Meridian Energy Limited · NZX:MEL

Meridian Energy — FY2012 Earnings Presentation

40 slides from Meridian Energy's earnings presentation, Aug 13, 2012

  1. Slide 1: Annual Results for Year Ended 30 June 2012

    MERIDIAN ENERGY LIMITED ANNUAL RESULTS FOR YEAR ENDED 30 JUNE 2012 RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2012 13 AUGUST 2012

  2. Slide 2: Disclaimer

    MERIDIAN ENERGY LIMITED 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

  3. Slide 3: Overview of Meridian

    MERIDIAN ENERGY LIMITED OVERVIEW OF MERIDIAN  Vertically integrated renewable developer, RETAIL ICPs - AS AT 30 JUNE 2012 generator and retailer of electricity (Source: Electricity Authority) 4% 15%  Generates electricity from renewable sources 11%  Largest generator in New Zealand – 28% of 23% 2

  4. Slide 4: Financial Performance

    MERIDIAN ENERGY LIMITED FINANCIAL PERFORMANCE  Net Profit After Tax (NPAT) was $74.6m compared to $303.1m in FY 2011 GROUP PROFIT – Adjusting for gain on sale of Tekapos 2012 74.6 106.1 Financial Year End 30 June 303.1 ($157.4m), Tekapo generation revenue1 and 2011 219.0 184.0 NZAS settlement recei

  5. Slide 5: Influences on Performance – Inflows

    MERIDIAN ENERGY LIMITED INFLUENCES ON PERFORMANCE – INFLOWS TOTAL INFLOW MERIDIAN'S WAITAKI AND WAIAU CATCHMENTS 22,000 Key 21,000 1 Hydro Generation Volume 2009 (excluding generation from Tekapo 20,000 10,764GWh1 Hydro Stations) 19,000 $48.53/MWh2 2 Average Wholesale Electricity Sales Price Receive

  6. Slide 6: Influences on Performance – Market

    MERIDIAN ENERGY LIMITED INFLUENCES ON PERFORMANCE – MARKET  Low demand growth over the last 5 years driven by ICPs CHANGING ELECTRICITY SUPPLIER AS AT 30 JUNE 2012 (SOURCE : ELECTRICITY AUTHORITY) global economic conditions 50,000 30% 25%  High retail churn remains but levelling out 40,000 Annuali

  7. Slide 7: Operational Highlights

    OPERATIONAL HIGHLIGHTS RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2012 13 AUGUST 2012 7

  8. Slide 8: Operational Highlights

    MERIDIAN ENERGY LIMITED OPERATIONAL HIGHIGHTS  Unprecedented hydrology conditions well managed during the year  Underlying1 Retail profitability improved by $5.90 per MWh of contracted sales – Annual ICP growth of 5% (Powershop 43%) – Continue to rebalance portfolio (location and segments)  Indus

  9. Slide 9: Operational Highlights (continued)

    MERIDIAN ENERGY LIMITED OPERATIONAL HIGHLIGHTS (continued)  Employee engagement results improved 3.4%  Improved health and safety metrics, which LOST-TIME FREQUENCY RATES (MERIDIAN EMPLOYEE INCIDENTS PER MILLION HOURS WORKED) Meridian Employee Incidents per Million outperform industry benchmarks 7

  10. Slide 10: Strategic Focus

    MERIDIAN ENERGY LIMITED STRATEGIC FOCUS – Continually improve business performance strategic – Continue to strengthen retail performance focus – Grow value through renewable generation – Develop Meridian’s Australian business market – Global economic impacts on customers imperatives – Ownership chan

  11. Slide 11: Financial Summary

    FINANCIAL SUMMARY RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2012 13 AUGUST 2012 12

  12. Slide 12: Financial Summary

    MERIDIAN ENERGY LIMITED FINANCIAL SUMMARY $ Millions JUNE 2012 JUNE 2011 % CHANGE Wholesale and Retail Energy Margin 729.5 920.2 (21%) International and Other Segment Energy Margin 33.7 30.1 12% Group Energy Margin 763.2 950.3 (19%) Dividends and Other Revenue 27.3 42.6 (36)% Energy Related Expenses

