Introduction to Aggreko March 2014
Overview Investment Case Our History Where We Operate Local Business Power Projects Strategy Products & Innovation Financial Information Shareholder Information Further Information 2
Financial Review Angus Cockburn, CFO 3 Investment Case Twangiza Mine, DRC
The global leader in temporary power and temperature control Customers in c.100 countries use us when the need is urgent or for a limited period Services are asset-intensive, often involve significant engineering input and are frequently in response to emergencies Two business models: Local Business rents power and temperature control equipment to a broad range of users Power Projects sells electricity, supplying and operating utility power plants, mainly in emerging markets to utility government users 2013 Highlights Revenue 1,573m PBT 338m EPS 93.3p DPS 26.3p ROCE 23% Power Fleet 9,654 MW Employees 5,938 Delivery Track Record 10 Year CAGR (2003-2013): Revenue 17% EPS 25% TSR 2009 2013 307% 4
Reasons to invest in Aggreko Market Structural growth in emerging markets drives demand in Power Projects Local business market is growing at 2x GDP Exposure to both developed and emerging markets Strategy Proven strategy that has delivered strong growth Plenty of runway ahead to continue to grow Competitive Advantage Global reach enables us to respond to rapidly shifting demand Two complimentary business models which diversify short term variability Scale economies, in-house manufacturing and a fungible global fleet deliver lower capital and operating costs Product innovation enables us to produce market leading products Shareholder Returns Cash generation set to increase over the next few years Priority is to invest in the business, but excess liquidity will be returned Maintain a target of net debt : EBITDA of 1x Dividend cover reducing to around 3x Gentle Warning This business has high variability and low visibility; progress is not smooth Returns in Power Projects are risk-unadjusted
Our History London 2012 Olympics
History of the Group Founded in the Netherlands Became a wholly owned subsidiary of Salvesen Group Entered the temperature control rental business through the acquisition of Mobile Air and Pierce Industrial in the US Demerged from Salvesen Group and listed on the LSE Acquired GE Energy Rentals Acquisition of Cummins India Acquisition of N.Z. Generator Hire Ltd, New Zealand 1973 1986 1989 2000 2008 2010 2012 1962 1984 1987 1997 2006 2009 2011 UK business established in Scotland Entered the US market through the acquisition of Electric Rental Systems Entry into Asia Pacific region with acquisition of Yeow Kong Electrical Company in Singapore Established Aggreko International Projects (Power Projects) in Jebel Ali Acquisition of Power Plus Rentals Ltd, Canada Acquisition of Northland Power Services and entry into US shale market Acquisition of Poit Energia in Brazil 7
Where We Operate Manufacturing, USA
A global business serving customers in c.100 countries Americas EMEA APAC Revenue 645m Revenue (ex fuel) 583m Revenue 303m Trading Profit 147m Trading Profit 114m Trading Profit 91m Service Centres & Offices 97 Service Centres & Offices 66 Service Centres & Offices 38 Local Business Fleet (MW) 1,785 Local Business Fleet (MW) 2,033 Local Business Fleet (MW) 804 9 Key Local business Sectors Oil & gas; petrochem & refining Key Local business Sectors Oil & gas; utilities, construction Key Local business Sectors Quarrying & mining; oil & gas Note: FY13 numbers
Customer base well diversified: revenue by geography FY13 Revenue excl. pass-through fuel by region Revenue: 1,531m Latin America 18% 22% North America Asia & Australasia 20% 14% Europe 16% Africa 10% Middle East 10
Local Business Houston Refinery, USA
Local Business Key Facts Contract value: Contract duration: Lead time: MW in power fleet: Service Centres: Application: 1k - 1m (average < 20k) 1 day 12 months 3 hours 4 weeks 4,622 MW 202 across 49 Countries Power, temperature control and oil-free compressed air; 25% is emergency response Keys to our competitive advantage Experienced people Broad range of equipment Ability to deploy quickly Low-cost operating model Local reputation and brand FY13 Revenue by customer type Revenue: 904m (59% of Group excl. fuel) Petrochemical & Refining 11% Events 6% Manufacturing Other 8% Shipping 7% 3% Services 7% Contracting 7% 10% Utilities 1% Military 9% Mining 7% Construction 24% Oil & Gas 12
Major Events Major Events Winter Olympics 2010, Vancouver FIFA World Cup 2010, Cape Town Olympics 2012, London Presidential Inauguration 2009, Washington 13
Industrial Oil Refinery, Tunisia
Commercial Manufacturing, USA 15
Shipping Belfast
Oil & Gas Brazil
Local business market drivers GDP In faster growing economies, businesses are busy and more likely to rent equipment to maintain production. Propensity to rent This is driven by tax treatment of assets, availability of financing and an awareness and acceptance of outsourcing. Events High value / low frequency events change the market size temporarily, e.g. Hurricane Sandy in 2012. Local business market is growing at c.2x GDP 18
