Meridian Energy Limited · NZX:MEL
Meridian Energy — H1 FY2023 Earnings Presentation
44 slides from Meridian Energy's earnings presentation, Mar 1, 2023
Slide 1: 2023 Interim Results Presentation
2023 Interim Results Presentation 1 MARCH 2023
Slide 2: Key points
Key points Discussions are ongoing with NZAS on a potential contract beyond 2024. These discussions are complex, and outcomes are uncertain. Meridian will update the market when discussions with NZAS are completed *Earnings before interest, tax, depreciation, amortisation, changes in fair value of h
Slide 3: Financial performance
Financial performance 1 M A R CH 2 02 3 2 02 3 I N TE R I M R E S ULTS PR E S E N TATI ON 3
Slide 4: Dividends
Dividends § Interim ordinary dividend declared of 6.00 Dividends declared CPS cps (80% imputed), 2.6% increase from 1H Interim dividend Final dividend Special dividends Total 25 FY22 21.30 § Dividend reinvestment plan will apply to this 20 19.34 17.40 4.88 2.44 16.90 interim dividend at 0% discount
Slide 5: EBITDAF
EBITDAF § EBITDAF1 $31M (8%) higher than 1H FY22 § $82M (16%) higher retail contracted sales revenue EBITDAF movement $M § Lower generation revenue and supply costs from 500 lower wholesale spot prices § $51M gain on close outs of forward hedge 0 positions -3 -2 -25 +61 § Operating costs $25M (26%)
Slide 6: Energy margin
Energy margin § Customer and sales volume growth across Energy margin movement $M residential, small business and corporate 700 Physical +$100M Financial -$41M segments 0 +2 600 +31 § Lift in both mass market and corporate +51 -124 +90 -7 average pricing 500 -290 +308 § 1.4% higher physical generati
Slide 7: Customers
Customers § Sales volume growth in small medium Customer sales Average price Total sales North Island South Island volume sales volume sales volume business (13%), agricultural (8%), large ($/MWh) (GWh) (GWh) (GWh) business (17%) 1H FY23 Residential 955 521 434 § Higher mass market net average sales
Slide 8: Generation
Generation § Inflows 114% of average in 1H FY23, including NZ average generation price highest winter inflows on record $/MWh 140 124 § Lowest January Waiau inflows on record in 120 113 January 2023 101 93 100 § Lake Pukaki storage has now fallen back to 80 average for the first time since July 2022
Slide 9: Operating costs
Operating costs § Operating costs $25M (26%) higher than 1H Operating costs1 FY22 $M Interim Final half-year Total 247 300 ↑ § 1H FY22 included a $7M provision release 242 relating to the MBIE review of Meridian’s 208 220 holiday pay treatment 186 195 124 200 124 ↑ § Growth in 1H FY23 from Flux and
Slide 10: Capital expenditure
Capital expenditure § Capital expenditure of $171M in 1H FY23 Capital expenditure (NZ operations) $M Interim Final half-year Total 435 § Expecting FY23 capital expenditure of 500 ↑ between $410M and $435M 410 400 § $50M to $55M of stay in business capex 264 § $360M to $380M of currently approved 300
Slide 11: Below EBITDAF
Below EBITDAF Meridian is currently considering a green bond offer of up to $200 million. Full offer details are expected to be released on 6th March § $5M decrease in NPBT1 from fair value of Underlying net profit after tax electricity hedges from rising forward electricity Six months ended 31 Dece
Slide 12: Business update
Business update 1 M A R CH 2 02 3 2 02 3 I N TE R I M R E S ULTS PR E S E N TATI ON 12
Slide 13: Wholesale prices
Wholesale prices § Above average inflows during 1H FY23 Otahuhu ASX futures settment price $/MWh § January 2023 inflows were 46% of average 270 § Factors outside hydrology continue to put 250 230 upward pressure on wholesale prices 210 § Rising thermal costs, concern around 190 availability and high
Slide 14: Policy and regulation
Policy and regulation Resource management reform § The New Zealand Government is replacing the current Resource Management Act with three new pieces of legislation § The first two bills were introduced into Parliament in November 2022 and are expected to pass into law in 2023 § These three new Acts,
Slide 15: Manapōuri transformers
Manapōuri transformers § In early December 2022 Manapōuri Unit 6 was taken out of service due to issues with the transformer § Six months is the best estimate of the time to resolve the issues with the Unit 6 transformer § The transformer for Manapōuri Unit 1 also previously indicated similar issues
Slide 16: Harapaki construction
