Meridian Energy Limited · NZX:MEL
Meridian Energy — Investor Day (May 2021)
66 slides from Meridian Energy's investor day presentation, May 11, 2021
Slide 1: Meridian Energy investor day presentation
For personal use only Meridian Energy investor day presentation 11 May 2021 Attached is a presentation Meridian Energy is making at the company’s investor day today. The presentation will commence at 10.30am New Zealand Standard Time and a live webcast will be available: https://web.lumiagm.com/?fro
Slide 2: 2021 Investor Day Presentation
For personal use only 2021 Investor Day Presentation 11 MAY 2021
Slide 3: Introduction
For personal use only Introduction Mark Verbiest Chair 2021 INVESTOR DAY PRESENTATION 2
Slide 4: Welcome
Welcome Welcome and introduction Mark Verbiest Chair For personal use only Strategy and targets Rory Blundell Group Strategy Manager Retail Lisa Hannifin Chief Customer Officer Flux Federation Nic Kennedy CEO Flex Federation Future of the NZ system Grant Telfar Modelling Manager South Island demand
Slide 5: Three key themes
Three key themes Aotearoa's future decarbonisation and the For personal use only electrification opportunity Future dry year solutions Meridian’s response to a 2024 NZAS exit 11 MAY 2021 2 0 2 1 I N V EST O R D A Y P R ES EN T A T IO N 4
Slide 6: NZAS exit response
NZAS exit response NZAS contract For personal use only 14 Jan 1 Jan 1 Jan 1 Jan 31 Dec 2021 2022 2023 2024 2024 Meridian portfolio response Current swaption CUWLP NI battery Process heat Data centre Green hydrogen 11 MAY 2021 2 0 2 1 I N V EST O R D A Y P R ES EN T A T IO N 5
Slide 7: Board matters
Board matters Dividend policy For personal use only No changes to ordinary dividend policy proposed (subject always to circumstances) ‘No earnings or dividend guidance’ approach will remain in place Current Board Diverse skill set Gender parity Board rotation Further changes planned this y
Slide 8: Strategy and targets
For personal use only Strategy and targets Rory Blundell Group Strategy Manager 2021 INVESTOR DAY PRESENTATION 7
Slide 9: Strategy
Strategy Champion Optimise Grow initiatives Strategic Competitive markets Trading & asset management Retail use only Sustainability Re-consenting Generation Climate action Financing Flux Grow a clear sustainability leadership NZ’s highest customer satisfaction position NZ’s largest retail group by I
Slide 10: Strategy
Strategy Champion Optimise Grow initiatives Strategic Competitive markets Trading & asset management Retail Current use only Sustainability Re-consenting Generation Climate action Financing Flux Regulatory and government relations Portfolio evolution to support continued Customer best in class digit
Slide 11: Retail
For personal use only Retail Lisa Hannifin Chief Customer Officer 2021 INVESTOR DAY PRESENTATION 10
Slide 12: Profitable growth
Profitable growth New Zealand retail sales volumes GWh Being delivered through volume and margin 9,000 >8,000 For personal use only 7,376 management 6,000 5,727 5,981 6,240 Improved financial performance continues despite 3,000 increased competition and pressure on retail margins 0 2017 2018 201
Slide 13: Sustained customer growth
Sustained customer growth ICPs by Segment Through disciplined execution of multi-brand strategy 400k For personal use only Total Total The Group is delivering net growth in all segments and has 324 338 12 become the 3rd largest retail group in NZ 10 300k Powershop recently surpassed a mileston
Slide 14: Core platform transformation
Core platform transformation Near completion with no major issues to date and For personal use only improved efficiencies Over 60% of Meridian ICPs have been successfully migrated to the Flux platform with the project due for completion in 2021 Source: Meridian Platform productivity benefits a
Slide 15: Stable customer satisfaction
Stable customer satisfaction CSAT – Gentailer brands 8 In both brands, despite core platform For personal use only transformation 7 Meridian Energy Genesis Contact Energy Mercury Trustpower Gentailer average 6 May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 Source: Meridian Source: Meridia
Slide 16: Improving retention and market leading brand
Improving retention and market leading brand Meridian continues to enjoy trader churn rates 12 month rolling average trader churn For personal use only significantly below the market average 12% Powershop’s programme of ‘churn busting’ work 10% has delivered substantial improvements to its churn
Slide 17: Innovation and delivery with a decarbonisation focus
Innovation and delivery with a decarbonisation focus EV Charging Network Meridian is launching a nationwide network of more than For personal use only 200 EV chargers to help build real momentum for the switch to electric as electrification of transport is one of the biggest ways to help combat clim
