Investor Day | 17 July 2018 - Amazon AWS
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Investor Day | 17 July 2018
Welcome and agenda for the day
Presentations
Welcome and Wrap up
Overview by senior
Strategic and Finish
of Retail managers in
overview Questions
small groups
1.00pm 1.30pm 2.15pm 4.30pm 5.30pm
2. Trustpower Investor Day 17 July 2018
Trustpower leadership team – depth of experience and talent 3. Trustpower Investor Day 17 July 2018
Trustpower key facts
1923 $1.8b
Tauranga based
History dates back FY19 EBITDAF
national electricity Market Key shareholders
to 1923 as the forecast to be
generator and capitalisation Infratil (51.0%) and
Tauranga Electric $205 million to
retailer of energy circa $1.8 billon TECT (26.8%)
Power Board $225 million
and telco
1,954 GWh 100,000
New Zealand generation Approximately customers
capacity (hydro) 487MW 247,000 have more Approximately 803
producing an customers than one FTE employees
average of circa product
1,954GWh per annum
4. Trustpower Investor Day 17 July 2018
Electricity industry poised for growth
The NZ economy is electrifying! Transpower’s view
“Synlait commits to never building another coal fired boiler – “ the major 100 89
new boiler to be electric”1 difference between
80 75
We are already starting to see the evidence the last 10 years
58
and the next 30 60
TWh
44
EV fleet size² EV’s will soon start to make a difference years will be 39
40
significantly more
10,000 electrification” ³ 20
Registrations
8,000
0
Vehicle
6,000
2015
2020
2030
2040
2050
4,000
2,000 Estimated
delivered electricity Industrial Transport Commercial
0
Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 demand by sector Residential Primary
1. Synlait announcement 28 June 2018, 2. https://www.transport.govt.nz/resources/
vehicle-fleet-statistics/ monthly-electric-and-hybrid-light-vehicle-registrations/ 3. Te Mauri Hiko Energy Futures – Transpower White Paper 2018 (page 20)
5. Trustpower Investor Day 17 July 2018
Fibre rollout and data consumption
driving significant telco growth
Actual and forecast fibre connections Trustpower’s customers are showing no signs of slowing down
Fibre opportunity growing fast Average data use per customer per month
• Driven by data hungry customers
• Creates new opportunity for customer engagement 200
Data Used (GB)
1,000 150
Fibre Connections (000s)
Forecast
750
100
500
50
250
0 0
Apr-15
Apr-16
Apr-17
Apr-18
Oct-14
Jul-15
Oct-15
Jul-16
Oct-16
Jul-17
Oct-17
Jan-15
Jan-16
Jan-17
Jan-18
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
6. Trustpower Investor Day 17 July 2018
Summary of key messages
Our retail business is well positioned Our generation assets are well placed to
• Our differentiated bundled strategy is adding value with a significant growth opportunity capitalise on a renewable future
due to the fibre rollout • Geographical diversity and high levels of
• Being a value led rather than price lead competitor is a long term sustainable and availability
profitable position
We are facing a high level of regulation
• We have made significant progress in our digital strategy and are well positioned for the
both in energy and in telco
digital future
• This could be positive or negative for
We have developed a high level of capability that gives us the flexibility and agility to Trustpower. However we are fully
perform well in a changing future engaged and believe we have the
flexibility and capability to prosper
• A highly capable organisation that focuses on collective learning and fast decision making
whatever the outcome.