Local business competition Aggreko is the only company with a global footprint Customers have a choice to buy or rent; largest competitors either general rental or equipment manufacturers Competitive environment has been stable Fierce local competition but no global competition Few local competitors are able to compete for large scale or technically demanding work Using market potential analysis we believe that the global local market is about 4bn and we have a 25% share 1 Global Aggreko 10-15 regional Hertz, URI, Sunbelt, Speedy Hire, CAT Hundreds of national Thousands of local small businesses 19
Local business customer proposition Fast deployment through proximity to customers Reliable in emergency situations Fungible range of customised products Covering variety of size and applications (from marquee, to a mine) Optimised for use in extremes of temperature and altitude Access to global pool of fleet when required In house technical expertise enables us to handle larger scale and more complex projects Flexibility over duration anything from 1 day Maintenance and servicing handled by Aggreko 20
Power Projects Utility, Mozambique
Power Projects Business Key Facts Contract value: Contract duration: Contract size: Lead time: MW in power fleet: 1m - 80m pa (average 5m) 6-12 months 20-50 MW on average 10-12 weeks 5,032 MW FY13 Revenue by customer type (excl. fuel) Revenue: 627m (41% of Group excl. fuel) Other Oil & Gas Mining Military 1% 3% 6% 2% Application: Hubs: Base-load and peak-shaving power Dubai, Rotterdam, Singapore, Panama Key to our competitive advantage Ability to quickly deploy large fleet capacity globally Highly reliable, easily-transportable, standardised, purpose-built equipment Expertise in engineering, commercial, tax, logistics and risk management 88% Utilities 22
100 MW diesel power plant for hydro shortfall support Kenya Argentina picture to be added
229 MW gas-fired cross-border power Mozambique
Power Projects market drivers 1. Demand Demand in developing countries is growing rapidly; 5% CAGR in electricity consumption driven by industrialisation and urbanisation. 2. Under-Investment Under-investment in new and replacement permanent power has led to frequent breakdowns and damaging power cuts. 3. Financing Capital markets are unwilling to support long-term infrastructure projects in many developing countries. 4. Developed Markets De-carbonisation and ageing infrastructure in developed countries requires $trillions in investment 25
Power Projects competition Only one other company that competes globally, APR Energy and it is 5x smaller overall Estimated market share MW There are c.10-15 CAT dealers that operate standalone and compete for power projects either locally or regionally Difficult to operate efficiently without a large homogenous fleet and infrastructure to market, sell and operate consistently across the world Others 34% 45% Aggreko In some countries, e.g. Indoneisa & Brazil with long standing power shortages there are a number of local competitors APR 21% 26
Power Projects customer proposition Immediate solution to today s problems; instant result, immediately felt by industry and consumers No need to raise capital for purchase; pay as you go Distributed generation means that power can go where it is most needed Low risk, proven solution, used by many countries Technically extremely helpful to network operators helps stabilise grid and supports other assets No long-term commitment send it away when you don t need it 27
Power Demand (kw) From hut to house... Demand for power grows very fast in developing countries 1. Demand ILLUSTRATIVE 7 6 5 4 3 2 1 Item Load Base Load 0 Lighting & Fan TV Fridge AC Water Sound Heater System House Lighting Computer CAGR: 25 years = 18%, 50 years = 9% 28
Non-OECD ex China is our core market 1. Demand Electricity Consumption Growth Rates 3-year rolling average to 2010; 10 year average => 2020 10 9 8 7 % 6 5 4 3 2 1 Forecast Non-OECD ex China Average: 4.8% CAGR: 4.6% Source: Oxford Economics 29 0 1995 2000 2005 2010 2015 2020 Non-OECD Non-OECD ex China
Comparative kwh consumption per head and growth rates 1. Demand ILLUSTRATIVE Kwh/head consumption 2008 CAGR in kwh/head consumption 2003-2008 USA 12,800 0% UK 5,700 0% Brazil 2,134 4% China 2,230 14% Vietnam 780 13% Angola 177 12% Yemen 150 7% 2008 2008 2008-2015 Number of countries Population, millions Average Kwh per capita Consumption CAGR Poorer than China 60 2936 426 7.1% China 1 1339 2230 9.1% Richer than China 92 2227 5800 2.0% Totals 153 6501 2638 3.9% 30 Source: Oxford Economics
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Recent capacity growth driven almost entirely by China 2. Under- Investment New MW of Permanent Power Installed 1979-2009 250,000 200,000 150,000 100,000 50,000 - World China World Ex China 31 Source: Platts
