MERIDIAN ENERGY LIMITED MANAGEMENT PRESENTATION Meridian Energy - - PowerPoint PPT Presentation

1 Meridian Energy Limited Management Presentation

MERIDIAN ENERGY LIMITED MANAGEMENT PRESENTATION

ABOUT MERIDIAN ENERGY

• New Zealand’s largest generator, all

production from renewable sources

• Seven big hydro stations – flexible plant

with the country’s largest storage; low

• perating costs and capital needs
• Five New Zealand wind farms and proven

success operating in a high wind environment

• Backed with more than a decade of

construction and operational experience

• Typical long generation position to manage

variable hydro inflows

• Around 375MW of consented new options
• Generation portfolio of wind, hydro and

renewable offtake in Australia

2 Meridian Energy Limited Management Presentation

SHAREHOLDER HIGHLIGHTS

• Five successive years of earnings and

dividend growth since listing

• Double digit shareholder returns every year

since listing

• High free cash flow, high payout ratio (75-

90% of that free cash flow), progressive

• rdinary dividend policy
• Structured capital management

programme running to 2022

3

585 618 650 657 666

550 600 650 700

2014 2015 2016 2017 2018 $M Financial Year ended 30 June

EBITDAF

19% 33% 31% 17% 14%

0% 5% 10% 15% 20% 25% 30% 35%

2014 2015 2016 2017 2018 % Financial Year ended 30 June

TOTAL SHAREHOLDER RETURN

Source: Meridian Source: Meridian Meridian Energy Limited Management Presentation

OPERATING UPDATE

• Wholesale prices have reflected ongoing

gas supply concerns

• Combined with recent high inflows, has

produced very favourable 2H FY19 trading conditions

• Solid customer growth in NZ and Australia

during FY19

• Meridian customer migration onto the Flux

platform has commenced

• Electricity Price Review final report will be

delivered mid-year

4 Meridian Energy Limited Management Presentation 72 77 87 285 149 99 125 153 171 100 157 83 55 53 96 128 127 65 55 54 56 91 50 100 150 200 250 300 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

$/MWh

MERIDIAN'S AVERAGE GENERATION PRICE*

FY19 FY18

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 2015 2016 2017 2018 2019

292 293 293 295 296 297 298 299 300 301 97 97 97 98 99 99 101 103 104 106

50 100 150 200 250 300 350 400 450 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19

MERIDIAN'S CUSTOMER CONNECTIONS

Australia gas Australia electricity New Zealand electricity

CLIMATE CHANGE

5 Meridian Energy Limited Management Presentation

We have seen

• No significant change to catchment inflows
• ver the last 100 years
• Some seasonal shift in inflows; drier

autumns, wetter summers

• Snowpack and glaciers getting smaller

Genesis Energy’s Tekapo B power station Contact Energy’s Clyde Dam

It is projected to get

• Wetter in our catchments, including in

winter

• With bigger individual rain storms
• Drier in irrigation areas
• Warmer everywhere
• Windier at our wind farms, especially in

winter

THE NEW ZEALAND ELECTRICITY MARKET

• Demands for action on climate change are

growing and the New Zealand regulatory landscape is changing

• The country is committing to reducing all

non-methane emissions to net zero by 2050 and up to 47% reduction in methane

• Electrification of existing fossil fuel energy

use (largely outside the electricity sector) could significantly lift electricity demand

• Depending on the rate of future

electrification, significant new generation will be needed

• Unsubsidised renewables are likely to form

the bulk of new generation; investment timing is uncertain

5% 17% 20% 49% 6%

3%

NZ 2016 SECTOR EMISSIONS

Electricity Road transport Stationary energy* Agricultural Industrial processes Waste

*manufacturing (including milk processing), construction and commercial sectors and domestic heating 6 Source: Meridian Meridian Energy Limited Management Presentation