• A strong focus on the communities in which we operate and a commitment to be a
positive contributor We are well positioned to grow both
• Agile and flexible technology platforms that support our commitment to digital initiatives organically and through acquisition
• We are extracting significant scale benefits from our telco platform
7. Trustpower Investor Day 17 July 2018
Trustpower’s key strategic convictions
Irrespective of which political party is in government societal pressures will lead towards lower Extensive use of digital technology
carbon and increased renewable generation such as AI and machine learning will
• Transition to a lower carbon world will lead to increased demand for electricity become the norm
• Existing and new renewable generation will be well placed in both the lower carbon and • Customers will expect to be able to
increased renewable generation scenarios interact via multiple channels of
their choice
• Transitioning NZ to an increased renewable generation portfolio will lead to periods of
instability and short term high prices benefitting generators with flexible generation which have • The cost efficiencies from
high levels of availability digitisation will be a necessity to
keep customers and stay profitable
Not all customers make their decisions based solely on price over the long term
• Customers will continue to see value in the bundle and will be attracted to it without the need • Digital benefits will be available
to price discount without the need for expensive large
• The current fibre rollout provides a significant opportunity for continued growth scale computer systems making
agility and speed to market key
• Trustpower can maintain its loyal energy only customer base for an extended period without
differentiators
the need for aggressive price discounting by continuing to provide excellent service and value
enhancements
8. Trustpower Investor Day 17 July 2018
Trustpower’s strategy – to create executable
options driving shareholder returns
Bundling Energy Generation Portfolio Maximising Identifying New
and Telco Performance Electricity Value Markets
Strategic
Pillars
Shareholder
Value
Driving action based Meeting our Strong, positive Lean, agile, scalable Open culture
on data, analytics and customers’ needs relationships technology platforms with a collective
Capabilities
To deliver
Strategic
insight and processes learning focus a total
shareholder
return in the top
quartile of the
NZX while
maintaining a
strong focus on
total societal
Values
impact.
Passion Respect Integrity Innovation Delivery Empower
9. Trustpower Investor Day 17 July 2018
Retail Overview Craig Neustroski – GM Markets
Electricity segment – not for the faint hearted
Consumer market highly competitive Electricity only
• Electricity segment remains highly competitive with consolidation and
failures likely
• Trustpower has a balanced portfolio across Commercial, Industrial,
Government and Consumer
• We have opportunity in new energy and emerging technology
• Cross sell within the Consumer segment is moving our customers out of
this category
Commercial and Industrial market
• Diverse customer base, typical contract term 2-3 years
• Average tenure over 7 years, supply relationships with some of New
Comment Zealand’s most recognised corporates for over 15 years
• Circa 40 retail brands now present • Profitable and sustainable circa 1,700GWh p.a.
11. Trustpower Investor Day 17 July 2018Electricity segment – diversity & tenure
Consumer market Product innovation
Electricity customer base by region
25%
Bay of Plenty
Metro
57% 18% Regional
Comment
• Electricity only customer base biased away from the metros
• Around 60% of customers have 5+ years tenure
12. Trustpower Investor Day 17 July 2018Trustpower the leading multi-utility business
Our achievements
Over 100,000 customers have more than one product
• Growth from a base of around 20,000 multi-utility customers in
mid 2013
Comment • We continue to see strong telecommunications growth
• We created a new category and others have followed • We are now realising material scale and cost to serve benefits
• There is plenty of room for growth in this category
• E.g. caching delivering savings of ~$3m p.a.
13. Trustpower Investor Day 17 July 2018We are building value
Total customers by region Current connections
2015 2018
273,000 38,000 89,000
electricity gas telco
Comment
• We are creating a diverse and resilient customer base
• We are creating a high value customer base
Over 100,000 customers have
• Significant opportunity remains for us more than one product
14. Trustpower Investor Day 17 July 2018Differentiated from competition
Bundle customers by region Bundle customers by tenure
