Infratil Limited · NZX:IFT
Infratil — Energy Developments — FY2002 Earnings Presentation
87 slides from Infratil's earnings presentation, Sep 3, 2002
Slide 1: June 2002 Financial Results & Business Update
Energy Developments June 2002 Financial Results & Business Update Supplement to ASX Release Appendix 4B 3 September 2002 1
Slide 2: Contents
Contents – June 2002 Financial Results – Corporate Update – Energy Business Update – SWERF® Business Update 2
Slide 3: June 2002 Financial Results
June 2002 Financial Results 3
Slide 4: Earnings & Dividend
June 2002 Financial Results Earnings & Dividend – Profit before tax $26.0 million (2001: $23.1 million) – Profit after tax of $20.8 million (2001: $18.9 million) – Basic earnings per share of 17.1 cents (2001: 16.6 cents) – As signalled in the Company’s interim results release in March 2002, Directo
Slide 5: Revenue & EBIT
June 2002 Financial Results Revenue & EBIT – Revenue for the full year (including share of net profit in associates) of $120.4 million (2001: $102.0 million) – Earnings before interest, tax and depreciation (EBITDA) of $66.8 million (2001: $60.7 million) – Earnings before interest and tax (EBIT) of
Slide 6: Normalised Results
June 2002 Financial Results Normalised Results 2002 2001 % $’000s $’000s Increase Profit before income tax (normalised) 19,971 16,112 24% Items affecting the result: - Proceeds from REC/ROC sales* 4,095 - - Greek Grant (after tax) - 4,700 - Grant Revenue 1,000 1,000 - Reversal of provisions - 1,386
Slide 7: Historical Financial Year Trends: Revenue and EBITDA
June 2002 Financial Results Historical Financial Year Trends Revenue EBITDA 140 140 120 120 100 100 A$ million A$ million 80 80 60 60 40 40 20 20 0 0 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 7
Slide 8: Historical Financial Year Trends: EBIT and Profit Before Tax
June 2002 Financial Results Historical Financial Year Trends EBIT Profit Before Tax 50 50 40 40 A$ million A$ million 30 30 20 20 10 10 0 0 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 8
Slide 9: Historical Financial Year Trends: Profit After Tax, Generating Capacity
June 2002 Financial Results Historical Financial Year Trends Profit After Tax Generating Capacity 25 400 350 20 300 15 250 A$ million 200 MW 10 150 100 5 50 0 0 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 Note: 2000 result excludes abnormal tax benefit 9
Slide 10: Cash & Financing
June 2002 Financial Results Cash & Financing – Cash at 30 June 2002 of $30.5 million (30 June 2001: $23.5 million) – Total debt at 30 June 2002 of $269 million (30 June 2001: $226 million) • Current debt $87.2 million • Non Current Debt $182.3 million – Company due to execute US$30 million project f
Slide 11: Cash & Financing (cont'd)
June 2002 Financial Results Cash & Financing (cont’d) • Project financing of EDL’s European joint ventures under evaluation - expected to release up to A$30 million of equity. Target date of completion - Q3 FY2003. • Review of Group’s Australian ‘mature’ project facilities underway with restructure
Slide 12: Historical Trends: Gearing Ratio
June 2002 Financial Results Historical Trends Gearing Ratio • Gearing ratio (Net 60% Debt to Net Debt plus Equity) of 40% at 30 50% June 2002 (30 June 2001: 38%) 40% • Aim remains to lift 30% gearing levels back towards target 50%+ 20% levels 10% 0% 1998 1999 2000 2001 2002 12 (Net debt to net debt
Slide 13: Segment Results
June 2002 Financial Results Segment Results 13
Slide 14: Segment Results: Australia/Asia
June 2002 Financial Results Segment Results Australia/Asia • Revenue $92.5 million (2001 $81.2 million) • EBITDA $56.9 million (2001 $48.6 million) • EBIT $40.2 million (2001 $31.8 million) Comments Reflects (pre tax): - REC revenue $3.5 million (prices achieved mid $30’s) - Recognition of deferred
Slide 15: Segment Results: United Kingdom/Europe
June 2002 Financial Results Segment Results United Kingdom/Europe (France, Greece) • Revenue $18.9 million (2001 $15.4 million*) • EBITDA $9.0 million (2001 $17.5 million*) • EBIT $4.5 million (2001 $4.2 million*) Comments – ROC revenue of $0.6 million. ROC legislation commenced 1 April 2002. – EBIT
Slide 16: Segment Results: United States
June 2002 Financial Results Segment Results United States • Revenue $9.0 million (2001 $0.7 million) • EBITDA $0.9 million loss (2001 $0.1 million loss) • EBIT $3.1 million loss (2001 $0.3 million loss) Comments • Carbon Limestone and Lorain projects commissioned late in 2001. Both experienced gasfi
Slide 17: Gasification and Waste-to-Energy Investment
June 2002 Financial Results Gasification and Waste-to-Energy Investment – Total investment at 30 June of $148.7 million: 2002 2001 $mill $mill • Whytes Gully Capital Work in Progress 23.2 18.9 • Development Expenditure – Business & Technical 84.9* 57.5 • Intangible Asset – Technology Development 35.
