MERIDIAN ENERGY LIMITED 2019 INTERIM RESULTS PRESENTATION MERIDIAN - - PowerPoint PPT Presentation
MERIDIAN ENERGY LIMITED 2019 INTERIM RESULTS PRESENTATION MERIDIAN ENERGY LIMITED 2019 INTERIM RESULTS PRESENTATION HIGHLIGHTS 18% increase in interim EBITDAF 5.70 ordinary dividend, a 6% increase cents per share 5% increase in NZ customer
MERIDIAN ENERGY LIMITED 2019 INTERIM RESULTS PRESENTATION
2
Meridian Energy Limited 2019 Interim Results Presentation
cents per share
increase in interim EBITDAF
increase in NZ customer numbers
3 Meridian Energy Limited 2019 Interim Results Presentation
Higher wholesale prices since October 2018 That marked national storage dropping below average for the first time since February 2018 And commencement of higher consumption by the Tiwai Point Smelter as new cells were cut in on potline 4 With uncertainty around gas supply as Pohokura offshore capacity was reduced and Maui pipeline issues were discovered Further 30 days of shutdown on Pohokura
February and April 2019 Electricity market is experiencing some periodic thermal plant outages ASX forward price curve has steadily lifted reflecting the shift in underlying supply demand balance Higher spot and forward wholesale prices
4 Meridian Energy Limited 2019 Interim Results Presentation 50 70 90 110 130 150 Q1 2019 Q3 2019 Q1 2020 Q3 2020 Q1 2021 Q3 2021 Q1 2022 Q3 2022
$/MWh
OTAHUHU ASX FUTURES SETTLEMENT PRICE
29 June 2018 28 September 2018 31 October 2018 30 November 2018 3 January 2019 31 January 2019 Source: Electricity Authority 100 200 300 400 500 600 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec
$/MWh
OTAHUHU DAILY AVERAGE SPOT PRICE
1H FY19 1H FY18
Source: Meridian
Despite lower irrigation volumes in 2018 2018 was the second equal warmest year
2017 Underlying demand growth of 1% excluding irrigation Flat demand in 2018 Medium term economic growth expected Policy settings should encourage decarbonisation Assumptions vary on rate of electrification
Different, positive views on future demand
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+1%
0% 0% +2% +1% +1% +2% +1%
+1%
REGIONAL ELECTRICITY DEMAND 2018 V 2017
0%
Source: Electricity Authority
Official opening in early December New cells have been cut in since October 2018 Tiwai contracts with Meridian now total 622MW 4th potline contract is for 50MW and represents: a 10% increase in the plant’s production capacity 1% growth in NZ total electricity demand growth LME prices have declined 13% since June 2018, however remain above 2017 levels 4th potline restarted
6 Meridian Energy Limited 2019 Interim Results Presentation 530 540 550 560 570 580 590 600 610 620 1-Jul-18 1-Aug-18 1-Sep-18 1-Oct-18 1-Nov-18 1-Dec-18
MW
TIWAI POINT AVERAGE DAILY LOAD
1,500 1,600 1,700 1,800 1,900 2,000 2,100 2,200 2,300 2-Jul-18 2-Aug-18 2-Sep-18 2-Oct-18 2-Nov-18 2-Dec-18
USD/TONNE
LME ALUMINIUM PRICES
Source: Meridian
LGC markets fell during 1H FY19 with: Developers looking to lock in contracts, putting downward pressure on prices Retailers under surrendering in front years and meeting carried over
2020 Recently black forward prices have increased in the lead up to summer with concerns around system reliability Extreme weather in January 2019 has driven demand, spot and forward prices higher Lower LGC prices
7 Meridian Energy Limited 2019 Interim Results Presentation 20 30 40 50 60 70 80 90 100
Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18
$A/MWH
AUSTRALIAN LGC PRICES
Spot CY19 CY20
1H FY19
Source: Meridian
8 Meridian Energy Limited 2019 Interim Results Presentation
Interim Climate Change Commission established to provide analysis on: How surrender obligations work if agricultural emissions enter the ETS Planning for the transition to 100% renewable energy by 2035 ICCC will be superceded by an Independent Climate Change Commission this year, enabled by the Zero Carbon Bill That Bill is currently being drafted; intended to go through select committee before June and pass into law late 2019 Work is also continuing on improvements to the ETS, a second tranche of changes expected to be announced in 2019 Electricity market will be the key enabler of greater decarbonisation in New Zealand This policy direction is lifting future electricity demand forecasts Climate change policy