Targeted acquisition Focused cross sell and retention in FY18
• Growth coming largely from the metros • Over 3,000 existing energy customers added Telco
• Targeted outbound campaigns are seeing 80% of new • 1,200 electricity customers added gas
customers taking two or more products
• 5,600 customers upgraded from DSL to Fibre
15. Trustpower Investor Day 17 July 2018Value based offers outperform simple price discounting
Electricity only vs multi-product churn
20%
Annualised churn
15%
Our acquisition incentive costs are similar to other in 10%
market discounts or cash incentives, however value based
offers outperform: 5%
Jun-16 Nov-16 Apr-17 Sep-17 Feb-18
• Better sales conversion and lower sales leakage
• Higher energy consumption and larger data plans driving Electricity Only Dual Fuel
higher margin per customer Triple Play Electricity and Telco
• Lower churn and lower credit risk Linear (Electricity Only) Linear (Dual Fuel)
• We have a solid suite of offers aimed at our target segments Linear (Triple Play) Linear (Electricity and Telco)
16. Trustpower Investor Day 17 July 2018Customer Operations Fiona Smith – GM Customer Operations
Our digital journey so far…
• Virtual Agent:100 topics • Virtual Agent: 300+ topics • Virtual Agent: 400 topics
• Virtual Agent:
• Faults • Webchat Launch • App launch: Account, Outages, Order & • App: Track & Trace all products
30 topics
IVR • Email Virtual Agent Pay features • Chatbot: Readings, PPD,
• Webchat Pilot
• Text • App Pilot • Chatbot: Balance & Payment Arrangement
• Credit Card
Balance • Robotics Pilot: 9 • Fibre Install Support • Fibre Automation Sprints x 3
Self Service
processes • Robotics: 15 processes • Robotics 20 processes
2015 2016 2017 2018 2018
(delivered) (year end)
• Call centre staff • Fibre roll out drives • Robotics & Bot capability secured • Predictive AI & machine learning skill gap
capability moderate skill and capability lift • Drive to support staff to embrace the shifting closed
• High volume - low • Effort & handle technology • Value differentiated service model analysis
complexity queries metrics • Wait times replace service levels complete
• Call quality & • People power • Customer feedback prioritises improvement • Predictive telephony bot intervention
service level protects the customer • Data and insight enables proactive analysis
metrics • External customer intervention • Journey mapping – simplify & automate
• Customer feedback survey & NPS with • Complex problem solving, agility & resiliency • Strengthen insight: Where does human
or engagement low feedback loop capability growth intervention drive value?
18. Trustpower Investor Day 17 July 2018With measurable outcomes …
FY-16 FY-17 FY-18 FY-19 Budget 39% increase in total services
with 54% growth in Telco
On Queue FTE 163 160 147 140
Number of services (000s) 270 330 359 375 62% ratio of services to CEA2
improvement (mitigating 86 FTE)
Services per FTE 1,656 2,061 2,442 2,677
Total contacts (000s) 891 1,018 1,440 1,651 85% growth in total contacts
Total staffed contacts (000s) 873 906 937 875 Staffed Volume controlled
Staffed contacts % 98% 89% 65% 53% through digitisation , & efficiency
with volume of complexity rising
Staffed contacts per FTE 5,355 5,665 6,371 6,249
Labour cost per service
Labour cost¹ per service $36.41 $35.23 $34.96 $34.07
decreasing
1. Labour cost : Total salary cost of the Service , Provisioning , Billing , Cash & Collections Teams
2. CEA = Customer Experience Agent or call centre staff member
19. Trustpower Investor Day 17 July 2018And digital success…
• 47% of all customer contacts are now 53% Staffed Interactions
serviced without human intervention
2018
46%
(YTD)
• Goal to reduce staffed contacts by
61% Staffed Interactions
another 12% across the next 18 months
& reduce on queue FTE by 10% 2017 54%
• Delivering a hybrid staffed/non-staffed 91% Staffed Interactions
model with a focus on value add human
interactions 2016 87%
Phone Email Webchat
Virtual Agent Trustpower App Credit Card Self Serve
Balance Self Serve IVR Outages Chat Bot
20. Trustpower Investor Day 17 July 2018While getting the balance right...
• Non Staffed interactions receive customer satisfaction Satisfaction ratings by channel
ratings on par with agent channels
90%
• Automating with a full understanding of the
75%
consequences
60%
• Analysis supports our conviction that staffed channels
45%
remain important
30%
• Staffed channels focus on the moments that matter,
the complex and the emotional, where propensity to 15%
churn spikes
0%
Webchat Agent Phone Agent Chatbot App
21. Trustpower Investor Day 17 July 2018And we know where to tackle next…
Bundled customers drive higher contacts up front (Cost to Acquire)
but in line with electricity-only customers longer term.