Slide 18: 2002/03 Profit Outlook
June 2002 Financial Results 2002/03 Profit Outlook • ‘Market’ consensus for FY 2003 PAT of $25.3 million (Bloomberg) - 22% increase on actual 2002. • 2002/03 results will be adversely impacted by: – Higher O & M costs in Australia reflecting timing of top end overhauls and other maintenance costs. –
Slide 19: Corporate Update
Corporate Update 19
Slide 20: Change in Substantial Shareholders
Corporate Update Change in Substantial Shareholders 20
Slide 21: Change in Share Register
Corporate Update Change in Share Register • On 25 July EDL issued 4,185,450 ordinary shares to each of Infratil Limited and Orion New Zealand Ltd at $4.13 per share. • The majority of the issue proceeds were used to fund the buy back and subsequent cancellation of 16.8 million NRG preference shares
Slide 22: Change in Share Register
Corporate Update Change in Share Register • Total issued capital has reduced from 123.3 million shares to 114.9 million shares. • Existing shareholders now have an additional 6.8% ownership interest in EDL with a corresponding increase in earnings per share. • EDL will seek shareholder approval at t
Slide 23: Corp. Office Relocation
Corporate Update Corp. Office Relocation – Key corporate management team and support functions have been relocated to Brisbane with the closure of the Melbourne office in late September 2002. – Relocation will deliver net head count savings/on costs of $1 million per annum (from 30 June 2001 levels)
Slide 24: Energy Business Update
Energy Developments Energy Business Update 24
Slide 25: Contents
Energy Business Update Contents – Highlights – Business Outlook – Business Strategy 25
Slide 26: Highlights
Energy Business Update Highlights 26
Slide 27: Highlights
Energy Business Update Highlights – 40 Megawatts (12%) increase of capacity (owned) – Critical mass of plants in the USA (35 MW) with addition of: • Zion project in Illinois (5.4 MW), to • Carbon Limestone (14.9 MW), and • Lorain (8.1 MW) in Ohio • Tessman Road (2.7 MW) Texas, expected to be commiss
Slide 28: Highlights
Energy Business Update Highlights – Gastec JV (France) continues to expand operations with addition of three projects: • Hersin (3.8 MW total) • Vemars (1.3 MW total) • Crepy (2.5 MW total) – Development progress continues on further SITA landfills 28
Slide 29: Highlights
Energy Business Update Highlights – UK LFG capacity continued to expand with additions to: • Mucking of 1.3 MW, and • Rainham of 2.6 MW. – 1.3 MW was added to the Ano Liossia project in Athens 29
Slide 30: Highlights
Energy Business Update Highlights In Australia: • Development of the 2.5 MW site at Eastern Creek (Sydney) brought the total developed on Waste Service (NSW) sites to 23.5 MW. EDL LFG developments with WS (NSW) now span close to ten years with additional work in the pipeline. • At Brooklyn, Victoria
Slide 31: Highlights: Cedar Hills Project
Energy Business Update Highlights – Cedar Hills Project, King County, Seattle preferred tenderer • 30 MW plus on active landfill • Provides opportunity to leverage in-house CCGT experience • Project staging could provide early benefits for all parties • Preliminary design optimisation underway in pa
Slide 32: Capacity Added FY 2002
Energy Business Update Capacity Added FY 2002 Total EDL Owned USA 28.5 28.5 Europe/UK 12.8 8.3 Australia 3.7 3.7 45 MW 40.5 MW 32
Slide 33: Business Outlook
Energy Business Update Business Outlook 33
Slide 34: Business Outlook
Energy Business Update Business Outlook – USA – Europe/UK – Australia/Asia 34
Slide 35: Business Outlook: USA
Energy Business Update Business Outlook USA • Greatest potential for LFG projects growth • Pipeline of projects under development over the next 24 months exceeds 40 MW, excluding King County • A number of significant project opportunities which were not previously considered viable by US developers
Slide 36: Business Outlook: Europe/UK
Energy Business Update Business Outlook Europe/UK • European JV’s remain the focus as UK potential for LFG projects more limited post the near term • Pipeline of projects under development over the next 24 months approximately 20 MW • Operations now successfully through the startup phase • JV manage
