TRUenergy Briefing 29 September 2006
2 Outline I ntroduction Richard McI ndoe Business Model and Strategy Richard McI ndoe Australia Energy Markets Tracy Stevens Break TRUenergy Overview Richard McI ndoe Retail Richard McI ndoe Operations and Construction Duncan Black Portfolio Managem ent and Tracy Stevens Risk Managem ent Break Ow nership and Capital Structure Duncan Black Financials Duncan Black Sum m ary and Outlook Richard McI ndoe TRUenergy Briefing 29 September 2006
I ntroduction
4 W hat is TRUenergy? • Integrated, diversified energy business • Generation and retail • Electricity and gas • ~ A$4.5bn assets, well capitalised • 4th largest generator in market with ~ 4,000MW across states and fuels • 5th largest retailer in market ~ 1.1m customers • Excellent platform for organic growth and acquisition TRUenergy Briefing 29 September 2006
5 TRUenergy and CLP • 100% owned by CLP Holdings • Owns all CLP’s assets in Australia, except Roaring 40s’ wind farms • CLP Holdings’ largest single investment outside Hong Kong • Represent 22% ¹ of CLP Holdings’ consolidated assets, and 8% ² of consolidated profit before financing and tax • Significant synergies between TRUenergy and CLP Power • Senior management drawn from CLP Power Asia • Board of Directors drawn from CLP Holdings Board and CLP Holdings senior management • Sir Rod Eddington is independent, non-executive Chairman TRUenergy Briefing 1: As at 30 June 2006 2: For 6 months ended 30 June 2006 29 September 2006
6 W hat is it im portant for you to know …..? • Australian energy market structure • TRUenergy’s business model • Our existing asset base • Our strategy • Growth potential and opportunities • Risk management • Financials TRUenergy Briefing 29 September 2006
7 I n the beginning…… • CLP established a presence in Australia with Yallourn Energy – Power station and retail to large Queensland industrial customers • Initially acquired ~ 73% Brisbane South Australia interest as part of PowerGen acquisition New South Wales in 2000 Adelaide Sydney • By 2004, had bought out minorities Victoria and owned 100% Melbourne Yallourn Energy TRUenergy Briefing 29 September 2006
8 Acquired TXU MEB and m erged w ith Yallourn… • Acquired the TXU merchant energy business in May 2005 from Singapore Power Queensland • Integrated Yallourn and TXU merchant energy businesses Brisbane South Australia • Combined corporate and portfolio management New South Wales functions Adelaide Sydney • Refinanced as corporate Victoria with A- credit rating Melbourne Torrens Island SEAGas Yallourn Energy Iona Ecogen TRUenergy Briefing 29 September 2006
9 And rebranded… • We rebranded to TRUenergy in June 2005 Queensland Brisbane South Australia New South Wales Adelaide Sydney Victoria Melbourne Torrens Island Yallourn SEAGas Iona Ecogen TRUenergy Briefing 29 September 2006
10 TRUenergy rebranding advertisem ent TRUenergy Briefing 29 September 2006
11 Organic grow th into New South W ales…. • We expanded into New South Wales organically • Organic mass market retail growth Queensland since mid 2005 • Commenced construction Brisbane South Australia of Tallawarra 400MW New South Wales CCGT power station Adelaide Sydney in June 2006 Victoria Melbourne Tallawarra Torrens Island Yallourn SEAGas Iona Ecogen TRUenergy Briefing 29 September 2006
12 Now planning Queensland m arket entry…. • We are seeking to grow our integrated business Queensland in Queensland Queensland • Mass market retail contestability from Brisbane South Australia July 2007 New South Wales • Potential future Adelaide Sydney generation opportunities Victoria Melbourne Tallawarra Torrens Island Yallourn SEAGas Iona Ecogen TRUenergy Briefing 29 September 2006
Business Model and Strategy