9 Meridian Energy Limited 2019 Interim Results Presentation
30 40 50 60 70 80 90
1998 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050
TWh
DEMAND FORECASTS
NZ Historical Demand Transpower - NZ Inc Transpower - Mobilise MBIE - High MBIE - Low Productivity Comm. - High Productivity Comm. - Low
Source: Meridian
10 Meridian Energy Limited 2019 Interim Results Presentation
Electricity price review
Second phase of the review is underway Preliminary options paper is due in February 2019 That paper will test solutions suggested by stakeholders and panel experts Final findings and recommendations will then be developed
Sep 18 Oct 18 Nov 18 Feb 19 Mar 19 Jun 19 First report for discussion released submissions closed Analysis of retail billing data released submissions closed Preliminary
planned release workshops followed by submissions Final report and recommendations delivered to Minister
Since June 2018 the EA has been preparing new TPM guidelines, including a new CBA Update from EA in December 2018: TPM review is a top priority Existing interconnection and HVDC charges will be replaced with a benefit- based charge and a residual charge Benefit-based charge for new investment and selected existing major investments Residual charge for remaining former investment Proposal for consultation expected to be released in mid-2019 Transpower’s RCP3 Proposal plans $60m investment to extend pole 2 operating life rather than complete replacement HVDC cost reduction expected from 2020, whether TPM review is complete or not Transmission pricing
11 Meridian Energy Limited 2019 Interim Results Presentation 20 40 60 80 100 120 140 160 180 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025
$M
TRANSPOWER HVDC REVENUE
Source: Transpower, Meridian
A Victorian Default Offer (VDO) will be created from 1 July 2019 to replace current standing offers The VDO will contain a cost for customer acquisition and retention, unlike the previously Basic Service Offer originally proposed by the Thwaites review Thwaites Review (Victoria)
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Default offer proposal still seeking support
ACCC Review (Federal) NEG dumped, reliability mechanisms have been retained Developed a package to address market concerns and deliver cost savings Includes proposed legislation that could compel companies to sell off large generation assets, which has been widely criticised Federal Government policy
Legislation passed requiring Ofgem to cap standard variable and default energy tariffs Cap (ceiling) is in place from the end of 2018 until 2020 Ofgem will then recommend if the cap should remain up to 2023 Recent wholesale price increases have led to Ofgem announcing the price cap will rise in April 2019 Strong acquisition push by the big retailers in the lead up to the cap’s introduction Including moving customers off default
covered by the cap) Price caps
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CUSTOMER SALES CUSTOMER NUMBERS SALES VOLUME (GWH) AVERAGE PRICE1 ($/MWH) 1H FY19 Residential 198,689 762 Small medium business 38,781 496 Agricultural 37,978 455 Large business 18,658 223 Total Residential/SMB 294,106 1,936 $116 Corporate 2,426 1,063 $82 1H FY18 Residential 188,698 719 Small medium business 36,916 477 Agricultural 37,382 607 Large business 17,159 224 Total Residential/SMB 280,155 2,027 $118 Corporate 2,241 1,114 $81
2% growth in customer numbers Growth in residential (6%) and small medium business sales volumes (4%) Lower agri sales reflect irrigation demand First Meridian staff customers migrated
Residential discounts now replaced with simple, lower rates Continued growth
15
1Volume weighted average price in $/MWh
Meridian Energy Limited 2019 Interim Results Presentation
64 57 44 93 124
20 40 60 80 100 120 140
2014 2015 2016 2017 2018 $/MWH Six Months Ended 31 December