  13. Slide 13: NZ Energy Margin (Wholesale and Retail – 2012 Analysis)

    MERIDIAN ENERGY LIMITED NZ ENERGY MARGIN (Wholesale and Retail – 2012 Analysis) Contracted Revenue Acquired Net Spot Exposure Generation Costs 2,400 2,200 2,000 302.2 1,800 1,600 1,400 1,328.3 $ M'illions 1,200 1,107.7 1,000 800 373.2 330.6 600 400 729.5 605.3 200 - Retail Wholesale Cost of Meridian

  14. Slide 14: NZ Energy Margin (Wholesale and Retail – 2011 to 2012)

    MERIDIAN ENERGY LIMITED NZ ENERGY MARGIN (Wholesale and Retail – 2011 to 2012) 1,500 Last Year Adjustments Contracted Revenue Acquired Net Spot Exposure Generation Costs 1,400 1,300 254.6 1,200 1,100 698.8 1,000 $ Millions 900 44.1 560.3 28.1 22.5 4.1 800 253.0 700 920.2 848.0 600 729.5 500 400 Ener

  15. Slide 15: Storage, Inflows and Price

    MERIDIAN ENERGY LIMITED STORAGE, INFLOWS AND PRICE  Record low inflows into our South Island WAITAKI STORAGE CATCHMENT (MERIDIAN STORAGE ONLY) catchments 3,000 2,500  Conservative generation as we responsibly Storage (GWh) 2,000 managed storage levels 1,500 1,000  Average wholesale electricity pr

  16. Slide 16: New Zealand Generation

    MERIDIAN ENERGY LIMITED NEW ZEALAND GENERATION  Hydro generation production fell 2,839GWh (22%) NEW ZEALAND PHYSICAL GENERATION VOLUMES from FY 2011, of which 1,015GWh was generated 9,790 1,206 from the Tekapo assets sold to Genesis 2012 Financial Year Ended 30 June 2011 12,629 1,023  Net reductio

  17. Slide 17: Retail

    RETAIL RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2012 13 AUGUST 2012 18

  18. Slide 18: Improved Retail Performance

    MERIDIAN ENERGY LIMITED IMPROVED RETAIL PERFORMANCE  When removing the volatility of the wholesale Retail Segment 2012 2011 Change market and replacing with a purchase price of Energy Sales ($m) $1,156.6 $1,029.1 12% $85/MWh, Retail profit (EBITDAF) per MWh of Avg Contracted Sales Price $163.9/MWh

  19. Slide 19: Improved Retail Performance (continued)

    MERIDIAN ENERGY LIMITED IMPROVED RETAIL PERFORMANCE (continued)  Total ICPs of 287,304 at 30 June 2012, 5% up on MERIDIAN ICP NUMBERS FY 2011 2012 116,580 35,369 122,834 12,521 Financial Year Ended 30 June  Growth achieved in a highly competitive market 2011 109,565 21,169 129,651 12,391 and despi

  20. Slide 20: Transmission (HVDC Charges)

    MERIDIAN ENERGY LIMITED TRANSMISSION (HVDC Charges)  Transmission costs increased $2.5m (3%) from FY 2011 TRANSMISSION COSTS  South Island generators continue to pay for an asset 2012 86.7 Financial Year Ended 30 June that brings national benefit 2011 84.2 2010 78.9  Anticipated price increases d

  21. Slide 21: Operating Expenditure

    MERIDIAN ENERGY LIMITED OPERATING EXPENDITURE  Employee and Other operating expenditure was $10.9m (5%) lower than in FY 2011 EMPLOYEE AND OTHER OPERATING COSTS 79.6 147.6  Employee expenditure reflected low level of 2012 Financial Year Ended 30 June performance incentives earned 2011 89.5 148.6 2