Slide 37: Business Outlook: Australia/Asia
Energy Business Update Business Outlook Australia/Asia • Opportunity exists in Australia to review opportunities in light of “green benefits” • Pipeline of projects under development over the next 24 months approximately 20 MW in LFG alone 37
Slide 38: Business Strategy
Energy Business Update Business Strategy 38
Slide 39: Business Strategy
Energy Business Update Business Strategy – Focus on delivering the existing LFG project pipelines in the USA on time and on budget – Review the current UK/European approach to ensure appropriately resourced for current project requirements and efficiency and simplicity of JV management processes – C
Slide 40: Business Strategy
Energy Business Update Business Strategy – Re-focus on Australian opportunities in light of improving market fundamentals, leveraging off existing relationships and forging new alliances with an improved customer focus – Review current Australian assets with a view to optimising returns – Focus on e
Slide 41: SWERF Status Update
Energy Developments SWERF® Status Update 41
Slide 42: Contents
Energy Developments Contents – Technology Review – Whytes Gully Operating Targets – Commercial Parameters – Marketing Status 42
Slide 43: Technology Review
Technology Review 43
Slide 44: Contents
Contents – Background – Char Gasifier – Operating Modes – Ancillary Plant Items 44
Slide 45: Technology Review: Background
Technology Review Background – Early this year the Company announced the suspension of capacity testing at the Whytes Gully SWERF® plant while the performance of the Char Gasifier was reviewed. – As the process produced a mixed stream of char and pyrolysis oils it was not acceptable to dispose of th
Slide 46: Technology Review: Background
Technology Review Background – In parallel with the test program a new “dry” char removal system was designed and installed to remove the char from the hot gas stream separate from the pyrolysis oils. – This system was successfully commissioned in May with subsequent testing of the char showing the
Slide 47: Technology Review: Background
Technology Review Background – The new Char Gasifier design only incorporated process principles that had been successfully demonstrated during the test program to ensure a robust design with minimal technical risk. – The process adopted for the new Char Gasifier is an atmospheric vessel with indire
Slide 48: Contents
Technology Review Contents – Background – Char Gasifier – Operating Modes – Ancillary Plant Items 48
Slide 49: Char Gasifier
Technology Review Char Gasifier – The new Char Gasifier utilises a 6 metre ISO shipping container for the vessel. – Steam fluidises the char for good mixing and heat transfer. – The steam (hydrogen and oxygen) reacts with the carbon in the char to produce syngas (hydrogen, carbon monoxide and carbon
Slide 50: Char Gasifier
Technology Review Char Gasifier – The char spends up to 8 hours in the Char Gasifier during which time the carbon is converted into syngas leaving an inert ash product. – The ash is removed from the end of the vessel and can either be used in the manufacture of products or disposed to a landfill. –
Slide 51: Char Gasifier System Schematic
Technology Review Primary Pulp Syngas Dry Char Removal System Cooling W ater Primary Gasifier Quench HX W ater Flue Gas Gas Blower Char Process Syngas Out Steam Flue Gas Super Vessel ID Fan heater Pump Burner Fuel Gas Filter Steam Ash Out FD Fan to Gas Processing Char Gasifier System Schematic 51
Slide 52: Contents
Technology Review Contents – Background – Char Gasifier – Operating Modes – Ancillary Plant Items 52
Slide 53: SWERF Operating Modes
Technology Review SWERF® Operating Modes – In the period since the installation of the dry char removal system, a series of performance runs have been undertaken at the plant to update the mass and energy balance for the revised process. – The separation of char from the pyrolysis oils has opened up
Slide 54: SWERF Operating Modes
