2011 Interim Results Presentation

Page 1


About Mighty River Power

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Slide 2

Flexible portfolio of electricity generation assets in New Zealand – hydro (1040MW), geothermal (387MW; 267MW equity interest), gas-fired co-generation (175MW). 90% renewable generation, with major geothermal share Generation assets located in the upper North Island, close to the major industry and residential load centres 402,000 retail customers with our brands, Mercury Energy, BOSCO Connect and Tiny Mighty Power. Top 10 global geothermal business – leveraging this expertise in US, Chile and Germany across 8 reservoirs

Actively pursuing future growth opportunities in geothermal generation and wind farm developments.


Highlights

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 

  Slide 3

$233.6m EBITDAF, a 22% increase on pcp NPAT up 15% to $85.2m. Underlying earnings of $88.7m, up 4% US$200m (NZ$260m) debt raised in USPP 3,504GWh total generation up 18%, with 69% increase in contribution from geothermal Geothermal 31% of generation, more than 400% up on 2007 15-year VAS, providing South Island energy hedge Retail expanded into new geographies; 49% growth in South Island sales International geothermal investment in 8 geothermal reservoirs across 3 countries $64.7m interim dividend, a 15% increase on pcp.


Financial highlights HY2011 ($m)

HY2010 ($m)

% Change

Energy Margin

340.8

278.7

+22

EBITDAF

233.6

191.2

+22

Underlying Earnings

88.7

85.5

+4

NPAT

85.2

73.9

+15

Dividend

64.7

56.2

+15

  Slide 4

Energy Margin and EBITDAF up 22%, primarily due to Nga Awa Purua geothermal plant commissioned in April 2010 Dividend up 15% on pcp (prior comparable period)


EBITDAF 260 250

12.4

240

1.4 18.3

4.4

230 220

33.7

210

$M

200

11.6

233.6

190 180 170

191.2

160 150 EBITDAF HY10 Hydro & Gas

   Slide 5

Geothermal

Contracts

Sales

Other Income

Operating Expenses

EBITDAF HY11

22% increase in EBITDAF on 1H2010 Increase primarily driven by production new from Nga Awa Purua geothermal plant Increased customer sales offset by increases in operating expenses


Operating expenses 115 3.7

1.7 110 3.1

116.1

105

$M 9.8

100

97.8 95

OPEX HY10

Slide 6

Maintenance

Int'l Geo

Sales & Marketing

Other

OPEX HY11


Financial performance HY2011 ($m)

HY2010 ($m)

$m Change

% Change

FY2010 ($m)

EBITDAF

233.6

191.2

+42.4

+22

327.8

Depreciation and amortisation

-67.7

-57.7

-10.0

-98.7

Change in fair value of financial instruments

-10.2

-1.5

-8.7

8.0

-3.5

-15.0

+11.5

-31.3

4.0

0.0

+4.0

-22.0

-0.0

1.8

-1.8

-11.7

EBIT

156.2

118.8

+37.4

+31

172.1

Net interest expense

-33.5

-14.0

-19.5

+139

-30.7

Profit before income tax

122.7

104.8

+17.9

+17

141.4

Income tax expense

-37.5

-30.9

-6.6

+21

-56.8

85.2

73.9

+11.3

+15

84.6

Impairments Equity accounted earnings of interest in jointly controlled entities Equity accounted earnings of associate companies

NPAT

Slide 7


EBITDAF to NPAT 240 230

10.2

220 210 200 190

67.7

180 170 160 150

3.5

233.6

4.0

$m 140

33.5

130

120 110

37.5

100 90

80

85.2

70 EBITDAF HY11

Slide 8

Change in fair Deprecation & value of financial amortisation instruments

Impairments

Equity accounted earnings in jointly controlled entities

Net interest expense

Income tax

NPAT HY11


NPAT to Underlying Earnings HY2011 ($m)

HY2010 ($m)

% Change

FY2010 ($m)

