AGL Energy Limited · ASX:AGL
AGL Energy — FY2015 Earnings Presentation
57 slides from AGL Energy's earnings presentation, Aug 12, 2015
Slide 1: ASX & Media Release: AGL reports 12.1% increase in FY15 Underlying Profit
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 12.1% increase in FY15 Underlying Profit After Tax
Slide 2: Dividends, outlook and conference call
Dividends: AGL has declared a fully franked final dividend of 34.0 cents per share. Shares will commence trading ex-dividend on 25 August 2015. The record date to For personal use only determine shareholders’ entitlements to the final dividend is 27 August 2015 with the dividend being paid to shareh
Slide 3: FY15 Full Year Results
FY15 Full Year Results 1 30 June 2015 For personal use only Andy Vesey Managing Director and CEO Brett Redman Chief Financial Officer 12 August 2015
Slide 4: Disclaimer and important information
Disclaimer and important information 2 The information in this presentation: For personal use only › 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 into account the potential and current indi
Slide 5: Agenda
Agenda 3 For personal use only 1 Results Highlights Andy Vesey 2 Group Financials Brett Redman 3 Operational Review/Outlook Andy Vesey 4 Supplementary Information IMPORTANT NOTE: This presentation should be read in conjunction with the AGL Energy Limited Financial Results ASX Release for the year en
Slide 6: FY15 highlights
FY15 highlights 4 Strong result driven by acquisition of Macquarie and underlying business. › Statutory Profit of $218 million, down 61.8% For personal use only › Underlying Profit of $630 million, up 12.1% » Excluding carbon repeal impact of $118 million NPAT, EPS up by 18 cps » Macquarie delivered
Slide 7: FY15 result
FY15 result 5 Underlying operating cash flow up 33%. For personal use only › Revenue: $10,678m 2.2% › Statutory Profit: $218m (61.8%) › Underlying Profit: $630m 12.1% FINANCIAL › Statutory EPS: 33.3 cps (66.1%)1 › Underlying EPS: 96.4 cps (0.5%)1 › DPS: (final dividend 34.0 cents - 100% fr
Slide 8: Strategic transformation
Strategic transformation 6 Rapid implementation. Alignment of structure with strategy For personal use only › Leadership team revitalised » EGM, Group Operations expected to be finalised by the end of the year › Organisation restructure close to final » Majority of key positions now filled » Restruc
Slide 9: Greenhouse gas / decarbonisation
Greenhouse gas / decarbonisation 7 Committed to action consistent with a 2°C world. › AGL released a new Greenhouse Gas policy in April 2015: For personal use only » Will not extend operating life of existing coal-fired power stations » Will not build, finance or acquire new conventional coal-fired
Slide 10: New Energy
New Energy 8 Building a base to move forward. Exiting under-performing areas For personal use only › Closed AGL Smarter Living Stores to focus on connected products Unlocking growth › Increased Solar PV revenue by 23% between FY14 and FY15 › Increased commercial energy efficiency project revenue by
Slide 11: Operating costs and sustaining capex
Operating costs and sustaining capex 9 Targeting $200 million1 of cash flow savings by FY17. Operating cost › Targeting $170 million (real) operating For personal use only 1,600 cost reduction over FY16-FY17: 70 1,500 1,460 » $100 million – Identified opportunities 2 $ million 1,400 Normalised2 1,36
