Presentation to the 7th Australia-New Zealand Climate Change … · 2011. 11. 11. · the Online...

Origin Energy Limited ACN 000 051 696 • Level 45 Australia Square, 264-278 George Street, Sydney NSW 2000 GPO Box 5376, Sydney NSW 2001 • Telephone (02) 8345 5000 • Facsimile (02) 9252 1566 • www.originenergy.com.au

To Company Announcements Office Facsimile 1300 135 638

Company ASX Limited Date 11 November 2011

From Helen Hardy Pages 30

Subject CONTACT ENERGY CAPITAL BOND OFFER – ROADSHOW PRESENTATION

Attached herewith is a copy of an announcement released to the NZX by Contact Energy today. Origin Energy holds 52.76% of quoted ordinary shares in Contact Energy Limited. Regards

Helen Hardy Company Secretary 02 8345 5023 – [email protected]

Presentation to the 7th Australia-New Zealand Climate Change and Business Conference

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Capital Bond offer Roadshow presentation

Arranger & Joint Lead Manager Joint Lead Managers Co-Manager

November 2011

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© Contact Energy Limited

Offer summary 2

Strategic outlook and overview 4

Financial information 10

The Capital Bonds 16

Offer structure 22

Capital Bond roadshow presentation 2

Overview

November 2011

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© Contact Energy Limited Capital Bond roadshow presentation 3

Offer summary

Issuer Contact Energy Limited (“Contact Energy”)

Use of Proceeds General corporate purposes

Ranking The Capital Bonds are unsecured and subordinated to all indebtedness of Contact Energy other than indebtedness ranking equally with, or subordinate to, the Capital Bonds

Offer Amount $150 million plus up to $100 million of oversubscriptions

Credit Rating Contact Energy is rated BBB (stable outlook) by Standard & Poor’s and FitchThe Capital Bonds are expected to be rated BB- by Standard & Poor’s. Fitch is not expected to rate the Capital Bonds

Equity Content Standard & Poor’s is expected to assign a “high equity content” (100%) to the Capital Bonds. However this is expected to reduce to minimal (0%) at the date falling 20 years prior to the Maturity Date (15 February 2022)

Interest Rate The Minimum Interest Rate and Margin will be set following the bookbuild on 22 November 2011. The Minimum Interest Rate will not be less than 8.0%On each Reset Date the Interest Rate for the next 5 year period will reset to the then Benchmark Rate plus the Step-up Margin (initial Margin plus the Step-up Percentage of 0.25%). Interest Payments are scheduled to be made quarterly in arrears

Maturity 15 February 2042

First Reset & Step-up Date 15 February 2017

Issuer Redemption Rights First Reset Date and each subsequent Interest Payment Date and in certain other limited circumstances, including on a Change of Control Event

Change of Control Event Investor put option if there is a Change of Control Event and an associated Ratings Downgrade

Mandatory Deferral of Interest

Payment of Interest must be deferred if Contact Energy’s issuer credit rating from Standard & Poor’s falls to BB or lower or Contact Energy is insolvent (not able to pay its debts as they fall due) or if paying the interest would cause insolvency.Deferred Interest is cumulative

November 2011

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Offer summary 2




Offer structure 22


Overview

November 2011

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© Contact Energy Limited Capital Bond roadshow presentation 5November 2011

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Contact Energy – Existing generation portfolio

666Capital Bond roadshow presentationNovember 2011

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2,0763,084

2,327

2,422923

8372,348

1,911

0

2,000

4,000

6,000

8,000

10,000

FY10 FY11

GWh

NI time of use NI mass market (SME & residential)SI time of use SI mass market (SME & residential)

43% 33%

57% 67%

Contact Energy - Retail electricity business

77

• Second largest electricity retailer in New Zealand– Approximately 447,000 customers – Supplies electricity to commercial and residential

customers– Diversified customer base and large proportion of

residential customers underpins a stable retail revenue base

• Contact Energy is competitive in a market that is constantly changing – Increased levels of customer losses in the last quarter of

the year ended 30 June 2011– Since the release of an increased level of discount with

the Online OnTime product in August 2011, Contact Energy has arrested and reversed the trend of net customer losses


Contact Energy’s load split by customer type and island (sales)

7,6748,254

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Contact Energy – Three key strategies for growth


Market share growth

Increasing portfolioflexibility

Lower average cost of generation– 166 MW Te Mihi

in construction

– Gas storage– Stratford peakers– Gas portfolio changes

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Contact Energy’s options position it well for the future

9

• Contact Energy has a geothermal development pipeline of over 400 MW including projects in construction, consented and in exploration – Geothermal generation can be complex to consent requiring world class

science and land management to ensure sustainability• The time is right for geothermal generation in New Zealand – affordable,

reliable, renewable and with a low carbon intensity• New developments will derive from and benefit from partnerships with

tangata whenua

• New Zealand’s geothermal resources which are available for development are finite – new approaches may see more resource become accessible –but it cannot be developed indefinitely; in New Zealand, new wind, hydro and gas will all have a role to play

