AGL Energy Limited · ASX:AGL
AGL Energy — H1 FY2013 Earnings Presentation
58 slides from AGL Energy's earnings presentation, Feb 27, 2013
Slide 1: FY13 Interim Results
FY13 Interim Results 6 Months to 31 December 2012 Michael Fraser, Managing Director and CEO Brett Redman, Chief Financial Officer | 27 February 2013
Slide 2: Disclaimer and important information
2 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 the potential and current individual investment obje
Slide 3: Agenda
3 Agenda › Result Highlights Michael Fraser › Group Financials Brett Redman › Operational Review / Summary Michael Fraser › Supplementary Information IMPORTANT NOTE: This presentation should be read in conjunction with the AGL Energy Limited ASX Appendix 4D for the 6 months ended 31 December 2012. »
Slide 4: Half year FY13 highlights
4 Half year FY13 highlights Integrated strategy drives strong earnings and cash flow growth. › Underlying Profit up 20% to $279.4 million › Underlying Operating Cash Flow before interest and tax up $492.4 million › Merchant Operating EBIT up $204.5 million (+82%) primarily reflecting Loy Yang A cont
Slide 5: Interim FY13 result
5 Interim FY13 result Strong growth in Statutory and Underlying Profit. › Revenue: $4,970.2m 37.5% › Statutory Profit: $364.7m 211.7% › Underlying Profit: $279.4m 20.0% FINANCIAL › Statutory EPS: 66.5 cps 171.4% › Underlying EPS: 51.0 cps 4.7% › Dividends Per Share (100% franked): 30.0 cps
Slide 6: Group Financials
6 Group Financials Brett Redman Chief Financial Officer
Slide 7: Statutory Profit to Underlying Profit reconciliation
7 Statutory Profit to Underlying Profit reconciliation Volatility of non-cash items highlights value of focus on Underlying Profit. 6 months to 31 Dec 2012 31 Dec 2011 Change $m Statutory Profit 364.7 117.0 247.7 Adjust for the following after tax items: Significant items - - Changes in fair value
Slide 8: Underlying Profit
8 Underlying Profit Generation portfolio drives step change in Operating EBITDA. 6 months to 31 Dec 2012 31 Dec 2011 Change $m Revenue 4,970.2 3,615.3 37.5% Operating EBITDA 650.0 438.9 48.1% Operating EBIT Retail 136.4 178.2 (23.5%) Merchant 453.3 248.8 82.2% Upstream Gas (2.5) 1.0 (350.0%) Energy
Slide 9: Group Underlying Profit
9 Group Underlying Profit Loy Yang A and renewable portfolio lift Wholesale Electricity contribution. Upstream Retail Merchant Gas 13.1 550 340.3 450 $ million 3.5 (145.2) (3.7) (3.5) (5.6) 350 279.4 (110.6) 250 232.9 (15.6) (26.2) 150 YTD Consumer Other Retail Wholesale Wholesale Merchant Other Ups
Slide 10: Retail – key financial metrics
10 Retail – key financial metrics Carbon and increased network charges drive higher revenue and costs. 6 months to 31 Dec 2012 31 Dec 2011 Change $m Electricity Revenue 1,774.3 1,410.2 25.8% Gas Revenue 698.1 582.8 19.8% Other Revenue (Fees & Charges) 41.2 38.4 7.3% Total Revenue 2,513.6 2,031.4 23.
