Meridian Energy NZX retail investor presentation

PG 1

Meridian Energy NZX retail investor presentation
1 October 2018

Attached is a presentation Meridian Energy Limited is making at NZX retail investor evenings in early October
2018.

ENDS
Neal Barclay
Chief Executive
Meridian Energy Limited


For investor relations queries, please contact:
Owen Hackston
Investor Relations Manager
021 246 4772
For media queries, please contact:
Polly Atkins
External Communications Specialist
021 174 1715

N Z X R E TA I L I N V E S T O R E V E N I N G
M A N A G E M E N T P R E S E N TAT I O N

NZELECTRICITY SECTOR
▪Five large retailer generators
▪$10b free float
▪Defensive, high yield characteristics
▪Frequently seen as bond proxies
▪Competing in a market with low growth in
the last decade
Main participants are listed
19%
33%
31%
17%
14%
0%
5%
10%
15%
20%
25%
30%
35%
20142015201620172018
Financial Year ended 30 June
MERIDIAN TOTAL SHAREHOLDER RETURN
Meridian Energy Limited NZX Retail Investor Presentation October 20182
Source: Meridian
0
1
2
3
4
5
6
7
8
9
10
MeridianMercuryContactGenesisTrustpower
$B
ELECTRICITY COMPANIES MARKET CAP
Source: NZX

MERIDIAN ENERGY
▪Largest of the five retailer generators
▪420,000 customers in three countries
▪Diversified NZ customer sales, weighted
towards business, commercial and
agricultural
▪40% of generation covered by TiwaiPoint
contract (price guarantee, not physical
supply)
▪Strong sustainability focus
$8.5b company, listed in 2013, 51%
Government owned
Meridian Energy Limited NZX Retail Investor Presentation October 20183

MERIDIAN ENERGY
▪Seven big hydro stations –flexible plant
with the country’s largest storage
▪With low operating costs and capital
needs
▪Five NZ wind farms, two in Australia
▪Proven success operating in a high wind
environment
▪Backed with more than a decade of
construction and operational experience
▪Typical long generation position to
manage variable hydro inflows
NZ’s largest generator, all production from
renewable sources
Meridian Energy Limited NZX Retail Investor Presentation October 20184
▪Recent acquisition of further renewable
generation and offtake agreements
Long-term competitor in Australia
Meridian Energy’s Benmore power station
Meridian Energy’s Manapōuripower station

HOW WE MAKE MONEY
Meridian Energy Limited NZX Retail Investor Presentation October 20185
666
629
435
1,039
-1,194
-154
195
86
-127
-259
16
0
400
800
1,200
1,600
2,000
2,400
Retail
Contracted
Sales
Wholesale
Contracted
Sales
Generation
Spot
Revenue
Cost to
Supply
Contracted
Sales
Cost of
Acquired
Generation
Acquired
Generation
Spot
Revenue
Australian
Earnings
Transmission
Costs
Operating
Costs
OtherEBITDAF
$M
Selling
electricity
to retail
customers
Selling
electricity
to
wholesale
customers
Selling
electricity we
generate to
the wholesale
market
Buying
electricity from
the wholesale
market for
customers
Buying
electricity
generated
by other
companies
Selling that
electricity to
the wholesale
market
Australian
retail and
generation
Costs of the
inter island
high voltage
link
Maintenance,
customer
service, IT,
salaries,
insurance

NZ ELECTRICITY DEMAND
Little demand growth in the last decade
Meridian Energy Limited NZX Retail Investor Presentation October 20186
▪Likely to be modest in the short term,
estimated between 0.5% and 1% pa on
average
▪New generation capacity will be needed,
probably after 2021
▪Older plant retirement will add to the
need for new generation
Future demand growth is expected
▪+ Economic growth
▪+ Positive net migration
▪-Industrial and manufacturing closure
▪-Warmer than average temperatures
▪-Growing impact of technology and
efficiency gains
▪+/-Variable irrigation load depending on
rainfall
30
40
50
60
70
80
90
19982002200620102014201820222026203020342038204220462050
TWh
DEMAND FORECASTS
NZ Historical Demand
Transpower
MBIE - High
MBIE - Low
Productivity Comm. - High
Productivity Comm. - Low
Meridian - High
Meridian - Low
Source: Meridian

NZ ELECTRICITY DEMAND
Zero Carbon New Zealand by 2050
Meridian Energy Limited NZX Retail Investor Presentation October 20187
▪Agriculture means NZ has one of the
highest per capita rates of emissions
▪32 million tonnes of carbon emissions
from the wider (non-agricultural) sector
could be removed through electrification
▪Converting all fossil fuel-based energy use
to renewables could add 75% to electricity
demand
▪Depending on the rate of electrification,
equivalent of two or more mid-sized wind
farms needed annually over the longer
term
▪Consent maturity is near dated
5%
17%
20%
49%
6%
3%
NZ 2016 SECTOR EMISSIONS
Electricity
Road transport
Stationary energy*
Agricultural
Industrial processes
Waste
0
3,000
6,000
9,000
12,000
15,000
201820192020202120222023202420252026202720282029203020312032203320342035
GWh
NZ CONSENT MATURITY
GeothermalGasWindTidalHydro
Source: Ministry for the Environment
Source: Meridian
*manufacturing (including milk processing), construction and commercial sectors and
domestic heating