Slide 12: Improve capital efficiency
Improve capital efficiency 10 One-off benefit to free cash flow of ~$1.2 billion targeted for FY16 and FY17. For personal use only Asset Sales One-off Benefits $m › First major asset sale expected 1H FY16 Asset Sales 1,000 » Macarthur (50%) wind farm ~$500 million Working Capital Reduction 200 › Ong
Slide 13: Group Financials
11 Group Financials For personal use only Brett Redman Chief Financial Officer
Slide 14: Statutory Profit to Underlying Profit reconciliation
Statutory Profit to Underlying Profit reconciliation 12 Volatility of non-cash items highlights value of focus on Underlying Profit. For personal use only $m FY15 FY14 Change Statutory Profit 218 570 (352) Adjust for the following after tax items: Significant items 578 20 Changes in fair value of
Slide 15: Significant items
Significant items 13 All consistent with previous announcements. $m Pre-tax Tax Post-tax For personal use only Upstream Gas Gloucester (275) 82 (193) Moranbah (321) 84 (237) Cooper Oil (7) 2 (5) Sub-total (603) 168 (435) Macquarie acquisition stamp duty (93) 28 (65) Macquarie elimination of derivati
Slide 16: Underlying Profit
Underlying Profit 14 Underlying Profit up 12.1% on prior period. For personal use only $m FY15 FY14 Change Revenue 10,678 10,445 2.2% Operating EBITDA 1,505 1,330 13.2% Operating EBIT Energy Markets 2,063 1,619 27.4% Group Operations (729) (473) 54.1% New Energy 2 21 (90.5%) Investments 26 23 13.0%
Slide 17: Group Underlying Profit drivers
Group Underlying Profit drivers 15 Represents after tax amounts. 800 Structural Growth Consumer Market Gross Margin For personal use only 700 20 4 62 112 15 (16) (13) (23) (11) (13) (29) 4 630 90 $ million (16) 600 562 (118) 500 400 1. Macquarie contribution consists of the following: > FY15 Full Ye
Slide 18: Energy Markets – key financial metrics
Energy Markets – key financial metrics 16 Higher generation and Queensland gas sales. For personal use only $m FY15 FY14 Change Operating EBITDA 2,152 1,727 24.6% Depreciation and amortisation (89) (108) (17.6%) Consumer Market EBIT 321 332 (3.3%) Electricity gross margin 426 420 1.4% Gas gross marg
Slide 19: Energy Markets – Operating EBIT drivers
Energy Markets – Operating EBIT drivers 17 Higher generation and Queensland gas sales. 2,200 Consumer Market Wholesale Markets For personal use only 2,100 88 21 2,063 (23) 2,000 128 1,900 $ million 407 1,800 1,700 34 1,619 6 3 1,600 (33) (18) 1,500 (169) 1,400 FY14 Electricity Gas Gross Consumer Con
Slide 20: Consumer Market - key metrics
Consumer Market - key metrics 18 Competitive market and investment in digital and customer value capability impacting metrics. $m FY15 FY14 Change For personal use only Gross margin ($m) 737 697 5.7% Net operating costs ($m) (416) (365) 14.0% EBIT ($m) 321 332 (3.3%) Average customer numbers (‘000)
Slide 21: Group Operations – key financial metrics
Group Operations – key financial metrics 19 Higher cost base from the acquisition of Macquarie. For personal use only $m FY15 FY14 Change Operating EBITDA (475) (286) 66.1% Depreciation and amortisation (254) (187) 35.8% Thermal (574) (340) 68.8% Renewables (77) (78) (1.3%) Natural Gas (23) (13) 76.