Staffed contact % driven by tenure & product mix Bundled Product Electricity Only
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60
Number of months post sale
22. Trustpower Investor Day 17 July 2018By understanding the data…
Why When Who
Contact Distribution New Fibre:
35% Week One
30%
25%
20%
15%
10%
5%
0%
Day 0Day 1Day 2Day 3Day 4Day 5Day 6Day 7
23. Trustpower Investor Day 17 July 2018And building capability… • Driving the human-robot relationship takes careful planning & collaboration • Starting early & experimentation builds new capability & supports agility • Understanding that sometimes human contact is the answer, not the problem & building their capability to adapt 24. Trustpower Investor Day 17 July 2018
To deliver on our convictions
We become We become & maximise
more effective more efficient human connection
Automation
Robotics Customer centred
Prescriptive AI
Simplification Relationship focussed
Digitisation
Ease of effort Proactive personalisation
Insight led
Faster Cheaper Valued
25. Trustpower Investor Day 17 July 2018…and aspirations
• Reduce staffed contacts from 53% to 40% enabling Forecast on-queue staffing & volumes
efficient service growth & focussing human
interactions on the moments that matter 158
KCE Migration
• Reduce on-queue FTE by increasing their productivity
132
by at least 10% (services/FTE)
• More than double the amount of automation in telco
provisioning
• Support 13,000 ex KCE customers (17,000 ICP) with
no back office FTE increase & on queue lift of 4 FTE
• Deliver back office initiatives delivering savings of
$600,000 + Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2018 2018 2018 2018 2019 2019 2019 2019 2020 2020
Total Services Supplied Total Contacts
Staffed Contacts On Queue Staff
26. Trustpower Investor Day 17 July 2018Energy and Regulatory Risk Peter Calderwood – GM Strategy and Growth
Portfolio strategy
Key focus areas
Strategic regulatory Issues Energy risk management New opportunities
• Joined up thinking within Government • Making sure energy risk management • Potential M&A Opportunities
maximises EBITDA within acceptable
• Climate change and move to low • Divestment where other owners
volatility
emissions economy are better fit
• Continuing to improve generation
• Evolution of gas and telco regulatory • Continuous scanning of new
dispatch to maximise revenue
governance arrangements technology and products for
• Co-optimisation of: existing customers
• Water allocation and quality
– Energy
• Electricity Price Review – Avoided Cost of Transmission
• Tax Working Group – Reserves
• Ongoing TPM work – Demand Side Management
28. Trustpower Investor Day 17 July 2018Climate change and low emissions economy
Key focus areas
Trustpower’s Position Key Areas for Involvement Opportunities
• Trustpower supports the now bi- • Productivity Commission • New storage and
partisan view that New Zealand generation technologies –
• Climate Change Commission (Zero Carbon Bill)
should significantly reduce its both grid connected and
green house gas emissions. • Joined up thinking across Government behind the meter
organisations
• Decarbonisation of other sectors • Enhancement of existing
will lead to increase in electricity – Recognise the positive impact of existing assets to support new
gross demand. hydro generation on NZ’s Emissions footprint intermittent generation
– Linkage to Water Reform (incl. via tax
• The transition to a new normal • Participation in new
reform)
will be turbulent and needs markets
careful and deliberate policy and • Market structures for transition to new normal
regulatory governance to
minimise disruption, and protect
the interests of investors
29. Trustpower Investor Day 17 July 2018Electricity price review
Key focus areas
Trustpower’s Position Key Areas for Involvement Opportunities
• The current market functions well. • Contribute to the review to • Leverage from
assist the Government to Trustpower as a
• The review is a valuable opportunity to fine-tune
deliver more effective knowledgeable and
industry governance
outcomes particularly for long term retailer
• Trustpower continues to support competition as the vulnerable customers.
most effective way of delivering the best outcome to
consumers.
• Ideal opportunity for a review of governance
arrangements for a new future energy mix.
