Agl Energy Limited · ASX:AGL
Agl Energy — H1 FY2016 Earnings Presentation
48 slides from Agl Energy's earnings presentation, Feb 10, 2016
Slide 1: AGL reports 24 percent Underlying Profit growth
AGL Energy Limited Locked Bag 1837 Level 22, 101 Miller St T: +61 2 9921 2999 ABN: 74 115 061 375 St Leonards NSW 2065 North Sydney NSW 2060 F: +61 2 9921 2552 For personal use only AUSTRALIA AUSTRALIA www.agl.com.au ASX & Media Release AGL reports 24 percent Underlying Profit growth 10 February 201
Slide 2: ASX & Media Release (continued)
Dividend: AGL has declared a fully franked interim dividend of 32.0 cents per share. The interim dividend will be paid on 16 March 2016. Shares will commence trading ex- For personal use only dividend on 23 February 2016. The record date to determine shareholders’ entitlements to the interim dividen
Slide 3: FY16 Interim Results
FY16 Interim For personal use only Results Half Year ended 31 December 2015 Andy Vesey Managing Director and CEO Brett Redman Chief Financial Officer Date 10 February 2016
Slide 4: Agenda
FY16 Interim Results | 10 February 2016 2 Agenda For personal use only 1 2 3 4 Results Group Operational Supplementary highlights financials review / information Outlook Andy Vesey Brett Redman Andy Vesey IMPORTANT NOTE: This presentation should be read in conjunction with the AGL Energy Limited Fin
Slide 5: FY16 Interim highlights
FY16 Interim Results | 10 February 2016 3 FY16 Interim highlights Underlying Profit up $73 million with Underlying EPS up 17%. For personal use only › Statutory Loss of $449 million › Underlying Profit of $375 million up 24% » Higher electricity generation volumes (7 TWh) added $36 million » Higher
Slide 6: Strategy update
FY16 Interim Results | 10 February 2016 4 Strategy update Strategic roadmap delivering results. For personal use only Organise for Drive productivity Unlock growth transformation and value › Exiting gas exploration and › Leverage market › Investment in renewables production opportunities and custome
Slide 7: Digital capability and customer experience
FY16 Interim Results | 10 February 2016 5 Digital capability and customer experience Digital strategy and investment is transforming the customer journey. For personal use only Mobile App › Solar Command feature officially launched in mobile App today » Real time solar production, consumption and he
Slide 8: Targeted investments in new capability
FY16 Interim Results | 10 February 2016 6 Targeted investments in new capability Investing in new initiatives to grow business in carbon constrained future. For personal use only Sunverge investment announced today › Emerging leader in demand response management for premises based energy storage › E
Slide 9: Powering Australian Renewables Fund
FY16 Interim Results | 10 February 2016 7 Powering Australian Renewables Fund AGL to lead new innovative renewable investment funding. For personal use only › New vehicle to develop 1,000 MW+ of large-scale Renewable Energy Target renewable generation for $2-3 billion 35 ~5,000 MW required » Seeded
Slide 10: Group Financials
FY16 Interim Results | 10 February 2016 8 Group For personal use only Financials Brett Redman Chief Financial Officer 2
Slide 11: Interim FY16 result
FY16 Interim Results | 10 February 2016 9 Interim FY16 result Key metrics. For personal use only Financial Results and Key Metrics 1H16 1H15 Change Statutory (Loss)/Profit ($m) (449) 308 246% Underlying Profit ($m) 375 302 24% Statutory EPS (cps) (66.5) 48.6 237% Underlying EPS (cps) 55.6 47.7
Slide 12: Statutory Profit to Underlying Profit reconciliation
FY16 Interim Results | 10 February 2016 10 Statutory Profit to Underlying Profit reconciliation Volatility of non-cash items highlights value of focus on Underlying Profit. For personal use only $m 1H16 1H15 Change Statutory (Loss) / Profit (449) 308 757 Adjust for the following after tax items: S
