ASX Release: FY16 Full Year Results
Infigen Energy (ASX: IFN) today announced its financial and operational results for the year ended 30 June 2016 (FY16). Infigen reported a statutory net profit after tax of $4.5 million. On a continuing operations basis net profit after tax of $7.0 million was $25.4 million higher than the prior corresponding period (pcp) primarily due to higher Large-scale Generation Certificate (LGC) and wholesale electricity prices.
Highlights for the year included:
- Safety: achieved a rolling 12-month lost time injury frequency rate (LTIFR) of zero, with no lost time injuries (LTIs) since November 2013, and eight years without an LTI at the Alinta and Lake Bonney wind farms
- Sale of US businesses: completed the sale of the US solar development assets and the US wind business resulting in approximately $100 million increase in cash available for growth
- Operating costs of $37.4 million were slightly below the guidance range of
- Reduced borrowings: $51.0 million of Global Facility borrowings repaid from operating cash flow (FY16 guidance: $50 million) and $5.5 million of Woodlawn facility borrowings repaid. Net debt was $594.9 million at 30 June 2016
- Organisational restructure: completed after the sale of the US businesses to reduce corporate costs from FY17 and position the Australian business for profitable growth
- Growth and development: positioned development pipeline to respond to supportive market conditions
Infigen reported Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) from continuing operations of $120.2 million, up 44%, and net operating cash flow of $56.9 million, up 71% compared to the pcp (FY15).
Key measures of performance on a continuing operations basis compared to FY15 were:
- Production increased by 1% to 1,469 GWh
- Revenue increased by 29% to $173.2 million
- EBITDA increased by 44% to $120.2 million
- Net operating cash flow increased by 71% to $56.9 million
- Net profit after tax from continuing operations increased by $25.4 million to $7 million
- Statutory net profit after tax was $4.5 million, an increase of $308.1 million primarily due to the pcp reflecting a loss on discontinued operations
Better wind conditions in New South Wales, improved turbine availability at Capital and Woodlawn wind farms, and improved network availability at Alinta and Lake Bonney wind farms were counterbalanced by lower wind conditions in South Australia and Western Australia. Revenue increased $39.4 million or 29% to $173.2 million as a result of higher LGC and electricity prices, higher revenue from hedging activities and higher production, partially offset by lower compensated revenue.
Operating costs of $37.4 million were slightly below the guidance range of $37.5-39.5 million, but up $2.7 million or 8% compared to the pcp. This was due to above historical average frequency control ancillary services (FCAS) fees incurred as a result of the Heywood (Victoria to South Australia) interconnector upgrade works, a full year post-warranty turbine operations and maintenance (O&M) cost step-up at Capital wind farm, and higher scheduled balance of plant maintenance costs at Alinta and Lake Bonney wind farms, partially offset by a decrease in other direct costs.
Infigen expects wind conditions to improve in FY17. This is primarily because the wind conditions in FY15 and FY16 were below the historical long-term average. Consequently, if wind conditions improve, production in FY17 is also expected to improve relative to FY16 performance.
FY17 futures electricity prices for South Australia and New South Wales currently are approximately 78% and 18% respectively higher than realised average FY16 prices in those states. In South Australia, wholesale electricity prices have been more volatile so far this financial year compared with FY16. The LGC spot price has been trading above $80 for the last two months and we expect this to continue throughout FY17.
Infigen is currently finalising a post-warranty service and maintenance agreement for Woodlawn wind farm for when the original equipment manufacturer’s warranty expires in October 2016. During FY17 Infigen will also progress negotiations on long-term service and maintenance agreements for other fleet assets where maintenance contracts expire in December 2017.
Following the closure of the Northern power station in South Australia in May 2016, there has been a sustained increase in underlying FCAS fees. In addition, when work is being carried out on the Heywood interconnector or network infrastructure surrounding the interconnector, AEMO has been procuring additional FCAS services from the small number of registered providers in South Australia. These procurements will result in higher FCAS charges for FY17.
During FY16 Infigen enhanced its development capability to respond to the emerging market opportunities. Infigen also completed an organisational restructure that has positioned the business for growth and reduced costs. Because of these two factors, corporate and development costs are expected to be approximately $14 million in FY17. At the beginning of FY17 Infigen had $137 million cash in Excluded Companies, a substantial portion of which is available for investment in growth opportunities.
EBITDA in FY17 is expected to be approximately $130 million. This is based upon the production and price outlooks outlined above and after anticipated higher costs for post-warranty turbine O&M services at Woodlawn wind farm, production-linked turbine O&M expense and FCAS charges.
Miles George, Infigen’s Managing Director, said, “The outlook for LGC and electricity market prices remains substantially higher than recently reported power purchase agreement prices. This price spread continues to widen, implying larger value transfers from developers to off-takers. Attractive merchant opportunities now exist for projects with a low cost of energy.”
“Infigen’s extensive experience as a developer-owner-operator and acquirer of assets has created a disciplined investment appraisal culture where we will only pursue opportunities with acceptable risk adjusted returns,” he said.
Infigen continues to participate in opportunities to secure power purchase agreements from formal tender processes and bilateral negotiations.
Infigen will also continue to assess corporate activity opportunities that might arise within the current fragmented renewable energy sector in Australia. New greenfield solar PV development initiatives to meet the expected increased demand for solar projects will also be pursued.
The Queensland and Victorian state governments’ proposed renewable energy targets will see those states increase their renewable energy ambition beyond the Federal targets. This will provide further opportunities for Infigen to build out its development pipeline.
The Federal Government has announced that in 2017 it will commence consideration of the emissions reduction policies required to meet increased national targets in close consultation with businesses and the community.
“Further development of national and/or state-based emissions reduction policies is required for Australia to meet its commitment under the Paris Agreement to reduce emissions by 26-28% on 2005 levels by 2030. Australia’s commitment under that agreement, to contribute its fair share of the global action required to limit temperature increases to well below 2 degrees, will require much more ambitious emissions reduction targets,” said Mr George.
General Manager, Strategy & Corporate Affairs
Manager, ESG & Investor Relations