Infratil Investor Day | 29 March 2017 - Trustpower
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Infratil Investor Day | 29 March 2017
Positive record of identifying and
executing strategic opportunities
From 1994 - 2013 2013 to today Looking to the future
• Listed in 1994 serving • Rebrand • 4th largest in energy and
40,000 customers growing multi product
• Focused growth in telco
• High growth through acquisition, including UFB • Strong position in telco
regulation, new generation builds
• Created platform for Tilt demerger • Creates a platform for
• Australian Renewables optimisation, convergence
• Created additional shareholder
and growth
• First forays into telco value through bolt on acquisitions
through Kinect • Well positioned to create
new shareholder value
• Significant growth in
shareholder value
2. Infratil Investor Day
Trustpower is well positioned to capitalise
Our world view on emerging market opportunities
• Global trend towards industry convergence is increasing • Easily restructured portfolio of generation assets
• Single industry players face high competition from both • Ability to grow in electricity, telco and adjacent markets
within and from outside the sector
• Can seek convergence and growth through acquisition (King
• Consolidation – is occurring within industry segments Country Energy)
to achieve scale, and across industries to provide
• New customer facing technology fits well at the junction of
customer solutions
energy and telecommunications business
“Trustpower’s core strategic approach is to create executable options in this world of uncertainty”
3. Infratil Investor Day
The dynamics and potential of our markets
Actual and forecast fibre connections (000’s) NZ annual electricity consumption (TWh)*
Fibre opportunity growing fast Electricity demand largely flat
• Driven by data hungry customers • Driven by beyond the grid efficiency and generation
• Creates new opportunity for customer engagement • Thermal plant retirement will tighten supply moving price
towards LRMC
900 43
40
800
38
700 35
600 33
500 30
400 28
300 25
23
200 20
100 18
0 15
Dec-14
Dec-17
Dec-20
1974
1979
1984
1989
1994
1999
2004
2009
2014
* Data from MBIE
4. Infratil Investor Day
Generation portfolio – provides efficient,
flexible risk management
38 20%
38 hydro power shareholding in Rangitata
stations across Diversion Race Management
Limited (New Zealand’s largest
21 irrigation scheme)
schemes
75% - 80%
65% of Trustpower’s EBITDAF
is provided by the NZ
shareholding in generation business
King Country
Energy
Flexible and low
436MW marginal cost
total NZ installed portfolio benefits from market
generation capacity firming and able to optimise
growth, hold or divest
5. Infratil Investor Day
Generation portfolio – provides efficient,
flexible risk management
3 6 96MW
Australian generating of AU generating
schemes units capacity
244GWh
typical annual production –
approximately 13% of TWP total
6. Infratil Investor Day
Transmission pricing & ACOT
Assessment of ongoing ACOT Current Trustpower estimate of future ACOT revenue
(Avoided Cost of Transmission) payments
30
Annualised $ (Millions)
• Reduction in ACOT payments from April 2018
Ongoing TPM uncertainty: 25
• We remain highly engaged in the Electricity 20
Authority's TPM review
15
• We believe there are important precedents ?
being set New
10
• We remain highly concerned about the quality TPM
of the decision-making process 5
Our submission focused on two key themes: 0
Apr-17
Apr-18
Apr-19
Apr-20
• The EA's review and proposals are based on
fundamental errors of law and process
• The review and proposals are not based on
sound evidence Unlikely Possible Probable Current ACOT at FY17 rate
7. Infratil Investor Day
Multi-product loyalty benefits continue
Electricity only vs multi-product customer churn
20%
Electricity Only
Dual Fuel
15%
Triple Play
For example in Auckland the
10%
Electricity and Telco NPV of a bundled acquisition
Linear (Electricity Only) campaign with a median
customer tenure of 4.7 years
5% Linear (Dual Fuel)
is more than 5 times that of
Linear (Triple Play) an electricity only campaign
0% Linear (Electricity and Telco)
Dec-14
Dec-15
Dec-16
“Intense competition continues, however bundling has maintained position in the face of heavy price discounting of electricity that is not
sustainable in the medium term”
9. Infratil Investor Day
We are focusing on growing our share
of the higher-value fibre market
2017 2020
Trustpower is taking a growing share of a growing market as
customers of legacy copper services with incumbent providers 1.4M households will
accelerate their migration to higher value, higher margin have access to fibre
fibre products by circa 2021
980K households
where fibre is available
Trustpower current Trustpower target
fibre market share share of market by
(6.8%) 2022 (11%)
837K households
317K households that forecast to take fibre
have fibre today by 2020
10. Infratil Investor DayCustomer acquisition is targeted at
higher value bundled customers
