Infratil Limited · NZX:IFT
Infratil — Trustpower — FY2018 Earnings Presentation
42 slides from Infratil's earnings presentation, May 14, 2018
Slide 1: Investor Briefing 2018 Year-end Results
Investor Briefing 2018 Year-end Results| 14 May 2018 1. 31 March 2018 Year-end Results Presentation to Investors – 14 May 2018
Slide 2: Contents
Contents FY18 highlights Overview of financial results Operational overview Strategy update and outlook 2. 31 March 2018 Year-end Results Presentation to Investors – 14 May 2018
Slide 3: FY18 Highlights and Financial Review
FY18 Highlights and Financial Review
Slide 4: FY18 Highlights
FY18 Highlights • Net Profit after tax of $129 million – up 38% • EBITDAF (including Australia) of $267 million - up 22% • Retail EBITDAF of $60 million, up 33% • NZ Generation EBITDAF of $196 million, up 16% • Divestment of GSP Energy Australian hydro assets adds value and tightens focus • Completi
Slide 5: EBITDAF bridge full year 2017 - 2018
EBITDAF bridge full year 2017 - 2018 5. 31 March 2018 Year-end Results Presentation to Investors – 14 May 2018
Slide 6: Retail transfer price
Retail transfer price Methodology 1. Establish a monthly base rate based primarily on ASX pricing (1/3 based 3 years ago,1/3 2 years ago, 1/3 1 year ago). 2. Adjust for location factors and load shape relative to pricing peaks (peaking factor) 3. Adjust for the annual volume option premium provided
Slide 7: Netback
Netback Strong retail profitability reflects: • Retention of existing customers through excellent service • Targeting of value adding new customers Note: includes Fixed Price Variable Volume (FPVV) commercial and industrial customers 7. 31 March 2018 Year-end Results Presentation to Investors – 14 M
Slide 8: Debt capital management
Debt capital management Maturity of debt financing Source of debt financing ($M) • FY19 forecast Debt/EBITDAF is circa 2.3 times • Trustpower expects to access debt capital markets during the year to increase debt tenure 8. 31 March 2018 Year-end Results Presentation to Investors – 14 May 2018
Slide 9: First full year of dividends post demerger
First full year of dividends post demerger Dividend declared of 17 cps bringing total dividend for the year to 34 cps 79% of underlying profit 68% of free cash flows 9. 31 March 2018 Year-end Results Presentation to Investors – 14 May 2018
Slide 10: Trustpower adds shareholder value
Trustpower adds shareholder value Share price is starting to reflect underlying Stock Price Movement 35% value • Refocus and renewed momentum since demerger 30% • High dividend yield 25% 22.9% • Modest gearing allowing for future growth 20% • Credible retail growth story 15% 15.3% • Flexible and geo
Slide 11: Generation portfolio performance
Generation portfolio performance
Slide 12: Market view
Market view Supply and demand tightening • Trustpower agrees with other market commentators and participants that the market is approaching a supply/demand balance. • This is particularly true now the fourth pot line at Tiwai is coming on line • The last 12 months demonstrate how changes in short te
Slide 13: Wholesale prices – overall about average but volatile
Wholesale prices – overall about average but volatile • Current storage levels well above average due to strong inflows since 1 February 2018 • The rapid change in storage levels indicates how quickly the situation can change • Highlights the importance of prudent risk management 13. 31 March 2018 Y
Slide 14: Wholesale price and volume risk management
Wholesale price and volume risk management – delivers sustainable earnings Well positioned at the start of Trustpower Controlled Storage winter 2017 200 $400 • Geographically distributed 180 Peter C- original graph from $350 generation James T I think $300 • Strong generation throughout the 160 $250
Slide 15: FY18 Generation volume – drives performance
FY18 Generation volume – drives performance Generation volume 2,000 Generation volume well above 1,500 long run average, however return to average would out GWh 1,000 perform FY14 – FY16 500 0 Total NI (Excl KCE) Total SI KCE 15. 31 March 2018 Year-end Results Presentation to Investors – 14 May 2018
Slide 16: Generation performance focus
Generation performance focus • Emphasis on health & safety, dam/civil safety and maintaining our licence to operate and compliance projects • Sharper focus on enhancement and incremental growth to create earnings uplift • Improving asset management maturity – more predictive and preventative focus f
Slide 17: Bundling energy and telecommunications
Bundling energy and telecommunications
Slide 18: Trustpower the leading multi-utility business
Trustpower the leading multi-utility business Our achievements Over 100,000 customers have more than one product • 2/3rds of all new customers are taking 2 or more products • We continue to see strong telecommunications growth and we are creating a diverse and resilient customer base • We are now re
Slide 19: We are no longer a multi-utility start up
We are no longer a multi-utility start up MATURING CUSTOMER BUNDLED CUSTOMERS BY BASE REGION Less than 1 Year 1-3 Years Bay of Plenty Metro Regional 3-5 Years > 5 Years 22% 21% 32% 28% 11% 46% 40% In the past year We have reached critical mass • Over 3,000 existing energy customers added Telco • 1,2
Slide 20: Creating Value for customers and shareholders
Creating Value for customers and shareholders Metric FY-18 FY-17 Var % Mass Market Electricity Sales GWh) 1,918 1,936 -1% Mass Market Gas Sales (TJ) 1012 1013 0% Comment Total Connections 397,000 388,000 2% • Significant improvement in Retail EBITDAF YoY driven Customers with 2+ services 100,000 90,
Slide 21: Value based offers outperform discounting
Value based offers outperform discounting Value based offers continue to outperform discounting offers : • 44% reduction in sales leakage (customers churning between sale and service provision starting) • 80% reduction in credit issues • 50% reduction in first year churn • 14% increase in average en
