Meridian Energy Limited · NZX:MEL
Meridian Energy — H1 FY2010 Earnings Presentation
28 slides from Meridian Energy's earnings presentation, Feb 24, 2010
Slide 1: Meridian Energy Limited 2010 Interim Results
Meridian Energy Limited 2010 Interim Results 6 months to 31 December 2009 24 February 2010
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
Slide 3: Agenda
Agenda » Results Highlights » Group Financials » Operational Review » Strategic & Financial Outlook 2010 Interim Results 6 months to 31 December 2009 3 24 February 2010
Slide 4: Results Highlights
Results Highlights Dec 09 Dec 08 – % Change Revenue $925.5m (17)% EBITDAF $297.4m 24% NPAT $142.5m 795% Underlying NPAT $118.7m 40% EBITDAF per MWh of Generation $43.4 1% Dividends Paid $263.9m » Total electricity generation 6,854 GWh, an increase of 22% on last year. » 143 MW of new wind b
Slide 5: Group Financials: Financial Performance
GROUP FINANCIALS Financial Performance $M Dec 09 Dec 08 % Change Operating Revenue 925.5 1,112.6 (17)% Operating Costs (628.1) (872.6) 28% EBITDAF 297.4 240.0 24% Unrealised Gains/(Losses) on Electricity Derivatives 23.4 (79.8) 129% Depreciation and Amortisation (87.3) (78.9) 11% Impairments (1.3) -
Slide 6: Group Financials: EBITDAF
GROUP FINANCIALS EBITDAF EBITDAF ($m ) $600 $500 512.4 476.4 $400 373.9 $300 $200 297.4 245.7 254.4 240.0 $100 $0 06/07 07/08 08/09 09/10 Interim Result Annual result • $297m was in-line with target and expectations for the six months to 31 December 2009 – 24% improvement from December 2008. • Resul
Slide 7: Group Financials: Revenue
GROUP FINANCIALS REVENUE Revenue ($m ) $1,200 $1,000 504.7 $800 490.5 $600 $400 601.7 $200 422.7 $0 Dec 08 Dec 09 Wholesale Retail Other • Retail Revenues - 3% lower than December 2008 as sales volumes marginally declined. • Generation Revenues - while generation volumes increased by 1,242 GWh, whol
Slide 8: Group Financials: Operating Expenditure
GROUP FINANCIALS OPERATING EXPENDITURE Operating Expenses ($m ) $1,000 $800 105.4 201.2 $600 124.7 $400 213.8 566.1 $200 289.6 $0 Dec 08 Dec 09 Energy Purchases Transmission & Distribution Other Operating Expenses • Energy related operating expenses declined from Dec 08 by 49% – as average spot pric
Slide 9: Group Financials: Underlying Profit After Tax
GROUP FINANCIALS UNDERLYING PROFIT AFTER TAX Underlying Profit after Tax ($m ) $250 $200 207.7 195.0 $150 104.5 $100 110.9 118.7 $50 99.9 84.6 $0 06/07 07/08 08/09 09/10 Interim Result Annual Result • NPAT after adjustments for one-off items and unrealised movements on financial instruments was $118
Slide 10: Underlying Profit After Tax reconciliation
GROUP FINANCIALS UNDERLYING PROFIT AFTER TAX $M Dec 09 Dec 08 % change Reported Net Profit/(Loss) After Tax 142.5 (20.5) Adjustments: Unrealised (Gain)/Losses on NZAS & Aluminum – CfD’s (32.5) 85.2 Unrealised (Gain)/Losses on Financial Instruments Other (0.4) 65.7 Net (Gain)/Losses on Sale of Proper
Slide 11: Key Financial Ratios
KEY FINANCIAL RATIOS Jun 10 Dec 09 Dec 08 Jun 09 Target Equity to Total Assets 54.2% 57.7% 59.7% 59.7% Return on Average Equity 5.6% 6.8%* (1.0)%* 2.1% Underlying Return on Average Equity (excl. Revaluation) 20.1% 16.6%* 13.2%* 14.1% Net Debt / (Net Debt plus Equity) 27.4% 23.8% 20.6% 20.9% EBITDAF
Slide 12: Capital Expenditure
CAPITAL EXPENDITURE Capital Expenditure 600 500 400 $m 300 200 100 0 06/07 07/08 08/09 09/10 Wind Hydro Solar Other Asset refurbishment Projected • Completed West Wind, commenced Te Uku wind farm and CalRENEW-1 solar farm in the USA. • Planned commencement of Australian investments. 2010 Interim Res
Slide 13: Funding
FUNDING Debt Maturity Profile ($m ) • S&P BBB+ credit rating re-confirmed. $600 • Debt increased from $1,252m as at 30 June $500 $400 2009 to $1,356m as at 31 December 2009. $300 • Cash and undrawn debt facilities of $445m. $200 338 390 272 $100 147 • Secured an additional $100m bank facility $0 70
Slide 14: Hydrology
HYDROLOGY Waitaki Storage - Lake Tekapo and Lake Pukaki 3000 Mean 1992 2000 2007 2008 2009 2500 2000 Storage (GWh) 1500 1000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec • Financial year began with storage 568GWh (31%) above average, the first quarter inflows were 120% of average, the secon
Slide 15: Pricing
PRICING Average Spot Price in 2009 $120 North Island South Island Price Separation Price Separation minimised over $100 HVDC pole outage $80 $/MWh $60 $40 $20 $- Nov Jan Jun Jul Mar Apr Feb Aug Sep Oct May Dec • Transmission constraints continue to create periods of price separation between North an