Slide 11: Retail – Operating EBIT drivers
11 Retail – Operating EBIT drivers Carbon timing and change in transfer pricing from Merchant impact gross margin. 178.2 180 2.8 49.6 160 $ million (8.7) (1.7) (4.2) 140 (6.2) 136.4 (40.0) (5.4) 120 (28.0) 100 YTD Carbon SA Transfer Gross Margin Other Gross Bad & Campaigns & Labour & Depreciation Ot
Slide 12: Retail – key operating metrics
12 Retail – key operating metrics Normalised gross margin per customer at $110. 6 months to 31 Dec 2012 31 Dec 2011 Change Consumer gross margin ($m) 316.4 334.9 (5.5%) Average customer numbers (‘000) 3,494.6 3,322.3 5.2% Gross margin per customer $90.54 $100.80 (10.2%) Gross margin per customer (ex
Slide 13: Retail – key operating metrics
13 Retail – key operating metrics Carbon and transfer price timing impacts key metrics. 6 months to 31 Dec 2012 31 Dec 2011 Change $m Operating costs (186.7) (166.8) 11.9% Depreciation and amortisation (34.5) (28.3) 21.9% Less fees and charges 41.2 38.4 7.3% Net operating costs (180.0) (156.7) 14.9%
Slide 14: Merchant – key financial metrics
14 Merchant – key financial metrics Loy Yang A drives growth in Operating EBIT. 6 months to 31 Dec 2012 31 Dec 2011 Change $m Operating EBITDA 535.7 287.7 86.2% Depreciation and amortisation (82.4) (38.9) 111.8% EBIT Energy Portfolio Management (EPM) Wholesale Electricity Gross Margin 518.9 178.6 19
Slide 15: Merchant – Operating EBIT drivers
15 Merchant – Operating EBIT drivers Strong result in wholesale electricity driven by Loy Yang A and low carbon generation fleet. 650 13.1 341.3 (4.2) 550 15.9 453.3 450 (9.8) $ million (145.2) (5.6) 350 248.8 28.0 250 (29.0) 150 YTD QLD Reg SA Transfer Wholesale Wholesale Eco Markets Merchant Busin
Slide 16: Upstream Gas – key financial metrics
16 Upstream Gas – key financial metrics Gloucester project Stage 1 receives approval to proceed. 6 months to 31 Dec 2012 31 Dec 2011 Change $m Operating EBITDA 9.3 11.1 (16.2%) Depreciation and amortisation (11.8) (10.1) 16.8% Operating EBIT Upstream Gas Queensland / South Australia 1.3 4.2 (69.0%)
Slide 17: Underlying Operating cash flow
17 Underlying Operating cash flow Higher earnings and working capital benefit from carbon lifts Operating cash flow. 6 months to 31 Dec 2012 31 Dec 2011 Change $m Operating EBITDA 650.0 438.9 211.1 Equity accounted income (2.9) 8.0 (10.9) Onerous contracts (26.4) (10.4) (16.0) Receivables (194.3) (5
Slide 18: Capital expenditure
18 Capital expenditure Stay in Business capital expenditure rises with Loy Yang A acquisition. 700 LEGEND Stay In Business Upstream Gas 600 Newcastle Gas Storage Macarthur 500 Retail Other 400 $ million 300 200 100 0 Jul - Dec 2012 Jan - Jun 2013 Forecast FY13 Forecast » FY13 Interim Results 6 month
Slide 19: Debt structure
19 Debt structure No major debt maturity until July 2014. › Loy Yang A debt restructured in August 2012 › Standard & Poor’s expected to lower equity credit content on $650 million hybrid › No impact on credit rating expected Facilities at Limit Usage 31 Dec 2012 $m $m › Entered into a $150 million w
Slide 20: Operational Review
20 Operational Review Michael Fraser Managing Director & CEO
Slide 21: People and safety
21 People and safety Safety metrics require on-going focus. Employee Lost Time Injury Frequency Rate Key safety statistics: › Total injuries – 17 (Loy Yang A: 4) › Lost time injuries - 7 (Loy Yang A: 2) Key Health and Safety improvement initiatives: › Increase safety leadership › Strengthen manageme
Slide 22: AGL continues strong growth in New South Wales
22 AGL continues strong growth in New South Wales Organic growth strategy creates shareholder value. › New South Wales electricity growth up 64,220 NSW electricity customer numbers 700,000 » Net growth over 260,000 since 1 January 2011 » NSW now AGL’s largest electricity base with 600,000 684,140 cu
Slide 23: Net national customer growth of 56,711