Slide 18: Our way of working continues to evolve
Our way of working continues to evolve For personal use only 11 MAY 2021 2 0 2 1 I N V EST O R D A Y P R ES EN T A T IO N 17
Slide 19: Flux Federation
For personal use only Flux Federation Move faster, price smarter & integrate widely Nic Kennedy, CEO May 2021
Slide 20: Flux Federation vision
FLUX FEDERATION VISION For personal use only Flux empowers visionary companies leading the energy transition; enabling them to respond to changing generation, distribution and consumption models by moving faster, pricing smarter and integrating widely. Flux Federation | May 2021 11 MAY 2021 2021 INV
Slide 21: Flux's role in the Meridian Group
FLUX’S ROLE IN THE MERIDIAN GROUP For personal use only 1. Providing the best retail platform in market to the Meridian Group Flux creates value for retailers the Meridian Group in 2. Selling that platform to other three ways... retailers to capture revenue for the Meridian Group 3. Building the ent
Slide 22: Introducing Flux Federation
INTRODUCING FLUX FEDERATION For personal use only ● 100% owned by Meridian Energy ● 250+ staff globally ● Remote-first operations Enabling retailers to ● World class Exec team ● Targeting growth in AU, NZ and UK, in mass move faster, price market, SME and C&I smarter and integrate Flux provides deep
Slide 23: Market demand accelerating
MARKET DEMAND ACCELERATING For personal use only Energy transition challenges - the 3D’s: “Energy retailers ● Digitisation globally are being ● ● Decentralisation Decarbonisation challenged like never before.” On top of: Increasing regulation - McKinsey ● ● Changing competition landscape ● Decreasin
Slide 24: Competition
COMPETITION For personal use only Incumbents ● SAP New entrant tech ● ● Gentrack Oracle companies see great ● Agility opportunity in the energy transition New entrants ● Flux (Meridian) ● Kaluza (Ovo) ● Kraken (Octopus) ● Ensek Flux Federation | May 2021 11 MAY 2021 2021 INVESTOR DAY PRESENTATION 23
Slide 25: Looking ahead
LOOKING AHEAD Last 12 months - Foundations for scale. Improving the team, architecture, product, brand and delivery and For personal use only establishing strategy for growth • Great things in Secured 101 talented people in 2020 during Covid, all remotely • business are never Transformed the culture
Slide 26: The future of the NZ system with 100% renewables
For personal use only The future of the NZ system with 100% renewables Grant Telfar Modelling Manager 2021 INVESTOR DAY PRESENTATION 25
Slide 27: Living in uncertain times: renewable energy & dry year flexibility
Living in uncertain times: renewable energy & dry year flexibility Hydro inflow deficits of 5TWh (20%) have historically been managed by Major Generation Sources Scaled to size of mean energy contribution : 2021-23 maintaining thermal capacity, flexible thermal fuel storage, and flexible For perso
Slide 28: Changes to the power system by 2030
Changes to the power system by 2030 A large volume of new renewable energy (RE) generation is NZ Power System 2030 Generation Summary needed: 12TWh, 3GW, and $7B of new grid generation Southland Stimulation & System Flexibility: all weeks, all hydrologies For personal use only 50 100% A secure p
Slide 29: Future dry year flexibility scenarios (1)
Future dry year flexibility scenarios (1) 610MW Southland demand Annual Demand Consumption with Dry-Year Flexibility This could either be new or existing demand For personal use only output Southland Stimulation; 610MW dry-year flexible H2; no thermal 250 100% Flex production down in times of hy
Slide 30: Future dry year flexibility scenarios (2)
Future dry year flexibility scenarios (2) 750MW hydrogen electrolysis plant Weekly Hydrogen Electrolysis Consumption For personal use only As per scenario #1, flex production down in times of hydro output Southland Stimulation & System Flexibility: all weeks, all hydrologies 140 inflow scarcity in
Slide 31: Future dry year flexibility scenarios (3)
Future dry year flexibility scenarios (3) Onslow-Manorburn (simple) pumped storage 585MW of (new or old) Southland load with no flexibility Annual Onslow-Manorburn Generation For personal use only output A simple 4,000GWh storage and 1,000MW power station 100 Southland Stimulation; 750MW generat
Slide 32: Annual system costs by 2030
Annual system costs by 2030 Over the decade, the challenge of meeting the generation needs of a power system moving towards 99%-100% RE are Annual NZ System Costs For personal use only significant, regardless of the dry-year solution pursued: Southland Stimulation & System Flexibility: all weeks,
Slide 33: The best source of future dry year flexibility
The best source of future dry year flexibility The scale and pace of change required to move the NZ power system to 100% renewable energy is significant Changes expected in wholesale market outcomes and performance will be dramatic at times: For personal use only Mean modelled prices ~$80/MWh