NPAT

85.2

73.9

+15

84.6

Change in fair value of financial instruments

10.2

1.5

-8.0

Change in fair value of financial instruments of associate companies

-0.2

0.0

17.5

Change in fair value of financial instruments of interest jointly controlled entities

-5.9

0.0

21.3

3.5

15.0

31.3

-4.1

-4.9

-10.0

0.0

0.0

2.9

88.7

85.5

Impairments Income tax expense on adjustments Impact due to Legislative changes Underlying Earnings

Slide 9

+4

139.6


Capital Expenditure 400 350 300 250

$M

200 150

100 50 0 FY 2006 Reinvestment

   Slide 10

FY 2007 Geothermal

FY 2008 Thermal

Hydro

FY 2009 Wind

FY 2010 Other new investment

FY 2011 Forecast Capex

Kawerau and Nga Awa Purua construction FY2007 – FY2010 No major domestic projects under construction FY2011 $1 billion new geothermal investment FY2006 – FY2010


Debt maturities (current) 400 350 300 250 $M

200 150

100 50 0 2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

Facility Maturity

    Slide 11

Average debt maturity profile 7.3 years at 31 December 2010, up from 5.4 at 30 June

Total debt facilities $1,210m with $985m drawn Next maturity is $200m retail bond in May 2013 and $150m bank facility in Dec 2013 Credit rating BBB+


Generation portfolio 4,000 3,500 3,000 2,500

GWh

2,000 1,500 1,000 500 0 1HY2007

1HY2008 Geothermal

  Slide 12

1HY2009 Co-generation

1HY2010 Hydro

1HY2011

Other

Geothermal 31% of generation, more than 400% up on same period in 2007 Company record production for half year


Generation flexibility 500

$180

450

$160

400

$140

350

$120

300 GWh

$100

250

$80

200

$60

150 100

$40

50

$20

0

$0 Jul

hydro

    Slide 13

$/MWh

Aug

geo

Sep

swn

Oct

Hydro VWAP

Nov

Dec

Geo VWAP

SWN VWAP

Southdown (SWN) production for peak demand (Jul – Aug) and drought (Dec) High hydro (no SWN) during high inflows periods (Sep – Oct) High prices for Southdown in December drought Geothermal maintenance in September (high hydro offset)


Generation volumes HY2011

HY2010

%change

FY2010

Hydro (GWh)

2,209

2075

+6%

3,730

Geothermal (GWh)

1,092

646

+69%

1,562

204

228

-10.5%

504

0

10

-

16

3,504

2,959

+18%

5,812

Generation

Co-generation (GWh) Biomass (GWh)

Total (GWh)

   Slide 14

Geothermal up 69% significant increase on HY2010 Hydro up on pcp but now only 63% of total generation Geothermal 31% of total


Carbon emissions HY2011

HY2010

% change

FY2010

249.1

192.9

+29%

418.8

Retail (kT)

35.8

36.0

-0.6%

60.5

Total (kT)

284.9

228.9

24.%

479.3

71.1

65.1

+9%

72.1

Generation (kT)

Generation carbon intensity (T/GWh)

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Slide 15

Costs of carbon emissions covered by Projects to Reduce Emissions (PREs)


Portfolio dynamics 700

$120

600

$100

500

$80

400 GWh

$60

S/MWh

300 $40

200

$20

100 0

$0 Dec-2010

Nov-2010

Oct-2010

TPO Storage

Sep-2010

Aug-2010

Jul-2010

Southdown

Jun-2010

May-2010

Slide 16

Apr-2010

 

Mar-2010

Feb-2010

Jan-2010

Hydro

Wholesale Price - RHS

Wholesale prices negatively correlated to storage (Taupo, SI correlated in 2010)

Southdown production correlated to price (negatively correlated to storage)


Pricing HY2011 ($/MWh)

HY2010 ($/MWh)

$/MWh change

% change

Weighted Average Wholesale Price of Generation (GWAP)

