Mighty River Power Commerce Committee Financial Review FY2011

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OV E R V I E W

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 (producing 15-18% of total NZ supply), complemented by sales to business and homes.

Sales to major industrial and commercial users and through our retail brands, Mercury Energy, GLO-BUG, Bosco Connect and Tiny Mighty Power, accounting for 18% of total NZ electricity consumption.

Top 10 global geothermal business – leveraging expertise in US, Chile and Germany.

Mighty River Power – Financial Review 2012

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OV E R V I E W

Generation & Retail Sales

90% renewable generation, with major geothermal share, supported by multiunit, gas-fired plant in Auckland.

Generation assets in the upper North Island, close to major industry and residential demand.

Mighty River Power – Financial Review 2012

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Our Strategy Mighty River Power’s strategy is focused on leveraging our core competencies to target sustainable growth and maximise long-term shareholder value. Our three priorities are:

1.

Maximising value of integrated domestic sales/generation within a defined risk framework.

2.

Securing economically-attractive development options and developing when appropriate.

3.

Targeting growth in global geothermal niche that provides risk-adjusted returns.


F I N A N C I A L R E SU LT S

Full-Year 2011 FY2011 ($m)

FY2010 ($m)

% Change

EBITDAF

443.1

327.8

+35

Underlying Earnings

162.2

139.6

+16

NPAT

127.1

84.6

+50

Dividend (Interim + Final)

110.4

86.5

+28

Record total electricity generation of 6,833GWh up 17% on 2010, with new geothermal plant and better hydro conditions. 96% of generation from renewable sources.

Geothermal output increased 40% to 2,192GWh of base-load production, with 96.5% availability of 140MW Nga Awa Purua station in first year of operation.

Above-average rainfall in Lake Taupo and Waikato River catchments, with hydro production up 17% to 4,368GWh (compared with long-term average of about 4,000GWh).

Total Shareholder Return (TSR) of 11.4% – reflecting 16% lift in underlying earnings plus $412 million pre-tax increase in asset valuations.

Mighty River Power – Financial Review 2012

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HIGHLIGHTS

Geothermal ‘Game-changer’ GWh

Electricity Generation – Mighty River Power

Investment of more than $1 billion in geothermal developments over the past five years – Kawerau, Nga Awa Purua, and offshore geothermal.

• •

30% of Company’s total generation, will be 40% with completion of Ngatamariki in 2013. Premium renewable, not weather-dependent: base-load, runs 24/7, output 3x wind farm and 2x hydro of the same capacity.

Mighty River Power – Financial Review 2012

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HIGHLIGHTS

Geothermal ‘Game-changer’ GWh

Electricity Generation – New Zealand

SOURCE: MED ENERGY DATA FILE

• •

Positive change in NZ’s energy mix, with geothermal displacing coal generation.

Mighty River Power’s lift in geothermal generation 2007-June 2011 saving New Zealand more than 2.5 million tonnes C02e (1.8 million tonnes/year on current output compared with coal).

Geothermal now #3, after hydro and gas. ‘Premium renewable’: 7% by capacity (MW), 14% by contribution (GWh).

Mighty River Power – Financial Review 2012

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HIGHLIGHTS

Market Dynamics GWh

Net New Generation vs Demand Growth (2007-2011)

SOURCE: EA/SCADA

• •

Virtually flat electricity demand nationally since 2007 (GFC and post Christchurch earthquakes).

Lower running of thermal generation, displaced by base-load geothermal.

Annual generation growth over same period of 5,800GWh (1,300MW of new generation added and only 310MW decommissioned).

Mighty River Power – Financial Review 2012

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HIGHLIGHTS

Market Dynamics 160%

National Hydro Storage (2008-March 2012)

GWh

WET

140% 120% 100% 80% 60% 40% 20%

DRY

0% 2012

2011

2010

2009

2008

Average

• •

Dry period in mid-2000s, then from late-2008 to late-2011.

Significant improvement in supply margins – positive demand/supply balance, supporting intense retail competition.

Recent national storage levels below-average due to dry conditions in the South Island, following three year wetter-than-normal period.

