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G E N E S I S E N E R G Y L I M I T E D
ASX CEO Connect
March 2018
Chris Jewell – CHIEF FINANCIAL OFFICER
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About New Zealand— good growth in a stable regulatory environment
Source: Economy Rankings 2017 (The World Bank), The Heritage Foundation 2017, Forbes Lists 2016, Legatum Prosperity Index 2016, Energy Architecture Performance Index 2017 (World Economic Forum)
MAR18 ASX CEO CONNECT
About Genesis Energy— only integrated energy management company in New Zealand
3MAR18
KEY INFORMATION
Revenue: NZ$2.0 billion
EBITDAF Guidance (FY18): NZ$350-360 million
Dividend Yield: 6.7%
Share Price: NZ$2.40
Market Capitalisation: NZ$2.4 billion
Average Daily Turnover: 750,000 shares
Credit Rating: BBB+ (Standard & Poors)
Genesis Energy is a large, fully integrated energy management company. It is New Zealand’s largest energy retailer, generates electricity from a diverse portfolio of thermal and renewable assets located throughout the country, and has an interest in the Kupe oil and gas field offshore of Taranaki.
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ASX CEO CONNECT
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Market fundamentals outlook— continue to be supportive
• Electricity demand growth of 1% in 2017 with EV penetration accelerating
• Total NZ gas demand down due to industrial however retail growth continues with connections up over 15,500 in past five years
• LPG demand growth remains strong, with 6% growth in market over last 12 months
Customer
Wholesale
Kupe
• Forward electricity prices more reflective of tightening supply/demand dynamics. Year 2 price is up $4MWh (5%) on prior comparable period
• Tiwai Point Aluminum Smelter economics stable with a more positive outlook
• Forward carbon prices up to $24 per tonne in 2020
• Brent crude up 20% in 2017 with consensus outlook for 2018 in the range of US$59 to $62/bbl
• LPG supply/demand balance tightening with a possible move to net import early 2020’s
ASX CEO CONNECT
Strategy Company
InvestorFinancial
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OptimiseTo improve short term return
InvestFor long-term value creation
InnovateFor medium term growth
REIMAGINING ENERGYto put control in our customers’ hands
Deliver operational excellence and value
optimisation
Increase value share of residential
category
Targeted growth in business category
Grow LPG category Build energy services
Insights and AnalysisFoundation investments in technology & digital
Embed data-driven decisions
Ways of working
Core Strategic Initiatives
Enabling Initiatives
Company strategy— five key strategic initiatives underpin our transformation
ASX CEO CONNECTMAR18
Company strategy: Recent strategy highlights— transformation journey underway
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ResetStrategy and vision
Acquired additional 15%of Kupe for $168 million
Launched NZ’s first real world research and
development energy community
Acquired retail LPG distribution business
of Nova Energy for $192 million
Delivered $200m EBITDAF H1 FY18
- Up 28% Launched loyalty program with
>120,000 customers linked
Supported NZ security of supply during two
dry periods
$200m
ASX CEO CONNECTMAR18
Company strategy: Innovating to lead— working with customers collaboratively to build our energy management capabilities
“Making Energy management real for our customers by initiating trials for our new services which include energy forecasting which went live
this month.”
MyAccount
Energy Management
“Partnering with customers to test and develop the latest energy innovations and deliver products and services that give them control about their energy
use.”
R&D
New Technologies
Innovation
Technology
Local Energy Project
Energy Management
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FY17 EBITDAF Operationalexcellence
Residentialvalue share
Businesscategorygrowth
Grow LPGcategory
Energyservices
Kupe Core growth OriginalFY21 EBITDAF
target
Nova Energyretail LPGbusiness
Revised FY21EBITDAF
target
$333m
$5m -$8m
$9m -$14m$5m -$8m
$6m -$10m $2m -$3m
$13m -$17m$12m -$17m
$15m -$20m
$385m -$410m
$400m -$430m
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NOTES1. Several initiatives are interdependent. As an example, energy services capability will contribute towards residential value share2. All ranges are net of operational investment required to achieve target outcomes3. Represents acquired EBITDAF in the acquisition of the Nova Energy retail LPG business not in original FY21 target. $4-6 million of synergies from the acquisition will be reflected in the
“grow LPG category”4. Core growth represents partial benefit from the rolling off of the take or pay gas contracts and natural growth in wholesale prices over time
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3
Financial strategy: FY21 target— target to deliver $400 - $430 million by FY21
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DIVIDEND & PAYOUT HISTORY
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Investor Strategy— continued growth in dividends with a 8.6% gross yield1 and outperformance of TSR relative to peers