AVERAGE GENERATION PRICE
6,163 6,087 6,296 5,289 5,925 739 771 733 648 621 6,902 6,858 7,029 5,937 6,546
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
2014 2015 2016 2017 2018 GWH Six Months Ended 31 December
NEW ZEALAND GENERATION
Hydro Wind Total
92% of average inflows in the six months to December 2018 with good winter storage Higher average prices received for generation (33%) and paid to supply contracted sales (37%) Good storage at end of January 2019: Waitaki catchment 98% of average Waiau catchment 92% of average Average generation levels at higher prices
16 Source: Meridian Source: Meridian Meridian Energy Limited 2019 Interim Results Presentation
Customer growth
17
2% growth in customer numbers 3% reduction in retail sales volume in 1H FY19 Momentum in Victorian gas sales with 12,500 customers and 142TJ of sales volume by the end of 1H FY19 South Australia is under development
Source: Meridian Meridian Energy Limited 2019 Interim Results Presentation
Lower generation prices Falling LGC price curve Drought conditions persist in NSW, leading to lower than expected FY19 and potentially FY20 hydro generation
48,208 77,970 97,547 97,241 99,368 20,000 40,000 60,000 80,000 100,000 120,000
Jun-15 Jun-16 Jun-17 Jun-18 Dec-18
CONNECTIONS
AUSTRALIAN ELECTRICITY CUSTOMERS
Proposed merger between npower (our franchisee) and SSE’s domestic retail business was abandoned in December 2018 Key issues appear to be intense retail competition and increased regulation npower will move into E.ON as part of E.ON’s acquisition of Innogy (npower’s parent) from RWE announced back in March 2018 Following this acquisition (later this year): RWE focused on generation E.ON focused on distribution and retail across Europe Powershop continues to acquire customers (55,000 by December 2018) and develop white label capability Merger abandoned
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4.80 5.10 5.33 5.38 5.70 1.40 2.44 2.44 2.44 2.44 6.20 7.54 7.77 7.82 8.14
3 6 9 12
2014 2015 2016 2017 2018 CPS Six Months Ended 31 December
INTERIM DIVIDEND DECLARED
Ordinary dividend Special dividend Total
Interim ordinary dividend declared of 5.70 cps, 86% imputed Capital management interim special dividend of 2.44 cps, unimputed Brings capital management distributions to $500M since the programme began in August 2015 6% growth in interim ordinary dividend
20
INTERIM DIVIDENDS DELCARED CPS IMPUTATION 1H FY2019 Ordinary dividends 5.70 86% Capital mgt special dividends 2.44 0% Total 8.14 1H FY2018 Ordinary dividends 5.38 88% Capital mgt special dividends 2.44 0% Total 7.82
Source: Meridian Meridian Energy Limited 2019 Interim Results Presentation
Higher residential and business sales volumes at stable average price Lower corporate sales volumes at higher prices Lower irrigation sales Higher wholesale prices and volumes with: 10% increase in physical generation 12% decrease in acquired generation 61% increase in derivative volumes sold 4th potline volumes and Tiwai price indexation Some NZ cost expansion, mainly asset refurbishments Growth in Australia and UK earnings, some cost growth to support this Higher NZ transmission costs Record interim EBITDAF, 18% up on 1H FY18
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455 474 485 452 510 445 465 455 492 900 939 940 944
200 400 600 800 1,000 1,200
2015 2016 2017 2018 2019 $M
NZ ENERGY MARGIN
Interim Final half-year Total 324 332 354 329 389 294 318 303 337 618 650 657 666
200 400 600 800
2015 2016 2017 2018 2019 $M
GROUP EBITDAF
Interim Final half-year Total
GSP hydro generation, impacted by drought conditions Firming retail electricity price Victorian gas earnings Sharp reduction in LGC prices Hedging benefits from these will be felt in 2H FY19 Additional operating costs for GSP assets, gas costs and renewed customer marketing Forward sales of LGCs are marked to market through fair value movements Sales settle each January with fair value gains/losses on settled sales transferring to EBITDAF 1H FY19 includes A$3M of settlement losses which will decrease 2H FY19 EBITDAF This compares to an equivalent figure in 2H FY18 of A$14M 14% increase in EBITDAF
