• Presentation for EKF • 25 September 2014 Investor Briefing November 2014 • [cover page being re-created by marketing] Trustpower key facts • Tauranga based national electricity / retailer • Market capitalisation circa NZ$2.3 billion • Key shareholders Infratil (51.1%). TECT (33.2%) • Free float of Trustpower’s shares 15.7% • New Zealand generation capacity (hydro / wind) 634 MW producing an average of circa 2,420 GWh per annum • In Australia, 371 MW Snowtown wind farm in South Australia producing an average of 1,354 GWh per annum and 105 MW Green State Power assets in NSW (hydro and wind producing 270 GWh per annum) • Approximately 234,000 electricity connections, 21,000 gas connections, and 35,000 telecommunication connections • 611 employees © Trustpower Limited NZ electricity 7 day rolling spot prices last 12 months © Trustpower Limited NZ 7 day rolling demand last 12 months © Trustpower Limited FY15 Interim results summary Satisfactory financial performance Snowtown Stage 2 wind farm became fully operational during the period One off discount on acquisition of $25m following post acquisition independent valuation of Green State Power assets EBITDAF $173m up 13% Underlying NPAT $67.4m down 4% • NZ generation production flat – low North Island hydro and wind offset by South Island hydro production Generation production 1,225 GWh up 0.6% • Increased customer sales - Increased mass market connections as retail growth strategy implemented - Increased TOU sales Multi Product retail strategy gaining momentum Customer Sales 2,051 GWh up 12% Telco connections 35,000 up 21% 15,000 more customers with two or more services • • • • • Development expenditure focussed on Australian wind • Capex spend on Snowtown Stage 2 now completed © Trustpower Limited Increased gearing in line with expectation following acquisition of Green State Power assets EBITDAF – Bridge Half Year FY15 200 190 180 $M 170 160 150 © Trustpower Limited EBITDAF, underlying earnings after tax and operating cash flow six months to 30 September 2014 EBITDAF, Operating Cash Flow & Underlying Earnings After Tax 200 180 160 $M 140 120 100 80 60 40 20 0 2010 2011 EBITDAF © Trustpower Limited 2012 Operating cash flow 2013 Underlying earnings 2014 Domestic average consumption © Trustpower Limited Customer Losses versus market Trustpower Losses vs Market – last 2 years 30% 50,000 45,000 25% 40,000 35,000 20% 30,000 15% 25,000 20,000 10% 15,000 10,000 5% 5,000 0% NZ Switch Count © Trustpower Limited Market % Losses Trustpower % Losses 2014/09 2014/08 2014/07 2014/06 2014/05 2014/04 2014/03 2014/02 2014/01 2013/12 2013/11 2013/10 2013/09 2013/08 2013/07 2013/06 2013/05 2013/04 2013/03 2013/02 2013/01 2012/12 2012/11 2012/10 0 Bundled offers drive lower churn Power only Power and telco © Trustpower Limited 46% lower churn Contracted customers and multiproduct penetration Proportion of Trustpower Residential Contracted vs Non Contracted Services per Customer 250000 200000 22% 150000 47% 100000 53% 78% 50000 0 2010 2011 1 service © Trustpower Limited 2012 2 or more services 2013 2014 Contracted Non Contracted Overhead costs and customer connections 350 160 300 140 120 250 100 200 80 150 60 100 40 50 20 0 0 Sep 10 Electricity Connections © Trustpower Limited $ per Electricity Connection Connections 000's Overhead Costs and Customer Connections Sep 11 Telecommunication Connections Sep 12 Gas Connections Sep 13 Sep 14 Overheads Per Electricity Customer excl Acquisitions Snowtown Stage 2 final outcome • Final take over occurred late October 2014 • Final cost of A$424m (excluding capitalised interest) A$16m under budget • Project (ungeared) IRR > 14% significantly exceeds Group target return for Australian wind farm developments • Strong health and safety and environmental record during construction • Superb addition to Trustpower's renewable energy portfolio • Expect 895 GWh of production for FY15 © Trustpower Limited Snowtown Stage 2 impact on the Trustpower Group First full year of operation of Snowtown 2 Project – FY16 Total Snowtown Stage 2 CAPEX(A$m)* 424 EBITDA (A$m) 77.9 NPAT (A$m) 19.9 Operating Free Cash Flow (after tax and debt service) (A$m) 41.9 * Excludes Capitalised Interest © Trustpower Limited Advance “Smart” metering deployment • Decision made to outsource metering services and install smart meters to our retail customer base • Long term service contract with Metrix • 3 year deployment project to commence mid 2015 © Trustpower Limited Metrix contract – financial impact FY15 Forecasted cost Business as Usual $M FY15 Hypothetical cost If Metrix Contract fully implemented $M Meter rental 5 17 Meter reading 7 - Other Costs 1 - EBITDAF 13 17 Depreciation 9 3 Capex (average last 5 years) 3 - Asset Value 20 5* * The Metrix contract does not impact on meter revenue or meter asset values for legacy meters leased to third parties. However this is expected to decline as other retailers convert to smart meters © Trustpower Limited Green State Power Acquisition (July 2014) Capacity GWh per annum 92.4MW 244 Blayney and Crookwell 14.1MW 26 Total 106.5MW 270 Hydro Hume, Burrinjuck and Keepit Wind Purchase Price A$72.2m EBITDAF (Full Year) A$8.5m Discount on acquisition A$22.5m Current sources of debt financing Funding Sources NZD* Millions 70 126 Debt Maturity 600 288 500 NZD 400 450 300 200 100 240 0-1 NZD Bank Senior Bonds • • 215 1-3 3-5 5-7 7+ Maturity - Years NZD & AUD ECA Sub Bonds AUD Bank Unutilised Bank NZD Bank Sub Bonds Senior Bonds NZD & AUD ECA AUD Bank Unutilised Bank Longer term funding mix currently provided by a combination of retail senior and subordinated bonds and ECA facilities Announced upcoming