Investor Strategy Day 22 November 2016 Disclaimer
This presentation has been prepared by Genesis Energy Limited (‘Genesis Energy’) for information purposes only. The information in this presentation is of a general nature and does not purport to be complete nor does it contain all the information required for an investor to evaluate an investment. This presentation may contain projections or forward-looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in any forward looking statement based on a number of important factors and risks. Although management may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward looking statements will be realised. EBITDAF, underlying profit and free cash flow are non-GAAP (generally accepted accounting practice) measures. Information regarding the usefulness, calculation and reconciliation of these measures is provided in the supporting material. Furthermore, while all reasonable care has been taken in compiling this presentation, to the maximum extent permitted by law Genesis Energy accepts no responsibility for any errors or omissions and no representation is made as to the accuracy, completeness or reliability of the information. This presentation does not constitute investment advice.
Investor Strategy Day 22 November 2016 2 Agenda
1 Introduction 2 Strategic 3 Optimise & overview direction __ __ Tracey Hickman Marc England __ Nigel Clark Michael Summers-Gervai Marc England Shaun Goldsbury Dean Schmidt
4 Innovate 5 Invest 6 Outlook ______James Magill Jen Cherrington-Mowat Nicola Richardson Dean Schmidt Chris Jewell Marc England Chris Jewell
Investor Strategy Day 22 November 2016 3 Investor Day 22 November 2016 Overview of NZ Electricity Market
Investor Strategy Day 22 November 2016 5 An integrated business delivering value
Investor Strategy Day 22 November 2016 6 Retail market # overview
Michael Summers-Gervai Customer Analytics Manager Energy Retailing
Genesis Energy maintains largest market share, as traditional retailers still dominate
LPG MARKET SHARE(kt)
11% ELECTRICITY MARKET SHARE NATURAL GAS MARKET SHARE
RESIDENTIAL
25.4%
39.0%
<1%
BULK
Sources: MBIE, Genesis Energy analysis, EA, GIC
Investor Strategy Day 22 November 2016 8 Market switching
Customers changing retailers remains high as number of energy participants continues to increase
MARKET SWITCHING TRENDS ACTIVE RETAILERS (>100 ICPS) 30 450000 26 400000 25 350000
300000 20
250000 15 200000
150000 10 100000 5 50000
0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Sources: EA, GIC, Genesis Energy analysis
Investor Strategy Day 22 November 2016 9 Customer churn
1 in 5 NZ customers switch each year but Genesis Energy maintains churn rates at or below market average
ELECTRICITY ANNUAL CHURN GAS ANNUAL CHURN 24.00% 24.00%
22.00% 22.00%
20.00% 20.00% 18.00% 18.00% 16.00% 16.00% 14.00%
12.00% 14.00%
10.00% 12.00% Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16
Market Genesis Energy Market Genesis Energy
Sources: EA, GIC, Genesis Energy analysis
Investor Strategy Day 22 November 2016 10 Electricity market volume
Business segment under represented in volume compared to ICP share
25% RESIDENTIAL 26%
ICP kWh
20% BUSINESS 11%
ICP kWh
Investor Strategy Day 22 November 2016 11 Distributed Energy
It’s early days but the direction is clear
TOTAL SOLAR INSTALLATIONS LEVELISED COST OF SOLAR (US) 14,000 USD/MWh $500 12,000 12,009 $400 10,000 8,000 1.6m $300 6,000 Households $200 4,000 1,645 $100 2,000
- $0 Sep 13 Sep 16 2010 2011 2012 2013 2014 2015
Residential Commerical Utility
0.5% of Total MW
Source: Lazard, EA, MBIE Total
Investor Strategy Day 22 November 2016 12 Brand strength
Genesis Energy brand strength places us in a strong position
ENERGY COMPANY BRAND AWARENESS CORPORATE REPUTATION 100%
90%
80%
70%
60%
50% Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16
Sources: Genesis Energy Market Research, Colmar Brunton
Investor Strategy Day 22 November 2016 13 Customer insights
Discounted pricing, moving and door-knocking are driving churn as our customers become more digitally active
DISCOUNT DRIVEN MOVING LEGACY CHANNELS
EXIT 40% 30%
ADVANCED METERS DIGITAL INTERACTIONS ONLINE SALES
30% x2 x4
Sources: Genesis Energy market research and analysis
Investor Strategy Day 22 November 2016 14 Wholesale # market overview Shaun Goldsbury Electricity Portfolio Manager Electricity supply
Renewable generation builds have led to thermal retirements NZ Electricity Generation by Fuel Type Installed Capacity by Fuel Type