POLITICS AND REGULATION
New Zealand
Meridian Energy Limited NZX Retail Investor Presentation October 20188
▪Policy support is increasing the pace of
NZ’s climate change actions
▪Government’s electricity price review has
delivered its first report
▪Energy affordability can be an issue
▪Low income households need better
support
▪Competition is high, customer
engagement varies
▪Industry delivers high quality supply
▪Distribution and transmission could be
more efficient
▪Lack of coherent energy policy to support
renewables
▪Electricity is highly politicised
Australia
Source: Ministry of Business, Innovation and Employment
0
2
4
6
8
10
12
14
16
18
20
2009201020112012201320142015201620172018
c/KWh
REAL RESIDENTIAL ELECTRICITY COST
Energy and other component
Lines component

TIWAI POINT ALUMINIUM SMELTER
12% of New Zealand’s total annual demand
Meridian Energy Limited NZX Retail Investor Presentation October 20189
▪CfDcontract with Meridian on NZAS
perpetual 12-month termination right
▪International aluminium is recovering,
LME prices up 13% in the last year
▪Additional 50MW contract signed
▪Aluminium remains a commodity exposed
to cycles and Chinese supply decisions
▪Meridian not expecting smelter closure,
change in ownership may occur
▪A smelter closure would trigger further
South Island grid investment (majority of
lower South Island generation can be
dispatched now)
▪Greater HVDC capacity and North Island
line uprating possible in the medium term
New Zealand Aluminium Smelter, TiwaiPoint

NEW TECHNOLOGIES
Solar
Meridian Energy Limited NZX Retail Investor Presentation October 201810
▪Solar uptake increasing in NZ as
economics slowly improve
▪NZ residential capacity factors are low
(13%-15%) and payback high (13 years)
▪Commercial solar opportunities are being
developed
▪Grid scale solar unlikely in NZ with
competing land uses and winter peak
demand
▪Solar uptake is much higher in Australia
with subsidy support
▪Residential capacity factors and paybacks
are better in Australia
▪Grid scale development is happening in
Australia as costs decrease significantly

NEW TECHNOLOGIES
Batteries
Meridian Energy Limited NZX Retail Investor Presentation October 201811
▪Battery value for energy management is in
load shifting (high to low price periods)
▪Grid scale unlikely in NZ due to large
hydro storage
▪Grid scale possible in Australia with
subsidy support
▪Solar and batteries to achieve residential
off-grid in NZ remains very expensive (20
year payback)
▪Batteries also offer other value:
▪Back-up power
▪Grid and transmission support
▪Avoided infrastructure costs

CLIMATE CHANGE
We have seen
Meridian Energy Limited NZX Retail Investor Presentation October 201812
▪No significant change to catchment
inflows over the last 100 years
▪Some seasonal shift in inflows; drier
autumns, wetter summers
▪Snowpack and glaciers getting smaller
Genesis Energy’s TekapoB power station
Contact Energy’s Clyde Dam
▪Wetter in our catchments, including in
winter
▪With bigger individual rain storms
▪Drier in irrigation areas
▪Warmer everywhere
▪Windier at our wind farms, especially in
winter
It is projected to get

SHAREHOLDER VALUE
Meridian Energy Limited NZX Retail Investor Presentation October 201813
High
Income
Strong free
cash flow
Low capital
needs
High free
cash flow
payout
Continued
cost
discipline
Progressive
ordinary DPS
Capital
management
Potential
Growth
NZ retail
load
Retail
platform
changes
Medium
term new
generation
Customer
growth in
Australia
Flux
Powershop
franchise
into the UK
Long term
sustainable
business

Meridian Energy Limited 2018 Annual Results Presentation14
The information in this presentation was prepared by Meridian Energy with due care and attention. However, the information issupplied in summary
form and is therefore not necessarily complete, and no representation is made as to the accuracy, completeness or reliabilityofthe information. In
addition, neither the company nor any of its directors, employees, shareholders nor any other person shall have liability whatsoever to any person for
any loss (including, without limitation, arising from any fault or negligence) arising from this presentation or any informationsupplied in connection
with it.
This presentation may contain forward-looking statements and projections. These reflect Meridian’s current expectations, based on what it thinks are
reasonable assumptions. Meridian gives no warranty or representation as to its future financial performance or any future matter. Except as required
by law or NZX or ASX listing rules, Meridian is not obliged to update this presentation after its release, even if things changematerially.
This presentation does not constitute financial advice. Further, this presentation is not and should not be construed as an offer to sell or a solicitation
of an offer to buy Meridian Energy securities and may not be relied upon in connection with any purchase of Meridian Energy securities.
This presentation contains a number of non-GAAP financial measures, including Energy Margin, EBITDAF, Underlying NPAT and gearing. Because they
are not defined by GAAP or IFRS, Meridian's calculation of these measures may differ from similarly titled measures presentedbyother companies
and they should not be considered in isolation from, or construed as an alternative to, other financial measures determined in accordance with GAAP.
Although Meridian believes they provide useful information in measuring the financial performance and condition of Meridian'sbusiness, readers are
cautioned not to place undue reliance on these non-GAAP financial measures.
The information contained in this presentation should be considered in conjunction with the company’s financial statements, which are included in
Meridian’s integrated report for the year ended 30 June 2018 and is available at:
WWW.MERIDIANENERGY.CO.NZ/INVESTORS/
All currency amounts are in New Zealand dollars unless stated otherwise.