Pacific Energy Limited Power Generation Macquarie Australia - PowerPoint PPT Presentation

Pacific Energy Limited Power Generation Macquarie Australia Conference May 2013 ASX: PEA

Power Station Developer & Owner – approx 250MW Pacific Energy Limited (ASX: PEA) Kalgoorlie Power Systems (KPS) Hydro 240MW 6MW Power station developer, owner and electricity supplier 2

Corporate Snapshot Share price performance (last 5 years) Trading summary & capital structure  ASX Code PEA  12 month high $ 0.54  12 month low $ 0.43  Current share price $ 0.465  Shares outstanding m 363  Market capitalisation $m 169  Cash $m 12  Debt $m 45  Enterprise value $m 201 Key shareholders Directors and management Director Position  Cliff Lawrenson Non Executive Chairman 26%  Adam Boyd Managing Director & CEO Ken Hall  Ken Hall Executive Director 51% Pacific Road  Louis Rozman Non Executive Director  Stuart Foster Non Executive Director 23% Other 3

Power Supply Infrastructure Generator hall Switch room Power station and adjacent switch room KPS power stations are designed, constructed and maintained by KPS personnel 4

KPS – Business Overview Proven track record with strong brand and industry reputation Established 30  Established 1981 – strong reputation for low cost reliable electricity supply Year Reputation  ‘Blue chip’ clients and repeat business  23 power stations under contract (240MW) Business model – BOM contract structure “Build / Own / Maintain”  Monthly ‘take or pay’ revenue model (3 to 15 year contract terms)  Miner supplies and pays for fuel (natural gas or diesel)  Design provides for low cost power station redeployment upon mine closure KPS competitive advantage In House Construction  & Maintenance Standardised design approach (low risk execution / minimum lifecycle costs)  Enhanced reliability and low cost  Engine maintenance interval extension and reduced maintenance costs KPS competitive advantage Monitoring Control  24 hour real time monitoring and management systems reduces maintenance Systems and personnel costs  Sophisticated control systems provide for unmanned operation 5

KPS – Business Overview (cont’d) Contracted long term annuity style cashflow (3 to 15 years) Transparent Long Term  Earnings Average 5 year+ contract portfolio term with early contract termination payments  Contracts invariably “roll-over” at contract end if mine continues KPS competitive advantage Technology Focus  Equipment modification reduce maintenance and fuel consumption  Waste heat recovery (low cost) – best practice fuel efficiency  Gas conversion technology (low cost) – diesel to gas switch 6

Growth Momentum MW 350 300 300 250 250 192 200 146 150 106 100 50 0 2009 2010 2011 2012 2013 Contracted Growth Group contracted capacity approximately 250MW (includes 6MW hydro in Victoria) 7

Record Earnings Growth To Continue $M 60 54 50 41 36-38 40 32 28 30 27 21.5 21 18 20 18.6 10 12.6 13 0 ∗ 2010A 2011A 2012A 2013A/F 2014CF Revenue EBITDA New contracted capacity to deliver FY13 and FY14 earnings growth ∗ Analyst Range 8

Quality Client Portfolio Major resource companies and revenue diversity brings opportunity 9

KPS – National Footprint Northern Territory  3 Power Stations  37MW Capacity Western Australia  KPS Office and Domestic Expansion Workshop Opportunities  17 Power Stations  190+MW Capacity South Australia  1 Power Station  11MW Capacity Perth Workshop (under development) Victoria  2 Hydro Stations  6MW Capacity KPS has an established and significant market position 10

FY13 Achievements To Date  HY2013 Record Result – $12.6M Adjusted EBITDA, up 19% and $6.5M Adjusted NPAT, up 16% on prior corresponding period  FY13 EBITDA Guidance unchanged $28M  45MW of new power station capacity commissioned in FY13 to date  Advancing construction of 48MW new power station capacity to be completed by August 2013 – significant impact on FY2014 earnings  Tenders / Indicative Proposals submitted >200MW (subject to mine development)  Credit facility restructure – $75M of credit funding limits (Drawn $39M) for future capacity growth ($60M available)  Strong Cashflow generation / FY13 Sustaining Capex < $2M / FY13 Maiden Franked Dividend flagged  Corporate Opportunities to expand capability / growth trajectory under consideration 11

Resource Sector Slowdown – Impact To Date  11MW Bronzewing Power Station Contract Terminated (Administrator appointed)  12MW Lake Johnson Power Station Contract – Termination discussions on going (Termination Payment expected)  Mitigation – 5MW C&M supply going forward at above mines – 12MW Existing Contract expansions under negotiation for completion in H1 FY14  Net Impact Estimated – Approximately FY14 $1.00M EBITDA reduction 12

Existing Contracts Contract Client 2013 2014 2015 2016 2017 Mine Life Cosmos 2 Xstrata Carosue Saracen 2028 Tropicana Anglo Gold Nullagine Millenium 2028 DBS Newmont 2028 Granites Newmont Garden/ 2018 Regis Moolart Well 2019 Jacinth Iluka Gwalia St Barbara up to 2022 Other Other 13

Diversified & Contracted Revenues Existing revenue (2013 to 2018) Existing client revenue (2013 to 2018) Newmont St Barbara 10% 14% Xstrata 22% Gold Alacer 7% Nickel Iluka 18% Regis Other 6% 8% Sandfire Millenium Minerals 3% 7% 3% 69% Navigator 4% 5% Norilsk 11% AngloGold 11% Other Portfolio gold commodity exposure focussed 14

Capacity & Geographical Footprint Expansion  Organic growth – National and later Africa focus (200MW market opportunity – 24 months)  Acquisition opportunities – businesses to deliver accretive shareholder value, expanded power station capacity and related energy services Domestic & International Expansion Opportunities Pacific Energy remains focussed on the value accretive growth of its asset and revenue portfolio 15

Competitive Advantage – Technology Focus on resource sector cost reduction and carbon emission imposts are driving market focus towards reduced fuel consumption and cheaper fuel substitutes  Access to lower cost fuels (natural gas)  Dual Fuel – gas and diesel fuel flexibility providing clients with lowest cost fuel option available  Waste Heat Recovery – proven fuel consumption savings technology  Proven Low Cost Delivery – fit for purpose design and innovation  Automated control - < 45 employees for 250MW of generation capacity Enhanced competitive advantage and opportunities to leverage KPS capabilities 16

Waste Heat Recovery – Fuel Saving Solution Pacific Energy Benefits 20MW 100MW PEA EBITDA enhancement* $1.2M pa $6.0M pa * Fuel savings only based on current diesel fuel prices @ $1.00/litre  KPS competitive advantage enhanced – 7% fuel savings  KPS and Mine Client share fuel saving and emission reduction benefits  Earnings growth achieved from existing power station fleet  100MW waste heat recovery solution roll-out over 3 - 4 years 17

Investment Rationale  Projects underpinned by resources production phase exposure. Industry fundamentals Competitive, low cost solutions to continue to deliver growth  Demand for long term cost effective power solutions remains (all High Growth infrastructure constrained environments) Mining Regions  Clear strategy and significant market opportunities remain for new New Markets replacement and cost reduction technology  Strong relationships with global and Australian based miners provides ongoing opportunities Strong Relationships  Business development /innovation partnership focus  Focus on competitive advantage/innovation/technology Active Management and Promotion  Proven management capability  KPS Business generates significant surplus cash to fund future growth Self Funding Business and dividends to shareholders Strong outlook for continued demand and significant business opportunities for KPS 18

Conclusion Thank You Q&A Gwalia Deeps Power Station - St Barbara 19