• Contact Energy’s options across all fuel sources position it well to continue to meet New Zealand’s needs and ensures a pivotal role in ensuring New Zealand’s security of supply

Capital Bond roadshow presentationNovember 2011

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Offer summary 2




Offer structure 22


Overview

November 2011

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FY07 FY08 FY09 FY10 FY11

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Capital Bond roadshow presentation

Generation and revenue

November 2011

• Revenue fluctuates depending on wholesale electricity prices and electricity generation volumes, amongst other factors– Dry year in FY08 saw higher prices and increased revenues and profits; Wet conditions in FY09, FY10 and

FY11 contributed to higher market hydro generation and lower wholesale electricity prices– FY09 also impacted by the outage of one of the high voltage transmission lines linking the North and South

Islands• Thermal generation balances the variable hydro generation • Ahuroa gas storage facility and Stratford peaker reduce the impact of negative hydrology

11

Generation by fuel source Operating revenue and wholesale electricity price

*Swaption refers to a contract Contact Energy has with a generator which allows Contact Energy to require that party to exchange the difference between a fixed price per MWh and the wholesale electricity price. This contract has a maximum capacity of 200 MW and expires on 31 December 2012.

Important note regarding financial information: The financial information set out in this section contains some financial and operational data for the entire Contact Energy Group. However, Contact Energy Limited is the sole obligor under the Capital Bonds and no other member of the Contact Energy Group guarantees or provides any other surety in respect of the Capital Bonds or any of Contact Energy’s obligations in relation to the Capital Bonds.

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© Contact Energy Limited Capital Bond roadshow presentation

Earnings and cashflows

November 2011

• NPAT largely follows EBITDAF• Substantial investment in new assets, with investing cashflow of over $400 million in each of the last

three years– Ahuroa gas storage, Stratford peaker plant, Te Huka geothermal plant – Investment continues with Te Mihi expected to be operational in the middle of 2013

12

EBITDAF and NPAT Operating and investing cashflows

0100200300400500600700


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EBITDAF (parent) EBITDAF (group)NPAT (parent) NPAT (group)

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Operating cashflow (cash in) (parent) Operating cashflow (cash in) (group)Investing cashflow (cash out) (parent) Investing cashflow (cash out) (group)

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Shareholders' equity Net debt/net debt+equity


Balance sheet

November 2011

• Parent borrowings have increased $371m (52%) over the last five years– Total parent borrowings of $1.1 billion– Relative to parent shareholders’ equity of over $3.1 billion

• Parent balance sheet gearing (net debt / net debt + equity**) of 27.2% at 30 June 2011– Successful rights issue in May 2011– Ongoing profit distribution plan

13

Parent total assets and liabilities Parent shareholders’ equity

*As taken from the statement of financial position in Contact Energy’s audited financial statements for the years ended 30 June. ** Net debt is based on the NZD equivalent of unsecured loans after the effect of FX hedging and before the deduction of deferred financing costs; equity is adjusted for the net effect of the fair value of financial instruments after tax.

0

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Total assets* Total liabilities Borrowings

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Borrowings, $1,085m

Capital Bonds, $250m

Shareholders' equity,

$3,145m

Borrowings, $1,085mShareholders'

equity, $3,145m

• BBB (stable outlook) issuer credit rating from Standard and Poor’s since 2002 – Benefits in the wholesale electricity and gas markets

of maintaining an investment grade credit rating– Historically have raised equity to support our growth

plans and creditworthiness

• Capital Bonds part of Contact Energy’s ongoing capital management strategy– Proceeds to be used for general corporate purposes

– Extends term funding profile– Provides increased financial flexibility– Further optimises the capital structure

• Standard & Poor’s is expected to assign “High Equity Content” (100%) to the Capital Bonds

14November 2011 Capital Bond roadshow presentation

Parent capital structure (30 June 2011)

Parent capital structure (pro-forma adjustment for the issue of $250 million Capital Bonds)

Note: The capital structure at 30 June 2011 is derived from the statement of financial position in Contact Energy’s financial statements for the year ended 30 June 2011. The pro-forma graph shows the capital structure of Contact Energy assuming $250 million of Capital Bonds had been issued on 30 June 2011 and is calculated based on Contact Energy shareholders’ equity of $3,145 million and borrowings of $1,085 million.

Capital structure

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• Total borrowings of $1.11 billion at 30 June 2011 (parent)– Bonds

– $550m retail bond (matures 2014) – $100m wholesale bond (matures 2017)

– US Notes– US$330m (NZD equivalent $587m2)

– Bank facilities– $450m in available credit facilities (undrawn at

30 June 2011)


Parent maturity profile3

1, 3 Carrying value. The individual amounts displayed are notional values. 2 Before fair value adjustments. *Undrawn at 30 June 2011.

