Meridian Energy Limited · NZX:MEL
Meridian Energy — FY2015 Earnings Presentation
28 slides from Meridian Energy's earnings presentation, September 2015
Slide 1: Better energy future
Better energy future MERIDIAN ENERGY LIMITED 2015 Annual results roadshow presentation
Slide 2: Disclaimer
SEPTEMBER 2015 Disclaimer The information in this presentation was prepared by Meridian Energy with due care and attention. However, the information is supplied in summary form and is therefore not necessarily complete, and no representation is made as to the accuracy, completeness or reliability of
Slide 3: Meridian and the New Zealand market
Meridian and the New Zealand market MERIDIAN ENERGY LIMITED 2015 Annual results roadshow presentation
Slide 4: About Meridian
SEPTEMBER 2015 About Meridian Vertically integrated renewable generator, retailing electricity to over 330,000 customers in New Zealand and Australia New Zealand’s largest generator from purely renewable sources Seven hydro stations Flexible plant with New Zealand’s largest storage Long life assets
Slide 5: The New Zealand electricity market
SEPTEMBER 2015 The New Zealand electricity market 5 Major generators 1 Transmission grid operator 29 Distribution businesses 26 Electricity retail brands 2 Million consumers MERIDIAN ENERGY LIMITED 2015 Annual results roadshow presentation 5
Slide 6: 2015 highlights
2015 highlights MERIDIAN ENERGY LIMITED 2015 Annual results roadshow presentation
Slide 7: Profitability and yield
SEPTEMBER 2015 Profitability and yield Great financial result Free cash Underlying EBITDAF NPAT flow1 NPAT $398m $618m $247m $209m +6% on FY2014, +6% on FY2014, +7% on FY2014, +7% on FY2014, +8% on PFI2 +5% on PFI +17% on PFI +17% on PFI And delivering to investors Ordinary Special Capital TSR dividen
Slide 8: The last year
SEPTEMBER 2015 The last year More rational political views on the sector Transmission pricing progressed NZAS immediate future is clearer NZ demand has grown Announcement of thermal plant retirement Review to the Renewable Energy Target completed Powershop Australia gaining momentum MERIDIAN ENERGY
Slide 9: Operational highlights
SEPTEMBER 2015 Operational highlights A year of average inflows The now familiar late summer dry spell was well managed Rapid resolution of Manapōuri transformer issues Wind investment has driven record level of NZ generation (Tekapo adjusted) Retail sales volume growth with a strong irrigation seaso
Slide 10: Health and safety
SEPTEMBER 2015 EMPLOYEE TRIFR1 Health and safety 16 INCIDENTS PER MILLION HOURS Preparing for changes to health and 14 12 safety legislation later this year 10 That work has re-evaluated high areas 8 6 of risk and the processes to manage 4 those risks 2 Particular emphasis on management 0 2011 2012
Slide 11: The New Zealand market
SEPTEMBER 2015 The New Zealand market NATIONAL DEMAND GWh 45,000 year on Positive demand growth returned in -0.5% -1.9% -0.6% +2.8% year change 40,000 the last year, but caution needed Provincial led, with some weather 35,000 driven growth but genuine underlying 30,000 increase Significant thermal pl
Slide 12: The Australian market
SEPTEMBER 2015 NEM ELECTRICITY CONSUMPTION The Australian market TWh 275 Declining demand at the market level 270 -2.3% RET1 agreed but mixed political 265 -2.6% 0.0% sentiment on renewables 260 A lot of permitted wind options, but 255 nearly all are short dated 250 Appetite for conventional PPAs2 i
Slide 13: Tiwai Point smelter contract
SEPTEMBER 2015 Tiwai Point smelter contract Contract terms (other than price) similar to those previously agreed Price on 400MW unchanged from 2013 variation, higher price on 172MW from 1 January 2017 Window to give 12 months notice to reduce to 400MW extended to 1 April 2016, then any time after 30
Slide 14: Transmission pricing
SEPTEMBER 2015 Transmission pricing June 2015 TPM options paper is a considerable evolution from 2012 Beneficiaries pay approach is retained, with residual costs allocated to load Goes a long way to solving the inequities of HVDC cost allocation and SI consumers paying for NI investment Must apply to
Slide 15: Meridian Retail
