28 August 2015 Financial Results Twelve months ended 30 June 2015 Presented by: Fraser Whineray William Meek Chief Executive Chief Financial Officer MIGHTY RIVER POWER FINANCIAL RESULTS
FINANCIAL RESULTS Agenda Highlights 4 Market Dynamics 8 Operational Update 15 Financial Update 20 Business & Strategy Update 30 Outlook 38 Appendix 40 MIGHTY RIVER POWER FINANCIAL RESULTS 3
HIGHLIGHTS A challenging year with some clear decisions MIGHTY RIVER POWER FINANCIAL RESULTS 4
HIGHLIGHTS Health and safety Achieving zero-harm is our goal TOTAL RECORDABLE INJURY strong focus on contractors and subcontractors FREQUENCY RATE (TRIFR) (per 200,000 hours; includes onsite employees and contractors) no serious…
HIGHLIGHTS FY2015 vs FY2014 800 FY2014 700 FY2015 600 m 500 400 300 200 100 0 Energy Margin EBITDAF NPAT Underlying Earnings Free Cash Flow Capital Expenditure Total Declared Ordinary Dividend Energy Margin,…
HIGHLIGHTS Dividend Fully imputed ordinary final dividend of 8.4cps DIVIDEND and special dividend of 2.5cps paid 30 September 2015 25 130% FY2015 fully imputed declared dividends of 110% 21.5cps 20 ordinary dividend up 4% to…
FINANCIAL RESULTS Market Dynamics MIGHTY RIVER POWER FINANCIAL RESULTS 8
MARKET DYNAMICS Churn and retail market Electricity prices flat in FY2015 including QUARTERLY SURVEY OF DOMESTIC ELECTRICITY PRICES regulated lines charges* 12% Retail overall Industry customer churn remains high at Lines 10% 19%…
MARKET DYNAMICS Demand 16,000 Demand growth returns with increases over FY2011 the last 4 quarters 14,000 FY2012 up 2.7% in FY2015, 2.0% after normalising for FY2013 temperature 12,000 FY2014 Growth across all sectors in FY2015…
MARKET DYNAMICS Supply Lake Taupo inflows 85% of average in FY2015 (national inflows 100% of average) NATIONAL AND TAUPO STORAGE LEVELS 85 160% 80 140% 75 % of average 120% 70 /MWh 100% 65 80% 60 60% 55 40% 50…
MARKET DYNAMICS Wholesale prices Wholesale market failed to respond in March/April to low national hydrology temporary drivers likely MIGHTY RIVER POWER FINANCIAL RESULTS 12
MARKET DYNAMICS Wholesale prices January 2015 demonstrated significantly higher spot prices compared to other years ASX FUTURES SETTLEMENT PRICE (OTA) with similar hydrology; saw uplift in ASX 90 prices for the quarter ended 31…
MARKET DYNAMICS Tightening supply with thermal rationalisation By 2019, 1,550MW of thermal capacity and 5,040GWh of thermal fuel commitments will have been removed from the New Zealand market (compared with 2013) New Zealand has…
FINANCIAL RESULTS Operational Update MIGHTY RIVER POWER FINANCIAL RESULTS 15
OPERATIONAL UPDATE Electricity sales RESIDENTIAL SALES (FPVV) Residential sales volume up 49GWh, 2,700 reflecting higher demand 2,650 2,600 Total ICPs flat year-on-year 2,550 GWh 2,500 Mercury down 8,600 reflecting Auckland…
OPERATIONAL UPDATE Electricity generation Total Generation 268GWh (4%) higher than FY2014 Hydro 673GWh lower than average representing the lowest hydro generation in the Companys history Geothermal 99GWh higher than FY2014…
OPERATIONAL UPDATE Electricity portfolio Average net position remained slightly short, reflecting the lower hydro generation during the period. Under normal hydrology net position square given Companys view on commercial pricing…
OPERATIONAL UPDATE LWAP/GWAP LWAP/GWAP ratio of the cost of electricity purchased (LWAP) relative to price received for generation (GWAP) FY2015 LWAP/GWAP remains favourable to peers but negatively impacted by less North…
FINANCIAL RESULTS Financial Update MIGHTY RIVER POWER FINANCIAL RESULTS 20
FINANCIAL UPDATE Financial highlights MIGHTY RIVER POWER FINANCIAL RESULTS 21
FINANCIAL UPDATE EBITDAF (FY2015 vs FY2014) Generation and energy cost reflect higher spot prices in FY2015 CFDs and customer sales reflect roll off of commercial and industrial sales Other revenue increased 18m, reflecting…
FINANCIAL UPDATE Operating expenditure Approx 30m reduction in annual operating OPERATING EXPENDITURE expenditure since listing in May 2013 including: 250 optimisation of asset management plan reduction in international geothermal…
FINANCIAL UPDATE Underlying earnings and NPAT (FY2015 vs FY2014) Underlying earnings down 40m reflecting lower energy margin and higher interest payments reflecting the 300m Capital Bond issue in July 2014 and capitalised interest in…
