Contact Energy – 2019 Interim Results
contactenergy.co.nz
MEDIA RELEASE
Monday, 11 February 2019
New products and services send customer advocacy sharply higher. Flexible
generation portfolio performed well in a volatile market. Distributions to shareholders
rise following the completion of two significant transactions
Highlights
Six months ended Comparison against
31 December 2018 1H18
EBITDAF
1
$291m up 23% from $236m
EBITDAF on continuing operations
$278m up 28% from $217m
Profit
$276m up 376% from $58m
Profit on continuing operations
$99m up 111% from $47m
Profit per share (cents)
38.6 cps up 377% from 8.1 cps
Underlying profit
1
$107m up 81% from $59m
Underlying profit per share (cents)
15.0 cps up 83% from 8.2 cps
Declared dividend (cents)
16.0 cps up 23% from 13.0 cps
Operating free cash flow
2
$203m up 44% from $141m
Operating free cash flow per share (cents)
2
28.3 cps up 44% from 19.7 cps
SIB Capital expenditure (cash)
$29m down 17% from $35m
Introduction of differentiated products and digital service investments improve
customer advocacy by 20%
Flexible generation portfolio and access to stored gas saw Contact increase wholesale
spot market sales during the higher priced October period as the market responded to
major gas field outages and lower national hydro storage levels
Working with customers, partners and suppliers to decarbonise New Zealand’s energy
sector, renewable generation up 10% on 1H18
Cost efficiency programme delivering, with cash spent on stay in business (SIB) capital
projects down by $6 million (17%) and other operating costs down $4 million (4%)
Completed the sale of Ahuroa gas storage (AGS) and the sale of the Rockgas LPG
business, receiving net cash proceeds of $438m in the period
Strong balance sheet, high quality renewable generation assets and lean, low cost
operations enable increasing dividends to shareholders with the target FY19 ordinary
dividend increasing to 39 cents per share, 7 cents per share higher than FY18. The
interim declared dividend is up by 23% to 16 cents per share
1
1
Refer to slides 39-42 of the 2019 Interim results presentation for a definition and reconciliation between statutory profit and the non-GAAP profit
measures earnings before net interest expense, tax, depreciation, amortisation, change in fair value of financial instruments and other significant
items (EBITDAF) and underlying profit (profit excluding significant items that do not reflect Contact’s ongoing performance).
² Refer to slide 23 of the 2019 Interim results presentation for a definition and reconciliation between cash flow from operating activities and the
non-GAAP measure operating free cash flow. Operating free cash flow represents cash available to repay debt, to fund distributions to
shareholders and growth capital expenditure.
contactenergy.co.nz
Putting our energy where it matters
“Despite a testing operating environment that included extended unplanned outages at some
of New Zealand’s largest gas fields, low hydro storage levels and a continuation of intense
retail competition, Contact’s flexible and resilient portfolio performed well. This was
underpinned by strong financial discipline, deepening the relationship with our customers
and a robust risk management framework”, Chief Executive Dennis Barnes said.
Contact reported a statutory profit for the six months ended 31 December 2018 of $276
million, $218 million higher than the prior corresponding period after realising a gain on the
sale of Rockgas and AGS of $172m. EBITDAF from continuing operations increased by $61
million, or 28%, to $278 million led by strong operational performance in the Wholesale
business. Operational improvements resulted in a further reduction in other operating costs
of $4 million, 4% down on the prior comparative period. Operating free cash flow increased
to $203 million, up 44% on 1H18 on a combination of higher operating earnings, lower stay
in business capital expenditure and interest costs that were partially offset by higher cash
tax.
“During the half we completed the sale of the AGS facility and the sale of the Rockgas LPG
business. These transactions simplify and focus the organisation and strengthen our
balance sheet”, Mr Barnes said.
Contact’s portfolio of long-life renewable generation assets supported by a robust balance
sheet provides the Board confidence to change the distribution policy to distribute ordinary
dividends targeting a pay-out ratio of 100% of Operating Free Cash Flow. This will see the
FY19 full year dividend target increased to 39 cents per share, compared to the 32 cents per
share declared for FY18. In line with the new policy, the Board has approved an interim
dividend of 16 cents per share which will be imputed up to 10 cents per share for qualifying
shareholders.
Connecting with our customers
Contact’s Customer business continues to reduce the cost to serve while improving the
customer experience.
Customer experience improvements saw a final quarter Net Promoter Score of +24, up 20%
on the prior comparative period while operational efficiencies led to a 2% reduction in the
cost to serve customers while also investing in a refreshed brand and new digital capability.
This has contributed to customer churn being 0.9 percentage points below the market
average and improved mass market electricity and gas earnings, with Customer EBITDAF
up by $3 million to $48 million for the six months ended 31 December 2018 when compared
to the same period a year ago.
“Even with volatile wholesale prices, the retail electricity market remains highly competitive,
with heavy discounting and large sign on credits the predominant tools for acquiring
customers. It’s important that we distinguish our products and services from our competitors
and we have accelerated the delivery of several smart customer solutions in the period,
including our new payment methods - PrePay and weekly/fortnightly billing - that help
customers manage their bills, and launched new products to deliver customer choice and
innovative rewards such as ‘free-bill’, ‘promise plan’ and our broadband and electricity
bundle. Empowering more customers to interact with us on their preferred digital channels
gives me confidence that our transformation into a customer-centric digital energy company
is progressing well” said Mr Barnes.
contactenergy.co.nz
Generating for the future
Contact’s Wholesale business is working with business customers, partners and suppliers to
decarbonise New Zealand’s energy sector.
“The conversion of business customers with a high carbon footprint to renewable energy will
enable demand-backed development of our consented geothermal resources. To accelerate
delivery of our strategy, we moved the Commercial and Industrial team into the Wholesale
business and are looking for opportunities to expand our offering to customers beyond
commoditised electricity”, Mr Barnes said.
Generation EBITDAF increased by $58 million to $243 million in the six months to 31
December 2018 compared to the same period a year ago, as production from hydro
generation increased by 25%, or 410GWh in line with historic averages after a dry 1H18 in
Contact’s Clutha catchment. In addition, as gas supply reduced, Contact supported the
market by accessing gas stored in AGS and offering additional thermal generation above our
contracted sales to meet wholesale spot demand.
“While the current lack of demand growth doesn’t support new renewable investment, we
are working hard to reduce the cost of our consented renewable development options to
meet the anticipated increasing demand from customers or execute on the economic
substitution of thermal generation with new renewables”, Mr Barnes said.
Outlook
“Contact has developed customer-centred processes, products and propositions that means
all customers can reliably access our best deals. This will continue with the imminent release
of our “basic plan”, a competitive no-frills, no prompt payment discount proposition. With
regards to the initial findings of the Electricity Price Review, customer-centred specific action
is necessary and a “one size fits all” approach will not work, as it is ultimately our customers
who will define the value of product features, discounts or rewards.
Recent gas production hasn’t been as reliable as we would have expected and we continue
to operate cautiously as we manage short-term supply constraints. Contact is engaging with
suppliers to contract gas for calendar year 2019 and beyond. In addition to the gas we
expect to contract, we have access to stored gas in AGS and other contractual options that
will give us appropriate access to energy for our customers.
In addition some of the nearer term priorities outlined, we will focus on delivering on our
transformation programme to reduce controllable costs, and seek opportunities to capture
value from scale efficiencies through brownfield geothermal development and by leveraging
our customer systems and lean operating model to improve returns”, Mr Barnes said.
ENDS
Investor enquiries: Matthew Forbes +64 21 072 8578
Media enquiries: Andrew Austin +64 21 644 167
---
2019
Interim
Financial Statements
Contact Interim Financial Statements 20192Contact Interim Financial Statements 20193
The energy that makes
the water hot, the milk
cold, keeps the warmth in
and the darkness out, is
nowhere near as vital as
the kind we carry within
ourselves. Human energy
is what makes us different.
It’s the kind of energy that
Contact is built on. And
the same energy that sets
us apart.
ABOUT THESE FINANCIAL STATEMENTS ...........................4
STATEMENT OF COMPREHENSIVE INCOME .....................5
STATEMENT OF CASH FLOWS ....................................................6
STATEMENT OF FINANCIAL POSITION .................................7
STATEMENT OF CHANGES IN EQUITY ..................................8
A. OUR PERFORMANCE ..................................................................9
A1. Segments ....................................................................................................9
A2. Earnings ......................................................................................................9
A3. Free cash flow .........................................................................................12
A4. Discontinued operation ...................................................................12
A5. Related party transactions ............................................................13
B. OUR FUNDING ..................................................................................14
B1. Share capital .............................................................................................14
B2. Dividends paid ........................................................................................14
B3. Borrowings ................................................................................................15
C. OUR ASSETS ....................................................................................16
C1. Property, plant & equipment and intangible assets .......16
D. OUR FINANCIAL RISKS ...............................................................17
D1. Transition to NZ IFRS 9 Financial Instruments ...................17
D2. Fair value of derivative financial instruments ....................17
INDEPENDENT AUDITOR’S REVIEW REPORT ...................19
GLOSSARY ..............................................................................................20
CORPORATE DIRECTORY .............................................................21
Contents
Contact Interim Financial Statements 20194Contact Interim Financial Statements 20195
About these Financial Statements
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
These interim Financial Statements are for Contact, a group made up of Contact Energy Limited and the entities over which it
has control or joint control.
Contact Energy Limited is registered in New Zealand under the Companies Act 1993. It is listed on the New Zealand stock
exchange (NZX) and the Australian Securities Exchange (ASX) and has bonds listed on the NZX debt market. Contact is an
FMC reporting entity under the Financial Markets Conduct Act 2013.
Contact’s interim Financial Statements for the six months ended 31 December 2018 provide a summary of Contact’s
performance for the period and outline significant changes to information reported in the Financial Statements for the year
ended 30 June 2018 (2018 Annual Report). The Financial Statements should be read with the 2018 Annual Report.
The Financial Statements have been prepared:
»In millions of New Zealand dollars
»In accordance with New Zealand generally accepted accounting practice (GAAP) and comply with NZ IAS 34 and with
IAS 34 Interim Financial Reporting
»Using the same accounting policies and significant estimation and critical judgments disclosed in the 2018 Annual
Report, except for those changed with Contact adopting NZ IFRS 9 Financial Instruments. The effect of these changes in
accounting policies are shown in note D1
»Certain comparative amounts have been reclassified to conform to the current year’s presentation and as a result of the
discontinued operation during the previous financial year (note A4).
