2013 | Annual Meeting · VECTOR LIMITED ANNUAL MEETING 2013 Delivering for shareholders and Auckland 1,252.2 627.4 201.7 392.3 261.8 144.4 1,279.2 630.5 206.2 426.2 298.6 146.9-200.0

VECTOR LIMITED ANNUAL MEETING 2013

2013 | Annual MeetingEMBARGOED 2PM / 22 OCTOBER 2013

1


Disclaimer:

This presentation contains forward-looking statements. Forward-looking statements often include words such as "anticipates", "estimates", "expects", "intends", "plans", "believes" and similar words in connection with discussions of future operating or financial performance. The forward-looking statements are based on management's current expectations and assumptions regarding the Vector’s businesses and performance, the economy and other future conditions, circumstances and results. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Vector’s actual results may vary materially from those expressed or implied in its forward-looking statements.

2


Michael StiassnyCHAIRMAN

3


Directors

• Alison Paterson

• Karen Sherry

• Hugh Fletcher

• James Carmichael

• Peter Bird

• Bob Thomson

4


Agenda

1. Chairman’s update

2. Group Chief Executive’s update

3. Ordinary business

4. Election of directors

5. Appointment and remuneration of auditors

6. Directors’ remuneration

7. General business

5


Vector’s vision and goal

• Seventh consecutive year of dividend increases

• Dividend injects well over $100M into the economy

• Gearing improved to 51.1%

• Standard & Poor’s BBB+/stable rating

6.5 6.5 6.75 7.0 7.25

7.25 7.5 7.5 7.5 7.75

0

4

8

12

16

2009 2010 2011 2012 2013

CP

S

FINANCIAL YEAR

Final

Interim

VISION: First choice for integrated infrastructure solutions

GOAL: Deliver sustainable dividend increases

6

Vector’s dividends


Delivering for shareholders and Auckland

1,252.2

627.4

201.7

392.3

261.8

144.4

1,279.2

630.5

206.2

426.2

298.6

146.9

-

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

REVENUE EBITDA* NET PROFIT OPERATING

CASH FLOW

CAPITAL

EXPENDITURE

DIVIDEND PAID

$M

ILLIO

N

2012

2013

*EBITDA is a non-Generally Accepted Accounting Practice (GAAP) profit measure and is defined on page 41 and reconciled to GAAP on page 42 of this presentation. All references to this measure throughout this

presentation is consistent with this definition.

2.2% 0.5% 2.2% 8.6% 14.1% 1.7%

7


The new economic reality

6,600

6,800

7,000

7,200

7,400

7,600

7,800

8,000

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

KW

h

FINANCIAL YEAR

POWER USAGE PER VECTOR RESIDENTIAL CONNECTION POINT

Source: Vector

8


Price is driving customer behaviour

Source: MBIE

9

-5%

0%

5%

10%

15%

20%

New Zealand retail New Zealand

distribution

Vector distribution

Real energy price change 2008 - 2013


The new economic reality

The drive for reduced spending gains momentum as:

• Customers demand greater choice and control over their energy use

• ‘Sustainability’ enters popular consciousness

• Home appliances become more energy efficient

• Governments promote energy efficiency

Alternatives to centrally-generated electricity more attractive

• The solar panel choice is becoming:

1. Right for the environment

2. Right for the wallet

Vector must be relevant for customers and we are achieving that goal.

10


Vector’s goal

AREAS OF STRATEGIC

FOCUS

DISCIPLINED GROWTH

CUSTOMER FOCUS

OPERATIONAL EXCELLENCE

REGULATORY OUTCOMES

PEOPLE AND SAFETY

INNOVATION


11


Strategic focus: disciplined growth

INNOVATION

Technology• Smart meters will transform energy management• Contracted installations rise 14.0% to 764,000 meters• Acquired Contact Energy’s gas meter portfolio, gas meter

fleet rises from 82,000 to 216,000

Gas Wholesale• Established as New Zealand’s leading gas aggregator• Matching disparate sources of gas supply with demand

across a broad range of New Zealand businesses

MARKET-FACING OPERATIONS

DISCIPLINED GROWTH

12


Strategic focus: disciplined growth

INNOVATION

Electricity and Gas Transportation• Growth driven by population increases in and around our networks• Acquisitions are challenging: critical infrastructure assets highly

coveted by international investors• Rely on our strategic areas of focus to drive earnings improvements

