Agl Energy Limited · ASX:AGL
Agl Energy — Investor Day (November 2016)
50 slides from Agl Energy's investor day presentation, Nov 14, 2016
Slide 1: AGL Investor Day ASX & Media Release
AGL Energy Limited Locked Bag 1837 Level 24, 200 George St T: +61 2 9921 2999 ABN: 74 115 061 375 St Leonards NSW 2065 Sydney, NSW, 2000 F: +61 2 9921 2552 For personal use only AUSTRALIA AUSTRALIA www.agl.com.au ASX & Media Release AGL Investor Day 14 November 2016 AGL Energy Limited (AGL) will tod
Slide 2: Disclaimer and important information
14/11/2016 For personal use only AGL Investor Day 2016 Disclaimer and important information The information in this presentation: - 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
Slide 3: Agenda
14/11/2016 Agenda For personal use only Market & Operations Update 1230 Richard Wrightson, General Manager, Wholesale Markets Wholesale Electricity: Managing Volatility Doug Jackson, Executive General Manager, Group Operations Group Operations: Driving Value Strategy & Growth Update 1345 Andy Vesey,
Slide 4: Wholesale Electricity: Managing Volatility
14/11/2016 For personal use only Wholesale Electricity: Managing Volatility Richard Wrightson General Manager, Wholesale Markets Rising wholesale electricity market Six-month rolling average spot price ($/MWh) Forward curve prices for FY18 flat swap ($/MWh) 70 70 65 65 60 60 55 55 50 50 Macquarie 45
Slide 5: Renewable build tracking thermal withdrawal
14/11/2016 Renewable build tracking thermal withdrawal For personal use only NEM renewable generation by state (GWh) NEM retirement/mothball of thermal generation (GWh) 30,000 30,000 25,000 25,000 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,000 0 0 2001 2003 2005 2007 2009 2011 2013 2015 2017
Slide 6: Demand outlook appears to be improving
14/11/2016 Demand outlook appears to be improving For personal use only 250,000 Electricity demand (GWh) 200,000 150,000 100,000 50,000 0 2010 2011 2012 2013 2014 2015 *2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actual Forecast NSW VIC QLD SA Source: AEMO * Data is for partially complete year
Slide 7: AGL coal supply position remains well-hedged
14/11/2016 AGL coal supply position remains well-hedged For personal use only Performance reflects capacity to flex incremental generation to meet market demand Black coal position (Mt) 14 12 Additional generation supported by stockpile drawdown 10 8 Stockpile drawdown 6 Contracted Coal Committed lo
Slide 8: SA pricing driven by thermal withdrawals
14/11/2016 SA pricing driven by thermal withdrawals For personal use only South Australia electricity forward curve flat swap ($/MWh) May 16: Jun 16: AGL 110 Closure of defers Torrens A 2012: Northern only operates Northern and mothballing Oct-Mar. Playford not Playford 100 intended to operate at al
Slide 9: Group Operations: Driving Value
14/11/2016 For personal use only Wholesale Group Electricity: Operations: Managing Driving Value Volatility 15 Group Operations: Driving Value Doug Jackson Executive General Manager, Group Operations 8
Slide 10: Focusing on improving our safety performance
14/11/2016 Focusing on improving our safety performance For personal use only Total Injury Frequency Rate (TIFR) per million man hours 12 Macquarie contractors 11.0 10 included from FY16 8 6.2 6 4.7 4 4.3 2.7 2 1.9 0 JAN 2016 FEB 2016 MAR 2016 APR 2016 MAY 2016 JUL 2014 OCT 2014 NOV 2014 DEC 2014 JA
Slide 11: Key operating statistics illustrate performance
14/11/2016 Key operating statistics illustrate performance For personal use only Lost generation due to mills (GWh) Duration of Liddell forced outages (days) 300 6.2 $45M gross 5.7 250 AGL margin acquisition improvement 4.8 in FY16 200 150 100 50 0 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Ja
Slide 12: Optimising an ageing plant
14/11/2016 Optimising an ageing plant For personal use only Finding the sweet spot at Liddell Year-to-date commercial availability comparison 100% 80% 60% Incremental generation can be priced to reflect associated operating impact 40% 20% 0% Time FY17 commercial availability FY16 commercial availabi
Slide 13: AGL Torrens outlook in a volatile market