Slide 34: South Island demand options
For personal use only South Island demand options Guy Waipara General Manager Development 2021 INVESTOR DAY PRESENTATION 33
Slide 35: Datagrid - overview
Datagrid - overview Manapouri has abundant, stable and very For personal use only competitive renewable energy (versus lack of hydro power in Australia) Southland has the coolest weather in ANZ (average 9.8°C temperature) Shortest distance to Australia, 20M population within 35 millisecond lat
Slide 36: Datagrid – project update
Datagrid – project update Exclusivity arrangement - Datagrid have For personal use only rights to up to 100MW of electricity Conditional on Datagrid achieving project milestones Working with Great South to identify potential sites, closure imminent Australian DC market forecast to grow from
Slide 37: Datagrid – project timeline
Datagrid – project timeline For personal use only Source: datagrid 11 MAY 2021 2 0 2 1 I N V EST O R D A Y P R ES EN T A T IO N 36
Slide 38: Process heat electrification - business
Process heat electrification - business Meridian team is working with South Island industrial customers to assist with the decarbonisation and For personal use only electrification of industrial plant Mainly replacement of coal boilers with electricity powered options Meridian is committed to:
Slide 39: Green hydrogen feasibility study
Green hydrogen feasibility study A three part study: For personal use only Market scan – markets, end use cases, logistics, NZ opportunity Technology and engineering assessment – development costs, technology options, health and process safety and logistics Dry year flexibility Study compl
Slide 40: Green hydrogen project plan
Green hydrogen project plan Key dates May 2021 For personal use only ROI released August 2021 Feasibility study and ROI completed March 2022 Select pathway December 2022 Develop consortium and commercial December 2023 Complete detailed design and secure consents December 2024 Final investment decisi
Slide 41: Green hydrogen initial conclusions
Green hydrogen initial conclusions Global demand forecasts are International focus on decarbonisation is driving large increases in demand forecasts for green high hydrogen For personal use only Countries such as Japan and South Korea have limited domestic decarbonisation options Many potential
Slide 42: Portfolio balance
For personal use only Portfolio balance Chris Ewers General Manager Wholesale 2021 INVESTOR DAY PRESENTATION 41
Slide 43: Role of Wholesale
Role of Wholesale The Wholesale Team are accountable for delivering Energy Margin while simultaneously For personal use only minimising risk and volatility across time. Specifically – we work collaboratively across Meridian to ensure we have: the optimal amount of committed sales going forward
Slide 44: Portfolio tracking
Portfolio tracking Portfolio length is decreasing physical generation hedging mass market sales C&I sales NZAS sales financial sales For personal use only TWh 1H FY21 18 +2.5 +2.6 +1.5 +1.7 17.0 +1.7 +0.7 15.5 15.3 14.8 14.9 14.8 2.7 15 2.0 13.8 1.1 1.6 13.3 2.5 12.3 12.3 2.2 2.3 2.2 12 1.3 1.6 5.
Slide 45: Lake Pūkaki low range operation
Lake Pūkaki low range operation Lake Pūkaki operating range schematic Lake Pūkaki is consented to be used 532.5m top of consented operating range For personal use only down to 513.0m 1,767GWh Usage below 518.0m is generally tied 523.8m current storage (10 May) to the System Operator’s Electricit
Slide 46: Lake Pūkaki low range operation
Lake Pūkaki low range operation Since April 2020, the full Lake Pūkaki storage range has been included in our modelling and forecasting For personal use only Including the contingent storage allows a greater use of flexibility in the main range which can be seen in the forecast distribution Co
Slide 47: Harapaki
Harapaki Investment in Harapaki will add length to the portfolio (542 GWh pa) And support existing flexibility while enabling continued retail sales growth For personal use only Investment in renewables also aligns with New Zealand's move towards a highly renewable energy system And supporti
Slide 48: Genesis swaption
Genesis swaption Meridian has a swaption arrangement with For personal use only Genesis for up to 150 MW, up until the end of 2022 The swaption is a financial arrangement, which locks in a fixed price for the volume called Since this was agreed, Lake Pūkaki contingent storage availability has
Slide 49: Smelter demand response
Smelter demand response Under the NZAS contract, Meridian can by notice to NZAS require a Smelter Demand Response For personal use only (SDR) when the relevant hydro storage is less than the Dry Year Trigger Level If Meridian gives NZAS an SDR notice, NZAS must start to reduce electricity consum
