Contact Energy Limited · NZX:CEN
Contact Energy — H1 FY2007 Earnings Presentation
32 slides from Contact Energy's earnings presentation, Feb 23, 2007
Slide 1: 2006/07 Interim Financial Results
2006/07 Interim Financial Results For the six months ended 31 December 2006 23 February 2007
Slide 2: The big picture
The big picture • A pleasing half year in challenging market conditions • The changing political environment on climate change and the NZ Energy Strategy opens up growth options in renewables • A strong focus on geothermal investment – up to 260 MW of additional capacity • Acceleration of wind plans
Slide 3: Overview of Financials
Overview of Financials contact
Slide 4: Financial Result Summary
Financial Result Summary $ millions 6 Months Ended 6 Months Ended Variance 31 December 2006 31 December 2005 $ % Operating Revenue 995.1 1,122.8 (127.7) (11%) Operating Expenses (719.7) (842.4) 122.7 (15%) Earnings Before Net Interest Expense, Income Tax, Depreciation, Amortisation and Financial Ins
Slide 5: Profit for the Period increased seven per cent
Profit for the Period increased seven per cent Earnings • EBITDAF decreased by two per cent to $275.4 million, and EBIT decreased by one per cent (excluding financial instruments and gain on disposal of Valley Power), primarily due to lower wholesale electricity spot prices and lower wholesale gas s
Slide 6: Interim dividend of 10.0 cents per share
The Board has resolved to pay a fully imputed interim dividend of 10.0 cents per share on 23 March 2007 Dividends Dividends 30 25 20 Cents per Share 15 10 5 0 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05* 2005/06 2006/07 Interim (cents) Special and Final Adjustment for 12 month year * 9 m
Slide 7: Analysis of Financial Result
Analysis of Financial Result 7
Slide 8: Total electricity revenue four per cent higher
Total electricity revenue (net of energy purchase costs) was four per cent higher than the corresponding period last year, despite lower wholesale electricity revenue Total Electricity Revenue (net of energy purchase costs) 679.4 651.4 • Total electricity revenue (net of energy purchase costs) was f
Slide 9: Wholesale Electricity Market
Spot prices in the six months to 31 December 2006 averaged $51.45/MWh, compared with $81.70/MWh for the previous corresponding period, primarily as a result of high levels of hydro inflows and storage levels Wholesale Electricity Market 350 4000 Haywards price National storage M ean National storage
Slide 10: Contact Generation
Total electricity generation volumes were slightly higher than in the prior period Contact Generation • Total generation was slightly higher at 5,597 GWh for the six months ended 31 December 2006, compared with 5,591 GWh for the six month period ended 31 December 2005 Electricity Generation • A drop
Slide 11: Gas Use in Generation
Contact’s average gas cost increased by approximately 28 per cent compared with the same period in 2005 Gas Use in Generation • Gas use in generation was 20 per cent lower in the period ended 31 December 2006 at 21.1 PJ as a result of significantly lower thermal generation • Despite the lower utilis
Slide 12: Electricity market share by volume increased slightly
Electricity market share by volume increased slightly • NZ retail electricity sales increased at 2.5 per cent while Contact’s share grew at 3.9 per cent for the six months • Contact’s retail market share increased by 0.3 per cent (Electricity Commission data) • Market share increase driven by increa
Slide 13: Gas revenue reduced significantly
Revenue from sales to wholesale and retail gas customers reduced significantly Gas Revenue Gas Revenue ($) Wholesale Gas • Wholesale gas sales to external 70 Revenue($) Retail Gas Revenue($) customers decreased from $41.4m to 60 $17.8m for the six months to 31 December 50 2006 $ Million 40 30 • This
Slide 14: Total operating expenses were flat between the periods
Total operating expenses were flat between the periods Total Operating Expenses • Total operating expenses (excluding retail electricity purchases) for the six months ended 31 December 2006 were flat at $487m • Retail electricity transmission and distribution costs increased to $214.3m from $194.3m
Slide 15: Fuel
contact Fuel 15
Slide 16: Lower use of Pohokura gas gave $7m EBITDA contribution
Lower than anticipated use of Pohokura gas resulted in a $7m EBITDA contribution in the six months • The charts below illustrate the make-up of Contact’s gas supply in the first half of the financial year and the expected make-up in the second half of the year • In the first half of the year there w