14/11/2016 AGL Torrens outlook in For personal use only a volatile market > Torrens A: operation reflects South Australian markets; annual assessment of ongoing operation > Torrens B: fuel optionality > Development permit provides flexibility to construct open-cycle gas turbine up to 800 MW Group Op
Slide 14: AGL Investor Day 2016
14/11/2016 For personal use only AGL Investor Day 2016 Growth in Power Shift: Agile Capital: New Energy: Transition: AGL a Growth Building the our Strategic Scenario Story Innovation Imperative Planning Accelerator 26 13
Slide 15: Growth in Transition: Our Strategic Imperative
14/11/2016 For personal use only Growth in Transition: Our Strategic Imperative Andy Vesey Managing Director & Chief Executive Officer Growth in Power Shift: Agile Capital: New Energy: Transition: AGL a Growth Building the our Strategic Scenario Story Innovation Imperative Planning Accelerator 28 14
Slide 16: Power Shift: AGL Scenario Planning
14/11/2016 For personal use only Power Shift: AGL Scenario Planning Alistair Preston Executive General Manager, Organisational Transformation Scenario planning applies a rigorous process to strategy Identify key trends Order uncertainty territories Define drivers and outcomes Test investments Monito
Slide 17: Mapping trends and uncertainty territories
14/11/2016 For personal use only Internal and external experts } mapped the trends shaping the Australian energy market 31 Distributed energy resources penetration rate Consumer behaviour We ordered the Competitive intensity uncertainty Network role C02 profile } territories, considering their influ
Slide 18: Drivers and outcomes were identified
14/11/2016 Drivers and outcomes were identified For personal use only High (80%) Driver matrix for Ability to control } distributed energy resources penetration suggests emergence of disruptive business models Low (20%) High (20%) Low (80%) 33 Costs We developed scenarios to illustrate four possible
Slide 19: Scenario narratives and anticipated values in 2025
14/11/2016 For personal use only High uptake of smart Government has distributed energy proactively engaged in an resources (DER) orderly transition from stimulates new business thermal to large-scale models. renewable plant… This results in increased Consumers have higher competition from expectati
Slide 20: Anticipated values in 2025
14/11/2016 For personal use only Anticipated values in 2025 Uncertainty Monitored Last data territories by triggers (Sep 16) #1 #2 #3 #4 Distributed Global lithium 97 GWh 500 GWh 400 GWh 200 GWh 125 GWh energy ion battery Today’s } penetration manufacturi ng capacity trends (GWh) support scenario #1
Slide 21: Acid test results
14/11/2016 Weighted Variance Strategy fit Optionality For personal use only robustness No-regrets business Digital decision; high robustness across all Transformation 81% 4.69 Yes 11 scenarios; high Program optionality provided by Agile framework The results of the Acid Test allow us to compare Risk
Slide 22: Power Shift: AGL Scenario Planning
14/11/2016 For personal use only Power Shift: AGL Scenario Planning Alistair Preston Executive General Manager, Organisational Transformation Growth in Power Shift: Agile Capital: New Energy: Transition: AGL a Growth Building the our Strategic Scenario Story Innovation Imperative Planning Accelerato
Slide 23: Agile Capital: a Growth Story
14/11/2016 For personal use only Agile Capital: a Growth Story Brett Redman Chief Financial Officer Recent actions underpin strong performance Total shareholder return 50% +46% 40% 30% 20% +14% 10% 0% -10% Nov 13 May 14 Nov 14 May 15 Nov 15 May 16 Nov 16 AGL S&P/ASX200 Accumulation Index Source: Ori
Slide 24: We are targeting increased returns
14/11/2016 We are targeting increased returns For personal use only Return on Equity 8.3% 8.0% 7.5% 7.5% 7.2% Targeting improvements in FY17 and onwards FY12 FY13 FY14 FY15 FY16 45 Unchanged outlook reflects strategy delivery FY17 Underlying Profit expected to be $720-800M 1 Primary drivers expected
Slide 25: Asset sales reflect discipline and focus
14/11/2016 Asset sales reflect For personal use only discipline and focus $948M of $1B divestment objective for FY17 already achieved Macarthur Wind Farm and Diamantina Power Station divestments completed in FY16 Sales to Powering Australian Renewables Fund (PARF) > Nyngan and Broken Hill solar proj
