AGL Energy Limited · ASX:AGL
AGL Energy — H1 FY2015 Earnings Presentation
55 slides from AGL Energy's earnings presentation, Feb 11, 2015
Slide 1: AGL reports Underlying Profit increase of 24.8 percent
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 11 February 2015 AGL reports Underlying Profit increase of 24.8
Slide 2: Dividend, outlook and conference call
Dividend: AGL has declared a fully franked interim dividend of 30.0 cents per share. The interim dividend will be paid on 25 March 2015. The record date to determine For personal use only shareholders’ entitlements to the interim dividend is 26 February 2015. Shares will commence trading ex-dividend
Slide 3: FY15 Interim Results
FY15 Interim Results Half Year ended 31 December 2014 Michael Fraser Managing Director and CEO Brett Redman Chief Financial Officer ‘AGL Macquarie 11 February 2015 Energyin] fe SAGL
Slide 4: Disclaimer and important information
2 Disclaimer and important information 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
3 Agenda For personal use only 4 Results Highlights Michael Fraser 6 Group Financials Brett Redman 19 Operational Review / Summary Michael Fraser 33 Supplementary Information IMPORTANT NOTE: This presentation should be read in conjunction with the AGL Energy Limited Financial Results ASX Release for
Slide 6: Half Year FY15 highlights
Half Year FY15 highlights 4 Strong performance from underlying business and Macquarie acquisition. › Statutory Profit of $308 million, up 18.0% For personal use only › Underlying Profit of $302 million, up 24.8% › Underlying Operating Cash Flow before interest and tax of $879 million » Up $201 milli
Slide 7: Interim FY15 result
Interim FY15 result 5 Statutory and Underlying Profit up on prior year. For personal use only › Revenue: $5,183m (2.0%) › Statutory Profit: $308m 18.0% FINANCIAL › Underlying Profit: $302m 24.8% › Statutory EPS: 48.6 cps 7.8%1 › Underlying EPS: 47.7 cps 14.1%1 › Dividends Per Share (100% f
Slide 8: Group Financials
6 Group Financials For personal use only Brett Redman Chief Financial Officer
Slide 9: Statutory Profit to Underlying Profit reconciliation
Statutory Profit to Underlying Profit reconciliation 7 Volatility of non-cash items highlights value of focus on Underlying Profit. For personal use only 6 months to 31 Dec 2014 31 Dec 2013 Change $m Statutory Profit 308 261 47 Adjust for the following after tax items: Significant items 1 128 17
Slide 10: Significant Items
Significant Items 8 Macquarie acquisition largest component. For personal use only 6 months to 31 December 2014 Pre Tax Tax After Tax $m Macquarie acquisition stamp duty (93) 28 (65) Macquarie elimination of derivative contracts (37) - (37) Macquarie acquisition and integration costs (13) 3 (10) Res
Slide 11: Underlying Profit
Underlying Profit 9 Underlying profit up 24.8% on prior period. For personal use only 6 months to 31 Dec 2014 31 Dec 2013 Change $m Revenue 5,183 5,287 (2.0%) Operating EBITDA 735 622 18.2% Operating EBIT Retail 159 136 16.9% Merchant 522 433 20.6% Upstream Gas (10) (13) (23.1%) Investments 4 14 (71
Slide 12: Retail – Key financial metrics
Retail – Key financial metrics 10 Improvement driven by higher gas volumes and retail margins. For personal use only 6 months to 31 Dec 2014 31 Dec 2013 Change $m Electricity revenue 1,999 2,142 (6.7%) Gas revenue 780 739 5.5% Other revenue (fees & charges) 34 37 (8.1%) Total revenue 2,813 2,918 (3.