Slide 22: Maximising electricity value
Maximising electricity value
Slide 23: Electricity segment – not for the faint hearted
Electricity segment – not for the faint hearted Consumer market highly competitive Electricity only • New Zealand electricity market one of the most competitive in the world • Consumer segment remains highly competitive with consolidation and failures likely • Opportunities remain in emerging energy
Slide 24: Electricity segment – Demonstrates diversity & tenure
Electricity segment – Demonstrates diversity & tenure Legacy Electricity only Consumer Market • Balanced portfolio across Commercial, Industrial, Government and Consumer ELECTRICITY CUSTOMER BASE • Cross sell within the Consumer segment is moving BY REGION customers out of this category • Trustpower
Slide 25: Meeting our customer needs
Meeting our customer needs
Slide 26: Customer service – a strategic capability
Customer service – a strategic capability Trustpower has been focusing on developing customer service as a strategic capability • Proven capability in acquiring and migrating customer bases without any noticeable increase in customer churn » EDNZ complete » KCE underway • One of the most automated u
Slide 27: Focus on efficiency, automation and digital solutions
Focus on efficiency, automation and digital solutions Increase in the numbers of products supplied and associated customer contacts is offset by the migration of customers to non staffed channels, leading to lower staff numbers Staff Productivity 420,000 200 400,000 180 380,000 # of services 160 # o
Slide 28: Automation providing customers with choice
Automation providing customers with choice • 45.7% of all customer contacts are now serviced without human intervention • Chatbot receiving customer satisfaction ratings on par with an agent • Staffed channels are focussed on positively impacting churn through delivering high quality service in the
Slide 29: Continued focus on customer and efficiency
Finance Customer Operations Continued focus on customer and efficiency • We continue to enhance our hybrid service model (a combination of staffed and unstaffed channels) allowing our customers to engage via their channel of choice while at the same time reducing our cost to serve • Trustpower App r
Slide 30: Growth and industry overview
Growth and industry overview
Slide 31: Trustpower's strategy – to create executable options driving shareholder returns
Trustpower’s strategy – to create executable options driving shareholder returns Bundling Energy and Generation Portfolio Maximising Identifying New Telco Performance Electricity Value Markets Strategic Pillars Shareholder Value Driving action based Meeting our Strong, positive Lean, agile, scalable
Slide 32: Industry consolidation
Industry consolidation Trustpower is well positioned to capitalise on emerging market opportunities • The joint KCE takeover offer by Trustpower and the King Country Electric Power Trust (KCEPT) was successful. Trustpower and KCEPT are now working together to achieve synergies, primarily through the
Slide 33: Key regulatory issues
Key regulatory issues Overview Trustpower broadly supports the principles espoused in the recent Productivity Commission report. However for these principles to be effected New Zealand needs a considered policy framework with “joined up thinking” across all sectors. We have growing concerns that pol
Slide 34: In summary
In summary • A strong financial performance in FY18 has established a solid platform for continued growth, particularly in retail. • Trustpower repositioned as a New Zealand focused multi-product platform • Multi-product platform delivering for customers and shareholders • Well positioned in an unce
Slide 35: March 2019 Forecast
March 2019 Forecast Trustpower expects its FY19 EBITDAF to be in the range of $205 million to $225 million • The following assumptions underpin this forecast: • Long run average generation volumes (NZ 1,890 GWh) • NZ Wholesale price averages $77/MWh baseload at Otahuhu and $73/MWh at Benmore • Avera
Slide 36: Thank You
Thank You
Slide 37: Appendix
Appendix
Slide 38: Trustpower key facts
Trustpower key facts • Tauranga based national electricity generator and retailer of energy and telco • History dates back to 1923 as the Tauranga Electric Power Board • Market capitalisation circa $1.8 billon • Key shareholders Infratil (51.0%) and TECT (26.8%) • New Zealand generation capacity (hy
Slide 39: FY18 Overview
FY18 Overview Key Drivers Comments • A very strong result thanks to favourable hydrology and pricing as well as an EBITDAF $266.8 million up 22% (up 14% if costs of the 2017 demerger are excluded) improved retail contribution. Underlying Earnings of $135 million up 17% • NZ generation was well above
Slide 40: Non-GAAP Measures
Non-GAAP Measures • Underlying Earnings is a non GAAP (Generally Accepted Accounting Principles) financial measure. Trustpower believes that this measure is an important additional financial measure to disclose as it excludes movements in the fair value of financial instruments which can be volatile
Slide 41: Generation volumes
Generation volumes FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Long run average MWh MWh MWh MWh MWh MWh MWh MWh MWh MWh MWh MWh MWh MWh Long Term NI Generation 690,401 780,391 546,024 749,931 614,570 779,535 921,240 724,997 566,207 516,092 626,126 758,366 987,184 712,389 Long Te
Slide 42: Disclaimer
Disclaimer While all reasonable care has been taken in the preparation of this presentation, Trustpower Limited and its related entities, directors, officers and employees (collectively "Trustpower") do not accept, and expressly disclaim, any liability whatsoever (including for negligence) for any l