Hydro Geothermal Coal Gas Wind Others Hydro Geothermal Coal/Gas Gas Wind Diesel Thermal Retirements 50,000 3,000 45,000 40,000 2,500 35,000 2,000 30,000 25,000
MW 1,500 20,000
15,000 1,000 10,000 5,000 500 0 0 Contact Genesis Mercury Meridian Trustpower
Source: MBIE Source: Genesis Energy internal data/Gentailer websites
Investor Strategy Day 22 November 2016 16 Hydro risk curves
Remaining thermal has more value due to retirements rebalancing market National Hydro Risk Curves 4,500
4,000
3,500
3,000
2,500
GWh 2,000
1,500
1,000
500
0 2013 2014 2015 2016 2017 1% Risk 2% Risk 4% Risk 8% Risk 10% Risk Max Storage Historical Average Actual Storage
Source: System Operator (Transpower) Investor Strategy Day 22 November 2016 17 Electricity demand growth
Genesis Energy is preparing a future with a range of possible outcomes Annual Electricity Demand Growth Forecast 50,000
45,000
40,000
GWh 35,000
30,000
25,000
20,000
1997 1999 2024 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1998 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2025
Historical Demand GWh Market Rule Smooth Sailing Boiled Frog Red Tape
Source: MBIE/Genesis Energy internal data Investor Strategy Day 22 November 2016 18 Transmission grid
Critical due to our unique geography and location of generation
HVDC Transfers
North Island Import North Island Export 4,000
3,000
2,000
1,000
- GWh
-1,000
-2,000
-3,000
-4,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD
Source: Transpower
Investor Strategy Day 22 November 2016 19 Transmission upgrades are required
If Tiwai closes these upgrades take a long time and the cost means it may not be the best option for the consumer
• Timeframe of at least five years • Only Southland upgrade is approved • Cost estimate is hundreds of millions of dollars • Who pays? (TPM)
Investor Strategy Day 22 November 2016 20 Wholesale market more fragmented
If Tiwai closes companies with South Island generation are the most affected Tiwai Exit Scenario: Wholesale Price Path1 North Island South Island • Initial price drop • Large regional separation • Market rebalances • Genesis Energy has a long retail position in the South Island
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26
Source: Genesis Energy internal modelling 1Assumes Tiwai exit 1-Jan-2018, HVDC upgraded 2022 and some thermal retirements
Investor Strategy Day 22 November 2016 21 Wholesale prices more volatile
If Tiwai closes the congested transmission grid will lead to an increase in regional and seasonal price volatility North Island Generation Capacity • Thermal generation still needed for capacity Winter Average Demand Winter Peak Demand • Plant runs less but gets paid more when it does run • North Island customers become riskier for retailers without generation
FY16 FY19 FY23
Investor Strategy Day 22 November 2016 Source: Genesis Energy internal data/modelling 22 Retail market is a shock absorber
If Tiwai closes companies with large retail bases are the least affected
• Wholesale price is only 35% Electricity Price Comparison (2000-2016)
of customers bill Wholesale Retail • Retail prices respond slowly • Genesis Energy retail market share is: − 26% of overall − 28% of North Island − 16% of South Island
Investor Strategy Day 22 November 2016 Source: MBIE/Genesis Energy internal data 23 Emissions trading scheme
Genesis Energy accounts for 3% of New Zealand carbon emissions
GT CO2e New Zealand Carbon Emissions 2014 New Zealand Unit (NZU) Spot Price 90 $25
80
$20 70
60 $15 50
40 $10
30
$5 20
10 $0 0 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Agriculture Industrial Processes and Waste Source: carbonmatch.co.nz Other Energy (inc. Transport) Other Electricity Generation Genesis Energy
Investor Strategy Day 22 November 2016 24 Creating fuel flexibility
Kupe is at the heart of our fuel strategy
• Kupe is completely vertically integrated, with gas, oil and LPG sold to: − Export − Wholesale − Retail − Generation
Investor Strategy Day 22 November 2016 25 Rankine fuel optionality
Huntly Rankine Monthly Fuel Use (TJ) and Gas % Fuel flexibility is a core value driver Total TJ Rolling 12 Months Gas % 5,000 40%
4,500 35% 4,000 30% • Rankine output has decreased 3,500
TJ 25%
3,000 Gas % Gas • Gas usage % has increased 2,500 20%
2,000 15% − Kupe and spot gas displaces coal 1,500 10% 1,000 5% • Average fuel cost falling 500 0 0% • Coal stockpile c350k tonnes Genesis Energy Average Fuel Prices
− Additional supply being investigated Gas Price ($/GJ) Coal Price ($/GJ)
$/GJ