  22. Slide 22: EBITDAF to NPAT

    MERIDIAN ENERGY LIMITED EBITDAF TO NPAT 500 450 400 228.2 350 300 250 $ Millions 476.6 200 82.5 15.2 150 68.6 60.1 44.6 1.2 100 23.6 15.2 50 106.1 74.6 - EBITDAF Dep & Amort Net Finance Premiums on Taxation Underlying 1 Fair Value Non-cash Other Effect of Taxation NPAT 30 June 2012 & Other Costs Ele

  23. Slide 23: Fair Value Movements

    MERIDIAN ENERGY LIMITED FAIR VALUE MOVEMENTS  To manage risk we enter into a range of financial FAIR VALUE MOVEMENTS instruments 2012 53.4  Accounting standards only allow hedge accounting Financial Year Ended 30 June 2011 (103.4) if specific conditions are met, this creates earnings 2010 (38.2) v

  24. Slide 24: Reprioritisation of Investments

    MERIDIAN ENERGY LIMITED REPRIORITISATION OF INVESTMENTS  Programme of rationalising non-core investments continues – In June 2012 Meridian sold its shareholding in Whisper Tech’s European joint venture – This follows on from the sale of the Right House business on 1 July 2011 – Marketing the US sol

  25. Slide 25: Funding

    MERIDIAN ENERGY LIMITED FUNDING  Standard & Poor’s A2, BBB+ (stable outlook) credit DEBT MATURITY PROFILE AS AT 30 JUNE 2012 rating maintained 2017+ 562 30 493  Cash and undrawn debt facilities of $611.5m 2016 157 50 including cash of $214.4m as at 30 June 2012 2015 135 150 Calender Year ($426.6m

  26. Slide 26: Capital Investment

    MERIDIAN ENERGY LIMITED CAPITAL INVESTMENT  The Macarthur development in Australia has dominated capital spend in 2012 600 INVESTMENT EXPENDITURE 2 42  Capital spend in 2013 will include completion of 500 20 9 the Macarthur wind farm and the commencement 42 35 43 400 7 of construction of the Mill

  27. Slide 27: New Zealand Development Pipeline

    MERIDIAN ENERGY LIMITED NEW ZEALAND DEVELOPMENT PIPELINE  Meridian has a diverse pipeline  Mill Creek wind farm (60MW) development showing strong economics and supporting North Island retail growth Maungaharuru  The Hunter Downs Irrigation scheme was granted resource consent in November 2011, sup

  28. Slide 28: Australian Operations

    MERIDIAN ENERGY LIMITED AUSTRALIAN OPERATIONS  Construction of the Macarthur wind farm (420MW), in a joint venture with AGL, progressing to plan  Foundations now complete on all 140 turbines, full commissioning expected July 2013  Macarthur pre-interest income of A$58m per year from January 2013

  29. Slide 29: Australian Development

    MERIDIAN ENERGY LIMITED AUSTRALIAN DEVELOPMENT  Mt Mercer wind farm is advancing through investment review and is showing very attractive economics  Early site assessments of future potential wind and solar options continues  Meridian is trialling the Powershop offering in the Australian retail m

  30. Slide 30: NZAS Disclosure

    MERIDIAN ENERGY LIMITED NZAS DISCLOSURE  Meridian Energy has been approached by Pacific Aluminium Pty Ltd, a business unit of Rio Tinto Ltd, the majority shareholder of New Zealand Aluminium Smelters Ltd (NZAS), to discuss potential changes to the electricity contract with the smelter  In 2007 Mer

  31. Slide 31: Additional Information

    ADDITIONAL INFORMATION RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2012 13 AUGUST 2012 32

  32. Slide 32: Income Statement

    MERIDIAN ENERGY LIMITED INCOME STATEMENT $ Millions 2012 2011 2010 2009 2008 Group Energy Margin 763.2 950.3 941.6 785.3 645.4 Dividend and Other Revenue 27.3 42.6 387 27.1 25.2 Energy Related Expenses (Non-core) - (10.7) (9.2) (3.3) - Energy Transmission Expense (86.7) (84.2) (78.9) (78.2) (75.3) G