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Accounting treatment of LGCs
30 36 41 6 8 36 44
10 20 30 40 50 60
2017 2018 2019 $NZ M
AUSTRALIAN EBITDAF
Interim Final half-year Total
Refurbishment spend on Te Āpiti wind farm and the Ōhau hydro stations Maintaining a similar level of promotional spend to 1H FY18, supporting NZ customer acquisition Higher Australian customer service costs from higher average customer numbers Costs associated with introduction of gas
Maintenance costs associated with GSP hydro assets Flux expansion and preparation for Meridian customer migration Relatively stable stay in business capex Total capex of $28M in 1H FY19 6% increase in operating costs
23 Meridian Energy Limited 2019 Interim Results Presentation 44 49 24 18 135 40 48 18 21 127 20 40 60 80 100 120 140 160 NZ Wholesale NZ Retail Australia Other Total
$M
OPERATING COSTS
1H FY19 1H FY18
23 19 19 17 21 37 31 28 30 60 50 47 47
10 20 30 40 50 60 70 80
2015 2016 2017 2018 2019 $M
STAY IN BUSINESS CAPEX
Interim Final half-year Total
$3M (2%) increase in depreciation No impairments in 1H FY19, compared with 1H FY18 impairments of $2M (Central Wind consent) No asset sale gains in 1H FY19 compared with 1H FY18 gains of $6M (farm land sales) $20M increase to NPBT from fair value of electricity hedges from rising forward electricity prices and falling LGC price curve ($2M reduction in 1H FY18) $15M reduction to NPBT from fair value of treasury instruments from decreases in New Zealand and Australian forward interest rates ($2M reduction in 1H FY18) $2M (5%) increase in net financing costs $17M increase in tax expense from higher NPBT $40M (38%) increase in underlying NPAT from higher EBITDAF, some offset from increases depreciation, interest, tax and swapation premiums 39% increase in NPAT
24
117 104 125 109 152 130 81 75 92 247 185 200 201
100 200 300
2015 2016 2017 2018 2019 $M
NET PROFIT AFTER TAX
Interim Final half-year Total 115 122 131 104 144 94 111 90 102 209 233 221 206
100 200 300
2015 2016 2017 2018 2019 $M
UNDERLYING NPAT
Interim Final half-year Total
Meridian Energy Limited 2019 Interim Results Presentation
Total borrowings as at 31 December 2018 of $1,561M Up $195M from 31 December 2017 Committed bank facilities of $725M of which $300M were undrawn Expiry of these facilities from FY19 to FY26 Recent USD 300M Private Placement
25 Meridian Energy Limited 2019 Interim Results Presentation
1.7 1.8 1.9 2.3 2.2
1 2 3
Jun-15 Jun-16 Jun-17 Jun-18 Dec-18 TIMES
NET DEBT/EBITDAF
340 325 56 135 160 489 50 35 75 100
100 200 300 400 500 600
2019 2020 2021 2022 2023 2024+ $M Financial Year ended 30 June
DEBT MATURITY PROFILE AS AT 31 DEC 2018
Drawn debt maturing (face value) Available facilities maturing
34% 4% 26% 5% 22% 9%
SOURCES OF FUNDING AS AT 31 DEC 2018
NZ$ bank facilities drawn/undrawn EKF - Danish export credit Retail Bonds Floating rate notes US private placement Commercial paper
26
Good current catchment storage Strong January 2019 generation and wholesale prices, with irrigation and air conditioning load driving demand NZ electricity price review preliminary options paper is imminent Followed by consultation in early 2019, final report to the Minister will follow that Transmission pricing proposal for consultation expected in the middle of the year NZ’s climate change actions will be shaped by this year’s Zero Carbon Bill, expected to pass into law late 2019 Default offers in two forms (Victoria, rest of the NEM) appear likely Australian federal election sometime in 2019
Meridian Energy Limited 2019 Interim Results Presentation
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28 Meridian Energy Limited 2019 Interim Results Presentation
Record level of interim operating cash flow Driven by higher 1H FY19 EBITDAF Includes reversal of timing differences that weighed on FY18 full year cash flow $100M (62%) increase
29 Meridian Energy Limited 2019 Interim Results Presentation
217 206 203 162 262 223 246 267 265 440 452 470 427
100 200 300 400 500