Slide 22: Underlying Operating cash flow
Underlying Operating cash flow 20 Strong operating cash flow reflecting quality earnings and the addition of Macquarie. For personal use only $m FY15 FY14 Change Operating EBITDA 1,505 1,330 175 Equity accounted income 4 1 3 Onerous contracts (14) (117) 103 Receivables 77 109 (32) Inventories (62) (
Slide 23: Capital expenditure
Capital expenditure 21 Large-scale solar farm spend of $232 million1 in FY15. 1,000 For personal use only 900 800 Group Operations - 700 Natural Gas Solar Projects 600 Growth Other $ million 500 Sustaining New Energy Normalised2 400 Newcastle Gas Storage 300 Sustaining 200 100 0 FY14 Actual FY15 Act
Slide 24: Debt structure
Debt structure 22 Long term funding locked in at attractive margins. › $600 million 7-year A$MTN program in October 2014 provided long term funding for Macquarie acquisition For personal use only › $410 million 6.5-year bank debt facility completed in February 2015 › AGL’s 50% share of the Macarthur
Slide 25: Financial ratios
Financial ratios 23 AGL financial metrics improve with strong cash flow generation at Macquarie. For personal use only › The key ratios Standard & Poor’s (S&P) apply to AGL are: » Gross Debt to Adjusted EBITDA » FFO / Cash interest › Improved metrics reflect: » Macquarie’s strong cash flows and acqu
Slide 26: Operational Review
24 Operational Review For personal use only Andy Vesey Managing Director and CEO
Slide 27: People and safety
People and safety 25 Consistent results in key safety and engagement measures. Key safety statistics for FY15: For personal use only Total injury frequency rate › TIFR was 4.3, a 54% increase from last year. 9 AGL Macquarie Excluding Macquarie, AGL performed 11% favourable 8 to last year 7 6 › Inclu
Slide 28: Consumer Market – weather and consumption
Consumer Market – weather and consumption 26 Demand decline and customer portfolio mix changes offset by more normalised weather. › Return to more normal For personal use only Days with minimum temperatures < 10 degrees1 weather in FY15 NSW VIC SA QLD 90 › Consumer Market electricity 80 volume decli
Slide 29: Consumer – market and customer dynamics
Consumer – market and customer dynamics 27 Core business stabilised with continued focus on key customer value drivers. For personal use only › Underlying AGL customer growth offset by APG customer churn in line with investment case › AGL churn reduced to 14.9% increasing the gap to Rest of Market t
Slide 30: Consumer – digital and customer service
Consumer – digital and customer service 28 Continued investment in digital and customer engagement strategies driving growth. › More than 1 million digital billing customer accounts For personal use only › Direct debit increasing to 18.7% penetration › Mobile App launched with over 2,000 downloads p
Slide 31: Gas portfolio
Gas portfolio 29 Queensland Wholesale gas sales ramp up in FY15. Queensland Wholesale Gas Sales FY14 to FY17 For personal use only Wholesale sales 80 Firm sales Potential sales › Queensland sales of 55 PJ in FY15, up from 19 60 PJ in FY14 PJ › Sales in FY15 delivered an average margin of 40 $3.40/GJ
Slide 32: Wholesale electricity prices
Wholesale electricity prices 30 Forward curve strengthening. › Return to more normal weather conditions has strengthened demand and spot prices For personal use only › Overall reduction in NSW black coal generation supporting lift in forward curve » AGL Macquarie generation 10% higher in FY15 › Rece
Slide 33: Macquarie
Macquarie 31 Acquisition has outperformed investment case. › Generation volumes and wholesale electricity prices For personal use only exceeded acquisition model › Outperformed investment case contributing $112 million NPAT in FY15 › Integration completed under budget and three months ahead of sched
Slide 34: Group Operations
