Vector Limited · NZX:VCT
Vector — FY2016 Earnings Presentation
32 slides from Vector's earnings presentation, 2016
Slide 1: Financial & Operational Results, Full Year Ended 30 June 2016
FINANCIAL & OPERATIONAL RESULTS FULL YEAR ENDED 30 JUNE 2016 Vector
Slide 2: Disclaimer
DISCLAIMER This presentation contains forward-looking statements. Forward-looking statements often include words such as "anticipates", "estimates", "expects", "intends", "plans", "believes" and similar words in connection with discussions of future operating or financial performance. The forward-lo
Slide 3: Michael Stiassny, Chairman
MICHAEL STIASSNY CHAIRMAN
Slide 4: Agenda
AGENDA * Dividend * FY2016 Highlights * Financial Overview * Outlook ° Q&A * Appendices Vector \/
Slide 5: Reshaping our portfolio towards growth
RESHAPING OUR PORTFOLIO TOWARDS GROWTH 10 consecutive years of dividend growth * Vector Gas sold for $952.5m* (cents per share) * Reinvesting proceeds for growth - Auckland networks - Smart metering - New energy technologies * Full year dividend 15.75 cents - Up 0.25 cents per share on prior year FY
Slide 6: Simon Mackenzie, Group Chief Executive
SIMON MACKENZIE GROUP CHIEF EXECUTIVE
Slide 7: Creating a new energy future via strategic pillars
CREATING A NEW ENERGY FUTURE VIA 5 STRATEGIC PILLARS eeopLe 2 SUSTAINABLE CUSTOMER Cu TURE GROWTH FOCUS OPERATIONAL PARTNERSHIPS (Q) Cee Lente ’ Vector \/
Slide 8: Culture that prioritises safety, innovation & diversity
CREATING A NEW ENERGY FUTURE VIA A CULTURE (8) Safety, People THAT PRIORITISES SAFETY, INNOVATION & DIVERSITY * Culture Vector welcomes Health & Safety at Work Act 2015 Focus on workplace safety rewarded with 43% reduction in TRIFR since FY13 Ceased most live-line work as part of taking all practica
Slide 9: Proceeds of Vector Gas sale to be recycled into higher growth opportunities
PROCEEDS OF VECTOR GAS SALE TO BE RECYCLED INTO HIGHER GROWTH OPPORTUNITIES * Vector Gas sold for $952.5m * Proceeds applied to debt before recycling for growth - Auckland networks - Smart metering - New energy technologies ¢ Auckland adding equivalent population of Hamilton every 5 years ¢ Vector’s
Slide 10: New technologies will deliver customer choice
Focus NEW TECHNOLOGIES WILL DELIVER mccame CUSTOMER CHOICE GOING THE DISTANCE: THE RANGE OF AN AVERAGE EV RELYING ON VECTOR'S CHARGING NETWORK * Facilitating EV uptake 16 Vector EV chargers across Auckland 4,469 Rapid charging sessions 371 Solar Battery Systems Installed * Advocating for Auckland co
Slide 11: Building relationships with leading innovators
BUILDING RELATIONSHIPS WITH LEADING INNOVATORS a Membership of Hawaiian Energy Excelerator gives access to latest energy innovation Installed 1 MW / 2 MWh Tesla Powerpack in Glen Innes Tesla Powerwall battery/solar installations underway for Future of Energy Programme Clustered Powerwall deployment
Slide 12: Network regulation should incentivise customer choice & innovation
NETWORK REGULATION SHOULD INCENTIVISE CUSTOMER CHOICE & INNOVATION 12 Continue to strive for regulation/energy policy that: - Delivers customers choice and value - Evolves with technological change - Promotes and rewards innovation - Allows companies to earn a fair return Appropriate policy settings
Slide 13: Dan Molloy, Chief Financial Officer
DAN MOLLOY CHIEF FINANCIAL OFFICER vectorW
Slide 14: Growth in adjusted EBITDA & net profit
GROWTH IN ADJUSTED EBITDA & NET PROFIT CONTINUING OPERATIONS ONLY , CONTINUING & DISCONTINUED OPERATIONS <—_ (excludes Vector Gas) td (includes Vector Gas through to sale on 20 April), =§ ———> 1153.4 1144.6 mFYI5 mFYI6 4519 473.0 369.2 322.6 352.1 287.5 274.4 149.4 154.4 156.9 Revenue Adjusted EBITD
Slide 15: Earnings growth in networks & technology, offset by gas trading
EARNINGS GROWTH IN NETWORKS & TECHNOLOGY, OFFSET BY GAS TRADING 2016 ADJUSTED EBITDA MOVEMENT ($M) Continuing Operations only (excludes Vector Gas) +8.0 +0.6 +18.9 FY2015 Regulated Networks Gas Trading Technology Corporate As a result The Auckland gas 6 the Auckland FY2016 Vector
Slide 16: Higher earnings, lower funding costs & gain on sale
HIGHER EARNINGS, LOWER FUNDING COSTS & GAIN ON SALE OFFSET BY IMPAIRMENT OF GAS TRADING MOVEMENT IN NET PROFIT AFTER TAX ($M) +1641 FY2015 16 and depreciation. Includes earnings from associates ion and depreciation ~10 months contribution -61.4 from VGL in FY16 vs full year in FY15 10.0 +8.6 +10. [|
Slide 17: Re-investment into Auckland & metering growth
RE-INVESTMENT INTO AUCKLAND & METERING GROWTH GROSS CAPITAL EXPENDITURE ($m) GROSS CAPEX BY SEGMENT FY2016 Continuing Operations Only Continuing Operations Only ™ Regulated Networks 29% Gas Trading Technology Corporate FY2015 FY2016 ™ Net capex = Capital contributions * Gross capex up 12.2% to $322.