Slide 13: Retail – Operating EBIT drivers
Retail – Operating EBIT drivers 11 Strong result reflecting normalised weather and disciplined price management. 180 For personal use only 12 170 25 (6) 3 159 160 8 (2) (2) 150 (15) $ million 140 136 130 120 110 100 YTD December Electricity Gross Electricity Gross Gas Gross Margin Gas Gross Margin B
Slide 14: Retail – Key operating metrics
Retail – Key operating metrics 12 Higher operating costs driven by APG and expensing of NSW acquisitions costs. 6 months to For personal use only 31 Dec 2014 31 Dec 2013 Change $m Operating costs (215) (200) 7.5% Depreciation and amortisation (35) (43) (18.6%) Less fees and charges 34 37 (8.1%) Net
Slide 15: Retail – Key operating metrics
Retail – Key operating metrics 13 Improved performance from better volumes and margin management. For personal use only 6 months to 31 Dec 2014 31 Dec 2013 Change Gross margin excluding fees and charges ($m) 375 342 9.6% Operating EBIT ($m) 159 136 16.9% Average customer numbers (‘000) 3,741.3 3,661
Slide 16: Merchant – Key financial metrics
Merchant – Key financial metrics 14 Operating EBIT up 20.6% on prior period. 6 months to For personal use only 31 Dec 2014 31 Dec 2013 Change $m Operating EBITDA 654 531 23.2% Depreciation and amortisation (132) (98) 34.7% Energy Portfolio Management (EPM) Wholesale Electricity gross margin 588 523
Slide 17: Merchant – Operating EBIT drivers
Merchant – Operating EBIT drivers 15 Growth from Macquarie acquisition and Queensland wholesale gas sales. 550 For personal use only 3 522 9 49 500 13 450 62 $ million 433 6 400 51 (17) 350 (87) 300 YTD December Carbon Repeal Macquarie Wholesale Merchant Queensland Other Gas Wholesale Gas - Eco-mark
Slide 18: Underlying Operating cash flow
Underlying Operating cash flow 16 Close management of receivables significantly improves underlying cash flow. For personal use only 6 months to 31 Dec 2014 31 Dec 2013 Change $m Operating EBITDA 735 622 113 Equity accounted income (net of dividends received) (9) (1) (8) Onerous contracts (8) (18) 1
Slide 19: Capital expenditure
Capital expenditure 17 Largest component Solar Project at Nyngan and Broken Hill. 900 For personal use only 800 700 Other Retail 600 Newcastle Gas Storage Upstream Gas 500 $ million Solar Project net of 400 govt. funding SIB – Other 300 SIB – Macquarie 200 SIB – Loy Yang 100 0 Jul - Dec 2014 Jan - J
Slide 20: Debt structure
Debt structure 18 Debt maturity profile lengthened and funding sources diversified. › Short-term Macquarie Generation debt facility replaced with 7-year $600 million MTN issue For personal use only » Awarded ‘Domestic Bond Deal of the Year’ by FinanceAsia and KangaNews › $410 million 6.5-year Asian
Slide 21: Operational Review
19 Operational Review For personal use only Michael Fraser Managing Director and CEO
Slide 22: People and safety
People and safety 20 Continued improvements in safety. Enterprise Bargain Agreements. Key safety statistics for 1H FY15: For personal use only Total Injury Frequency Rate › Total injury frequency rate down from 2.8 to 2.6 8 7 › Occupational injury frequency rate down from 3.7 to 1.3 6 5 Key health a
Slide 23: Macquarie acquisition
Macquarie acquisition 21 Macquarie performing in line with expectations. Integration on track. › Integration proceeding well and consistent with For personal use only business case › All corporate functions now integrated into AGL structure › Energy trading and finance functions fully integrated › R
Slide 24: Aluminium smelter contracts
Aluminium smelter contracts 22 Commodity price benefits from higher premiums and lower exchange rate. › AGL has two electricity contracts with aluminium Aluminium Price For personal use only producers 4,500 » Tomago ▪ Current output of 550,000 tonnes p.a. 4,000 ▪ New contract signed in 2010 ▪ Contra
Slide 25: Wholesale electricity price outlook
Wholesale electricity price outlook 23 Rising prices as higher domestic gas prices reduce gas-fired generation. For personal use only › Queensland gas powered generators are Wholesale Electricity Price expected to significantly reduce output from $80 2015 as fuel supply diverts to LNG projects Carbo
Slide 26: Gas portfolio
Gas portfolio 24 Queensland wholesale gas sales ramp up in FY15. › Queensland wholesale gas sales: Queensland Wholesale Gas Sales FY13 to FY17 For personal use only 80 » Sales of 56 PJ in FY15, up from 19 PJ in FY14 » Sales in FY15 contracted at an average margin 60 Firm sales Potential sales of $3.