REGULATED OPERATIONS

DISCIPLINED GROWTH

13


Vector’s goal

AREAS OF STRATEGIC

FOCUS

DISCIPLINED GROWTH

CUSTOMER FOCUS


REGULATORY OUTCOMES

PEOPLE AND SAFETY

INNOVATION


14


Simon MackenzieGROUP CHIEF EXECUTIVE

15


Strategic focus: customers

INNOVATION

Customers want• A utility they can trust • Reliable, efficient infrastructure services• Timely delivery and online services• Choice and flexibility over how they use energy• Good value

CUSTOMERS

16



INNOVATION

CUSTOMERS

Solar+

Communication

17



INNOVATION

Vector’s roll out of half a million smart meters attracts international attention

Large gas users turn to Vector as we configure gas supply to their needs

CUSTOMERS

Smart Meters +

Gas Wholesale

18



INNOVATION

Electricity transmission pricing• Vector does not support Electricity Authority proposals,

which are likely to lead to higher Auckland prices• Vector seeks robust evidence to support pricing changes• South Island generators should bear the cost of the

Cook Strait cable, not consumers

Vector supports the Manaiakalani Trust, which is fostering e-learning in East Auckland

CUSTOMERS

Looking after the interests of the Auckland

region

19


Strategic focus: operational excellence

• Revenue rises 12.5% to $109.1M

• EBITDA rises 13% to $76.3M

• Installed smart meter base rises 37.0%

• Vector Communications makes an important contribution to the business

245,477

369,394

505,888

0

100,000

200,000

300,000

400,000

500,000

600,000

2011 2012 2013

Electricity Smart Meters


Technology

20



• Revenue fell 2.3% from $380.9M to $372.2M

• EBITDA fell 8.2% from $65.8M to $60.4M

• Results underpinned by the continuation of Kapuni gas at legacy prices

• LPG sales and tolling volumes assist performance

26.1

27.7 26.5

79,01576,876

71,757

129,893

130,820

151,544

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

0

10

20

30

40

50

60

2011 2012 2013

TO

NN

ES

PJ

Natural Gas Sales (PJ) Gas Liquids sales (tonnes)

Liquigas LPG tolling (tonnes)


Gas Wholesale

21



• Revenue rises 2.3% from $214.6M to $219.6M

• EBITDA rises 6.2% from $160.5M to $170.4M

• Network availability 99.99%

• Volume falls due to reduced gas-fired power station demand

• Customer increases assisted by subdivision activity and SME growth

152,508

154,649

156,952

120.1125.4

118.2

20.8 21.8 21.40

20

40

60

80

100

120

140

150,000

151,000

152,000

153,000

154,000

155,000

156,000

157,000

158,000

2011 2012 2013

PJ

CU

STO

MER

S

Distribution Customers Transmission Volume (PJ)

Distribution Volume (PJ)


Gas Transportation

22



• Revenue rises 3.9% from $609.0M to $632.9M

• Higher Transpower charges drive revenue increases

• EBITDA falls 3% from $384.1M to $372.5M

• Volumes fall due to warm weather and continuing falls in energy usage

• Networks available 99.98% of the time

532,607

535,228

539,232

8,319 8,424 8,332

4,362

2,621

4,004

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

528,000

530,000

532,000

534,000

536,000

538,000

540,000

2011 2012 2013

PJ

CU

STO

MER

S

Customers Volume Distributed (GWh)

Net Movement in Customers


Electricity

23



New Zealand Electricity Distribution Business operating costs


Electricity

24


Strategic focus: regulation

• The decisions on the Merit Appeals of the Commerce Commission’s Input Methodology are due shortly

• Brought by Vector along with six of New Zealand’s largest infrastructure companies

• Decision will represent a further maturation of the New Zealand regulatory regime

• Productivity Commission investigation into enhancements to New Zealand’s regulatory regime

• Opportunity for recommendations that deliver better outcomes for infrastructure investment

• Reducing the number of regulators and minimising duplication and overlap of responsibilities amongst regulatory bodies

