Contact Energy Limited · NZX:CEN
Contact Energy — Debt Investor Presentation (August 2015)
32 slides from Contact Energy's debt investor presentation, August 2015
Slide 1: Retail Bond Offer Investor Presentation
Retail Bond Offer Investor Presentation August 2015 Graham Cockroft, Chief Financial Officer Lead Manager and Co-Manager Louise Tong, Head of Treasury and Tax Organising Participant
Slide 2: Disclaimer
Disclaimer The offer of debt securities by Contact Energy Limited (Contact or the Issuer) is made in reliance upon the exclusion in clause 19 of schedule 1 of the Financial Markets Conduct Act 2013 (FMCA). The offer of Contact Energy bonds (Bonds) is an offer of bonds that have identical rights, pri
Slide 3: Presentation team
Presentation team Graham Cockroft Chief Financial Officer Graham Cockroft was appointed as Contact’s Chief Financial Officer in June 2012. Prior to this he spent three years as Contact's Chief Operating Officer in which he was responsible for the operation of Contact's wholesale and generation funct
Slide 4: Agenda
Agenda 1 New Zealand electricity market overview Graham Cockroft 2 Contact overview Graham Cockroft 3 Business performance update Graham Cockroft 4 Capital structure and funding requirements Louise Tong 5 Bond offer information Jason Green, ANZ 4 August 2015 Retail Bond Presentation
Slide 5: 1. New Zealand electricity market overview
1. New Zealand electricity market overview
Slide 6: Industry dominated by highly hedged, vertically integrated companies
Industry dominated by highly hedged, vertically integrated companies with the five largest companies now all publicly listed Retail electricity market share by customer number Generation market share by volume (GWh) Other Other 8% 7% Contact Trustpower Contact 21% 5% 24% Trustpower 12% Meridian 14%
Slide 7: New Zealand has added subsidy free renewable generation
New Zealand has added subsidy free renewable generation, which, in a period of flat demand, has displaced fossil fuels New Zealand energy supply National electricity demand (based on GWh of generation) 50 100% Coal 90% Gas 40 80% 70% Wind 30 60% Geothermal TWh 50% 20 40% 30% Hydro 10 20% 10% 0 2000
Slide 8: 2. Contact overview
2. Contact overview
Slide 9: Snapshot of Contact Energy
Snapshot of Contact Energy
Slide 10: Contact is one of New Zealand's largest listed companies and a leading integrated energy company
Contact is one of New Zealand’s largest listed companies and a leading integrated energy company Upstream FuelFuel Generation Wholesale/Retail Retailer Generator Flexible and diverse fuel Flexible generation portfolio Leading retail customer portfolio base in NZ • Hydro and geothermal generation • 2
Slide 11: Contact's operations
Contact’s operations National focus with 12 power stations totalling 2,359 MW capacity Otahuhu 400 MW 1,326 GWh Ohaaki 50 MW 327 GWh Te Rapa 44 MW Te Mihi Clyde Whirinaki Ahuroa 189 GWh 166 MW 432 MW 155 MW 17.0 PJ 1,159 GWh 0.03GWh 2,299 GWh 11.3 PJ TCC 377 MW 329 GWh Te Huka 28 MW 204 GWh Peakers
Slide 12: A number of important events are now behind us
A number of important 17 Aug 2015 – Otahuhu closure announced events are now behind us 5 Aug 2015 – Genesis announces Huntly Rankine closure by 2018 4 Aug 2015 – ORG sells shares 3 Aug 2015 – Tiwai contract extended Jun 2015 – $367m special dividend paid May 2015 – Review of international growth opt
Slide 13: Business set up to deliver stable cash flows
Business set up to deliver stable cash flows Focus on efficiency and lower capital expenditure expected to increase free cash flow Second largest gas and electricity Flexible portfolio allows management of retailer in New Zealand variable operating conditions Contact electricity sales Contact genera
Slide 14: Earnings and cash flow
Earnings and cash flow Group EBITDAF and NPAT Group Groupoperating operatingand andnet netinvesting investingcash cashflow flow 700 600 600 600 500 500 500 400 400 400 $m $m $m 300 300 300 200 200 200 100 100 100 0 00 FY10 FY11 FY12 FY13 FY14 FY15 FY10 FY10 FY11 FY11 FY12 FY12 FY13 FY13 FY14 FY14 FY
Slide 15: Contact has raised equity to maintain its investment grade credit rating
Contact has 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% 6.0 3.5 35% net debt/(net debt + equity) 3.0 30% 5.0 2.5 25% 4.0 $ bn $ bn 2.0 20% 3.0 1.5 15% 2.0 1.0 10% 1.0 0.