The Financial Statements were authorised on behalf of the Contact Energy Limited Board of Directors on 8 February 2019:
Rob McDonald
Chair
Dame Therese Walsh
Chair, Audit Committee
$mNote
Unaudited
6 months ended
31 Dec 2018
Unaudited
6 months ended
31 Dec 2017
Audited
year ended
30 June 2018
Revenue and other incomeA21,304 1,1262,152
Operating expensesA2(1,026)(909)(1,703)
Significant itemsA25 (2)3
Depreciation and amortisationC1(102)(106)(215)
Net interest expense(39)(4 3)(84)
Profit before tax 14266 153
Tax expense(4 3)(19)(41)
Profit from continuing operations 9947 112
Discontinued operation
Profit from discontinued operation after taxA210 1120
Gain on sale of discontinued operationA2167--
Profit 276 58132
Items that may be reclassified to profit/(loss):
Change in hedge reserves (net of tax) - continuing operationsD2(22)(5)11
Change in hedge reserves (net of tax) - discontinued operationD2(3)13
Comprehensive income 251 54146
Profit per share (cents) - basic and diluted38.6 8.1 18.4
Profit per share (cents) from continuing operations 13.8 6.5 15.6
Profit per share (cents) from discontinued operation 24.8 1.6 2.8
Statement of Comprehensive Income
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
Contact Interim Financial Statements 20196Contact Interim Financial Statements 20197
Statement of Cash Flows
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
$mNote
Unaudited
6 months ended
31 Dec 2018
Unaudited
6 months ended
31 Dec 2017
Audited
year ended
30 June 2018
Receipts from customers 1,396 1,212 2,281
Payments to suppliers and employees(1,087)(976)(1,791)
Ta x p a i d(41)(20)(33)
Operating cash flows268 216 457
Purchase of assets(29)(39)(82)
Proceeds from sale of assets/operations438 - 6
Interest received- -1
Investing cash flows 409 (39)(75)
Dividends paidB2(136)(107)(201)
Proceeds from issues of shares- 1 1
Proceeds from borrowings-- 118
Repayment of borrowings(298)(14)(217)
Interest paid(36)(4 0)(79)
Gas sale and repurchase arrangement-(7)(7)
Financing cash flows(470)(167)(385)
Net cash flow207 10 (3)
Add: cash at the beginning of the year3 6 6
Cash at the end of the year210 16 3
Statement of Financial Position
AT 31 DECEMBER 2018
$mNote
Unaudited
31 Dec 2018
Unaudited
31 Dec 2017
Audited
30 June 2018
Cash and cash equivalents
210 16 3
Trade and other receivables153 182 175
Inventories31 38 35
Intangible assetsC137 23 10
Derivative financial instrumentsD215 9 14
Assets held for sale- 184 299
Total current assets 446 452 536
Inventories
17 21 23
Property, plant and equipmentC14,190 4,402 4,253
Intangible assetsC1249 275 262
Goodwill179 182 179
Derivative financial instrumentsD259 47 51
Other non-current assets - 11 7
Total non-current assets 4,694 4,938 4,775
To t a l a s s e t s 5,140 5,390 5,311
Trade and other payables
181 182 172
Ta x p a y a b l e 71 10 7
BorrowingsB3315 442 513
Derivative financial instrumentsD237 51 17
Provisions7 12 11
Liabilities held for sale- - 42
Total current liabilities
611 697 762
BorrowingsB3885 1,108 972
Derivative financial instrumentsD253 54 44
Provisions51 51 48
Deferred tax690 74 6 751
Other non-current liabilities7 7 7
Total non-current liabilities 1,686 1,966 1,822
Total liabilities 2 ,297 2 ,663 2,584
Net assets
2 ,843 2 ,727 2 ,727
Share capitalB11,522 1,519 1,520
Retained earnings 1,334 1,214 1,194
Hedge reserves(18)(11)7
Share-based compensation reserve 5 5 6
Shareholders' equity 2 ,843 2 ,727 2 ,727
Contact Interim Financial Statements 20198Contact Interim Financial Statements 20199
Statement of Changes in Equity
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
$mNote
Share
capital
Retained
earnings
Other
reserves
Shareholders'
equity
Balance at 1 July 2017
1,515 1,263 - 2 ,778
ProfitA2- 58 - 58
Change in hedge reserves (net of tax) - - (4) (4)
Exercised share scheme awards - - (3) (3)
Share-based compensation expense - - 1 1
Change in share capital 4 - - 4
Dividends paidB2- (107)- (107)
Unaudited balance at 31 December 2017 1,519 1,214 (6) 2 ,727
ProfitA2- 74 - 74
Change in hedge reserves (net of tax) - - 18 18
Exercised share scheme awards
- -
(1) (1)
Share-based compensation expense
- - 2 2
Change in share capital 1 - - 1
Dividends paidB2- (93)- (93)
Audited balance at 30 June 2018 1,520 1,194 13 2 ,727
ProfitA2- 276 - 276
Change in hedge reserves (net of tax) - - (25) (25)
Exercised share scheme awards - - (3) (3)
Share-based compensation expense
- - 2 2
Change in share capital 2 - - 2
Dividends paidB2- (136)- (136)
Unaudited balance at 31 December 2018 1,522 1,334 (13) 2 ,843
A1. SEGMENTS
Contact changed its operating segments and now reports under the below two operating segments. The new operating
segments provide a clearer view of profitability in the operating businesses, as the segments exclude indirect corporate costs.
All comparative information has been restated.
The Wholesale segment includes revenue from the sale of electricity to the wholesale electricity market, to Commercial &
Industrial (C&I) customers and to the Customer segment, less the cost to generate and/or purchase the electricity and costs
to serve and distribute electricity to C&I customers.
The Customer segment includes revenue from delivering electricity, natural gas and other products and services to
customers less the cost of purchasing those products and services, and the costs to serve customers. The Customer
segment in the following table excludes Rockgas Limited (Rockgas) the discontinued operation – refer note A4.
Unallocated includes corporate functions not directly allocated to the operating segments.
The Customer segment purchases electricity from the Wholesale segment at a price fixed in a manner similar to transactions
with third parties.
A2. EARNINGS
The table on the next page provides a breakdown of Contact’s revenue and expenses, earnings before interest, tax,
depreciation and amortisation, changes in fair value of financial instruments and significant items (EBITDAF) by segment, and
a reconciliation from EBITDAF and underlying profit to profit reported under NZ GAAP.
EBITDAF and underlying profit are used to monitor performance and are non-GAAP profit measures. Significant items are
excluded from EBITDAF and underlying profit when they meet criteria approved by the Board of Directors.
The Electricity Authority (EA) are reviewing a claim of an Undesirable Trading Situation (UTS) from September/October 2018.
If the EA finds a UTS existed then under the Electricity Industry Participation Code the EA have a number of remedies
available to it including directing that any trades be closed out or settled at a specified price. Contact has made no provision
for this outcome as Contact maintains the high spot prices reflect supply-demand conditions during the period.
A. Our Performance
Notes to the financial statements for the six months ended 31 December 2018
The revenue and operating expense categories include the
below line items:
»Wholesale electricity, net of hedging: Revenue
received from electricity generated and sold through the
wholesale market and the net settlement of electricity
hedges sold on the electricity futures markets, to
generators, other retailers and industrial customers.
»Electricity purchases, net of hedging: The cost of
electricity purchased from the wholesale market to
supply customers and the net settlement of buy-side
electricity hedges. Revenue received to manage
location risk, including Financial Transmission Rights is
also included.
»Electricity-related services revenue: Revenue from the
sale of complementary products and services to the
wholesale market for the provision of instantaneous
reserves, frequency keeping and other ancillary services.
»Electricity-related services cost: This includes
reserve costs, constrained on costs, frequency keeping
and other ancillary service costs.
The significant items in this reporting period are:
»Change in fair value of financial instruments:
Movements in the valuation of electricity price
derivatives that are not accounted for as hedges, hedge
accounting ineffectiveness and the effect of credit risk
on the valuation of hedged debt and derivatives. Refer to
note D2 for a breakdown.
»Gain on sale of Rockgas: Rockgas was sold to Gas
Services NZ Midco Limited on 30 November 2018. Refer
note A4.
»Gain on sale of Ahuroa Gas Storage (AGS) Facility:
The sale of the AGS Facility to GSNZ SPV1 Limited
(GSNZ) was completed on 1 October 2018. Cash
proceeds from sale received to date are $190 million
resulting in a gain on sale of $5 million before tax after
deducting net assets of $185 million. Consideration of up
to $10 million remains unrecognised as it is contingent
on GSNZ obtaining a favourable binding ruling as to the
tax treatment of the main assets it acquired.
»Remediation for Holidays Act non-compliance:
During the current period, spend of $1 million has been
incurred in order to resolve non-compliance with
aspects of the Holidays Act 2003. The provision has
also been reduced by $2 million as a result of ongoing
reassessment. The provision for remediation of the
Holidays Act non-compliance is $1 million at 31
December 2018 (31 December 2017: $5 million, 30 June
2018: $4 million).