Slide 27: Consumer energy volumes
Consumer energy volumes 25 Gas volumes up, but electricity demand remains subdued. AGL Total Consumer Energy Volumes For personal use only › Return to more normal weather in 1H 8.0 1H FY14 1H FY15 40 1H FY14 1H FY15 FY15, compared with record warm 7.0 35 weather in prior period 6.0 30 5.0 25 › Consu
Slide 28: Retail – Market and customer dynamics
Retail – Market and customer dynamics 26 Core business delivers growth despite intense market competition. Customer Accounts For personal use only › AGL churn maintained at 15.4% for 4.0 3.9 the 1H FY15, increasing the gap to 3.8 Rest of Market to 5.6% Million Accounts 3.7 3.6 › APG customer churn i
Slide 29: Retail – Operational performance
Retail – Operational performance 27 Growth in digital interaction with customers. For personal use only E-billing AGL Energy Online › Investment in digital innovation 1.0 0.7 › 1 million e-Bill customer accounts 0.6 Million Customers Million Accounts 0.8 0.5 0.6 › Monthly billing approaching 200k 0.
Slide 30: AGL's Bowen Basin interests
AGL’s Bowen Basin interests 28 Divestment process continues. › AGL’s Bowen Basin interests held for sale For personal use only › Purchased in 2006 to augment domestic gas, now regarded as non-core as long-term destination for gas is LNG exports › Assets comprise » Entitlement to 1,250 PJ (2P), 4,027
Slide 31: Gloucester gas project
Gloucester gas project 29 Production testing of Waukivory Pilot voluntarily suspended. For personal use only › Waukivory Pilot » Completed fracture stimulation and installation of well completions including dewatering pumps, well metering skids and enclosed flares » Production testing voluntarily su
Slide 32: Project updates
Project updates 30 Construction complete or well advanced on all projects. Diamantina Power Station – Mt Isa (302 MW, AGL 50% interest) For personal use only Construction complete and fully operational › Diamantina Power Station (DPS) (242 MW CCGT) commissioned in October 2014 and delivering energy
Slide 33: Outlook FY15
Outlook FY15 31 Underlying Profit guidance of $575 million to $635 million reaffirmed. For personal use only › FY15 Underlying Profit expected to be between $575 - $635 million1,2 » Approximate 50:50 split expected between 1H FY15 and 2H FY15 › Macquarie integration and performance in line with expe
Slide 34: Contact information
32 Contact information Sales - Electricity and gas www.agl.com.au For personal use only Customer Service 131 245 AGL Energy Online https://aglenergyonline.agl.com.au Corporate Information www.agl.com.au/about-agl/media-centre/contact-us Investors Media Nicole Rizgalla Karen Winsbury Investor Relatio
Slide 35: Supplementary Information
33 Supplementary For personal use only Information
Slide 36: Electricity sales volume
34 Electricity sales volume For personal use only 6 months to 31 Dec 2014 31 Dec 2013 Change GWh Consumer New South Wales 2,862 2,795 2.4%. Victoria 1,958 2,093 (6.5%) South Australia 1,234 1,240 (0.5%) Queensland 1,157 1,254 (7.7%) Consumer Total 7,211 7,382 (2.3%) Business New South Wales 1,701 1,
Slide 37: Gas sales volume