Maturity profile

0100200300400500600700

FY12 FY13 FY14 FY15 FY16 FY17 FY18

$ milli

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Senior bank facilities (undrawn*) US NotesSenior Bonds Wholesale Bonds

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Offer summary 2




Offer structure 22


Overview

November 2011

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Equity credit

November 2011

• Capital Bonds structured to achieve 100% equity credit from Standard & Poor’s– Subordinated– 30 year tenor (Standard & Poor’s requires at least 20 years remaining to gain 100% equity credit)– 0.25% step-up at year five (maximum permitted by Standard & Poor’s to gain 100% equity credit)– Mandatory deferral of interest– Deferred interest is cumulative for up to 5 years– Expected issue credit rating of BB-

• Capital Bonds are not expected to achieve any equity credit from Fitch

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Interest payments

• Interest rate– The Minimum Interest Rate will be not less than 8%– Interest rate for the period until the first Reset Date (15 February 2017) and the Margin is to be set

by bookbuild on 22 November– Interest rate resets every five years at the then Benchmark Rate + Margin + 0.25%

• Mandatory deferral– Interest must be deferred if Contact Energy’s issuer credit rating from Standard & Poor’s is BB or

lower or Contact Energy is insolvent (unable to pay its debts as they fall due) or payment would cause insolvency

– No ability to defer interest for any other reason (otherwise an Event of Default)– All Deferred Interest must be paid if the circumstances which led to the deferral of interest

no longer apply (and payment would not trigger a further deferral of interest) on the following Interest Payment Date

– All Deferred Interest outstanding must be paid five years after the original date of deferral– Deferred Interest accrues interest at the Interest Rate

November 2011 18

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Redemption

November 2011 19

• Redeemable early by Contact Energy– On the first Reset Date (15 February 2017) and any Interest Payment Date thereafter– If a Tax Event, Rating Agency Event or Change of Control Event occurs (see next page)– If there is less than $75 million of Capital Bonds on issue following redemption at the option of

Bondholders pursuant to a Holder Put Event Notice

• Year five (15 February 2017)– Contact Energy can call the Capital Bonds– Step-up in margin if not called (0.25%)– Callable at par (voluntary call on subsequent Interest Payment Dates between reset dates is at the

higher of par and market)

• Year ten (15 February 2022)– Standard and Poor’s equity content to minimal (Standard and Poor’s will treat as debt)– Likely to be high cost debt with limited benefitsFor

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Change of control

• A Change of Control Event is, in summary– An entity controls more than 50% of the control of voting rights of Contact Energy (or in the case of

Origin Energy 90% or more)

• Issuer Call– Contact Energy will have the right to call the Capital Bonds upon a Change of Control Event– Price is higher of market or par (plus accrued and unpaid interest) (unless on a reset date then par)

• Investor Put– Investors will have the right to put the Capital Bonds upon a Change of Control Event if there is an

associated rating downgrade by Standard & Poor’s and the resulting issuer credit rating is lower than BBB and it is not reinstated within 90 days after the Change of Control Event

– Price is at par (plus accrued and unpaid interest)

November 2011 20

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Comparison of instruments

Contact Capital Bonds

Genesis Capital Bonds

IAG Subordinated

Bonds

New Zealand Post Notes

Vector Capital Bonds

Perpetual Shares

(old Tier I)

Form Subordinated Debt

Subordinated Debt

Subordinated Debt

Subordinated Debt

Subordinated Debt

Preference Shares

Interest payments

Mandatory deferral if rating

BB or lower


BB+ or lower

Discretionary1 Discretionary Discretionary Discretionary

Cumulative Yes Yes Yes Yes No No

Tenor 30 years 30 years 25 years 30 years Perpetual Perpetual

Reset period 5 years 5 years 5 years 5 years 5 years 1 or 5 years

Step-up 0.25% 0.25% - 1.00% 1.00% -

Reset margin Fixed Fixed Fixed Remarketing Election process

Fixed

Equity content

To year 10 To year 10 To year 5 To year 10 Perpetual Perpetual

November 2011 21

1 IAG may defer interest payments if APRA requests IAG to restore or improve its margin of solvency or capital adequacy levels and no distributions have been made on equally or lower ranking securities since the date of that regulatory intervention; or no distributions have been made on any equally or lower ranking securities for 12 months. Source: Extracted from various Investment Statements and Prospectuses.

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Offer summary 2




Offer structure 22


Overview

November 2011

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Offer process

• Bookbuild Process– NZX Firms, institutional investors and other approved parties to be invited to participate in the

bookbuild process

• Firm Offer and Public Pool– Allocations to the Firm Offer and Public Pool (if any) will be determined after the bookbuild

process

• Minimum Applications / Minimum Holding and Transfers– $5,000 and multiples of $1,000 thereafter– No minimum holding (other than as prescribed by the Listing Rules)

• Fees– Firm Fees of 0.50% to those participating in the bookbuild– Retail brokerage fee of 1.00%

November 2011 23

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© Contact Energy Limited November 2011

Prospectus registered Thursday 10 NovemberRoadshow presentations Monday 14 – Wednesday 16 NovemberBookbuild and Margin and Minimum Rate Set Date Tuesday 22 November (midday)Firm allocations notified Tuesday 22 NovemberOffer opens Wednesday 23 NovemberOffer closes Thursday 15 December (midday)Interest Rate Set Date Friday 16 DecemberIssue Date Tuesday 20 DecemberQuotation and trading expected to commence on the NZDX (under the ticker CENFA)

Wednesday 21 December


Offer timetable

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© Contact Energy Limited November 2011 Capital Bond roadshow presentation

Nationwide print and internet advertising campaign

25

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Business highlights

560,000+ customers across its electricity, gas

and LPG businesses

One of New Zealand’s largest

electricity generators and

retailers

166 MWs (gross) of geothermal

generation under construction

One of the largest publicly listed

companies in New Zealand1

Net assets of $3.1 billion at 30 June

20112

Issuer credit rating of BBB (stable outlook) from

Standard & Poor’s

November 2011 26

1 By market capitalisation ($4 billion as at 9 November 2011). 2 Parent net assets as at 30 June 2011, see the statement of financial position in Contact Energy’s audited financial statements for the year ended 30 June 2011.

