delivers opportunities to participate in production leases and exploration licenses Operational role delivers 40 key operational staff & solid basis for future opportunities ¾ ESSO/BHP contracts r
Slide 20: Merchant Energy - Growth Opportunities
Merchant Energy - Growth Opportunities ¾ ‘Locked in’ development/growth opportunities across key energy sources: Hydro, Wind and Gas ¾ Indicative development costs per MW: gas $1.0m, hydro $1.2m, wind $2.3m Note: Hallett wind farm contracted. Macarthur, Dollar and Bluff subject to PPA with AGL Infra
Slide 21: Gas Networks - Financials
Gas Networks - Financials Dec 2005 Dec 2004 Change 6 months to … $m $m % Total revenue 173.3 177.8 -2.5 Expenses 68.7 67.7 +1.5 EBITDA 104.6 110.1 -5.0 D&A 36.5 36.0 +1.4 EBIT 68.1 74.1 -8.1 Key factors ¾ Performance primarily driven by reduced tariffs following regulatory reset applying in July 200
Slide 22: Electricity Networks - Financials
Electricity Networks - Financials Dec 2005 Dec 2004 Change 6 months to … $m $m % Total revenue 108.7 96.3 +12.9 Expenses 51.8 45.4 +14.1 EBITDA 56.9 50.9 +11.8 D&A 9.2 11.9 -22.7 EBIT 47.7 39.0 +22.3 Key factors ¾ Positive performance primarily driven by higher, weather related sales volumes and inc
Slide 23: Energy Networks - Operational
Energy Networks - Operational New South Wales ¾ Mild winter, warmer spring & summer impacts load growth ¾ Declining NSW housing estate starts slows gas network connections Gas Customers connected (net) 13,491 -7.2% Energy distributed 48.7 PJ -2.9% Additional network length 88 km Victoria ¾ Str
Slide 24: Agility - Financials
Agility - Financials Dec 2005 Dec 2004 Change 6 months to $m $m % Inter-segment revenue 143.9 143.5 +0.3 Other external revenue 93.1 66.9 +39.2 Total revenue 237.0 210.4 +12.6 Expenses 202.5 176.4 +14.8 EBITDA 34.5 34.0 +1.5 D&A 2.6 1.8 +44.4 EBIT 31.9 32.2 -0.9 Key factors ¾ Strong growth in third
Slide 25: Agility – Continued Expansion
Agility – Continued Expansion ¾ Won in excess of $100m additional third party work ¾ Ongoing expansion and scope of client and project portfolio Western Power WA Third Party Order Book $m Multinet/Alinta Vic 6 months ended Dec 120 Sydney Water 100 Expanding in NSW – Transgrid O&M work 80 E
Slide 26: Energy Investments (excluding significant items)
Energy Investments (excluding significant items) Dec 2005 Dec 2004 Change 6 months to Comment $m $m % Continuing ¾Warmer than average winter ActewAGL (50%) 26.8 29.3 -8.5 ¾Regulatory reset of network tariffs ¾Full contribution from GGT and 30% APT (30%) 10.3 8.1 +27.2 of CGP pipelines Elgas (50%) 7.
Slide 27: Outlook
SIAGL Outlook 27
Slide 28: Financial Outlook
Financial Outlook ¾ Detailed dividend forecasts have been provided to Shareholders in the AGL Demerger Scheme Booklet. These forecasts remain unchanged (see below) and are subject to Shareholder approval of the demerger scheduled for 27 March 2006 2005 2006 2007 Cents per share Actual Outlook Outloo
Slide 29: Questions and Answers
SIAGL Questions and Answers 29
Slide 30: Further Information & Disclaimer
Further Information & Disclaimer A full range of information on AGL including annual reports, presentations and financial results is available from our website www.agl.com.au Alternatively, contact Graeme Thompson Head of Investor Relations phone: +61 2 9921 2789 mobile: +61 (0)412 020 711 e-mail: g
Slide 31: Supplementary Information
SIAGL Supplementary Information
Slide 32: Balance Sheet
Balance Sheet As at As at 31 Dec 2005 30 Jun 2005 $m $m Current Assets 1,311.3 1,308.8 PPE 4,590.6 3,782.4 Other Non Current Assets 3,860.0 2,789.7 Total Assets 9,761.9 7,880.9 Current Liabilities 820.1 588.7 Total Debt 3,020.0 1,643.2 Other Non Current Liabilities 1,246.8 997.0 Total Liabilities 5,
Slide 33: Key Ratio Analysis (continuing operations)
Key Ratio Analysis (continuing operations) 6 months to 2005 2004 Change Franking 100.0% 90.3% +9.7 Dividend payout ratio 50.2 51.2 -1.0 Dividend cover 1.99x 1.95x +0.04x Basic EPS (excl significant items) 51.3c 44.4c +15.5% Operating cash flow per share 53.4c 63.5c -15.9% EBITDA margin (excl signifi
Slide 34: Profit Reconciliation - Reported v Underlying
Profit Reconciliation - Reported v Underlying Dec 2005 Dec 2005 Dec 2004 Dec 2004 reported Significant excl. sig. reported Significant excl. sig. $m $m $m $m $m $m Energy Networks Gas 68.1 68.1 74.1 74.1 Electricity 47.7 47.7 39.0 39.0 Agility 31.9 31.9 32.2 32.2 Retail Energy 153.8 153.8 141.9 141.