Jul-14 Jul-15
Jan-14 Jan-15 Jan-16
Jun-14 Jun-15 Jun-16
Oct-14 Oct-15
Apr-14 Apr-15 Apr-16
Feb-16 Feb-14 Sep-14 Feb-15 Sep-15
Dec-14 Dec-15
Aug-14 Aug-15
Nov-14 Nov-15
Mar-15 Mar-14 Mar-16
May-14 May-15 May-16
Investor Strategy Day 22 November 2016 26 Gas position is reducing over time
In 2020 we see a significant value uplift and material risk reduction
Genesis Energy Gas Contracts New Zealand Total Gas Production Kupe Contract Flexible + MUG Kupe 300 Future Kupe (incl non-firm gas) Third party contract Other contracted gas Gas Demand 250 Gas Demand Plus Contracted Gas Sales 50 Other 45 200 40 Turangi 35 Kupe 150 30 Pohokura PJ McKee PJ 25 100 20 Mangahewa 15 Maui 50 10 Kapuni 5 0 0
2016 2017 2018 2019 2020 2021 2022 2023 2024
2007 2014 2021 2028 2000 2001 2002 2003 2004 2005 2006 2008 2009 2010 2011 2012 2013 2015 2016 2017 2018 2019 2020 2022 2023 2024 2025 2026 2027 2029 2030
Investor Strategy Day 22 November 2016 27 Our strategic direction # Marc England Chief Executive
Re-imagining energy to be customers’ first choice for energy management OUR VISION
Re-imagining energy to be customers’ first choice for energy management. Strategic themes to energy management
1. Optimise generation 2. Optimise “Traditional Retail “ Optimise − Deliver best in class cost to serve To improve short term − Drive loyalty into the customer base return − Win and keep valuable customers 3. Seeking corporate efficiency gains
1. Enable products and services based on new customer data flows Innovate 2. Become market maker of customer comfort, convenience and control For medium term growth 3. Maximise the value of our Bottled Gas resources 4. Grow market share in Business to Business segment 5. Create an empowered and accountable agile culture and way of working
1. Investment into systems and data capabilities, including accelerated foundation investment in retail Invest 2. Develop eco-system platforms that deliver comfort, convenience and control In long-term value creation for customers and advantage for Genesis Energy 3. Obtain greater influence of our Kupe business 4. Targeted business growth
Investor Strategy Day 22 November 2016 3 Approaching strategic planning
Dean Schmidt EGM Corporate Affairs & Transformation Future thinking informs decisions today
Scenarios provide plausible futures against which to challenge actions and assumptions
Scenarios are a mix of qualitative and quantitative insights
Investor Strategy Day 22 November 2016 5 NEW RETAIL ENTRANTS NEW RETAIL ENTRANTS NEW RETAIL ENTRANTS NEW RETAIL ENTRANTS
Established players Continued growth Continued growth Multiple new entrants from other industries of Tier 2 innovation of Tier 2 innovation across competitive or countries enter and channels and channels spectrum (telco, start ups, adjacencies)
REAL WHOLESALE PRICE PATH REAL WHOLESALE PRICE PATH REAL WHOLESALE PRICE PATH REAL WHOLESALE PRICE PATH
DISTRIBUTED ENERGY COSTS DISTRIBUTED ENERGY COSTS DISTRIBUTED ENERGY COSTS DISTRIBUTED ENERGY COSTS
DE costs shift slowly to be DE costs shift to be lower than DE costs reduce but still DE costs shift quickly to be significantly lower than grid grid energy costs higher than grid energy costs significantly lower energy costs than grid energy costs Optimising generation
Tracey Hickman EGM Generation and Wholesale Operating with closer integration
Driving value through greater integration of maintenance, operations and wholesale activities
Maintenance Operations Wholesale
Investor Strategy Day 22 November 2016 8 Optimising generation assets to drive improved value
Can pull six levers to optimise the assets
Reliability and safety
Productivity Flexibility
Efficiency Risk Availability Cost Revenue
Trade (buy and sell)
Investor Strategy Day 22 November 2016 9 Risk management matches maintenance with consequence
Integrated risk management drives process safety and reliability up, and costs down
Risk Bowties Causes Controls Event Mitigation Consequences
Asset Maintenance programme Management Capital investment programme Planning
Investor Strategy Day 22 November 2016 10 Effective planning, timing and efficient resource utilisation
Effective planning and scheduling of maintenance drives plant availability and productivity up and costs of outages down
March
Flexible use of people resources drives costs down
Investor Strategy Day 22 November 2016 Trading and hedging to manage operational risk
Operating and trading our assets to drive efficiency, leverage flexibility, reduce risk and create new value