Contact Interim Financial Statements 201910Contact Interim Financial Statements 201911
Unaudited 6 months ended 31 Dec 2018 Unaudited 6 months ended 31 Dec 2017 Audited year ended 30 June 2018
$mWholesaleCustomerUnallocated Eliminations
To t a l
continuing
operations
Discontinued
operationTo t a lWholesaleCustomerUnallocated Eliminations
To t a l
continuing
operations
Discontinued
operationTo t a lWholesaleCustomerUnallocated Eliminations
To t a l
continuing
operations
Discontinued
operationTo t a l
Mass market electricity-455 - -455 - 455 -458 - - 458- 458- 884 - (1)883 - 883
C&I electricity - Fixed Price 199-- - 199- 199217- - - 217- 217432 - - - 432 - 432
C&I electricity - Spot16 - - - 16 - 16 11- - - 11- 1120- - - 20- 20
Wholesale electricity, net of hedging560 - - - 560 - 560 380-- - 380- 380705 - - - 705 - 705
Electricity-related services revenue8 - - - 8 - 8 3-- - 3- 3 7 - - - 7 - 7
Inter-segment electricity sales159 - - (159)- - - 159-- (159)-- -314 - - (314) - - -
Gas2 39 - - 41 - 41 -39 - -39- 394 71 - - 75 - 75
LPG- - - - - 58 58 -- - -- 63 63- - - - - 121 121
Steam16 - - - 16 - 16 14-- -14 - 1425 - - - 25 - 25
Total revenue960 494 - (159) 1,295 58 1,353 784497 - (159)1,122 63 1,1851,507 955 - (315) 2 ,147 121 2 ,268
Other income 6 3 - - 91 10 22 - -4 1 5- 5 - - 5 2 7
Total revenue and other income966 497 - (159) 1,304 59 1,363 786499 - (159)1,126 64 1,1901,507 960 - (315) 2 ,152 123 2 ,275
Electricity purchases, net of hedging(4 85)- - - (4 85)- (4 85)(367)- - - (367)- (367)(657)- - - (657)- (657)
Electricity purchases - Spot(14)- - - (14)- (14)(9)- - - (9)- (9)(17)- - - (17)- (17)
Electricity-related services cost(7)- - - (7)- (7)(4)- - - (4)- (4)(7)- - - (7)- (7)
Inter-segment electricity purchases- (159)- 159 - - - -(159)- 159-- -- (314)- 314 - - -
Gas and diesel purchases(51)(10)- - (61)- (61)(57)(8)- - (65)-
(65)(107)(16)- - (123)- (123)
Gas storage costs(6)- - - (6)- (6)(1)- - - (1)- (1)(1)- - - (1)- (1)
LPG purchases- - - - - (37)(37)-- - - -(36)(36)- - - - - (73)(73)
Generation transmission & reserve costs(21)- - - (21)- (21)(20)- - - (20)- (20)(39)- - - (39)- (39)
Electricity networks, levies & meter costs
- Fixed Price
(72)(219)- - (291)- (291)(78)(225)- - (303)- (303)(152)(4 3 3)- - (585)- (585)
Electricity networks, transmission levies &
meter costs - Spot
(2)- - - (2)- (2)(2)- - - (2)- (2)(3)- - - (3)- (3)
Gas networks, transmission & meter costs(5)(20)- - (25)- (25)(5)(20)- - (25)- (25)(9)(37)- - (4 6)- (4 6)
Other operating expenses(50)(4 0)(13)-(103)(7)(110)(52)(41)(13)-(106)(8)(114)(103)(82)(24)1 (208)(15)(223)
Carbon emission costs(10)(1)- - (11)(2)(13)(6)(1)-- (7)(1)(8)(15)(2)- - (17)(3)(20)
Total operating expenses(723)(4 49)(13)159 (1,026)(46)(1,072)(601) (454) (13)159(909)(45)(954)(1,110)(884)(24)315 (1,703)(91)(1,794)
EBITDAF243 48 (13) - 278 13 291 185 45(13)-21719 236 397 76(24)- 449 32 481
Depreciation and amortisation (102)-(102)(106)(3) (109) (215) (5) (220)
Net interest expense (39)-(39)(4 3)-(4 3) (84) - (84)
Tax on underlying profit (4 0)(3)(4 3) (20)(5) (25)(4 0) (7) (47)
Underlying profit 97 10 107 48 11 59 110 20 130
Significant items
Change in fair value of financial instruments (2)- (2) (2) - (2) 3-3
Gain on sale of Rockgas - 167 167 - - - - - -
Gain on sale of AGS Facility 5 - 5 - - -- - -
Remediation for Holidays Act
non-compliance
2 - 2 ------
Tax on significant items (3)- (3) 1 - 1(1)-(1)
Profit 99 177 276 47 11 58112 20 132
Underlying profit per share (cents) 13.6 1.4 15.0
6.6 1.6 8.2 15.4 2 .7 18.1
Contact Interim Financial Statements 201912Contact Interim Financial Statements 201913
A3. FREE CASH FLOW
$m
Unaudited
6 months ended
31 Dec 2018
Unaudited
6 months ended
31 Dec 2017
Audited
year ended
30 June 2018
EBITDAF
291 236 481
Ta x p a i d (41) (20) (33)
Change in working capital net of non-cash, investing and financing activities10(8) (7)
Non-cash items included in EBITDAF98 17
Significant items, net of non-cash amounts
(1) - (1)
Operating cash flows 268 216 457
Net interest paid
(36) (4 0) (78)
Stay in business capital expenditure (29) (35) (78)
Operating free cash flow
203 141 301
Proceeds from sale of assets/operations 438 - 6
Free cash flow
641 141 307
Operating free cash flow per share (cents) 28.3 19.7 42 .0
Proceeds from sale of assets/operations, in the table above, does not include the tax payable for the AGS sale ($44 million)
and certain cash flows in relation to the Rockgas sale (refer note A4), as these are expected to occur in the second half of the
current financial year.
A4. DISCONTINUED OPERATION
At 30 June 2018 the sale of Rockgas, a wholly owned subsidiary of Contact, was highly probably resulting in the assets and
liabilities of Rockgas being classified as held for sale and its operations reported separately as a discontinued operation.
The sale of Rockgas to Gas Services NZ Midco Limited (Purchaser) completed on 30 November 2018. The results for the
period up to 30 November 2018 and the gain on sale have been presented as a discontinued operation in the Statement of
Comprehensive Income, with a breakdown in note A2. The impact on the Group following the sale is shown below.
Details of sale of Rockgas Limited
$m
Unaudited
6 months ended
31 Dec 2018
Sales price260
Initial net debt adjustment(10)
Sales proceeds received250
Carrying value of assets disposed(76)
Costs to sell(4)
Working capital and final net debt adjustments9
Settlement of carbon and income tax liabilities(12)
Provisional gain on sale167
The working capital and final net debt adjustments in the gain on sale are subject to finalisation with the Purchaser.
$m
Unaudited
30 Nov 2018
Cash and cash equivalents 1
Trade and other receivables23
Inventories 4
Property, plant and equipment and intangible assets 83
Goodwill 3
Other non-current assets3
Assets 117
Trade and other payables 14
Ta x p a y a b l e 8
Borrowings (lease obligations)9
Provisions 2
Deferred tax 8
Liabilities 41
Carrying value of assets disposed76
The carrying amounts of assets and liabilities as at the date of sale were:
Net cash flows of the discontinued operation
The cash flows for the discontinued operation up to the date of disposal are presented below.
$m
Unaudited
6 months ended
31 Dec 2018
Unaudited
6 months ended
31 Dec 2017
Audited
year ended
30 June 2018
Net operating cash flows
91935
Net investing cash flows246(3)(6)
Net cash flows from discontinued operation2551629
Net investing cash flows include the cash proceeds from sale of Rockgas being the sales price less the initial net debt
adjustment and costs to sell incurred in the current financial period. Cash proceeds from the sale yet to be received/paid
include the working capital and final net debt adjustments, settlement of carbon and income tax liabilities, and remaining
costs to sell.
Operating free cash flow from the discontinued operation is $7 million (31 December 2017: $16 million, 30 June 2018:
$29 million) and free cash flow is $255 million (31 December 2017: $16 million, 30 June 2018: $29 million).
A5. RELATED PARTY TRANSACTIONS
Contact’s related parties include Directors and the Leadership Team. Contact sold its 50% interest in Rockgas Timaru
Limited as part of the sale of Rockgas on 30 November 2018. Transactions with Rockgas Timaru Limited up to that point and
all other related party transactions are disclosed below:
»Sales of LPG to Rockgas Timaru Limited of $1 million (31 December 2017: $1 million, 30 June 2018: $2 million).
»Directors’ fees of $1 million (31 December 2017: $1 million, 30 June 2018: $1 million).
»Leadership Team’s salary and other short-term benefits of $4 million (31 December 2017: $4 million, 30 June 2018:
$6 million), which includes $1 million of share-based compensation expense (31 December 2017: $1 million, 30 June 2018:
$1 million).
Contact Interim Financial Statements 201914Contact Interim Financial Statements 201915
B1. SHARE CAPITAL
During the period Contact granted a new tranche of share awards under the Equity Scheme, comprising 124,751 PSRs and
859,458 DSRs. PSRs and DSRs have no exercise price.
B2. DIVIDENDS PAID
On 8 February 2019 the Board declared an interim dividend of 16 cents per share to be paid on 9 April 2019.
Number$m
Balance at 1 July 2017
715,525,756 1,515
Share capital issued 750,281 4
Balance at 31 December 2017 716,276,037 1,519
Share capital issued 10,533 1
Balance at 30 June 2018 716,286,570 1,520
Share capital issued 418,002 2
Balance at 31 December 2018 716,704,572 1,522
Comprised of:
Ordinary shares 716,374,842 1,523
Restricted shares - Contact Share 329,730 (1)
$m
Cents per share
Unaudited
6 months ended
31 Dec 2018
Unaudited
6 months ended
31 Dec 2017
Audited
Year ended
30 June 2018
2017 final dividend
15
- 107 107
2018 interim dividend
13
- - 93
2018 final dividend
19
136 - -
136 107 201
B. Our Funding
Notes to the financial statements for the six months ended 31 December 2018
Borrowings denoted with an asterisk (*) are Green Debt Instruments under Contact’s Green Borrowing Programme. At 31
December 2018 Contact remains compliant with the requirements of the programme. Further information is available on the
sustainability section on Contact’s website.
Contact uses bank facilities to manage its liquidity risk and maintains a buffer of undrawn bank facilities over its forecast
funding requirements to enable it to meet any unforeseen cash flows.
Contact’s bank facilities have a range of maturities:
$m
Unaudited
31 Dec 2018
Unaudited
31 Dec 2017
Audited
30 June 2018
Bank overdraft
1 3 2
*Commercial paper 80 180 140
*Bank facilities - 106 231
Lease obligations 26 38 38
*Wholesale bonds 50 100 50
*Retail bonds 472 472 472
*Export credit agency facility 65 72 68
*USPP notes 4 47 560 4 47
Face value of borrowings 1,141 1,531 1,448
Deferred financing costs (5) (7) (6)
Fair value adjustment on hedged borrowings 64 26 52
Carrying value of borrowings 1,200 1,550 1,494
Current 315 442 513
Non-current 885 1,108 972
Liabilities held for sale - Lease obligations - - 9
B3. BORROWINGS
$m
Unaudited
31 Dec 2018
Unaudited
31 Dec 2017
Audited
30 June 2018
Less than 1 year
85 170 160
Between 1 and 2 years 165 110 160
Between 2 and 3 years 125 80 175
More than 3 years 50 165 100
425525595
Contact Interim Financial Statements 201916Contact Interim Financial Statements 201917
C1. PROPERTY, PLANT & EQUIPMENT AND INTANGIBLE ASSETS
C. Our Assets
Notes to the financial statements for the six months ended 31 December 2018
Included within property, plant and equipment is $29 million (31 December 2017: $38 million, 30 June 2018: $32 million), of
lease assets with a depreciation charge of $2 million for the six months ended 31 December 2018 (31 December 2017:
$2 million, 30 June 2018: $5 million).
At 31 December 2018, Contact was committed to $8 million of capital expenditure (31 December 2017: $11 million, 30 June
2018: $6 million) and $7 million of carbon forward contracts (31 December 2017: $2 million, 30 June 2018: $27 million), with all
payments due within one year of the reporting period end.
Property, plant and equipment
$m
Unaudited
31 Dec 2018
Unaudited
31 Dec 2017
Audited
30 June 2018
Opening balance
4,2534,611 4,611
Additions2236 61
Transfers to assets held for sale- (155)(237)
Depreciation(84)(90)(182)
Disposals(1)--
Closing balance4,1904,4024,253
Intangible assets
$m
Unaudited
31 Dec 2018
Unaudited
31 Dec 2017
Audited
30 June 2018
Opening balance
272332 332
Additions3515 23
Transfers to assets held for sale- (29)(28)
Amortisation(18)(19)(38)
Disposals(3)(1)(17)
Closing balance286298272
Current37 23 10
Non-current249 275 262
D1. TRANSITION TO NZ IFRS 9 FINANCIAL INSTRUMENTS
NZ IFRS 9 Financial Instruments (NZ IFRS 9) replaces NZ IAS 39 Financial Instruments: Recognition and Measurement.
Contact transitioned to NZ IFRS 9 with a date of initial application of 1 July 2018. NZ IFRS 9 addresses the classification and
measurement of financial assets and financial liabilities, the impairment of financial assets and hedge accounting. The
transition has resulted in two key changes being the recognition of a cost of hedging reserve and the application of hedge
accounting to interest rate swaps that were not previously hedge accounted.