Slide 26: The way we use capital is evolving
14/11/2016 The way we use capital is evolving For personal use only 2006-2015 2015-2016 2017 onwards “Building the Base” “Optimisation” “Agile Capital” Asset acquisition and Asset sales, efficiency Targeted investment consolidation of programs and capital where management competitive advantage manag
Slide 27: A strong range of growth opportunities
14/11/2016 A strong range of growth opportunities Acid test For personal use only Robustness Strategy fit Optionality More Reflects AGL’s commitment to 20% equity stake in the Fund developed PARF equity investments $200M from FY16 onwards, starting with NSW solar projects today ~$300M investment thr
Slide 28: Growth Project Break-Out Presentations
14/11/2016 For personal use only Agile Capital: a Growth Story Brett Redman Chief Financial Officer Growth Project Break-Out Presentations Stephen Mikkelsen, Executive General Manager, Energy Markets Phaedra Deckart Maree Mamo Head of Wholesale Gas General Manager, Customer, Capability & Insights Sc
Slide 29: Western Australia: Market Entry
14/11/2016 For personal use only Western Australia: Market Entry Scott Thomas General Manager, Projects WA is attractive in size and accessibility Population Contestable gas market Gas market competitors 2.6M people ~700,000 gas sites ~90% Alinta share 1.0M households ~10,000 business sites 2013 Kle
Slide 30: Changing dynamics to drive customer value focus
14/11/2016 Changing dynamics to drive customer value focus For personal use only Gas market primed for Wholesale market is Increased focus on Electricity market competition responsive value and cost contestable in future Limited competition in gas AGL has investigated gas Mining has led economy, ~1M
Slide 31: Strategic Options in East Coast Wholesale Gas
14/11/2016 For personal use only Strategic Options in East Coast Wholesale Gas Phaedra Deckart Head of Wholesale Gas LNG demand continues to lead market transition By 2018, 70% of gas demand will be Queensland LNG 6000 East Coast gas demand (TJ/d) 5000 4000 3000 2000 1000 0 2015 2016 2017 2018 2019
Slide 32: Market moving to shorter-term contracts
14/11/2016 Market moving to shorter-term contracts For personal use only Re-contracting needed to meet future demand 3000 2500 East Coast gas (TJ/d) 2000 1500 1000 500 0 2015 2020 2025 2030 2035 Contracted domestic supply Contracted gas to LNG Domestic demand (base case) Source: AGL, Poten & Partner
Slide 33: Supply tightness to continue
14/11/2016 Supply tightness to continue For personal use only Shortfalls could occur in absence of further development Source: AEMO, Poten & Partners 63 Disruption driving need for market reform > ACCC East Coast Gas Inquiry focus areas: transportation, transparency, liquidity > AGL supports increas
Slide 34: Existing options for security of supply
14/11/2016 Existing options for security of supply For personal use only Three key areas: Strategic options Commentary Status quo foundation supply Continue to negotiate with Cooper Basin and Gippsland Basin for long-term competitive supply Expand domestic supply Binding heads of agreement executed
Slide 35: Digital Transformation Program
14/11/2016 For personal use only Digital Transformation Program Maree Mamo General Manager, Customer, Capability & Insights Simon Moorfield Chief Information Officer Digital Transformation Shift the way Foundational Adoption Future state we work • People • Customer chooses digital • Customer experie
Slide 36: New Energy: Building the Innovation Accelerator
14/11/2016 For personal use only Growth in Power Shift: Agile Capital: New Energy: Transition: AGL a Growth Building the our Strategic Scenario Story Innovation Imperative Planning Accelerator 69 New Energy: Building the Innovation Accelerator Elisabeth Brinton Executive General Manager, New Energy
Slide 37: Applying new technologies to deliver our business definition
