Meridian Energy Limited · NZX:MEL
Meridian Energy — Investor Day (June 2024)
74 slides from Meridian Energy's investor day presentation, Jun 25, 2024
Slide 1: 2024 Investor Day
2024 Investor Day 25 JUNE 2024 Lake Manapōuri in the Fiordland National Park
Slide 2: 25 JU N E 20 24 20 24 I N VE ST OR D
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Slide 3: Today’s agenda
Today’s agenda 9.30am - 9.40am Welcome Owen Hackston Investor Relations Manager 9.40am – 10.00am Opening comments Mark Verbiest Chair 10.00am – 10.20am Strategy and priorities Neal Barclay Chief Executive 10.20am – 10.40am New Zealand’s Aluminium Smelter Chris Blenkiron Chief Executive and General M
Slide 4: Opening comments
Mark Verbiest, Chair Opening comments Maintenance at Meridian’s West Wind Farm near Wellington 2 5 J UN E 2 02 4 2024 INVESTOR DAY 4
Slide 5: Energy policies from the coalition government
Energy policies from the coalition government § Ceased work on Onslow pumped hydro investigations. MBIE continuing work on security of supply. § Offshore oil and gas exploration ban repealed. § Net Zero by 2050 reiterated with doubling of renewable electricity included. § Repeal Natural and Built En
Slide 6: Energy transition
Energy transition § Represents a significant investment cycle: $30B+ new sector generation investment. § Demand response established as a risk management solution. However, we are experiencing transition challenges: § Domestic gas supply decline and energy security. § Ability of grid investment to k
Slide 7: Strategy and priorities
Neal Barclay, Chief Executive Strategy and priorities Meridian’s Harapaki Wind Farm in Hawke’s Bay 2 5 J UN E 2 02 4 2024 INVESTOR DAY 7
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Slide 9: Strategy spotlight: Grow process heat renewable generation
Strategy spotlight: Spotlight: Grow process heat renewable generation Te mahi Te whainga Our key initiatives Our targets Horizon 1 Horizon 2 Horizon 3 FY25 FY26 FY27–29 to FY30 to FY50 Accelerate • Install 75 fast chargers by the end of • Additional 200GWh • NZ’s largest and most electrification of
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Slide 11: Looking back
Looking back 25 JU N E 20 24 20 24 I N VE ST OR D AY 11
Slide 12: Looking forward
Looking forward Note: Jul 24 NZAS contract effective date is subject to satisfaction of remaining conditions precedent 25 JU N E 20 24 20 24 I N VE ST OR D AY 12
Slide 13: Demand growth
Demand growth Near-term growth is influenced by climate factors Long-term growth is supported by fundamentals Demand growth YoY de mand growth dry rural South island areas ºC 8% variation to mean temperature (RHS) 6% +3.0 NZ population >6M by 2050 (Stats NZ) +2.0 4% +1.0 2% 0% +0.0 -2% -1.0 ~1m elec
Slide 14: Meridian Energy Investor Day
Meridian Energy Investor Day 25 JUNE 2024 14
Slide 15: NZAS Overview
NZAS Overview 796 Employees 202 Contractors 2t/t 13t/t aluminium aluminium 337,176 $105.2M $452.6M 2,200 approx indirectly Carbon International Saleable Wages and Economic supported intensity average tonnes salaries Contribution 15
Slide 16: Carbon: Our place in the world
Carbon Our place in the world 25 20 Scope 1 and 2 Emissions tCO2/t 15 10 5 0 13% 75% Chart source: Industry available information 16
Slide 17: Carbon: Our place in Aotearoa
Carbon Our place in Aotearoa 2,000 1990-2021 GHG Emissions - kt CO2e 1,800 Iron and Steel Production 1,600 1,400 1,200 1,000 800 600 Aluminium Production 400 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Chart source: : MfE 'NZ Interaction Emissions Tracker' ( https
Slide 18: Ngāi Tahu Relationship
Memorandum of Understanding • Signed on 4 October 2022. Ngāi Tahu Relationship • It covers the overarching relationship, remediation co-design and community funding. • Established Advisory Group to oversee MoU implementation. • Three Awarua Rūnaka / Ngāi Tahu representatives and Mā whero, mā pango,
Slide 19: Remediation Journey Highlights
Remediation Journey Highlights Feb 2021 May 2022 Feb 2024 Throughout 2023 Nov 2023 Onsite landfill Rio Tinto confirms it will permanently closed. Export of all 24Kt of Extensive independent Export of stored SCL return Ouvea Premix Ouvea that was stored report into commences to Australia. stored in S
Slide 20: Questions?