Slide 13: Underlying Profit
FY16 Interim Results | 10 February 2016 11 Underlying Profit Underlying Profit up 24.2% on prior period. Underlying EPS up 16.6%. For personal use only $m 1H16 1H15 Change Revenue 5,601 5,183 8.1% Operating EBITDA 885 735 20.4% Operating EBIT Energy Markets 1,196 993 20.4% Group Operations (437) (35
Slide 14: Group Underlying Profit drivers
FY16 Interim Results | 10 February 2016 12 Group Underlying Profit drivers Market opportunities maximised in the first half of FY16. For personal use only 600 Energy Markets 31 6 500 126 5 3 400 (82) 375 (15) (9) 40 (32) 302 $ million 300 200 100 0 1H15 NPAT Consumer Wholesale Wholesale Gas Energy G
Slide 15: Energy Markets – key financial drivers
FY16 Interim Results | 10 February 2016 13 Energy Markets – key financial drivers Higher generation and disciplined price management. For personal use only Consumer Market Wholesale Markets 1,250 5 6 1,196 1,200 12 19 126 1,150 1,100 $ million 1,050 11 0 29 993 (5) 1,000 950 900 850 800 1H15 Consume
Slide 16: Consumer - key metrics
FY16 Interim Results | 10 February 2016 14 Consumer - key metrics Investment in digital and customer value capability positively impacting metrics. For personal use only $m 1H16 1H15 Change Average customer numbers (‘000) 3,708 3,741 (0.9%) Cost to Serve per customer account $37 $38 (2.6%) Cost to G
Slide 17: Transformation – Opex targets
FY16 Interim Results | 10 February 2016 15 Transformation – Opex targets 85% of cost reductions now identified. For personal use only 1,600 36 10 1,500 1,460 - 34 1,404 1,400 1,370 (102) (68) $ million 1,300 1,200 1,100 OPERATIONAL 1,000 FY15 CPI M&A Reduction FY16 CPI M&A Reduction FY17 Normalise
Slide 18: Operating cost savings
FY16 Interim Results | 10 February 2016 16 Operating cost savings On track to deliver $170 million target in FY17. For personal use only 1H16 FY16 Total $ million Actual Target Target Group Operations 18 49 77 Maintenance optimisation 9 21 29 Procurement 10 22 29 Labour and contractor 4 11 13 Other
Slide 19: Capital expenditure and asset sales
FY16 Interim Results | 10 February 2016 17 Capital expenditure and asset sales Targets are on track for delivery in FY17. For personal use only Sustaining capital expenditure › Capital expenditure: targeting $100 million (real) sustaining capital expenditure 500 $100m reduction less CPI reduction ov
Slide 20: Transformation – Working capital
FY16 Interim Results | 10 February 2016 18 Transformation – Working capital Significant progress towards $200 million target working capital reduction. For personal use only 1H16 FY16 FY17 $ million Actual Target Target Optimise coal stockpile at AGL Macquarie 32 2 21 > 1H16 favourability driven by
Slide 21: Underlying Operating cash flow
FY16 Interim Results | 10 February 2016 19 Underlying Operating cash flow Strong operating cash flow reflecting quality earnings. For personal use only 1,100 Underlying operating cash flow before interest and tax 1,000 15 36 26 150 (43) 900 879 (30) (11) (18) 866 (6) $ million (14) 800 (118) 700 600
Slide 22: Debt structure
FY16 Interim Results | 10 February 2016 20 Debt structure Elimination of project finance debt simplifies structure. For personal use only › Proceeds from the Macarthur Wind Farm sale partially used to repay $315 million of AGL Loy Yang senior debt › Enabled debt restructure to remove security over A
Slide 23: Operational Review
FY16 Interim Results | 10 February 2016 21 Operational For personal use only Review Andy Vesey Managing Director and CEO 3
Slide 24: People and safety
FY16 Interim Results | 10 February 2016 22 People and safety Consistent results in key safety and engagement measures. For personal use only Safety Total injury frequency rate (rolling 12 months) › TIFR was 3.0, a 31% improvement from June 2015. 10 AGL Macquarie Excluding Macquarie, AGL performed 24
Slide 25: Wholesale electricity prices