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Questions?

November 2011© Contact Energy Limited

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Disclaimer

28

The Offer referred to in this presentation is being made pursuant to a simplified disclosure prospectus dated 9 November 2011 (Offer Document). A copy of the Offer Document may be obtained free of charge from www.contactenergy.co.nz/bonds.This document does not constitute a recommendation by Craigs Investment Partners Limited, (the “Arranger”), Craigs Investment Partners Limited, ANZ National Bank Limited, ASB Bank Limited and Forsyth Barr Limited (together the “Joint Lead Managers”), Westpac Banking Corporation, New Zealand Branch (the “Co-Manager”) or The New Zealand Guardian Trust Limited (the “Trustee”) or any of the directors, officers, employees or agents of the Arranger, the Joint Lead Managers, the Co-Manager, the Trustee or Contact Energy Limited (the “Issuer” or “Contact Energy”) to subscribe for, or purchase, any of the Capital Bonds. None of the Issuer (except as required by law), the Arranger, the Joint Lead Managers, the Co-Manager, the Trustee nor any of their respective directors, officers, employees or agents accepts any liability whatsoever for any loss arising from this document or its contents or otherwise arising in connection with the Offer.This document is for preliminary informational purposes only and is not an offer to sell or the solicitation of an offer to purchase or subscribe for the Capital Bonds and no part of it shall form the basis of or be relied upon in connection with any contract or commitment or whatsoever. The information in this document is given in good faith and has been obtained from sources believed to be reliable and accurate at the date of preparation, but its accuracy, correctness and completeness cannot be guaranteed. You should not decide to purchase the Capital Bonds until you have read the Offer Document. The Issuer intends to offer the Capital Bonds to the public in New Zealand. No action has been or will be taken by the Issuer which would permit an offer of Capital Bonds, or possession or distribution of any offering material, in any country or jurisdiction where action for that purpose is required (other than New Zealand).The Capital Bonds are unsecured, subordinated, redeemable, cumulative, interest bearing debt obligations of the Issuer. The Capital Bonds will rank equally among themselves and will be subordinated to all other indebtedness of the Issuer, other than indebtedness expressed to rank equally with, or subordinate to, the Capital Bonds. This document provides a summary of the business and financial performance of the Contact Energy Group. Investors should be aware that the Capital Bonds are being issued by Contact Energy, the parent company of the Contact Energy Group. No subsidiary of Contact Energy nor any other person guarantees, or provides any other surety in respect of the Capital Bonds or any of Contact Energy’s obligations in relation to the Capital Bonds. Contact Energy is the only person (as that term is defined in the Securities Act) legally liable to pay interest on the Bonds and the Principal Amount of the Capital Bonds as at the date of the Offer Document.


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Disclaimer (cont.)

29

There are statements in this presentation that are “forward looking statements”. As these forward-looking statements are predictive in nature, they are subject to a number of risks and uncertainties relating to Contact Energy. As a result, actual results and conditions may differ materially from those expressed or implied in this presentation. Given these uncertainties, the recipient should not place undue reliance on any forward-looking statements in this presentation. Under no circumstances should the recipient regard the inclusion of such forward-looking statements in this presentation as a representation or warranty by any member of the Contact Energy group, their respective directors, officers and employees or any other person as to the achievement of the results expressed or implied by such statements or that the assumptions underlying such forward-looking statements will in fact be correct. The members of the Contact Energy group, and their respective directors, officers and employees, disclaim any responsibility or obligation to inform recipients of any matter arising or coming to their notice, after the date of this presentation, which may affect any matter referred to in this presentation, other than where required to do so by the Securities Act 1978, the Securities Regulations 2009, the Financial Reporting Act 1993 or the NZSX/NZDX Listing Rules. No person is authorised to give any information or to make any representation in connection with the offer which is not contained in this presentation or the Offer Document. Any information or representation in connection with the offer not contained in this presentation or the Offer Document may not be relied upon as having been authorised by any member of the Contact Energy group, the Trustee, the Arranger, Joint Lead Managers, the Co-Manager or any of their respective directors, officers, employees, or associates. Contact Energy is not licensed to provide financial product advice in relation to the Capital Bonds. The information provided in this presentation is not financial product advice and is not intended to be relied upon as advice to investors or potential investors. This presentation has been prepared without taking into account the financial situation, investment objectives or particular needs of any particular person. Credit ratings are not a recommendation to buy, sell or hold the securities issued by the Issuer (including the Capital Bonds) and the ratings may be subject to revision or withdrawal at any time by Standard & Poor’s or Fitch.Application has been made to NZX Limited (NZX) for permission to list the Capital Bonds on the NZDX and all the requirements of NZX relating thereto that can be complied with on or before the date of distribution of this document have been duly complied with. However, the Capital Bonds have not yet been approved for trading and NZX accepts no responsibility for any statement in this document. The NZDX is a registered market operated by NZX (which is a registered exchange), regulated under the Securities Markets Act.


