Disclaimer
The information in this presentation was prepared by Mighty River Power Limited with due care and
attention with every effort made to ensure its accuracy.
The presentation may contain projections or forward looking statements regarding a variety of items.
Such projections or forward looking statements are based on current expectations, estimates and
assumptions made by management and are subject to a number of risks, uncertainties and
assumptions. There can be no assurance that results contemplated in any projections and forward
looking statements in this presentation will be realised. Actual results may differ materially from
those projected in this presentation.
About Mighty River Power
•
New Zealand’s only large, renewables dominated energy company with
both hydro and geothermal generation
•
Core business based on diversified low fuel cost electricity generation
portfolio complemented by sales to business and homes
•
90% renewable generation, with major geothermal share, supported by a
multi-unit, gas-fired plant in Auckland
•
Generation assets located in the upper North Island, close to major
industry and residential demand
•
Sales to commercial customers and through retail brands, Mercury
Energy, Bosco Connect and Tiny Mighty Power, accounting for 18% of total
NZ energy consumption
•
Top 10 global geothermal business – leveraging expertise in US, Chile and
HIGHLIGHTS
•
Lift in operating earnings and underlying performance
•
Gains in market share and pricing in generation and sales
•
Geothermal growth– Hudson Ranch I and Ngatamariki
FINANCIAL
RESULTS
•
Underlying earnings growth supported by diverse and balanced operational
base
•
Strong cash flows with NPAT impacted by non-cash fair value movements
•
Diversified debt portfolio with no refinancing required until December 2013
BUSINESS
UPDATE
•
Increased sales and generation volumes against backdrop of flat national
demand
•
Higher electricity prices from customers and for generation
•
High Court upholds UTS ruling – Further appeals pending
OUTLOOK
•
Hudson Ranch I commissioning March / April 2012
•
Construction of Ngatamariki with commissioning expected mid 2013
•
Lift in FY2012 earnings guidance
•
Financial results built on the company’s diverse and complementary portfolio, market share and pricing gains in generation and customer sales•
Improvement in operating earnings driven by 4.5% increase in weighted average price (FPVV) received from residential and commercial customers, and $7m gain from sale of PRE credits•
Significant fall in NPAT due to non-cash fair value movements recognised under IFRS predominantly as a result of a global fall in long-term interest rates•
Underlying earnings up 14% (earnings after removing significant one-off items and the change in the fair value of financial instruments)Financial Highlights
HY2012
($m)
HY2011
($m)
% Change
Energy Margin
356.9 340.8 +4.7EBITDAF
254.5 233.6 +8.9Underlying Earnings
101.7 89.4 +13.8NPAT
17.6 92.8 -81.1Dividend
74.8 64.7 +15.6 HIGHLIGHTS•
National storage levels below average due to dry conditions in the South Island•
High wholesale spot price as a result of poor national hydrologyMarket Dynamics
HIGHLIGHTS•
Lake Taupo hydrology close to average•
Continuing flat demand growth•
Customer churn continuing at elevated levels confirming competitive environmentMarket Dynamics
HIGHLIGHTS•
Higher generation largely due to greater use of gas-fired generation in response to higher wholesale prices•
Geothermal base-load reliable and slightly increased from pcpGains in Market Share and Pricing
HIGHLIGHTS•
Achieved increases in FPVV sales and pricing despite lower customer numbers•
Strong growth in commercial customers•
Expansion into small provincial towns•
