May 2015 Mighty River Power Investor Roadshow Presented by: Fraser Whineray William Meek Chief Executive Chief Financial Officer MIGHTY RIVER POWER INVESTOR ROADSHOW
MIGHTY RIVER POWER Mighty River Power at a glance MIGHTY RIVER POWER INVESTOR ROADSHOW 3
MIGHTY RIVER POWER Economy & Industry MIGHTY RIVER POWER INVESTOR ROADSHOW 4
ECONOMY & INDUSTRY About New Zealand ECONOMIC SUMMARY Population of 4.5m; 1.5m based in Auckland, GDP NZ237.9b 3.4m based in North Island Credit Rating AA/Stable (positive) Economy dominated by services, manufacturing Inflation…
ECONOMY & INDUSTRY The industry we operate in 1 2 3 4 W ERE AND INVOLVED INVOLVED HERE... HERE... 4. RETAILERS AND CONSUM ERS 19 retailers buy from wholesale market 1. GENERATORS and on-sell to nearly Generate electricity…
ECONOMY & INDUSTRY Regulation Market structure Framework has been fairly settled since 1999 after a period of significant reform in late 1990s Labour have publicly moved away from the policy to introduce a Single Buyer model Market…
ECONOMY & INDUSTRY Demand Demand fell from 2007 2013 driven by NZ ELECTRICITY CONSUMPTION AND GROWTH Annual Growth Rate (RHS) industrial demand Consumption (LHS) 40,000 5% Demand up 2% in CY2014; trend continued in 4% 2015 35,000…
ECONOMY & INDUSTRY Competitive retail market Electricity prices fallen to lower-half of the 2013 OECD ELECTRICITY PRICES (PPP BASIS) OECD 0.40 most major retailers continue to signal stable energy prices 0.35 prompt payment,…
INDUSTRY Unsubsidised Renewable Energy: advantage for New Zealand 1,200MW of unsubsidised renewable generation built over the past 10 years; displacement of fossil fuels NEW ZEALANDS GENERATION MIX % OF RENEWABLE ENERGY 50,000…
ECONOMY & INDUSTRY Supply Hydro generation accounts for 57% of supply South Island 43%, inflows highest in summer negative correlation to peak demand North Island 14%, rain-fed inflows highest in winter correlated with peak demand…
ECONOMY & INDUSTRY Wholesale prices As at 30 June 2013 ELECTRICITY FUTURES PRICE As at 30 June 2014 Established electricity futures contracts for As at 31 March 2015 As at 20 May 2015 three years forward 90 80 70 Short term…
MIGHTY RIVER POWER Business Overview MIGHTY RIVER POWER INVESTOR ROADSHOW 13
BUSINESS OVERVIEW Together safe Goal continues to be zero-harm extensive TOTAL RECORDABLE INJURY FREQUENCY engagement with contractors and RATE (TRIFR) subcontractors (rolling 12 month, per 100,000 hours; includes contractors)…
BUSINESS OVERVIEW An integrated electricity generation/retail company MIGHTY RIVER POWER 15
RETAIL SERVICE INNOVATOR Focus on value-differentiation in highly competitive market % of CUSTOMERS HIGHLY SATISFIED1 ANNUAL CUSTOMER CHURN2 Other top 4 brands New Zealand Mercury Mercury MRP 65% 22% 60% 20% 55% 18% 50%…
RETAIL SERVICE INNOVATOR Customer first Passing on the benefits of strong competition no increase in headline energy prices for residential electricity and gas customers in April 2015 reward for loyalty customers who commit for 2…
RETAIL SERVICE INNOVATOR GLOBUG a smart platform for growth Home-grown pre-pay technology lowers disconnection rates and bad debts GLOBUG online and app based self service Lower cost of electricity for customers eliminates late…
RETAIL SERVICE INNOVATOR Actively manage sales book for multi-year value RESIDENTIAL SALES Actively manage sales book for value, 3,000 rather than customer numbers by 2,500 optimising across customer segments 2,000 GWh 1,500…
SUSTAINABLE ENERGY PRODUCER Electricity Generation Will be a 100% renewable electricity generator following closure of Auckland gas- ELECTRICITY GENERATION Gas fired station in December 2015 8,000 Hydro Geothermal High up-front…
SUSTAINABLE ENERGY PRODUCER Waikato Hydro System 100% own and operate nine power stations along the Waikato River Flexible output can be increased or decreased very quickly and efficiently Supports generation of 4,000GWh annually…
SUSTAINABLE ENERGY PRODUCER Geothermal the baseload renewable Reliable renewable geothermal generation normally runs 24/7, not dependent on weather Resource consents generally for 35 years Exiting International geothermal…
SUSTAINABLE ENERGY PRODUCER Partnerships Aligned values around harnessing natural resources and sustainability Joint venture partnerships with Maori landowners a key foundation of successful track record in geothermal development…
A PORTFOLIO APPROACH Net position Average net position moved towards square, reflecting view of market NET POSITION FY2014 NET POSITION 1,500 90 9,000 Gas-fired 80 8,000 Other CFD Sell 1,000 CFD Buy 70 7,000 'End User' CFD…
