Contact Energy Limited · NZX:CEN
Contact Energy — H1 2005 Earnings Presentation
34 slides from Contact Energy's earnings presentation, May 2005
Slide 1: Contact - Overview & Half Year Results
Contact - Overview & Half Year Results Investor Briefing April/May 2005
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 stat
Slide 3: Highlights for half year
Contact has put in a strong performance over the last six months - in financial, operational and strategic terms Highlights for half year • EBITDA of $240m - up 26%. Core earnings continue to show the benefits of an integrated energy business model – Retail tariff momentum from last year – Higher wh
Slide 4: Overview of financials
Overview of financials contact
Slide 5: Net Surplus Summary
Net surplus growth was also supported by lower financing costs and a reduction in the effective tax rate from 40% to 34% for the six month period Net Surplus Summary Six months Six months Change ended 31 ended 31 2005 vs March 2005 March 2004 2004 % growth $M $M $M Revenue 631.3 567.0 64.3 11% Opera
Slide 6: Net surplus after tax
Contact performed strongly in the last six months - recording a net surplus after tax of $89m, up 61% on comparable period Net surplus after tax First half (unaudited) 180 160 140 120 100 $m 80 60 40 Second Half First Half 20 0 1999 2000 2001 2002 2003 2004 2005 6
Slide 7: EBITDA
Earnings before interest, tax, depreciation and amortisation also grew strongly to $239.9m - 26% higher than for the six months to 31 Mar 2004 EBITDA First half (unaudited) 500 450 400 350 300 $m 250 200 150 100 Second Half 50 First Half 0 1999 2000 2001 2002 2003 2004 2005 7
Slide 8: Dividend
Board has resolved to pay fully imputed interim dividend of 8 cps. The increase reflects solid operating performance. Dividend • An 8 cent per share fully imputed interim dividend will be Dividends paid on 27 May 2005. 30 Special and Final • Future dividend payment dates 25 Interim will change to re
Slide 9: Trading operations
Trading operations contact
Slide 10: Retail Electricity Revenue
Net retail electricity revenue was relatively static as higher wholesale electricity costs offset the benefits of increased retail tariffs Retail Electricity Revenue • Retail electricity revenue increased Retail Electricity Revenue to $463.8 million in the first half of 500 2005 compared with $440.8
Slide 11: Customers
Competition in the retail market has been strong over the last 12 months. By expanding geographic reach and increasing marketing efforts the loss of customers has reversed Change in Customer Numbers 5000 4000 4000 3000 2000 1000 1000 Customers 0 0 0 Electricity -1000 Gas -2000 -3000 -2000 -4000 -300
Slide 12: Expanding our Retail Offering
Contact has extended its offering to new areas to maintain its customer base. Expanding our Retail Offering • Contact now provides retail offers in all areas of New Zealand, except the King Country • Extending Contact’s retail offering has increased retail competition 12
Slide 13: Wholesale Electricity Revenue
Wholesale electricity revenues were significantly up on prior comparable period - reflecting higher wholesale electricity prices during the period Wholesale Electricity Revenue • Wholesale electricity revenue Wholesale Electricity Revenue rose for the six months to 31 300 March 2005 250 • Average wh
Slide 14: Wholesale electricity market
Spot prices in half year to 31 March 2005 averaged $46.2/MWh, compared with $40.40/MWh in the half year to 31 March 2004, as a result of lower hydro inflows and storage levels. Wholesale electricity market Daily Average Haywards Prices, South Island Storage & Inflows 4000 $250 H1 2004 H1 2005 3500 $
Slide 15: Contact Generation
While total generation was only slightly higher in the first half of 2004/05, there was an increase in thermal generation relative to hydro generation. Contact Generation Contact Generation 6000 5000 4000 Te Rapa New Plymouth GWh 3000 TCC Otahuhu C Clutha 2000 Geothermal 1000 0 2004 2005 15
Slide 16: Gas usage
Contact’s gas use for generation increased during the period due to a reduction in Hydro inflows. Wholesale volumes were also up. Gas usage Gas Use • As thermal generation made up 30 for reduced hydro generation and responded to higher wholesale 25 prices, gas use for generation has increased 20 Who
Slide 17: Gas Revenue
The retail and wholesale gas businesses also made solid contributions to the growth in Net Surplus Gas Revenue • Retail gas revenue increased to Gas Revenue $59.9 million from $50.4 million 70 60 • Gas customer numbers stabilised during the quarter, but remain 8000 50 below customer numbers at the W