2015 2016 2017 2018 2019 $M
OPERATING CASHFLOW
Interim Final half-year Total
$M WHOLESALE RETAIL AUSTRALIA
OTHER/ UNALLOCATED
INTER- SEGMENT SIX MONTHS ENDED 31 DECEMBER 1H FY19 1H FY18 1H FY19 1H FY18 1H FY19 1H FY18 1H FY19 1H FY18 1H FY19 1H FY18
Energy margin 430 360 80 92 66 57
2 2 6 5 1
8 (9) (5) Energy transmission expense (63) (60)
(3)
(44) (40) (49) (48) (24) (18) (23) (25) 5 4 EBITDAF 325 262 37 49 41 36 (10) (17) (4) (1)
30 Meridian Energy Limited 2019 Interim Results Presentation
37 49
+4 +1
10 20 30 40 50 60
EBITDAF 31 Dec 2017 Retail contracted sales Costs to supply contracted sales Other revenue Operating costs EBITDAF 31 Dec 2018
$M
MOVEMENT IN RETAIL SEGMENT EBITDAF
For treatment of financial trading FY18 energy margin reclassified
31 Meridian Energy Limited 2019 Interim Results Presentation
ENERGY MARGIN ($M) 1H FY18 REPORTED CHANGES 1H FY18 RESTATED FY18 RESTATED Contracted sales 49 12 61 123 Cost to supply customers (37) (10) (47) (100)
Net cost of acquired generation
(14) (25) Generation spot revenue 45 12 57 87 Energy Margin 57
85
2% increase in customers since June 2018 Customers
32
5% decrease in overall volumes 6% increase in residential volumes 4% increase in small business volumes 1% decrease in large business volumes 25% decrease in agri volumes, irrigation- driven 1% decrease in average sales price Residential, Business, Agri segment 5% decrease in volumes 1% increase in average sales price Corporate segment
Meridian Energy Limited 2019 Interim Results Presentation
104 102 103 106 109 116 117 115 119 119 56 56 59 66 69 276 275 277 291 297
50 100 150 200 250 300 350
Jun-15 Jun-16 Jun-17 Jun-18 Dec-18 ICP (000)
NEW ZEALAND CUSTOMER NUMBERS
Meridian North Island Meridian South Island Powershop Total 1,880 2,001 1,886 2,027 1,936 1,113 1,163 911 1,114 1,063 2,993 3,164 2,797 3,141 2,999
500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
2014 2015 2016 2017 2018 GWH Six Months Ended 31 December
RETAIL SALES VOLUME
Residential, SMB, Agri Corporate Total
Inflows for 1H FY19 were 92% of historical average January 2019 inflows were 99% of average Inflows
33
Meridian’s Waitaki catchment storage at 31 December 2018 was 98% of historical average By 31 January 2019, this position was also 98% of historical average Storage
Meridian Energy Limited 2019 Interim Results Presentation 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
GWh
Financial year
MERIDIAN'S COMBINED CATCHMENT INFLOWS
December YTD 85 year average
500 1,000 1,500 2,000 2,500 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec
GWh
MERIDIAN'S WAITAKI STORAGE
Average 1979- 2013 2014 2015 2016 2017 2018
1H FY19 generation was 10% higher than 1H FY18 Reflected higher hydro and lower wind generation Volume
34
1H FY19 average price Meridian received for its generation was 33% higher than 1H FY18 1H FY19 average price Meridian paid to supply contracted sales was 38% higher than 1H FY18 Price
Meridian Energy Limited 2019 Interim Results Presentation
6,163 6,087 6,296 5,289 5,925 739 771 733 648 621 6,902 6,858 7,029 5,937 6,546
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
2014 2015 2016 2017 2018 GWH Six Months Ended 31 December
NEW ZEALAND GENERATION
Hydro Wind Total 64 57 44 93 124
20 40 60 80 100 120 140
2014 2015 2016 2017 2018 $/MWH Six Months Ended 31 December
AVERAGE GENERATION PRICE
2% growth in customer numbers since June 2018 12,500 gas customers in Victoria by 31 December 2018 Customers
35
3% decrease in sales volumes 142TJ of gas sales in Victoria Sales volume
Meridian Energy Limited 2019 Interim Results Presentation 48,208 77,970 97,547 97,241 99,368 20,000 40,000 60,000 80,000 100,000 120,000
Jun-15 Jun-16 Jun-17 Jun-18 Dec-18
CONNECTIONS
AUSTRALIAN ELECTRICITY CUSTOMERS
63 163 241 289 280
50 100 150 200 250 300 350
2014 2015 2016 2017 2018 GWH Six Months Ended 31 December
RETAIL SALES VOLUME
1H FY19 generation was 37% higher than 1H FY18 1H FY19 includes 123GWh of seasonal generation from the GSP hydro assets 1H FY19 wind generation was 3% lower than 1H FY18 Volume