Technology Review SWERF® Operating Modes – The outcome of this is the opportunity to configure a SWERF® plant to match the outputs to the needs or drivers of any particular location of market. – In markets such as the United Kingdom, where SWERF® earns very high electricity prices, the most attracti
Slide 55: SWERF Operating Modes
Technology Review SWERF® Operating Modes – In either configuration where BioOil is sold, less power is generated at the SWERF® plant for a given tonnage of waste processed. – An example of this is a 5 MWe SWERF® facility would nominally process 50,000 tonnes of waste annually; in either BioOil Expor
Slide 56: Contents
Technology Review Contents – Background – Char Gasifier – Operating Modes – Ancillary Plant Items 56
Slide 57: Ancillary Plant Items
Technology Review Ancillary Plant Items These items consist of a number of ancillary processes currently being installed at Whytes Gully to further guarantee emission levels: • sulphur removal from syngas • arsenic removal from syngas • quench water processing system 57
Slide 58: Ancillary Plant Items
Technology Review Ancillary Plant Items – The sulphur and arsenic removal systems for syngas are required to guarantee that all aspects of the plant emissions performance will be better than licence requirements. – The quench water processing system is required to deal with the concentration of salt
Slide 59: Whytes Gully Operational Targets
Whytes Gully Operational Targets 59
Slide 60: Key Milestones for the Whytes Gully plant
Whytes Gully Operational Targets Key Milestones for the Whytes Gully plant over the next 24 months are: Item Target Dates • Char Gasifier performance testing complete Q1 FY2003 • Commencement of capacity testing Q1 FY2003 • Ancillary plant items completed Q1 FY2003 • Emissions testing using “dosed”
Slide 61: Key Milestones (cont)
Whytes Gully Operational Targets Key Milestones (cont): Item Target Dates • Sales contract for BioOil with refinery or chemical plant Q3 FY2003 • Issue of DA and full EPA licence Q4 FY2003 • Stable operation at 200 tonnes/day Q4 FY2003 • Commencement of commercial operation Q1 FY2004 • Begin upgrade
Slide 62: Commercial Parameters
62 Boerne Commercial Parameters
Slide 63: Contents
Commercial Parameters Contents – Capital Costs – Revenues – Operating Costs – Project Returns 63
Slide 64: Capital Costs
Commercial Parameters Capital Costs – The expected capital costs for a SWERF® plant have changed due to a number of factors which will increase costs: • Passage of time; • Increasing equipment list for the plant. This includes: – Char Gasifier – BioOil systems – Sulphur and Arsenic removal processes
Slide 65: Capital Costs
Commercial Parameters Capital Costs – Additional operating experience and the revised lower temperature operating parameters have resulted in areas where reductions in capital costs are expected. – These include: • Primary Gasifier coils now operate at significantly lower temperatures resulting in s
Slide 66: Capital Costs
Commercial Parameters Capital Costs – Capital costs will also be less for the power generation component of future SWERF® plants when configured in either BioOil Export Mode. – A nominal 150,000 tpa plant configured in Power Generation Mode requires 12 generator sets. – The similar plant configured
Slide 67: Contents
Commercial Parameters Contents – Capital Costs – Revenues – Operating Costs – Project Returns 67
Slide 68: Revenues
Commercial Parameters Revenues – The forecast revenues for a SWERF® plant have improved due to a number of factors: • pressure on waste disposal costs for land filling due to legislative changes in key markets combined with better market knowledge; • higher electricity prices for SWERF® electricity;
Slide 69: Revenues: Waste Disposal Costs
Commercial Parameters Revenues – Waste disposal costs: • In metropolitan Sydney disposal costs for MSW are now as high as $A 90.00 per tonne. • In the United Kingdom disposal cost expectations for 2005 are now £50.00 per tonne. • In Ireland the introduction of a land filling tax of €15.00 per tonne.