Mighty River Power – Financial Review 2012

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HIGHLIGHTS

Sales & Pricing GWh Electricity Sales – Mighty River Power

• • • •

Achieved increases in volume of 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 and attraction initiatives:

– 3-year fixed-price offers introduced in FY2011 attracting 80,000 customers (~20%) – GLO-BUG pre-payment solution based on smart meters. Mighty River Power – Financial Review 2012

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HIGHLIGHTS

Residential Pre-Pay Option Number of Pre-Pay Customers – Mighty River Power

Active community engagement

GLO-BUG offer – technology innovation providing only smart meter based pre-pay electricity system in NZ.

• • •

Customers in control of their spend, avoids ‘bill shock’. Supported by community and budgeting agencies. Selected as preferred provider of pre-pay services for Meridian Energy customers in Christchurch.

Mighty River Power – Financial Review 2012

GLO-BUG provides real-time information

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F I N A N C I A L R E SU LT S

Half-Year 2012 & Guidance HY2012 ($m)

HY2011 ($m)

% Change

EBITDAF

254.5

233.6

+9

Underlying Earnings

101.7

89.4

+14

NPAT

17.6

92.8

-81

Dividend (Interim)

74.8

64.7

+16

Financial results again built on diverse and complementary portfolio, market share and pricing gains in generation and customer sales.

Significant fall in accounting profit 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, impairments and the change in the non-cash fair value of financial instruments).

Full-year EBITDAF guidance in the range of $460 million-$475 million (initial guidance in October 2011 of $430 million-$450 million).

Mighty River Power – Financial Review 2012

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F I N A N C I A L R E SU LT S

Capital Expenditure $m

FY Forecast

• •

$1 billion new geothermal investment FY2006-FY2010.

• •

Ngatamariki construction commenced FY2012, with commissioning expected 2013.

Shareholder accepted lower dividends during construction phase – dividends now increased to reflect higher operating cash flows.

FY2012 capex forecast of $359 million, reflecting spend at Ngatamariki ($199 million) and investments in international geothermal projects ($80 million).

Mighty River Power – Financial Review 2012

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B U SI N E SS U P DAT E

Development & Growth Options • -

Hudson Ranch Power I – United States

• -

Ngatamariki – New Zealand

• • • • • -

49.9MW, power to grid March 2012. First of international investments to move into commercial operation. 82MW geothermal station, completion mid-2013. Construction well underway. Tolhuaca – Chile Exploratory drilling, three months behind plan.

Hudson Ranch Power I

Taheke – New Zealand Development agreement among multiple landowners. Exploration planning underway. Bavaria – Germany

Four concessions, seismic surveys underway. Exploratory drilling expected in 2H2012. Turitea – New Zealand Consented for up to 60 turbines (180MW). Puketoi – New Zealand

$466m Ngatamariki project

Consenting underway for a 53 turbines (326MW).

Mighty River Power – Financial Review 2012

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B U SI N E SS U P DAT E

Market Regulation • -

• • -

Water allocation – Variation 6 Environment Court judgement to increase abstraction from Waikato River (3.6% to 5% above Karapiro).

Water is NZ’s most important strategic asset. Policy needs to provide certainty for investors in water-related infrastructure and land development. UTS (Undesirable Trading Situation)

Karapiro hydro station

High Court ruling to uphold UTS and confirming pricing reset to $3,200/MWh. Appeals pending. Clear rules and regulatory enforcement – important precedent for electricity customers, market participants and NZ economy. Frequency methodology change (EA) Significantly lower costs to the NZ electricity industry ($10 million) and fairer for all North Island frequency-keeping service providers.

Mighty River Power – Financial Review 2012

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B U SI N E SS U P DAT E

Profit with Purpose • • • -

• -

Cornerstone principles and values Vital foundation for commercial sustainability and future growth. Social Responsibility is part of Mighty River Power’s culture and DNA – integral to our business model. Maori Land Trusts Joint development approach with shared vision for sustainable harnessing of resources. Long-term partnerships, inter-generational benefits.

Tomorrow’s workforce Unlocking employee potential – leadership and development. Apprentice Programme, has 95% completion rate over six years. Extended with Contact Energy.

Support for Universities – Auckland/Canterbury. Community support and sponsorship Engagement and consultation (Puketoi, Aratiatia) Starship Foundation/Star Supporters Club , Rowing NZ, Taupo Ironman, Waikato River Trails, Movies by Moonlight.

Mighty River Power – Financial Review 2012

Waikato River Trails – 100km of previously inaccessible riverside.

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