23 Net national customer growth of 56,711 Competition intensifies and market dynamics continue to change. › Net national customer growth of 56,711 (1.6%) Lead sales by channel type » Dual fuel accounts up 50,948 (3.1%) » Significant competition in most states › Customer growth in QLD electricity and
Slide 24: AGL leading Australia's retail energy markets
24 AGL leading Australia’s retail energy markets Customer engagement strategies underpin growth. AGL Energy Online - Customer Registrations › AGL Smarter Living business model now fully integrated ‘online, in store and in-home’ 500,000 400,000 › Online registrations grow steadily 300,000 » AGL Energ
Slide 25: My AGL IQ launched
25 My AGL IQTM launched A world class offering – all customers, all states, all fuels and all meters. › My AGL IQTM launched 25 February 2013, enables customers to see, act and save on energy usage › First major Australian retailer to deliver energy monitoring tools to all customers in all states ›
Slide 26: Regulatory pricing
26 Regulatory pricing SA price deregulation is a positive step. › SA government implemented price deregulation effective 1 February 2013 » Increased levels of competition and investment expected in the SA electricity market » Guarantee residential and small business customers on standing contract pr
Slide 27: Loy Yang A and Macarthur expand generation portfolio
27 Loy Yang A and Macarthur expand generation portfolio Plant availability reflects planned maintenance on Unit 1. › Integration on track Loy Yang A Availability Factor › H1 FY13 operational performance 96 Projected Availability (Full Year) 94 Availability Factor YTD » Availability factor - 85.7% 92
Slide 28: Continued growth in renewable portfolio
28 Continued growth in renewable portfolio High wind farm capacity factors plus hydro storage near capacity. Wind Farm Capacity Factors › Total renewable portfolio capacity of 1,720 MW › Strong track record of developing high performing wind projects on time and on budget » Higher than average capac
Slide 29: Subsequent events: NSW gas policy reversal
29 Subsequent events: NSW gas policy reversal Likely asset impairment and future gas supply impacts. › Book value of Camden (including the northern Eastern Australia Gas Demand expansion) and Hunter gas projects of $325 million may 3,000 be substantially impaired once rule changes finalised 2,500 ›
Slide 30: Gloucester Gas Project
30 Gloucester Gas Project State and Commonwealth approvals now in place for Stage 1. › Approvals received for Stage 1 with a total of 128 conditions » State development approval 92 conditions » Federal EPBC 36 conditions › Applications made for petroleum production licence and pipeline licence in De
Slide 31: Newcastle Gas Storage and Diamantina Power Station
31 Newcastle Gas Storage and Diamantina Power Station Construction well underway. Newcastle Gas Storage Facility › 120 TJ/day peaking capacity › In-ground services are being installed including communications, water supply and temporary power › Ground improvement under the LNG tank is complete and f
Slide 32: Integrated strategy
32 Integrated strategy Delivering growth and diversity of earnings. Energy Production Retail Markets ENERGY PRODUCTION Status Status core › 5,825 MW of operating GAS RENEWABLE THERMAL › 2.1 million electricity capacity including 1,720 PRODUCTION GENERATION GENERATION customers MW of renewable genera
Slide 33: AGL growth pipelines
33 AGL growth pipelines AGL’s integrated strategy creating significant growth pipelines. Additional renewable developments to meet RET Increased NSW gas production Bowen Basin JV Silverton Wind Farm Shareholder Value Solar Flagships QGC gas supply contract Mount Isa Power Station and gas supply cont
Slide 34: Summary
34 Summary Loy Yang A and low carbon generation portfolio drive first half growth. › Retail continues to perform well » Adverse QLD regulatory price determination begins to impact earnings » Continued strong growth in NSW electricity customer numbers › Merchant delivers strong profit growth » Loy Ya
