Meridian Energy Limited · NZX:MEL
Meridian Energy — Non-Deal Roadshow (May 2017)
27 slides from Meridian Energy's roadshow presentation, May 2017
Slide 1: Powering today, protecting tomorrow
Powering today, protecting tomorrow MERIDIAN ENERGY LIMITED I investor roadshow presentation
Slide 2: Disclaimer
MAY/JUNE 2017 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: New Zealand economy
New Zealand economy MERIDIAN ENERGY LIMITED I investor roadshow presentation
Slide 4: New Zealand economy
MAY/JUNE 2017 New Zealand economy Economy is in a prolonged phase of growth since 2008/09 recession Currently experiencing record net migration, positive business and consumer confidence, recovering commodity prices1 Future economic growth is expected to remain solid in the next three years2 Ranked t
Slide 5: New Zealand electricity market
New Zealand electricity market MERIDIAN ENERGY LIMITED I investor roadshow presentation
Slide 6: New Zealand market
MAY/JUNE 2017 New Zealand market wholesale retail 5 Major generators (all listed) 1 Transmission grid operator (state owned) 1 Big industrial user (Rio Tinto/ 29 Distribution businesses (various 34 Electricity retail brands 2 Million consumers (41 TWh pa) Sumitomo ownership (5 major smelter) structu
Slide 7: The New Zealand market
MAY/JUNE 2017 The New Zealand market NATIONAL DEMAND GWh year on 50,000 -1.1% +1.8% +1.1% -1.6% year Demand growth in the market eliminated change by current climatic conditions (above 40,000 average temperatures and high rainfall) 30,000 National demand has decreased 1.6% in 20,000 the last calenda
Slide 8: The New Zealand market
MAY/JUNE 2017 The New Zealand market GENERATION MARKET SHARE Vertical integration is the prevailing 10% 5% structure in the market Trustpower Retail provides a wholesale market Meridian 16% hedge against spot price variability Mercury 31% Insulates earnings against Contact Genesis unexpected shocks
Slide 9: Retail
MAY/JUNE 2017 Retail Low generation growth environment has led to greater focus on retail profitability Regulator has established low entry barriers for new retailers Varying loyalty plays and offer/tariff differentiation across the market Rise in energy management initiatives mainly focused on usage di
Slide 10: New technology
MAY/JUNE 2017 New technology Solar uptake increasing as economics slowly improve, including commercial Residential capacity factors remain low (15%) and payback high (13 years) Battery value is in load shifting (high to low price periods); grid scale unlikely due to large hydro storage Solar and bat
Slide 11: Tiwai Point smelter
MAY/JUNE 2017 Tiwai Point smelter Around 12% of New Zealand’s total annual demand CfD contract with Meridian now operates on NZAS perpetual 12-month termination right International aluminium market is improving, but remains challenging Meridian’s modelling suggests smelter is cash positive after sta
Slide 12: International Energy Agency review
MAY/JUNE 2017 International Energy Agency review 1 World class level of cost competitive renewable energy sources Well functioning wholesale and retail markets, system flexibility and security of supply Sector reforms have delivered greater market efficiency and improved risk management Regulatory focu
Slide 13: Australian electricity market
Australian electricity market MERIDIAN ENERGY LIMITED I investor roadshow presentation
Slide 14: The Australian market
MAY/JUNE 2017 The Australian market Market still reluctant to commit to new renewables at scale, despite high LGC prices Uncertain political support for renewables and low long-term PPA pricing Likelihood of meeting the 2020 RET target remains questionable Security of supply issues have manifested i
Slide 15: New technology
MAY/JUNE 2017 New technology Residential solar uptake 30% in some states with subsidy support Commercial solar may take off as high wholesale prices roll through Residential capacity factors and payback periods better than New Zealand, costs have been static over the last three years Utility scale so
Slide 16: Meridian Energy
Meridian Energy MERIDIAN ENERGY LIMITED I investor roadshow presentation
Slide 17: About Meridian
MAY/JUNE 2017 About Meridian Vertically integrated renewable generator, retailing electricity to 374,000 customers in New Zealand and Australia New Zealand’s largest generator from purely renewable sources Seven hydro stations HVDC LINK (STATE OWNED) TIWAI POINT ALUMINIUM SMELTER Flexible plant with
Slide 18: About Meridian
MAY/JUNE 2017 About Meridian Annual NZ generation has averaged RETAIL CONTRACTED SALES 13,000 GWh since listing (90% hydro, 10% wind) Residential Typical long generation position to 33% 32% Small medium business manage hydrology risk Large business Supported by a North Island swaption Agricultural S
Slide 19: Meridian's earnings
MAY/JUNE 2017 Meridian’s earnings wholesale +$588m retail +$69m international +$34m corporate/other -$41m FY16 EBITDAF $650m Source: Meridian segment disclosures MERIDIAN ENERGY LIMITED I investor roadshow presentation 19
Slide 20: Our strategy
MAY/JUNE 2017 Our strategy Focus on what is material to shareholder value Maintaining an Protecting and open market in maximising our which we can generation asset compete and wholesale effectively position Powering today, protecting tomorrow Developing Growing retail value opportunities by making th
Slide 21: Progress on strategy
MAY/JUNE 2017 Progress on strategy Maintaining an TPM cost benefit analysis to be redone, open market in implementation still expected by April 2020 which we can Election year focus unlikely to be on electricity compete market structure effectively NZ wind options ready to meet expected new supply Dev
Slide 22: Progress on strategy
MAY/JUNE 2017 Progress on strategy Protecting and NZAS back-to-back arrangements with other maximising our generators in effect generation Transmission grid resilient to a Tiwai exit asset and wholesale Ability of HVDC to deliver energy into the North position Island is robust Growing retail Two year
Slide 23: Risk management
MAY/JUNE 2017 Risk management Comprehensive risk management programme addressing key risks: Health and safety Adverse hydrological conditions Market response to Tiwai Point smelter closure Use of and access to water Plant failure Legislative and regulatory risks Competitor behaviour Information tech
Slide 24: 5 year financials
MAY/JUNE 2017 5 year financials EBITDAF UNDERLYING NPAT $M $M 800 300 250 600 200 400 150 618 650 233 585 585 100 195 209 477 163 200 50 106 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Financial Year ended 30 June source: Meridian Financial Year ended 30 June source: Meridian Improvement d
Slide 25: 5 year financials
MAY/JUNE 2017 5 year financials OPERATING COSTS CAPITAL ASSET ADDITIONS $M $M Retail segment Wholesale Corporate/Elims International IPO Costs 600 300 246 237 238 248 500 227 18 25 35 49 400 200 44 44 42 300 79 543 94 79 80 200 415 100 309 100 86 88 90 91 85 59 0 0 2012 2013 2014 2015 2016 2012 2013
Slide 26: Free cash flow and dividends
MAY/JUNE 2017 Free cash flow and dividends Dividend policy targets 75%-90% free DIVIDENDS DECLARED CPS Specials Total cash flow payout 20 18.23 Total, 18.38 Final 18 Interim Capital management programme in 16 Total 13.01 5.35 4.88 14 response to low capital spend outlook 12 2.00 10 18 months into a 5
Slide 27: Funding
MAY/JUNE 2017 DEBT MATURITY PROFILE AS AT 31 DEC 2016 Funding $M 500 Total borrowings as at 31 December 2016 400 of $1,229m 300 107 Net borrowings (net of cash) as at 31 200 357 408 105 203 December 2016 of $1,185m 100 80 105 10 Committed bank facilities of $620m as at 0 2017 2018 2019 2020 2021 202