Origin Energy Limited · ASX:ORG
Origin Energy — H1 FY2005 Earnings Presentation
42 slides from Origin Energy's earnings presentation, Feb 21, 2005
Slide 1: Interim Results Announcement, Half-year ended 31 December 2004
Interim Results Announcement Half-year ended 31 December 2004 21 February 2005 1
Slide 2: Outline
Outline • Performance Highlights • Financial Review • Operating Review • Outlook - All comparative data are in relation to the prior corresponding period, July – December 2003, unless otherwise stated - All references to $ are references to Australian dollars unless otherwise specifically marked - A
Slide 3: Performance Highlights
Performance Highlights 3
Slide 4: Financial Highlights
Financial Highlights • Revenue# $ 2,292 million up 24% • EBITDA# $ 440 million up 44% • NPAT $ 152 million up 21% • Basic EPS 22.6 cps up 18% • Free cash flow (FCF) $ 247 million up 7% • FCF per share 36.8 cps up 4% • Debt / (debt + equity) 41% (31 Dec 04) 31% (30 Jun 04) • OCAT Ratio* 13.6% target
Slide 5: Operating Highlights
Operating Highlights • Acquisition of 51.4% interest in Contact effective 1 October 2004 • Higher retail margins realised despite increased levels of churn • Increased oil production from the Perth Basin • Liquids processing restored at the Moomba gas plant in August • Development drilling at Yolla
Slide 6: Rights Issue
Rights Issue • Pro-rata renounceable Rights Issue of 1 new share for every 6 existing shares at $5.70 per new share • Proceeds of $641 million to repay CUPS issued to fund the Contact acquisition with the balance of net proceeds to repay debt • Fully underwritten by Citigroup and Deutsche Bank • Off
Slide 7: Financial Review
Financial Review 7
Slide 8: Consolidation of Contact changes presentation of Origin's results
The consolidation of 100% of Contact produces a number of significant changes in the presentation of Origin’s results Consolidation of Contact – Origin has consolidated 100% of Contact Energy as required by Australian accounting standards. – Outside equity interests are recognised in reporting of ne
Slide 9: Profit & Loss
Profit & Loss Dec 04 Dec 03 % change ($m) ($m) Revenue 2,291.8 1,845.8 24% EBITDA 440.4 306.5 44% EBIT 304.6 205.9 48% Net interest expense (53.3) (24.0) 123% Tax expense (77.2) (54.8) 41% Outside Equity Interests (22.0) (1.5) 1387% NPAT 152.1 125.6 21% Earnings per share (cents) 22.6¢ 19.2¢ 18% Fre
Slide 10: EBITDA of $440.4 million is 44% higher
EBITDA of $440.4 million is 44% higher primarily due to the inclusion of 100% of Contact Divisions Dec 04 Dec 03 % change ($m) ($m) Exploration & Production 121.0 102.9 18% Retail 157.4 147.2 7% Generation 30.0 43.2 (31%) Networks 16.5 13.2 25% Contact 115.5 - - Total 440.4 306.5 44% • E&P: CGP sale
Slide 11: Depreciation & Amortisation
Depreciation & Amortisation Dec 04 Dec 03 ($m) ($m) Buildings, plant & equipment 81.2 46.2 Amortisation of exploration and 33.3 27.2 evaluation costs in producing areas Electricity hedging contracts 2.2 4.6 Intangibles 18.3 21.7 Other 0.8 0.9 Total 135.8 100.6 – Contact consolidation primarily impac
Slide 12: Profit & Loss
Profit & Loss Dec 04 Dec 03 % change ($m) ($m) Revenue 2,291.8 1,845.8 24% EBITDA 440.4 306.5 44% EBIT 304.6 205.9 48% Net interest expense (53.3) (24.0) 123% Tax expense (77.2) (54.8) 41% Outside Equity Interests (22.0) (1.5) 1387% NPAT 152.1 125.6 21% Earnings per share (cents) 22.6¢ 19.2¢ 18% Fre
Slide 13: Funding & Interest
Funding & Interest Six months ended Dec 04 Jun 04 Dec 03 ($m) ($m) ($m) Net debt ($m) 2,742 861 744 Total equity ($m) 3,915 1,939 1,870 Net debt to equity (%) 70% 44% 40% Debt to (debt + equity) (%) 41% 31% 28% Net interest expense ($m) 53.3 21.4 24.0 Net interest cover (x EBIT)* 4.9 6.2 8.5 Average
Slide 14: Convertible Undated Preference Shares (CUPS)
Convertible Undated Preference Shares (CUPS) Facility drawn $600 million Subscriber Deutsche Bank Dividends BBSW + 100 bps, discounted for franking payable on reset dates Term Perpetual First Reset Date 31 May 2005 Issuer Redemption At face value plus accrued dividend Holder Conversion On reset date
Slide 15: Tax Reconciliation
Tax Reconciliation Dec 04 Dec 03 ($m) ($m) Profit before tax 251.3 181.9 Prima facie tax 77.4 54.7 add non deductible amortisation 12.0 6.9 less one-off items (8.6) (4.1) less other permanent differences (3.6) (2.7) equals Tax expense 77.2 54.8 Tax paid (64.2) (3.8) Subvention payments - (4.0) • Inc