FY16 Interim Results | 10 February 2016 23 Wholesale electricity prices Forward curves continued to strengthen in both NSW and VIC. For personal use only › The NSW and VIC forward curves continued to strengthen and rallied higher towards year end driven by: » Increased demand due to QLD LNG plants c
Slide 26: Gas portfolio
FY16 Interim Results | 10 February 2016 24 Gas portfolio Long-term strategic arrangements secured to optimise AGL’s gas portfolio. For personal use only Queensland sales Queensland Wholesale gas sales › Despite delays in LNG project start-up, AGL continues to secure portfolio optimisation opportunit
Slide 27: Consumer Market volume
FY16 Interim Results | 10 February 2016 25 Consumer Market volume Consumer electricity demand stabilising with weather and customer mix delivering growth. For personal use only › The decline in residential electricity demand per customer Change in residential electricity demand per customer (weather
Slide 28: Consumer – Sales and Operations
FY16 Interim Results | 10 February 2016 26 Consumer – Sales and Operations Customer Value Strategy combined with targeted operating cost initiatives driving strong customer profitability. For personal use only › Internal AGL channels contribute close to 80% of total sales and retentions › Customer l
Slide 29: Group Operations
FY16 Interim Results | 10 February 2016 27 Group Operations Improved generation across the asset portfolio. For personal use only › Additional generation across the portfolio added $36 million NPAT Generation volumes › Generation increased 7 TWh in 1H16 vs 1H15 » Additional 2 months of AGL Macquarie
Slide 30: Natural Gas update
FY16 Interim Results | 10 February 2016 28 Natural Gas update Review of gas assets and exit of gas exploration and production. For personal use only AGL announced on 4 February 2016 that exploration and production of natural gas will no longer be a core business Key considerations › Fall in global o
Slide 31: New Energy
FY16 Interim Results | 10 February 2016 29 New Energy Investing in emerging distributed technologies. For personal use only Cumulative solar sold (kW) Results progressing 10,000 1H15 1H16 › Residential solar sales in 1H16 increased 2.5 times over 1H15 8,000 6,000 › Commercial solar sales in 1H16 inc
Slide 32: Outlook
FY16 Interim Results | 10 February 2016 30 Outlook Underlying Profit expected to be in the upper half of the guidance range. For personal use only › FY16 Underlying Profit expected to be in the upper half of the guidance range of $650 - $720 million, subject to normal market conditions » AGL maximis
Slide 33: Contact information
FY16 Interim Results | 10 February 2016 31 Contact information For personal use only Website www.agl.com.au Customer Service 131 245 Corporate Information www.agl.com.au/about-agl Investors Media Nicole Rizgalla Kathryn Lamond Investor Relations Manager Media Manager OPERATIONAL phone: +61 2 9921 26
Slide 34: Supplementary Information
FY16 Interim Results | 10 February 2016 32 Supplementary For personal use only Information 4
Slide 35: Electricity sales volume
FY16 Interim Results | 10 February 2016 33 Electricity sales volume For personal use only GWh 1H16 1H15 Change Consumer New South Wales 2,933 2,862 2.5% Victoria 1,892 1,958 (3.4%) South Australia 1,309 1,234 6.1% Queensland 1,174 1,157 1.5% Consumer Total 7,308 7,211 1.3% Business New South Wales 2
Slide 36: Gas sales volume
FY16 Interim Results | 10 February 2016 34 Gas sales volume For personal use only PJ 1H16 1H15 Change Consumer New South Wales2 11.7 13.0 (10.0%) Victoria 18.9 18.5 2.2% South Australia 1.8 1.7 5.9% Queensland 1.4 1.4 - Consumer Total 33.8 34.6 (2.3%) Business New South Wales 12.4 16.7 (25.7%) Victo
Slide 37: Customer numbers