30. Trustpower Investor Day 17 July 2018Review of DGPPs (ACOT payments) Assessment of ongoing ACOT Current Trustpower estimate of future ACOT revenue (Avoided Cost of Transmission) payments ACOT revenue reduction over time (estimate), incl. Rotokawa and • Electricity Authority’s final decision announced 6 KCE Contribution December 2016 • Lower SI review complete • Lower NI proposed beneficiaries published and presently subject to consultation • Outcomes are in line with previous guidance. 31. Trustpower Investor Day 17 July 2018
Balanced exposure to wholesale risk
Overview of a typical year
Trustpower Generation Tilt FPVV PPAs FPVV PPAs (excl Tilt) FPFV Hedges incl ASX Spot passed through to C&I
Generation/Purchase
FPVV = Fixed Price
Overall long Customer
Variable Volume Direct pass
generation to reduce contracts
through with
FPFV = Fixed Price exposure to weather matched to
no market
Fixed Volume related hydro/wind hedge
exposure
variability contracts
Retail
Net Length MM Fixed Price C&I Fixed Price C&I on spot
32. Trustpower Investor Day 17 July 2018Generation Overview Stephen Fraser – GM Generation
Generation portfolio – provides
efficient, flexible risk management
43 20%
hydro power shareholding in Rangitata Diversion
stations across Race Management Limited (New
Zealand’s largest irrigation scheme)
26
schemes 75% - 80%
of Trustpower’s EBITDAF
is provided by the NZ generation
75% business
shareholding in
King Country Energy
Flexible and low
marginal cost
496MW portfolio benefits from market firming
total NZ installed and able to optimise growth, hold or
generation capacity divest
34. Trustpower Investor Day 17 July 2018We will continue to drive portfolio profitability & manage risk
in the near term through a number of different focus areas
Key focus areas
Maximizing portfolio Our licence to operate Asset Identifying new
profitability and risk management efficiency generation opportunities
• Continuous improvement • Focus on health, safety • Targeted asset • Sharper focus on
and focus on revenue and the environment, management practices development: ‘brownfield’
growth with an eye on dam/civil safety – that focus on the enhancement and
cost efficiencies delivering our ‘licence to efficiency, reliability and ‘greenfield’ growth by
operate’ agenda availability of our highest keeping an eye out for the
• Improved
value assets right opportunities
project/programme
delivery and supply chain • Improving asset
optimisation management maturity –
more data and analytics,
predictive and
preventative focus
35. Trustpower Investor Day 17 July 2018Generation portfolio – outperforms market
• Strong output from NI schemes in FY18; our geographically diverse spread of generation stabilises our output against regional
hydrology.
• This enabled us to outperform market expectations of price for the majority of the financial year while our competitors
experienced difficult portfolio positions in the South Island.
– Our average monthly Generation Weighted Average Price (GWAP) was 3.4% higher than the national average price.
9%
$46.28
8%
% difference between GWAP and
$132.29
200 7% $127.37
national average price
6% $121.52
5%
GWh
$147.03
100 4% $67.89
3% $66.92
$56.74 $99.69
2% $85.30 $61.38
0 1%
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 0%
Northland Bay of Plenty Taranaki -1% $55.71
Marlborough/Tasman West Coast Canterbury
Otago KCE LT average (incl. KCE) Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
36. Trustpower Investor Day 17 July 2018Matahina G1 refurbishment + enhancement – case study
• Refurbished second-hand 56 MVA Transformer Matahina – based on actual generation
replaced end-of-life single-phase transformers – total
installed cost of $1.5m versus $3-5m for a new 45
transformer 35
GWh
• Investigations initiated for a Low-flow Turbine to 25
increase total station GWh
15
5
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
1 in 5 1 in 20 Median: Monthly 1 in 20 1 in 5 Actual Generation
Matahina Station (In top 5 highest value in portfolio):
• Outage timed to minimise lost generation
Transformer lifted onto Installed in final • Concurrent major rotor refurbishment works
trailer for short journey location in
to switchyard switchyard • ‘Healthy’ outage concept with good H&S results
37. Trustpower Investor Day 17 July 2018Coleridge G2 & G3 generator replacement
• Condition assessment and Asset Management Plan identified Coleridge Generators G2 & G3 (12 MW each) as two of our six top-
earning machines, but being in very poor condition
• International tendering process to select preferred supplier and installer
• Optimal timing for generator replacement balanced the risk of failure (lost revenue) with the benefit of delay (project cost).