Slide 16: Operating cash flow after tax has increased
Operating cash flow after tax has increased with the inclusion of 3 months of Contact Dec 04 ($m) Dec 03 ($m) EBITDA 440 306 Change in working capital (38) (7) Stay-in-business capex (net*) (55) (39) Other (incl. non-cash items) 18 1 Tax / subvention payments (64) (8) OCAT 301 254 Net interest paid
Slide 17: Growth capex for major development projects increased
Growth capex for major development projects increased…… Dec 04 ($m) Dec 03 ($m) Stay-in-business 56.4 39.7 Growth Exploration & Production 142.4 105.7 Retail 11.4 7.5 Generation 3.5 4.8 Networks 0.0 0.0 Contact 10.3 0.0 Total capital expenditure 224.0 157.7 Acquisitions 967.5 83.5 Capex including ac
Slide 18: Cash flow return from the business segments
Cash flow return from the business segments is measured pre-tax and targets 14.3% over a full year Funds Operating OCFR OCFR Employed Cash flow Dec 04 Dec 03 ($m) ($m) (%) (%) Half year returns* Exploration & 1,239 77.4 6.3% 8.5% Production Retail 1,259 140.1 11.1% 11.1% Generation 335 24.3 7.3% 7.2
Slide 19: Interim fully franked dividend of 7 cents per share
An interim fully franked dividend of 7 cents per share has been declared (prior period 6 cents fully franked) Dividends - cents per share 16 Payment and DRP Franking 14 100% 100% 40% 100% 100% • Ex-dividend date 24 February 2005 12 • Date of record 2 March 2005 10 7 • Payable 23 March 2005 8 5 • DRP
Slide 20: Operating Review
Origin energy Operating Review
Slide 21: Executive Management Team reorganised and streamlined
The Executive Management Team of Origin has been reorganised and streamlined ……….. Managing Director & CEO Grant King Chief Operating Officer Executive General Manager Executive General Manager, Australia Exploration Major Development Projects Karen Moses Rob Willink Andrew Stock Chief Financial Off
Slide 22: Exploration & Production: EBITDA of $121.0 million
Exploration & Production: EBITDA of $121.0 million up 18% on higher oil revenues and sale of Carpentaria gas pipeline 200 180 • Oil production rates in the Perth Basin Total Segment Revenue & EBITDA ($m) Dec-04 continued to increase averaging over 180 160 Dec-03 4,200 bopd. Average oil price 160 140
Slide 23: Oil sales from the Perth Basin continued to rise
Oil sales from the Perth Basin continued to rise and Moomba liquids production was restored for 4 months of the half • Liquids sales should increase 10.0 Liquids Sales by Product by Half Year (PJE) again in the coming half: 9.0 – Perth Basin approaching 5,000 8.0 bopd net to Origin Petajoule Equival
Slide 24: Reserves revisions in Cooper and Otway Basins
Specific events in the Cooper and Otway Basins led to reserves revisions with no impact on asset carrying values Proved and Probable Reserves (PJe*) 2P reserves at 30 June 2004 2,220 less Cooper & Otway reserves revisions+ (39) less Production to 31 Dec 2004 (41) Approximate current 2P reserves# 2,1
Slide 25: BassGas project construction delays
The BassGas project experienced significant construction delays with gas introduced onto the platform in January 2005 BassGas Project (37.5%) • Development drilling completed in September. Several zones tested and new hydrocarbon pools discovered • Some impurities detected in the gas stream requirin
Slide 26: Spring Gully Project on schedule
The Spring Gully Project is continuing on schedule for delivery of gas in July 2005…… • Construction at Spring Gully approaching 80% complete mid February 2005 • 21 wells commissioned representing nearly half of required wells, with flow rates exceeding average expectations • At the end of January 4
Slide 27: Otway Gas Project and Kupe Gas Project progress
Planning and development of the Otway Gas Project and Kupe Gas Project progressed steadily during the half….. Otway Gas Project (29.75%) Kupe Gas Project (50%) • Project 16% complete at 31 • Front End Engineering and Design December 2004 work with respect to offshore • Regulatory approvals received
Slide 28: Retail: EBITDA of $157.4 million up 7%
Retail: EBITDA of $157.4 million up 7% as stronger electricity margins offset lower gas volumes and higher LPG purchasing costs • Segment revenues increased 5% as the net impact of 32% higher LPG 1,800 200 revenue, 3% higher electricity revenue 1,600 Dec-04 180 and 2% lower gas revenue Dec-03 Total