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Capital Bond offer Roadshow presentation

Arranger & Joint Lead Manager Joint Lead Managers Co-Manager

November 2011


Offer summary 2




Offer structure 22


Overview

November 2011

© Contact Energy Limited Capital Bond roadshow presentation 3

Offer summary

Issuer Contact Energy Limited (“Contact Energy”)

Use of Proceeds General corporate purposes

Ranking The Capital Bonds are unsecured and subordinated to all indebtedness of Contact Energy other than indebtedness ranking equally with, or subordinate to, the Capital Bonds

Offer Amount $150 million plus up to $100 million of oversubscriptions

Credit Rating Contact Energy is rated BBB (stable outlook) by Standard & Poor’s and FitchThe Capital Bonds are expected to be rated BB- by Standard & Poor’s. Fitch is not expected to rate the Capital Bonds

Equity Content Standard & Poor’s is expected to assign a “high equity content” (100%) to the Capital Bonds. However this is expected to reduce to minimal (0%) at the date falling 20 years prior to the Maturity Date (15 February 2022)

Interest Rate The Minimum Interest Rate and Margin will be set following the bookbuild on 22 November 2011. The Minimum Interest Rate will not be less than 8.0%On each Reset Date the Interest Rate for the next 5 year period will reset to the then Benchmark Rate plus the Step-up Margin (initial Margin plus the Step-up Percentage of 0.25%). Interest Payments are scheduled to be made quarterly in arrears

Maturity 15 February 2042

First Reset & Step-up Date 15 February 2017

Issuer Redemption Rights First Reset Date and each subsequent Interest Payment Date and in certain other limited circumstances, including on a Change of Control Event

Change of Control Event Investor put option if there is a Change of Control Event and an associated Ratings Downgrade

Mandatory Deferral of Interest

Payment of Interest must be deferred if Contact Energy’s issuer credit rating from Standard & Poor’s falls to BB or lower or Contact Energy is insolvent (not able to pay its debts as they fall due) or if paying the interest would cause insolvency.Deferred Interest is cumulative

November 2011


Offer summary 2




Offer structure 22


Overview

November 2011

© Contact Energy Limited Capital Bond roadshow presentation 5November 2011

(


Contact Energy – Existing generation portfolio



2,0763,084

2,327

2,422923

8372,348

1,911

0

2,000

4,000

6,000

8,000

10,000

FY10 FY11

GWh

NI time of use NI mass market (SME & residential)SI time of use SI mass market (SME & residential)

43% 33%

57% 67%

Contact Energy - Retail electricity business

77

• Second largest electricity retailer in New Zealand– Approximately 447,000 customers – Supplies electricity to commercial and residential

customers– Diversified customer base and large proportion of

residential customers underpins a stable retail revenue base

• Contact Energy is competitive in a market that is constantly changing – Increased levels of customer losses in the last quarter of

the year ended 30 June 2011– Since the release of an increased level of discount with

the Online OnTime product in August 2011, Contact Energy has arrested and reversed the trend of net customer losses


Contact Energy’s load split by customer type and island (sales)

7,6748,254


Contact Energy – Three key strategies for growth


Market share growth

Increasing portfolioflexibility

Lower average cost of generation– 166 MW Te Mihi

in construction

– Gas storage– Stratford peakers– Gas portfolio changes


Contact Energy’s options position it well for the future

9

• Contact Energy has a geothermal development pipeline of over 400 MW including projects in construction, consented and in exploration – Geothermal generation can be complex to consent requiring world class

science and land management to ensure sustainability• The time is right for geothermal generation in New Zealand – affordable,

reliable, renewable and with a low carbon intensity• New developments will derive from and benefit from partnerships with

tangata whenua

• New Zealand’s geothermal resources which are available for development are finite – new approaches may see more resource become accessible –but it cannot be developed indefinitely; in New Zealand, new wind, hydro and gas will all have a role to play

• Contact Energy’s options across all fuel sources position it well to continue to meet New Zealand’s needs and ensures a pivotal role in ensuring New Zealand’s security of supply



Offer summary 2




Offer structure 22


Overview

November 2011


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20

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Operating revenue (parent) Operating revenue (group)Average wholesale electricity price

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000


GWh

Hydro Geothermal Thermal Swaption*


Generation and revenue

November 2011

• Revenue fluctuates depending on wholesale electricity prices and electricity generation volumes, amongst other factors– Dry year in FY08 saw higher prices and increased revenues and profits; Wet conditions in FY09, FY10 and

FY11 contributed to higher market hydro generation and lower wholesale electricity prices– FY09 also impacted by the outage of one of the high voltage transmission lines linking the North and South

Islands• Thermal generation balances the variable hydro generation • Ahuroa gas storage facility and Stratford peaker reduce the impact of negative hydrology

11

Generation by fuel source Operating revenue and wholesale electricity price

*Swaption refers to a contract Contact Energy has with a generator which allows Contact Energy to require that party to exchange the difference between a fixed price per MWh and the wholesale electricity price. This contract has a maximum capacity of 200 MW and expires on 31 December 2012.