Supported by a range of customer retention initiatives– 3yr fixed price offers introduce in FY2011 attracting 80,000 customers – GLO-BUG prepayment solution based on smart meters
Sales and Pricing
HY2012
HY2011
Change
% Change
Electricity customers
383,000 402,000 -19,000 -4.7Electricity sales (GWh)
2,555 2,531 +24 +0.9Residential FPVV
1,408 1,445 -38 -2.6Commercial FPVV
1,148 1,085 +63 +5.8Weighted average sales price
(FPVV)
$113.58 $108.65 $4.93 +4.5Financial Performance
HY2012
($m)
HY2011
($m)
$m
Change
%
Change
FY2011
($m)
EBITDAF
254.5 233.6 20.9 +8.9 443.1Depreciation and amortisation
-73.2 -67.7 -5.5 -145.4Change in fair value of financial instruments
-85.7 -5.8 -79.9 -25.6Impairments
-2.7 -3.5 0.8 -19.8Equity accounted earnings of interest in jointly
controlled entities
-21.5 8.6 -30.1 2.9Equity accounted earnings of associate companies
2.0 -0.0 2.0 2.1EBIT
73.4 165.2 -91.8 -55.6 257.2Net interest expense
-36.9 -33.5 -3.4 -10.1 -71.8Profit before income tax
36.5 131.6 -95.1 -72.3 185.5Income tax expense
-18.8 -38.8 20.0 +51.5 -58.4NPAT
17.6 92.8 -75.2 -81.0 127.1•
EBITDAF improved 9% driven primarily by a 4.5% increase in the weighted average price (Fixed Price Variable Volume) received from residential and commercial customers•
Higher wholesale prices increased generation sales value and correspondingly increased costs for spot purchases•
$7m earned from sale of carbon credits (PREs earned by the Nga Awa Purua project)EBITDAF
FINANCIAL RESULTS•
Non cash fair value movement in financial instruments impacted strongly by decrease in long-term global interest rates ($85.7m relates to fair value movements in NZ derivatives and $20.3m relates to our share of the fair value movements of derivatives associated with offshore investment)•
Increased non-cash depreciation charge due to FY2011 asset revaluation•
Net interest expense reflects higher average debt levels and cost of fundsEBITDAF to NPAT
FINANCIAL RESULTS•
Downward shift in global swap yield curves over the last four years•
Historically record low levels resulted in large non-cash fair value adjustments•
Mighty River Power does not hedge account for interest rate derivatives•
Fair value of derivatives subject to future interest rate movementsFair Value of Financial Instruments
FINANCIAL RESULTS•
Operating expenses are favourable to pcp however this is expected to correct in the second half due to the timing effect caused by the re-scheduling of maintenance projects•
Other operating expenses include favourable FX movements (unrealised foreign currency translation)•
International geothermal costs relate to the operating costs of the GGE Fund (US/Chile/Germany) – higher due to increased development activity and includes some prior period costs previously capitalised.Operating Expenses
FINANCIAL RESULTS•
Kawerau and Nga Awa Purua construction FY2007 – FY2010•
No major domestic projects under construction FY2011•
$1 billion new geothermal investment FY2006 – FY2010•
Ngatamariki construction commenced FY2012 with commissioning expected mid 2013•
Capex spent $163.7m, mainly for Ngatamariki ($94.6m) and investments in international geothermal projects ($38.6m)Capital Expenditure
FINANCIAL RESULTS•
Average debt maturity profile 5.9 years at 31 December 2011, from 6.4 at 30 June•
Total debt facilities increased by $50m to $1,360m with $1,025m drawn, $335m of headroom•
Next maturity is $200m retail bond in May 2013 and $250m bank facility in Dec 2013•
Credit rating BBB+/stable/A2•
Post balance date– $200m three year bank facility added
– $200m Commercial Paper programme
established
Debt Maturities
FINANCIAL RESULTS•
Flexibility in generation portfolio resulting in ability to adjust net position to market conditions•