Slide 50: Harapaki wind farm
For personal use only Harapaki wind farm Chris More Wind Maintenance & Development Manager 2021 INVESTOR DAY PRESENTATION 49
Slide 51: Harapaki site features
Harapaki site features Highest wind farm in NZ – in sub-alpine altitudes For personal use only Terrain has geological features that require innovative solutions Great access to site via State Highway 5 from Napier, being the main port of supply Transmission connection is on the site. Signifi
Slide 52: Community and Iwi
Community and Iwi Within the Te Pōhue community For personal use only based on the eastern side of the range Two iwi have ties to the region; Ngati Hineuru and Maungaharuru Tangitu Trust Meridian will be a good long-term citizen and fulfil what is culturally appropriate to iwi and also support
Slide 53: Team
Team Assembled a very experienced delivery For personal use only team with deep construction and operational experience Aim to use local expertise to fill site roles as much as reasonably possible Team disciplines aligned with contracts thereby having commercial and technical oversight Stron
Slide 54: Delivery
Delivery Meridian has chosen the ‘Principal’ For personal use only over ‘turn key’, or ‘Engineer, Procure, Construct’ models Enables Meridian to set, monitor and control the Health & Safety and performance culture on-site Enables the complex interaction between contractors to be seamlessly man
Slide 55: Technology
Technology Direct Drive (DD) technology has far less For personal use only moving parts as there is no gearbox DD turbines use less oil, have greater ability to respond to changes in wind strength and generally have a longer life expectancy Meridian previous experience with DD technology at th
Slide 56: Financials
Financials NZ$395M capital investment 41 turbines | 176MW | 542 GWh For personal use only 35% capacity factor NZ$35M to NZ$39M EBITDAF p.a. On a $/kW basis, Harapaki construction is expected to be 17% lower than Mill Creek The technology change to direct drive turbines gives rise to two
Slide 57: Generation development
For personal use only Generation development Rebecca Knott Head of Renewable Development 2021 INVESTOR DAY PRESENTATION 56
Slide 58: Development context
Development context Meridian’s analysis suggests 12TWh of new grid generation by 2030 to meet 100% RE For personal use only Greater than the CCC’s Draft Advice, which suggested 10TWh of additional system generation +10TWh by 2035 A third of that growth equates to at least 7 Meridian generation
Slide 59: Development scenario
Development scenario Frequent builds will be needed just to meet a portion of the CCC’s projected system growth For personal use only Development focus is on finding, consenting and holding options, not the timing of builds Harapaki 7+ additional projects North Island battery Source: Meridian 11
Slide 60: Current development pipeline
Current development pipeline Pipeline of 1.9GW (4,400GWh) For personal use only Development pipeline (MW) Consented sites will likely require re-consenting for better technology fit 110 Design, development and construction timeframe is subject to site complexity Opportunities inevitably will
Slide 61: North Island battery
North Island battery To build greater depth to North Island reserve For personal use only offers In turn allowing greater HVDC North transfer and less inter-island price differential Potentially shared ownership with Contact Energy Likely 100MW capacity NZAS exit delay gives more time to c
Slide 62: Forever Forests
Forever Forests Target For personal use only 1,100 hectares of new plantings to grow Meridian’s own carbon offsets (21t) Plant Meridian land Partner with others land Purchase land (marginal land) Long-term native biodiversity through mixed model (exotics and natives) Progress 60ha plan
Slide 63: Closing comments
For personal use only Closing comments Neal Barclay Chief Executive 2021 INVESTOR DAY PRESENTATION 62
Slide 64: NZAS exit response
NZAS exit response NZAS contract For personal use only 14 Jan May 21 1 Jan 1 Jan 1 Jan 31 Dec investor 2021 day 2022 2023 2024 2024 Meridian portfolio response Exploring Current swaption options on CUWLP schedule completion review of site design & construction NI battery sites acquisition consents N
Slide 65: Supply demand balance
Supply demand balance NZAS exit mostly absorbed by 2030 with modest For personal use only organic demand growth and new load (industrial heat, data centre, EV’s) NZ Power System New Generation & Retirement 10 Year Outlook Exit @Feb21 2,500 2,000 1,500 expected annual energy [GWh] 1,000 500 0 Sourc
Slide 66: Closing comments
Closing comments Engaged Lazard to assess Australian strategic For personal use only direction and options People focus changing world of work health, safety and wellbeing 11 MAY 2021 2 0 2 1 I N V EST O R D A Y P R ES EN T A T IO N 65