Contact now recognises a cost of hedging reserve to record the change in the fair value of the cost to convert foreign currency
of Cross Currency Interest Rate Swaps (CCIRS) into New Zealand dollars. Contact has elected to apply NZ IFRS 9 on a
retrospective basis, however has not restated comparative information. Instead the impact is reflected in opening equity on 1
July 2018. This resulted in an increase in the cost of hedging reserve of $1 million, offset by a decrease in the cash flow hedge
reserve of $1 million. The cost of hedging reserve at 31 December 2018 is nil and the cash flow hedge reserve is a debit of $18
million. These reserves are presented together in the Statement of Financial Position as “Hedge reserves”.
Contact has applied the new hedge accounting requirements prospectively and all interest rate swaps now qualify as
continuing hedging relationships, which aligns more closely with Contact’s interest rate risk management activity. This has
resulted in interest rate swaps not previously designated in a hedge relationship being hedge accounted from 1 July 2018 as
cash flow hedges.
D2. FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS
The fair value of derivatives used to hedge risk, excluding held for sale derivatives, categorised by accounting treatment is
provided below.
* For interest rate swaps in place on transition to NZ IFRS 9, the hedging relationship for accounting purposes can only
commence on 1 July 2018. This means that interest rate swaps will not be exactly matched to the underlying exposure. Any
hedge ineffectiveness will continue to be recognised in the Statement of Comprehensive Income.
D. Our Financial Risks
Notes to the financial statements for the six months ended 31 December 2018
Unaudited
31 Dec 2018
Unaudited
31 Dec 2017
Audited
30 June 2018
$mAssetLiabilityAssetLiabilityAssetLiability
Fair value hedges
CCIRS 57 - 44 (26) 47 (2)
Interest rate swaps 5 - 7 - 5 -
Cash flow hedges
CCIRS - margin- (2) - (4) - (2)
Interest rate swaps* - (60) - - - -
Electricity and LPG price derivatives6 (24)- (12)9 (1)
Derivatives not designated in hedge relationship
Interest rate swaps--1 (55)2 (54)
Electricity price derivatives6 (5)4 (8)2 (2)
74 (91)56 (105)65 (61)
Current15 (37)9 (51)14 (17)
Non-current59 (53)47 (54)51 (4 4)
Contact Interim Financial Statements 201918Contact Interim Financial Statements 201919
Unaudited
6 months ended
31 Dec 2018
Unaudited
6 months ended
31 Dec 2017
Audited
year ended
30 June 2018
$m
Profit/
(loss)
Hedge
reserves
Profit/
(loss)
Hedge
reserves
Profit/
(loss)
Hedge
reserves
CCIRS 12 - 15 - 42 -
Interest rate swaps- - (1) - (3) -
Fair value adjustment to borrowings (13) - (15) - (41) -
Fair value hedges (1) - (1) - (2) -
CCIRS - margin - - - - - 2
Interest rate swaps (1) (7) - - - -
Foreign exchange derivatives - (1) - - - 1
Electricity and LPG price derivatives - (26) - (6) - 16
Tax on change in fair value - 9 - 2 - (5)
Cash flow hedges (1) (25) - (4) - 14
Interest rate swaps - - (1)- 1 -
Electricity price derivatives-- -- 4 -
Derivatives not designated in hedge relationships-- (1) - 5 -
Total fair value movement (2) (25) (2) (4) 3 14
The change in the fair value of derivatives is provided below. The fair value movements in hedge reserves includes the
discontinued operation in all periods.
Independent Auditor’s Review Report
To the shareholders of Contact Energy Limited
REPORT ON THE INTERIM FINANCIAL
STATEMENTS
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements on
pages 4 to 18 do not:
i. present fairly in all material respects the company’s
financial position as at 31 December 2018 and its
financial performance and cash flows for the six
month period ended on that date; and
ii. comply with NZ IAS 34 Interim Financial Reporting.
We have completed a review of the accompanying interim
financial statements which comprise:
»the statement of financial position as at 31 December
2018;
»the statements of comprehensive income, changes in
equity and cash flows for the six month period then
ended; and
»notes, including a summary of significant accounting
policies and other explanatory information.
Basis for conclusion
A review of interim financial statements in accordance with
NZ SRE 2410 Review of Financial Statements Performed by
the Independent Auditor of the Entity (“NZ SRE 2410”) is a
limited assurance engagement. The auditor performs
procedures, consisting of making enquiries, primarily of
persons responsible for financial and accounting matters,
and applying analytical and other review procedures.
As the auditor of Contact Energy Limited, NZ SRE 2410
requires that we comply with the ethical requirements
relevant to the audit of the annual financial statements.
Our firm has also provided other services to the company in
relation to AGM Scrutineering and trustee reporting. Subject
to certain restrictions, partners and employees of our firm
may also deal with the company on normal terms within the
ordinary course of trading activities of the business of the
company. These matters have not impaired our
independence as reviewer of the company. The firm has no
other relationship with, or interest in, the company.
Use of this Independent Auditor’s Review Report
This report is made solely to the shareholders as a body. Our
review work has been undertaken so that we might state to
the shareholders those matters we are required to state to
them in the Independent Auditor’s Review Report and for no
other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
shareholders as a body for our review work, this report, or
any of the opinions we have formed.
Responsibilities of the Directors for the interim
financial statements
The Directors, on behalf of the company, are responsible for:
»the preparation and fair presentation of the interim
financial statements in accordance with NZ IAS 34
Interim Financial Reporting;
»implementing necessary internal control to enable the
preparation of interim financial statements that are fairly
presented and free from material misstatement,
whether due to fraud or error; and
»assessing the ability to continue as a going concern.
This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of
accounting unless they either intend to liquidate or to
cease operations, or have no realistic alternative but to
do so.
Auditor’s Responsibilities for the review of the
interim financial statements
Our responsibility is to express a conclusion on the interim
financial statements based on our review. We conducted our
review in accordance with NZ SRE 2410. NZ SRE 2410
requires us to conclude whether anything has come to our
attention that causes us to believe that the interim financial
statements are not prepared, in all material respects, in
accordance with NZ IAS 34 Interim Financial Reporting.
The procedures performed in a review are substantially less
than those performed in an audit conducted in accordance
with International Standards on Auditing (New Zealand).
Accordingly we do not express an audit opinion on these
interim financial statements.
This description forms part of our Independent Auditor’s
Review Report.
David Gates
For and on behalf of KPMG
Wellington, 8 February 2019
Contact Interim Financial Statements 201921Contact Interim Financial Statements 201920
Glossary
AGSAhuroa Gas Storage
ASXAustralian Securities Exchange
C&ICommercial and Industrial
CCIRSCross currency interest rate swaps
DSR/PSRDeferred share rights / performance share rights
EAElectricity Authority
EBITDAFA non-GAAP measure equal to earnings before net interest expense, tax,
depreciation and amortisation, changes in fair value of financial instruments and
other significant items (refer note A2)
Free cash flowA non-GAAP measure of the cash generating performance of the business. It
represents cash available to fund distributions to shareholders and growth capital
expenditure. It is equal to operating cash flows less net interest paid and
stay-in-business capital expenditure plus proceeds from asset sales
LPGLiquid petroleum gas
NZ GAAPNew Zealand generally accepted accounting practice
NZXNew Zealand Stock Exchange
Operating free cash flowA non-GAAP measure equal to Free cash flow less proceeds from asset sales
Significant itemsItems excluded from EBITDAF and underlying profit. These items are determined in
accordance with the principles of consistency, relevance and clarity (refer note A2)
Underlying profitA non-GAAP measure equal to reported profit/(loss) adjusted for significant
items that do not reflect Contact’s ongoing performance (refer note A2)
USPPUnited States private placement
Corporate directory
BOARD OF DIRECTORS
Rob McDonald (Chair)
Victoria Crone
Whaimutu Dewes
Jon MacDonald
David Smol
Elena Trout
Dame Therese Walsh
LEADERSHIP TEAM
Dennis Barnes
Chief Executive Officer
Dorian Devers
Chief Financial Officer
Venasio-Lorenzo Crawley
Chief Customer Officer
James Kilty
Chief Generation and Development Officer
Tania Palmer
Chief People Officer
Catherine Thompson
General Manager, External Relations and General Counsel
REGISTERED OFFICE
Contact Energy Limited
Harbour City Tower
29 Brandon Street
Wellington 6011
New Zealand
Phone: +64 4 499 4001
Fax: +64 4 499 4003
Find us on Facebook, Tw i t t e r, LinkedIn and Yo uTu b e by
searching for Contact Energy
COMPANY NUMBERS
NZ Incorporation 660760
ABN 68 080 480 477
AUDITOR
KPMG
PO Box 996
Wellington 6140
REGISTRY
Change of address, payment instructions and investment
portfolios can be viewed and updated online:
investorcentre.linkmarketservices.co.nz
investorcentre.linkmarketservices.com.au
New Zealand Registry
Link Market Services Limited, PO Box 91976, Auckland 1142
Level 11, Deloitte Centre, 80 Queen Street, Auckland 1010
contactenergy@linkmarketservices.co.nz
Phone: + 64 9 375 5998
Fax: +64 9 375 5990
Australian Registry
Link Market Services Limited, Locked Bag A14, Sydney
South, NSW 1235
680 George Street, Sydney, NSW 2000
contactenergy@linkmarketservices.com.au
Phone:+61 2 8280 7111
Fax: + 61 2 9287 0303
INVESTORS ENQUIRIES
Matthew Forbes
Investor Relations Manager
investor.centre@contactenergy.co.nz
Phone: +64 4 462 1323
---
1
2019 Interim Results Presentation
Six months ended 31 December 2018
2
Disclaimer and important information
This presentation may contain projections or forward-looking statements regarding a variety of items. Such forward-looking statements are
based upon current expectations and involve risks and uncertainties.
Actual results may differ materially from those stated in any forward-looking statement based on a number of important factors and risks.
Although management may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward-looking
statements will be realised.
EBITDAF, underlying profit, free cash flow and operating free cash flow are non-GAAP (generally accepted accounting practice) measures.
Information regarding the usefulness, calculation and reconciliation of these measures is provided in the supporting material.
Furthermore, while all reasonable care has been taken in compiling this presentation, Contact accepts no responsibility for any errors or
omissions.
This presentation does not constitute investment advice.
Numbers in the presentation have not all been rounded and might not appear to add.
