Genesis Energy Segment Note Update 23 January 2020 G E N E S I S E N E R G Y L I M I T E D
Contents Section Discussion Page 3 1 Summary of Key Segment Note Changes Half Year 2019 Segment Note Update and Reconciliation 5 2 • HY19 Operating Revenue • HY19 Operating Expenses Full Year 2019 Segment Note Update and Reconciliation 10 3 • FY19 Operating Revenue • FY19 Operating Expenses Restatement Relating to Adoption of NZ IFRS 16: Leases and Removal of 15 4 Corporate Allocations 18 5 Appendix: Restated Segment Note for FY2019 Half and Full Year Genesis Energy Limited Segment Note Update 2.
1. Summary of Key Segment Note Changes
Key Segment Note Changes ❖ The key structural changes to the segment note affect only items above EBITDAF. ❖ The segment note EBITDAF is now broken out into gross margin and other operating expenses. Previously gross margin was not differentiated in the note. ❖ Other changes to the structure include: • Intersegment revenues and expenses are shown separately by segment (previously disclosed in total by product); • Emissions revenue and expenses are shown separately (previously disclosed within the product it related to i.e. electricity, gas or petroleum); • Petroleum revenue and expenses has been split into LPG and oil; • Other revenue has been allocated to products where possible; • Electricity purchases and electricity network, transmission, levies and meters are shown separately (previously disclosed together); • Gas purchases and gas network, transmission, levies and meters are shown separately (previously disclosed together); • Other operating expenses have been split into two lines (other costs, nested within gross margin, and other operating expenses) and electricity and gas metering costs, marketing fees & levies have been presented in their respective product lines. ❖ In addition to changes in the structure of the segment note, FY19 information has been restated to reflect: • Adoption of NZ IFRS 16 Leases accounting standard. This has resulted in changes to other operating expenses and line items below EBITDAF, as shown in Section 4. • Realignment of Genesis' Technology and Digital function, previously captured under the Corporate Segment. This has been aligned to the Retail Segment 1 to better reflect internal business unit accountability. This change affects employee benefits and other operating expenses in addition to line items below EBITDAF, as shown in Section 4. • The change in allocation of employee benefits and other operating expenses from the Corporate Segment to Retail and Wholesale Segments. The corporate allocation has been removed in FY20, with FY19 disclosures restated to allow for comparability. The impact is disclosed in Section 4. 1 Retail netbacks are unaffected by the realignment of the Technology and Digital function from the Corporate Segment to Retail and Technology and Digital costs will continue to be excluded from future netback calculations. Genesis Energy Limited Segment Note Update 4.
2. Half Year 2019 Update and Reconciliation
HY19 Operating Revenue Significant changes are discussed below and refer to the segment note table on the next slide: 1) External Revenue: a) Retail: Revenue lines by product now include revenue recoveries, which were previously included in other revenue (Electricity $5.3m, Gas $0.7m, LPG $0.4m). $1.4m of revenue has been reallocated to electricity from gas $(1.1)m and LPG $(0.3)m. b) Wholesale: Intersegment revenue is now split out clearly by product, presented below total external revenue. Revenue from emissions on fuel sales and electricity contracts have been removed from their respective product lines, and is now shown as its own line item (refer note 2 below). c) Kupe: Intersegment emissions on fuel sales and gas product intersegment line items are now shown separately. Internal gas revenue of $42.9m and internal gas emission revenue credits of $2.2m were previously combined to represent Kupe gas revenue of $40.7m. 2) Emissions revenue had previously been included within their respective commodity revenue lines. Emissions revenue is now presented as its own line item: a) Wholesale: Emissions previously included within electricity revenue $2.5m, gas revenue $3.8m, petroleum revenue (including LPG) $0.2m and other revenue $0.2m are now disclosed together on a new line emissions on fuels sales and electricity contracts ($6.7m). 3) Petroleum revenue has been split into LPG and oil revenue: a) Kupe: $28.2m of petroleum revenue previously disclosed has now been split into oil revenue $15.3m, LPG revenue $4.9m, emissions $0.4m and LPG intersegment $7.6m. Genesis Energy Limited Segment Note Update 6.
