Agl Energy Limited · ASX:AGL
Agl Energy — 1H FY2017 Earnings Presentation
25 slides from Agl Energy's earnings presentation, Feb 9, 2017
Slide 1: AGL Energy FY17 Interim Results
9/2/2017 AGL Energy FY17 Interim Results Half year ended 31 December 2016 9 February 2017 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 h
Slide 2: Results Highlights and Strategy Update
9/2/2017 Results Highlights Review of Market Update and and Strategy Update Operations and Outlook Financial Results Andy Vesey Brett Redman Andy Vesey Managing Director and CEO CFO Managing Director and CEO 3 Results Highlights and Strategy Update Andy Vesey Managing Director and CEO 2
Slide 3: Improving safety outcomes; interim results delivering on strategy
9/2/2017 Improving safety outcomes year to date Total Injury Frequency Rate per million hours worked, employees 5.2 4.3 4.1 2.7 1.8 FY13 FY14 FY15 FY16 1H17 year to date 5 Interim results: delivering on our strategy Five key areas of achievement 1. Strong result supports outlook 2. Transformation an
Slide 4: Imperatives and objectives framing our activity
9/2/2017 Imperatives and objectives framing our activity Strategic imperatives driving our agenda Prosper in a carbon- Build customer constrained future advocacy Key objectives for strategy and decision-making From: high From: operator of From: mass emissions large assets retailing technology To: or
Slide 5: Recapping our key growth initiatives
9/2/2017 Recapping our key growth initiatives More > Solar Flagships and Silverton now sold to PARF (total 355 MW) PARF equity investments advanced > 350 MW Coopers Gap wind farm targeted for early FY18 financial close > $300m digitally enabled program underway Customer Experience Transformation* >
Slide 6: Accelerating innovation at AGL
9/2/2017 Accelerating innovation at AGL New Energy progress scorecard Key initiative Details 1H17 output Next steps Connected home Solar Command 1.0 launched: real- 4,250 Solar Command customers Develop, scale and iterate and digital apps time solar performance monitoring signed up to market testing
Slide 7: Strong performance supports dividend uplift
9/2/2017 Strong performance supports dividend uplift Solid profit growth; cash flow impacted by working capital movements 1H17 1H16 Change Statutory Profit/(Loss) after tax ($m) 325 (449) 172% Underlying Profit after tax ($m) 389 375 4% Statutory EPS (cents) 48.2 (66.5) 172% Underlying EPS (ce
Slide 8: Electricity: lower generation and sales volumes
9/2/2017 Electricity: lower generation and sales volumes Lower sales volumes driven by mild winter weather Comparison of volumes (TWh) Generation volumes down 0.4 TWh - Greater planned outage days at Bayswater 1H16 1H17 Generation Sales Generation Sales - Partly offset by reduction in forced outages
Slide 9: Gas: higher sales volumes; lower margin
9/2/2017 Gas: higher sales volumes Higher AGL Torrens generation and business customer acquisitions Comparison of gas volumes (PJ) 1H17: 130.7 PJ 1H16: 122.2 PJ 33.4 Consumer customers down 0.4 PJ 33.8 - Warmer winter weather in July and August 39.1 Business customers up 2.3 PJ 36.8 - New customer a
Slide 10: On track for targeted $170m opex reduction
9/2/2017 On track for targeted $170m opex reduction Real operating expenditure savings of $38m delivered in 1H17 ($m) CPI increase Cost reductions Impact in 1H17: $18m Achieved in 1H17: $38m 10 (4) Remaining FY17 forecast: $16m Remaining FY17 target: $10m 1,460 36 15 (122) 1,380 - (48) 1,381 34 2H16
Slide 11: Working capital impact on cash flow
9/2/2017 Working capital impact on cash flow > Movement in futures margin calls to be offset by future benefit of rising wholesale prices > Receivables impacts largely timing related including early collections in 2H16 reducing 1H17 > Objective for $200m reduction in underlying working capital remai
Slide 12: Balance sheet and liquidity position
9/2/2017 Balance sheet and liquidity position Strong liquidity enabling capital management strategy Debt maturity profile (at 9 February 2017) > Cash balance of $969m at 31 December 2016 700 > Net debt $2.6b, down $154m during 1H17 600 > Debt headroom ~$2b 500 > Moody’s Baa2 credit rating, stable ou
Slide 13: Electricity: well positioned for rising curve