14 The business today Generation assets Site Comment MW Yallourn Brown coal-fired base load stat ion 1,480 TIPS Gas-fired intermediate to peaking stat ion 1,280 Ecogen Hedge agreement to 2019 966 Tallawarra CCGT under construction – commercial – 400 operat ion scheduled for late 2008 Retail assets Ret ail foot print I&C Electricit y cust omers cust omers Gas cust omers Mass market Electricit y – approx. 600,000 cust omer accounts. and S ME Primarily Vict oria, developing NS W and S A ret ail Brisbane Gas – approx. 500,000 cust omer accounts. cust omers Primarily Vict oria, developing NS W and S A Other TRUenergy assets Det ails Gas storage Largest gas storage facilit y in Vict oria Adelaide Sydney facility S EAGas Tallawarra Foundation shipper agreement ( >50% pipeline Torrens Island Pipeline Power capacit y) and 33% owner Power S tation Melbourne S EAGas S tation Multiple gas (TIPS ) Gas contracts for the next 15 years from multiple Pipeline greenfield suppliers suppliers Yallourn Yallourn S upplies brown coal t o Yallourn power stat ion Gas S torage mine Ecogen Facility Hedge (up (12 PJ) to 966MW) TRUenergy Briefing 29 September 2006
15 TRUenergy Briefing 29 September 2006
16 W hat is an integrated energy business…..? • Unregulated – Perceive more value and growth potential in unregulated sector, rather than regulated transmission and distribution • Generation and retail – Power generation as well as retailing to all types of customer • Electricity and gas – Integrated by retailing gas and electricity, gas fired generation • Portfolio of assets – Generation, retail and gas assets with complementary characteristics TRUenergy Briefing 29 September 2006
17 I ntegrated Energy Business Model • Portfolio of gas supply contracts • Yallourn coal mine Upstream • Assets across value chain • Underground gas storage facility provides earnings stability and • Yallourn, base-load coal-fired station • TIPS, gas/ oil-fired peaking power station opportunity • Ecogen hedge, gas-fired peaking station Generation • Tallawarra, site for gas-fired station • Generation and retail focused • Not focused on regulated T&D • 33% equity interest in SEAGas pipeline and rights to > 50% of capacity Transmission • No equity in gas – currently source gas through long term • No assets Distribution contracts • ~ 500,000 mass market & SME gas • ~ 600,000 mass market & SME electricity Retail • Large I&C electricity customers • Large I&C gas customers TRUenergy Briefing 29 September 2006
18 Electricity Market Structure Overview Forward Market Spot Market Grid Generator Wholesale Connection Hedge $ Pool $ Charges $ Futures Transmission Trader Pool Monopoly Exchange Grid Hedge $ Pool $ Network Charges Distribution Retailer $ Network Retail Bill $ End Use Customer TRUenergy Briefing 29 September 2006
19 Vertical I ntegration - the issue… • Vertical integration between generation and electricity retail is a key feature of TRUenergy’s business model • Generator - sells generation into electricity pool, hedges revenue in short to medium term in forward market • Retailer - buys generation from electricity pool, hedges commodity cost in short to medium term in forward market • Earnings volatility for standalone generator or retailer a result of pool and contract market volatility, and hedging mismatches • Vertical integration of generation and retail provides for optimal outcomes TRUenergy Briefing 29 September 2006
20 Vertical I ntegration - the issue… Victorian Electricity Forward Contract prices $55 CAL 02 $53 CAL 03 $51 CAL 04 CAL 05 $49 12 MTHS (360 DAYS MOVING DAILY AVERA Regulated Retail CAL 06 $47 CAL 07 tariffs $45 Indicative (Indicative only) $43 Retail Margins $41 $39 h W $37 /M $35 $ $33 $31 $29 $27 12 month Generation $25 moving avg Earnings $23 spot price $21 $19 $17 $15 9 0 0 0 0 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 /1 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 c b y g v b y g v b y g v b y g v b y g v e a u o a u o a u o a u o a u o e e e e e M M M M M D N N N N N F A F A F A F A F A • Retail tariffs relatively constant, to a large extent are regulated • Retail margin has inverse correlation with generation margins TRUenergy Briefing 29 September 2006
21 Vertical I ntegration - the benefits • I nternalise Margins - combining or internalising retail and generation margins, resulting in more stable cashflow/ income stream than either standalone • Reduced Risk – balancing generation output and retail load reduces earnings volatility – Reduced cost of debt and equity - TRUenergy’s debt margins today are one third of Yallourn’s standalone – Achieved A- credit rating - not possible for standalone generator or retailer TRUenergy Briefing 29 September 2006
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