IRR % A growing number of countries cannot finance new infrastructure 3. Financing Projected IRR s vs. Country Risk ILLUSTRATIVE 25% 20% 15% 10% 5% 0% EU / USA Brazil India UNBANKABLE 32
Installed base is ageing fast 4. Competition Operating capacity (GW) reaching >40 years old in period 2005-2010 2010-2015 Movement Africa 6 9 47% Anz-Oceania 5 7 29% Asia 26 51 97% China 3 6 98% CIS 42 49 16% Europe 59 91 54% Latin America 9 17 102% Middle East 1 7 430% North America 89 171 91% TOTAL 240 407 70% 1,000 GW of world generating capacity > 40 years old by 2015 In next 10 years North America and Europe will have to invest $tn s in power infrastructure to replace ageing capacity and respond to renewables. This will draw investment away from countries with poor risk profiles at a time when their infrastructure is ageing rapidly. Source: Platts 33
Strategy Mining, Australia
Aggreko s strategy Leading global provider of temporary power and temperature control Standard operating processes and systems Moveable fungible fleet Global reach Lowest capital cost Local Business Power Projects Service Efficiency Optimise Network Scale Product Innovation Orange Blood Culture: Passion, Pace, Performance 35
We will continue to grow faster than the market in our Local business Service Efficiency Optimise Network Outstanding customer service High-quality rental fleet Result: Maintain clear differentiation from competitors Use benefits of global scale to optimise utilisation Use Orange Excellence to drive efficiency Result: Make attractive returns Expand network in faster growing markets of ME, Africa, Latam & Asia Focus on adding new service centres /upgrading existing centres in Europe & NA Drive performance of recently opened depots Exploit specific global verticals: major events, wind, oil & gas Result: Increase market share and extend global reach Through pursuing these actions we believe that over the five years from 2013-2017 we can achieve: Underlying revenue growth between 8-12% Trading margins between 17-20% ROCE between 18-21% 36
Power Projects business will grow in line with the market Scale Address demand globally resulting in higher utilisation because demand moves Focus on non-oecd ex. China with ability to react to black swans Maintain a diverse customer portfolio, reducing the risk to the Group Optimise economies of scale to retain 20-40% capital cost / MW advantage Leverage links with the local business Result: Largest, most responsive operator with lower volatility of demand, better lifetime utilisation of equipment and lower capital costs Product Innovation Continue to invest in product development of gas and HFO (cheaper fuels) Work towards bringing the cost of temporary power in line with permanent power Continue to develop capability to act as an Independent Power Producer Result: Market leading products and the ability to offer customers the best value Through pursuing these actions we believe that over the five years from 2013-2017 we can achieve: Underlying revenue growth between 10-15% (subject to year on year variation) Trading margins between 27-32% ROCE between 25-30% 37
Group strategy for the next 5 years Implement business-line strategies for Local & Power Projects Build strength and depth in management team Keep looking for bolt-on acquisitions Build synergies between Local and Power Projects Drive operational efficiency & economies of scale Innovate in product development Aggreko has a proven strategy and the management to deliver it 38
Strategic Targets & KPIs Strategy Targets 2 FY13 Progress Local Superior service Utilise global scale for efficiency Increase market share and extend presence in emerging markets Revenue growth: 8-12% Margin: 17-20% ROCE: 18-21% Revenue growth: 7% Margin: 18% ROCE: 17% NPS score up to 64% Opened 8 new service centres 1 Power Projects Grow to secure operating efficiencies and competitive advantage Be the largest global operator Innovate to make temporary power competitive with permanent power Revenue growth: 10-15% Margin: 27-32% ROCE: 25-30% Revenue growth: 4% Margin: 31% ROCE: 27% Mozambique project delivers lower cost/kwh than some permanent SA power Panama contract to compete with permanent power Group To be the leading global provider of temporary power and temperature control Revenue growth: 10% Margin: 20% ROCE: 20% Revenue growth: 6% Margin: 22% ROCE: 21% Innovation through HFO and G3+ help retain market leading position 39 (1) Net of closures (2) These are averages over a five year period and there will be years when we may be outside one of these ranges. Revenue growth is underlying, i.e excluding London Olympics, Poit acquisition, pass-through fuel and currency translation and adjusted to exclude Military and Japan. Margin and ROCE targets are on a reported basis post amortisation.
