Contact Energy Limited · NZX:CEN
Contact Energy — FY2007 Earnings Presentation
26 slides from Contact Energy's earnings presentation, August 2007
Slide 1: Annual Financial Results
Annual Financial Results for the twelve months ended 30 June 2007
Slide 2: Disclaimer
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 in any forward-looking stat
Slide 3: Overview
Overview A successful year in challenging market conditions Completion of the acquisition of Rockgas Pleasing progress on development on Contact’s $2bn renewable programme Confirmed consents for Wairakei and Clutha power stations Further enhancement of Contact’s gas position Leadership i
Slide 4: Financial Results and Operating Outlook
Financial Results and Operating Outlook 4
Slide 5: Financial Results Summary
Financial Results Summary 12 Months Ended 12 Months Ended Variance 30 June 2007 30 June 2006 $million $million $million % Operating Revenue $1,998.0 $2,330.1 ($332.2) -14% Operating Costs ($1,454.3) ($1,773.1) $318.8 -18% EBITDAF $543.7 $557.0 ($13.4) -2% Depreciation ($139.2) ($133.2) ($6.0) 4% Cha
Slide 6: Key drivers of profit for the period ended June 2007
Key drivers of profit for the period ended 30 June 2007 On an adjusted basis, profit at $231.2m was down by 4% while EBITDAF was 2% lower than in the 2006 financial year In the 2007 financial year, wholesale electricity revenue reduced by 40% with an average wholesale price of $53.70/MWh compare
Slide 7: Dividend
Dividend Dividends per Share 30 27 25 25.7 26 25 23 20.9 Cents per Share 19 20 17.36 15.79 15 10 5 0 1999 2000 2001 2002 2003 2004 2005* 2006 2007 Financial Year * 2005 was a nine month period and has been annualised Total dividend per share at 27 cents is 3.8% higher than for the 2006 financial y
Slide 8: Electricity Revenue
Electricity Revenue Total Electricity Revenue (net of electricity purchase Hedged and Unhedged Electricity Revenue costs) 82.4% hedged 85.9% hedged 1,600.0 1,400.0 $1347.7m $1344.8m 1,200.0 301.5 1,000.0 $ million 714.4 800.0 600.0 1,046.2 400.0 630.4 200.0 0.0 2005/6 2006/7 Financial Year Retail El
Slide 9: Wholesale Electricity Prices
Wholesale Electricity Prices 3,500 $350 3,000 $300 2,500 $250 Storage (GWh) Price ($/MWh) 2,000 $200 1,500 $150 1,000 $100 500 $50 - $0 1-Jul-05 1-Aug-05 1-Sep-05 1-Oct-05 1-Nov-05 1-Dec-05 1-Jan-06 1-Feb-06 1-Mar-06 1-Apr-06 1-May-06 1-Jun-06 1-Jul-06 1-Aug-06 1-Sep-06 1-Oct-06 1-Nov-06 1-Dec-06 1-
Slide 10: Generation volumes
Generation volumes Generation by source 100% 90% 80% 5,413 70% 6,649 60% 50% 40% 1,968 1,820 30% 20% 3,639 10% 3,065 0% 2005/6 2006/7 Financial year Contact hydro generation (GWh) Contact geothermal generation (GWh) Contact thermal generation (GWh) Total generation at 11,020 GWh was 4% lower than
Slide 11: Gas use in generation
Gas use in generation Volume and average cost of gas for generation 60.0 $223.9m 6 $215.6m 50.0 5 5.02 40.0 4 Gas purchased for 4.12 generation (PJ) $/GJ PJ 30.0 3 20.0 2 Average cost per GJ for 54.0 generation (including 10.0 43.2 1 transmission) 0.0 0 2005/6 2006/7 Financial Year Total gas used
Slide 12: Sources of gas supply
Sources of gas supply As illustrated, Contact’s access to Maui 367 gas continues to drop and Contact acquired a Gas sources (%) and significant volume of Pohokura gas in the second average gas cost half of this year In addition, the long term ROFR gas contracts commenced on 1 April 2007 In the
Slide 13: Wholesale and Retail gas
Wholesale and Retail gas Wholesale gas revenue was 30% lower than in the prior period while the sales volume was down by 32% - this was largely due to the loss of one large volume customer (approx. 7PJ) The gross margin contribution per GJ from wholesale sales dropped significantly as gas costs
Slide 14: Rockgas - full financial year overview