Hydro Efficiency Rankine Efficiency Trading & Hedging Operational Risk
Investor Strategy Day 22 November 2016 12 Optimising generation and trading
Greater value being delivered by integration of maintenance, operations and energy trading
Revenue Opex, Capex Plant defects
Investor Strategy Day 22 November 2016 13 Optimising customer value
Nigel Clark EGM Customer Operations Driving improvement across operations
Leading Low cost Increase Innovative & customer business customer differentiated experience & model lifetime value products & service services
DIGITAL ANALYTICS INNOVATIVE CULTURE
Investor Strategy Day 22 November 2016 Driving improvement across operations
Frictionless digital services for better customer outcomes at lower cost
• Customer focus • Interactions down • Frictionless • Best technology • Understanding • Flexible • Track Performance • Multiple channels Low cost Leading • Analytics and continuous customer business Improvement experience model & service
Investor Strategy Day 22 November 2016 Driving improvement across operations
Understanding customers to deliver engaging products and services
• Understanding • Scaled Agile • Segmentation • SME and LPG growth • Proactive • Future service structures • Loyalty Increase Sales • Low Churn customer capability lifetime value
Investor Strategy Day 22 November 2016 More self service and reduction in call handling
Changing interaction is delivering great results
Investor Strategy Day 22 November 2016 18 Growing customer value
Improving the customer experience through a focus on digital, analytics and an innovative culture
Cost to Acquire Customer Churn Sales Cost to serve
Investor Strategy Day 22 November 2016 19 Innovate to grow
James Magill EGM Product Marketing Leveraging new technology to meet customer needs
Embracing the changing environment
Digital expectations Distributed Energy Future technologies
Investor Strategy Day 22 November 2016 21 Innovating for today’s markets as well as the future
Experiment with integrating technologies to develop, iterate and ultimately scale new products/services
Investor Strategy Day 22 November 2016 22 New opportunities for growth
We are evolving the way we work and design products for our customers
Design
Understand Test Scale
Iterate
Investor Strategy Day 22 November 2016 23 Existing opportunities for growth
Focus on opportunities for growth in existing markets by disrupting current business models
Bottled gas Small & medium enterprise Residential
Investor Strategy Day 22 November 2016 24 Changing landscape for distributed energy
Moving from traditional one flow to seven flows of electrons
Investor Strategy Day 22 November 2016 25 Innovate for growth
Innovation and sales focus on improving share of LPG and SME markets
LPG volume market share SME volume market share Energy Management product holdings
Investor Strategy Day 22 November 2016 26 From electricity market to energy market
Rethinking the traditional regulatory frameworks as the boundaries blur
• Create a level playing field for emerging technology competition in the home and Level playing business field
• Create a simplified distribution network that seamlessly integrates new technology Benefiting in a way that benefits consumers consumers
• Create fairer access, and protection, of consumer data to allow for effective Protection of competition data
Investor Strategy Day 22 November 2016 27 Digital strategy
Jen Cherrington-Mowat EGM Technology and Digital Customers are core to the technology and digital strategy
Every project must contribute to our operational and customer value proposition
A technology and digital strategy delivered through:
Customer • Customer-centric design-led thinking and product and service development • Best of breed partners, suppliers and vendors • Products and services that can be integrated, creating optimised customer experience and continued learning
Infrastructure / Applications
Technology and Digital strategy
Investor Strategy Day 22 November 2016 29 Enabling growth through tech’ investment
Modular, scalable, best of breed applications and infrastructure
Mobile app
Investor Strategy Day 22 November 2016 30 Tech’ investment has already started
Key programmes of work are underway to support the business ambitions
CRM
My Account Self Service Billing
Mobile app Call Centre
Infrastructure Integration Applications Channels Customers layer
Investor Strategy Day 22 November 2016 31 Next generation insight enabling new products and services