30 40 50 60 70 80 90 FY1997 FY2003 FY2009 FY2015 FY2021 FY2027 FY2033 FY2039 FY2045 TWh

DEMAND FORECASTS

Full decarbonisation Partial decarbonisation History

Source: Ministry for the Environment

• Further thermal and older renewable plant

closures or repowering are inevitable

• Closures will require new generation and

capital spend, adding to growth and in addition to decarbonisation

• Unit costs of newer technologies (wind,

solar, batteries) will continue to decline

• Costs of more traditional generation will

continue to improve modestly

• Increases in intermittent generation will

create more volatile market prices

• Value of flexibility will increase over time
• Consumer-led technology uptake will
• ccur, supplementing rather than

displacing grid-level power

THE NEW ZEALAND ELECTRICITY MARKET

7 Meridian Energy Limited Management Presentation

50 100 150 200 250 300 350 400 450 500 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 MW

PLANT RETIREMENT SCHEDULE

Source: Meridian

MERIDIAN’S INVESTMENT PROPOSITION

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Income

Strong free cash flow Low capital needs High free cash flow payout Continued cost discipline Progressive

• rdinary DPS

Capital management

Potential

Growth NZ retail load Retail platform changes Medium term new generation Customer growth in Australia Flux Powershop franchise into the UK Long term sustainable business

Meridian Energy Limited Management Presentation

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DISCLAIMER

T H E I N F O R M A T I O N I N T H I S P R E S E N T A T I O N W A S P R E P A R E D B Y M E R I D I A N E N E R G Y W I T H D U E C A R E A N D A T T E N T I O N . H O W E V E R , T H E I N F O R M A T I O N I S S U P P L I E D I N S U M M A R Y F O R M A N D I S T H E R E F O R E N O T N E C E S S A R I L Y C O M P L E T E , A N D N O R E P R E S E N T A T I O N I S M A D E A S T O T H E A C C U R A C Y , C O M P L E T E N E S S O R R E L I A B I L I T Y O F T H E I N F O R M A T I O N . I N A D D I T I O N , N E I T H E R T H E C O M P A N Y N O R A N Y O F I T S D I R E C T O R S , E M P L O Y E E S , S H A R E H O L D E R S N O R A N Y O T H E R P E R S O N S H A L L H A V E L I A B I L I T Y W H A T S O E V E R T O A N Y P E R S O N F O R A N Y L O S S ( I N C L U D I N G , W I T H O U T L I M I T A T I O N , A R I S I N G F R O M A N Y F A U L T O R N E G L I G E N C E ) A R I S I N G F R O M T H I S P R E S E N T A T I O N O R A N Y I N F O R M A T I O N S U P P L I E D I N C O N N E C T I O N W I T H I T . T H I S P R E S E N T A T I O N M A Y C O N T A I N F O R W A R D - L O O K I N G S T A T E M E N T S A N D P R O J E C T I O N S . T H E S E R E F L E C T M E R I D I A N ’ S C U R R E N T E X P E C T A T I O N S , B A S E D O N W H A T I T T H I N K S A R E S E C U R I T I E S A N D M A Y N O T B E R E L I E D U P O N I N C O N N E C T I O N W I T H A N Y P U R C H A S E O F M E R I D I A N E N E R G Y S E C U R I T I E S . T H I S P R E S E N T A T I O N C O N T A I N S A N U M B E R O F N O N - G A A P F I N A N C I A L M E A S U R E S , I N C L U D I N G E N E R G Y M A R G I N , E B I T D A F , U N D E R L Y I N G N P A T A N D G E A R I N G . B E C A U S E T H E Y A R E N O T D E F I N E D B Y G A A P O R I F R S , M E R I D I A N ' S C A L C U L A T I O N O F T H E S E M E A S U R E S M A Y D I F F E R F R O M S I M I L A R L Y T I T L E D M E A S U R E S P R E S E N T E D B Y O T H E R C O M P A N I E S A N D T H E Y S H O U L D N O T B E C O N S I D E R E D I N I S O L A T I O N F R O M , O R C O N S T R U E D A S A N A L T E R N A T I V E T O , O T H E R F I N A N C I A L M E A S U R E S D E T E R M I N E D I N A C C O R D A N C E W I T H G A A P . A L T H O U G H M E R I D I A N B E L I E V E S T H E Y P R O V I D E U S E F U L I N F O R M A T I O N I N M E A S U R I N G T H E F I N A N C I A L P E R F O R M A N C E A N D C O N D I T I O N O F M E R I D I A N ' S B U S I N E S S , R E A D E R S A R E C A U T I O N E D N O T T O P L A C E U N D U E R E L I A N C E O N T H E S E N O N - G A A P