Capacity to cover sales book during periods of high wholesale prices (hydro and thermal generation)•
Active participation in high growth ASX futures marketIntegrated Generation & Sales Portfolio
BUSINESS UPDATEPortfolio Flexibility
•
Wholesale prices negatively correlated to national storage•
Southdown production correlated to price and negatively correlated to storagePeople and Performance
•
Continue to invest in a range of programmes in employee and leadership development that
support retention of people in key areas of organisational capability
•
Commitment to building a powerful and vigorous health and safety culture across the company
–
Increased awareness in health and safety has resulted in a 40% increase in near-miss
reporting on pcp
–
Health & Safety Performance TRIFR (total recordable injury frequency rate) down 18% as at
December 2011
•
Initiatives to support availability of critical skills
–
Establishment of a Chair in Geothermal Reservoir Engineering with University of Auckland
-$1m of funding over a five year period
–
Apprenticeship programme to build tomorrow’s workforce and nurture expertise
Regulatory Outcomes
•
Environment Court judgment to increase water volume for abstraction from the Waikato River– Offset by operational and plant efficiency gains, higher geothermal base-load – Flexibility of gas-fired generation at
Southdown
•
High Court ruling to uphold UTS and confirming pricing reset– Further appeals pending
•
EA change for the frequency keeping methodology ensures real-time balancing of supply and demand – Significant savings to the electricity industryand Mighty River Power
•
ETS changes to phase in increase in price cap over next 3 years•
Mighty River Power top 10 global geothermal operator•
Interests in USA, Chile, Germany and NZ•
Applying geothermal experience and leveraging existing rare competencies•
Investment in geothermal exploration, development and construction•
Accessing growth opportunities offshore that are not constrained by demandInternational Geothermal Investments
OUTLOOK•
Hudson Ranch Power I - Salton Sea, Southern California
– Delivered first power to grid March 2012 – Operating at full capacity – 49.9MW
– Commissioning expected March/April 2012
•
Ngatamariki - NZ
– Groundbreaking for the $466m 82MW geothermal station near Taupo in the half year with construction well underway with completion planned for mid 2013 – Successfully completed five monitoring wells and
commenced drilling of first deep injection well
– Civil enabling works completed and foundations underway for power station
Geothermal Development
OUTLOOK•
Tolhuaca - Chile
– Exploratory drilling behind plan due to a more severe winter than expected and a mechanical incident with the rig involving GGE’s drilling contractor
•
Te ia a Tutea (Taheke field) - NZ
– Development agreement signed with landowners in November with exploration planning underway
•
Bavaria - Germany
– 4 concessions acquired and preparations for seismic surveys are underway with exploratory drilling likely in second half of 2012
•
Turitea - NZ
– Final consent achieved in September for up to 60 turbines
•
Puketoi NZ
– Consent hearing about to begin for a 53 turbine project
Future Development Options
OUTLOOKOutlook
•
Full year earnings in the range of $460m - $475m (lifted from initial guidance of $430m - $450m)
•
Benefit of geothermal base-load capacity, complemented by good hydrology in the Waikato River
catchment relative to the South Island
•
Increased hydro production in response to elevated wholesale market prices
•
Ngatamariki construction on track for full commissioning mid 2013 taking geothermal
contribution to 40% of generation production
•