Slide 70: Revenues: Electricity Prices
Commercial Parameters Revenues – Higher prices for SWERF® electricity: • expected revenues now $A 65.00 / MWh in Australia due to MRET. • in the United Kingdom average prices greater than £55.00 / MWh are now anticipated. 70
Slide 71: Revenues: BioOil Sales Potential
Commercial Parameters Revenues BioOil sales revenue potential: • The energy value of BioOil with a crude oil price of $US 26.00 / bbl is about $A 390.00 per tonne. • The potential additional value in Australia for an excise free product is about $A 500 per tonne. • The world market price for the typ
Slide 72: Contents
Commercial Parameters Contents – Capital Costs – Revenues – Operating Costs – Project Returns 72
Slide 73: Operating Costs
Commercial Parameters Operating Costs – A number of factors are exerting upward pressure on operating costs: • Increased complexity of plant requiring higher skill levels of operating staff at higher rates of pay. • Higher than anticipated rates of pay for overseas projects (as per LFG experience).
Slide 74: Operating Costs
Commercial Parameters Operating Costs – A number of factors are exerting downward pressure on operating costs: • Reduced costs for gasifier maintenance due to lower operating temperatures. • Reduced engine maintenance costs (less engines) in BioOil and Chemical Export plants. • Increased tonnages re
Slide 75: Contents
Commercial Parameters Contents – Capital Costs – Revenues – Operating Costs – Project Returns 75
Slide 76: Project Returns
Commercial Parameters Project Returns – The key commercial parameters for SWERF® projects were released to markets in September 2001 with the 2000/01 results release. – The relevant data released was: • Capex - $A 2,600 / kWe - $A 275 / tonne • Revenues - $A 132 /tonne • Opex - $A 43 /tonne – This d
Slide 77: Project Returns
Commercial Parameters Project Returns – A simple discounted cash flow model using this data provides robust returns to equity at a level which has encouraged the Company to continue the investment in SWERF®. – Updating a DCF model with the inputs revised to reflect the changes in assumptions as desc
Slide 78: Marketing Status
Marketing Status 78
Slide 79: Contents
Marketing Status Contents – Overview – Australia – United Kingdom – United States 79
Slide 80: Marketing Status: Overview
Marketing Status Overview – Customer interest in the SWERF® product continues to grow even as delays have occurred in the performance proving of the Whytes Gully facility – Genuine competitors are few and market intelligence shows that SWERF® is highly competitive in all markets by a substantial mar
Slide 81: Marketing Status: Australia
Marketing Status Australia – The Sydney market remains a major focus, supported by costly waste management alternatives and governments’ demonstrated desire to move to better environmental options – Regional NSW also continues to warrant ongoing attention as waste volumes may be agglomerated to supp
Slide 82: Marketing Status: Australia
Marketing Status Australia – The Queensland and Victorian markets suffer from no clear government policy which encourage the emergence of technologies which could replace the landfill option. 82
Slide 83: Marketing Status: United Kingdom/Europe (Derby)
Marketing Status United Kingdom/Europe – Derby Stage 1 - Status • Contract in place for 50,000 tpa (potential for >200,000 tpa) • Planning consent received for 220,000 tpa, other permit work progressing • Derby CC continues to support the Stage 1 project 83
Slide 84: Marketing Status: United Kingdom/Europe (Kent)
Marketing Status United Kingdom/Europe – Kent, UK - Status • Co-tender with Brett Waste Management, an established local waste company, successful for 100,000 tpa contract (potential for 165,000 tpa) • Contract negotiations progressing (had been held up - now resolved) • Planning application and EIA
Slide 85: Marketing Status: United States (Southwest Florida)
Marketing Status United States – Southwest Florida - Status • Request for Proposal (RFP) submitted in April for 150,000 tpa (future potential for 250,000 tpa) • Excellent opportunity for SWERF® as incineration is ineligible for RFP response • County landfill due for closure 2004 • Brightstar not cho
Slide 86: Marketing Status: United States (Southern California)
Marketing Status United States – Southern California • Emerging as a source of good project opportunities • Incineration not seen as an acceptable option • Partial combustion technologies which claim to offer advantages over incineration also considered less than acceptable by a number of communitie
Slide 87: The End
The End 87