35 Gas sales volume 6 months to For personal use only 31 Dec 2014 31 Dec 2013 Change PJ Consumer New South Wales 13.0 12.2 6.6% Victoria 18.5 17.0 8.8% South Australia 1.7 1.6 6.2% Queensland 1.4 1.4 0.0% Consumer Total 34.6 32.2 7.5% Business New South Wales 16.7 16.1 3.7% Victoria 14.8 14.4 2.8% S
Slide 38: Customer numbers
36 Customer numbers For personal use only Customer Numbers Change since 31 Dec 2014 30 Jun 2014 (‘000) 30 Jun 2014 Electricity New South Wales 813 820 (7) Victoria 657 673 (16) South Australia 428 434 (6) Queensland 385 389 (4) 2,283 2,316 (33) Gas New South Wales 702 707 (5) Victoria 556 567 (11) S
Slide 39: Consumer market - Key indicators
37 Consumer market - Key indicators 6 months to For personal use only 31 Dec 2014 31 Dec 2013 Change Electricity Volume (GWh) 7,211 7,382 (2.3%) Avg. consumer accounts ('000) 2,273 2,224 2.2% Revenue ($m) 1,999 2,142 (6.7%) Gross margin ($m) 215 192 12.0% Gross margin 10.8% 9.0% 1.8 ppts Gross margi
Slide 40: Business customers – Key indicators
38 Business customers – Key indicators For personal use only 6 months to 31 Dec 2014 31 Dec 2013 Change Electricity Volume (GWh) 6,393 6,628 (3.5%) Business accounts ('000) 19.1 19.0 0.5% Revenue ($m) 926 1,065 (13.1%) Gross margin ($m) 19 19 0.0% Gross margin per MWh $3.04 $2.79 9.0% Gas Volume (PJ
Slide 41: Retail – Cost to serve
39 Retail – Cost to serve For personal use only Operating costs Cost per account 6 months to 31 Dec 31 Dec Change 31 Dec 31 Dec Change 2014 2013 2014 2013 $m $m $ $ Cost to serve1 (143) (134) 6.7% (38) (37) 2.7% Cost to acquire2 (57) (58) (1.7%) (164) (159) 3.1% Cost to retain2 (16) (14) 14.3% (36)
Slide 42: Wholesale electricity & generation
40 Wholesale electricity & generation 6 months to For personal use only 31 Dec 2014 31 Dec 2013 Change $m Wholesale Electricity 588 523 12.4% Merchant Operations (323) (213) 51.6% Wholesale Operating EBIT 265 310 (14.5%) Consisting of: Retail 552 735 (24.9%) Business and Wholesale1 539 589 (8.5%) To
Slide 43: Wholesale electricity & generation
41 Wholesale electricity & generation 6 months to For personal use only 31 Dec 2014 31 Dec 2013 Change Volumes (GWh) Retail 7,741 7,908 (2.1%) Business and Wholesale 10,712 8,228 30.2% Total Demand1 18,453 16,136 14.4% AGL generated (16,019) (9,818) 63.2% Pool sales 16,019 9,818 63.2% Pool purchases
Slide 44: Wholesale gas
42 Wholesale gas 6 months to For personal use only 31 Dec 2014 31 Dec 2013 Change $m Retail 275 225 22.2% Business, Wholesale and Generation1 620 451 37.5% Total Revenue 895 676 32.4% Gas purchases (558) (471) 18.5% Haulage and storage (132) (124) 6.5% Total Cost of Sales (690) (595) 16.0% Wholesale
Slide 45: Generation: Operational performance
43 Generation: Operational performance 1. "Equivalent Availability Factor' is used to measure Loy Yang Availability / Start Reliability (%) For personal use only A, and represents the percentage of time the plant is 100 available to operate. International benchmark used is North American Electricity
Slide 46: Generation portfolio