Data and analytics supporting data-driven insights
1011000111 1000101010 1110011100 1011000101
Data Data Insights Customer Convenience, Comfort and Control
Investor Strategy Day 22 November 2016 32 Digital strategy is enabling growth
Customer insights coupled with modular and adaptable IT structure enable new services
Customer Insights Capex Investment in digital services
Investor Strategy Day 22 November 2016 33 Invest
Chris Jewell Chief Financial Officer Balance sheet capability
Estimated Net Debt/EBITDAF ratio Head room for investment in growth 3 Estimated Phase II Development • Balance Sheet provides flexibility to deploy for 2.8 investment in growth and pay dividends 2.6 2.4 • Current debt levels well within S&P BBB+ key credit rating metrics 2.2
2 Net Debt/EBITDAF ratio Debt/EBITDAF Net − FY16 EBITDAF interest cover of 6.3x 1.8 FY17 FY18 FY19 FY20 FY21 − FY16 Net Debt to EBITDAF ratio of 2.5x S&P Range GNE Base Case − FY16 Adjusted gearing of 30.4% GNE + 15% Kupe stake GNE + Kupe 15% + Strategic Initiatives • Average maturity tenor of 8 years Estimated dividend payout ratio • Diversified debt portfolio across products, Estimated countries and maturities Phase II Development • $200m -$250m capacity for further investment1
• Any investment needs to: Dividend as % of FCF % of as Dividend − Align with strategy
− Be earnings accretive FY17 FY18 FY19 FY20 FY21
1Assumes further hybrid funding is issued GNE Base Case GNE + Kupe 15% GNE + Kupe 15% + Strategic Initiatives
Investor Strategy Day 22 November 2016 35 Areas of investment opportunities
Investment opportunities aimed at enhancing and supporting our core business
Kupe – building on our LPG – investing to grow retail integrated fuels strategy and and bulk market share creating a flexible fuels strategy with 15% share acquisition from NZOG
Distributed generation and Foundation technology Energy Management systems – to augment products current products and capability or provide entry into new retail channels
Investor Strategy Day 22 November 2016 36 Recap of Kupe transaction highlights
Acquisition of New Zealand Oil and Gas’ 15% share in Kupe
Transaction Acquisition of NZOG’s 15% stake in Kupe JV for $168m increasing Genesis Energy’s stake to 46%
Strategic Greater flexibility over future gas supply and increased JV influence
Balance Sheet Strengthened funding platform for transition to new energy future
Deal Structure Purchase 100% of the shares in four NZOG subsidiaries that hold its 15% stake and royalty receipts
Production Additional 160kbbls of oil and 13,000 tonnes of LPG per annum plus 26PJ of uncontracted gas
EBITDAF Approximately $39m incremental annual EBITDAF at current oil prices and exchange rates
Dividend Enhanced support for Genesis Energy’s dividend payments and imputation benefits
Funding Transaction will be funded by existing debt facilities
Timing Acquisition effective 1 January 2017
Investor Strategy Day 22 November 2016 37 Improving integrated fuels strategy: Gas
Significant value in future uncontracted gas Projected Kupe Gas Sales1 • Significant value in 26PJ of uncontracted gas • Domestic gas reserves declining and current prices are low Pre Transaction 124 53 118 − Transaction effectively contracts all of NZOG’s future Kupe gas at today’s +48% prices and factoring in Tiwai risk
• A significant source of fuel for Genesis Post Transaction 124 78 92 Energy generation and retail portfolios beyond 2020 • Genesis Energy retains right of first 0 50 100 150 200 250 300 350 refusal over 54% of uncontracted gas it PJ doesn’t own Contracted gas total GNE equity uncontracted and non-firm gas - 2P • Opportunity under consideration to Remaining uncontracted and non-firm gas with GNE ROFR - 2P accelerate production by 10% p.a. 1 Based on Origin Energy reported undeveloped and developed 2P reserves at 30 June 2016
Investor Strategy Day 22 November 2016 38 Improving integrated fuels strategy: LPG
Platform to grow LPG business • Acquisition will increase Genesis Energy’s Genesis Energy share of New Zealand LPG production share of total New Zealand LPG production from 14% to 21% Genesis Energy 14% • Additional 13kt pa purchased whilst NZ is an exporter and prices are low Pre Deal Others 86%
− NZ production is expected to decline and industry likely to become net importer of LPG Genesis Energy 21% − Benefits to owning a greater share of declining supply Post Deal Others 79% • Provides a strong platform to grow LPG business − Current retail sales market share of Source: LPGA FY2016 figures, Genesis Energy only 2%