Harapaki construction § Good progress on bulk earthworks, cable trenching and foundation piling during the last quarter § Revised roading design has proved mostly resilient to the 1.6 metres of rain that fell on site during January and February 2023 § First 14 sets of turbines are en route and expec
Slide 17: Ruakākā battery energy storage system
Ruakākā battery energy storage system § Construction announced in December 2022 § Stage one of a two-stage project that anticipates the future construction of a 130MW solar farm § 100 MW peak and 200 MWh (2 hours) energy storage § Project completion in second half of 2024 § SafT Battery Energy Stora
Slide 18: Southern Green Hydrogen
Southern Green Hydrogen § Woodside Energy selected as preferred partner, moving into the development stage of the project § A final investment decision will follow the development stage § Mitsui & Co., Ltd. will participate in development of potential markets § Collaboration with Ngāi Tahu and local
Slide 19: Retail initiatives
Retail initiatives Certified Renewable Energy § 100 customers now with Meridian’s Certified Renewable Energy product § Net proceeds of the product will be reinvested back into decarbonisation projects Zero charging network § 137 public EV chargers deployed Energy hardship § New energy wellbeing pilo
Slide 20: Evolving our customer approach
Evolving our customer approach Retail sales volume § From growth GWh 10,000 8,941 56% 8,000 8,405 growth 7,376 in 5 6,000 years 5,981 6,240 5,727 4,000 2017 2018 2019 2020 2021 2022 Financial Year ended 30 June Source: Meridian § To energy solutions 1 M ARCH 20 23 20 23 I N T E RI M RE SU L T S PRE
Slide 21: Renewable development pipeline
Renewable development pipeline § Deep pipeline of 4.7 GW (11.1 TWh) of development options § Pipeline has doubled in size in the last six months § 1.5 GW secured, 3.2 GW in advanced prospects 1 M ARCH 20 23 20 23 I N T E RI M RE SU L T S PRE SE N T AT I ON 21
Slide 22: NZAS contract termination – portfolio response
NZAS contract termination – portfolio response 1 M ARCH 20 23 20 23 I N T E RI M RE SU L T S PRE SE N T AT I ON 22
Slide 23: Closing comments
Closing comments § Strong interim performance supported by record winter 2022 inflows § Relatively low 2022-23 summer inflows and NIWA outlook suggests a continuation of dryish conditions, with a La Niña influence prevailing into autumn § Ruakākā solar farm and Mt Munro wind farm consents will both
Slide 24: Additional information
Additional information 1 M A R CH 2 02 3 2 02 3 I N TE R I M R E S ULTS PR E S E N TATI ON 24
Slide 25: Debt and funding
Debt and funding § December 2022 total borrowings of $1,118M Debt maturity profile as at 31 December 2022 $M § Committed bank facilities of $585M, of 700 Drawn debt maturing (face value) Available facilities maturing which $550M were undrawn 600 § Green bond offer of up to $200M under 500 considerat
Slide 26: Capital expenditure
Capital expenditure § Consistent level of stay in business capex Capital expenditure (NZ operations) Interim Final half-year Total $M § Largely consists of system and generation 300 asset enhancement spend § NZ operations capex of $171M in 1H FY23 200 175 § Expecting FY23 NZ operations capex of 83 1
Slide 27: Segment results
Segment results § Flux Federation included in ‘other and unallocated’ segment $M Wholesale Retail Australia Other & unallocated Inter-segment Discontinued ops Total 1H FY23 1H FY22 1H FY23 1H FY22 1H FY23 1H FY22 1H FY23 1H FY22 1H FY23 1H FY22 1H FY23 1H FY22 1H FY23 1H FY22 Contracted sales 226 27
Slide 28: NZ operations results
NZ operations results NZ Operations EBITDAF Financial year ended 30 June 2022 2021 2020 2019 2018 2017 $M Contracted sales 1,582 1,433 1,327 1,178 1,064 968 Cost to supply customers (2,463) (2,896) (1,486) (1,874) (1,194) (707) Net cost of hedging 148 271 11 126 41 (4) Generation spot revenue 1,757
Slide 29: Retail
Retail Customers New Zealand customer connections ICP (000) 500 Meridian North Island Meridian South Island Powershop Total § 0.4% increase in customers since June 2022 365 367 347 400 324 302 117 118 106 89 300 74 Mass market segment 119 120 122 126 126 200 § 1% decrease in residential volumes 100
Slide 30: Hydrology
Hydrology Inflows Meridian’s combined catchment inflows GWh 10,000 § 1H FY23 inflows were 114% of average 8,000 § January 2023 inflows were 46% of average 6,000 4,000 Storage 2,000 § Meridian’s Waitaki storage as of 31 0 Financial 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Slide 31: Generation
