Contact Energy Limited · NZX:CEN
Contact Energy — Investor Presentation (January 2008)
23 slides from Contact Energy's investor presentation, Jan 29, 2008
Slide 1: New Zealand's leading integrated energy company
New Zealand’s leading integrated energy company Presentation to Asian Investors 29 January 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 – 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 Contact Revenue and Earnings Growth
Slide 4: Recent Strategic Initiatives
Recent Strategic Initiatives • Recent activity has positioned Contact well for the next few years: – The introduction of the New Zealand Energy Strategy and climate change policy have placed renewable generation at centre stage – Contact has a unique set of options which can be leveraged in this env
Slide 5: 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 6: The NZ Energy Strategy
The NZ Energy Strategy • The New Zealand Energy Strategy is focussed on lowering emissions from generation • 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 o
Slide 7: Energy and climate change policy
Energy and climate change policy • The Government has announced its intention to introduce an Emissions Trading Scheme progressively covering all gases and major emitters • Electricity is covered from 1 January 2010 • Legislation is expected to be passed in calendar 2008 • The Government has also in
Slide 8: 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
Slide 9: 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 10: Drivers of the long-run price path
Drivers of the long-run price path • Over the longer term prices will trend towards the LRMC of the next most economic source of new generation • Prices are forecast to rise to $75-$80/MWh and trend towards a wind LRMC of $85-$100/MWh to support new generation required at the beginning of the next d
Slide 11: Gas supply and demand
Gas supply and demand • Over the next 3 years, the gas market may see periods of over supply with limited paths to market for excess gas • Methanex is the major source of incremental demand in the New Zealand market and its Waitara plant is fully contracted to April 2008 with suggestions that Methan
Slide 12: 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 over the next couple of years • Medium to long term gas supp
Slide 13: 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 14: 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 15: Contact's strategic focus
Contact’s strategic focus • Government policy supports the development of renewables and Contact’s recently granted call-in for Te Mihi increases confidence that new renewables can be delivered to the market • Gas and generation market conditions through to the end of the decade indicate the market
Slide 16: New generation - geothermal
New generation - geothermal • Geothermal production and capacity are forecast to double over the next 5-7 years as exploration and reservoir management capabilities continue to deepen Geothermal Capacity (MW net) 2006 2014 Wairakei Station 157 - Wairakei Binary 14.5 14.5 Poihipi (effective) 30 50 Oh
Slide 17: Update on geothermal projects
Update on geothermal projects • Consents have been lodged for the Te Mihi power station – the Government has announced its intention to “call-in” the project. The resource consent hearing will take place during 2008 • Consents for the Tauhara station are expected to be filed during this calendar yea
Slide 18: Wind Projects
Wind Projects • A significant wind project in Waikato has been announced: • Hauāuru ma raki (North-west wind) • up to 550 MW • consultation has commenced and consents are expected to be filed in the next 2 months • Four further wind options being developed
Slide 19: Hydro generation options
Hydro generation options • Hawea Gates – Contact is developing a 16.4 MW, NZ$43m, hydro facility at the existing Hawea control gates which utilises consented Hawea River flows – Commissioning expected to be 2011 – although turbine delivery times are increasing – Consents have now been secured • Cont
Slide 20: Stratford Peaker
Stratford Peaker • Contact intends to redevelop the old site TCC once occupied by the Stratford Power power Station to build a peaker plant (up to station 300MW) • The first phase (100-200 MW) is expected to be commissioned early in 2010 Proposed • Given the expected increase in wind location of dev
Slide 21: Capital expenditure is dominated by generation initiatives
Capital expenditure is dominated by generation initiatives • The future capex profile now includes about $2bn in renewable investment as well as about $150m in gas peaking capacity and the investment in gas storage
Slide 22: 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 • Contact is well positioned to make a key cont
Slide 23: contact
c contact
Contact Energy — Investor Presentation (January 2008) on 6ix