Contact Energy Limited · NZX:CEN
Contact Energy — Macquarie Australia Conference 2008
21 slides from Contact Energy's conference presentation, May 2008
Slide 1: New Zealand's leading integrated energy company
New Zealand’s leading integrated energy company Presentation to Macquarie’s Australia Conference May 2008
Slide 2: Disclaimer
Disclaimer This presentation may contain projections or forward looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in any forward-looking stat
Slide 3: Snapshot of Contact Energy
Snapshot of Contact Energy • 630,000 customers (electricity, gas, LPG) • 28% of NZ’s generation from 9 power stations – 50% natural gas – 35% hydro – 15% geothermal • 27% share of the electricity retail market • 40% of the gas retail market • 50% of the LPG market Contact Revenue and Earnings Growth
Slide 4: The sector is dominated by integrated generator / retailers
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 5: Electricity demand
Electricity demand • Electricity demand has been growing at ~2% p.a. over the last 10 years • Residential demand has grown despite price increases which have averaged 4.5% p.a. over the last 10 years • Demand side is expected to absorb the moderate effects of carbon pricing without material demand d
Slide 6: Electricity supply
Electricity supply • Wind generation, although well suited to NZ conditions, has execution risks (public opposition, Maori interests, capital cost pressures) • However, additional wind will be built over the next 5 years which will increase volatility • Contact’s wind generation sites are well locat
Slide 7: Energy and climate change policy
Energy and climate change policy • During the half year, legislation was introduced to give effect to the Government’s climate change and energy policies • Two major planks of Government policy: – NZ Energy Strategy – 90% renewable energy by 2025 – Economy-wide Emissions Trading Scheme that sets a m
Slide 8: Progress on Strategic Initiatives
Progress on Strategic Initiatives • Policy initiatives have placed renewable generation at centre stage – NZ Energy Strategy – targets 90% renewable energy by 2025 – Economy-wide Emissions Trading Scheme – all gases, all sectors • Contact has a unique set of options which can be leveraged in this en
Slide 9: Gas-fired generation will have a significant role
Gas-fired generation will have a significant role • Contact has leading gas-fired options – Gas-fired peaking plant: Up to 300 MW • First phase 2 x 100 MW units to be constructed adjacent to Contact’s CCGT at Stratford, Taranaki - cost $250m, contracts now signed • Construction commenced, expected t
Slide 10: A renewables scenario
A renewables scenario Supply vs Demand: Mean Year Energy TWh 55 50 New Hydro 45 New Peakers New Wind 40 New Geothermal Existing Gas 35 Existing Coal 30 Existing Renewables EC Mean Demand (~1.4% growth) 25 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Note:
Slide 11: A renewables scenario – energy shift 2008 - 2025
A renewables scenario – energy shift 2008 - 2025 Supply vs Demand: Mean Year Energy TWh 60 New Hydro 50 New Peakers 40 New Wind New Geothermal 30 Existing Gas 20 Existing Coal 10 Existing Renewables 0 2008 2025 Note: one possible scenario only. 11
Slide 12: Geothermal: The ultimate renewable
Geothermal: The ultimate renewable • Cornerstone to the 90% renewables target • Only genuine baseload renewable • Favourable economics • Contact’s geothermal plans: Geothermal Capacity (MW net) 2008 2014 Wairakei Station 157 Wairakei Binary 14.5 14.5 Poihipi (effective) 30 50 Ohaaki (effective) 65 6
Slide 13: Harnessing NZ's wind resources
Harnessing NZ’s wind resources • The 90% target will require significant increases in wind generation • Contact’s wind plans: • 550 MW Hauauru ma raki wind farm on Waikato farmland • Other wind sites in the North and South Islands • Wholesale price path will trend toward a wind LRMC ($85 – 100 / MWh
Slide 14: Gas supply and demand
Gas supply and demand • The gas market is reasonably in balance over the short to medium term • Beyond 2010 the key issues for the gas market are the impact on demand of the construction of renewable generation and whether supply can be extended beyond 2015 Note: the petrochemical potential demand i
Slide 15: Gas supply is increasingly inflexible
Gas supply is increasingly inflexible • Contact‘s average gas cost including transmission has risen from $3.70/GJ in FY 03 to around $5.02/GJ in FY 07 (an average of 9% p.a.) • Gas prices per GJ are expected to increase about 20% per annum in this financial year • Medium to long term gas supply cont
Slide 16: Future gas supply
Future gas supply • It seems likely that gas can be secured at least to 2015 • Contact is currently considering its strategy for securing further supply. Key factors in determining the optimal timing will be: – Assessing the impact on gas demand of alternative generation sources (wind, geothermal) –
Slide 17: Long-term gas supply
Long-term gas supply • Given the domestic position seems assured only till 2015 at the most, it remains prudent to maintain an LNG backstop • Should LNG be required over the longer term Contact’s ability to manage the supply logistics will be enhanced by the availability of gas storage • Gasbridge i
Slide 18: Prices are expected to rise
Prices are expected to rise • The policy environment is clearly guiding investment toward renewables • To realise the policy goals, wholesale prices are expected to trend toward the LRMC of wind • $85 -100 / MWh • Resulting in continued upward pressure on retail prices Entry Limit Price $23/t carbon
Slide 19: Capital expenditure
Capital expenditure • The future capex profile now includes about $2 billion in renewable investment as well as investments in gas peaking capacity and gas storage 19
Slide 20: Outlook
Outlook • Government policies – supports the development of renewables • Reserve margins are currently tight and are expected to remain so over the medium term – Contact’s geothermal and gas-fired peaking projects are well placed – Wind will continue to increase its penetration • Wholesale prices ar
Slide 21: contact
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