annual general meeting 18 may 2018 - ascendant
TRANSCRIPT
ASCENDANT GROUP LIMITEDAnnual General Meeting18 May 2018
FORWARD LOOKING INFORMATION
This document contains forward-looking statements that reflect management’s current beliefs with respect to AscendantGroup Limited’s (“Ascendant”) future growth, results of operations, performance, business prospects and opportunities. Allsuch information and statements are made pursuant to safe harbor provisions contained in applicable securities legislation.Statements that are not historical facts, including statements about management’s beliefs and expectations, are forward-looking statements. The words “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “projects”,“schedule”, “should”, “budget"," forecast”, “might”, “will”, “would”, “targets” and similar expressions are often intended toidentify forward-looking information, although not all forward-looking information contains these identifying words.
These statements are based on information currently available to Ascendant’s management and should not be read asguarantees of future events, performance or results, and will not necessarily be accurate indications of whether, or the timeat which, such events, performance or results will be achieved. The forward-looking information is based on reasonableassumptions and is subject to risks, uncertainties and other factors that could cause actual results to differ materially fromhistorical results or results anticipated by the forward-looking information. Factors that could cause results or events to differfrom current expectations are discussed in the “Primary Factors Affecting Ascendant’s Business” section of ourManagement’s Discussion and Analysis as at April 20, 2018 and may also include: capital market and liquidity risk; estimatedenergy consumption rates; maintenance of adequate insurance coverage; changes in customer energy usage patterns;developments in technology that could reduce demand for electricity; interest rate risk; credit risk; foreign exchange risk; risksassociated with pension plan performance and funding requirements; loss of service area; risk of failure of informationtechnology infrastructure and cybersecurity risks; and availability of labour and management resources.
Readers are cautioned not to place undue reliance on forward-looking information as actual results could differ materiallyfrom the plans, expectations, estimates or intentions and statements expressed in the forward-looking information. Allforward-looking information in this document is qualified in its entirety by the above cautionary statements and, except asrequired by law, Ascendant undertakes no obligation to revise or update any forward-looking information as a result of newinformation, future events or otherwise.
Unless otherwise specified, all financial information referenced is in US dollars.
Nothing in this document should be construed as an offer or sale of securities of Ascendant or any other person.
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OUR BUSINESS
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Powering Bermuda for more than 100 years
Electric Vehicles
Power Generation
Transmission, Distribution and Retail
Energy Services
YEAR IN REVIEW
(25%)(5%)15%35%55%75%95%115%135%155%
Jan 2016 Apr 2016 Jul 2016 Oct 2016 Jan 2017 Apr 2017 Jul 2017 Oct 2017 Jan 2018 Apr 2018
AGL S&P/TSX Capped Utility Index
RENEWED PERFORMANCE
• New Management Team and strategy in last two years• Strong execution is delivering results
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CEOtransition
Licencesgranted
2 Year Total Shareholder Return
Replacement generation approved
Electricity Act 2016
Electricity regulation transfers to
Regulatory Authority
Energy Commission
directive setting rate
methodologyReplacement
generation proposal submitted
IRP submittedNew strategy
adoptedDividend
increased 50%
Source: FactSet, Bloomberg.
16% decrease in customer outage minutes
(2017 vs. 2016)
43%earnings growth
(2017 vs. 2016)
AG Holdings core
earnings up $2.7 Million(2017 vs. 2016)
North Power Station
approved(March 2018)
45%share price
growth(2017 vs. 2016)
RECENT MAJOR ACCOMPLISHMENTS
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ASCENDANT 2017 GROUP RESULTS
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$1.32
Unregulated businesses
$0.28
Reduction in corporate expenses
$0.20
Other$0.10
$1.90
2016 2017
Core Earnings Per Share
Capital spending
Increase in cashDividend / Share repurchaseDebt repayment
2016 FFO 2017 FFO
Cash Flow Per Share
$4.28
$3.14
UP36%
UP43%
ASCENDANT 2017 SUBSIDIARY RESULTS
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$24.3
Fuel and purchased
powerInventory
Obsolescence
Fuel adjustment
revenueTariff
stabilisationfund
Other
$23.3
2016 2017
BELCO Core Earnings ($ millions)
$0.5
AIRCARE
IFM
Other
$3.3
2016 2017
AGH Core Earnings ($ millions)
UP$2.8M
STABLE
BELCO OPERATIONAL HIGHLIGHTS
9
297250
2016 2017
Customer outages in minutes1
90% 85%
2016 2017
Plant Availability
Sales (kWh)
2.662.19
3.29
2016 2017 CARILECbenchmark
Injury frequency rate2
1 System average interruption duration index2 Lost time injury frequency rate
400
450
500
550
600
650
700
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
(in millions)
LOOKING FORWARD
Strategic Priorities
OUR STRATEGY
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Strategic PillarsEngaged passionate people Operational excellence
Superior customer experience
• Vision: By 2021, Ascendant is the most respected, sustainable and progressive energy and services organisation in the Atlantic
• Mission: Everyday we provide the people of Bermuda with energy and services to enhance their lives
Reduced Customer
Rates
Increased Shareholder
Value
Outcomes
Execute $250M capital plan
Achieve competitive valuation
Achieve productive regulatory compact
Grow non-regulated business
Improve cost and efficiency
ACTION PLAN
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Execute $250M capital plan
Achieve competitivevaluation
Achieve productive regulatory compact
Strategic Priorities
Grow non-regulated business
2018 2019 2020 2021 2022
Improve cost and efficiency
• Capital plan approved• Appropriate tariff
methodology in place
• Replacement Generation• Battery storage
• Achieve operational efficiencies to bring rates in line with peers
• $10 Million EBITDA
• Revisit dividend policy• List on North American
exchange
• Close export financing• Establish investment grade
credit rating• Access private placement
markets
• T&D upgrades• Advanced meters
REGULATORY COMPACT
Significant progress in establishing regulatory compact• Regulatory Authority issued Licences to BELCO in October 2017
• Tariff and Integrated Resource Plan consultations underway. Anticipate resolution by year-end.