Group Operations 32 Improved availability across the generation portfolio. Generation › Following the acquisition of Macquarie, AGL For personal use only 45 generation totaled 38.2 TWh, compared to 40 supply of 38.0 TWh in FY15 35 30 › Maintenance strategy of increasing condition Generation TWh 25 m
Slide 35: Project updates
Project updates 33 Gloucester Newcastle Gas Storage Facility Solar For personal use only Waukivory Pilot › Storage facility completed and Nyngan Solar Plant – NSW (~102 MW) » Flow testing to be carried out over opened June 2015 › Construction of the solar plant was the next six months › On time on b
Slide 36: Outlook
Outlook 34 AGL well placed to respond to and manage industry challenges. › Organisational restructure and transformation to deliver operating cost and cash benefits in FY16 For personal use only › Macarthur wind farm sale (~$500 million) expected to be completed 1H FY16 › Macquarie continuing to per
Slide 37: Contact information
Contact information 35 Sales - Electricity and gas www.agl.com.au For personal use only Customer Service 131 245 AGL Energy Online/My AGL IQTM https://aglenergyonline.agl.com.au Corporate Information www.agl.com.au/about/Pages/Default.aspx Investors Media Nicole Rizgalla Kathryn Lamond Investor Rela
Slide 38: Supplementary Information
36 Supplementary For personal use only Information
Slide 39: Electricity sales volume
Electricity sales volume 37 For personal use only GWh FY15 FY14 Change Consumer New South Wales 5,593 5,579 0.3% Victoria 3,839 4,234 (9.3%) South Australia 2,416 2,522 (4.2%) Queensland 2,332 2,504 (6.9%) Consumer Total 14,180 14,839 (4.4%) Business New South Wales 3,773 3,252 16.0% Victoria 4,179
Slide 40: Gas sales volume
Gas sales volume 38 For personal use only PJ FY15 FY14 Change Consumer New South Wales 23.5 22.4 4.9% Victoria 33.7 29.7 13.5% South Australia 3.2 2.9 10.3% Queensland 2.6 2.6 - Consumer Total 63.0 57.6 9.4% Business New South Wales 29.3 31.5 (7.0%) Victoria 26.4 27.6 (4.3%) South Australia 6.5 8.0
Slide 41: Customer numbers
Customer numbers 39 Customer Numbers For personal use only 30 Jun 2015 30 Jun 2014 Change (‘000) Consumer Electricity New South Wales 806 815 (9) Victoria 646 665 (19) South Australia 422 431 (9) Queensland 387 386 1 Total Consumer Electricity 2,261 2,297 (36) Consumer Gas New South Wales 700 707 (7
Slide 42: Consumer Market – key indicators
Consumer Market – key indicators 40 For personal use only Electricity FY15 FY14 Change Volume (GWh) 14,180 14,839 (4.4%) Avg. Consumer Accounts ('000) 2,264 2,267 (0.1%) Revenue ($m) 4,023 4,344 (7.4%) Gross Margin ($m) 426 420 1.4% Gross Margin 10.6% 9.7% 0.9 ppts Gross Margin per customer $188 $18
Slide 43: Business Customers – key indicators
Business Customers – key indicators 41 For personal use only Electricity FY15 FY14 Change Volume (GWh) 12,798 12,963 (1.3%) Revenue ($m) 1,818 2,080 (12.6%) Gross Margin ($m) 42 39 7.7% Gross margin per MWh $3.28 $2.98 10.1% Gas Volume (PJ) 79.1 80.6 (1.9%) Revenue ($m) 583 653 (10.7%) Gross Margin
Slide 44: Electricity portfolio margin
Electricity portfolio margin 42 $m FY15 FY14 Change For personal use only Consumer Market 426 420 1.4% Business Customers 42 39 7.7% Wholesale Electricity 1,300 1,038 25.2% Eco Markets 27 52 (48.1%) Group Operations (Thermal & Renewables) (651) (418) 55.7% Portfolio margin 1,144 1,131 1.1% Consumer
Slide 45: Electricity portfolio metrics ($/MWh)
Electricity portfolio metrics ($/MWh) 43 FY15 FY14 Change For personal use only Generation volumes (GWh) 38,249 19,577 95.4% Consumer Market 14,180 14,839 (4.4%) Business Customers & Wholesale Markets 22,017 15,306 43.8% Sold volumes (GWh) 36,197 30,145 20.1% Consumer Market1 283.7 292.7 (3.1%) Busi
Slide 46: Electricity volumes