3
Agenda
1
1H19 Highlights and Progress on Strategy
Dennis Barnes, CEO
4 -14
15 -25
2
Operational Performance and Financial Results
Dorian Devers, CFO
26 -30
3
Market Update and Outlook
Dennis Barnes, CEO
4
4
1H19 Highlights and Progress on Strategy
Dennis Barnes
CEO
5
Strong financial performance and optimisation of
the portfolio results in higher dividends
Summary of key financial performance measures
1
Refer to slides 39-42 for a definition and reconciliation of EBITDAF and underlying profit
2
Refer to slides 23 for a reconciliation of operating free cash flow
Six months ended 31 December 2018
Continuing operations
comparison against 1H18
Continuing
operations
Discontinued
operation
Total
EBITDAF
1
$278m$13m$291m
↑
28% from $217m
Profit
$99m$177m$276m
↑
111% from $47m
Profit per share
13.8cps24.8 cps38.6 cps
↑
112% from 6.5 cps
Underlying profit
1
$97m$10m$107m
↑
102% from $48m
Underlying profit per share
13.6 cps1.4 cps15.0 cps
↑
106% from 6.6 cps
Declared interim dividend per share
16.0 cps
↑
23% from 13.0cps
Operating free cash flow
2
$196m$7m$203m
↑
57% from $125m
Operating free cash flow per share
2
27.3 cps1.0 cps28.3 cps
↑
57% from 17.4cps
SIB capital expenditure (cash)
$27m$2m$29m
↓
16% from $32m
»Completed the sale of Ahuroa gas storage
(AGS) and the sale of the Rockgas LPG
business, receiving net cash proceeds of
$438m in the period
»EBITDAF from continuing operations was up
by $61m against the prior comparative
period having benefited from comparatively
stronger hydro generation following record
low inflows during 1H18. In addition, our
flexible generation portfolio and access to
stored gas saw Contact increase wholesale
spot market sales during the higher priced
October period as the market responded to
major gas field outages and lower national
hydro storage levels
»Strong balance sheet, high quality
renewable generation assets and lean, low
cost operations enable increasing dividends
to shareholders with the target FY19
ordinary dividend increasing to 39 cents per
share, 7 cents per share higher than FY18
6
New distribution policy provides clarity to investors
and will drive a strong capital discipline
* Operating Cash Flow less stay in business capex and net interest costs after adjusting for expected medium-term stay-in-business capital expenditure, mean hydrology and
appropriate Board consideration of a sustainable financial structure
once the S&P net debt / EBITDAF
ratio is below 2.8x
80-
90%
of Operating Free CashFlow
Previous
distribution policy
Ordinary dividend of
100%
of expected Operating Free
CashFlow*
New distribution policy
Payment timing and split, target gearing and imputation
policy have remained the same (see page 30)
39 cps
UP FROM 35 CENTS PER
SHARE PREVIOUSLY
TARGETED
Ordinary dividend
FY19 dividend of
7
Highlights
CONTINUED PROGRESS IN DELIVERING VALUE FOR KEY STAKEHOLDERS
MAINTAINING FINANCIAL DISCIPLINE
Strong cost control, with continuing other operating costs down by $3m
(3%). Cash spent on continuing SIB capital expenditure down by $5m
(16%). $514m reduction in net debt.
ENHANCED CUSTOMER ADVOCACY
Net promoter score (NPS) for final quarter of 1H19 of +24, up from the +20
recorded for the same period in FY18 as the brand was refreshed and smart
customer solutions were launched
SAFE AND ENGAGED EMPLOYEES
Zero recordable injuries in 1H19 after two employees injured in 1H18.
Targeting improvement on the FY18 engagement score of 77% as we strive
to achieve “best-in-class” employer
1
target
1H19 dividend of 16 cents per share, up 3 cents per share on 1H18. Target
FY19 dividend of 39 cents per share, up 22% on FY18
REWARDING SHAREHOLDERS
Comparison against 1H18
6%
Reduction in total
ongoing cash operating
costs and capital spend
20%
Improvement
in NPS
2.9
23%
Reduction in the total
recordable injury
frequency rate (TRIFR)
Increase to the interim
dividend
1
Benchmark for “best-in-class” >82% engagement
8
Further operational improvement expected
MAINTAINING FINANCIAL
DISCIPLINE
BUILDING CUSTOMER ADVOCACY
REWARDING
SHAREHOLDERS
CONTROLLABLE OPEX AND CAPEX COSTS ($m)
DISTRIBUTIONS ($m)
NET PROMOTER SCORE
-8
3
15
20
FY18FY15FY16FY17FY19
target
>25
397
391
357
292
275
FY19
target
FY17FY15FY16FY18
81
7979
93
115
110
107107
136
165
367
100
FY15FY16
286
FY18
229
FY17FY19
target
558
186
280
Buyback
Special dividend
Final dividend
Interim dividend
1.9
3.3
3.2
5.2
FY18FY17FY15FY16
0.0
1H19
TOTAL RECORDABLE INJURY FREQUENCY RATE
Recordable injuries per million hours worked
SAFE AND ENGAGED
EMPLOYEES
EMPLOYEE ENGAGEMENT (%)
Promoters less detractors
44%
FY15FY16
56%
FY19
target
FY17FY18
68%
77%
>82%
Declared or target
9
National electricity demand flat
Source: EMI, Contact
NATIONAL ELECTRICITY DEMAND (TWh)
2.52.52.52.5
2.6
5.2
5.4
5.0
5.3
5.0
13.3
13.4
13.3
13.4
13.4
1H171H15
21.0
1H191H161H18
21.0
21.3
20.8
21.2
+4%
0%
North IslandNZASSouth Island (ex NZAS)
REGIONAL CHANGE (%) 1H19 vs 1H18
»
The NZAS gradual re-commissioning of the 4th potline (50MW) from
October 2018, resulted in a 4% increase in electricity consumption. Once
fully operational national demand will increase by ~1% (NZAS demand
will be up ~17%)
»
South Island irrigation related demand was significantly lower than 1H18
»
Residential demand increased by 2% per customeron lower average
temperatures
Source: EMI, Contact
Demand at key South
Island irrigation nodes
reverted to historical
averages after a dry
1H18
0%
0%
1%
(1%)
1%
(1%)
(17%)
(8%)
0%
1%
(3%)
1%
0%
10
-1,000
-600
-200
200
600
1,000
Jul-17Sep-17Nov-17Jan-18Mar-18May-18Jul-18Sep-18Nov-18
Variance to mean (GWh)
North Island storageSouth Island storage
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Jun-17Aug-17Oct-17Dec-17Feb-18Apr-18Jun-18Aug-18Oct-18Dec-18
Mean storageActual storage
National storage rising in advance of Winter
SOUTH ISLAND INFLOWS NORMALISED FROM A
DRY 1H18
»
An acute drought in key South Island catchments between October and
December 2017 was broken in February 2018 when cyclones Fehi and
Geta made landfall. This contributed to above mean national storage at
the start of Winter 2018
»
Extreme November 2018 rainfall added ~700GWh to national storage over
a two week period after the traditional Spring inflows failed to materialise
NATIONAL HYDRO STORAGE AGAINST MEAN STORAGE (GWh)
AVERAGE MONTHLY STORAGE VS MEAN BY ISLAND (GWh)
MONTHLY NATIONAL RAINFALL
As a percentage of 1981 –2010 monthly normal (source: NIWA)
400%
200%
160%
140%
120%
100%
80%
60%
40%
20%
10%
July August September October November December
1H18
1H19
of normal
rainfall
Mean storage 1926 –2016 (source: NZX hydro)
Mean storage 1926 –2016 (source: NZX hydro)
1H191H18
11
Wholesale spot prices responded to fuel scarcity
»
While volatile hydrology is a well-known feature of electricity
supply in New Zealand, normally reliable gas production was
significantly constrained in 1H19 impacting generation from
thermal assets
»
Remedial work to the Pohokura gas field’s offshore pipeline
and platform, which was completed in December 2018,
ended more than 200 days of constrained gas supply
across two separate outages. Restricted production from
Pohokura is expected to continue over 2H19
»
Gas availability should improve as current constraints are
unlocked
»
The elevated spot price environment has led to increases in short-
dated forwards (i.e. for contracts maturing less than six months
ahead)
»
Long-dated forward prices (1 February 19: $88.3/MWh) have
increased by over $12.9/MWh (or over 17 per cent) in the last six
months
20
120
220
320
JulAugSepOctNovDecJanFebMarAprMayJun
FY13 - FY19 rangeFY13 - FY19 averageFY19FY18
MONTHLY WHOLESALE SPOT ELECTRICITY PRICES ($/MWh)
Generation weighted (source: Electricity Authority –Wholesale electricity prices)
ELECTRICITY FORWARD PRICE CURVES ($/MWh)
20
120
220
320
Jul-17Sep-17Nov-17Jan-18Mar-18May-18Jul-18Sep-18Nov-18
7-day simple moving average spot priceLong-dated futures
Short-dated futures
Generation weighted (source: Electricity Authority –Wholesale electricity prices)
HYDRO STORAGE LEVELS AND THERMAL FUEL
CONSTRAINTS INCREASED NEAR TERM PRICES
12
Our strategy
Optimise the Customer and Wholesale
businesses to deliver strong cash flows
CUSTOMER
WHOLESALE
A service and value focused retailer,
connecting customers and communities to
smart solutions that make living easier for
them now, and in the future
An innovative, safe and efficient generator
working with business customers, partners and
suppliers to decarbonise New Zealand’s
energy sector
Underpinned by a disciplined and transparent approach to operating and capital
expenditure while continuing to investigate ways to optimise our portfolio of assets
13
High-performing, efficient retailer with the lowest cost to serve and best customer experience of the tier 1 retailers in New Zealand,
with an ability to execute consistently.
Customer business continues to reduce cost to
serve while improving customer experience
13
NEAR TERM DESCRIPTION OF SUCCESS
»Move to a simple, lean operating model centred on the customer
experience reinventing key customer processes
»Capable employees, identifying and driving performance initiatives
with ownership and accountability
»Transform technology to drive efficiency and increasingly automated
customer experiences
»Reposition the brand and reputation from a strong operational
retailer to a smart customer solutions provider
DELIVERING ON OUR STRATEGY
•Value defined by customers
•Scalable
•Leverages existing capabilities and cost structures
•Short paybacks
•Complementary partnerships
FRAMEWORK FOR
NEW INVESMENT
PROGRESS
»New operating model and transition to a support model for LPG and C&I
businesses in place
»Agile teams reducing delivery times
»Increased digitisation improving NPS and lowering servicing and acquisition costs
»10% reduction in call centre volumes
»15% increase in web traffic and 7% increase in digital sales
»Majority of applications migrated to Amazon web services
»33% increase in downloads of the new mobile app
»Delivering smart customer solutions supports brand positioning
»Introduced new payment methods with PrePay and weekly/fortnightly billing to
help customers manage their bills
»New products launched to deliver customer’s choice and innovative rewards
including “free-bill”, “promise plan” and “broadband bundle”
14
DELIVERING ON OUR STRATEGY
Wholesale business is delivering continuous
improvement while enabling decarbonisation
NEAR TERM DESCRIPTION OF SUCCESS
Focus on operational excellence and investment in digital approaches with clear payback to accelerate continuous improvement.