  33. Slide 33: Underlying Profit After Tax (Reconciliation)

    MERIDIAN ENERGY LIMITED UNDERLYING PROFIT AFTER TAX (Reconciliation) $ Millions 2012 2011 2010 2009 2008 Group Net Profit After Tax 74.6 303.1 184.0 89.3 128.6 Net Change in Fair Value of Financial Instruments 68.0 14.2 23.3 32.5 14.3 Net Change in Fair Value of Electricity, Aluminium and Foreign Ex

  34. Slide 34: Balance Sheet

    MERIDIAN ENERGY LIMITED BALANCE SHEET $ Millions 2012 2011 2010 2009 2008 Cash and Cash Equivalents 214.4 368.2 54.4 47.9 71.7 Accounts Receivable and Prepayments 298.1 240.9 199.1 188.2 471.1 Other 58.3 18.1 18.1 30.8 61.9 Current Assets 570.8 627.2 271.6 266.9 604.7 Property, Plant and Equipment 7

  35. Slide 35: Wholesale Segment Performance

    MERIDIAN ENERGY LIMITED WHOLESALE SEGMENT PERFORMANCE $ Millions JUNE 2012 JUNE 2011 % CHANGE Energy Sales Revenue 1,329.8 954.6 39% Energy Related Expenses (567.4) (246.9) (130%) Energy Distribution Expense (23.5) (20.1) (17%) Wholesale Energy Margin 738.9 687.5 7% Dividend and Other Revenue 6.1 8.

  36. Slide 36: Retail Segment Performance

    MERIDIAN ENERGY LIMITED RETAIL SEGMENT PERFORMANCE $ Millions JUNE 2012 JUNE 2011 % CHANGE Energy Sales Revenue 1,156.6 1,029.1 12% Energy Related Expenses (785.4) (448.9) (75%) Energy Distribution Expense (380.7) (347.5) (10%) Energy Margin (9.5) 232.7 2,549% Dividend and Other Revenue 11.6 9.4 23%

  37. Slide 37: International Segment Performance

    MERIDIAN ENERGY LIMITED INTERNATIONAL SEGMENT PERFORMANCE $ Millions JUNE 2012 JUNE 2011 % CHANGE Energy Sales Revenue 23.3 21.8 7% Energy Related Expenses (0.5) (0.5) 0% International Energy Margin 22.8 21.3 7% Dividend and Other Revenue 2.6 - Energy Transmission Expenses (2.0) (1.9) (5%) Gross Mar

  38. Slide 38: Other Segment Performance

    MERIDIAN ENERGY LIMITED OTHER SEGMENT PERFORMANCE $ Millions JUNE 2012 JUNE 2011 % CHANGE Energy Sales Revenue 20.9 15.3 37% Energy Related Expenses (10.0) (6.7) 49% Energy Distribution Expense - 0.2 Energy Margin 10.9 8.8 24% Dividend and Other Revenue 7.5 23.2 (68%) Energy Related Expenses (Non-co

  39. Slide 39: Generation Pipeline

    MERIDIAN ENERGY LIMITED GENERATION PIPELINE Development Option Stage Capacity Central Wind Investment ready 120MW Maungaharuru Consent held 94MW Mill Creek Consent held 60MW Mt Munro Consent Application Lodged 60MW Hurunui Consultation 76MW Pukaki (Gate 18) Hydro Consents held 35MW North Bank Hydro

  40. Slide 40: Segment Reporting

    MERIDIAN ENERGY LIMITED SEGMENT REPORTING We view the business from the perspective of three reportable segments, being Wholesale, Retail and International Meridian Segment Composition New Zealand Wholesale Retail International Other Segments Unallocated Wholesale Meridian Retail Australia Energy fo

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