Customer growth Current customers
Jan-2017
Jan-2016 275,000 electricity
Jan-2015
0 50,000 100,000 150,000 200,000 250,000 32,000 gas
Electricity Only Dual Fuel
Electricity Telco Electricity+Gas & Telco
Mixed 76,000 telco
Targeted growth
• Focus is on managing Customer Lifetime Value
• Driving sustainable growth in the higher value segments 90,000 customers have
• Insight driven proposition development more than one product
11. Infratil Investor DayReshaping the customer experience
Keeping pace with changing customer Net promoter score
expectations and creating long-term,
mutual customer value 120 100
Net promoter score increases due to:
90
100 80
• Propensity models and proactive intervention
80 70
• Platform stability 60
• Process redesign 60 50
• Easier interaction for the customer 40
40 30
20 20
10
0 0
September 2016 December 2016
Detractors Passives Promoters NPS
12. Infratil Investor DayImproving cost efficiency without compromising quality of
service through the leverage of digital and emerging technology
Interactions by channel
Q1 2016
• We have focused on driving interactions to
lower cost channels where customer
preference allows us to do so
• Increased focus on digital channels has led to a
reduction in recruitment of 16 staff Q1 2017
• Future investment; apps, push notifications,
machine learning & greater use of robotics and
chatbots will see continued improvements
Q1 2018
0 20 40 60 80 100
Phone Email Virtual Webchat Chatbots
13. Infratil Investor DayInvesting in technology platforms that are fit for purpose,
secure, modern and customer centered
Past Current Future
Multi-product &
Customer Centric
Key focus areas
Stable & Resilient
Speed & Scale
Modern
Workplace
Foundational Keep it Simple, Scalable, Rock Solid IT Cloud Digital & Build &
Principles and Fit for Purpose & ISP Agility Data First Leverage IP
14. Infratil Investor DayPeople capability – Trustpower
senior leadership team
Vince Kevin Peter Stephen
Hawksworth Palmer Calderwood Fraser
Melanie Simon Fiona Craig
Dyer Clarke Smith Neustroski
15. Infratil Investor DayPeople capability to execute on future opportunities
Key focus areas
Future organisational Adaptability and Changing nature of Keeping our workforce
capability flexibility the workforce safe and secure
• Strengthen resiliency, • Activity based working • Reward and recognition • Focus on risk-based
leadership, and approach assessment
• Measuring
collaboration for better
responsiveness to • Graduate program to • Reducing absenteeism
business outcomes
customers and markets young professionals and staff turnover
• Fast business as well as individual and
• Increase gender and
improvement team measures
cultural diversity
• Attracting and retaining
new talent
16. Infratil Investor DayKey performance areas
A clear focus for ensuring a more valuable business in the future
Key focus areas
Optimising performance of Enhancing the multi-service offer Improving long-term industry
the generation portfolio and customer experience structure
• Asset management that is • Continue to lead the change to • Manage relative position given
value driven value enhancing multi-service inevitable changes in future
• Operating cost flexible to offers business models
market conditions • Improve customer experience in • Execute accretive inorganic
• ACOT and TPM - continue to provisioning and customer growth options when available
work for sustainable solution service • Major shareholder that
• Maximise value within overall • Demonstrate efficiency from supports Trustpower to be
trading portfolio through scale and digital investment part of future industry
flexible contracting • Align acquisition costs with the consolidation
lifetime value of a multi-service
customer
17. Infratil Investor DayTrustpower is well positioned in a world that is decentralising
and converging at the customer premise
A proven ability to execute in our target markets
• We are not relying on our strong relative position in the traditional electricity industry to build our future business
• Trustpower has made a series of investments in the last few years to pre-position for the inevitable changes in the industry:
- diversified generation fleet, multi-service offer, flexible enterprise systems, online capability, improved work environment, and
extending the Trustpower brand
• The most obvious strategic shift has been towards multi-service retail – this is a high conviction and important strategy but only part
of the overall plan for preparing the business for major changes
• 2017/18 Proof points:
- Customer retention post acquisition term
- Continued ability to execute targeted campaigns in high value segments
- Increased returns through cost optimisation and scale
Will create opportunities for growth in energy and other utility services, and a path to value through customer insight,
portfolio management, cost efficiency and targeted investment
18. Infratil Investor DayInfratil Investor Day | 29 March 2017
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