Slide 35: Outlook FY13
35 Outlook FY13 Underlying NPAT guidance of $590 million to $640 million reaffirmed. › Previous guidance of Underlying NPAT for FY13 of $590 million to $640 million confirmed subject to normal trading conditions › Continued growth expected in second half despite: » Expectation that energy demand wil
Slide 36: Contact information
36 Contact information Sales - Electricity and gas www.agl.com.au Customer Service 131 245 AGL Energy Online/My AGL IQTM https://aglenergyonline.agl.com.au Corporate Information www.agl.com.au/about/Pages/Default.aspx Investors Media John Hobson Karen Winsbury Head of Capital Markets Head of Corpora
Slide 37: Supplementary Information
37 Supplementary Information
Slide 38: Electricity sales volume
38 Electricity sales volume 6 months to 31 Dec 2012 31 Dec 2011 Change GWh Consumer New South Wales 2,746 2,327 18.0% Victoria 2,214 2,372 (6.7%) South Australia 1,416 1,435 (1.3%) Queensland 1,393 1,447 (3.7%) Consumer Total 7,769 7,581 2.5% Business New South Wales 2,078 2,583 (19.6%) Victoria 2,4
Slide 39: Gas sales volume
39 Gas sales volume 6 months to 31 Dec 2012 31 Dec 2011 Change PJ Consumer New South Wales 13.9 13.9 0.0% Victoria 17.2 15.5 11.0% South Australia 1.6 1.4 14.3% Queensland 1.5 1.5 0.0% Consumer Total 34.2 32.3 5.9% Business New South Wales 19.3 14.0 37.9% Victoria 13.9 12.5 11.2% South Australia 5.3
Slide 40: Customer numbers
40 Customer numbers Change since Customer Numbers 31 Dec 2011 30 Jun 2012 31 Dec 2012 30 Jun 2012 Electricity New South Wales 556,982 619,920 684,140 64,220 Victoria 637,505 637,708 623,850 (13,858) South Australia 463,513 458,822 458,125 (697) Queensland 354,645 367,482 378,412 10,930 2,012,645 2,0
Slide 41: Consumer market - key indicators
41 Consumer market - key indicators 6 months to 31 Dec 2012 31 Dec 2011 Change Electricity Volume (GWh) 7,769 7,581 2.5% Avg. Consumer Accounts ('000) 2,105.5 1,951.5 7.9% Revenue ($m) 1,774.3 1,410.2 25.8% Gross Margin ($m) 199.4 217.5 (8.3%) Gross Margin 11.2% 15.4% (4.2 ppts) Gross Margin per cus
Slide 42: Business customers – key indicators
42 Business customers – key indicators 6 months to 31 Dec 2012 31 Dec 2011 Change Electricity Volume (GWh) 7,911 9,103 (13.1%) Business Accounts ('000) 19.5 19.8 (1.5%) Revenue ($m) 1,081.9 939.9 15.1% Gross Margin ($m) 32.2 29.5 9.2% Gross margin per MWh $4.16 $3.24 28.4% Gas Volume (PJ) 46.0 38.3
Slide 43: Retail – Cost to Serve
43 Retail – Cost to Serve 6 months to 31 Dec 2012 31 Dec 2011 Change Net operating costs ($m) 180.0 156.7 14.9% Net operating cost per customer account $51.43 $47.14 9.1% Cost to acquire/retain ($m) 64.1 48.8 31.4% Cost to acquire/retain per account acquired/retained1 $67.84 $67.75 0.1% Cost to serv
Slide 44: Retail – weather
44 Retail – weather › Winter months Heating Degree Days » Victoria: Average temperatures in winter 2012, winter 800 2011 second warmest temperatures on record 700 Heating Degree Days 600 » South Australia: Overnight temperatures during winter 500 2012 were the coldest since 1997 400 300 » New South
Slide 45: Merchant – generation: operational performance
45 Merchant – generation: operational performance 1. ‘Commercial availability’ is used to measure Torrens Commercial Availability / Start Reliability (%) Island performance, and represents the percentage of times the plant is available to operate when required 100.0 98.0 2. ‘Start reliability’ is us
Slide 46: Merchant – hydrology
46 Merchant – hydrology › 52.6% of hydro capacity is linked to drought resistant Kiewa Scheme › Dartmouth is in service and currently available for 177MW. Dam is currently above 95% with the water authority planning releases over the next few months › Eildon is currently available for full capacity
Slide 47: Merchant – generation: carbon intensity
