Presentation 14 February 2018 Marc England CHIEF EXECUTIVE Chris - PowerPoint PPT Presentation

HY18 Result Presentation 14 February 2018 Marc England – CHIEF EXECUTIVE Chris Jewell – CHIEF FINANCIAL OFFICER G E N E S I S E N E R G Y L I M I T E D

AGENDA Key Financial Highlights Performance Operational and Outlook Strategic Update HY18 2 RESULT PRESENTATION

1. Key Highlights

HY18 key highlights — positive start to FY18 as our diverse portfolio, acquisitions and strategy deliver results Strong financial performance Delivering business outcomes • • EBITDAF up 28% to $200m, 15% excluding acquisitions Strong wholesale performance with generation volumes up 25%, • NPAT down 24% to $28 million, due to fair value movements GWAP up 80% • • Underlying earnings up 14% to $43 million Steady performance for customer segment (EBITDAF impacted • Free cash flow up 37% to $129 million by higher costs) • • Operating cash flow up 57% to $199 million Kupe gas production at 94% of maximum capacity supporting • Operating costs 1 up 16%, down 1% on an underlying basis generation requirements • excluding growth expenditure and carbon costs TRIFR of 1.37 remains at sector leading levels Continuing progress on strategy Converting to shareholder returns • New brand launched with promoter score up 2 ppts • > 100,000 EOL customers, up 5% • Dividend declared of 8.3cps, up 1% • Organic LPG growth up 27%. LPG integration on track including • Dividend Reinvestment Plan introduced to support growth with bringing forward third party distributor exit NZ government commitment to retain 51% ownership • B2B sales teams drive volumes up 17% • 12 month total shareholder return 7% ahead of NZX50 • Thermal assets providing an important role in ensuring New Zealand security of supply 1. Operating costs refers to “other operating expenses and employee benefits”, including carbon costs for trading purposes. Refer to Operating costs on slide 9 for further information. HY18 RESULT PRESENTATION 4

2. Financial Performance

HY18 financial highlights — strong financial performance in variable market conditions FINANCIAL HIGHLIGHTS $ MILLIONS HY17 HY18 200 173 156 149 129 95 83 82 43 37 37 28 27 23 EBITDAF NPAT Underlying Earnings Operating Costs Free Cash Flow Capital Expenditure Interim Dividend + 1% + 17% + 28% -24% + 14% + 16% + 37% HY18 RESULT PRESENTATION 6

HY18 EBITDAF waterfall — 28% EBITDAF growth driven by strong underlying performance and FY17 acquisitions HY18 vs HY17 EBITDAF $ MILLIONS Favourable Unfavourable 4 5 4 7 2 7 2 19 200 25 156 HY17 EBITDAF Generation Kupe Kupe LPG Pricing Lines costs Reduced Investment Other HY18 EBITDAF margin acquisition volumes and acquisition improvements retail in growth fuel prices demand opex HY18 RESULT PRESENTATION 7

Segment performance — Strong H1 for Wholesale and Kupe with Customer prioritising growth investment Customer Wholesale - LPG distribution business acquisition benefit offset by investment - Strong performance as Genesis’ diverse portfolio responds to market in growth conditions EBITDAF up $24 million (29%) to $106 million EBITDAF down $6 million (9%) to $57 million Generation 3,870 GWh up 25% Electricity sales 3,008 GWh up 3% Gas sales 4.0PJ down 7% GWAP $96/MWh up 80% LPG sales 18.3 kilo tonnes up 610% Average fuel cost $36/MWh up 17% Transfer price impact $2.5 million Transfer price impact $(2.5) million Kupe - Impact of 15% additional stake and strong production levels to support thermal plant EBITDAF up $24 million (75%) to $56 million Gas sales 6.1PJ up 61% Oil sales 241kbbl up 64% LPG sales 22.7kt up 96% HY18 RESULT PRESENTATION 8

Operating expenses — underlying expenses down 1%, before acquisitions, investment in growth and carbon OPERATING EXPENSES 1 OPERATING EXPENSE BRIDGE $ MILLIONS Favourable Unfavourable $ MILLIONS 176 173 3 149 142 144 14 7 6 173 138 137 149 2 3 HY17 LPG Investment in Carbon Other HY18 HY14 HY15 HY16 HY17 HY18 operating acquisition growth opex costs movements operating 2 Underlying operating expenses Carbon costs expenses expenses Investment in growth LPG acquisition $7 million of additional investment to support growth Operating cost efficiencies in core business, in line with market guidance, carbon for trading underlying expenses down 1% purposes up in line with increase in carbon costs 1. Operating costs refers to “other operating expenses and employee benefits”. 2. Carbon costs represent the cost of carbon used for trading purposes, offset by revenue recognised in other revenue. 3. Investment in business sales teams and rebranding. HY18 RESULT PRESENTATION 9