36 Meridian Energy Limited 2019 Interim Results Presentation
441 437 309 305 296 123 419
100 200 300 400 500 600
2014 2015 2016 2017 2018 GWH Six Months Ended 31 December
AUSTRALIAN GENERATION
Wind Hydro Total
389
329
+58
+45 +259 +10
+9 +3
100 200 300 400 500
EBITDAF 31 Dec 2017 Retail contracted sales Wholesale contracted sales Costs to supply customers Net cost of acquired generation Generation spot revenue Virtual asset swap margins Other market costs Australian energy margin Other revenue Transmission expenses Employee &
expenses EBITDAF 31 Dec 2018
$M
MOVEMENT IN EBITDAF
37
New Zealand Energy Margin +$58M (13%)
Meridian Energy Limited 2019 Interim Results Presentation
XXXX
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144 152 389
+5 +7
100 150 200 250 300 350 400 450 EBITDAF Depreciation and amortisation Premiums paid
interest Net finance costs Tax Underlying NPAT Net change in fair value of hedges/ instruments Premiums paid
interest Tax NPAT
$M
1H FY19 EBITDAF TO NPAT RECONCILIATION
A non-GAAP financial measure representing energy sales revenue less energy related expenses and energy distribution expenses Used to measure the vertically integrated performance of the retail and wholesale businesses Used in place of statutory reporting which requires gross sales and costs to be reported separately, therefore not accounting for the variability of the wholesale spot market and the broadly
the cost of retail electricity purchases ENERGY MARGIN
39
distribution costs (fees to distribution network companies that cover the costs of distribution of electricity to customers), sales to large industrial customers and fixed price revenues from derivatives sold (Contract sales revenue) Purchases required to cover contracted customer sales (Cost to supply customers) The fixed cost of derivatives acquired to supplement generation and manage spot price risks, net of spot revenue received for generation acquired from those derivatives (Net cost of acquired generation) Revenue from the volume of electricity that Meridian generates (Generation spot revenue) The net position of virtual assets swaps with Genesis Energy and Mercury Other associated market revenues and costs including Electricity Authority levies and ancillary generation revenues (i.e. frequency keeping)
40
1H FY19 1H FY18 VOLUME1 VWAP2 $M VOLUME1 VWAP2 $M
Residential/SMB contracted sales 1,936 $116.4 225 2,027 $117.6 238 Corporate contracted sales 1,063 $81.8 87 1,114 $80.6 90 Retail contracted sales 2,999 $104.1 312 3,141 $104.5 328 NZAS sales 2,608 2,525 Sell side CfDs 1,234 767 Wholesale contracted sales 3,842 $64.7 249 3,292 $58.1 191 Cost to supply retail customers 3,160 3,295 Cost to supply wholesale customers 3,842 3,292 Cost to supply customers 7,002 ($134.5) (942) 6,587 ($97.9) (645) Acquired generation revenue 1,051 $142.8 150 1,118 $96.6 115 Cost of acquired generation 1,051 ($68.1) (71) 1,118 ($68.7) (82) Future contract close outs (3) (2) Net cost of acquired generation 76 31 Generation spot revenue 6,546 $124.2 812 5,937 $93.2 553 Net VAS position 529 6 478 (4) Other market costs (3) (2) Energy Margin 510 452
LWAP:GWAP 1H FY19 1.11 1H FY18 1.08
1GWh 2Volume weighted average price in $/MWh
Meridian Energy Limited 2019 Interim Results Presentation
510
812 312 249
150
+6
200 400 600 800 1,000 1,200 1,400
Generation spot revenue Retail contracted sales (net) Wholesale contracted sales Cost to supply customers Acquired generation spot revenue Cost of acquired generation Future contract close
Virtual asset swap margins Other market costs Energy Margin
$M
NEW ZEALAND ENERGY MARGIN
41
Contracted sales revenue $561M Net cost of acquired generation $76M
Meridian Energy Limited 2019 Interim Results Presentation
510 510
452 +259
+58
+35 +11
+10
100 200 300 400 500 600 700 800
Energy Margin 31 Dec 2018 Generation spot revenue Retail contracted sales (net) Wholesale contracted sales Cost to supply customers Acquired generation spot revenue Cost of acquired generation Future contract close outs Virtual asset swap margins Other market costs Energy Margin 30 Jun 18
$M