FY16 Interim Results | 10 February 2016 35 Customer numbers For personal use only Customer numbers 31 Dec 2015 30 Jun 2015 Change (‘000) Consumer Electricity New South Wales 818 806 12 Victoria 633 646 (13) South Australia 417 422 (5) Queensland 391 387 4 Total Consumer Electricity 2,259 2,261 (2) C
Slide 38: Consumer Market – key indicators
FY16 Interim Results | 10 February 2016 36 Consumer Market – key indicators For personal use only Electricity 1H16 1H15 Change Volume (GWh) 7,308 7,211 1.3% Avg. Consumer Accounts ('000) 2,260 2,273 (0.6%) Revenue ($m) 1,980 1,999 (1.0%) Gross Margin ($m) 244 215 13.5% Gross Margin 12.3% 10.8% 1.5 p
Slide 39: Business Customers – key indicators
FY16 Interim Results | 10 February 2016 37 Business Customers – key indicators For personal use only Electricity 1H16 1H15 Change Volume (GWh) 6,439 6,393 0.7% Revenue ($m) 826 926 (10.8%) Gross Margin ($m) 17 19 (10.5%) Gross margin per MWh $2.72 $3.04 (10.5%) Gas Volume (PJ) 37.0 44.1 (16.1%) Reve
Slide 40: Energy Markets – Operating EBIT
FY16 Interim Results | 10 February 2016 38 Energy Markets – Operating EBIT Higher generation and disciplined price management. For personal use only $m 1H16 1H15 Change Operating EBITDA 1,244 1,038 19.8% Depreciation and amortisation (48) (45) 6.7% Consumer Market EBIT 200 160 25.0% Electricity gros
Slide 41: Group Operations – Operating EBIT
FY16 Interim Results | 10 February 2016 39 Group Operations – Operating EBIT Additional two months of AGL Macquarie and higher depreciation. For personal use only $m 1H16 1H15 Change Operating EBITDA (272) (229) 18.8% Depreciation and amortisation (165) (126) 31.0% Thermal (338) (279) 21.1% Renewabl
Slide 42: New Energy – Operating EBIT
FY16 Interim Results | 10 February 2016 40 New Energy – Operating EBIT Investing in emerging distributed technologies. For personal use only $m 1H16 1H15 Change Revenue 64 64 - Cost of goods sold (34) (33) 3.0% Gross margin 30 31 (3.2%) Operating costs (excluding D&A) (32) (19) 68.4% Operating EBITD
Slide 43: Wholesale Contracting
FY16 Interim Results | 10 February 2016 41 Wholesale Contracting For personal use only › AGL’s Wholesale Risk Management Policy (Policy) is approved AGL Energy Expected Electricity Hedge Position by the Board and establishes the requirements for managing All Regions wholesale risk › The Policy clear
Slide 44: Generation portfolio
FY16 Interim Results | 10 February 2016 42 Generation portfolio For personal use only Asset Characteristics 1H16 Performance Sent Out Capacity Capacity Carbon Intensity Asset State Type Status Generation Factor (MW) (tCO2e/MWh) (GWh) (%) Bayswater NSW Coal Owned 2,640 0.9 8,977 77% Liddell NSW Coal
Slide 45: Significant items
FY16 Interim Results | 10 February 2016 43 Significant items All consistent with previous announcements. For personal use only $m Pre-tax Tax Post-tax Restructuring costs (23) 7 (16) Natural gas impairments Camden (32) 9 (23) Gloucester (166) 47 (119) Silver Springs (208) 62 (146) Spring Gully (14)
Slide 46: Debt facilities
FY16 Interim Results | 10 February 2016 44 Debt facilities For personal use only As at 31 December 2015 Limit Usage $m Current Export Credit Agency Facility 11 11 CPI Indexed Bonds 11 11 Non Current Bank Term Debt 1,060 1,060 Bank Revolver Debt 550 25 Medium Term Notes 600 600 US Senior Notes 338 33
Slide 47: Comparative information
FY16 Interim Results | 10 February 2016 45 Comparative information For personal use only › AGL has changed the basis for segment reporting to align with its updated organisational structure. The table below summarises the changes to FY15. Refer to ASX announcement on 29 July 2015 for more informatio
Slide 48: Disclaimer and important information
FY16 Interim Results | 10 February 2016 46 Disclaimer and important information For personal use only The information in this presentation: › Is not an offer or recommendation to purchase or subscribe for securities in AGL Energy Limited or to retain any securities currently held. › Does not take in