47 Merchant – generation: carbon intensity Capacity H1 FY13 Carbon Asset Location Type Status Capacity Factor Output intensity (tonnes (MW) (%) (GWh) CO2e/MWh) Torrens Island SA CCGT Owned 1,280 18% 1,024 0.6 Wattle Point SA Wind Control dispatch 91 30% 120 0.0 Hallett 1 SA Wind Control dispatch 95
Slide 48: Merchant – electricity hedging policy
48 Merchant – electricity hedging policy › AGL Risk Management Policy is set by the Board and establishes the requirements for the management of wholesale risk › Clearly defined and approved commodity and transaction limits › Counterparty credit limit tier allocation › Market price risk is contained
Slide 49: Merchant – wholesale electricity prices
49 Merchant – wholesale electricity prices › Forward prices rallied across the NEM through Cal 2013 Flat Forward Price - All Regions December 2011 following the successful passage $70 NSW QLD SA VIC of the Clean Energy Act through both houses of parliament, and the full price of carbon was $65 facto
Slide 50: Merchant – Electricity Hedging: Position
50 Merchant – Electricity Hedging: Position Physical Financial Satisfying Financial Risk Limits Unhedged load must be limited Range of profit outcomes from so that potential downside unhedged load exposed to variable cannot result in an NPAT below wholesale market prices. this level as modelled in w
Slide 51: Upstream Gas - Reserves
51 Upstream Gas - Reserves AGL share of CSG reserves 31 Dec 2012 30 Jun 2012 Change PJ 2P 3P 2P 3P 2P 3P Gloucester (100%) 669 832 669 832 - - Moranbah (50%) – Bowen Basin 307 511 376 862 (18.4%) (40.7%) Camden (100%) 140 186 142 189 (1.4%) (1.6%) Hunter (100%) 142 271 142 271 - - Silver Springs (va
Slide 52: Upstream Gas – Permits
52 Upstream Gas – Permits Permits Permits Working Working Basin Project Exploration Production Basin Project Exploration Production Interest 2 2 Interest 2 2 (Area km ) (Area km ) (Area km ) (Area km ) PEL 2 (6,708)r - 100% ATP 471P (453)r - 28.71-100% PEL 5 (401)r - 100% ATP 709P (146) - 100% - PPL
Slide 53: Reconciling Statutory to Underlying cash flow
53 Reconciling Statutory to Underlying cash flow 6 months to 31 Dec 2012 31 Dec 2011 Change $m Statutory net cash provided by operating activities 364.8 27.8 Increase / (decrease) in futures margin calls 21.3 (19.6) Increase / (decrease) in net green position (54.1) (15.2) Unwind of carbon assistanc
Slide 54: Retail debtors
54 Retail debtors › Introduction of carbon and network increases drive Bad and Doubtful Debts rises in gas and electricity prices 1.8% › Price rises phased in between July to October 2012 1.6% causing some initial customer bill shock 1.4% › As a result: 1.2% › Consumer bad and doubtful debts increas
Slide 55: Energy Investments
55 Energy Investments 6 months to 31 Dec 2012 31 Dec 2011 Change $m ActewAGL 15.9 17.3 (8.1%) Loy Yang A - (4.9) (100.0%) Total EBIT 15.9 12.4 28.2% » FY13 Interim Results 6 months to 31 December 2012 » 27 February 2013 » AGL External
Slide 56: Capital expenditure
56 Capital expenditure 6 months to 31 Dec 2012 SIB Discretionary Total $m Merchant 67.6 128.6 196.2 Upstream Gas - 75.2 75.2 Retail - 22.2 22.2 Corporate Other 6.3 4.4 10.7 Total 73.9 230.4 304.3 » FY13 Interim Results 6 months to 31 December 2012 » 27 February 2013 » AGL External
Slide 57: Balance Sheet
57 Balance Sheet As at 31 Dec 2012 30 Jun 2012 $m Current assets 3,138.7 4,131.9 PPE, E&E and oil & gas assets 6,346.1 6,323.5 Other non current assets 4,507.4 4,283.0 Total Assets 13,992.2 14,738.4 Current debt 46.6 616.0 Other current liabilities 2,162.8 1,993.8 Non current debt 3,207.3 3,696.0 Ot
Slide 58: Fair Value Reconciliation
58 Fair Value Reconciliation Net Assets (Liabilities) As at $m 31 Dec 2012 30 Jun 2012 Change Electricity derivative contracts 270.4 208.7 61.7 Interest rate swaps and foreign currency derivative contracts (112.5) (224.9) 112.4 Total net assets (liabilities) for derivative contracts 157.9 (16.2) 174