Questions? 20
Slide 21: NZAS contracts
Mike Roan – Chief Financial Officer NZAS contracts Transmission lines near New Zealand’s Aluminium Smelter in Southland 2 5 J UN E 2 02 4 2024 INVESTOR DAY 21
Slide 22: NZAS Base Contract
NZAS Base Contract Other than force majeure, the Base Contract is straightforward. It includes the following elements: § A sustainable price beginning 1 July 2024 subject to conditional CPI escalation from 2028. § A 20-year term, up to 31 December 2044 noting that NZAS can exercise a 2-year terminat
Slide 23: NZAS Demand Response Agreement
NZAS Demand Response Agreement § The term of the Demand Response Agreement (DRA) mirrors that of the Base Contract. § Under the DRA, four demand response Options are exercisable by Meridian. § If an Option is exercised, Base Contract quantity will be reduced by 18.75MW, 37.5MW, 75MW or 138.75MW. § S
Slide 24: NZAS Demand Response Agreement
NZAS Demand Response Agreement Summary of Demand Response Options Equivalent Exercisable Reduction Usual Usual Ramp- Usual Ramp-Up Usual Ramp-Up reduced from Meridian Ramp- DR Period Down Period Notice Period Period Option consumption demand response Down (equivalent Maximum Calls (equivalent (equiv
Slide 25: NZAS Demand Response Agreement - examples
NZAS Demand Response Agreement - examples Maximum call volumes associated with each Option NZAS DR MW at maximum duration 150 Option 4 (Maximum MEL GWh: 560.1) Option 3 (Maximum MEL GWh: 322.3) Option 2 (Maximum MEL GWh: 148.5) 100 Option 1 (Maximum MEL GWh: 72.0) Meridian MW 50 0 1 8 15 22 29 36 43
Slide 26: Example 1: exercising Option 1
NZAS Demand Response Agreement - example 1: exercising Option 1 § Meridian provides NZAS with three business days’ notice (Notice Period) that it is executing Option 1. § In that notice, it also sets out how long it wants the Option for. In this example, the call is for 150 days (the DR Period). § B
Slide 27: Example 2: exercising Option 3
NZAS Demand Response Agreement - example 2: exercising Option 3 § Option 1 has been called as per previous example. § On day 20 of the DR Period, Meridian gives NZAS three business days’ notice that it would like to exercise Option 3. § The notice also sets out how long Option 3 is exercised for. It
Slide 28: NZAS Demand Response Agreement and Meridian trading
NZAS Demand Response Agreement and Meridian trading § An internal information barrier was set up during negotiations so that Meridian’s traders would not have information that might impact trading decisions. That barrier was removed when the contracts were publicly announced. § Since then, Meridian
Slide 29: Other elements of the NZAS Demand Response Agreement
Other elements of the NZAS Demand Response Agreement Maximum Number of Calls § Each Option exercise represents one call. § If Meridian exercises Option 1 and then Option 3, that represents a call for Option 1 and Option 3 respectively. Demand Response Premium (DRP) § Not payable in the first six mon
Slide 30: Meridian Retail
Lisa Hannifin – Chief Customer Officer Meridian Retail 25 JUNE 2024 2024 INVESTOR DAY 30
Slide 31: Strong, sustained growth and discipline
Strong, sustained growth and discipline ICPs ICP GROWTH GWh SALES VOLUME $/MWh NETBACK 370,000 10,000 GROWTH 140 GROWTH 350,000 9,000 130 330,000 120 8,000 310,000 110 7,000 290,000 100 270,000 6,000 90 250,000 5,000 80 22 20 18 19 24 21 23 18 19 24 23 21 23 22 22 20 20 18 19 24 21 FY FY FY FY FY FY
Slide 32: Adapting to emerging technologies in changing markets
Adapting to emerging technologies in changing markets New technology Trend: Decarbonisation Digitisation (supply & demand) Increased electricity New customer service Implication: Two-way energy flows demand models Description: EVs, home electrification, Retailers increasingly Customers will and gree
Slide 33: Driving future value
Driving future value From To Customer Commodity power supply Fully electrified home and transport demand (e.g. heating, cooking appliances) Mix of grid supply and orchestrated behind-the- TOU meter assets Non-TOU Volatile wholesale prices; competition between Market Traditional incumbent led mar
Slide 34: New value pools are emerging with potential ~$100M EBITDAF
New value pools are emerging and have the potential to contribute ~$100M to EBITDAF for Meridian in 2030 Potential annual EBITDAF uplift1 ($M) for Meridian by innovation value pool for 2030 and steady state (assuming 30% market share) Value pool estimate in 2030 Incremental value in pool in 2040 Hyp