New G3 G3 stator
rotor being lifted
awaiting into station
installation
38. Trustpower Investor Day 17 July 2018People, Culture and Communication Mel Dyer – GM People & Culture
Building organisational capability
Key Capabilities
Driving action Delivering Building, Keeping our Fostering an
based on data, products, maintaining and workforce and open
analytics and propositions, leveraging contractors organisational
insight and service that strong, positive safe and well culture with a
meet our relationships collective
customers’ with our learning
needs. stakeholders. focus.
40. Trustpower Investor Day 17 July 2018People capability to execute on future opportunities Key Capabilities Future organisational capability • Targeted development to strengthen resiliency, leadership, and collaboration for better business outcomes – Over 50% of Leadership program spots taken by women in the last 4 years • Focus on cross functional teams to match our customers’ experience and to deal with increasing complexity • Fast business improvement skills development – Focusing on driving efficiency and a better outcome for our customers • Internal Facilitators trained to help groups work in different ways and break down barriers https://www.trustpower.co.nz/Getting-To-Know-Us/Working-For-Trustpower 41. Trustpower Investor Day 17 July 2018
Focus on diversity to build capability and drive success
Diversity for adaptability and flexibility Demographics
• Recent review of our remuneration has ensured we are competitive Gender balance
- but with no desire to be the highest payer in our markets
• Focus is on providing an environment where people can flourish
• analysis of the pay gap between males and females for the same
position shows no significant difference between genders
Male v female remuneration, 2018 Males
Female - 2018 Male - 2018
Females
Salary
Organisational Level
42. Trustpower Investor Day 17 July 2018Safety and wellbeing
Keeping our workforce safe and well
Injury frequency rates per 200,000 hours worked - 12 month rolling average Key focus areas
20 • Completed production of new Safety
Lost Time Management System
18
Lost Time and Medical Treatment
16
• New incident reporting system
Injury frequency rate
Lost Time, Medical Treatment and First Aid
14
implemented with better reporting for
12
root cause diagnosis
10
8 • Public Safety accreditation maintained
6
4 • Wellbeing initiatives in major projects
2 • New in car monitoring system
0
implemented
Jul-16
Jul-12
Apr-18
Apr-13
Jul-13
Oct-13
Apr-14
Jul-14
Apr-15
Jul-15
Apr-16
Apr-17
Jul-17
Oct-12
Oct-14
Oct-15
Oct-16
Oct-17
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
• Participation in industry StayLive forum
43. Trustpower Investor Day 17 July 2018Maintaining a strong community presence which
recognises the value of being a good corporate citizen
Sponsorship of the TECT
13 regional and 1 national Rescue Helicopter
Community Awards events
held annually to celebrate
the work of volunteers and
community groups Generation team
tree planting
44. Trustpower Investor Day 17 July 2018A range of efforts are helping build and maintain positive
relationships with our key stakeholder groups
This year Trustpower received an
Enhancement funds that Fisheries management – including environmental management
provide for local environmental, eel management programmes, trout accreditation from BRAID in
cultural and community projects release in some catchments, and recognition of the work undertaken
in the catchments Trustpower ongoing fish passage investigations on the Rakaia River to restore
operates and initiatives braided river bird habitat
45. Trustpower Investor Day 17 July 2018Digital Platforms Simon Clarke – GM Business Solutions & Technology
Our responsive tech foundations will underpin our evolution
to a future ready digital business
Past Current
Multi-product &
CX/UX focus v4.02
Key focus areas
Stable & Resilient
Infrastructure
Speed & Scale
Modern
Collaborative
Workplace
Foundational Keep it Simple, Scalable Rock Solid IT Cloud & People Digital & Build & Leverage
Principles & Fit for Purpose & ISP Platforms Agility Data Lead People & IP
47. Trustpower Investor Day 17 July 2018We are transitioning to an agile delivery model focused on
value and user & customer experience (UX/CX)
