Contact Energy Limited · NZX:CEN
Contact Energy — Macquarie Investor Conference 2007
26 slides from Contact Energy's conference presentation, May 2, 2007
Slide 1: Investor presentation slides disclosure
2 May 2007 Investor presentation slides disclosure Slides from Contact Energy’s investor presentation to be given today at the Macquarie Investor Conference in Sydney will shortly be available under the Investor section of the Contact website www.contactenergy.co.nz. Jonathan Hill Communications Man
Slide 2: New Zealand's leading integrated energy company
New Zealand’s leading integrated energy company Macquarie Investor Conference Sydney May 2007
Slide 3: Snapshot
Snapshot • 620,000 customers (electricity, gas. LPG) • Generates 27% of NZ’s demand from 10 power stations – 51% natural gas – 34% hydro – 15% geothermal • 27% share of the electricity retail market • 40% of the gas retail market • 50% of the LPG market 2
Slide 4: Recent Strategic Initiatives
Recent Strategic Initiatives • December 2006: Government issued its draft New Zealand Energy Strategy. Focused on lowering carbon emissions • February 2007: Contact announced up to $2 billion of renewable generation projects, delays CCGT decision for up to 18 months • March 2007: Contact’s submissio
Slide 5: Generation Customers
The sector is dominated by integrated generator / retailers Rio Tinto supply • A high level of integration between generation and retail customer bases • Three of Contact’s competitors are state owned • Contact is the only generator/retailer with access to LPG as well as natural gas Mighty Meridian
Slide 6: The NZ Energy Strategy is focussed on lowering emissions
The NZ Energy Strategy is focussed on lowering emissions • Generation emissions in 2005 were around 11% New Zealand’s total emissions • Contact’s emissions are projected to fall due to the introduction of new renewable generation from the beginning of the next decade 5
Slide 7: Contact has emerged as a leader in carbon policy debate
Contact has emerged as a leader in carbon policy debate • Political view of carbon has altered dramatically with all parties now acknowledging the issue and seeking a market-based mechanism to price carbon. • Contact is advocating the introduction of a cap-and-trade mechanism to price carbon phasing
Slide 8: Contact has challenged the sector to cut carbon emissions by 40% by 2014
Contact has challenged the sector to cut carbon emissions by 40% by 2014 7
Slide 9: Electricity demand
Electricity demand • Electricity demand has been growing at ~ 2% p.a. over the last 10 years, with the majority of that growth coming from commercial demand • Residential demand growing despite price increases which have averaged 4.5% p.a. over the last 10 years • Short-to-medium term (3-year) focus
Slide 10: Electricity supply
Electricity supply • Wind generation, although well suited to NZ conditions, will have significant execution risks (public opposition, Maori interests, capital cost pressures) • However, additional wind will be built over the next 5 years… • …which will increase intermittency. • Market design change
Slide 11: Supply versus demand
Supply versus demand • Chart shows current and committed generation against growth in peak demand 10
Slide 12: Drivers of the long-run price path
Drivers of the long-run price path • Over the longer term it is assumed that prices will tend towards the LRMC of the next most efficient plant. • At a carbon pricing of $20/ tonne, CCGTs and wind appear to be equivalently priced, in the $75 - $90 / MWh range. No CO2 Cost, CO2 Cost of $20/t First 1,
Slide 13: The gas market is long through 2010
The gas market is long through 2010 • Over the next 3 years, the gas market will see periods of over supply with limited paths to market for excess gas. Contact is focussing on the management of the take-or-pay requirements of the increasingly less flexible gas supply contracts. • Methanex is a majo
Slide 14: Contact's gas supply is becoming increasingly inflexible and more expensive
Contact’s gas supply is becoming increasingly inflexible and more expensive • Contact‘s average gas cost including transmission has risen from $3.70/GJ in FY 03 to around $4.75 in FY 06 (9% p.a.) Prices will continue to rise over the next five years as supplies of low priced Maui 367 gas are replace
Slide 15: Gas supply over the long term is influenced by decisions on generation options
Gas supply over the long term is influenced by decisions on generation options • Over the long term the value of access to fuel will be significant given the relative scarcity of developed gas reserves in New Zealand • It seems likely that gas can be secured at least to 2015 • Key issue remains deal
Slide 16: Long-term gas market issues
Long-term gas market issues • Negotiations with potential suppliers to extend portfolio beyond 2010 and provide foundation for generation development strategy (in particular Otahuhu C timing) are underway. • Forecast supply position suggests timing of LNG importation will be unlikely prior to 2015.
Slide 17: Implications on Contact's strategy
Implications on Contact’s strategy • The weight of probabilities is that New Zealand will have a carbon pricing mechanism with the debate now centred on how that should be structured • There is considerable focus on encouraging new renewables to be constructed although questions remain as to the tim
Slide 18: New generation - geothermal
New generation - geothermal • The geothermal fleet has been allowed to naturally run down over the last few years. • Geothermal production and capacity are forecast to double over the next 5-7 years as exploration and reservoir management capabilities continue to deepen. WRK at maximum production un
Slide 19: New generation – hydro and wind
New generation – hydro and wind Wind • Contact now controls four wind generation sites with a total capacity of up to 700 MW. • Land owner agreements are well advanced for the four sites. • All sites have been extensively monitored and indicate high quality wind resources. • Any two sites would requ
Slide 20: New generation – CCGT
New generation – CCGT • Otahuhu C has been a key generation option for some years and is the best site in New Zealand for a new CCGT • In response to the Government’s Energy Strategy Contact has indicated that it will defer the Otahuhu C development and accelerate Contact’s renewable options • Howev
Slide 21: Capital expenditure is dominated by generation initiatives
Capital expenditure is dominated by generation initiatives • The future capex profile now includes: – $1.0b on Geothermal – $1.0b on Wind and – $0.5b on Otahuhu C 20
Slide 22: On 30 April 2007 Contact completed the purchase of Rockgas
On 30 April 2007 Contact completed the purchase of Rockgas • Last month, Contact added bottled and reticulated LPG to its range of products with the acquisition of Rockgas. • Rockgas is New Zealand’s largest supplier of LPG with more than 50% of the New Zealand LPG market. 21
Slide 23: Rockgas is New Zealand's largest supplier of LPG with over 50% of the market
Rockgas is New Zealand’s largest supplier of LPG with over 50% of the market • Rockgas is an LPG specialist which has been operating since 1934. • Supplies over 50% of the New Zealand market. • Supplies over 300 bulk industrial customers, 7,000 commercial customers, and 17,000 residential customers.
Slide 24: Rockgas provides a unique energy offering in NZ
Rockgas provides a unique energy offering in NZ and provides significant opportunities for further growth • There are a number of benefits for Contact in the purchase of Rockgas – Key element in positioning Contact as an “energy solutions” company – LPG is the major alternative energy source in the
Slide 25: Outlook
Outlook • Contact operates a successful integrated business model from fuel source through to the customer. • The New Zealand government has strongly signalled its intent to promote the development of renewables and the reduction of greenhouse emissions. There is little doubt that this reflects the
Slide 26: Contact
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