44 Generation portfolio 1H FY15 Carbon Capacity For personal use only Capacity 7 Sent Out Asset State Type Status Intensity Factor1 Generation (MW) (tCO2e/MWh) (GWh) (%) 2 Coal Owned 2,640 0.9 4,682 61% Bayswater NSW 2 Liddell NSW Coal Owned 2,000 1.0 2,310 40% Loy Yang VIC Coal Owned 2,210 1.3 6,94
Slide 47: Electricity hedging
45 Electricity hedging For personal use only › AGL Wholesale Risk Management Policy is AGL Energy Expected Hedge Position - All Regions approved by the Board and establishes the requirements for the management of wholesale risk volume › Clearly defined permitted hedging activities, transaction limit
Slide 48: Upstream Gas – Key financial metrics
46 Upstream Gas – Key financial metrics For personal use only 6 months to 31 Dec 2014 31 Dec 2013 Change $m Operating EBITDA (4) (1) 300.0% Depreciation and amortisation (6) (12) (50.0%) Operating EBIT Upstream Gas Queensland (2) (7) (71.4%) New South Wales (2) - n/a Sundry (6) (6) - Operating EBIT
Slide 49: Upstream Gas – Reserves
47 Upstream Gas – Reserves For personal use only AGL share of gas reserves As at 31 Dec 14 As at 30 Jun 14 Change PJ 2P 3P 2P 3P 2P 3P Gloucester (100%) 527 649 527 649 - - Moranbah (50%) - Bowen Basin 282 478 285 481 (1.1%) (0.6%) Camden (100%) 43 43 45 45 (4.4%) (4.4%) Silver Springs (various) 57
Slide 50: Upstream Gas – Permits
48 Upstream Gas – Permits Permits Permits For personal use only Working Working Basin Project Exploration Production Basin Project Exploration Production Interest Interest 2 2 (Area km2) (Area km2) (Area km ) (Area km ) ATP 471P (445) - 28.71-100% PEL 2 (6,694)r - 100% - PL 1 (55) 15% PEL 5 (398)r -
Slide 51: Reconciling Statutory to Underlying cash flow
49 Reconciling Statutory to Underlying cash flow For personal use only 6 months to 31 Dec 2014 31 Dec 2013 Change $m Statutory net cash provided by operating activities 588 748 Cash flow relating to significant items 124 22 Underlying operating cash flow 712 770 (7.5%) Net finance costs paid 99 99
Slide 52: Investments
50 Investments For personal use only 6 months to 31 Dec 2014 31 Dec 2013 Change $m ActewAGL 15 14 7.1% New Energy (8) - n/a Diamantina Power Station (3) - n/a Operating EBIT 4 14 (71.4%) FY15 Interim Results Half Year ended 31 December 2014 11 February 2015 AGL External
Slide 53: Capital expenditure
51 Capital expenditure For personal use only 6 months to 31 Dec 2014 SIB Discretionary Total $m Merchant 120 169 289 Upstream Gas - 64 64 Retail - 19 19 Corporate and Other 7 6 13 Capital expenditure 127 258 385 Less: Solar projects government funding - (28) (28) Total capital expenditure 127 230 35
Slide 54: Balance sheet
52 Balance sheet For personal use only As at 31 Dec 2014 30 Jun 2014 $m Current assets 3,436 3,411 PPE, E&E and oil & gas assets 7,855 6,236 Other non current assets 4,632 4,487 Total Assets 15,923 14,134 Current debt 765 45 Other current liabilities 2,031 2,121 Non current debt 2,921 3,669 Other no
Slide 55: Fair value reconciliation
53 Fair value reconciliation Net Assets (Liabilities) For personal use only As at $m 31 Dec 2014 30 Jun 2014 Change Energy derivative contracts 156 18 138 Interest rate swaps and foreign currency derivative contracts (39) (79) 40 Total net assets (liabilities) for derivative contracts 117 (61) 178 C