Meridian Energy Investor Presentation

PG 1

Meridian Energy investor presentation
23 May 2019

Attached is a presentation Meridian Energy will be making today at Craigs Investment Partners investor day.

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:
Claire Shaw
Corporate Affairs Manager
021 370 677

1
Meridian
 
Energy
 
Limited
 
Management
 
Presentation
MERIDIAN ENERGY LIMITED
MANAGEMENT PRESENTATION

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; 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

Around 375MW of consented new options

Generation portfolio of wind, hydro and renewable offtake in Australia
2
Meridian
 
Energy
 
Limited
 
Management
 
Presentation

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 payout ratio (75-90% of that free cash flow), progressive ordinary dividend policy

Structured capital management programme running to 2022
3
585
618
650
657
666
550
600
650
700
2014
2015
2016
2017
2018
$M
Financial Year ended 30 June
EBITDAF
19%
33%
31%
17%
14%
0%
5%
10%
15%
20%
25%
30%
35%
2014
2015
2016
2017
2018
%
Financial Year ended 30 June
TOTAL SHAREHOLDER RETURN
Source:
 
Meridian
Source:
 
Meridian
Meridian
 
Energy
 
Limited
 
Management
 
Presentation

OPERATING UPDATE
Wholesale prices have reflected ongoing gas supply concerns

Combined with recent high inflows, has produced very favourable 2H FY19 trading conditions

Solid customer growth in NZ and Australia during FY19

Meridian customer migration onto the Flux platform has commenced

Electricity Price Review final report will be delivered mid-year
4
Meridian
 
Energy
 
Limited
 
Management
 
Presentation
72
77
87
285
149
99
125
153
171
100
157
83
55
53
96
128
127
65
55
54
56
91
0
50
100
150
200
250
300
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
$/MWh
MERIDIAN'S AVERAGE GENERATION PRICE*
FY19
FY18
0
500
1,000
1,500
2,000
2,500
1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec
GWh
MERIDIAN'S WAITAKI STORAGE
Average 1979-
2013
2015
2016
2017
2018
2019
292
293
293
295
296
297
298
299
300
301
97
97
97
98
99
99
101
103
104
106
0
50
100
150
200
250
300
350
400
450
Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19
MERIDIAN'S CUSTOMER CONNECTIONS
Australia gas
Australia electricity
New Zealand electricity

CLIMATE CHANGE
5
Meridian
 
Energy
 
Limited
 
Management
 
Presentation
We have seen
No significant change to catchment inflows over the last 100 years

Some seasonal shift in inflows; drier autumns, wetter summers

Snowpack and glaciers getting smaller
Genesis
 
Energy’s
 
Tekapo B
 
power
 
station
Contact
 
Energy’s
 
Clyde
 
Dam
It is projected to get
Wetter in our catchments, including in winter

With bigger individual rain storms

Drier in irrigation areas

Warmer everywhere

Windier at our wind farms, especially in winter

THE NEW ZEALAND ELECTRICITY MARKET
Demands for action on climate change are growing and the New Zealand regulatory landscape is changing

The country is committing to reducing all non-methane emissions to net zero by 2050 and up to 47% reduction in methane

Electrification of existing fossil fuel energy use (largely outside the electricity sector) could significantly lift 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; investment timing is uncertain
5%
17%
20%
49%
6%
3%
NZ 2016 SECTOR EMISSIONS
ElectricityRoad transportStationary energy*AgriculturalIndustrial processesWaste
*manufacturing (including milk processing), construction and commercial sectors and domestic heating
6
Source:
 
Meridian
Meridian
 
Energy
 
Limited
 
Management
 
Presentation
30
40
50
60
70
80
90
FY1997 FY2003 FY2009 FY2015 FY20
21 FY2027 FY2033 FY2039 FY2045
TWh
DEMAND FORECASTS
Full decarbonisation
Partial decarbonisation
History
Source:
 
Ministry
 
for
 
the
 
Environment


Further thermal and older renewable plant closures or repowering are inevitable

Closures will require new generation and capital spend, adding to growth and in addition to decarbonisation

Unit costs of newer technologies (wind, solar, batteries) will continue to decline

Costs of more traditional generation will continue to improve modestly

Increases in intermittent generation will create more volatile market prices

Value of flexibility will increase over time

Consumer-led technology uptake will occur, supplementing rather than displacing grid-level power
THE NEW ZEALAND ELECTRICITY MARKET
7
Meridian
 
Energy
 
Limited
 
Management
 
Presentation
0
50
100150200250300350400450500
2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042
MW
PLANT
 
RETIREMENT
 
SCHEDULE
Source:
 
Meridian

MERIDIAN’S INVESTMENT PROPOSITION
8
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
 
Management
 
Presentation

9
DISCLAIMER
THE INFORMATION IN THIS PRESENTATION WAS PREPARED BY MERIDIAN ENERGY WITH DUE CARE AND ATTENTION. HOWEVER, THE INFORMATION IS SUPPLIED 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
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