NEW ZEALAND ENERGY MARGIN
42
Contracted sales revenue +$42M Net cost of acquired generation +$45M
Meridian Energy Limited 2019 Interim Results Presentation
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SIX MONTHS ENDED 31 DECEMBER $M 2018 2017
Retail service revenue (field services revenue etc) 4 3 Dam Safety Intelligence 1 1 Flux UK 6 4 Other 2 2 Total other revenue 13 10
Meridian Energy Limited 2019 Interim Results Presentation
Meridian uses derivative instruments to manage interest rate, foreign exchange and electricity price risk As forward prices and rates on these instruments move, non-cash changes to their carrying value are reflected in NPAT Accounting standards only allow hedge accounting if specific conditions are met, which creates NPAT volatility $20M positive change in fair value of electricity and other hedges in 1H FY19 from changing forward electricity prices $15M negative change in fair value of treasury instruments in 1H FY19 from decreasing forward interest rates On electricity and other hedges and treasury instruments
44 Meridian Energy Limited 2019 Interim Results Presentation
5
50
FY15 FY16 FY17 FY18 1H FY19 $M
NET CHANGE IN FAIR VALUE OF FINANCIAL INSTRUMENTS
45
SIX MONTHS ENDED 31 DECEMBER $M 2018 2017 New Zealand energy margin 510 452 Australia energy margin 66 57 Other revenue 13 10 Energy transmission expense (65) (63) Employee and other operating expenses (135) (127) EBITDAF 389 329 Depreciation and amortisation (137) (134) Impairment of assets
Gain/(loss) on sale of assets
Net change in fair value of electricity and other hedges
20 (2) Net finance costs (43) (41) Net change in fair value of treasury instruments (15) (2) Net profit before tax 214 154 Income tax expense (62) (45) Net profit after tax 152 109
Meridian Energy Limited 2019 Interim Results Presentation
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SIX MONTHS ENDED 31 DECEMBER $M 2018 2017 Net profit after tax 152 109 Underlying adjustments Hedging instruments
Net change in fair value of electricity and other hedges
(20) 2 Net change in fair value of treasury instruments 15 2
Premiums paid on electricity options net of interest
(7) (6) Assets (Gain)/loss on sale of assets
Impairment of assets
Total adjustments before tax (12) (6) Taxation Tax effect of above adjustments 4 1 Underlying net profit after tax 144 104
Meridian Energy Limited 2019 Interim Results Presentation
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SIX MONTHS ENDED 31 DECEMBER $M 2018 2017 Receipts from customers 1,695
1,374
Interest and dividends received
(1,310)
(1,101)
Interest and income tax paid (123)
(111)
Operating cash flows 262
162
Sale of property, plant and equipment
Sales of subsidiaries and other assets
(23)
(18)
Stamp duty/capitalised interest
(12)
(10)
Investing cash flows (35)
(16)
Term borrowings drawn 89
170
Term borrowings repaid (5)
(5)
Shares purchased for long-term incentive
(292)
(286)
Financing cash flows (208)
(121)
Meridian Energy Limited 2019 Interim Results Presentation
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SIX MONTHS ENDED 31 DECEMBER $M 2018 2017
Cash and cash equivalents 78 108 Trade receivables 259 304 Customer contract assets 20 19 Other current assets 141 122 Total current assets 498 553 Property, plant and equipment 7,809 7,871 Intangible assets 59 58 Other non-curent assets 200 212 Total non-current assets 8,068 8,141 Payables, accruals and employee entitlements 304 328 Customer contract liabilities 15 11 Current portion of term borrowings 512 190 Other current liabilities 83 95 Total current liabilities 914 624 Term borrowings 1,049 1,176 Deferred tax 1,668 1,700 Other non-current liabilities 271 261 Total non-current liabilities 2,988 3,137 Net assets 4,664 4,933
Meridian Energy Limited 2019 Interim Results Presentation
