UBS Australian Utilities Conference
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UBS Australian Utilities Conference. Presentation by Jeff Dimery, Group General Manager Merchant Energy, AGL Energy Limited. April 2010.

UBS Australian Utilities Conference. Presentation by Jeff Dimery, Group General Manager Merchant Energy, AGL Energy Limited. April 2010.

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UBS Australian Utilities Conference Presentation Transcript

  • 1. AGL Energy Limited Regulatory reform: Blowing in the right direction Jeff Dimery Group General Manager Merchant Energy UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 2. 2 Disclaimer The information in this presentation: › Is not an offer or recommendation to purchase or subscribe for securities in AGL Energy Limited or to retain any securities currently held. › Does not take into account the potential and current individual investment objectives or the financial situation of investors. › Was prepared with due care and attention and is current at the date of the presentation. › Actual results may materially vary from any forecasts (where applicable) in this presentation. › Before making or varying any investment in securities in AGL Energy Limited, all investors should consider the appropriateness of that investment in light of their individual investment objectives and financial situation and should seek their own independent professional advice. UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 3. Investment in renewable technologies 3 Wind is the global technology of choice among renewable technologies- 63% of investment in 2009 (US$60bn) Source: PEW Centre (2010) UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 4. Technology cost curve 4 Wind currently has a substantial cost advantage » Source: ACIL Tasman, AGL, Roam, MMA Renewable technologies UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 5. 5 Policies globally driving renewable investment Since mid-2009, a number of new policies have been announced that will drive renewable investment Country/State Renewable Mandate Spain 22.5% renewable by 2020 US – Colorado 30% renewable by 2020 US - Alaska 50% renewable by 2025 Israel 10% renewable by 2020 Kuwait 5% renewable by 2020 » Source: DB Climate Change Advisors UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 6. 6 Expanded Renewable Energy Target… Source: Roam, AGL UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 7. 7 Renewable Energy Certificates: Prices start to rise Penalty effectively raised to $93 per MWh. $100 › Responsibility resides with $90 retailer $80 $70 › Increased penalty Expanded MRET Announced SHW & PV Increases REC Bank $60 recognises need to $/REC incentivise development of $50 higher cost renewable sites $40 $30 › Anticipate rapid rise in REC $20 Expanded MRET Passed prices following $10 Drought Impacting Hydros development of low cost $0 sites and ramp up of target Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 8. 8 Impact of Renewable Policy Setting Fundamental changes required to generation mix. New Build Generation Mix Years of Forecast - 2010 to 2020 Coal Plant CCGT Base Plant OCGT Peak Plant Renewable Plant 20000 18000 Capacity required (MW) 16000 14000 Renewables dominate 9,500MW 12000 1,200MW 10000 8000 4,500MW OCGT peaking plant 6000 5,500MW displaces CCGT base plant 4000 5,500MW 2000 2,800MW 0 Original 2006 forecast Current 2010 forecast (ETS, 2% MRET) (ETS, 20% Expanded RET) Source: AGL Greenhouse modeling UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 9. 9 Renewable Energy Certificate (REC) obligations Appropriate regulatory settings required to facilitate investment. › Macarthur (365MW) conditional commitment › Federal legislation requires AGL to surrender approximately 9 million RECs per annum by 2020 › Strong pipeline of development opportunities › Proven capability in site selection, project development and performance › Development pipeline delayed until improved MRET policy framework 1. Excludes long-term supply agreements and Voluntary REC demands. UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 10. 10 Australia has a world class wind resource Average wind speeds (metres per second) › Wind resource is best in Tasmania and areas in Western Australia, South Australia and Victoria › NSW, Queensland and the Northern Territory have limited large scale wind potential › The best wind sites are already being taken in Tasmania, South Australia >8 and Western Australia 6-8 4-6 <4 Source: CSIRO UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 11. 11 Wind farms: Success factors A number of critical issues can mean success or failure of a wind farm development: › Wind resource › Land access (support by landowners) › Capital cost › Connection access: (cost, loss factor, grid capacity) › Wind farm scale (to absorb certain fixed cost) › O&M costs (typically only around 2% of capital cost per year) UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 12. 12 Wind farms: Cost profile 1 UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 13. 13 Wind resource drives turbine selection Location of Hallett 1 turbines & wind speeds › Wind speed generally increases with height › Wake effects reduce yield and drives turbine spacing › Hallett Wind Farm stages 1, 2 and 4 are classic wind farm sites with prevailing winds perpendicular to ridge Wind Rose for Hallett 1 N UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 14. 14 Wind project diversity improves reliability Geographical diversity enhances the level of ’firm’ generation. Wattle Point Hallett 1 Pool Pric e 100 $10,000 90 Regional pool price ($/MWh) 80 Wind generation (MW) $1,000 70 60 50 $100 40 30 $10 20 10 0 $1 Sun 06 Mon 07 Tue 08 Wed 09 Thu 10 Fri 11 Half hour time increments (6-12 April 2008) UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 15. 15 Delivering high capacity factors Operational performance exceeds investment assumptions. 1 UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 16. 16 Strong growth pipeline Market leading portfolio provides strategic depth and optionality. Project Nominal Capacity (MW) Location Type Project Status Definition Bogong 140 Victorian Alps Hydro Commissioning Committed McKay Creek Up Rate 10 Victorian Alps Hydro Commissioning Committed Hallett 2 71 SA - Hallett Wind Commissioning Committed Hallett 4 132 SA - Hallett Wind Under Construction Committed RENEWABLE GENERATION Werribee Expansion 2 VIC - Werribee Biogas Under Construction Committed Oaklands Hill 67 VIC - West Wind Under Construction Committed Hallett 5 52 SA – Hallett Wind Under Construction Committed In Development, JV with Conditional Macarthur 365 VIC - West Wind Meridian Commitment Barn Hill 130 SA - Redhill Wind DA Approved Probable Hallett 3 80 SA - Hallett Wind In Development Possible Crows Nest 150 QLD - Toowoomba Wind Permitted Possible Landowner Agreements in Ben Lomond 150 NSW - Armidale Wind Possible Place Landowner Agreements in Coopers Gap 300 QLD - Kingaroy Wind Possible Place Other 3 Projects totalling up to 600 Various Various Under Review Possible UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 17. 17 Summary › Significant progress with renewable policies › Critical that legislation is passed in May/June 2010 › Requires ~ $30 billion of investment in renewable generation › Delay to CPRS is disappointing › Uncertainty adversely impacts investment decisions › Wind will be the dominant renewable technology over next decade › AGL’s renewable portfolio performing well › First-mover advantage › Considerable development and operational experience › Well-positioned portfolio of sites UBS – Australian Utilities Conference 29 April 2010 AGL External
  • 18. 18 Further Information / Contacts A range of information on AGL Energy Limited including ASX & Media Releases, Presentations, Financial Results, Annual Reports and Sustainability Reports is available from our website: www.agl.com.au Alternatively, contact: INSTITUTIONAL INVESTORS & ANALYSTS RETAIL INVESTORS & MEDIA John Hobson Nathan Vass Head of Investor Relations Investor Relations & Media AGL Energy Limited AGL Energy Limited phone: +61 2 9921 2789 phone: +61 2 9921 2264 Mobile: +61 (0) 488 002 460 mobile: +61 (0) 405 040 133 e-mail: john.hobson@agl.com.au e-mail: nvass@agl.com.au UBS – Australian Utilities Conference 29 April 2010 AGL External