Slide 35: Targeting new value pools with new propositions
Targeting new value pools with new propositions Meridian’s perspective on the retail customer fundamentally changes Economic value for customers is based on reductions in total energy spend A range of international reference points have been considered Trials and experience to date have highlighted
Slide 36: A new way forward
A new way forward Next Generation Retail Base Camp Customers Digital Values & Behaviours BASE CAMP ee 3 6
Slide 37: Sharpening our strategy to set us up for success
Sharpening our strategy to set us up for success 37
Slide 38: Ngā mihi
Nga mihi Questions Wan 7) Meridian. @PowersHop
Slide 39: Energy system modelling
Rory Blundell, Group Strategy Manager Energy system modelling Meridian’s Benmore Power Station in the Waitaki Valley 2 5 J UN E 2 02 4 2024 INVESTOR DAY 39
Slide 40: Meridian’s modelling framework
Meridian’s modelling framework 25 JU N E 20 24 20 24 I N VE ST OR D AY 40
Slide 41: Plausible future scenarios
Plausible future scenarios 25 JU N E 20 24 20 24 I N VE ST OR D AY 41
Slide 42: Demand projections
Demand projections At an aggregate level, our projections are generally aligned with others. Industrial electrification via process heat Annual NZ Demand for Generation 2030 2040 2050 § We see EV growth slower at first 75,000 History Evo REVO 9TWh than some, but a tipping point 70,000 Revo CCC - Ref
Slide 43: Consumer involvement
Consumer involvement Picking demand is extra hard as it’s the sum of many moving parts. Consumer involvement in electricity markets (REVO) 25,000 BESS Charge Household Batteries/Demand Flex Charge 20,000 Heavy EV Load Decarbonisation Load Consumer Demand (GWh) EV Load 15,000 BESS Discharge Household
Slide 44: Levelised cost of energy
Levelised cost of energy We believe innovation will deliver technology cost improvements over time, though now starting from a higher base. Typical Renewable Technology LCOE wind: MEL range solar: MEL range on-shore wind (ex China) grid solar (ex-China) Global history (IRENA) and NZ forecast (WMO23)
Slide 45: Wholesale price outlook
Wholesale price outlook Putting it all together, you get Real prices ~$115/MWh in the North Island for the next 15 years or so. Average Annual NZ Price Outlook at Ōtāhuhu WMO23 $200 History $180 NI History (real) TWAP [$/MWh - real 2023] History-Avg $160 $140 EVO REVO $120 EVO EVO REVO $100 REVO $80
Slide 46: Price participation
Price participation Average prices hide a very dynamic system. Example - Annual Price Participation 140% History Waitaki chain Manapōuri Wind Solar 130% 120% 110% GWAP/TWAP 100% 90% 80% 70% 60% 50% 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050 Financial Year ended 30 June Source:
Slide 47: Flexibility
Flexibility Significant investment in flexibility required no matter how you look at it. Within Week Firming Requirements - EVO Within Week Firming Requirements - REVO 5,000 5,000 Batteries and Demand Flexibility Grid-Scale BESS 4,500 Load Participation 4,500 Fossil Peakers Fossil Peakers 4,000 4,00
Slide 48: Conclusions
Conclusions § We have a mature analytical framework to explore, understand and ultimately answer strategic issues facing Meridian and the market within a volatile future environment. § Our plausible scenarios indicate what electricity generation “could” look like – we acknowledge we won’t get it rig
Slide 49: Development pipeline
Rebecca Knott – Head of Renewable Development Development pipeline Blade transportation at Meridian’s Harapaki Wind Farm in Hawke’s Bay 2 5 J UN E 2 02 4 2024 INVESTOR DAY 49
Slide 50: Changes from Feb 2024
Changes from Feb 2024 Ruakākā solar →Q3 2026 Western Bays solar ←from secured options Waiinu solar +110MW Manawatū battery →Q1 2027 Waiinu wind ←Q4 2029 Waikato solar ←from secured options Swannanoa solar +70MW 25 JU N E 20 24 20 24 I N VE ST OR D AY 50
Slide 51: Waiinu Energy Park
Waiinu Energy Park Location and indicative layout of the Waiinu Energy Park § Near Waiinu Beach and Waitōtara, South Taranaki and 42km north-west of Whanganui. § Wind generation (max) 350MW, 50 turbines; Solar array (max) 400MW, BESS. § Maximum annual generation ~2,000GWh (enough to power ~285,000 a
Slide 52: Western Bays solar development
Western Bays solar development Location and indicative layout of the Western Bays solar project § Western side of Lake Taupō and east of Bunnythorpe to Whakamaru 220kV transmissions lines. § Maximum capacity of 500MW; located within ~ 630ha of privately owned farmland. § Maximum annual generation ~9