International geothermal – active pipeline of projects through GGE, not limited by domestic
demand
Calendar
KEY DATES FOR 2012
OUTLOOKFY2012 Financial Year end
30 June
2012 Annual Results announcement
28 August
Consolidated Income Statement
Consolidated Income Statement HY2012 HY2011(restated)
Total revenue 729.1 618.2
Energy costs 344.0 246.4
Other direct costs of sales, including metering 15.5 20.9
Other expenses 115.1 117.2
EBITDAF 254.5 233.6
Depreciation and amortisation (73.2) (67.7)
Change in fair value of financial instruments (85.7) (5.8)
Net interest (36.90 (33.5)
Equity accounted earnings of associate companies 2.1 (0.0)
Equity accounted earnings of jointly controlled entities (21.5) 8.6
Impaired assets (2.7) (3.5)
Profit before taxation 36.5 131.6
Income tax expense (18.8) (38.8)
NET PROFIT FOR THE PERIOD 17.6 92.8
Consolidated Balance Sheet
Consolidated Balance Sheet HY2012 HY2011 (restated)
SHAREHOLDERS’ EQUITY
Total shareholders’ equity 2,882.2 2,654.2
ASSETS Current assets
Cash and short term deposits 43.2 41.8
Derivative financial instruments 18.1 19.6
Other 236.7 233.3
Total current assets 298.0 294.6
Non-current assets
Property, plant & equipment 4,872.5 4,296.4 Derivative financial instruments 160.7 88.8
Other 173.8 246.6
Total non-current assets 5,207.1 4,631.7
Total Assets 5,505.2 4,926.4
LIABILITIES Current liabilities
Loans 6.2 5.7
Derivative financial instruments 27.6 23.7
Other 226.5 190.5
Total current liabilities 260.3 219.9
Non-current liabilities
Loans 1,051.4 982.9
Derivative financial instruments 444.1 308.8
Other 867.2 760.6
Total non-current liabilities 2,362.7 2,052.3
Total Liabilities 2,623.0 2,272.2
TOTAL NET ASSETS 2,882.2 2,654.2
Consolidated Cash Flow
Cash Flow Statement HY2012 HY2011(restated)
OPERATING CASH FLOW
Net cash receipts 258.2 222.4
Net interest paid (41.5) (34.9)
Taxes paid (31.4) (35.3)
Net cash provided by operating activities 185.4 152.2
Investing cash flow (149.5) (108.2)
Financing cash flow (21.7) (10.1)
Net increase in cash 14.2 33.9
Opening cash 28.7 7.9
Net foreign exchange movements 0.3 0.0
CLOSING CASH 43.2 41.8
NPAT to Underlying Earnings
HY2012
($m)
HY2011
($m)
Change
%
FY2011
($m)
NPAT 17.6 92.9 -81.0 127.1
Change in fair value of financial instruments 85.7 5.8 25.6
Change in fair value of financial instruments of associate
companies -0.4 -0.2 1.4
Change in fair value of financial instruments of interest
jointly controlled entities 20.6 -9.9 2.0
Impairments 2.7 3.5 19.8
Income tax expense on adjustments -24.7 -2.7 -12.9
Impact due to Legislative changes 0.0 0.0 -0.8
Underlying Earnings 101.7 89.4 +13.8 162.2
Operating Information
SALES HY2012 HY2011 Change % Change
Electricity Customers 383,000 402,000 Electricity sales (GWh) 2,555 2,531 +24 +0.9 Residential FPVV 1,408 1,445 -38 -2.6 Commercial FPVV 1,148 1,085 +63 +5.8 Spot 995 1,111 -116 -10.4 Net CFD 938 1,060 -122 -11.5 PURCHASES
Electricity total NZEM (GWh) 3,709 3,797 -88 -2.3
Gas purchases
Retail (PJ) 0.61 0.62 -1.6
Cogeneration (PJ) 2.84 2.05 38.5
($/GJ) $8.11 $7.70 5.3
Operating Information
PRICING HY2012 HY2011 Change % Change
Weighted Average Wholesale Price of Generation
(GWAP) ($/MWh) $80.16 $56.18 $23.98 +42.7
Weighted Average Purchase Cost (LWAP) ($/MWh) $83.48 $58.54 $24.94 +42.6 Weighted average sales price (FPVV) ($/MWh) $113.58 $108.65 $4.93 +4.5
LWAP/GWAP ratio 1.04 1.04 GENERATION VOLUMES Hydro (GWh) 2,258 2,220 +38 +1.7 Geothermal (GWh) 981 977 +4 +0.0 Co-generation (GWh) 308 207 +101 +48.8 Biomass (GWh) 0 0 0 -100.0 Total (GWh) 3,548 3,405 +143 +4.2 CARBON EMISSIONS Generation (kT) 295.5 251.9 +43.6 +17.3 Retail (kT) 32.6 36.0 -3.4 +9.7 Total (kT) 328.0 288 +40 +13.9
Generation carbon intensity (T/GWh) 83.3 74.0 +9.3 +12.6 APPENDICES