Products & Innovation Mosel Bay Refinery, South Africa
Product range Product Type Fleet Size Key Regions FY13 Revenue Power Gas, diesel and HFO generators 5KW-2MW; ancillaries. c. 20,000 units All 1,086m Temperature Control Chillers; heaters; air conditioners; air handlers; de-humidifiers; cooling towers. c. 4,900 units All 124m Oil-free Air Electric and diesel oil-free air compressors. c. 600 units Americas 30m 41 Note: Revenue excludes service and pass-through fuel
Relative cost of permanent and temporary power ILLUSTRATIVE Permanent Power ($c/kwhr) Temporary Power ($c/kwhr) 15-20 25-30 c.3 c.4-5 13-20 10-15 3-10 7-15 c.5-6 2-3 Hydro Nuclear Gas HFO Gas HFO Diesel Rental cost Fuel cost 42
Drivers of our product strategy Drive down delivered cost / kwh Capital cost Fuel cost: type & consumption Gas by far the cheapest but limited availability HFO more widely available but until we developed our engines no suitable rental technology Diesel most widely available but by far the most expensive Operating costs Focus on mobility & standardisation Design in flexibility & granularity; plug-and-play Reinforce our unique & hard-to-copy strengths Sharing fleet and resources with Local business Adapt technology to build unique capability Exploit benefits of having own manufacturing, refurbishment & supply chain Leverage volume in spares and consumables Support on a global basis 43
Investment in gas has been a big success Power Projects Gas Revenue $m 350 300 250 200 150 100 50 0 2007 2008 2009 2010 2011 2012 2013 Proprietary Aggreko product, launched in 2006 57% CAGR 2007-2013 Higher margin, similar ROCE to diesel Cheaper fuel, lower emissions Expanded market by reducing cost / KWh Enabled us to operate as an Independent Power Producer Operates in both Local & Power Projects 44
Product development The Aggreko G3+ HFO 1MW continuous 20ft containerised genset running on HFO Cost / MW less than half that of new product from leading manufacturers The Aggreko G3+ Produces 14% more power than a standard G3 Optimised for Utility duty materially improved, market-leading fuel consumption >20% lower cost / MW than a new Aggreko standard G3 Engines are rebuilds of our Cummins KTA50 G3 4,134MW in fleet Conversion of G3 to G3+ and G3+ HFO carried out as part of standard 25,000 hours rebuild 45
Power Projects product range is extremely competitive Aggreko is the only operator who: Can offer customers choice of diesel, HFO and gas; low emissions or fuel optimised Has developed gas into a volume rental product Has developed proprietary technology to optimise performance Has a large pool of engines that can be rebuilt to produce new product at very low cost Our capital cost / MW in all fuel types is significantly lower than competitors and will reduce further as we refurbish more fleet 46
Financial Information Wind Farm, Ireland
Overview of Results Underlying revenue up 4% Power Projects (1)% Local +7% Underlying trading profit up 1% Power Projects (5)% Local +11% Underlying trading margin maintained at 24% EPS down 8% Dividend increase of 10%; cover of 3.5x down from 4.2x, in line with the strategy to reduce dividend cover m FY13 FY12 Reported Change Underlying Change Revenue 1,573 1,583 -% 4% Revenue excl. pass-through fuel 1,531 1,543 -% Trading profit 357 386 (8)% 1% Operating profit 363 390 (7)% Net interest expense (25) (25) -% Profit before tax 338 365 (8)% Tax (88) (95) 8% Profit after tax 250 270 (8)% Dividends per share (declared) Diluted earnings per share 26.30p 23.91p 10% 93.31 101.66 (8)% 48 Note: All numbers are pre-amortisation of intangible assets arising from business combinations and pre 2012 exceptional items. Post amortisation and exceptional items: 2013 PBT 333m, PAT 246m, D-EPS 92.03p; 2012 PBT 367m, PAT 276m, D-EPS 103.86p.