Digitising operations Digitising UX/CX
Based on insight & focused on Based on market insight
automating processes and lowering and user and customer
costs across the business response
Examples Examples
Nine cross-functional Chorus B2B integration Customer App
teams working in sprints • enabling fibre install support • >12,000 downloads
with quarterly reviews • ~$160K cost for $500K pa • >5000 contacts mitigated
Work prioritised saving Webchat
by business owners based Baseband IP Migration • ~10,000 interactions/month
on value & impact with long
• ~27,000 telco customers AI Chatbot
term strategic goals in mind
•We have a scalable & modern ISP platform & capability
Optical backhaul gives us
more control & visibility in
key markets
Increasing caching &
Trans Tasman peering
capability provides better
customer experience &
reduces international
bandwidth and input costs
In-house ISP Network
Operations Team means
less reliance on upstream
vendors and closer
connection to customer
49. Trustpower Investor Day 17 July 2018TB No. Services
000’s
0
4
8
12
16
100
0
25
50
75
Oct-14
Dec-14 Oct-14
Feb-15 Dec-14
Apr-15 Feb-15 Total services
Total bandwidth
Jun-15 Apr-15
Aug-15 Jun-15
Oct-15 Aug-15
Dec-15 Oct-15
Feb-16 Dec-15
Feb-16
Apr-16
Apr-16
Jun-16
Jun-16
Aug-16
Aug-16
Oct-16
50. Trustpower Investor Day 17 July 2018
Oct-16
Dec-16
Dec-16
Feb-17 Feb-17
Apr-17 Apr-17
Jun-17 Jun-17
Aug-17 Aug-17
Oct-17 Oct-17
Dec-17 Dec-17
Feb-18 Feb-18
Apr-18 Apr-18
Jun-18 Jun-18
Our ISP network has supported
Mbps
significant growth & is NZ leading
3.0
3.5
4.0
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
CallPlus
Dec-16
MyRepublic
Jan-17
Vodafone NZ
Feb-17
Mar-17
Apr-17
May-17
https://ispspeedindex.netflix.com/country/ new-zealand
Jun-17
Spark
Jul-17
Aug-17
Trustpower
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Bigpipe
Mar-18
2degrees
Apr-18
May-18We are last to the dance on smart meters - but best dressed
• Cost based business case (only now just making
sense)
• Partnership with Australasian metering technology
& service company L+G/intelliHub
• “Proof of Performance” over the last 12 months to
test technology & business processes - complete
• Internal development of fit for purpose & scalable
meter data management (MDM) platform -
complete
• 3 year deployment programme - commenced
51. Trustpower Investor Day 17 July 2018Finance Overview and Wrap up
Kevin Palmer– Chief Financial OfficerFY19 guidance remains unchanged
After normalising for the sale of our Australian (GSP) assets (~$27m) and abnormal hydrology during FY18 (~$20m), we retain
our current EBITDAF guidance of $205-$225m:
FY18 to FY19 Bridge – Difference (range) from FY18
12
10
8 8
7
6
5
4 4 3
$M
2
0
-2 -4 -3
-3 -3 -3
-4 -4 -5 -5
-6 -6
-8
ACOT Retail Retail Generation Generation Corporate Other
gross profit OPEX OPEX Other Revenue OPEX
53. Trustpower Investor Day 17 July 2018Debt position
Key comments
• Debt levels forecast to be ~2x Debt/EBITDA and are below industry peers. A capital distribution programme is being considered by
the Board to return Trustpower to 2.5x-2.8x debt/EBITDAF over time.
• The average tenor of debt is shorter than ideal but is not a real concern at these debt levels – while not seen as urgent Trustpower is
considering a debt capital market issuance.
Sources of debt ($m) Debt maturity ($m)
400
Bank Unutilised Bank
163 172 300
Sub Bonds
Senior Bonds
200 Senior Bonds
Sub Bonds Bank
114 100
Unutilised Bank
211
0
0-1 1-3 3-5 5-7 7+
54. Trustpower Investor Day 17 July 2018Summary of key messages
Our retail business is well positioned Our generation assets are well placed to
• Our differentiated bundled strategy is adding value with a significant growth opportunity capitalise on a renewable future
due to the fibre rollout • Geographical diversity and high levels of
• Being a value led rather than price lead competitor is a long term sustainable and availability
profitable position
We are facing a high level of regulation
• We have made significant progress in our digital strategy and are well positioned for the
both in energy and in telco
digital future
• It is yet to be seen if this will be a
We have developed a high level of capability that gives us the flexibility and agility to positive or negative for Trustpower.
