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Explore Envestra's financial performance, capital expenditures, debt management, regulatory challenges, and asset sales potential. Learn about 2003-2004 prospects and distribution forecasts.
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UBS Utilities and Renewable Energy Conference 12 November 2003 Presented by: Ian Little Managing Director Envestra Limited
Recent market queries • What’s happening with our distributions? • Where do we spend our capital? • Is Envestra’s gearing too low? • How do we minimise debt risks? • What’s happening in the regulatory arena? • Will Envestra participate in asset sales? • What are our 2003-2004 prospects?
What’s happening with our distributions? • Strong, reliable cash flows • Six years of meeting forecast returns • Access arrangements in place – distributions to be maintained • Distribution growth – depends on business growth, regulatory outcomes, tax and operating performance • After loan notes repaid in 2009 - dividends Forecast
Where do we spend our capital? Normally $50-60M/year: • $10-15M replacement • $40-$45M growth Replacement: • Upgrade mains (100-150km/year) • 60,000 meters/year Growth: • New subdivisions (300 km last year) • Mains, inlets and meters (20,000/year)
Where do we spend our capital? 2003-2004 forecast: • $15M Replacement • $45M Growth • $30M FRC $90M Total Full retail contestability system: • $50M over three years • Victoria and South Australia (Queensland deferred) • $20 million/annum revenue
How do we fund our capex? 2002-2003 Summary Interest ($117M) Revenue ($283M) Operating expenses ($80M) Interest on loan notes Distributions ($67M) Loan note repayments Replacement capital expenditure ($10M) 25% Loan drawdowns ($47M) Growth capital expenditure ($65M) 75% About 25 per cent of growth capital expenditure (excluding acquisitions) and all distributions to shareholders are funded from revenue.
Is our gearing too low? • Aim to minimise cost of capital • Debt $1.8B and Assets $2.4B • Loan notes excluded from debt • Gearing 75% • Assets at acquisition values (1997 and 1999) • Revaluation $386M to $535M gearing <65%
How do we minimise debt risks? • Debt duration and balanced maturities • Interest rate hedging – currently about 90% hedged through to 2006
What’s happening in the regulatory arena? • Access Code Review – our proposals: Clear set of objectives to guide Regulators Creating real incentives for network extensions Greater allowance for marketing activities More flexible, light handed, approach Improving efficiency of regulatory process Process Risks – none for three years Gearing, beta, 6% risk free rate Upside – pre-tax approach, benchmarked operating costs, more realistic volume forecasts Outcomes
Will Envestra participate in asset sales? • Four major ‘groups’ of transmission assets for sale • Potential value gap – buyers versus sellers • Significant “publicly known” issues with each • Transmission versus distribution – risk transfer for Envestra • Acquisition far from certain
What are our 2003-04 prospects? • Cold and wet - off to a good start • Total gas delivered up 5% to October • 5,100 new domestic consumers in 1Q • 5.7¢ distribution – full-year 9.5¢ anticipated • Long-term financing via US private placement (secured 30 year debt) • Higher than normal capex ($90M) • Revenue $300M • Modest pre-tax profit improvement forecast Envestra performing to expectations