senior bond maturity of $75m will be refinanced with a General and Exchange offer targeting $100-125 million © Trustpower Limited Gearing measures Assumptions © Trustpower Limited - Forecast based on current dividend level No impact from revaluation of generation assets as at 31 March 2015 Dividends Interim Dividend as % of Underlying Earnings and Cash Earnings 100 % Profit 90 80 70 60 50 Sep 09 Sep 10 Sep 11 Dividend as % Underlying Earnings Sep 12 Sep 13 Dividend as % Cash Profit Dividends Per Share Dividend (cents per share) 60 • • 50 40 30 20 10 2010 2011 2012 Special Dividends 2013 Ordinary Dividends 2014 Interim dividend of 20cps announced payable 12 December 2014 No change versus prior period © Trustpower Limited Half year to Sep 14 Canterbury Irrigation Scope of Potential mid Canterbury Solution • • Staged Investment - up to 120,000Ha $250m-300m of investment (excluding on farm irrigation infrastructure) Specific Stages Stage 1: BCI pumps – completed Supplies the first 8,000-10,000 Ha of irrigation but without security of supply from storage Stage 2: More Pumps + Lake Coleridge Storage completed Storage and supply contracts signed with BCI and CPW provide irrigation potential of 40,000Ha. • BCI steadily adding scheme members to stage 1 (13,000 ha) • BC1 Stage 2 (4000 ha) capital raising under way • CPW stage 1 (20,000 ha) well advanced Stage 3: Enhanced release of storage capacity from Coleridge • • • © Trustpower Limited Increase irrigated area up to 120,000Ha. Increased storage release to Rakaia River via Coleridge HEPS for abstraction by CPW, BCI and other parties CPW planning under way for stage 2 and 3 development (45,000 ha) Generation development pipeline • Trustpower retains significant options • NZ hydro and wind - Near term oversupply headwind to investment - Maintain options as long as possible • Australian wind - 20% by 2020 renewable energy target largely met by wind - PPA’s mitigate risk - Progressing DAs in SA, VIC and NSW with view that Government review of LRET scheme will continue to support further wind development © Trustpower Limited Renewable Energy Target review update • • • Warburton review side-lined Bi-partisan negotiation commenced If agreement is reached there will be no more legislated reviews © Trustpower Limited Group strategic focus Retail Growth Initiatives • • • • Regional and metro acquisition campaigns continue Multiproduct retailing initiatives (grow gas and telco offering) Improvement of customer experience through technology Smart metering deployment (3 years from H1 2015) Australia Wind • • Progress development approval processes for 4 projects SA, VIC and NSW (close to 1,300 MW in aggregate) in anticipation of favourable RET review outcome. Determine viable funding options for future growth of Australian wind Irrigation • Development of Canterbury regional infrastructure solution which will include enhancement of Coleridge power station Corporate • Preparation for Head office move Q1 2016 © Trustpower Limited Non-GAAP Measures • Underlying Earnings is a non GAAP (Generally Accepted Accounting Principles) financial measure. Trustpower believes that this measure is an important additional financial measure to disclose as it excludes movements in the fair value of financial instruments which can be volatile year to year depending on movement in long term interest rate and or electricity future prices. Also excluded in this measure are items considered to be one off and not related to core business such as changes to the company tax rate or gain/impairment of generation assets. • EBITDAF is a non GAAP financial measure but is commonly used within the electricity industry as a measure of performance as it shows the level of earnings before impact of gearing levels and non-cash charges such as depreciation and amortisation. Market analysts use the measure as an input into company valuation and valuation metrics used to assess relative value and performance of companies across the sector. • Reconciliation between statutory measure of profit and the two measures above are given below: Proft After Tax Attributable to Shareholders of the Company Fair value losses / (gains) on financial instruments Discount on acquisition Changes in income tax expense in relation to adjustments Change in corporate tax rules Underlying Earnings After Tax Operating Profit Fair value losses / (gains) on financial instruments Discount on acquisition Depreciation and amortisation EBITDAF © Trustpower Limited HY2010 59,710 (3,171) 951 6,281 63,771 HY2011 68,762 9,480 (2,654) 75,588 HY2012 69,839 8,863 (2,482) 76,220 HY2013 77,167 (10,066) 2,818 69,919 HY2014 89,235 4,395 (24,986) (1,231) 67,413 HY2010 121,984 (3,171) 28,880 147,693 HY2011 122,709 9,480 29,398 161,587 HY2012 124,764 8,863 32,474 166,101 HY2013 129,138 (10,066) 34,029 153,101 HY2014 147,796 4,395 (24,986) 46,141 173,346 Disclaimer Some of the information set out in the presentation relates to future matters, that are subject to a number of risks and uncertainties (many of which are beyond the control of Trustpower), which may cause the actual results, performance or achievements of Trustpower or the Trustpower Group to be materially different from the future results set out in the presentation. The inclusion of forward-looking information should not be regarded as a representation or warranty by Trustpower, the directors of Trustpower or any other person that those forward-looking statements will be achieved or that the assumptions underlying any forward-looking statements will in fact be correct. © Trustpower Limited Thank you
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