FY 2011 Annual Report results - Media Presentation - 26 ...€¦ · Microsoft PowerPoint - FY 2011...

Genesis Energy

Results for the 12 months to 30 June 2011Genesis Power Ltd trading as Genesis Energy

Albert BrantleyChief Executive

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Disclaimer

This presentation may contain projections or forward looking information (“Forward Looking Statements”). Such Forward Looking Statements are based on current expectations and involve risks, uncertainties and assumptions. Forward Looking Statements are not guarantees of future performance or results. Actual performance and results may differ materially from those stated in any Forward Looking Statements. This could arise for a number of reasons, including any of the assumptions underlying such Forward Looking Statements proving to be inaccurate or incorrect.

Genesis Power Limited trading as Genesis Energy and its directors cannot and do not give any assurance that the performance or results expressed or implied by any Forward Looking Statement will actually occur. While reasonable care has been taken in compiling this presentation, Genesis Energy and its directors accept no liability for any errors or omissions. This presentation does not constitute financial advice.

Genesis Energy 2011 annual results

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Contents

Market Overview 04

Genesis Energy – Overview and Highlights 05

Business Strategy – Customer Experience, Portfolio Optimisation and Innovation 07

Production and Sales 14

Financial Review 15

Market Outlook 22

Business Outlook 23

Strategic Challenges 24

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New Zealand market overview

Last 12 months characterised by:

• Intense competition for retail customers:

• Combined market share of the four largest electricity retailers decreased over the financial year from 85.4% to 84.4% *

• Switching rates increased significantly over 2010/2011 period

• ‘What’s My Number’ campaign commenced late May 2011

• Warm and wet hydrology conditions throughout most of the year

• 300MW of new generation commissioned and added to the 10,500MW generation base as at June 2010. Generation base as at June 2011*:

• 64% renewable

• 36% thermal

* Source: Electricity Authority


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Genesis Energy overview

2011 highlights:

• Developed strategy to become New Zealand’s leading customer-focused energy company.

• Customer experience

• Portfolio optimisation

• Innovation

• Customer numbers increased overall for electricity, gas and LPG despite tough competition

• Purchase of Tekapo A and B added 185 MW low cost South Island generation to the portfolio

• $275 million NZDX-listed Capital Bonds issued

• First full year of operations at the Kupe oil and gas field

• Value of generation assets increased by net $297 million to $2,596 million


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Overview of FY11 result

12 months to 30 June 2011

$m

30 June 2010

$m*

Operating revenue 1,834.5 1,895.3

Operating expenses 1,541.8 1,646.5

EBITDAF 292.7 248.8

EBIT 30.5 131.5

Net profit after tax -16.6 69.3

Underlying earnings 63.5 87.7

Total assets 3,677 2,532

Total liabilities 1,965 1,086

Total equity 1,712 1,446

• Improved Earnings Before Interest, Tax, Depreciation, Amortisation, Fair value changes and other gains and losses (EBITDAF) driven by reduced cost base and higher retail prices

• Revaluation charge of $67.8m (after tax) taken on acquisition of Tekapo assets

• Underlying earnings declined reflecting market competitiveness and some tax changes

* Some items restated


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Genesis Energy’s business strategy is based on the key themes of customer experience, portfolio optimisation and innovation

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Customer experience: Retail

• Largest electricity and gas retailer

• Our vision is to be New Zealand’s leading customer-focused energy company

• Changing the customer experience through technology and innovation to provide customers greater choices and control

• In-house Contact Centre has enabled the move to customer-centric model

• Continue to target improvements in cost efficiencies, operational performance and customer service

• Focus on customer experience has supported strong growth in South Island customers


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Portfolio optimisation: Generation

• Renewable generation up 18% to 2,138 GWh, of which 99% is hydro

• Thermal generation down 24%:

• Gas 12% lower at 3,372 GWh

• Coal 47% lower at 1,015 GWh

• Average wholesale price achieved down 3.6%: Occasions when cheaper to purchase at spot rather than run plant

Generation by Fuel Type (GWh)

0

1,0002,000

3,000

4,000

Hydro Wind Gas Coal

2007 2008 20092010 2011

Total generation down 14% to 6,526 GWh, but hydro up


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Portfolio optimisation: Hydrology


Wet conditions prevailed over FY10/11, now below average

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Portfolio optimisation: Energy Management

Addition of Tekapo A and B power stations and enhanced commercial trading strategies

• Energy management strategy is to generate from: • Renewable and Huntly Unit 5 to meet retail demand• Thermal to meet wholesale contracts

• Revenue at $1,088m in FY11 (down 5.4%) reflecting: • Wet and warm conditions• Average price received for generation $56.67 (FY11)

• Wholesale gas sales (13.2PJ) up strongly

• Coal stockpile 1,532 Kt (up 40%) due to reduced generation from coal

• Kupe Q4 plant issues resolved

• On-going evaluation of the Castle Hill, Slopedown wind and the Reporoageothermal sites

• Castle Hill wind farm resource consents application lodged 1 August 2011


Huntly Unit Generation (GWh)