Slide 18: Operating expenses
Operating expenses rose by 4% for the half year, driven mainly by increased gas use and costs associated with retail and branding activity. Operating expenses • Operating expenses were $391.4 Operating Expenses million for the half year to 31 March 450 2005, an increase from the $376.8 million for t
Slide 19: Interest, depreciation and amortisation
Depreciation has increased as a result of the revaluation of Contact’s assets at 30 September 2004. Interest, depreciation and amortisation • The increase in depreciation and amortisation reflects the Depreciation and Interest 80 result of the revaluation of fixed assets as at 30 70 September 2004,
Slide 20: Taxation
Contact’s effective tax rate in the half year to 31 March 05 was 34% as a result of the TCC outage and adjustments for income tax over provided in previous years Taxation • Contact’s effective tax rate for Effective Tax Rate the six months to 31 March 45 2005 fell to 34%, compared to 40 40% for the
Slide 21: Generation Development
contact Generation Development 21
Slide 22: Ti Mihi Steam
Four new production wells are being drilled at Ti Mihi, which will support an additional 18MW of renewable generation. Ti Mihi Steam • Ti Mihi Steam: – Four new production wells to be drilled at Ti Mihi to supply the Wairakei and Poihipi power stations – Expected to add about 18MW of renewable gener
Slide 23: TCC Upgrade
TCC’s capacity has increased by 12MW as a result of improvements during the recent outage TCC Upgrade • Major maintenance outage successfully completed • approximately 10MW of capacity added to TCC as a result of a compressor upgrade • approximately 2% increase in efficiency • An outage is planned a
Slide 24: Other generation projects
Other key generation projects are proceeding on expected timelines. Other generation projects • Wairakei Binary plant expected to be commissioned by June 2005 • The application for a resource consent to develop Hawea Gates has been submitted • Commissioning of New Plymouth of Fuel Oil has commenced
Slide 25: Otahuhu C
Delivery of an assured fuel supply to the station remains the key hurdle to progressing developments, including the Otahuhu C proposal Otahuhu C • Otahuhu C is an excellent site for a large scale gas fired generation development • $300 million to $400 million of CAPEX + $100 million per annum gas co
Slide 26: Longer term fuels outlook
contact Longer term fuels outlook 26
Slide 27: LNG Backstop
While it would be best for New Zealand for LNG not to be needed, it is prudent to develop a backstop against the possibility that new domestic gas supply is not forthcoming LNG Backstop Potential 1. Push forward cost effective renewables gap 2. Support National Exploration Activity 3. Create coal or
Slide 28: Key prospects tested on a timetable consistent with alternatives
Contact has a strategic interest in seeing a number of key prospects tested on a timetable consistent with alternative options to domestic gas ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 Refine site studies Site selection Mid 05 Final investment Site decision access 2007-8 Consent studies consultation RMA proce
Slide 29: Supporting Gas Exploration
The strategic drivers for Contact to become more directly engaged upstream are as strong as ever Supporting Gas Exploration • Strategic drivers for Contact to engage upstream remain: – despite higher gas prices there is still insufficient exploration activity – market remains highly concentrated – w
Slide 30: LNG Study - Key Findings
LNG has been shown to be a viable backstop option for New Zealand. Work is progressing on selection of a terminal site - decision over next 6 months LNG Study - Key Findings • The delivered cost to Auckland of LNG would be in line with post-Maui gas from indigenous sources, in range of NZ$6.50/GJ to
Slide 31: Regulation
contact Regulation 31
Slide 32: Transmission Alternatives
The recently announced Electricity Commission review of Auckland transmission upgrades is a cause of concern Transmission Alternatives • An upgrade of New Zealand’s transmission system is overdue • There is no either/or choice between new generation and transmission lines. Generation is not an alter
Slide 33: Conclusions
contact Conclusions 33
Slide 34: Highlights for half year
Contact has put in a strong performance over the last six months - in financial, operational and strategic terms Highlights for half year • Strong six month financial result demonstrating the benefits of integrated energy business model • Increased electricity customers in the face of significant re