Contact Energy Limited · NZX:CEN
Contact Energy — Non-Deal Roadshow (April 2017)
26 slides from Contact Energy's roadshow presentation, April 2017
Slide 1: 2017 International Investor Roadshow
Higher Res images pending: branding team Monday 2017 International Investor Roadshow Dennis Barnes – Chief Executive Officer Contact Energy Annual meeting of shareholders April 2017 October 2016 Ticker: CEN.NZE
Slide 2: Disclaimer
Disclaimer Not financial product advice: This presentation is for information purposes only and is not financial or investment advice or a recommendation to acquire Contact Energy's (Contact) securities, and has been prepared without taking into account the objectives, financial situation or needs o
Slide 3: Profile: Dennis Barnes, Chief Executive Officer
Profile Dennis Barnes Chief Executive Officer Dennis Barnes has been Chief Executive Officer of Contact since 2011. Dennis has completed Contact’s NZD2bn investment programme in renewable energy, flexible generation and companywide systems. Over his time at Contact Dennis has provided industry leade
Slide 4: Contents
Contents 1 New Zealand 2 Electricity industry 3 Contact Energy 4 Industry and company information Contact Energy October April 2017 2016 International Annual meeting Investor of Roadshow shareholders 4
Slide 5: New Zealand has an open economy that works on free market principles
New Zealand has an open economy that works on free market principles New Zealand's stable economy and political system, reputation for innovation and the ease of doing business make it an attractive place to invest » Safe, stable and secure business environment » Ease of doing business » Comparative
Slide 6: New Zealand has delivered significant and sustainable economic progress
New Zealand has delivered significant and sustainable economic progress The efficient and sustainable use of resources has seen positive movements in key economic, social and environmental indicators over the past 30 years Assets and Disposable Energy Greenhouse Labour infrastructure income intensit
Slide 7: The New Zealand economy is entering its eighth year of expansion
The New Zealand economy is entering its eighth year of expansion Consumer confidence is translating into growth in private consumption Record high net migration Strong tourism growth Domestic Annual net migration inflow of 71,300 (+1.5% of population) Total annual hospitality spending up 9%, interna
Slide 8: The New Zealand electricity market continues to work effectively
The New Zealand electricity market continues to work effectively Industry structure supports a reliable, affordable and environmentally sustainable electricity system “New Zealand serves as a model for effective Quality Progressive Stable political Rational market energy markets renewable regulatory
Slide 9: Industry risks are balanced with potential for growth, strong capital discipline to continue
Industry risks are balanced with potential for growth, strong capital discipline to continue » Estimated population » Tiwai aluminium smelter » New products and » Consented and scalable growth of 320k p.a. economics improving services through a renewable development by 2020 (+7%) » Dairy processing
Slide 10: With strong cash flow, Contact is well placed to grow shareholder value
With strong cash flow, Contact is well placed to grow shareholder value Contact is well positioned to manage all risks. Delivering Quality portfolio of Internalised risk Retail systems Strong governance long life generation management and capability and cash flow operational assets supports agility
Slide 11: Contact is trading below intrinsic value making it analysts' preferred sector entry point
Contact is trading below intrinsic value making it analysts’ preferred sector entry point $4.89 27 March closing share price Contact is Forsyth Barr currently $5.10 +4% - Neutral undervalued EV / Consensus FY17 12 month Target Price Macquarie EBITDA 9.8x 9.4x 10.8x 12.2x 10.6x relative to $5.26 +7%
Slide 12: Contact's debt levels temporarily higher than peers
Contact’s debt levels temporarily higher than peers Contact’s financial framework prioritises a robust balance sheet, with strong free cash flow currently directed to debt repayment Distributions $122m in debt Free cash flow Balance Sheet repayment » Ordinary dividend equal to 100% between March » O
Slide 13: Accelerating debt reduction through cost control and performance management
Accelerating debt reduction through cost control and performance management Keeping the focus on extracting value from our portfolio of assets 01 The Customer business will deliver value by providing customers with choice, certainty and control The Generation business is on a 02 continuous improveme