Investor Strategy Day 22 November 2016 39 Positive impact on earnings
EBITDAF expected to increase
• Transaction is expected to increase annualised EBITDAF by Financial Impact FY2016 FY2017 approximately $39m of Acquisition Estimated Pro-forma Estimated $m Incremental Impact1 Incremental Impact2,3 • Based on pro-forma FY2016 estimates, earnings accretion EBITDAF $39.3m $15.1m of approximately 6% relative to FY2016 reported NPAT of NPAT $11.3m $2.2m $184.2m EPS 1.13cps 0.22cps • Six months earnings impact in FY2017 Free Cash Flow4 $18.4m $5.7m − FY2017 EBITDAF expected to increase by approximately $15.1m after transaction costs2 − FY2017 NPAT is expected to increase by approximately $2.2m after transaction, depletion, depreciation and funding costs − Increase in FY2017 Free Cash Flow of approximately $5.7m 1 Estimated incremental benefit based on ownership of NZOG stake for full 12 months ending 30 June 2016 including cost of financing acquisition but excluding transaction costs 2 Includes transaction costs of $2.6m covering financial and legal advisor fees 3 These estimates are based on an average oil price of US$50.98/bbl for FY2017 and a NZD/USD cross rate of US69.4c 4 Free Cash Flow is EBITDAF less interest expense, less tax, less stay in business capital expenditure
Investor Strategy Day 22 November 2016 40 Strong strategic rationale
Greater gas flexibility and JV influence
• Enhances previously communicated ‘Integrated Fuels Strategy’ to create value from production through to thermal generation and retail: ‒ Ownership of an additional 26PJ of uncontracted gas ‒ Additional LPG volumes – 13kt/yr - 21% of national production ‒ Improved support for retail LPG growth initiative ‒ Attractively priced LPG contract for all of NZOG’s share of LPG • Low cost opportunity to accelerate up to 10% per year of production • Improves level of influence and control within the JV ‒ For example provides more control over the timing of future development of the asset • Underpins dividend payments with a more diverse earnings stream ‒ Increased $US dollar denominated and reduced proportional exposure to electricity market dynamics • Strengthens medium term Balance Sheet metrics supporting a longer term transition to a new Energy future ‒ Efficient use of Balance Sheet capacity with no integration risk ‒ Kupe field well understood by Genesis Energy and a strong performing quality asset
Investor Strategy Day 22 November 2016 41 How we work
Nicola Richardson EGM People and Culture Being deliberate with our best asset: our people
To become a lean and agile top quartile employer
Lean corporate • Optimisation of the corporate functions
Invest in • Investment in new capabilities, product development, capability insights, sales and software integration skills
• An unwavering focus to keep our people safe and well Zero Harm
Speed up • Adapt new ways of working to realise EBITDAF faster product delivery
Investor Strategy Day 22 November 2016 43 Focus on Zero Harm is paying off
92% improvement in Total Recordable Injury Rate over five years Total Recordable Injury Frequency Rate Frequency Injury Recordable Total 0.52
2011 2016
Investor Strategy Day 22 November 2016 44 Commitment and summary
Marc England Chris Jewell Disclaimer
This presentation has been prepared by Genesis Energy Limited (‘Genesis Energy’) for information purposes only. The information in this presentation is of a general nature and does not purport to be complete nor does it contain all the information required for an investor to evaluate an investment. This presentation may contain projections or forward-looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in any forward looking statement based on a number of important factors and risks. Although management may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward looking statements will be realised. EBITDAF, underlying profit and free cash flow are non-GAAP (generally accepted accounting practice) measures. Information regarding the usefulness, calculation and reconciliation of these measures is provided in the supporting material. Furthermore, while all reasonable care has been taken in compiling this presentation, to the maximum extent permitted by law Genesis Energy accepts no responsibility for any errors or omissions and no representation is made as to the accuracy, completeness or reliability of the information. This presentation does not constitute investment advice.