»Operating costs 4% lower than 1H18
»Strong safety performance with zero recordable injuries
»Commercial and Industrial teams fully integrated into the
Wholesale business
»Strong trading performance and enhanced business performance
reporting
»Progressed options for renewable development at Tauhara
PROGRESS
FRAMEWORK FOR NEW INVESMENT
•Sustainable new demand or contracted support
•New geothermal development cost competitive with new
firmed renewables and thermal life extensions
»Sustainable cost reduction
»Strengthen geothermal capability to remain as a recognised world leader
»Partner with customers on mutually beneficial decarbonisation
opportunities
»Develop options to enable the economic substitution of thermal
generation with renewables
»Lower the cost of geothermal to ensure Contact development options
are cost competitive with firmed intermittent renewables
15
15
Operational Performance and Financial Results
Dorian Devers
CFO
16
Profit of $276m, supported by proceeds from
portfolio changes
58
47
48
97
99
11
61
20
Discontinued
operation
Discontinued
operations
Profit on
continuing
operations
177
Profit on
continuing
operations
1
Items
excluded
from
underlying
1H18
underlying
profit
EBITDAF
4
Depreciation
and
amortisation
4
Net interest
costs
1H19 profitTax1H19
underlying
profit
2
Items
excluded
from
underlying
1H18 profit
276
+49
STATUTORY PROFIT ($m)
PROFIT ON CONTINUING OPERATIONS UP BY 111% AS EBITDAF FROM CONTINUING OPERATIONS
INCREASED BY $61m
17
EBITDAF from continuing operations up by $61m
12
7
39
1H191H18Generation
costs
Contracted
revenue
Trading /
merchant
revenue
185
243
+58
2
1
2
1
1
Gas
gross
margin
1H18Electricity
gross
margin
Energy
costs
(inc.
carbon)
Other
income
Cost to
serve
1H19
45
48
+3
1
13
Labour1H18Staff
incentives
1H19
1
13
0
WHOLESALE EBITDAF ($m)
CUSTOMER EBITDAF ($m)
CORPORATE / UNALLOCATED ($m)
Continuing business performance
18
Generation costs
Electricity generated or acquired
(GWh)
1,726
1,652
1,635
2,045
1,016
887
385
171
4,762
Thermal
1H18
Acquired
1H19
Hydro
Geothermal
4,754
Renewable generation up 10% on 1H18, costs down by $12m
81
57
81
50
60
52
59
49
35
35
24
25
25
24
10
Generation
type
1
6
6
Cost typeGeneration
type
Cost type
Acquired
Thermal
Renewable
164
176176
164
-12
1H181H19
Electricity generated or acquired ($m)
Gas storage
Other operating costs
Electricity and gas transmission and levies
Carbon costs
Gas and diesel
»
Hydro generation was up 410 GWh (25%) as
hydro generation returned to mean after a dry
1H18, geothermal lower on planned Wairakei
outage
»
Higher renewable production required less
thermal generation (+$5m) and less acquired
generation (+$21m)
»
This was offset by higher unit input costs for
gas, diesel and carbon (-$4m), higher electricity
and gas transmission and gas storage costs (-
$4m) and a higher price for the acquired
generation (-$10m)
»
Prioritisation of more efficient thermal plant and
lower labour costs saw efficiency gains of $4m
»
Renewable costs are essentially fixed providing
leverage to increased hydro generation
19
159
159
138
126
42
53
14
16
2
1H191H18
362
7
355
+7
2,069 GWh
$76.9 / MWh
Wholesale contracted revenue
Contracted revenue ($m)
Energy prices higher on the prior period, reduced exposure to fixed price sales and redirected
load to higher priced channels
1,736 GWh
$79.6 / MWh
658 GWh
$63.4 / MWh
(52 GWh)
+$1.9 / MWh
(164 GWh)
+$0.7 / MWh
+50 GWh
+$11.2 / MWh
Other net income
Steam sales
CFD salesCustomer sales
C&I netback
»
Fixed price variable volume electricity sales to Customer
and C&I customers were 216 GWh (4%) lower than
1H18 (-$16m) which was partially offset by higher prices
(+$4m)
»
Increased CFD sales to support NZAS, which was up by
22GWh contributed to higher CFD electricity sales in
1H19 (+$1m). Higher pricing was achieved on both end-
user CFDs (+$2m) and short-term CFD sales to other
generators (+$8m)
»
Steam revenue was $2m higher on 1H18 on a 6%
increase in volumes and a higher tariff which reflected
rising carbon prices
»
Other income was up by $5m on 1H18, predominantly
due to improvements made to trading activity which
limited exposure to volatile markets
20
Wholesale trading and merchant revenue
TRADING EBITDAF ($m)
Contact was able to generate to support the market during higher priced periods in 1H19
33
78
-23
-33
6
-4
1H181H19
0
45
+39
357
459
-58
4,244
-4,355
4,355
1H18
-4,244
-1
458
1H19
299
($64.6 / MWh)
LONG / SHORT POSITION (GWh)
$92.9 / MWh
$170.5 / MWh
($114.6 / MWh)
6.2%
($5.2 / MWh)
6.7%
($7.7 / MWh)
Spot sales and buy CFD settlement
Merchant salesPool purchases
Spot purchases and sell CFD settlement
»
Contact’s flexible generation portfolio
and access to stored gas saw a 102
GWh increase in merchant sales
volumes (+$17m) to support the
market during the recent higher priced
periods as the spot price responded to
gas field outages and lower national
hydro storage levels. The price
received for this “long” generation was
up by $77/MWh (+$28m)
»
Strong generation volumes and risk
management saw limited price
exposure to unhedged spot market
purchases
»
LWAP/GWAP losses only increased by
0.5% but higher spot prices saw the
absolute cost increase by $10m to
$33m
TRADING REVENUE
Merchant sales: short-term sales channel
available when the spot prices exceed the
opportunity cost on Contact generation
Pool purchase: short-term opportunistic
purchases from the spot electricity market
when better value than alternatives
(adjusted for volatility and volume)
LWAP / GWAP losses: locational price
differences between where electricity is
generated and purchased
21
Customer business performance
458
455
39
39
2
3
1H181H19
499
497
-2
1,907 GWh
$240.4 / MWh
452 GWh
$85.4 / MWh
Revenue ($m)
EBITDAF ($m)
233
236
19
19
-159-159
-41
-40
-1
-8
Electricity
2
-1
-10
1H181H19
48
3
Gas
Other income
45
+3
(33 GWh)
+$2.2 / MWh
+33 GWh
($4.5 / MWh)
EBITDAF up by $3m on higher tariff, lower network costs and a reduction in cost to serve
Revenue less
networkcosts
$122.3 / MWh
Other income
Gas
Electricity
»
Electricity sales volume down 33 GWh due to
lower customers numbers, offset by higher gas
sales to SME customers
»
Intense competition and the decision not to
renew 2,700 SME ICPs reduced average
customer connections
»
Customer numbers stable over the past three
months with new propositions in market.
Broadband offer attractive.
»
Electricity gross margin up on successful
customer retentions and corrections to historical
pricing anomalies
»
Broadband and LPG services revenue
leverages existing cost infrastructure
»
Energy costs increased, following higher ASX
prices and higher gas and carbon costs
»
Other operating expenses favourable $1m despite
investment in digital, brand and new products
($83.5 / MWh)
+$3.1 / MWh
($1.4 / MWh)
Gas costs
Electricity costsCarbon costs
Other operating expenses
22
Cost efficiency programme continues to deliver
controllable cost reduction
OTHER OPERATING COSTS ($m)
8
7
13
13
52
50
41
40
1H18
114
1H19
110
-4
Wholesale
Customer
Corporate
LPG
2
6
4
1H18Asset
disposals
110
Cost and
efficiency
programme
1H18
rebased for
the effect
of the
disposals
1H19
operating
costs
before
incentives
Staff
incentives
1H19
112
114
106
»
Efficiency programme delivers $6m
operating cost reduction in 1H19,
against $8m target for FY19
»
Wholesale and corporate labour costs
down on reduced FTE
»
ICT costs lower after the move to the
cloud and efficiency initiatives
»
Further reduction in bad debt
»
Customer investment in brand and
digital accommodated
»
On target for guided FY20 reductions
»
Staff incentives up on improvement to
financial performance on 1H18
OTHER OPERATING COST MOVEMENT ($m)
CONTROLLABLE OPEX ($m)
263
247
243
223
205
190
FY20 targetFY15FY16FY17FY18FY19 target
-6%
5% reduction in like for
like other operating costs
23
Cash flow and capital expenditure
128
102
69
FY18FY16FY17
60 -65
FY19 target
»
EBITDAF up on strong Wholesale performance
»
Working capital changes up by $18m on improved receivables collections
»
Cash tax up in line with increasing earnings and balancing payments from prior
periods
»
Capital expenditure on continuing operations of $27m in 1H19
6 months
ended
31
December
2018
6 months
ended
31 December
2017
Comparison against
1H18
EBITDAF
$291m$236m
↑
$55m
Workingcapital changes
$10m($8m)
↑
$18m
Taxand interest paid
($77m)($60m)
↓
($17m)
SIBCapital
($29m)($35m)
↑
($6m)
Other non cash movements
$9m$8m
↑
$1m
Operating free cash flow
2
$203m$141m
↑
$62m
Operating free cash flow per share
2
28.3 cps19.7 cps
↑
8.6 cps
Proceeds from saleof assets/operations
$438m-
↑
$438
Free cash flow
$641m$141m
↑
$500m
SIB CAPEX ($m)
6
2
Historic
2
Revision to
guidance
Current
65
75
-10
LONG RUN AVERAGE CAPEX ($m)
Efficiency improvementsAGS
Rockgas
10
15
40
65
Customer
Wholesale -Maintanence
Wholesale -TCC and drilling
Excludes capex associated with Wairakei extension post 2026
OPERATING CASH FLOW UP BY $62m ON HIGHER EBITDAF, FAVOURABLE WORKING CAPITAL
MOVEMENTS AND LOWER INTEREST AND CAPEX COSTS
24
Strong free cash flow directed to strengthening the
balance sheet
141
107
203
136
438
298
7
4
1
Uses
142
Sources
10
Sources
14
207
Uses
142
641641
Gas sale and repurchase
Shares isued
OFCF
Net sales proceeds
Growth investment
Increase in cash
Debt repayment
Dividends paid
236
291
-60
-77
-35
-29
203
8
-8
141
1H191H18
10
8
EBITDAF
Working capital changes
Interest and tax
Other non cash movements
SIB cash capex
OPERATING FREE CASH FLOW –OFCF ($m)
SOURCES AND USES OF CASH ($M)
1H181H19
EBITDAF TO CASH CONVERSION INCREASED TO 70% IN 1H19 FROM 60% IN 1H18
25
Strong balance sheet
222
50
70
150
100
153
224
150
175
50
50
7
160
7
FY19FY20
7
FY21FY22
77
FY23
7
FY24