Cash flow — operating cash flow up 57% and free cash flow up 37% in line with EBITDAF growth FREE CASH FLOW 1 OPERATING CASH FLOW $ MILLIONS $ MILLIONS 199 129 114 165 163 95 136 92 127 83 HY14 HY15 HY16 HY17 HY18 HY14 HY15 HY16 HY17 HY18 Significantly up reflecting higher EBITDAF, reduction in coal inventory and carbon Improved free cash flow reflects operating trading units, reduced tax pre-payments performance improvement and use of pre-paid gas 1. Free cash flow represents EBITDAF less tax, interest and stay in business capital expenditure. HY18 RESULT PRESENTATION 10

Capital expenditure — disciplined approach as capital reallocated to support growth segments CAPITAL EXPENDITURE 1 CAPITAL EXPENDITURE 1 $ MILLIONS $ MILLIONS 82 24 47 44 40 8 27 58 5 44 40 39 22 FY14 FY15 FY16 FY17 FY18 YTD FY14 FY15 FY16 FY17 FY18 YTD 2 Wholesale Customer Kupe Technology & Digital Stay in Business Tekapo Canal Growth Reallocation of capital to growth areas with Continued discipline on spend a higher ROCE 1. Capital expenditure excludes M&A activities. 2. Key projects include LPG distribution investment, the Energy Project and Technology and Digital development. HY18 RESULT PRESENTATION 11

Capital structure — net debt has reduced by $52m with improving debt metrics SOURCES OF FUNDING NET DEBT AND NET DEBT/EBITDAF 31 DECEMBER 2017 5.0 31 DECEMBER 2016 1,210 1,158 1200 4.5 100 100 190 966 4.0 1000 905 310 3.5 831 193 3.1 193 anticipated 800 3.0 3.3 30 Jun18 range 2.9 2.5 2.9 600 2.6 2.5 290 2.0 400 1.5 200 1.0 425 240 200 0.5 0 0.0 Bank debt Wholesale domestic bonds FY14 FY15 FY16 FY17 HY18 FY18 Fct USPP Retail bonds Capital bonds Net debt Net debt/EBITDAF Average tenor at HY18 up 3.1 years, interest costs Reduced reliance on bank debt, S&P rating down 20 basis points to 5.8%, improving net debt reaffirmed at BBB+, 15 January 2018 to EBITDAF HY18 RESULT PRESENTATION 12

Dividends — continued growth in dividends with a 8.6% gross yield 1 and outperformance of TSR relative to peers DIVIDEND & PAYOUT HISTORY 2017 TOTAL SHAREHOLDER RETURN 120% 83 82 82 80 100% 2017 closing share price: $2.52 87% 87% 64 72% 29.2% 80% 64% 77% 50 25.1% 60% 22.0% 40% 20% 0 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec HY14 HY15 HY16 HY17 HY18 Dividends % of Free Cash Flow Genesis Peer Index NZX50 TSR has exceeded market by 7.2% and peer index Interim dividend of 8.3cpu declared (up 1.2%), with 80% imputation, representing a 8.6% gross yield 1 by 4.1% in past 12 months 1. Gross yield based on closing share price as at 29 December 2017. HY18 RESULT PRESENTATION 13

3. Operational and strategic update

Customer segment highlights — growth in LPG, B2B and EOL, with NPS improving NPS AND PROMOTER SCORE LPG SALES VOLUMES PJ 40% GE-Rolling 12M (KT) EOL-Rolling 12M (KT) ICP count 8 70,000 7 60,000 30% 6 50,000 5 20% 40,000 4 30,000 3 10% 20,000 2 10,000 1 0% 0 0 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 -10% NPS - Genesis 3 Month Rolling Promoter - Genesis 3 Month Rolling Refreshed brand showing early signs of improved NPS Significant organic growth, new distribution platform in place TOTAL B2B VOLUME BILLED EOL CONNECTIONS 3,000 110 Electricity Gas LPG 2,619 2,353 100 2,500 ‘000’s 90 2,000 GWh 80 1,500 70 1,000 60 500 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 0 Dec-16 Dec-17 EOL, 2 nd largest tier 2 retailer, > 100,000 customers, up 4% B2B segment momentum growing with 11% volume from June 2017 increase HY18 RESULT PRESENTATION 15

Brand refresh — new Genesis brand launched focused on leading the way to a new energy future 68% 78% of New Zealanders believe of New Zealander’s the brand relaunch makes believe that the brand Genesis seem more relaunch says something innovative than other new about Genesis 1 energy providers 1 2 5% 2% Customer websites launched Improvement in brand Improvement in promoter ‘Top 2 Consideration’, a score whilst NPS trending lead indicator for sales positive conversions 1. Based on a representative sample of 524 energy decision makers. HY18 RESULT PRESENTATION 16