Important note regarding financial information: The financial information set out in this section contains some financial and operational data for the entire Contact Energy Group. However, Contact Energy Limited is the sole obligor under the Capital Bonds and no other member of the Contact Energy Group guarantees or provides any other surety in respect of the Capital Bonds or any of Contact Energy’s obligations in relation to the Capital Bonds.


Earnings and cashflows

November 2011

• NPAT largely follows EBITDAF• Substantial investment in new assets, with investing cashflow of over $400 million in each of the last

three years– Ahuroa gas storage, Stratford peaker plant, Te Huka geothermal plant – Investment continues with Te Mihi expected to be operational in the middle of 2013

12

EBITDAF and NPAT Operating and investing cashflows

0100200300400500600700


$ milli

on

EBITDAF (parent) EBITDAF (group)NPAT (parent) NPAT (group)

0

100

200

300

400

500


$ milli

on

Operating cashflow (cash in) (parent) Operating cashflow (cash in) (group)Investing cashflow (cash out) (parent) Investing cashflow (cash out) (group)


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5

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15

20

25

30

35

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500

1,000

1,500

2,000

2,500

3,000

3,500


%

$ milli

on

Shareholders' equity Net debt/net debt+equity


Balance sheet

November 2011

• Parent borrowings have increased $371m (52%) over the last five years– Total parent borrowings of $1.1 billion– Relative to parent shareholders’ equity of over $3.1 billion

• Parent balance sheet gearing (net debt / net debt + equity**) of 27.2% at 30 June 2011– Successful rights issue in May 2011– Ongoing profit distribution plan

13

Parent total assets and liabilities Parent shareholders’ equity

*As taken from the statement of financial position in Contact Energy’s audited financial statements for the years ended 30 June. ** Net debt is based on the NZD equivalent of unsecured loans after the effect of FX hedging and before the deduction of deferred financing costs; equity is adjusted for the net effect of the fair value of financial instruments after tax.

0

1,000

2,000

3,000

4,000

5,000

6,000


$ milli

on

Total assets* Total liabilities Borrowings


Borrowings, $1,085m

Capital Bonds, $250m

Shareholders' equity,

$3,145m

Borrowings, $1,085mShareholders'

equity, $3,145m

• BBB (stable outlook) issuer credit rating from Standard and Poor’s since 2002 – Benefits in the wholesale electricity and gas markets

of maintaining an investment grade credit rating– Historically have raised equity to support our growth

plans and creditworthiness

• Capital Bonds part of Contact Energy’s ongoing capital management strategy– Proceeds to be used for general corporate purposes

– Extends term funding profile– Provides increased financial flexibility– Further optimises the capital structure

• Standard & Poor’s is expected to assign “High Equity Content” (100%) to the Capital Bonds


Parent capital structure (30 June 2011)

Parent capital structure (pro-forma adjustment for the issue of $250 million Capital Bonds)

Note: The capital structure at 30 June 2011 is derived from the statement of financial position in Contact Energy’s financial statements for the year ended 30 June 2011. The pro-forma graph shows the capital structure of Contact Energy assuming $250 million of Capital Bonds had been issued on 30 June 2011 and is calculated based on Contact Energy shareholders’ equity of $3,145 million and borrowings of $1,085 million.

Capital structure


• Total borrowings of $1.11 billion at 30 June 2011 (parent)– Bonds

– $550m retail bond (matures 2014) – $100m wholesale bond (matures 2017)

– US Notes– US$330m (NZD equivalent $587m2)

– Bank facilities– $450m in available credit facilities (undrawn at

30 June 2011)


Parent maturity profile3

1, 3 Carrying value. The individual amounts displayed are notional values. 2 Before fair value adjustments. *Undrawn at 30 June 2011.

Maturity profile

0100200300400500600700

FY12 FY13 FY14 FY15 FY16 FY17 FY18

$ milli

on

Senior bank facilities (undrawn*) US NotesSenior Bonds Wholesale Bonds


Offer summary 2




Offer structure 22


Overview

November 2011


Equity credit

November 2011

• Capital Bonds structured to achieve 100% equity credit from Standard & Poor’s– Subordinated– 30 year tenor (Standard & Poor’s requires at least 20 years remaining to gain 100% equity credit)– 0.25% step-up at year five (maximum permitted by Standard & Poor’s to gain 100% equity credit)– Mandatory deferral of interest– Deferred interest is cumulative for up to 5 years– Expected issue credit rating of BB-