Investor Strategy Day 22 November 2016 2 Total Shareholder Return (TSR)
Genesis Energy TSR has been positive to date Genesis Energy Share TSR Since IPO vs NZX50
Dividend Per Share Genesis Energy TSR NZX50 TSR • Genesis Energy is targeting upper 80% 14 70% FY2015 Interim FY2016 interim 12 quarter annual TSR amongst dividend 8.0cps dividend 8.2cps 60% 10 comparable companies FY2015 Final 50% dividend 8.0cps FY2014 Final 8 dividend 6.6cps − Translates to target TSR of 14+% per 40% 6 30% annum FY2016 final dividend 8.2cps 4 20%
2 Dividends Cents PerShare • Genesis Energy outperformed against TotalShareholder Return SinceIPO 10%
its target in FY2016 0% 0
-10% -2
Jul-14 Jul-15 Jul-16
Jan-15 Jan-16
Jun-14 Jun-15 Jun-16
Oct-14 Oct-15 Oct-16
Apr-15 Apr-14 Apr-16
Sep-14 Feb-15 Sep-15 Feb-16 Sep-16
Dec-14 Dec-15
Aug-14 Aug-15 Aug-16
Nov-14 Nov-15
Mar-15 Mar-16
May-14 May-15 May-16
FY2015 FY2016 Since IPO1 GNE TSR 5% 32% 52% NZX50 TSR 11% 20% 37%
1 TSR from 17 April 2014 to 31 October 2016
Investor Strategy Day 22 November 2016 3 How we think about building shareholder value
Targeting upper quartile TSR Estimated contributions to targeted FY17- • Our plan targets upper quartile annualized FY21 annualised TSR by strategic initiative TSR growth over FY17-FY21 16% New initiatives collectively 6.8% 14+% 14% • Shareholders will see yield plus growth 12% 2% • Components of TSR performance include: 10% 1% 1 − Average dividend yield 7% 8% 7% − Optimise 4% 6% 4% − Innovate 1% 4% − Invest 2% 2% • TSR impact of initiatives is estimated based 0% Dividend Yield Optimise Innovate Invest Total TSR on uplift in EBITDAF and use of capex Based on share price of $1.96 on 31 October 2016
1 Average forecast dividend 2017-2020 divided by average forecast share price
Investor Strategy Day 22 November 2016 4 How we aim to deliver and track TSR
Strategic Initiative Description Target Incremental Annualised Cumulative CAPEX annualised EBITDAF uplift to achieve target TSR FY17 -FY21 $m FY17-FY21 $m FY17-FY21 Genesis Energy core • Underlying earnings driving current dividend yield $15m - $25m 7% Optimise • Lean corporate support centre • Retail gross margins • Retail cost to serve $20m - $30m1 $5m-$10m 4% • Customer churn reduction • Generation cost base Innovate • LPG growth • SME and business segment growth $12m - $17m $20m-$30m 1% • Energy Management products Invest • Acquisition of additional 15% stake in Kupe $168m (Kupe • Foundation technology systems purchase price), $35m - $40m $46m (Kupe capex), 2% $5m-$10m (GE tech systems investment) Total $82m - $112m 14+%
1$12m of Optimise annualised EBITDAF uplift is included in FY17 EBITDAF guidance 2 Includes 15% share of estimate Phase 2 development capex
Investor Strategy Day 22 November 2016 5 Target earnings profile
Targeting $400m+ EBITDAF by FY21 (with a range of $375m - $425m)
• FY17 EBITDAF guidance – $305m - $325m Estimated contributions to growth in annualised EBITDAF FY17-21 • Transformation journey $375m -$425m underway - FY17 earnings 420 $15m -$25m guidance includes some $35m -$40m 370 $12m -$17m transformation value $305m -$325m $20m -$30m 320 • EBITDAF target enables Yield plus Growth 270
220
170
120 FY17 EBITDAF Optimise Innovate Invest Core Growth FY21 EBITDAF Guidance Target
Note that $12m of Optimise annualised EBITDAF uplift is included in FY17 EBITDAF guidance
Investor Strategy Day 22 November 2016 6 How our balance sheet will support growth
Estimated Net Debt/EBITDAF ratio Focus on creating capacity 3 Estimated Phase II Development 2.8 • Balance Sheet remains strong to invest for growth, pay 2.6 down debt, and pay dividends 2.4 2.2