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Acquired generation 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 retail customers, less distribution costs Average wholesale contracted sales price volume weighted average electricity price received from wholesale customers, including NZAS Combined catchment inflows combined water inflows into Meridian’s Waitaki and Waiau hydro storage lakes Cost of acquired generation volume weighted average price Meridian pays for derivatives acquired to supplement generation Cost to supply contracted sales volume weighted average price Meridian pays to supply contracted customer sales Contracts for Difference (CFDs) an agreement between parties to pay the difference between the wholesale electricity price and an agreed fixed price for a specified volume of electricity. CFDs do not result in the physical supply of electricity Customer connections (NZ) number of installation control points, excluding vacants FRMP financially responsible market participant GWh gigawatt hour. Enough electricity for 125 average New Zealand households for one year Historic average inflows the historic average combined water inflows into Meridian’s Waitaki and Waiau hydro storage lakes over the last 85 years Historic average storage the historic average level of storage in Meridian’s Waitaki catchment since 1979 HVDC high voltage direct current link between the North and South Islands of New Zealand ICP New Zealand installation control points, excluding vacants ICP switching the number of installation control points changing retailer supplier in New Zealand, recorded in the month the switch was initiated MWh megawatt hour. Enough electricity for one average New Zealand household for 46 days National demand Electricity Authority’s reconciled grid demand www.emi.ea.govt.nz NZAS New Zealand Aluminium Smelters Limited Retail sales volumes contract sales volumes to retail customers, including both non half hourly and half hourly metered customers Sell side derivatives sell-side electricity derivatives excluding the sell-side of virtual asset swaps Virtual Asset Swaps (VAS) CFDs Meridian has with Genesis Energy and Mercury. They do not result in the physical supply of electricity
Meridian Energy Limited 2019 Interim Results Presentation
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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 THE INFORMATION. IN ADDITION, NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS, EMPLOYEES, SHAREHOLDERS NOR ANY OTHER PERSON SHALL HAVE LIABILITY WHATSOEVER TO ANY PERSON FOR ANY LOSS (INCLUDING, WITHOUT LIMITATION, ARISING FROM ANY FAULT OR NEGLIGENCE) ARISING FROM THIS PRESENTATION OR ANY INFORMATION SUPPLIED IN CONNECTION WITH IT. THIS PRESENTATION MAY CONTAIN FORWARD-LOOKING STATEMENTS AND PROJECTIONS. THESE REFLECT MERIDIAN’S CURRENT EXPECTATIONS, BASED ON WHAT IT THINKS ARE REASONABLE ASSUMPTIONS. MERIDIAN GIVES NO WARRANTY OR REPRESENTATION AS TO ITS FUTURE FINANCIAL PERFORMANCE OR ANY FUTURE MATTER. EXCEPT AS REQUIRED BY LAW OR NZX OR ASX LISTING RULES, MERIDIAN IS NOT OBLIGED TO UPDATE THIS PRESENTATION AFTER ITS RELEASE, EVEN IF THINGS CHANGE MATERIALLY. THIS PRESENTATION DOES NOT CONSTITUTE FINANCIAL ADVICE. FURTHER, THIS PRESENTATION IS NOT AND SHOULD NOT BE CONSTRUED AS AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY MERIDIAN ENERGY SECURITIES AND MAY NOT BE RELIED UPON IN CONNECTION WITH ANY PURCHASE OF MERIDIAN ENERGY SECURITIES. THIS PRESENTATION CONTAINS A NUMBER OF NON-GAAP FINANCIAL MEASURES, INCLUDING ENERGY MARGIN, EBITDAF, UNDERLYING NPAT AND
MEASURES PRESENTED BY OTHER COMPANIES AND THEY SHOULD NOT BE CONSIDERED IN ISOLATION FROM, OR CONSTRUED AS AN ALTERNATIVE TO, OTHER FINANCIAL MEASURES DETERMINED IN ACCORDANCE WITH GAAP. ALTHOUGH MERIDIAN BELIEVES THEY PROVIDE USEFUL INFORMATION IN MEASURING THE FINANCIAL PERFORMANCE AND CONDITION OF MERIDIAN'S BUSINESS, READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE NON-GAAP FINANCIAL MEASURES. THE INFORMATION CONTAINED IN THIS PRESENTATION SHOULD BE CONSIDERED IN CONJUNCTION WITH THE COMPANY’S CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2018, AVAILABLE AT: WWW.MERIDIANENERGY.CO.NZ/INVESTORS/ ALL CURRENCY AMOUNTS ARE IN NEW ZEALAND DOLLARS UNLESS STATED OTHERWISE.
Meridian Energy Limited 2019 Interim Results Presentation