Slide 53: Prospecting
Prospecting 25 JU N E 20 24 20 24 I N VE ST OR D AY 53
Slide 54: Iwi and community engagement
Iwi and community engagement We are committed to engagement in both Fast Mt Munro pop-in shop in Eketāhuna Track or traditional RMA route. RMA is the Resource Management Act 25 JU N E 20 24 20 24 I N VE ST OR D AY 54
Slide 55: Consenting
Guy Waipara, General Manager Development Consenting cElver trap and transfer in the Waitaki Valley 2 5 J UN E 2 02 4 2024 INVESTOR DAY 55
Slide 56: Past project consenting
Past project consenting § Widely recognised that Resource Management Act (RMA) is expensive and time consuming. § Increasing delays and complexity are obvious. Project Turbines Average Council Environment Court Number of consent Lodged Final Decision issued homes hearing days hearing days conditions
Slide 57: Future consenting
Future consenting § Achieving high levels of electrification requires fit for purpose approval pathways for both new development and reconsenting and repowering. Wholesale market outlook generation mix TWh 60 The new consenting and development 50 challenge 40 30 The re-consenting and re-powering 20
Slide 58: Current Meridian consenting
Current Meridian consenting 25 JU N E 20 24 20 24 I N VE ST OR D AY 58
Slide 59: Fast Track Approvals Bill (FTAB)
Fast Track Approvals Bill (FTAB) § Part of a programme of RMA Reforms that the Government proposes to implement. § Submissions closed 19 April and the Select Committee is scheduled to report back to Parliament by 7 September. § The date by which the legislation might be passed and operative, will de
Slide 60: Meridian and the FTAB
Meridian and the FTAB § Meridian has experienced the systemic problems the FTAB is seeking to address. § Meridian has nominated projects for the FTAB that have significant scale, good economics and that are not already in a process for approval. § Meridian has proposed two projects to be scheduled:
Slide 61: Meridian’s Waitaki reconsenting
Meridian’s Waitaki reconsenting 25 JU N E 20 24 20 24 I N VE ST OR D AY 61
Slide 62: Generation
Tania Palmer – General Manager Generation Generation Machine hall at Meridian’s Manapōuri power station in the 2 5 J UN E 2 02 4 2024 INVESTOR DAY 62 Fiordland National Park
Slide 63: Generation team strategy
Generation team strategy 25 JU N E 20 24 20 24 I N VE ST OR D AY 63
Slide 64: A foundation for growth and flex
A foundation for growth and flex 1% of time hydro is online 2% of time we generate at full load § Meridian’s hydro portfolio and our operational Meridian hydro performance Availability Service Factor excellence allows us to manage complexity well Capacity Factor GWh output (RHS) 100% 16,000 and has
Slide 65: Wind Farm performance
Wind Farm performance 1Original equipment manufacturers § Five operational wind farms, soon to be six. Meridian Wind Farm availability § Different maintenance models (full outsource; Te Apiti White Hill West Wind Te Uku Mill Creek insource; hybrid) for each wind farm has meant we 100% are robust aga
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Slide 67: A new operating model
A new operating model § Our 2022 transformation to a new operating model has enabled growth and flexibility with some key accomplishments in last 18 months. Our priorities Grow renewable generation Deliver operational excellence Our key initiatives Grow our dispatchable MW capacity Build operational
Slide 68: Closing
Neal Barclay, Chief Executive Closing Meridian’s West Wind Farm near Wellington 2 5 J UN E 2 02 4 2024 INVESTOR DAY 68
Slide 69: Meridian’s strategy map
Meridian’s strategy map Meridian’s West Wind Farm near Wellington 2 5 J UN E 2 02 4 2024 INVESTOR DAY 69
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Slide 73: Meridian Retail sources, references and disclaimers
Meridian Retail sources, references and disclaimers Page 32: Content supplied during McKinsey review, 2023 Page 33: Content supplied during McKinsey review, 2023 Page 34: Content supplied during McKinsey review, 2023 1. All numbers are indicative. For solar, battery, EVs, home electrification, proce
Slide 74: Disclaimer
Disclaimer The information in this presentation was prepared by Meridian This presentation contains a number of non-GAAP financial Energy with due care and attention. However, the information is measures, including Energy Margin, EBITDAF, Underlying NPAT and supplied in summary form and is therefore