2017 TOTAL SHAREHOLDER RETURN
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Genesis Peer Index NZX50
29.2%
25.1%
22.0%
2017 closing share price: $2.52
1. Gross yield based on closing share price as at 29 December 2017.
• FY17 16.6c of dividends declared up 1.2% representing a cash yield of 6.7%. Dividend policy to grow in real terms over time with 3.8% growth delivered in past three years against inflation of 2.5%
• TSR target of top quartile, translating to ~14%, with a focus on dividend yield plus growth
• TSR has exceeded market by 7.2% and peer index by 4.1% in past 12 months
114130
160 164 166
73%80% 81% 81% 84%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
20
40
60
80
100
120
140
160
180
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FY2013 FY2014 FY2015 FY2016 FY2017%
of
Free
Cas
h F
low
Tota
l Div
iden
ds
Paid
($
mill
ion
s)
Total dividends paid Total Dividend Paid as % of FCF
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Financial Performance
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151 173 176 156200
157172 159 177
0
50
100
150
200
250
300
350
400
FY14 FY15 FY16 FY17 HY18
$ MILLIONS
EBITDAF EBITDAF BY SEGMENT
• HY18 EBITDAF $200 million, up 28%, FY18 guidance of $350 - $360 million
• NPAT down 24% to $28 million, due to fair value movements, underlying earnings up 14% to $43 million
• Operating cash flow up 57% to $199 million, and free cash flow up 37% to $129 million
Financial overview— a diverse portfolio delivering consistent earnings over time
83 87 103 11058
169201 194 176
106
10794 80 84
56
10
15
20
25
30
35
40
45
50
55
0
50
100
150
200
250
300
350
400
FY14 FY15 FY16 FY17 HY18
$ MILLIONS
Customer Generation & Wholesale Kupe Corporate
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• Average cost of debt 5.8%, down 20 basis points
• Average tenure 11 years, up 3.1 years
• S&P reaffirmed BBB+ rating post acquisitions in January 2018 with Net Debt/EBITDAF expected to return to upper end of target range by end of FY18
• Dividend reinvestment plan announced at HY18, 2.5% discount
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Key Debt Metrics 31 Dec 2017
Total Debt $ 1,229.1
Cash and Cash Equivalents $ 40.6
Headline Net Debt $ 1,188.5
USPP FX and FV Adjustments $ 25.2
Adjusted Net Debt1 $ 1,163.3
Headline Gearing 39.1%
Adjusted Gearing 38.6%
Net Debt/EBITDAF2 3.0x
Interest Cover 6.9x
1. Net debt has been adjusted for foreign currency translation and fair value movements related to USD denominated borrowings which have been fully hedged with cross currency swaps
2. EBITDAF is based on the midpoint of the guidance range provided for FY18
GENESIS ENERGY DEBT PROFILE
Capital structure overview— long tenure debt in place at lower cost, with BBB+ rating from S&P, DRP in place
$0
$50
$100
$150
$200
$250
$300
FY2018
FY2019
FY2020
FY2021
FY2022
FY2023
FY2024
FY2025
FY2026
FY2027
FY2042
FY2047
$m
Retailable Bonds Wholesale Domestic Drawn Bank Undrawn Bank Capital Bonds USPP
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Summary
15FY1715
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• Company strategy
• Deliver operational excellence and value optimization
• Increase value share of residential category
• Grow business 2 business & LPG categories
• Build energy services
• Financial strategy
• Deliver EBITDAF of $400 - $430 million by FY21
• Investor strategy
• Deliver yield plus growth, target top quartile TSR (~14%)
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Genesis Energy— our mission is to reimagine energy, to put control in our customers’ hands
ASX CEO CONNECTMAR18