Slide 16: Net Contract Position
NET CONTRACT POSITION Net Position (GWh) 500 500 400 400 300 300 200 200 $MWh GWh 100 100 0 - -100 -100 -200 -200 -300 -300 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2008 net position 2009 net position 2008 avg purchase price 2009 avg purchase price • Careful management of the electricity port
Slide 17: Wholesale Performance
WHOLESALE PERFORMANCE $M Dec 09 Dec 08 % change Wholesale Revenues 422.7 601.7 (29.8)% Wholesale Electricity Purchases (106.2) (219.3) 51.6% Transmission, Distribution and Levies (46.0) (45.5) (1.1)% Employee and Other Costs (35.2) (27.8) (26.6)% Total Operating Expenses (187.4) (292.6) 36.0% Wholes
Slide 18: Wholesale
WHOLESALE • The commissioning of West Wind provided an additional 265GWh, doubling wind production from 2008. Combined with improved hydrology, the increased demand from Tiwai Point aluminium smelter, and additional HVDC capacity resulted in generation output 22% above last year. • Active management
Slide 19: Retail - Performance
RETAIL - PERFORMANCE $M Dec 09 Dec 08 % change Retail Revenues 490.5 504.7 (2.8)% Retail Electricity Purchases (174.9) (342.2) 48.9% Transmission, Distribution and Levies (166.4) (155.7) (6.8)% Employee and Other Costs (27.6) (32.2) 14.6% Total Operating Expenses (368.9) (530.1) 30.4% Retail Segment
Slide 20: Retail ICPs
RETAIL Custom er Churn - ICP sw itches (Source: Electricty • Customer numbers declined marginally Com m ission) (0.8%) from December 2008, during a 30,000 period of intense competition and customer 25,000 churn. 20,000 • As a result electricity sales reduced by ICPs 15,000 2.3%. 10,000 • Residential
Slide 21: Renewable Development
RENEWABLE DEVELOPMENT Development Project Plant Location Project Stage Capacity MW Ross Island 1 Antarctica Commissioning Te Uku 64 North Island Under Construction Central Wind 100 - 120 North Island Environment Court Decision Pending (conditional consent granted Jan 2010) Mill Creek 67 North Island
Slide 22: Renewable Development: West Wind, Ross Island
RENEWABLE DEVELOPMENT West Wind (Wellington) • Commissioned and transferred to operations October 2009. • Contributed 252 GWh of generation in six months to 31 December 2009. • Exceeding design capacity expectations – achieving 48.7%. • Played a significant role in security of supply when a fire at
Slide 23: Renewable Development: CalRENEW-1, Te Uku
RENEWABLE DEVELOPMENT CalRENEW-1 (USA) • Meridian’s 1st solar photovoltaic farm neared completion. • 5 MW plant capacity. • Located near the city of Mendota, California and will be the first solar photovoltaic farm to be connected to the Pacific Gas and Electric network. Te Uku (Waikato) • Meridian’
Slide 24: Investments
INVESTMENTS • Powershop – customers increased to 7,100, offering a range of electricity products. Received customer satisfaction rating of 92% from Consumer NZ. • Whisper Tech – commenced commercial production of Stirling based micro combined heating & power system in Spain. • Damwatch – with a glob
Slide 25: People & Safety
PEOPLE & SAFETY • Reaffirmed commitment to health and safety being our top priority – Addressing unacceptable recent performance which is reflected in improved statistics; and – Increasing Executive visibility and individual accountability. • Determined to reshape the company, organisationally and c
Slide 26: Fit for Purpose
FIT FOR PURPOSE • In 2009 Meridian undertook an internal review called “Fit for Purpose”, focused on the effectiveness of our way of doing business in order to improve company performance. • Implementation of recommendations of this review is progressing with: – Completion of corporate restructure,
Slide 27: Strategic Focus
STRATEGIC FOCUS • Meridian’s renewable led strategy remains sound: – Electricity demand growth is expected to recover as global economies rebound. – Oil and gas prices are projected to increase in the long run, which in turn raises the cost of new thermal generation projects and creates more head ro
Slide 28: Outlook
OUTLOOK • Financial performance is in line with business plan targets for the first six months. The high level of retail competition will continue to challenge us over the rest of the year. However, we anticipate that underlying profit for the full year will exceed last year under most hydrology con