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TD&R
IPPs
Distributed generationEnd-user
Vertically integrated utility
PPA PPA+ net benefit test
Feed-in tariffs
Proposed regulatory structure
Generation
CAPITAL PLAN
• Significant investment profile over next five years
• Financing plan delivers more appropriate capital structure
• Drives cash flow and earnings growth
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$-
$100
$200
$300
$400
$500
$600
2017 2018 2019 2020 2021 2022
$ M
illio
ns
Capital Profile
Other fixed assets Grid rate base
Generation rate base Debt
Rate Base
GENERATION INVESTMENT
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New power station location
North Power Station & Battery Storage
GENERATION INVESTMENT
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Engineering and civil works
Equipment delivery Construction Commissioning
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019
• $124 Million capital spend over 18 months – 100% debt financed
• 4 x 14 MW dual-fuel capable engines + 10 MW Battery energy storage
• Final construction approvals in progress and approved by Regulatory Authority
• 86% of project via turnkey contract
North Power Station & Battery Storage
GRID INVESTMENT
• $124 Million over 5 years• Transmission and substation upgrades to enable new technologies• Advanced metering and related infrastructure
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Belmont to Lighthouse
Prospect to Flatts
Lighthouse to NOB
Flatts to Mullet Bay
2018 2019 2020 2021
COST AND EFFICIENCY
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• Capital Plan investment designed for more efficient operation
• Strategic initiative to lower costs over five years
• Review procurement and inventory processes to reduce cost and capital employed
• Company-wide process redesign to streamline work
Fuel$55.9
Fuel Tax$29.2
Other $11.4
D&A$25.0
Labour$51.1
Supplies and other
O&M$40.1
2017 Operating Costs($ Millions)
Controllable
Non-controllable
CAPITAL STRUCTURE
• Target solid investment grade debt metrics
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0.0 x
0.5 x
1.0 x
1.5 x
2.0 x
2.5 x
3.0 x
3.5 x
4.0 x
4.5 x
Debt to EBITDA
20172022eIndustry benchmark
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Debt / Equity
20172022eIndustry benchmark
VISIBILITY TO GROWTH
• Regulated capital plan plus non-regulated growth deliver outstanding growth
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$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00Core EPS
2016 2017 2022e
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00FFO/sh
2016 2017 2022e
EXPERIENCED TEAM
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Balanced skill-set across diverse range of industries
Extensive public company experience
Mix of local and global experience
Board of Directors
Executive
Management Team with combined industry experience of
more than 100 years
Extensive experience with well-known global public companies
Mix of local and global experience
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
AGL Island utilityaverage (1)
US SmallCap average
(2)
Canadianutility average
(3)
0.0x
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
1.4x
1.6x
1.8x
2.0x
AGL Island utilityaverage (1)
US Small Capaverage (2)
Canadianutility average
(3)
STRATEGIC PLAN DESIGNED TO UNLOCK SIGNIFICANT VALUE
22
TEV / EBITDA (trailing 12 mths)
________________________Source: FactSet as of April 24, 2018.(1) Includes Caribbean Utilities, Hawaiian Electric(2) Includes Portland General Electric, ALLETE, El Paso Electric, Ottertail Corporation(3) Includes ATCO, Fortis, HydroOne, Algonquin, Emera, AltaGas
Price / Book Value
THE VALUE OF ASCENDANT’S STRATEGY
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Valuation upside • Execution of strategy designed to unlock Company’s true value in 24 to 36 months
Evolving regulatory environment
• Significant progress toward establishing strong regulatory compact
Visible growth plan• $250 Million Capital Plan will drive significant cash flow
growth over next five years• Growth in non-regulated business
Solid track record • 134% total shareholder return since 2016• 43% core earnings growth since last year
Stable earnings• More than 80% of earnings from regulated business• Non-regulated business underpinned by long-term
contracts
QUESTIONS?