Slide 18: Sale of Vector Gas further strengthens balance sheet
SALE OF VECTOR GAS FURTHER STRENGTHENS BALANCE SHEET NET ECONOMIC DEBT & GEARING ($m) GROUP DEBT MATURITY ($m) 52.5% 52.9% 53.6% 53.4% . a a Last of pre-GFC debt matures 1 i 6 months after next electricity e790) reset 286) 150 « Jun 4 Dec 14 Jun 15 Dec 15 Jun 16 FYIT FYI8 FYI9 FY20 FY21 FY22 FY23 ci
Slide 19: Auckland continues to deliver growth - Regulated Networks
Regulated AUCKLAND CONTINUES TO DELIVER GROWTH Networks Segment ADJUSTED EBITDA MOVEMENT ($M) * New connections remain elevated, up 11% 132 $3.4 — — 368.6 * Electricity volumes down 0.5% due to warmer +83 Le! “2.6 Q4 & continuing decline in usage per ICP 46.6 | | i" aor Mi * Auckland regulated asset
Slide 20: Technology result driven by smart meter rollout
TECHNOLOGY RESULT DRIVEN BY SMART METER ROLLOUT Etrelosy Segment ADJUSTED EBITDA MOVEMENT ($M) ° Vector’'s NZ smart metering rollout largely 156 complete in FY17 ——— | +0.5 113.5 105.5 : "5.6 — — Record 180k meters installed in FY16 — Targeting 140k-160k meters in NZ in FY17 * Focus shifting to Aust
Slide 21: $64 million gas trading write down
$64 MILLION GAS TRADING WRITE DOWN 228 Trading Segment ADJUSTED EBITDA MOVEMENT ($M) 46.9 * Goodwill associated with this segment dates | +10 — back to the acquisition of NGC in 2005 43 || = 40.6 58 * Impairment reflects outlook for natural gas operations, and more specifically Kapuni — Output from
Slide 22: Simon Mackenzie, Group Chief Executive
SIMON MACKENZIE GROUP CHIEF EXECUTIVE
Slide 23: Outlook
OUTLOOK 23 Network earnings stability through to 2020 - Maximum allowable electricity revenues set through to the next electricity reset in April 2020 - Sale of Vector Gas significantly reduces our exposure to a negative gas reset in 2017 - Within 6 months of the 2020 reset, all debt will have been
Slide 24: Q&A - Any questions?
Q&A ANY QUESTIONS? vector W
Slide 25: Appendices
APPENDICES
Slide 26: Year adjusted EBITDA performance by segment
5 YEAR ADJUSTED EBITDA PERFORMANCE BY SEGMENT Adjusted EBITDA (Continuing Operations Only) Smillion For the year ended 30 June 4781 475.8 473.0 446.5 4519 FY2012 FY2013 FY2014 FY2015 FY2016 mmm Regulated Networks 397.1 391.9 3511 349.7 368.5 mam Gas Trading 65.8 60.4 50.9 46.9 40.6 mmm Technology 65
Slide 27: Group profit statement
GROUP PROFIT STATEMENT YEAR ENDED 30 JUNE ($M) 27 INCOME STATEMENT ee ee Change Revenue (excluding capital contributions) 1,094.8 N06 14 Operating expenditure (621.8) (658.7) +5.6 Adjusted EBITDA 473.0 451.9 +47 Capital Contributions 498 42.8 16.4 Depreciation and amortisation (194.6) (179.0) -87 Ne
Slide 28: Group cash flow
GROUP CASH FLOW ! YEAR ENDED 30 JUNE ($M) CASH FLOW eae ae Operating cash flow 352.1 369.2 Replacement capex (144.4) (146.4) Dividends paid (159.2) (155.4) Cash available for growth and debt repayment 48.5 674 Growth capex (195.7) (165.4) Acquisitions 0.0 (19.9) Proceeds from sale of discontinued op
Slide 29: Segment results
SEGMENT RESULTS YEAR ENDED 30 JUNE ($M) 2016 2015 | Change % 2016 2015 | Change % 2016 2015 | Change % 2016 2015 | Change % caer contrluens 6773 683.5 -0.9 179.1 1557 +15.0 2771 314.2 18 21 04 +525.0 Operating expenditure (3088) (333.8) +75 (775) (50.2) 54.4] (2365) | (267.2) 15 (517) (50.6) -2.2 pe
Slide 30: GAAP to non-GAAP reconciliation
GAAP TO NON-GAAP RECONCILIATION Vector's standard profit measure prepared under New Zealand GAAP is net profit. Vector has used non-GAAP profit measures when discussing financial performance in this document. The directors and management believe that these measures provide useful information as they
Slide 31: Segment adjusted EBITDA
SEGMENT ADJUSTED EBITDA 3 SEGMENT ADJUSTED EBITDA ($m) Year ended 30 June Technology Gas Trading Regulated Networks Continuing Regulated Networks Discontinued Reported segment EBITDA 14.4 40.6 417.4 79.1 less capital contributions (0.9) 0.0 (48.9) (3.8) Segment adjusted EBITDA| 13.5 40.6 368.5 75.3
Slide 32: Vector
Vector 7