FINANCIAL UPDATE Consolidated cash flow Net cash provided by operating activities fell 8m, principally reflecting lower hydro generation and reductions in commercial volumes Net cash used in financing activities fell 18m, due to…
FINANCIAL UPDATE Capital expenditure Capital expenditure of 110m (FY2014: 93m) new investment of 31m* (FY2014: 33m) including smart metering stay-in-business of 79m (FY2014: 60m) including Ngatamariki and Rotokawa wells, on-going…
FINANCIAL UPDATE Accounting impacts of international geothermal and Southdown decisions International Geothermal In December 2014 announced exit of Chile and Germany, with no further development capital in US as development options…
FINANCIAL UPDATE Funding profile and ratios 30 June 2015 30 June 2014 30 June 2013 30 June 2012 30 June 2011 30 June 2010 Net debt (m) 1,082 1,031 1,028 1,116 976 971 Gearing ratio (%) 24.5 24.3 24.4 27.0 25.1 26.5 Debt/EBITDAF…
FINANCIAL UPDATE Capital management bbb stand-alone rating - key reference point for DEBT/EBITDAF dividend policy and sustainable capital structure one-notch upgrade given Crown majority ownership 3.0 key ratio for stand-alone S&P…
FINANCIAL RESULTS Business & Strategy Update MIGHTY RIVER POWER FINANCIAL RESULTS 30
BUSINESS & STRATEGY UPDATE Improving customer value and loyalty Reward loyalty to improve customer satisfaction and reduce churn customers who commit for two years get additional discount behaviour-based segmentation targeting…
BUSINESS & STRATEGY UPDATE GLOBUG delivering real value GLOBUG is the fastest growing retailer since re-launch in February almost 30,000 GLOBUG customers 11,000 additional customers since February 2015 (80% from other retailers)…
BUSINESS & STRATEGY UPDATE Generation portfolio going 100% renewable Hydro life-cycle refurbishment Work has began on Whakamaru upgrade to expand capacity by 20MW (to 120MW) and 4% increase in efficiency Karapiro upgrade almost…
BUSINESS & STRATEGY UPDATE Metrix Metrix 2 meter service provider in NZ almost 390,000 smart meters now installed providing services for almost 70% of Auckland region 20 energy retailers and distribution customers Ended Trustpower…
BUSINESS & STRATEGY UPDATE Long-term opportunities to yield value over time Water Long-term Lake Taupo partnership agreement with Tuwharetoa Maori Trust Board Aligned goals with iwi and other stakeholders to make the Waikato the…
BUSINESS & STRATEGY UPDATE Transmission Pricing Methodology (TPM) Electricity Authority options paper substantially different from 2012 proposal Mass market consumers, particularly in the Upper North Island, would see an increase in…
OUTLOOK Fresh thinking Customer, Company, Country MIGHTY RIVER POWER FINANCIAL RESULTS 37
FINANCIAL RESULTS Outlook MIGHTY RIVER POWER FINANCIAL RESULTS 38
OUTLOOK FY2016 guidance and outlook FY2016 EBITDAF will be in the range of 490m-515m subject to any material adverse events, significant one-off expenses or other unforeseeable circumstances and assumes: 4,150GWh of hydro production…
FINANCIAL RESULTS Questions MIGHTY RIVER POWER FINANCIAL RESULTS 40
FINANCIAL RESULTS Appendix MIGHTY RIVER POWER FINANCIAL RESULTS 41
APPENDIX Operating information Year ended Year ended 30 June 2015 30 June 2014 VWAP1 Volume VWAP1 Volume Electricity Sales (/MWh) (GWh) (/MWh) (GWh) FPVV sales to customers 117.21 4,486 117.70 4,844 Residential customers 2,497…
APPENDIX Operating information Year ended Year ended 30 June 2015 30 June 2014 VWAP Volume VWAP Volume Electricity Generation (/MWh) (GWh) (/MWh) (GWh) Hydro 77.82 3,327 74.86 3,497 Gas 84.58 4644 86.13 125 Geothermal…
APPENDIX Contracts for Difference Year ended Year ended 30 June 2015 30 June 2014 Net Contracts for Difference (Sell)/Buy GWh Sell - End User (1,623) (1,976) Sell - VAS1 (699) (674) Sell - Inter-generator & ASX (1,061) (605) Sell…
APPENDIX Balance sheet As at 31 As at As at December m 30 June 2015 30 June 2014 m change % change 2014 SHAREHOLDERS EQUITY Total shareholders 3,337 3,219 118 3.7 3,010 equity ASSETS Current assets 286 292 (6) (2.1) 270…
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 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 Year ended Year ended m 30 June…
APPENDIX Non-GAAP measure: EBITDAF, Underlying Earnings and Net Debt EBITDAF is reported in the financial statements and is a measure that allows comparison across the electricity industry Underlying Earnings is reported in the…
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