Slide 35: Capex
Capex SIB Discretionary Total 6 months ended 31 Dec 2005 $m $m $m Agility 0.0 7.0 7.0 Energy Networks - Gas 8.1 15.0 23.1 Electricity 10.3 25.7 36.0 Merchant Energy 14.0 30.8 44.8 Retail Energy 0.4 0.0 0.4 Investment 1.1 4.6 5.7 Corporate other 2.5 21.9 24.4 Total 36.4 105.0 141.4 35
Slide 36: AIFRS in AGL - Balance Sheet Impact
AIFRS in AGL - Balance Sheet Impact Transitional 2004/05 Total $m $m $m Total equity under AGAAP 30 June 2005 3,267.6 AIFRS adjustments AASB2 Share based payment (14.2) 5.2 (9.0) AASB3 Reversal of goodwill amortisation - 39.5 39.5 AASB112 Income tax (625.9) 8.3 (617.6) AASB119 Employment benefits 5.
Slide 37: AIFRS Profit Effect
AIFRS Profit Effect EPS Growth AGAAP vs AIFRS (excluding significant items) Dec 2005 Dec 2004 $m $m AGAAP PAT 216.9* 226.6 Weighted average number of shares 456.4 456.6 EPS (cps) 47.5 49.6 EPS (Growth) -4.2% AIFRS PAT 234.1 238.8 Weighted average number of shares 456.4 456.6 EPS (cps) 51.3 52.3 EPS
Slide 38: AIFRS Profit Effect
AIFRS Profit Effect Dec 2005 Dec 20041 $m $m AASB2 Share based payment (3.6) (1.8) AASB3 Reversal of goodwill amortisation 19.8 20.3 AASB119 Employee benefits 1.7 4.2 AASB112 Income tax 6.5 6.9 AASB3 Equity accounted investments - 0.7 Additional depreciation on fair value uplift (18.1) (18.1) AASB13
Slide 39: Retail – Electricity Sales Volume (GWh)
Retail – Electricity Sales Volume (GWh) 2005 2004 Variance Mass Market VIC 2,389 2,532 (143) (5.6)% SA 1,975 2,268 (293) (12.9)% NSW/ACT 549 275 274 99.6% 4,913 5,075 (162) (3.2)% C&I VIC 2,365 2,385 (20) (0.8)% SA 1,506 1,437 69 4.8% NSW/ACT 1,875 2,190 (315) (14.4)% QLD 311 311 0 0% 6,057 6,323 (2
Slide 40: Retail – Electricity Gross Margin
Retail – Electricity Gross Margin 2005 2004 Variance $m $m Mass market 144.4 128.7 15.7 Commercial & Industrial 14.7 17.4 (2.7) Total 159.1 146.1 13.0 ¾ Mass market Increased margin due to favourable energy costs. 40
Slide 41: Retail – Gas Sales Volume (TJ)
Retail – Gas Sales Volume (TJ) 2005 2004 Variance Mass Market NSW 14,544 15,377 (833) (5.4)% VIC 18,966 20,512 (1,546) (7.5)% SA 609 63 546 866.7% 34,119 35,952 (1,833) (5.1)% C&I NSW 18,839 19,005 (166) (0.9)% VIC 14,059 13,641 418 3.1% SA 3,093 2,684 409 15.2% 35,991 35,330 661 1.9% Total 70,110 7
Slide 42: Retail – Gas Gross Margin
Retail – Gas Gross Margin 2005 2004 Variance $m $m $m Mass market 111.0 109.1 1.9 Commercial & Industrial 17.9 16.4 1.5 Total 128.9 125.5 3.4 ¾ Mass market Up by $1.9m from 2004 representing an increase of 1.7%. Although the half year to December 2005 experienced warmer weather, this was offset by
Slide 43: Retail – Contract Customer Details