9/2/2017 Market Update and Outlook Andy Vesey Managing Director and CEO Electricity: well positioned for rising curve Pass-through of market prices varies according to segment Consumer customer sales Pricing changes occur annually by state 15.7 Impact phased over time due to competition, customer af
Slide 14: Gas: multiple options to strengthen supply
9/2/2017 Gas: multiple options to strengthen supply Portfolio development to respond to dynamic, volatile market > Expectation remains for at least $100m Underlying EBIT impact on gas margin in FY17 from reduced Queensland gas margin, supply curtailment and other issues > Progress in FY17 to date to
Slide 15: On track to deliver FY17 guidance
9/2/2017 On track to deliver FY17 guidance Underlying Profit after tax expected to be in the upper half of $720-800m guidance range, subject to normal trading conditions > Electricity: impact of rising wholesale prices expected to continue – Forward curve points to sustained improvement – Impact pha
Slide 16: Reconciliation of Statutory to Underlying Profit
9/2/2017 Reconciliation of Statutory to Underlying Profit ($m) 1H17 1H16 Change Statutory Profit/(Loss) 325 (449) 774 Adjust for the following after tax items: Significant items Restructuring costs - 16 (16) Natural Gas impairments - 640 (640) Changes in fair value of financial instruments 64 168 (1
Slide 17: Energy Markets and Group Operations Underlying EBIT
9/2/2017 Energy Markets – Underlying EBIT ($m) 1H17 1H16 Change Underlying EBITDA 1,261 1,240 2% Depreciation and amortisation (47) (49) (4%) Customer EBIT 230 230 - Consumer Electricity gross margin 244 244 - Consumer Gas gross margin 150 171 (12%) Business Electricity gross margin 18 17 6% Busines
Slide 18: Reconciliation of EBITDA to cash flow; debt facilities
9/2/2017 Reconciliation of EBITDA to cash flow ($m) 1H17 1H16 Underlying EBITDA 924 885 Equity accounted income (12) (15) Onerous contracts (20) (22) Gain on divestment (21) - Working capital movements (172) 18 Underlying operating cash flow before interest and tax 699 866 Net finance costs paid (84
Slide 19: Electricity and gas sales volumes
9/2/2017 Electricity sales volumes GWh 1H17 1H16 Change Consumer New South Wales 2,792 3,002 (7%) Victoria 1,812 1,928 (6%) South Australia 1,157 1,406 (18%) Queensland 1,262 1,284 (2%) Consumer total 7,023 7,620 (8%) Business New South Wales 2,346 2,020 16% Victoria 1,649 2,050 (20%) South Australi
Slide 20: Customer numbers; Consumer market key indicators
9/2/2017 Customer numbers (‘000) 31 Dec 2016 30 Jun 2016 Change Consumer Electricity New South Wales 811 808 3 Victoria 637 636 1 South Australia 398 408 (10) Queensland 401 395 6 Total Consumer Electricity 2,247 2,247 - Consumer Gas New South Wales 666 674 (8) Victoria 536 533 3 South Australia 132
Slide 21: Business market indicators; generation portfolio
9/2/2017 Business Market key indicators 1H17 1H16 Change Electricity Volume (GWh) 5,805 6,439 (10%) Revenue ($m) 775 826 (6%) Gross margin ($m) 18 17 6% Gross margin 2.3% 2.1% 0.2 pts Gross margin per MWh ($) 3.14 2.72 15% Gas Volume (PJ) 39.1 36.8 6% Revenue ($m) 290 268 8% Gross margin ($m) 38 31
Slide 22: Breakdown of FY17 opex saving target; capex targets
9/2/2017 Breakdown of FY17 opex saving target: $170m ($m) 1H17 actual FY16 and 1H17 actual FY17 target Group Operations 7 55 77 Maintenance optimisation 3 23 29 Procurement 1 19 29 Labour and contractor 2 15 13 Other 1 4 6 Additional generation - (6) - Energy Markets 26 68 66 Labour and contractor 8
Slide 23: Working capital targets; Queensland wholesale gas
9/2/2017 Working capital targets update FY16 and FY17 ($m) 1H17 actual FY16 and 1H17 actual target Optimise coal stockpile at AGL Macquarie 12 33 42 Excess gas bank to be naturally consumed 83 66 21 Reduce surplus large scale generation certificates and other green assets 12 40 64 Consumer credit an
Slide 24: Wholesale contracting
9/2/2017 Wholesale contracting AGL’s Wholesale Markets Risk Management Policy (Policy) is Electricity hedged positions (all regions) approved by the Board and establishes the requirements for managing risks arising from wholesale energy markets. The Policy clearly defines permitted contracting activ
Slide 25: AGL Energy FY17 Interim Results
9/2/2017 AGL Energy FY17 Interim Results Half year ended 31 December 2016 9 February 2017 25