$56.24

$52.79

$3.45

+6.5%

Weighted Average Purchase Cost (LWAP)

$58.54

$50.33

$8.21

+16.3%

$108.63

$100.54

$8.09

+8.0%

1.04

0.95

Weighted average sales price (FPVV) LWAP/GWAP ratio

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Slide 17

Average sales price increase ($8.09/MWh) similar to purchase cost LWAP ($8.21) LWAP/GWAP ratio change reflects need to move high hydro inflows, and increased base-load geothermal generation from Nga Awa Purua. HY2010 was an outlier relative to long-term trend of 1.03


Sales HY2011

HY2010

402,000

400,000

Residential FPVV

1,445

Commercial FPVV Spot

Electricity Customers

Change (GWh)

Change (%)

1,379

66

4.8

1,085

1,106

-21

-1.9

1,098

1,035

63

6.0

512

556

-44

-7.9

Electricity sales (GWh)

Net CFD

  Slide 18

Held market share around 20% in highly competitive environment Expanded retail offer into new areas including Nelson, Invercargill, Wairarapa, Marlborough, North Canterbury


South Island retail growth 3,000.0

2,500.0

2,000.0

1,500.0

North Island South Island

1,000.0

500.0

0.0 HY09

   Slide 19

HY10

HY11

South Island Fixed Price sales grew to 336GWh, up 67% from HY10 and up 510% since HY09 39,000 South Island customers, 10% of total customers South Island Fixed Price sales volumes are 13% of total Fixed Price sales


Purchases HY2011

HY2010

Change (GWh)

Change (%)

Electricity total NZEM (GWh)

3,797

3,697

100

2.7

Total generation production

3,504

2,959

545

18

Retail (PJ)

0.62

0.74

-16

Cogeneration (PJ)

2.05

2.30

-11

$7.7

$6.8

13

Purchases

Gas purchases

($/GJ)

  Slide 20

Generation production grew faster than sales – reflecting sales drive in 2009/2010 ahead of Nga Awa Purua commissioning Gas volumes down due to lower Southdown use – gas costs up 13%


Domestic growth opportunities

Nga Awa Purua 140MW

- Commissioned April 2010 - achieving world-leading 96% availability after start-up

Ngatamariki

-

Slide 21

consented May 2010 focus on commercial considerations – including equipment procurement Earliest commissioning late 2013


International geothermal investments

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Slide 22

Mighty River Power top 10 global geothermal operator US$250 million committed capital to partner GeoGlobal Energy (GGE) Good international geothermal growth opportunities Leveraging existing rare competencies in geothermal GGE has significant development pipeline – 3 countries, 8 reservoirs US$124 million deployed from US$250 million commitment Hudson Ranch I, California:

-

Majority shareholding of US$400m project 49.9MW under construction

On track to commissioning early 2012 US$92m of $107m commitment deployed.


International geothermal investments



Tolhuaca, Chile:

-



Weilheim, Germany:

-

Slide 23

Slim-hole drilling confirmed high temperature resource Preparation for production-scale drilling, due to start 2011 US$17m of $66m commitment deployed.

German Govt renewable energy policy Targeting low temperature geothermal resources

Two concessions acquired in Bavaria Geophysical surveys of Weilheim prospect US$11m deployed.


Strategy and outlook

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$1 billion investment over 5 years contributing to strong EBITDAF result Benefit of full-year contribution from Nga Awa Purua; geothermal now over 30% Hydro only 63%; portfolio optimisation by Southdown Domestic development options:

-

   Slide 24

Ngatamariki: commercial arrangements, procurement negotiations; earliest commissioning late 2013 Turitea: draft consent, 10-year lapse period; firm option to add wind

International geothermal – active pipeline of projects through GGE, not limited by domestic demand Focus on water policy – investor certainty, strategic resource for NZ Improved outlook for FY2011, EBITDAF guidance lifted from $391 million to $420-435 million


Questions?

Slide 25


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