Slide 14: Delivering value by providing customers with choice, certainty and control
Delivering value by providing customers with choice, certainty and control Reducing cost to serve and improving the customer experience through systems-enabled operational improvements Sustain Electricity and gas cost to serve is reducing Net promoter score is improving Lowest Cost to Serve Source:
Slide 15: Continuous improvement is focused on safety, reliability, operating costs and resource utilisation
Continuous improvement is focused on safety, reliability, operating costs and resource utilisation Improving the efficiency of our generation portfolio, reducing the cost of energy by $10m in 1H17 Improving efficiency of conversion (GWh produced per unit of geothermal fluid extracted) at Wairakei, T
Slide 16: Through significant portfolio change, Contact has delivered value for shareholders
Through significant portfolio change, Contact has delivered value for shareholders Supporting our business through a lean and efficient Finding, developing and Understanding, winning head office function generating the energy and keeping customers Ownership and capital the market requires Health, sa
Slide 17: Contact will continue to optimise the value of assets in the portfolio
Contact will continue to optimise the value of assets in the portfolio Thermal generating plant Contact Low cost, long-life renewable hydro The Stratford gas peaking plant and The Taranaki combined cycle Te Rapa thermal plant provides focuses on and geothermal gas storage plant supports base load st
Slide 18: Industry and Company Information
Higher Res images pending: branding team Monday Industry and Company Information Contact Energy October 2016 Annual meeting of shareholders April 2017
Slide 19: The New Zealand electricity market
The New Zealand electricity market 5 Major generators 1/2 Hourly wholesale 1 State-owned national transmission grid 29 Distribution businesses 34 Retail electricity 2 Million consumers spot market operator brands Contact Energy October April 2017 2016 International Annual meeting Investor of Roadsho
Slide 20: Industry dominated by five listed vertically integrated companies
Industry dominated by five listed vertically integrated companies Retail electricity market share by customer Generation market share by volume connections 4% 5% 10% 20% 21% 13% 16% 13% 25% 20% 19% 34% Source: Electricity Authority (as at 31 December 2016) Source: Electricity Authority (year ended 3
Slide 21: 85% of New Zealand's consumption of 39TWh in 2016 came from renewable generation
85% of New Zealand’s consumption of 39TWh in 2016 came from renewable generation National demand by sector New Zealand electricity supply (% of generation) 18,000 100% Industrial Coal 16,000 90% Gas 14,000 80% Wind NZ electricity demand (GWh) 12,000 70% Residential Geothermal 10,000 60% 8,000 50% Co
Slide 22: About Contact
About Contact 21% 84% $84/MWh $28/MWh our share of the electricity the proportion of electricity Contact the electricity and gas netback we the average cost to supply electricity generation market in New Zealand generated from renewable resources received from retail sales in 1H17 and gas to our cus
Slide 23: Contact's operations have a national footprint covering 45 locations
Contact’s operations have a national footprint covering 45 locations Including 11 power stations with 1,969MW capacity Name Capacity FY16 Gen Contact Energy October April 2017 2016 International Annual meeting Investor of Roadshow shareholders 23
Slide 24: Following a period of significant capital investment, operating cash flow remains strong
Following a period of significant capital investment, operating cash flow remains strong EBITDAF and NPAT Group operating and net investing cashflow 700 600 600 500 500 400 400 300 $m $m 300 200 100 200 0 -100 100 -200 FY11 FY12 FY13 FY14 FY15 FY16 1H16 1H17 0 FY11 FY12 FY13 FY14 FY15 FY16 1H16 1H17
Slide 25: Contact raised equity to maintain its investment grade credit rating
Contact raised equity to maintain its investment grade credit rating during the period of capital investment Total assets and liabilities Shareholders’ equity and gearing 7.0 4.0 40.0% 6.0 3.5 35.0% 3.0 30.0% 5.0 2.5 25.0% Gearing ratio 4.0 $bn $bn 2.0 20.0% 3.0 1.5 15.0% 2.0 1.0 10.0% 1.0 0.5 5.0%
Slide 26: Contact's balance sheet is supported by a robust funding portfolio
Contact’s balance sheet is supported by a robust funding portfolio Funding maturity profile Funding sources 450 9% NEXI USPP Domestic bonds Bank 4% 400 30% 350 300 250 28% $m 200 150 100 29% 50 - FY17 FY18 FY19 FY20 FY21 FY22 FY23 - FY27 FY28 - FY32 Bank Debt Domestic bonds USPP NEXI CP Maturity » C