Slide 17: Medium-term gas demand and supply
Medium-term gas demand and supply • The chart above illustrates possible gas utilisation by contract, given a “mean” hydro year scenario and Contact’s current gas contracts • Each of the major contracts has some degree of fixed commitment or constraint. These constraints operate over different time
Slide 18: Short Term Outlook
contact Short Term Outlook 18
Slide 19: Drivers of second half of the Financial Year
Drivers of second half of the Financial Year • Contact benefited during the previous six months from delays in the production of gas from the Pohokura field, which was replaced by lower cost gas. Contact’s Pohokura contract coming into full production will increase the average cost of gas in the nex
Slide 20: Responding to Climate Change and the New Zealand Energy Strategy
Responding to Climate Change and the New Zealand Energy Strategy 20
Slide 21: Significant growth opportunities in a carbon-constrained world
New Zealand’s Energy Strategy and climate change policy will significantly impact Contact’s generation development programme • Contact has a range of significant growth opportunities that position the company well in a carbon-constrained world • We are now looking to execute these opportunities and
Slide 22: What is needed to achieve climate change goals?
What is needed to achieve the country’s climate change goals? • Accelerated investment in renewable generation • The replacement of Huntly coal-fired capacity with gas-fired generation could reduce emissions by 60 per cent per MWh. Shifting Huntly up the merit order is key to quickly reducing genera
Slide 23: We have a window until 2012/13 to develop new renewables
We have a window until 2012/13 to develop new renewables • e3p and other committed new plant will provide security of supply into the next decade • New capacity will be required by around 2012/13 depending on the level of demand growth. If renewables cannot supply this then a new gas-fired plant wil
Slide 24: Contact's geothermal plans – up to 260 MW of new capacity
Contact’s geothermal plans – two new stations, up to 260 MW of new capacity • Planning two new stations - at Te Mihi and Tauhara which could add up to 260 MW to the existing 227 MW at Wairakei. This would give a total of up to 487 MW at Wairakei - Tauhara • $1 billion investment programme subject to
Slide 25: Resistivity Boundary Zone of Geothermal Area
Resistivity Boundary Zone of Geothermal Area Te Mihi Area Wairakei Power Station Poihipi Tauhara Area Power Station
Slide 26: Consenting issues critical
Consenting issues critical • Normal consenting process takes too long • Wairakei reconsenting application lodged in 2001 – still not resolved • We have had preliminary positive discussions with the Minister of Energy on the possibility of call-in under the RMA of a Wairakei-Tauhara suite of consents
Slide 27: Developing wind generation options – four sites, up to 700 MW
Contact is now actively developing wind generation options - four sites, up to 700 MW • MoU with the wind development arm of Investec signed in October 2006 • Contact has agreed the commercial terms to purchase two wind farm sites from Investec. Capacity of up to 300 MW. Land owner agreements are in
Slide 28: Otahuhu C
With confidence around renewable development, Otahuhu C could be deferred for 12-18 months while carbon pricing policy is developed • One of only two consented new thermal sites (the other is at Contact’s TCC site) • Ideal location in Auckland • With sufficient confidence around geothermal consentin
Slide 29: Capital Management
contact Capital Management 29
Slide 30: Capital Management
Capital Management • The acquisition and investment proposals outlined clearly have implications for capital management • Potentially, we are looking at up to $2 billion of capital expenditure commitments over the next five years • Any significant release of cash to shareholders at this time could p
Slide 31: Looking Forward
contact Looking Forward 31
Slide 32: Profitable and exciting growth opportunities that are environmentally sustainable
Profitable and exciting growth opportunities that are environmentally sustainable • Contact operates a successful business model which integrates a retail customer business and a generation business. The last six months have continued to demonstrate the value of this model • In the last six months t