Electricity volumes 44 Purchased volumes (GWh) FY15 FY14 Change For personal use only Consumer Market 15,220 15,900 (4.3%) Business Customers & Wholesale Markets 22,819 16,073 42.0% Total demand 38,039 31,973 19.0% AGL generated 38,249 19,577 95.4% Pool sales (38,249) (19,577) 95.4% Pool purchases 3
Slide 47: Gas portfolio margin
Gas portfolio margin 45 $m FY15 FY14 Change For personal use only Consumer Market 311 277 12.3% Business Customers 60 62 (3.2%) Wholesale Markets 380 164 131.7% Eco Markets 4 3 33.3% Portfolio margin 755 506 49.2% Consumer Market 1,495 1,362 9.8% Business Customers, Wholesale Gas & Eco Markets 1,359
Slide 48: Gas volumes and metrics ($/GJ)
Gas volumes and metrics ($/GJ) 46 FY15 FY14 Change For personal use only Consumer Market 63.0 57.6 9.4% Business Customers & Wholesale Markets 171.1 146.6 16.7% Sold volumes (TJ) 234.1 204.2 14.6% Consumer Market 23.7 23.7 - Business Customers & Wholesale Markets 7.9 6.6 19.7% Revenue ($/GJ) 12.2 11
Slide 49: Generation portfolio
Generation portfolio 47 Asset Characteristics FY15 Performance For personal use only Sent Out Capacity Capacity Carbon Intensity Asset State Type Status Generation Factor (MW) (tCO2e/MWh) (GWh) (%) Bayswater NSW Coal Owned 2,640 0.9 13,125 69% Liddell NSW Coal Owned 2,000 1.0 6,639 46% Loy Yang VIC
Slide 50: Electricity hedging
Electricity hedging 48 AGL Energy Expected Electricity Hedge Position – All Regions For personal use only › AGL Wholesale Risk Management Policy is approved by the Board and establishes the requirements for the management of wholesale risk › Clearly defined permitted hedging activities, transaction
Slide 51: Gas – reserves
Gas – reserves 49 Gloucester reserves reassessed. For personal use only AGL share of gas reserves1 As at 30 Jun 2015 As at 30 Jun 2014 Change PJ 2P 3P 2P 3P 2P 3P Gloucester (100%)2 462 632 527 649 (12.3%) (2.6%) Moranbah (50%) - Bowen Basin 279 475 285 481 (2.1%) (1.2%) Camden (100%) 41 41 45 45 (8
Slide 52: Gas – permits
Gas – permits 50 Permits Permits For personal use only Working Working Basin Project Exploration Production Basin Project Exploration Production 2 2 Interest Interest (Area km ) (Area km ) 2 (Area km ) 2 (Area km ) - PPL 1 (48) 100% ATP 1190 (372) - 28.71%-100% - PPL 2 (1) 100% - PL 1 (55) 15% Sydne
Slide 53: New Energy
New Energy 51 Investing in emerging distributed technologies. For personal use only $m FY15 FY14 Change Total revenue 119 135 (11.9%) Cost of goods sold (61) (73) (16.4%) Gross margin 58 62 (6.5%) Operating costs (excluding D&A) (45) (32) 40.6% Operating EBITDA 13 30 (56.7%) Depreciation & amortisat
Slide 54: Reconciling Statutory to Underlying Cash Flow
Reconciling Statutory to Underlying Cash Flow 52 For personal use only $m FY15 FY14 Change Statutory net cash provided by operating activities 1,044 699 Cash flow relating to significant items 142 61 Underlying Operating cash flow 1,186 760 56.1% Net finance costs paid 194 198 (2.0%) Income tax paid
Slide 55: Return on Funds Employed
Return on Funds Employed 53 For personal use only $m FY15 FY14 Operating EBIT 1,126 1,004 Average Funds Employed 11,859 10,018 Operating EBIT / Funds Employed 9.5% 10.0% Operating EBIT 1,126 1,004 Less: Upstream Gas EBIT 23 13 Less: Equity Accounted Diamantina EBIT 3 2 Adjusted Operating EBIT 1,152
Slide 56: Investments
Investments 54 For personal use only $m FY15 FY14 Change ActewAGL 31 25 24.0% Diamantina Power Station (5) (2) 150.0% Operating EBIT 26 23 13.0% > FY15 Full Year Results 12 Months to 30 June 2015 > 12 August 2015 > AGL External
Slide 57: Comparative information
Comparative information 55 › AGL has changed the basis for segment reporting to align with its updated organisational structure. The table below summarises the changes to FY14. Refer to ASX announcement on 29 July 2015 for more information. For personal use only AGL Group FY14 $ million Revised Stru