2013: Revenues of 1,531m from three product families Power (inc ancillaries) Temperature Control Oil-free Air Rental revenue 1,240m (81% of total revenues) 1,086m / 88% 124m / 10% 30m / 2% Gross Rental Assets 2,373m 1,960m / 83% 240m / 10% 173m / 7% Why Power & Temperature Control? Mission critical: availability, service and reliability more important than price => strong margins Fleet fungible between sector and geography => can operate as a global business Rental product is different to purchase product => differentiated offering Long life of equipment => 10-year old equipment can get same rate as new 49
Revenue & Trading Profit by Business FY13 m Revenue FY12 m Underlying % FY13 m Trading Profit FY12 m Underlying % Strong performance in local business with underlying revenue and profit up Power Projects profit impacted by Japan and Military off-hires and weaker trading conditions Local Business 892 842 7% 161 146 11% Power Projects (ex fuel) Trading Margin: 18% 17% ROCE: 20% 19% 627 631 (1)% 196 207 (5)% Trading Margin: 31% 33% ROCE: 27% 31% Total 1,519 1,473 4% 357 353 1% Trading Margin: 24% 24% ROCE: 23% 25% 50 All figures are pre-amortisation and excluding the net book value of intangible assets arising from business combinations. Also excluding revenue, trading profit and operating assets from London Olympics, Poit acquisition, pass-through fuel and currency translation.
Diverse geographic spread and complimentary business models Revenue (ex. fuel) by Market ( m) Trading Profit (ex. fuel) by Business ( m) 900 800 882 400 350 359 700 600 500 649 300 250 200 150 196 163 400 100 300 50 200 2007 2008 2009 2010 2011 2012 2013 0 2007 2008 2009 2010 2011 2012 2013 Emerging Markets Developed Markets Local Power Projects Total Group 51 Emerging markets = Local: Russia, Middle East, Asia, Africa, LATAM; Power Projects = everywhere excluding Japan
Very attractive returns on capital 45 40 35 30 25 20 Return on Capital Employed % 26.9% 21.1% 16.8% Returns are very attractive, and reflect relative risk profiles Power Projects peak returns 2009-2011 driven by Japan & Military Local ROCE peaks in 2008 and 2010 due to Olympics and World Cup; diluted slightly 2011 to expansion in Emerging Markets; slight improvement in 2012 due to London Olympics 15 2008 2009 2010 2011 2012 2013 Local Power Projects Group 2013 ROCE diluted by challenging Power Projects environment and lack of events in the Local business 52
Shareholder Information Aggreko Service Centre, Jebel Ali
Shareholder information Share Price History* Market Information Our Shareholders 2500 2000 1500 1000 500 0 Listing: London Ticker: AGK:LN Market Cap: c. 4.3bn ISC: 269m Dividend Policy Rest of World Europe (ex UK) 7.8% 5.4% North America 23.4% 63.7% UK AGK FTSE100 FTSE350 Bus. Serv. Share Types Reduce dividend cover to c.3x earnings between 2013 and 2015. Shareholder Returns ( m) Ordinary: Listed on the LSE Capital Structure Treasury: Shares purchased by the Company out of distributable reserves. They hold no voting or pre-emption rights and receive no dividends Priority is to invest in the business. Excess capital will be returned to shareholders. Target net:debt : EBITDA is c.1x. 148 29 40 52 2009 2010 2011 Special Dividend 58 2012 2 66 200 46 2013 2014 Proposed Ordinary Dividend 54 * Past performance is no indication of future performance; data correct at 13 February 2014
Further Information Refining, USA
Further information Business Information For further information about Aggreko, please refer to the following: Website: ir.aggreko.com/investors Annual report: ir.aggreko.com/investors/financial-reports References All data correct as of 31 December 2013 unless otherwise stated Stock market data from Reuters, 13 February 2014 unless otherwise stated Investor Relations Contact Louise Bryant, Head of Investor Relations ir@aggreko.com 56
Disclaimer The information contained in this presentation has largely been extracted from the Results Announcement for the year ended 31st December 2013. This presentation may contain certain forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements. Any forward-looking statements made by or on behalf of Aggreko speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. This presentation is published solely for information purposes. The distribution of this presentation in jurisdictions other than the UK may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the UK should inform themselves about, and observe, any applicable requirements. All opinions expressed in this presentation are subject to change without notice and may differ from opinions expressed elsewhere. 57