Rockgas - full financial year overview Rockgas 140.0 126.1 120.0 105.8 99.5 100.0 80.0 Revenue $million 80.0 Operating costs 60.0 EBITDAF 40.0 20.4 19.4 20.0 0.0 2005/6 2006/7 Financial Year This summarises Rockgas full year performance – Contact was the owner for the period of May and June 2007
Slide 15: Operating Expenses
Operating Expenses (excluding retail electricity purchase costs) Operating Expenses 1200.0 $994.3m $998.2m 1000.0 21.7 Rockgas expenses 229.0 212.8 800.0 Other (excluding Rockgas) $million 600.0 354.5 325.3 Gas purchases and 400.0 transmission Electricity transmission and 200.0 410.8 438.4 distribut
Slide 16: Capital expenditure and interest expense
Capital expenditure and interest expense Net interest expense was 7% lower than for the 12 months ended 30 June 2006. This was largely due to Contact earning $23m of interest income as a consequence of its net cash position during the period (up to 30 April 2007 at which time the Rockgas acquisiti
Slide 17: Revaluation and depreciation expense
Revaluation and depreciation expense Depreciation has increased by about 5% to $139.2m in the 2007 financial year. This includes $1.3m of Rockgas depreciation for the 2 months of Contact’s ownership In line with Contact’s accounting policy, the company has reviewed the value of its generation as
Slide 18: Fuel outlook
Fuel outlook This illustrates sources and expected average cost of Contact’s gas based on mean hydro generation over the period to 2010/11 In the 2007/8 financial year total average gas costs are expected to rise a further 20% (approx) as Contact increases its gas take from the Pohokura field wi
Slide 19: Short term outlook
Short term outlook Prices on energyhedge which range between approx.$50/MWh and $70/MWh over the next few years There is expected to be excess gas available at least for the period to 2010 and possibly beyond that once Kupe is on stream Energy Hedge Closing Price ($/MWh) - 24 August 2007 80 70 6
Slide 20: Contact's future environment and opportunities
Contact’s future environment and opportunities 20
Slide 21: Carbon policy
Carbon policy It seems increasing likely that a cap and trade regime will be introduced into New Zealand with Government proposals expected to be released shortly Contact anticipates that this will be introduced from 2009 with the effect being reflected in prices in steps to 2012 At a carbon p
Slide 22: Energy policy and market considerations
Energy policy and market considerations Substantial new capacity will be needed by 2012/13 to meet peak demand growth The volatily of wind means it can provide a limited contribution to firm capacity Hydro development lead times are too long to provide any new capacity in the short to medium t
Slide 23: Context for the next five years
Context for the next five years Given the likely policy framework and New Zealand Energy Strategy objectives, focus is centred on developing Contact’s renewable options Gas and generation market conditions through to the end of the decade indicate the market will be relatively long in energy wit
Slide 24: Progress on geothermal development
Progress on geothermal development Consents have now been granted which enable operation of the existing plant at Wairakei until 2026 This will enable operation at Poihipi to increase from 30MW to 55MW during the remainder of this calendar year Application for additional consents required to e
Slide 25: Progress on Contact's wind and hydro options
Progress on Contact’s wind and hydro options Wind Contact now controls four wind generation sites with a total capacity of in the range of 700 – 950MW All sites have been extensively monitored and indicate high quality wind resources Pleasing progress has been made with two priority sites on k
Slide 26: Conclusion
Conclusion Contact has again performed well despite having to absorb a 20% increase in the average gas cost and a 42% reduction in wholesale prices During the financial year Contact secured additional long term gas and make significant progress on new generation options Contact now has access