Slide 29: Average prices higher for electricity and LPG
Average prices higher for electricity and LPG. Gross margin increased for both products, but decreased for natural gas Product information and % Natural Gas Electricity LPG change from Dec 03 Revenue (A$m) 455 (-2%) 868 (+3%) 255 (+32%) Gross margin (A$m) 78 (-12%) 153 (+14%) 74 (+19%) Sales (PJ) 61
Slide 30: Pool prices have risen; contract prices steady
Pool prices have risen over the last half but contract prices have remained reasonably steady……. $70 Monthly Average Spot Victorian Spot and Forward Contract Price Electricity Prices Rolling 365 $60 day Average Spot Price 2001 Historical Forward Price $50 2002 Historical Forward Forward Forward Pric
Slide 31: Focus on margins; EBITDA margins increase despite customer losses
Origin’s focus on margins has seen EBITDA and EBIT margins increase this half despite customer losses…. Mass Market Churn: Completed & Pending # Origin Natural Electricity 50% Customers Gas 45% VIC Elec NSW Elec (‘000) % Churn: Monthly data annualised 40% SA Elec Vic Gas Jun ‘04 979* 894* NSW Gas SA
Slide 32: New products and sales channels
Origin has continued to investigate and develop new products and sales channels….... • Origin has run a number of targeted campaigns emphasising customer choice, augmented products, value and incentives to stay • Separate and exclusive offerings include: – $50 off AFL club membership – 1 month’s fre
Slide 33: Acquisition of remaining 50% of Rockgas in New Zealand
The acquisition of the remaining 50% of Rockgas in New Zealand added significant sales volumes ……. Weighted Average International • Rockgas added 26 ktonnes but Propane Price (CP) Australian volumes declined by around 11 kt, mostly in autogas 900 International Propane Price • Cost of LPG benchmark C
Slide 34: Generation: EBITDA of $30 million
Generation: EBITDA of $30 million, $13 million lower than last year due to non-recurrence of Dec 03 benefits……. • Lower result for Dec 04 reflects non- 50 25 recurrence of Osborne tax Total Segment Revenue & EBITDA ($m) 45 Dec-04 consolidation benefit, planned major Dec-03 outage at Osborne and lowe
Slide 35: Availability for externally contracted plants
Availability for externally contracted plants was high with the exception of Osborne (major planned outage Oct & Nov) Major Origin Origin Capacity Type Operation Availability Contracting Power Int. % MW Party Plants Worsley 50 120 Cogen Base 98% Western Power & Worsley Bulwer Is. 50 32 Cogen Base 96
Slide 36: Networks: EBITDA of $16.5 million up 25%
Networks: EBITDA of $16.5 million up 25% on six month contribution from SEA Gas pipeline………. 100 1.2 • SEA Gas contribution of $3.3 million Dec-04 90 Dec-03 • Higher network management fees Total Segment Revenue ($m) 1.0 80 received from Envestra were more EBITDA & Capex ($m) 70 than offset by lower
Slide 37: Contact: EBITDA of $115.5 million
Contact: EBITDA of $115.5 million in line with Origin’s expectations at the time of acquisition….. 400 140.0 • Acquisition completed on 1 October Dec-04 2004 350 Dec-03 120.0 Total Segment Revenue ($m) • Changes to Board and senior 300 management EBITDA & Capex ($m) 100.0 250 • Constitution changed
Slide 38: Retail prices in NZ have continued to increase
Retail prices in NZ have continued to increase since Origin announced acquisition of an interest in Contact………. Contact Retail Pricing 1998 - Nov 2004 Growth options include: Simple Average Retail Price in Incumbent Areas* 20 • Enhancements to geothermal projects at Wairakei, Poihipi 18 and Ohaaki •
Slide 39: Outlook
Origin energy
Slide 40: Second half results expected to be higher
Profit over the first half was enhanced by three months contribution from Contact and increased contributions from E&P, Retail and Networks. Results for the second half are expected to be higher than the corresponding period last year due to: • The inclusion of six months of Contact • The return to
Slide 41: Strong prospects for continued growth through major projects
Looking further ahead there are strong prospects for continued growth through a range of major projects Growth capital expenditure compared with calendar • An increase in production from CSG 2004 free cash flow (excluding Contact)* fields in Queensland to supply long 500 term contracts with AGL, QAL
Slide 42: Origin
Origin energy