SEPTEMBER 2015 Meridian Retail Segment EBITDAF up +$3m (+17%) adjusted for the sale of Arc Innovations A year of operational improvement: Lift in customer retention rate $3m less bad debts written off with 44% less disconnections 70% reduction in vacant site consumption 20% decrease in call centre vo
Slide 16: Powershop New Zealand
SEPTEMBER 2015 Powershop New Zealand Customer satisfaction above 90% for 7 years in a row Industrialisation of processes for ease of use at scale Which supports growth in Australia and potential new market opportunities Maintaining market share on low marketing spend Lifting load through a much impr
Slide 17: Powershop Australia
SEPTEMBER 2015 Powershop Australia Viable business with strong sources of competitive advantage: Customer control Renewable profile Fair pricing Differentiated service Promotional spend needed to support customer acquisition POWERSHOP AUSTRALIA CUSTOMERS FRMP Brand position has allowed us to 60,000 es
Slide 18: Concluding remarks
SEPTEMBER 2015 Concluding remarks Over the next year, NZ focus will be on: Positioning for upcoming thermal contraction Lifting retail profitability Improving quality and cost effectiveness of customer experience Achieving more from existing assets Operating and capital cost management Support for tra
Slide 19: 2015 financial performance
2015 financial performance MERIDIAN ENERGY LIMITED 2015 Annual results roadshow presentation
Slide 20: Financial performance
SEPTEMBER 2015 Financial performance FINANCIAL PERFORMANCE AGAINST PRIOR YEAR $M 1,200 12 months to 30 June 2015 12 months to 30 June 2014 1,000 954 924 800 618 585 600 440 433 467 400 316 334 238 237 247 230 209 195 200 147 123 129 0 Energy Trans- Operating EBITDAF NPAT Underlying Operating Investm
Slide 21: Dividends
SEPTEMBER 2015 DIVIDENDS DECLARED Dividends CPS 20 Ordinary dividends Special dividends Ordinary final dividend of 8.08 cps, 15 5.35 55% imputed 2.00 10 83% FCF Brings full year FY2015 ordinary 75% FCF payout 12.88 payout dividend to 12.88 cps, representing 5 11.01 83% of free cash flow, 72% imputed 0
Slide 22: Earnings and energy margin
Results for the year ended 30 June 2011 include the Tekapo SEPTEMBER 2015 power stations, which were sold to Genesis Energy in June 2011 ENERGY MARGIN1 Earnings $M 1,200 +3% ‘Like for like’ EBITDAF (excluding 1,000 insurance proceeds and IPO costs) 800 increase of $20m (3%) in FY2015 from: 600 950 9
Slide 23: Costs
Results for the year ended 30 June 2011 include the Tekapo SEPTEMBER 2015 power stations, which were sold to Genesis Energy in June 2011 OPERATING COSTS Costs $M Retail segment Wholesale Corporate/Elims +3% 300 International IPO Costs Adjusting for IPO costs, Operating costs 250 238 227 246 14 237 2
Slide 24: Below EBITDAF
Results for the year ended 30 June 2011 include the Tekapo SEPTEMBER 2015 power stations, which were sold to Genesis Energy in June 2011 NET PROFIT AFTER TAX Below EBITDAF $M 350 +7% Additional depreciation +$19m (+9%) 300 250 from the Mill Creek and Mt Mercer 200 Net finance costs +$5m (+7%) from 15
Slide 25: Latest operating information
Latest operating information MERIDIAN ENERGY LIMITED 2015 Annual results roadshow presentation
Slide 26: Market data
SEPTEMBER 2015 NATIONAL DEMAND Market data GWh 3,800 Demand in the 2015 calendar year has 3,600 3,400 slowed to be 2.0% higher than the same eight month period last year 3,200 3,000 Switching remains high with the 12 2,800 month average switching rate for all 2,600 retailers at 19.4% at the end of J
Slide 27: New Zealand retail
SEPTEMBER 2015 NEW ZEALAND CUSTOMER NUMBERS New Zealand retail ICP (000) Meridian North Island Meridian South Island -0.3% 350 Powershop 287 Small decline in ICP numbers since June 300 48 272 277 277 275 250 51 55 56 56 2015, reflecting aggressive residential 200 sales activity 150 123 115 114 116 11
Slide 28: Hydrology
SEPTEMBER 2015 MERIDIAN'S COMBINED CATCHMENT INFLOWS Hydrology GWh 2,500 July and August 2015 monthly inflows 2,000 together were 117% of average 1,500 Storage at the end of August 2015 was 1,000 134% of historical average 500 To date this financial year Meridian’s 0 New Zealand generation is 5% lower