A PORTFOLIO APPROACH LWAP/GWAP LWAP/GWAP ratio of the cost of electricity purchased (LWAP) relative to price received for generation (GWAP) Active managing generation dispatch to maximise value over time, combined with inherent…
DATA & TECHNOLOGY SUPPLIER A leader in metering Advanced Metering Infrastructure (AMI) metering propositions commercially driven by energy retailers (not regulation) Metrix is the second largest meter provider in New Zealand over…
MANAGEMENT Leadership team Successful Chief Executive transition completed in August 2014 Fraser Whineray took up role on 1 September 2014; previously GM Operations Completed realignment of the leadership team to provide stability…
MANAGEMENT Board of Directors Independent Board; Chair nominated by Board; must be approved by Minister of Finance A diverse and complementary mix of skills with eight directors following the appointment of Patrick Strange (February…
MIGHTY RIVER POWER Ownership SHARE REGISTER Listed on NZX and ASX in May 2013 AT MARCH 2015 More than 100,000 shareholders 2% Loyalty shares transferred from Crown 14 May 2015, almost 95,000 eligible shareholders 14% Crown…
STRATEGY Fresh thinking Customer, Company, Country STRENGTHEN OUR SKILLS DEVELOP AND GROW NEW AND EXPERTISE OPPORTUNITIES & SKILLS MIGHTY RIVER POWER INVESTOR ROADSHOW 30
MIGHTY RIVER POWER Financial MIGHTY RIVER POWER INVESTOR ROADSHOW 31
FINANCIAL Financial track record ENERGY MARGIN CAGR 7% EBITDAF CAGR 11% 800 600 700 500 600 500 400 m m 400 300 300 200 200 100 100 0 0 FY2010 FY2011 FY2012 FY2013 FY2014 FY2010 FY2011 FY2012 FY2013 FY2014 UNDERLYING…
FINANCIAL HY2015 vs HY2014 400 HY2014 350 HY2015 300 m 250 200 150 100 50 0 Energy Margin EBITDAF NPAT Underlying Earnings Free Cash Flow Capital Expenditure Total Declared Dividend Energy Margin, EBITDAF and…
FINANCIAL FY2015 guidance and outlook Interim results guidance FY2015 dividend guidance of 14 cents per share FY2015 EBITDAF guided to be in the range of 480m - 500m subject to any material adverse events, significant one-off…
FINANCIAL Operating expenses 30m of permanent savings since listing consistent with a clear focus on group-wide efficiency and effectiveness programme right sizing business for current market environment and activity levels…
FINANCIAL Capital expenditure FY2015 interim results guidance of 85m for stay-in-business and 35m for committed growth capex Completed 1.4b geothermal development programme in FY2013; FY2015 growth capex mainly reflects smart…
FINANCIAL Funding profile Drawn debt as at 31 December 2014 was 1,110m with undrawn facilities of 300m Average interest rates of 8.3% in FY2014 - reflection of interest rate hedges put in place in 2008 ahead of the major domestic…
FINANCIAL Credit rating and funding ratios bbb stand alone rating is key reference point for dividend policy and a sustainable capital structure S&P confirmed BBB+ credit rating under revised corporate credit criteria in May 2014…
FINANCIAL Dividend Interim Dividend policy targets 70% to 85% of Free DIVIDEND PER SHARE Final Special Cash Flow on average over time % of Free Cash Flow (rhs) Supplementary dividends paid to foreign 20 90 investors 18 80…
FINANCIAL RESULTS Appendix MIGHTY RIVER POWER INVESTOR ROADSHOW 40
APPENDIX MRP.NZ MRP SHARE PRICE AND VOLUME KEY METRICS 4.00 16 PE ratio (FY2016)* 21x 3.50 14 EV/EBITDAF (FY2016) 10x 3.00 12 Cash Dividend Yield 4.9% (FY2015) NZ per share 2.50 10 Volume (m) 2.00 8 Gross Dividend…
APPENDIX Supplementary dividends to non-resident shareholders Reduces or eliminate the economic impact of Non-Resident Withholding Taxes For illustrative purposes see below worked example for a corporate investor. This should not be…
APPENDIX Non-GAAP measure: Energy margin Energy Margin provides a measure that, unlike sales or total revenue, accounts for the variability or the wholesale spot market and the broadly offsetting impact of wholesale prices on the cost…
APPENDIX Balance sheet As at As at 31 31 December December As at 30 As at 30 As at 30 As at 30 As at 30 m 2014 2013 June 2014 June 2013 June 2012 June 2011 June 2010 Shareholders Equity Total shareholders equity 3,010 3,185 3,219…
APPENDIX Consolidated cash flow m HY2015 HY2014 FY2014 FY2013 FY2012 FY2011 FY2010 Net cash provided by operating 176 171 317 286 277 293 200 activities Net cash used in investing (47) (64) (99) (84) (292) (202) (296) activities Net…
APPENDIX Non-GAAP measure: Free Cash Flow Free Cash Flow is a measure that the Company uses to evaluate the levels of cash available for debt repayments, growth capital expenditure and dividends m HY2015 HY2014 FY2014 FY2013…
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