22
FY25
-29
229
207
252
207
157
245
»
Face value of net borrowings reduced by $514m to $931m following the completion of the asset
sales. Net debt has reduced by $767m since the end of FY15. Gearing reduced to 29.7% at 31
December 2018, down from 35.4% at 30 June 2018
»
$222m retail bond maturing in May 2019 being partly refinanced
»
Weighted average interest rate increased by 42bp on FY18
»
Contact continues to target a credit rating of BBB (net debt / EBITDAF <2.8x)
-210
27
-12
-4
1,539
1,626
1,677
1,698
1,401
FY15FY14
25
23
1,608
-5
1,504
FY16
41
-6
FY17
38
1,410
-3
FY18
26
1,115
1H19
1,416
1,445
931
FY16
7.55%
FY17FY14
6.06%
5.25%
5.53%
FY15
5.01%
FY18
5.43%
1H19
ROBUST TREASURY MANAGEMENT ENSURES ACCESS TO DIVERSE FUNDING SOURCES
CLOSING NET DEBT ($m)
INTEREST RATE (%)
NET DEBT TO EBITDAF (x)
BORROWING MATURITIES ($m)
1,372
1,425
1,672
1,593
1,5061,259
Average net debt ($m)
Weighed average interest rate on average net debt
Face value of borrowings less cash
USPPUndrawn bank facilitiesDomesticNEXI
Includes S&P adjustments (AGS currently treated as a lease)
Lease obligationsBorrowingsCash on hand
3.0
3.1
3.1
3.0
2.7
2.5
2.6
3.4
3.2
3.2
3.1
2.2
FY18FY14FY17FY16FY15FY19
forecast
SmoothedSnapshot
Average tenor of 3.6 years as at 31 December 2018
26
26
Market update and Outlook
Dennis Barnes
CEO
27
Our strategy
Optimise the Customer and Wholesale
businesses to deliver strong cash flows
CUSTOMER
WHOLESALE
A service and value focused retailer,
connecting customers and communities to
smart solutions that make living easier for
them now, and in the future
An innovative, safe and efficient generator
working with business customers, partners and
suppliers to decarbonise New Zealand’s
energy sector
Underpinned by a disciplined and transparent approach to operating and capital
expenditure while continuing to investigate ways to optimise our portfolio of assets
28
CONTRACT GAS
Engaging with suppliers to contract for gas for 2019 and beyond. Increasingly confident that gas
availability will improve as current gas supply constraints are unlocked
MANAGE WHOLESALE MARKET VOLATILITY
Contact manages fuel variability through portfolio flexibility and a strong risk management
framework
In addition to the gas we expect to contract, access to stored gas in AGS and other contractual
options which will give us appropriate access to energy
EXECUTE ON THE COST AND EFFICIENCY PROGRAMME
The focus remains on the reduction of controllable costs, simplification of the organisation and
asset portfolio
Investment in digital and data to build a platform from which we will further reduce costs and
develop new, innovative propositions
CAPTURE SCALE EFFICIENCIES
Further develop the rich set of brownfield geothermal development
opportunities available
In time, our large customer base and world class systems will provide
an attractive opportunity for partners
DECARBONISATION
Develop options to enable the economic substitution of thermal
generation with renewables
Partner with customers on mutually beneficial decarbonisation
opportunities
DELIVERING CUSTOMER VALUE
Continue to develop customer centred processes, products and propositions that will appeal to all,
including the most vulnerable. Next proposition to be released imminently is a “basic plan” i.e. no
PPD offer. Ultimately customers will define the value of product features, discounts and rewards
Participation in the Electricity Price Review consultation
Priorities
FULLY COMMERCIALISE GAS STORAGE
Work with FlexGas, the new AGS operating entity, to attract long term users into the facility before
the expansion is completed (early 2020)
NEAR TERM
MEDIUM TERM
Contact held an investor day in November 2018 which outlined some of
the key longer term strategic Wholesale options as New Zealand
transitions to a lower carbon future.
A link to a replay of the event and presentation materials has been made
available at:
https://contact.co.nz/aboutus/investor-centre
29
Guidance affirmed
FY19 (f)
Changeto prior
guidance
Other operating costs$200–210m
-
Depreciation and amortisation$200 –205m
Rangenarrowed
on completion of
disposals
Net interest (accounting)$75–80m
Rangenarrowed
on completion of
disposals
Cash interest$70 –75m
Newguidance
added
Stay in business capital
expenditure (accounting)
$65 –75m
-
Target ordinary dividend per
share
39 cps
up4cps (+11%)
CONFIDENCE IN THE ABILITY TO DELIVER PERFORMANCE IMPROVEMENTS
480
-60
-70
-65
FY20
285
Key assumptions:
»Hydro generation at 3,900 GWh (mean), geothermal
generation at 3,350 GWh (average)
»ASX electricity futures and electricity retail margins stable
»Excludes working capital movements
FY20 OFCF ($m)
EBITDAF
Cash interestSIB cash capex
Cash tax
FY20 (f)
Changeto prior
guidance
$185–195m
-
$195 –205m
-
$60 –65m
-
$55 –60m
Newguidance
added
$60 –65m
-
39 cps
Newguidance
added
30
New distribution policy
NEW POLICY
INTERIM DIVIDEND FOR FY19 OF 16 CENTS PER SHARE UP 23%
»Contact’s policy is to distribute ordinary dividends targeting a pay-out
ratio of 100% of an Operating Free Cash Flow* which is adjusted for
expected medium-term stay-in-business capital expenditure, mean
hydrology and the consideration of a sustainable financial structure
including the targeting of a long-term credit rating of BBB
»Dividend payments are expected to be split into an interim dividend paid
in April, targeting around 40% of the total expected dividend for the
financial year, and a final dividend to be paid in September
»It is the intention of the Board to attach imputation credits to dividends
to the extent they are available
»Interim dividend of 16 cents per share (1H18 13
cents per share) is imputed to 65% or 10 cents per
share for qualifying shareholders. This represents a
pay-out of 57% of 1H19 operating free cash flow per
share
»Target FY19 ordinary dividend of 39 cents per share
(FY18 32 cents per share)
»Record date 21 March 2019; payment date 9April
2019
»The NZD/AUD exchange rate used for the payment
of Australian dollar dividends will be set on 29 March
2019
* Operating Free Cash Flow is Operating cash flow less stay-in-business capital expenditure and net
cash interest costs
31
31
Supporting materials
32
»
On 1 December 2018, Contact completed the sale of Rockgas and
received $250m of cash proceeds. The final adjustments for working
capital and net debt are expected over the next few months
»
Provisional gain on sale of $167m
»
On 1 October 2018, Contact completed the sale of AGS and
received $190 million in cash, with a further $10 million contingent
on the new owner obtaining a favourable binding ruling in line with
our tax treatment
»
Profit on disposal of $5m
¹Assets are no longer depreciated once held for sale
1H19
1H18
Comparison
against 1H18
5 year
average
Normalised
FY20 vs
average of
FY13-18
Total
AGS pro-
forma
(3 months
included)
Rockgas
(5 months
included)
Proceeds
EBITDAF
$7m($6m)$13m$16m
($9m) $21m($41m)
EBIT¹
$7m($4m)$13m$9m
($2m)$8m($28m)
Proceeds from saleof assets/operations
$438m$190m$248m-
$438
Underlying profit per share
1.2 cps(0.6 cps)1.4 cps0.4 cps1.3 cps
(0.1cps)0.8 cps(2.8 cps)
Capex
($2m)-($2m)($3m)
$1m($10m)$10m
Operating free cash flow
$7m($4m)$7m$4m$12m
($5m)$7m($3m)
Financial impact of the asset disposals
SALE OF AHUROA GAS STORAGE FOR $200M
SALE OF ROCKGAS LPG FOR $260M
ASSET DISPOSALS COMPLETED IN THE PERIOD
33
Generation and sales position
1H13
4,761
1,726
1,169
4,327
685
966
1,849
2,129
2,149
836
1,598
1,166
1H12
1,768
1,144
1,522
4,812
1,087
1H141H15
2,168
1,479
1,036
4,669
2,010
2,045
1,623
2,073
1H16
1,552
4,916
1H17
4,738
1,635
1,652
1H181H19
4,310
4,533
Thermal generationHydro generationGeothermal generation
CONTACT GENERATION OUTPUT (GWh)
4,327
2,069
4,532
2,017
384
1,736
1,572
658
708
357
459
51
4,820
Generation
50
58
Sales
171
4,755
1
GenerationSales
4,820
4,755
ELECTRICITY GENERATION AND SALES POSITION (GWh)
1H18
1H19
Purchased pool
Sales to Customer
Acquired generation
Direct generation
Spot generation
Merchant sales
Sales to C&I
CFD gross sales
34
Wairakei geothermal field mass take and efficiency
GEOTHERMAL FUEL EXTRACTED AT WAIRAKEI VS CONSENTED (GWh)
WAIRAKEI, POIHIPI AND TE MIHI CONVERSION EFFECTIVNESS
(MWh per KT EXTRACTED)
00
82%
1H161H171H151H141H19
88%
98%
94%
102%
1H18
99%
-1.8
Wairakei mass extracted% of geothermal fluid extracted
26.3
30.3
30.8
30.7
32.0
32.3
1H141H151H161H171H181H19
+2%
+1%
»Obtained a variation to the Wairakei mass take consent in
September 2017. This allows for the extraction of 245k tonnesof
geothermal fluid per day on average over a year (calculation period
ends in February every year). Previously the take was reset
quarterly.
»Efficiency improvements have continued to deliver more
generation per tonne extracted
35
Generation volumes
-44
-77
-104
2,013
1H19
1,712
-3
1H171H16
2,117
1H18
2,149
2,010
2,073
1,635
2,045
Total inflowsInflows stored
Hydro generation (GWh)
Geothermal generation (GWh)
Thermal generation (GWh)
582
488
719
716
569
612
539
486
208
199
209
203
165
159
161
155
98
99
1,623
1H161H17
1,726
1H18
1,652
1H19
1,552
94
92
Te HukaPoihipiTe Mihi
WairakeiOhaaki
553
298
463
649
156
275
369
69
211
111
133
114
116
2
1H161H171H181H19
1,090
736
4
1,016
887
54
52
50
51
Whirinaki
Direct generation
TCCTe Rapa -spot
Stratford PeakersOtahuhu
»Geothermal generation was 74GWh lower
than 1H18 primarily due to the scheduled 4
yearly inspection at Wairakei (53GWh
lower) and lower mass extracted in the
period
Renewable generation up 10% on 1H18
»Hydro generation was 55GWh above mean
in 1H19 and 410GWh higher than a dry
1H18
»Thermal generation volumes were 129GWh
lower in 1H19 on higher renewable
generation, lower sales and restricted gas.