New Segment Note Reconciliation: HY19 Operating Revenue ➢ Please refer to the previous slide for discussion points referenced under the New Segment Note. ➢ Note that all restated financial numbers remain unaudited at the stage of market issue, whereby some minor rounding differences may be present, however the Segment Note will be audited at the completion of the financial year 2020. Previous Segment Note New Segment Note Restated and unaudited in ($) million Retail Wholesale Kupe Corporate Intersegment Total in ($) million Retail ref Wholesale ref Kupe ref Corporate Total Electricity revenue 648.3 758.9 - - (271.3) 1,135.9 Electricity 655.0 1a 485.1 1b - - 1,140.1 Gas revenue 83.0 79.7 40.7 - (71.0) 132.4 Gas 82.6 1a 45.6 1b - - 128.2 Pretroleum revenue (including LPG) 34.1 11.5 28.2 - (17.2) 56.6 LPG 34.2 1a 1.7 1b 4.9 3a - 40.8 Emission unit revenue from trading - 25.1 - - - 25.1 Oil - - 15.3 3a - 15.3 Other revenue 6.8 3.4 0.5 0.3 - 11.0 Emissions on fuel sales and electricity contracts - 6.7 2a 0.4 3a - 7.1 Emission unit revenue from trading - 25.1 - - 25.1 Other revenue 0.4 3.2 0.5 0.3 4.4 Total external revenue 772.2 567.4 21.1 0.3 1,361.0 Electricity - intersegment - 271.3 1b - - 271.3 Gas - Intersegment - 30.3 1b 42.9 1c - 73.2 LPG - intersegment - 9.6 1b 7.6 3a - 17.2 Emissions on fuel sales - intersegment - - (2.2) 1c - (2.2) Operating revenue 772.2 878.6 69.4 0.3 (359.5) 1,361.0 Total segment revenue 772.2 878.6 69.4 0.3 1,720.5 Genesis Energy Limited Segment Note Update 7.
HY19 Operating Expenses Significant changes are discussed below and refer to the segment note table on the next slide: 1) Electricity & gas purchase, transmission and distribution costs are now split between respective product purchase lines and network, transmission levies and metering costs: a) Retail: Electricity & gas metering costs, and market fees & levies, totalling $27.0m were previously included in other operating expenses but are now shown in their respective product cost lines, along with transmission costs. Intersegment purchases are clearly identified below total external costs in the new note. b) Wholesale: Electricity & gas metering costs, and market fees & levies, totalling $3.0m were previously included in other operating expenses but are now shown in their respective product cost lines. Electricity purchases now include only spot market purchases and ancillary costs. 2) All emission costs were previously grouped within their respective product lines, now shown on separate lines: a) Wholesale: In the new segment note emissions associated with fuel sales of $4.7m includes $4.5m of emissions from gas sales previously included in gas purchases and $0.2m emissions from LPG sales previously included in other operating expenses. b) Wholesale: In the new segment note emissions associated with electricity generation of $4.3m was previously in fuels consumed. 3) Petroleum production, marketing and distribution costs are now split into LPG purchases, inventory changes and transportation costs and oil inventory changes, storage and transportation costs: a) Retail: Petroleum costs previously disclosed, $16.8m, are now split between LPG purchases, inventory changes and transportation costs $7.2m and LPG intersegment purchases $9.6m, as clearly identified in the Segment costs section. b) Kupe: To better reflect its operations Kupe’s previously stated petroleum production, marketing and distribution costs of $14 .8m has been split out into oil inventory changes, storage and transportation costs $(0.8)m, emissions associated with fuel sales $2.4m, and other costs above gross margin $5.7m, and other operating expenses of $7.5m below gross margin. 4) Fuels consumed: a) Wholesale: Fuel consumed of $117.4m as disclosed in the previous segment note has now been split and disclosed as fuel consumed in electricity production $72.4m, emissions associated with electricity generation $4.3m (identified in note 2b above), intersegment fuels consumed $42.9m and intersegment emission costs $(2.2)m. Genesis Energy Limited Segment Note Update 8.
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