12 months to 30 June

- 1,000 2,000 3,000

Unit 1Unit 2Unit 3Unit 4Unit 5

FY11 FY10 FY09

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Portfolio optimisation: Future of Huntly

• Total generation at Huntly Power Station for the year 4,387 GWh (down 24%)

• Unit 3 status update: Short term storage phase - limited maintenance programme and declining reliability

• Discussions continue with stakeholders regarding resource consent renewals

• Review in FY11/12 regarding storage profile of units


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Innovation: A key to growing prosperity

• Providing energy and utility solutions to grow the prosperity of our customers

• Lean Six Sigma driving improvements and efficiencies at Contact Centre

• Customer satisfaction at 91%

• Cost to serve per connection down by 30%

• Energy Online now run from Genesis Energy Hamilton Contact Centre

• Advanced Meters in over 190,000 households and other properties

• ‘Energy Usage’ allows customers to track how much energy they have used and when - monthly, weekly, daily, or even hourly

• Provision of new services

• Exploring partnerships and technology

• Developing a systematic innovation capability


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Production and sales

Performance Summary 30 June 2011 30 June 2010

Thermal generation GWh 4,387 5,761

Renewable generation GWh 2,138 1,815

Total Generation GWh 6,526 7,576

Average wholesale electricity price $/MWh 59.67 61.88

Retail electricity sales GWh 5,705 6,378

Wholesale and retail gas sales PJ 17.8 9.6

Gas used in generation PJ 27.9 31.8

Coal used in generation PJ 11.1 21.2

Total fuel used in generation PJ 39.0 53.0

Electricity customer numbers 549,300 535,200

Gas customer numbers 112,200 108,500


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Financial review

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Revenue

0%

4%

8%

12%

16%

20%

0500

10001500200025003000

2007 2008 2009 2010 2011

$m

Revenue and Operating Margin

Operating revenue Operating expenses

Operating margin

Revenue Breakdown FY11

($m)

$1,548

$190$97

Electricity

Gas

Other


• Declining revenue (down $61m to $1,834 m in FY11) reflected lower wholesale electricity prices and reduced electricity sales to industry

• Operating margin improvement highlights stronger revenue quality

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EBITDAF and profit

• EBITDAF improved to $293m reflecting cost savings, lower cost of production and improved retail margins

• Full year contribution from Kupe oil and gas field

• NPAT loss of $16.6m due to write-down of Tekapo A and B power station assets

• Underlying profits $63.5m, down $24.2m on prior year ($87.7m)

EBITDAF and Underlying Earnings

0

80

160

240

320

400

2007 2008 2009 2010 2011

$m

0%

2%

4%

6%

8%

10%

EBITDAF

Underlying profits

Return on equity (adj for revaluation)


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Cashflow and capex

• Free cashflow lower due to purchase of Tekapo A and B assets

• Slightly improved operating cashflow at $245.6m

• Cash from financing activities reflected $275m Capital Bonds offer

• Capex dominated by Tekapo A and B asset purchase. Other capex $53.5m for FY11


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Assets

Asset base continues to grow:

• June 2011 asset revaluation showed $297m increase to $2,596m, net of the revaluation of the $96.8m (before tax) Tekapo assets.

• Increase driven by continuing growth in value of hydro assets plus purchase of Tekapo A and B assets

• Coal stockpile value $148.6m, reflecting 40% growth to $1,532 Kt.


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Debt

• Successful $275m Capital Bonds offer closed fully subscribed with $50m over-subscriptions accepted

• Capital Bonds listed on the NZDX

• Term is 30 years and treated as equity by S&P

• Gearing (Net debt/ net debt + equity) 41.2%

• Total committed funding facilities $1,075m as at 30 June 2011 ($510m drawn down)


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Outlook

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Market outlook


• NIWA Climate Outlook for August to October 2011

• Near normal rainfall and near or above average temperatures in all regions (except east of the South Island)

• Expect low to modest electricity growth (1.5% per annum)

• ‘What’s My Number’ campaign may continue to impact on retail market switching levels

• ASX wholesale futures prices indicate (at 18 August 2011):

• North Island wholesale prices of $66MWh in December 2011 and $102MWh in June 2012

• South Island wholesale prices of $60MWh in December 2011 and $110MWh in June 2012

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Business Outlook


• Statement of Corporate Intent tabled on 11 August 2011

• Includes performance projections for 2011/12

• Focus on expanding Customer Experience initiatives

• Integration of Tekapo A and B power stations

• Improve generation profile/revenues and support further retail growth in the South Island

• Tekapo A and B power station canal repairs commence

• Continuing partial impact of emissions trading scheme

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Strategic focus

Customer experience:

• Build on 2010/11 customer growth

• Superior customer experience will drive greater value for all

Portfolio optimisation

• Huntly site will continue to have national significance

• Creating options for further commercially-driven development

Innovation

• Developing new products and services using new technology

• Focused on creating an innovation culture and programme


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Thank you.

FY 2011 Annual Report results - Media Presentation - 26 ...€¦ · Microsoft PowerPoint - FY 2011...

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