• Capital Bonds are not expected to achieve any equity credit from Fitch

17


Interest payments

• Interest rate– The Minimum Interest Rate will be not less than 8%– Interest rate for the period until the first Reset Date (15 February 2017) and the Margin is to be set

by bookbuild on 22 November– Interest rate resets every five years at the then Benchmark Rate + Margin + 0.25%

• Mandatory deferral– Interest must be deferred if Contact Energy’s issuer credit rating from Standard & Poor’s is BB or

lower or Contact Energy is insolvent (unable to pay its debts as they fall due) or payment would cause insolvency

– No ability to defer interest for any other reason (otherwise an Event of Default)– All Deferred Interest must be paid if the circumstances which led to the deferral of interest

no longer apply (and payment would not trigger a further deferral of interest) on the following Interest Payment Date

– All Deferred Interest outstanding must be paid five years after the original date of deferral– Deferred Interest accrues interest at the Interest Rate

November 2011 18


Redemption

November 2011 19

• Redeemable early by Contact Energy– On the first Reset Date (15 February 2017) and any Interest Payment Date thereafter– If a Tax Event, Rating Agency Event or Change of Control Event occurs (see next page)– If there is less than $75 million of Capital Bonds on issue following redemption at the option of

Bondholders pursuant to a Holder Put Event Notice

• Year five (15 February 2017)– Contact Energy can call the Capital Bonds– Step-up in margin if not called (0.25%)– Callable at par (voluntary call on subsequent Interest Payment Dates between reset dates is at the

higher of par and market)

• Year ten (15 February 2022)– Standard and Poor’s equity content to minimal (Standard and Poor’s will treat as debt)– Likely to be high cost debt with limited benefits


Change of control

• A Change of Control Event is, in summary– An entity controls more than 50% of the control of voting rights of Contact Energy (or in the case of

Origin Energy 90% or more)

• Issuer Call– Contact Energy will have the right to call the Capital Bonds upon a Change of Control Event– Price is higher of market or par (plus accrued and unpaid interest) (unless on a reset date then par)

• Investor Put– Investors will have the right to put the Capital Bonds upon a Change of Control Event if there is an

associated rating downgrade by Standard & Poor’s and the resulting issuer credit rating is lower than BBB and it is not reinstated within 90 days after the Change of Control Event

– Price is at par (plus accrued and unpaid interest)

November 2011 20


Comparison of instruments

Contact Capital Bonds

Genesis Capital Bonds

IAG Subordinated

Bonds

New Zealand Post Notes

Vector Capital Bonds

Perpetual Shares

(old Tier I)

Form Subordinated Debt

Subordinated Debt

Subordinated Debt

Subordinated Debt

Subordinated Debt

Preference Shares

Interest payments


BB or lower


BB+ or lower

Discretionary1 Discretionary Discretionary Discretionary

Cumulative Yes Yes Yes Yes No No

Tenor 30 years 30 years 25 years 30 years Perpetual Perpetual

Reset period 5 years 5 years 5 years 5 years 5 years 1 or 5 years

Step-up 0.25% 0.25% - 1.00% 1.00% -

Reset margin Fixed Fixed Fixed Remarketing Election process

Fixed

Equity content

To year 10 To year 10 To year 5 To year 10 Perpetual Perpetual

November 2011 21

1 IAG may defer interest payments if APRA requests IAG to restore or improve its margin of solvency or capital adequacy levels and no distributions have been made on equally or lower ranking securities since the date of that regulatory intervention; or no distributions have been made on any equally or lower ranking securities for 12 months. Source: Extracted from various Investment Statements and Prospectuses.


Offer summary 2




Offer structure 22


Overview

November 2011


Offer process

• Bookbuild Process– NZX Firms, institutional investors and other approved parties to be invited to participate in the

bookbuild process

• Firm Offer and Public Pool– Allocations to the Firm Offer and Public Pool (if any) will be determined after the bookbuild

process

• Minimum Applications / Minimum Holding and Transfers– $5,000 and multiples of $1,000 thereafter– No minimum holding (other than as prescribed by the Listing Rules)

• Fees– Firm Fees of 0.50% to those participating in the bookbuild– Retail brokerage fee of 1.00%

November 2011 23

© Contact Energy Limited November 2011

Prospectus registered Thursday 10 NovemberRoadshow presentations Monday 14 – Wednesday 16 NovemberBookbuild and Margin and Minimum Rate Set Date Tuesday 22 November (midday)Firm allocations notified Tuesday 22 NovemberOffer opens Wednesday 23 NovemberOffer closes Thursday 15 December (midday)Interest Rate Set Date Friday 16 DecemberIssue Date Tuesday 20 DecemberQuotation and trading expected to commence on the NZDX (under the ticker CENFA)

Wednesday 21 December


Offer timetable

24

© Contact Energy Limited November 2011 Capital Bond roadshow presentation

Nationwide print and internet advertising campaign

25


Business highlights

560,000+ customers across its electricity, gas

and LPG businesses

One of New Zealand’s largest

electricity generators and

retailers

166 MWs (gross) of geothermal

generation under construction

One of the largest publicly listed

companies in New Zealand1

Net assets of $3.1 billion at 30 June

20112

Issuer credit rating of BBB (stable outlook) from

Standard & Poor’s

November 2011 26

1 By market capitalisation ($4 billion as at 9 November 2011). 2 Parent net assets as at 30 June 2011, see the statement of financial position in Contact Energy’s audited financial statements for the year ended 30 June 2011.


