Meridian Energy NZX Singapore investor presentation

PG 1

Meridian Energy NZX Singapore investor presentation
17 October 2018

Attached is a presentation Meridian Energy Limited is making at an NZX Investing In New Zealand event
being held in Singapore on 18 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

I N V E S T I N G I N N E W
Z E A L A N D
M A N A G E M E N T
P R E S E N TAT I O N

Meridian Energy Limited Investing in New Zealand October 20182
THE NEW ZEALAND ELECTRICITY MARKET

Meridian Energy Limited Investing in New Zealand October 20183
THE NEW ZEALAND ELECTRICITY MARKET
▪Delivering a reliable, affordable and environmentally sustainable electricity system
▪A well functioning market, characterised by:
▪Quality renewable resources
▪Progressive regulatory settings
▪Stable political environment
▪Rational market competition
▪Vertical integration is the prevailing structure
▪Wholesale and retail market regulation provided by an independent regulator –The Electricity Authority (EA)
▪EA mandate to deliver efficient market operation, security of supply, promote competition
▪No price controls, non-competitive distribution sector has regulated rates of return
“New Zealand serves as a
model for effective energy
markets and secure power
system operation”
International Energy Agency
(IEA) New Zealand 2017
Review

Meridian Energy Limited Investing in New Zealand October 20184
THE NEW ZEALAND ELECTRICITY MARKET
5major generators
(all listed)
1transmission grid
owner (state owned)
1big industrial user
(Rio Tinto/Sumitomo
smelter)
29distribution
businesses
(various
ownership
structures)
33retailers
(44 brands)
2.1million
consumers
(41 TWhpa)
2017 GENERATION MIX
Hydro
Geothermal
Biogas
Wood
Wind
Solar
Oil
Coal
Gas
Waste Heat
82%renewable
2017 CONSUMPTION MIX
Agriculture/
Forestry/ Fishing
Industrial
Commercial (incl.
Transport)
Residential
Sources: Electricity Authority and Ministry of Business, Innovation and Employment

Meridian Energy Limited Investing in New Zealand October 20185
THE NEW ZEALAND ELECTRICITY MARKET
▪New Zealand’s hydro generation is managed against
limited controlled storage
▪Bulk of hydro inflow is anti-correlated to winter
demand peak
▪Thermal capacity and fuel storage manages
potential hydro inflow deficit and other renewable
intermittency
▪Efficient and well-functioning wholesale market
manages this supply risk
▪Significant oversupply has existed in the market,
older thermal plant closure is bringing better
balance
▪Demand growth in the last decade has only been
modest

Meridian Energy Limited Investing in New Zealand October 20186
THE NEW ZEALAND ELECTRICITY MARKET
▪Market will be the key enabler of greater
decarbonisation in New Zealand
▪42% of non-agricultural carbon emissions could be
removed over time through electrification
▪Converting this fossil fuel-based energy use to
predominately renewables could add 75% to
current electricity demand
▪Depending on the rate of future electrification,
significant new generation will be needed
▪Unsubsidised renewables are likely to form the bulk
of new generation
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
5%
17%
20%
49%
6%
3%
NZ 2016 SECTOR EMISSIONS
Electricity
Road transport
Stationary energy*
Agricultural
Industrial processes
Waste
*manufacturing (including milk processing), construction
and commercial sectors and domestic heating
Source: Ministry for the Environment
Source: Meridian

Meridian Energy Limited Investing in New Zealand October 20187
THE NEW ZEALAND ELECTRICITY MARKET
▪New Zealand Government is conducting a review of
electricity prices
▪An initial paper has been released:
▪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
▪New Zealand residential electricity prices are 20% lower
than the OECD average and 40% lower than Australia
▪Pricing from the competitive parts of the electricity
supply chain have been flat in real terms since 2011
▪Historical distribution cost increases have resulted in
higher residential prices
*manufacturing (including milk processing), construction
and commercial sectors and domestic heating
9
12
15
18
2009201020112012201320142015201620172018
c/KWh
REAL RESIDENTIAL ELECTRICITY COST
Energy and other componentLines component
32%
27%
11%
13%
13%
3%
1%
AVERAGE RESIDENTIAL BILL
Generation
Distribution
Transmission
Retail
GST
Metering
Other
+28%
since 2009
+4%
since 2009
Source: Ministry of Business, Innovation and Employment
Source: Electricity Authority