Slide 16: 3. Business performance update
3. Business performance update
Slide 17: Key themes
Key themes Increased • Free cash flow improvement cash flow » Sales volumes stable » Strong retail competition continues to impact margins » Transition phase following investment in new systems and plant complete Distribution of • 15 cps final dividend (76 cps distributed to shareholders) free cash
Slide 18: Statutory profit down 43% to $133m, Free cash flow up 21%
Statutory profit down 43% to $133m Underlying earnings down 29% Year ended 30 June 2015 1 EBITDAF $525m down 11% from $587m Profit $133m down 43% from $234m 1 Underlying earnings after tax (UEAT) $161m down 29% from $227m FY15 declared dividends (cents) 76.0 cps up 192% from 26.0 cps 1 Underlying op
Slide 19: Contact's capital investments have positioned it well for the New Zealand market
Contact’s capital investments have positioned it well for the New Zealand market … Upstream FuelFuel Generation Wholesale/Retail Retailer Generator Largely renewable fuel Flexible generation portfolio Significant customer base • Renewable generation increased • Peakers and gas storage provide • Reta
Slide 20: Contact's cost of energy continues to track down
Contact’s cost of energy continues to track down with minimal capital requirements to support cash flow Cost of energy $50 12,000 • FY16 cost of energy expected to continue to improve $45 10,000 » Improved plant availability following maintenance programme in FY15 $40 8,000 $/MWh » Geothermal genera
Slide 21: Retail stabilisation substantially complete
Retail stabilisation substantially complete Customer service metrics all now close to pre go-live levels • Key front and back office metrics now at, or close Customer satisfaction survey to, pre go-live levels 10 CEM (3 month rolling average) » Customer satisfaction survey now back at pre 8 go-live
Slide 22: Contact's churn levels have returned to market levels
Contact’s churn levels have returned to market levels as the new retail system has stabilised Retail competition remains intense Electricity churn Annualised churn (losses/total customers 30% 25% 20% 15% * 10% 5% 0% Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 May 15 Contact Energy Industry (Excl Contact) Dat
Slide 23: Outlook
Outlook Financial • Continued strong free cash flow Customer • Lower cost to serve to offset continued intense retail competition • C&I load reduced following the non-renewal of the Fonterra electricity contract • Customer business begins to move beyond stabilisation to optimisation • No repeat of 1
Slide 24: 4. Capital structure & funding requirements
4. Capital structure & funding requirements
Slide 25: BBB (stable) S&P Corporate Credit Rating since 2002
BBB (stable) S&P Corporate Credit Rating since 2002 Reaffirmed April, May & August 2015 • Investment grade rating provides Contact with benefits in terms of access to multiple funding markets and efficient borrowing costs • Historically, Contact has raised equity to maintain its investment grade cre
Slide 26: Funding requirements
Funding requirements Over the last few years, Contact has successfully executed a material refinancing programme including: » Terming out its maturity profile to mitigate against any material requirements in any one year » Diversifying funding sources across multiple debt markets » Adding flexibilit
Slide 27: Contact funding portfolio at 30 June 2015
Contact funding portfolio at 30 June 2015 Funding Maturity Profile Funding Diversity 6% 12% 36% 14% 6% 26% Bank Facilities $600m NEXI $90m USPP $416m Retail Bonds $222m Wholesale Bonds $200m CP $100m • Weighted average tenor of funding facilities 4.7 years (excluding bridge facilities) • Net interes
Slide 28: Contact credit highlights
Contact credit highlights Diversified, portfolio; Now has a SAP provides largely Vertically widely held platform for low marginal integrated share efficiency and cost, business register Lower cost innovation renewable to acquire generation Lowest cost to serve Diversified Significant Strong BBB S&P
Slide 29: 5. Bond offer information
5. Bond offer information
Slide 30: Key terms of the offer
Key terms of the offer Issuer Contact Energy Limited Description Unsecured, unsubordinated, fixed rate, interest bearing debt obligations of the Issuer, ranking equally and without preference among themselves and equally with all other outstanding unsecured and unsubordinated indebtedness of Contact
Slide 31: Key dates and process
Key dates and process Date Process 24 August 2015 (Monday) Offer opens 24 - 27 August 2015 Roadshow presentations in Auckland and Wellington and investor call. 28 August 2015 Offer closes – bids due 1pm (Friday) 28 August 2015 Allocations and rate set post 1pm 4 September 2015 (Friday) Issue date 7
Slide 32: Questions?
Questions?
Contact Energy — Debt Investor Presentation (August 2015) on 6ix