REGULATORY OUTCOMES

25


Strategic focus: people & safety

• Graduate recruitment – providing Vector with new leaders • Apprentices programme – developing the skills for the future • Safety programmes – ensuring staff and the public are safe in and around

our operations

PEOPLE

Employing great people

& keeping them safe

26


Strategic focus: people & safety

• Safety practices continuously improved and benchmarked against New Zealand and international best practice

• Implemented a new Incident Reporting Management programme

• Continuing to enhance and maturing our risk management framework

PEOPLE

Employing great people

& keeping them safe

27


Outlook

• Targeting EBITDA to meet market consensus estimates for the 2014 financial year

• Remain focused on continued growth in our technology portfolio and tight cost control

28


Michael StiassnyCHAIRMAN

29


Ordinary business

30


Election of directors

31


Re-election of Peter Bird

Proxy Voting

For 800,455,923

Against 168,654

Abstain 149,571

Discretionary 862,543

Additional discretionary held by the Chairman 1,394,921

32


Re-election of Bob Thomson

Proxy Voting

For 800,454,116

Against 184,223

Abstain 136,206



33


Election of Jonathan Mason

Proxy Voting

For 800,374,289

Against 179,617

Abstain 170,522



34


Appointment of auditor

Proxy Voting

For 800,865,281

Against 178,755

Abstain 69,497



35


Directors’ remuneration

After a detailed review of the directors’ remuneration including advice from independent expert remuneration consultants, dsd Consulting Limited, the board seeks:

• To increase the annual sum payable to the Chairman by $11,400 plus GST from $189,900 plus GST to $201,300 plus GST; and

• To increase the annual sum payable to each other Director by $5,700 plus GST from $94,950 plus GST to $100,650 plus GST

Reflects:

• Fees last increased in 2010

• The need to attract and retain the highest quality Directors

• The increasing governance and regulatory requirements on the Company’s business continue to increase the workload on Directors

• Payments cover all services by Directors

• dsd Consulting recommended an increase of 6%, equal to increase sought

36


Directors’ remuneration

Proxy Voting

For 792,731,622

Against 7,725,786

Abstain 556,210


Additional discretionary held by the Chairman

1,182,039

37


Voting

38


General business

39


Meeting close

40


Appendix

Non-GAAP reporting measures

41

Vector’s standard profit measure prepared under New Zealand GAAP is net profit. Vector has used non-GAAP profit measures when discussing financial performance in this document. The directors and management believe that these measures provide useful information as they are used internally to evaluate performance of business units, to establish operational goals and to allocate resources. For a more comprehensive discussion on the use of non-GAAP profit measures, please refer to the policy ‘Reporting non-GAAP profit measures’ available on our website (vector.co.nz)

Non-GAAP profit measures are not prepared in accordance with NZ IFRS (New Zealand International Financial Reporting Standards) and are not uniformly defined, therefore the non-GAAP profit measures reported in this document may not be comparable with those that other companies report and should not be viewed in isolation or considered as a substitute for measures reported by Vector in accordance with NZ IFRS.

Vector’s definition of non-GAAP profit measures used in this document:

• EBITDA: Earnings before net finance costs, income tax, depreciation, amortisation, share of net profit/(loss) from associates and impairments

• EBIT: Earnings before net finance costs, income tax, share of net profit/(loss) from associates and impairments.


Appendix

GAAP to non-GAAP reconciliation

2013$M

2012$M

Net profit for the period (GAAP)

Add back: income tax expense1

Add back: impairment of investment in associates1

Deduct: share of net profit from associates1

Add back: net finance costs1

EBIT

Add back: depreciation and amortisation1

EBITDA

206.2

83.6

3.6

(1.3)

164.3

456.4

174.1

630.5

YEAR ENDED 30 JUNE

201.7

81.6

4.1

0.3

166.2

453.9

173.5

627.4

1. Extracted from Vector’s 2013 audited financial statements

42

Documents

2013 | Annual Meeting · VECTOR LIMITED ANNUAL MEETING 2013 Delivering for shareholders and Auckland 1,252.2 627.4 201.7 392.3 261.8 144.4 1,279.2 630.5 206.2 426.2 298.6 146.9-200.0