• Some new hybrid debt funding possible to create 2 Net Debt/EBITDAF ratio Debt/EBITDAF Net investment optionality (on top of the existing $200m of 1.8 hybrids) FY17 FY18 FY19 FY20 FY21 S&P Range GNE Base Case • We will continue to track the impact of new strategy on GNE + 15% Kupe stake GNE + Kupe 15% + Strategic Initiatives capital structure based on: Estimated dividend payout ratio − Net Debt/EBITDAF Estimated Phase II Development − Gearing − Dividend as % of FCF
• $200m -$250m capacity for further investment1 FCF % of as Dividend
FY17 FY18 FY19 FY20 FY21 1Assumes further hybrid funding is issued GNE Base Case GNE + Kupe 15% GNE + Kupe 15% + Strategic Initiatives
Investor Strategy Day 22 November 2016 7 How we are tracking success
New disclosure metrics • Commitment to disclose further metrics over time to help the market track our journey towards EBITDAF growth
OPTIMISE INNOVATE Retail Generation & Wholesale Retail IT • Retail cost to serve • Availability • LPG customer • App releases • Cost to acquire • Forced Outage Factor numbers • Digital transactions • Calls answered • Rankines output • LPG sales volumes • Customer interactions • Coal / Gas mix • LPG market share • Retail netback • SME market share • Multiple product customers • % digital only customers INVEST Oil & Gas Corporate • Oil price realised • Headcount (FTE) • Oil hedge levels
Investor Strategy Day 22 November 2016 8 How we think about creating shareholder value
Progressive growth Dividend c.8% yield $164m+ pa Cash
funded Weighted average $35-50m pa Stay in Targeted TSR Business capex organic earnings growth of 14+% $10-15m pa growth of c.2-3% capex
Debt EPS growth of funded Acquisitions c.5-10% $168m
Investor Strategy Day 22 November 2016 Uplift – through business transformation
• Upper quartile TSR targeted • Target $400m+ EBITDAF by FY21 • Transformation journey underway – Some value embedded in FY17 guidance – Kupe acquisition delivers immediate value • Strategy underpins dividend payments • Further disclosures planned on lead indicators and strategic initiatives • Balance Sheet has $200m - $250m capacity • Risks are well understood • Tiwai - including relative market incentives • Carbon – priced in – thermal playing a smaller role over time
Investor Strategy Day 22 November 2016 10 Bringing together today’s sessions Our plan on a page
REIMAGINING ENERGY
Vision to be customers’ first choice for energy management
OPTIMISE INNOVATE INVEST
To improve short term return For medium term growth In long-term value creation
Themes Strategic
Maximise Leverage data, Create enduring Deploy Enhance Organise for return from analysis and customer technology to experience with best in class
core activities insight relationships build trust new business strategic
Priorities Strategic models execution Lean start up Data driven decision Scaled agile ways of Commercial product relationship making working development management
Distributed asset Software Field force capabilities
CriticalFuture Sales capabilities management development management
Investor Strategy Day 22 November 2016 11 An integrated approach to strategy We will make decisions with a holistic approach to value
Corporate strategy An optimised supplier Lean and agile 1st and energy manager quartile performer
OPTIMAL TSR Path to 14+% annualised TSR
Investor strategy Financial strategy Yield plus growth Maintain 2.5-2.8x net debt/EBITDAF ratio
Investor Strategy Day 22 November 2016 12 A team committed to driving success
Driving change in every part of the Genesis Energy business
With thoughtful insight, acute focus and action, Genesis Energy will be a $400m+ EBITDAF company by FY2021 Success will come from:
Being obsessed Disrupting the Focusing on Delivering lean and with customer way things are maximising value agile 1st quartile experience and defining from our integrated performance new approaches fuel position
Investor Strategy Day 22 November 2016 13