14/11/2016 Applying new technologies to deliver our business definition For personal use only Products and solutions Commercial Business definition partnerships Harness insights to enrich the customer’s energy experience Technology investments 71 Develop and prove Transition to Products and new busi
Slide 38: Focus on three value pools
14/11/2016 Focus on three value pools, aligned with scenario planning outcomes For personal use only Deploying Creating energy Inventing the low-carbon orchestration personalised consumer and “grid edge” retailer solutions solutions at scale Data-driven market research and analysis External data Int
Slide 39: World's largest residential PV/battery virtual power plant
14/11/2016 World’s largest For personal use only residential PV/battery virtual power plant $20M demonstration project leverages strategic investment in Sunverge and is supported by Federal Government 1,000 connected customer batteries storing 7MWh of energy (equivalent to 5MW peaker) in South Austr
Slide 40: Energy Impact Partners investment
14/11/2016 Energy Impact Partners For personal use only investment Investment in global Energy Impact Fund Managed by private-equity firm in New York AGL to join EIP Nexus Council alongside Southern Company, National Grid and Xcel Energy Inc Access to leading-edge products, technologies, partnership
Slide 41: Supplementary Information
14/11/2016 For personal use only AGL Investor Day 2016 Supplementary Information 40
Slide 42: History of AGL
14/11/2016 History of AGL 2013 2016 For personal use only AGL invests in demand 1837 2006 Macarthur Wind Farm opens and is the largest response management company Sunverge and Australian Gas Light AGL Energy Limited founded wind farm in the Southern offers customers EV Company is created from merger
Slide 43: AGL operations and key generation capacity
14/11/2016 AGL operations and key generation capacity For personal use only OPERATIONAL OVERVIEW VIC SA QLD NSW Total customer accounts Customer accounts Customer accounts Customer Customer accounts 3.71 million accounts 533,000 gas 132,000 gas accounts 674,000 gas ˗ 2.2 million electricity
Slide 44: Coal supply position
14/11/2016 Coal supply position For personal use only AGL Macquarie AGL Loy Yang Coal sourced from Peabody’s Wilpinjong mine, BHP Billiton’s Mt Coal sourced from AGL Loy Yang mine, largest brown coal mine in Arthur mine and Glencore’s Mangoola mine Australia Significant strategic coal advantag
Slide 45: Largest privately-owned generator in the NEM
14/11/2016 Largest privately-owned generator in the NEM For personal use only 12,000 10,000 Generation capacity (MW) 8,000 6,000 4,000 2,000 0 AGL Origin Energy Snowy Hydro Energy Stanwell CS Hydro Engie Australia Tasmania Source: Australian Energy Regulator 2015/2016 financial and company presentat
Slide 46: Lowest cost thermal generation portfolio
14/11/2016 Lowest cost thermal generation portfolio For personal use only Cost position in the National Electricity Market 160 Short run marginal cost at $9.0/GJ gas price 140 Short run marginal cost at $7.5/GJ gas price 120 Short run marginal cost of $3.9/GJ gas price 100 Short run marginal cost of
Slide 47: Strong customer and generation position
14/11/2016 Strong customer and generation position For personal use only Residential customers by state Generation capacity by state (MW) 164 474,000 1,726 540,000 1,482,000 4,901 3,617 1,169,000 NSW VIC SA QLD NSW VIC SA Other 91 Customer numbers and customer churn Total customer numbers vs. EBIT p
Slide 48: Retail energy markets across the NEM
14/11/2016 Retail energy markets across the NEM For personal use only NSW VIC SA QLD Overall 8 5 8 4 5 7 22 28 31 34 8 13 36 Gas 15 54 20 20 65 23 22 44 25 Electricity 4 5 20 15 4 19 14 24 24 24 6 33 7 31 50 10 7 16 21 36 37 19 18 29 19 5 AGL Origin EnergyAustralia Snowy Hydro Ergon Simply Other Sou
Slide 49: Debt maturity and debt mix post USPP issue
14/11/2016 Debt maturity and debt mix post USPP issue For personal use only Debt maturity profile ($M) Borrowings mix 700 600 500 400 Bond Bank Debt 300 Debt 41% 43% 200 Sub 100 Notes 16% 0 FY24 FY20 FY21 FY26 FY29 FY18 FY22 FY25 FY28 FY30 FY31 FY23 FY27 FY32 FY17 FY19 Drawn Bank Debt Bond Debt Undr
Slide 50: AGL Investor Day 2016
14/11/2016 For personal use only AGL Investor Day 2016 49