Disclaimer

28

The Offer referred to in this presentation is being made pursuant to a simplified disclosure prospectus dated 9 November 2011 (Offer Document). A copy of the Offer Document may be obtained free of charge from www.contactenergy.co.nz/bonds.This document does not constitute a recommendation by Craigs Investment Partners Limited, (the “Arranger”), Craigs Investment Partners Limited, ANZ National Bank Limited, ASB Bank Limited and Forsyth Barr Limited (together the “Joint Lead Managers”), Westpac Banking Corporation, New Zealand Branch (the “Co-Manager”) or The New Zealand Guardian Trust Limited (the “Trustee”) or any of the directors, officers, employees or agents of the Arranger, the Joint Lead Managers, the Co-Manager, the Trustee or Contact Energy Limited (the “Issuer” or “Contact Energy”) to subscribe for, or purchase, any of the Capital Bonds. None of the Issuer (except as required by law), the Arranger, the Joint Lead Managers, the Co-Manager, the Trustee nor any of their respective directors, officers, employees or agents accepts any liability whatsoever for any loss arising from this document or its contents or otherwise arising in connection with the Offer.This document is for preliminary informational purposes only and is not an offer to sell or the solicitation of an offer to purchase or subscribe for the Capital Bonds and no part of it shall form the basis of or be relied upon in connection with any contract or commitment or whatsoever. The information in this document is given in good faith and has been obtained from sources believed to be reliable and accurate at the date of preparation, but its accuracy, correctness and completeness cannot be guaranteed. You should not decide to purchase the Capital Bonds until you have read the Offer Document. The Issuer intends to offer the Capital Bonds to the public in New Zealand. No action has been or will be taken by the Issuer which would permit an offer of Capital Bonds, or possession or distribution of any offering material, in any country or jurisdiction where action for that purpose is required (other than New Zealand).The Capital Bonds are unsecured, subordinated, redeemable, cumulative, interest bearing debt obligations of the Issuer. The Capital Bonds will rank equally among themselves and will be subordinated to all other indebtedness of the Issuer, other than indebtedness expressed to rank equally with, or subordinate to, the Capital Bonds. This document provides a summary of the business and financial performance of the Contact Energy Group. Investors should be aware that the Capital Bonds are being issued by Contact Energy, the parent company of the Contact Energy Group. No subsidiary of Contact Energy nor any other person guarantees, or provides any other surety in respect of the Capital Bonds or any of Contact Energy’s obligations in relation to the Capital Bonds. Contact Energy is the only person (as that term is defined in the Securities Act) legally liable to pay interest on the Bonds and the Principal Amount of the Capital Bonds as at the date of the Offer Document.



Disclaimer (cont.)

29

There are statements in this presentation that are “forward looking statements”. As these forward-looking statements are predictive in nature, they are subject to a number of risks and uncertainties relating to Contact Energy. As a result, actual results and conditions may differ materially from those expressed or implied in this presentation. Given these uncertainties, the recipient should not place undue reliance on any forward-looking statements in this presentation. Under no circumstances should the recipient regard the inclusion of such forward-looking statements in this presentation as a representation or warranty by any member of the Contact Energy group, their respective directors, officers and employees or any other person as to the achievement of the results expressed or implied by such statements or that the assumptions underlying such forward-looking statements will in fact be correct. The members of the Contact Energy group, and their respective directors, officers and employees, disclaim any responsibility or obligation to inform recipients of any matter arising or coming to their notice, after the date of this presentation, which may affect any matter referred to in this presentation, other than where required to do so by the Securities Act 1978, the Securities Regulations 2009, the Financial Reporting Act 1993 or the NZSX/NZDX Listing Rules. No person is authorised to give any information or to make any representation in connection with the offer which is not contained in this presentation or the Offer Document. Any information or representation in connection with the offer not contained in this presentation or the Offer Document may not be relied upon as having been authorised by any member of the Contact Energy group, the Trustee, the Arranger, Joint Lead Managers, the Co-Manager or any of their respective directors, officers, employees, or associates. Contact Energy is not licensed to provide financial product advice in relation to the Capital Bonds. The information provided in this presentation is not financial product advice and is not intended to be relied upon as advice to investors or potential investors. This presentation has been prepared without taking into account the financial situation, investment objectives or particular needs of any particular person. Credit ratings are not a recommendation to buy, sell or hold the securities issued by the Issuer (including the Capital Bonds) and the ratings may be subject to revision or withdrawal at any time by Standard & Poor’s or Fitch.Application has been made to NZX Limited (NZX) for permission to list the Capital Bonds on the NZDX and all the requirements of NZX relating thereto that can be complied with on or before the date of distribution of this document have been duly complied with. However, the Capital Bonds have not yet been approved for trading and NZX accepts no responsibility for any statement in this document. The NZDX is a registered market operated by NZX (which is a registered exchange), regulated under the Securities Markets Act.


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