Generation Volume New Zealand generation GWH Hydro Wind Total 8,000 § 1H FY23 generation was 1.4% higher than 1H 6,546 7,187 779 6,676 7,111 709 7,214 640 FY22, with higher hydro and lower wind 6,000 621 765 generation 4,000 6,408 6,402 6,574 5,925 5,911 2,000 Price 0 2018 2019 2020 2021 2022 § 1H F
Slide 32: 1H FY23 EBITDAF
1H FY23 EBITDAF Movement in EBITDAF $M New Zealand energy margin +$61M 600 500 -64 +2 +0 -44 +82 -7 -3 -2 400 -25 +382 300 -290 200 425 394 100 0 EBITDAF 31 Retail Wholesale Generation Cost to Net cost of Virtual asset Other Other Transmission Metering Employee & EBITDAF 31 Dec 2021 contracted contr
Slide 33: EBITDAF to NPAT
EBITDAF to NPAT 1H FY23 EBITDAF to NPAT reconciliation $M 450 400 350 -144 300 425 -10 -23 250 +10 -67 200 27 -6 -11 150 201 181 100 EBITDAF Depreciation and Premiums paid on Net finance costs Tax Underlying Net change in fair Loss on sale of Premiums paid on Tax NPAT amortisation electricity option
Slide 34: Energy margin
Energy margin Defined as § Revenues received from sales to customers net of § A non-GAAP financial measure distribution costs (fees to distribution network companies representing energy sales revenue less that cover the costs of distribution of electricity to energy related expenses and energy custo
Slide 35: Energy margin
Energy margin Energy margin $M 1,500 1,200 371 -439 900 226 -84 600 51 -256 -4 -4 229 137 300 598 371 0 Mass market C&I sales Financial Generation Cost to Cost to Hedging Hedging Contract VAS margins Market costs Energy sales contract spot supply supply fixed costs spot close outs Margin sales (incl
Slide 36: Energy margin
Energy margin Energy margin movement $M 800 -36 +74 +2 600 +31 -44 -80 +51 +52 -7 -290 +308 400 598 537 200 0 Energy Margin Mass market C&I sales Financial Gene ration Cost to supply Cost to supply Hedging fixed Hedging spot Contract close VAS margins Market costs Energy Margin 31 Dec 21 sales contr
Slide 37: Energy margin
Energy margin 1H FY23 1H FY22 Volume VWAP NZD M Volume VWAP NZD M Res, business, agri sales 2,750 $135 371 2,568 $125 320 Corporate and industrial sales 1,920 $119 229 1,884 $105 198 Retail contracted sales 4,670 $128 600 4,452 $116 518 NZAS sales 2,524 2,525 Financial contract sales 1,432 1,590 Who
Slide 38: Fair value movements
Fair value movements § Meridian uses derivative instruments to Change in fair value of financial instruments $M manage interest rate, foreign exchange and 400 electricity price risk 300 281 236 § As forward prices and rates on these 200 instruments move, non-cash changes to 100 27 their carrying val
Slide 39: Income statement
Income statement Six months ended 31 December 2022 2021 $M New Zealand energy margin 598 537 Other revenue 14 14 Energy transmission expense (41) (38) Electricity metering expenses (23) (21) Employee and other operating expenses (123) (98) EBITDAF 425 394 Depreciation and amortisation (144) (144) Im
Slide 40: Underlying NPAT reconciliation
Underlying NPAT reconciliation Six months ended 31 December 2022 2021 $M Net profit after tax 201 145 Underlying adjustments Hedging instruments Net change in fair value of energy hedges 5 68 Net change in fair value of treasury instruments (32) (58) Premiums paid on electricity options net of inter
Slide 41: Cash flow statement
Cash flow statement Six months ended 31 December 2022 2021 $M Receipts from customers 1,637 1,986 Interest received 6 - Payments to suppliers and employees (1,253) (1,629) Interest paid (33) (40) Income tax paid (92) (92) Operating cash flows 265 225 Purchase of property, plant and equipment (136) (
Slide 42: Balance sheet
Balance sheet Six months ended 31 December 2022 2021 $M Cash and cash equivalents 198 152 Trade receivables 271 303 Customer contract assets 14 15 Other current assets 336 156 Assets held for sale - 729 Total current assets 819 1,355 Property, plant and equipment 8,587 7,966 Intangible assets 82 80
Slide 43: Glossary
Glossary Hedging volumes buy-side electricity derivatives excluding the buy-side of virtual asset swaps Average generation price the volume weighted average price received for Meridian’s physical generation Average retail contracted sales price volume weighted average electricity price received from
Slide 44: 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