Base load generation at TCC was prioritised
over the Stratford peakers
36
858
767
829
63
162
86
-305
-253
-299
1H18
Opening storage
1H19
677
Gas injected
2H18
616
Gas extracted
616
27
104
55
219
229
247
-142
-278
-144
55
104
Opening storage
1H181H192H18
Inflows
Releases
159
HAWEA STORAGE (GWh)
GAS STORAGE (GWh EQUIVALENT)
Using the 1H19 thermal efficiency (9.1 TJ/GWh)
CLOSING STORAGE
CLOSING STORAGE
Fuel storage movements
37
Contracted and stored gas
7.8
7.6
11.1
7.0
10.0
9.3
-2.0
-9.7
-7.4
-8.1
-1.4
-1.4
-1.7
-0.4
-0.2
0.0
5.6
2H181H18
0.6
1H19
7.0
7.6
-0.8
Net extractionPurchases
Wholesale sales
Generation
Customer sales
Opening storage
Net injection
CONTRACTED GAS VOLUMES (PJ)
SOURCES AND USES OF GAS (PJ)
0.51
-0.04
0.39
Jul-18
0.78
Nov-18
0.00
-0.06
Aug-18
1.03
Sep-18
-0.04
Oct-18
-0.22
0.03
Dec-18
0.35
0.72
1.03
0.47
-0.43
-0.19
Gas injectedGas extracted
AHUROA GAS STORAGE MONTHLY
INJECTIONS AND EXTRACTIONS (PJ)
7.7
4.1
6.7
4.7
4.5
10.9
6.9
4.1
6.5
4.5
1.6
1.2
3.1
2.7
4.3
4.4
4.5
4.5
CY19
18.4
0.4
CY18CY17CY15CY16CY20
24.4
16.7
18.4
4.9
Swap
Genesis
Other
Maui
38
Historical financial information
Unit1H151H161H171H181H19
Revenue$m1,240 1,120 1,037 1,190 1,363
EBITDAF$m257 254 264 236 291
Profit/(loss)$m51 (116)96 58 276
Underlying profit$m76 73 82 59 107
Underlying profit per sharecps10.4 10.0 11.5 8.2 15.0
Operating free cash flow$m163 200 134 141 203
Operating free cash flow per sharecps22.2 27.3 18.7 19.7 28.3
Declared dividendscps11.0 11.0 11.0 13.0 16.0
Total assets$m6,1395,726 5,587 5,390 5,140
Total liabilities$m2,617 2,848 2,766 2,663 2,297
Total equity$m3,522 2,878 2,821 2,727 2,843
Gearing ratio%28.0 37.036.435.429.7
39
Non-GAAP profit measure: EBITDAF
»
EBITDAF is Contact’s earnings before net interest expense, tax, depreciation, amortisation, change in fair value of financialinstruments and other
significant items
»
EBITDAF is commonly used in the electricity industry so provides a comparable measure of Contact’s performance
»
Reconciliation of EBITDAF to statutory profit:
6 months ended
31 December
2018
6 months ended
31 December
2017
Variance onprior year
$m%
EBITDAF
291 236 5523%
Depreciation and amortisation
(102)(109)76%
Significant items (grossof tax)
172 (2) 174-
Net interest expense
(39)(43)49%
Tax expense
(46)(24)(22)(92%)
Profit
276 58 218376%
»
Depreciation and amortisation, change in fair value of financial instruments, net interest and tax expense are explained in the following slide
40
Reconciliation between EBITDAF and Profit
»The adjustments from EBITDAF to reported profit are as follows:
»Depreciation and amortisation: Reduced by $7m (6%) as depreciation on the held for sale asset (AGS) and the discontinued operation
(Rockgas) stopped, offset by an increase of TCC as the plant was utilised more
»Change in fair value of financial instruments: Totalled ($2m) in 1H19 reflecting a unfavourable movement in interest rate derivatives over
the period
»Other significant items are detailed on the next two slides
»Net interest expense decreased $4m (9%) to $39m in 1H19 on reduced average borrowings after the proceeds from asset sales where
applied to the reduction of debt.
»Tax expense for the six months ended 31 December 2018 was $46m up $22m in 1H18 on increased operating earnings.Tax expense
represents an effective tax rate of29%
41
Non-GAAP profit measure: Underlying profit
6 months ended
31 December
2018
6 months ended
31 December
2017
Variance onprior year
$m%
Profit
1075948 81%
Change in fair value of financial instruments
(2)(2)--
Sale of Rockgas Limited(LPG)
167 -167-
Sale of Ahuroagas storage
5-5 -
Remediation for Holidays Act non-compliance
2-2-
Tax on items excluded from underlying profit
(3)1(4) -
Underlying profit
27658 218376%
»Underlying profit provides a consistent measure of Contact’s ongoing performance
»Underlying profit excludes the effect of significant items from reported profit. Significant items are determined based on principles approved by the Board of
Directors
»Other significant items are determined in accordance with the principles of consistency, relevance and clarity. Items consideredfor classification as other
significant items include impairment or reversal of impairment of assets; business integration, restructure, acquisition and disposal costs; and transactions
or events outside of Contact’s ongoing operations that have a significant impact on reported profit
»Reconciliation of statutory profit for the year to underlying profit:
42
Reconciliation between Profit and Underlying profit
»The only adjustment from reported profit to underlying profit for 1H19 was the:
»Change in the fair value of financial instruments: Movements in the valuation of interest rate and electricity price derivativesthat are not
accounted for as hedges, hedge accounting ineffectiveness and the effect of credit risk on the valuation of hedged debt and derivatives
»The adjustments from reported profit to underlying profit for 1H19 are as follows:
»Change in the fair value of financial instruments
»Rockgas Limited Sale: Rockgas was sold to Gas Services NZ MidcoLimited on 30 November 2018, the provisional net gain on sale at 1H18
was $167m
»AhuroaGas Storage Facility Sale: The sale of the AGS Facility to GSNZ SPV1 Limited (GSNZ) was completed on 1 October 2018. Cash
proceeds from sale received to date are $190 million resulting in a gain on sale of $5 million before tax. Consideration of up to $10 million
remains unrecognisedas it is contingent on GSNZ obtaining a favourablebinding ruling as to the tax treatment of the main assets it acquired.
»Remediation for Holidays Act non-compliance: During 1H19, spend of $1 million has been incurred in order to resolve non-compliance with
aspects of the Holidays Act 2003. The provision has also been reduced by $2 million as a result of ongoing reassessment of the expected
liability
»Tax on the items outlined above
43
Wholesale segment
1H191H18
Sixmonths ended 31 December 2018Sixmonths ended 31 December 2017
VolumeGWAPVolumeGWAPReference to segment note
Note: this table has not been rounded andmight not addGWh$/MWh$mGWh$/MWh$m
Electricity sales to Customer2,017 78.9 159 2,069 76.9 159 6
Electricity sales to Fixed C&I (netback)1,52179.8 121 1,686Data in operating report
Electricity sales –Direct5197.7 5 50
Electricity sales to C&I1,572 80.4 126 1,736 79.6 138
2, 18, 21 [C&I opexonly] +
Spot margin 3,11,19
CfDs–Tiwaisupport376353
CfDs-Long term sales298258
CfDs-Short term sales3447
Electricity sales -CFDs708 74.6 53 658 63.4 42 4
Total contracted electricity sales4,296 78.7 338 4,463 76.0 339
Steam sales351 45.9 16 330 43.0 14 7
Other income6 2 9
Net income on gas sales1 -7, 14 (gas cost)
Net income on electricity related services1 -5, 12
Net other income7 2
Total contracted revenue (1)4,647 77.8 362 4,792 74.0 355
14, 15, 17, 20, 21, 22
[less gas sold and C&I opex]Generation costs4,583(30.6)(140)4,377(32.2)(141)
Acquired generation cost171(138.1)(24)384(91.2)(35)10
Generation costs (including acquired generation) (2)4,754 (34.5)(164)4,762 (37.0)(176)
Spot electricity revenue4,532133.4 605 4,32792.6 401 4
Settlement on acquired generation171166.1 28 38490.3 35 10
Spot revenue and settlement on acquired generation (GWAP)4,703 134.6 633 4,712 92.4 435
Spot electricity cost(3,538)(138.5)(490)(3,755)(97.6)(367)10
Settlement on CFDs sold(708)(137.8)(98)(658)(94.3)(62)4
Spot purchases and settlement on CFDs sold (LWAP)(4,246)(138.4)(588)(4,413)(97.1)(429)
Trading, merchant revenue and losses(3)45 7
Wholesale EBITDAF (1+2+3)243 185
---
Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Results for announcement to the market
Name of issuer Contact Energy Limited
Reporting Period
6 months to 31 December 2018
Previous Reporting Period
6 months to 31 December 2017
Amount (000s) Percentage change
Revenue from ordinary
activities
$NZ1,363,000 14.5%
Profit (loss) from ordinary
activities after tax attributable
to security holder
$NZ107,000 81.4%
Net profit (loss) attributable
to security holders
$NZ276,000 375.9%
Interim/Final Dividend
Amount per Quoted Equity
Security
$0.16
Imputed amount per sec
Quoted Equity Security
$0.10
Record Date 21 March 2019
Dividend Payment Date 9 April 2019
Net tangible assets per
Quoted Equity Security
$3.32 5.7%
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Figures above are the combined result and position for the
continuing operations and discontinuing operation.
‘Profit (loss) from ordinary activities after tax attributable to
security holder’ is Contact’s underlying profit. Underlying profit
excludes significant items that do not reflect the ongoing
performance of the Group. This is a non-statutory measure.
Authority for this announcement
Name of person
authorised
to make this announcement
Kirsten Clayton, Company Secretary
Investor enquiries Matthew Forbes, Investor Relations Manager
Contact phone number
+64 21 072 8578
Contact email address
investor.centre@contactenergy.co.nz
Date of release through MAP
11 February 2019
Unaudited financial statements accompany this announcement.
---
Corporate Action Notice
(for a Distribution)
Page 1 of 2
Section 1: issuer information
Name of issuer Contact Energy Limited
Financial product name/description Ordinary shares
NZX ticker code CEN
ISIN (If unknown, check on NZX
website)
NZCENE0001S6
Type of distribution
(Please mark with an X in the relevant
box/es)
Full Year Quarterly
Half Year X Special
DRP applies NO
Record date Close of trading on: 21/03/2019
Ex-Date (one business day before the
Record Date)
20/03/2019
Payment date (and allotment date for
DRP)
09/04/2019
Total monies associated with the
distribution
$114,672,731.52
(716,704,572 shares @ $0.16 / share)
Source of distribution (for example,
retained earnings)
Operating Free Cash Flow
Section 2: distribution amounts
Total amount $0.198889
Cash per financial product $0.16
Supplementary distribution $0.017647
Section 3:
Is the distribution imputed Fully imputed
Partial imputation
No imputation
If fully or partially imputed, please state
imputation rate as % applied
62.5% (10 cents per share)
Imputation tax credits per financial
product
$0.038889
Resident withhold tax amount per
financial product
$0.026744
Section 4: distribution re-investment plan - not applicable
DRP % discount (if any) %
Start date and end date for determining
market price for DRP
Close of trading on:
[dd/mm/yyyy]
Close of trading on:
[dd/mm/yyyy]
Page 2 of 2
Date strike price to be announced (if not
available at this time)
Close of trading on: [dd/mm/yyyy]
Specify source of financial products to
be issued under DRP programme (new
issue or to be bought on market)
DRP strike price per financial product $
Last date to submit a participation
notice for this distribution in accordance
with DRP participation terms
[dd/mm/yyyy]
Section 5: authority for this announcement
Name of person authorised to make this
announcement
Kirsten Clayton, Company Secretary
Investor enquiries Matthew Forbes, Investor Relations Manager
Contact phone number +64 21 072 8578
Contact email address investor.centre@contactenergy.co.nz
Date of release through MAP 11 February 2019
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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