Retail – Contract Customer Details Market Offers by Fuel – Mass Market Fuel Dec 2005 Dec 2004 % Gas 372,743 234,441 59 Electricity 538,640 344,724 56 Total 911,383 579,165 57 Market Offers by State – Mass Market State Dec 2005 Dec 2004 % NSW 254,083 153,862 65 VIC 501,513 320,558 56 SA 155,787 104,7
Slide 44: Merchant - GEAC (Loy Yang) Performance
Merchant - GEAC (Loy Yang) Performance ¾ Contract market prices increased, spot prices volatile Weekly Contract Market Movements V Weekly Spot Price for VIC $36 $120 $35 $100 Contract Price ($/MWh) Spot Price ($/MWh) $34 $80 $33 $60 $32 $40 $31 $30 $20 $29 $0 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-0
Slide 45: Merchant - GEAC (Loy Yang) Financial Performance
Merchant - GEAC (Loy Yang) Financial Performance Electricity Sales GWh Average price (net of charges in fair value of derivatives 7,503 $35.88 $/MWh GEAC Financial Performance – AGL Equity Accounted Result For 6 months ended 31 Dec 2005 2004 ($m) ($m) Electricity sales revenue 87.5 78.6 Mining & oth
Slide 46: Merchant - GEAC (Loy Yang) Cash Flow
Merchant - GEAC (Loy Yang) Cash Flow Dec 2005 Dec 2004 ($m) ($m) Cash held at start 190.1 189.8 Cash flow from operations Total receipts from customers 276.1 327.8 Payments to suppliers (28.8) (162.0) Interest and other costs of finance paid (144.0) (113.0) Interest receipts 5.0 5.3 Hedging receipts
Slide 47: Energy Networks - Operational Statistics
Energy Networks - Operational Statistics Six months to Gas Electricity Dec 2005 Dec 2004 Change Dec 2005 Dec 2004 Change Volume transported - Tariff 17.27 PJ 17.68 PJ -2.3% Small customers 1,006 990 GWh 1.6% Contract 31.46 PJ 32.50 PJ -3.2% Large customers 1,132 1,148 GWh -1.4% Total 48.73 PJ 50.18
Slide 48: EBIT - Energy and Infrastructure – 6 months to 31 Dec 2005
EBIT - Energy and Infrastructure – 6 months to 31 Dec 2005 Energy Infrastructure AGL Total $m $m $m Agility - 31.9 31.9 Networks Gas - 68.1 68.1 Electricity - 47.7 47.7 Retail Energy 153.8 - 153.8 Merchant Energy 34.2 - 34.2 Energy Investment Actew AGL - Distribution - 18.4 18.4 Actew AGL - Retail 8
Slide 49: EBIT - Energy and Infrastructure – 6 months to 31 Dec 2004
EBIT-Energy and Infrastructure – 6 months to 31 Dec 2004 Energy Infrastructure AGL Total $m $m $m Agility - 32.2 32.2 Networks Gas - 74.1 74.1 Electricity - 39.0 39.0 Retail Energy 141.9 - 141.9 Merchant Energy 19.3 - 19.3 Energy Investment Actew AGL - Distribution - 18.9 18.9 Actew AGL - Retail 10.
Slide 50: Cash flow – Energy and Infrastructure for the 6 months ending 31 Dec 2005
Cash flow – Energy and Infrastructure for the 6 months ending 31 Dec 2005 and 2004 Energy Infrastructure Total Dec 2005 Dec 2004 Dec 2005 Dec 2004 Dec 2005 Dec 2004 $m $m $m $m $m $m EBITDA 220.7 190.5 236.9 242.2 457.6 432.7 Working capital -34.2 -0.5 -14.6 -0.2 -48.8 -0.7 Equity accounted -6.7 +2.