Meridian Energy Limited Investing in New Zealand October 20188
MERIDIAN ENERGY

Meridian Energy Limited Investing in New Zealand October 20189
ABOUT MERIDIAN ENERGY
▪NZ$ 8b company, listed in 2013, 51% Government
owned
▪Largest and most liquid of five listed New Zealand
retailer generators
▪The only New Zealand electricity company with a
customer and asset base diversified across different
countries
▪Strong environmental, social and governance focus
▪40% of New Zealand generation covered by a price
guarantee contract with Rio Tinto/Sumitomo’s New
Zealand aluminium smelter

Meridian Energy Limited Investing in New Zealand October 201810
ABOUT MERIDIAN ENERGY
▪New Zealand’s largest generator, all production
from renewable sources
▪Seven big hydro stations –flexible plant with the
country’s largest storage
▪With low operating costs and capital needs
▪Five New Zealand wind farms and 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
▪Generation portfolio of wind, hydro and renewable
offtake in Australia

Meridian Energy Limited Investing in New Zealand October 201811
STRATEGIC FOCUS
Champion benefits of competitive
markets
▪Competing vigorously
▪Leadership in sustainability in New
Zealand and Australia
▪Supporting wholesale liquidity
Support retail growth & protecting our
generation legacy
▪Contribution of hydro to 100%
renewable aspiration
▪Maintaining a best in class generation
portfolio
▪Best placed renewable energy pipeline
C l e a n e n e r g y f o r a f a i r e r & h e a l t h i e r w o r l d
Grow overseas earnings, through
▪Expansion of challenger brand
▪Strengthening our vertically
integrated position
▪Flux client success
Grow New Zealand retail, through
▪Simpler systems
▪Reduced cost
▪Faster adoption
▪Relentless focus on customer
experience

Meridian Energy Limited Investing in New Zealand October 201812
SHAREHOLDER HIGHLIGHTS
▪Five successive years of earnings and dividend
growth since listing
▪Double digit shareholder returns every year since
listing
▪High free cash flow, high payoutratio, progressive
ordinary dividend policy
▪Structured capital management programme
running to 2022
▪Strategic focus on potential market growth in three
countries
19%
33%
31%
17%
14%
0%
5%
10%
15%
20%
25%
30%
35%
20142015201620172018
Financial Year ended 30 June
MERIDIAN TOTAL SHAREHOLDER RETURN
585
618
650
657
666
550
600
650
700
20142015201620172018
$M
Financial Year ended 30 June
EBITDAF
Source: Meridian
Source: Meridian

Meridian Energy Limited Investing in New Zealand October 201813
NEW TECHNOLOGIES
▪Solar uptake increasing in New Zealand as
economics slowly improve
▪New Zealand residential capacity factors are low
(13%-15%) and payback high (13 years)
▪Commercial solar opportunities are being
developed
▪Grid scale solar unlikely in New Zealand in the near
term 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

Meridian Energy Limited Investing in New Zealand October 201814
NEW TECHNOLOGIES
▪Battery value for energy management is in load
shifting (high to low price periods)
▪Grid scale unlikely in New Zealand due to large
hydro storage
▪Grid scale possible in Australia with subsidy support
▪Solar and batteries to achieve residential off-grid in
New Zealand remains very expensive (20 year
payback)
▪Batteries also offer other value:
▪Back-up power
▪Grid and transmission support
▪Avoided infrastructure costs

Meridian Energy Limited Investing in New Zealand October 201815
NEW TECHNOLOGIES
▪Electric vehicle levels are growing in New Zealand
▪Government and company fleet conversions
increasing
▪Meridian will have converted 80% of its passenger
fleet by 2020
▪New Zealand uptake dependent on the second-
hand import market, so expected to be gradual
▪Uptake may have system impacts, particularly
network resilience in high peak periods
▪Tariffs to incentivise off peak charging now in the
market
▪Technology may change with a move to fast
charging infrastructure
▪High fossil fuel generation in Australia limits electric
vehicle environmental proposition

Meridian Energy Limited Investing in New Zealand October 201816
MERIDIAN'S INVESTMENT PROPOSITION
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 Investing in New Zealand October 201817
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 reliability of the 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 information supplied 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 change materially.
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 presented by other 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's business, 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.
D I S C L A I M E R