perform well in a changing future However we are fully engaged and
believe we have the flexibility and
• A highly capable organisation that focuses on collective learning and fast decision making
capability to prosper whatever the
• A strong focus on the communities in which we operate and a commitment to be a outcome.
positive contributor
• Agile and flexible technology platforms that support our commitment to digital initiatives We are well positioned to grow both
organically and through acquisition
• We are extracting significant scale benefits from our telco platform
55. Trustpower Investor Day 17 July 2018Thank You
Non-GAAP Measures
• EBITDAF is a non GAAP financial measure but is commonly used within the electricity 2017 industry2018as a measure of performance as it shows the level of earnings
before impact
ProftofAfter
gearing levels and to
Tax Attributable non-cash charges
Shareholders such
of the as depreciation and92,545
Company amortisation.128,127
Market analysts use the measure as an input into company
valuation and
Fairvaluation metrics
value losses usedontofinancial
/ (gains) assess relative value and performance of companies
instruments (3,825) across the sector. The EBITDAF shown in the financial statements
2,675
excludes the Australian
Gain business
on sale of which is
the subsidiary a discontinued
after income tax operation. - (183)
• Reconciliation betweenofstatutory
Impairment assets measures of profit and EBITDAF, as well as EBITDAF per the financial
3,479 5,099statements and total EBITDAF, is given below:
Demerger related expenditure 23,959 -
Changes in income tax expense in relation to adjustments (687) (749)
Underlying Earnings After Tax 115,471
2017 134,969
2018
Operating Profit 141,883 191,068
Fair value losses / (gains) on financial instruments (3,825) 2,675
Impairment of assets 3,479 5,099
Depreciation and amortisation 44,742 44,242
Discount on acquisition - -
EBITDAF per financial statements 186,279 243,084
EBITDAF of Australian business 31,552 26,684
Reclassification of foreign currency translation reserve - (3,022)
Total EBITDAF 217,831 266,746
57. Trustpower Investor Day 17 July 2018Disclaimer While all reasonable care has been taken in the preparation of this presentation, Trustpower Limited and its related entities, directors, officers and employees (collectively "Trustpower") do not accept, and expressly disclaim, any liability whatsoever (including for negligence) for any loss howsoever arising from any use of this presentation or its contents. No representation or warranty, expressed or implied, is made as to the accuracy, completeness or thoroughness of the content of the information. All information included in this presentation is provided as at the date of this presentation. Except as required by law or NZX listing rules, Trustpower is not obliged to update this presentation after its release, even if things change materially. The reader should consult with its own legal, tax, investment or accounting advisers as to the accuracy and application of the information contained herein and should conduct its own due diligence and other enquiries in relation to such information. The information in this presentation has not been independently verified by Trustpower. Some of the information set out in the presentation relates to future matters, that are subject to a number of risks and uncertainties (many of which are beyond the control of Trustpower), which may cause the actual results, performance or achievements of Trustpower or the Trustpower Group to be materially different from the future results set out in the presentation. The inclusion of forward-looking information should not be regarded as a representation or warranty by Trustpower or any other person that those forward-looking statements will be achieved or that the assumptions underlying any forward-looking statements will in fact be correct. This presentation may contain a number of non-GAAP financial measures. Because they are not defined by GAAP or IFRS, they should not be considered in isolation from, or construed as an alternative to, other financial measures determined in accordance with GAAP. Although Trustpower believes they provide useful information in measuring the financial performance of the Trustpower Group, readers are cautioned not to place undue reliance on any non-GAAP financial measures. This presentation is for general information purposes only and does not constitute investment advice or an offer, inducement, invitation or recommendation in respect of Trustpower securities. The reader should note that, in providing this presentation, Trustpower has not considered the objectives, financial position or needs of the reader. The reader should obtain and rely on its own professional advice from its legal, tax, investment, accounting and other professional advisers in respect of the reader’s objectives, financial position or needs 58. Trustpower Investor Day 17 July 2018
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