Origin Energy Limited · ASX:ORG
Origin Energy — Morgan Stanley Asia Pacific Summit 2007
48 slides from Origin Energy's conference presentation, Nov 13, 2007
Slide 1: ASX announcement cover note
For personal use only To Company Announcements Office Facsimile 1300 300 021 Company Australian Stock Exchange Limited Date 13 November 2007 From Bill Hundy Pages 48 Subject PRESENTATION Attached for your information is a presentation being made by Mr Frank Calabria, Chief Financial Officer to the M
Slide 2: Morgan Stanley Asia Pacific Summit, Singapore, November 2007
For personal use only Morgan Stanley Asia Pacific Summit Singapore November 2007 1
Slide 3: Outline
Outline For personal use only • Highlights • Origin’s strategy • Strategy implementation • Appendix – Reserves position and five year financials Any forward looking information in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect and these st
Slide 4: A year of transformation with progress on significant projects
This year has been a year of transformation for Origin with progress on a number of significant projects and initiatives… For personal use only Strong Financial Performance Coal seam gas reserves doubled & • EBITDAF up 12% contracts signed • Underlying NPAT up 10% • 2P CSG reserves up 1,000 PJ to 2,
Slide 5: Performance highlights
The company has continued to perform strongly through this period of significant Performance growth and change… highlights For personal use only • Revenue $6,456 million up 10% • EBITDAF $1,201 million up 12% • Underlying Profit $370 million up 10% • EPS – Underlying 44.3 cps up 4% • Free cash flow
Slide 6: Reinvesting cash flows into development projects
…while reinvesting strong cash flows into development projects underpinning the organic growth of the company… For personal use only Major Project Timetable Financial Year FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 Calendar Year 2007 2008 2009 2010 2011 BassGas CSG - SG Phase 4 Otway Gas Project Kupe Gas P
Slide 7: Origin's strategy
For personal use only Origin’s strategy 6
Slide 8: Financial objectives and business strategies
Origin’s financial objectives and business strategies have been established to respond to changes in the energy industry since the mid 90’s… For personal use only • Financial Objective Steady and predictable cashflows EPS growth of 10-15% pa on average • Business Strategy Positioned in the com
Slide 9: Managing wholesale electricity and gas price volatility
The effective implementation of this strategy helps us manage the volatility in wholesale electricity and gas prices which arise in the energy industry… For personal use only $150 $140 Forward $130 Victorian Spot and Curve Jun 07 Forward Contract $120 • Wholesale electricity markets have $110 experi
Slide 10: Growth across the competitive segments of the industry
…and has provided us with the ability to perform strongly and grow the business across the competitive segments of the industry…. For personal use only Fuel Retailer Generator 4,000 4.0 3,500 2P Reserves 4,000 Customers (PJe) Generation Capacity 3.5 3,500 (millions) 3,000 (MW) 3.0 3,000 2,500 2.5 2,
Slide 11: Growth in scale has increased cash flows and earnings
The growth in scale of operations has led to increased cash- flows and earnings… For personal use only EBITDAF by business type • Initial growth in Retail came from (A$, millions) acquisitions and margin expansion - with 1400 further consolidation likely (eg NSW privatisation) 1200 • Longer term inv
Slide 12: Significant growth and increasing value for shareholders
These strategies have resulted in significant growth and increasing value for shareholders • Free cash flow per share(1) has grown at a For personal use only CAGR 21% since listing 80 74 • EPS has increased from 13 cents per share in FCFPS 71 70 EPS 63 60 DPS 2000 to 44 cents per share in 2007 (unde
Slide 13: Reporting across four segments plus Contact
Origin has reported its business across four segments covering its operations in Australia with Contact being reported as a fifth segment 30 June 2007 For personal use only EBITDAF FE (1) E&P - One of the largest suppliers of gas to eastern Australian markets •Over 3,471 PJe 2P reserves and annual p
Slide 14: Strategy implementation
For personal use only Strategy implementation 13
Slide 15: Integration into fuel: gas reserves close to markets
Integration into fuel has been a key component of Origin’s positioning – establishing gas reserves close to markets… For personal use only Fuel Retailer Generator • Origin has an extensive portfolio of gas and oil exploration and production interests near key markets in 4,000 Australia and New Zeala
Slide 16: Acreage across Queensland coal seam gas fairways
Origin has established an extensive acreage position across the prime coal seam gas fairways in Queensland… • Current key assets are: For personal use only Bowen Basin (Fairview, Spring Gully) Undulla Nose (Talinga, Orana, Condabri, Argyle, Kenya, Lauren) • Origin’s share of 2P reserves in these
Slide 17: Monetising CSG reserves through channels to market
As well as growing its gas reserves Origin has been able to monetise its reserves base through its channels to market… For personal use only 120 2500 CSG Reserves 110 Origin's CSG Production 2250 100 2000 90 RTA Contract 1750 Annual Production (PJ) 80 22PJ/a 2 P R e se rv e s (P J) 1500 70 1250 60 D
Slide 18: BassGas project
Origin is the Operator and a 42.5% interest holder in the BassGas project which commenced operation in Sept 2006 For personal use only BassGas Project: Yolla A platform viewed from the flare-boom • Gross annual production will be approximately 20 PJ of sales gas and 1.4 million barrels of condensate
Slide 19: Otway Gas Project
The Otway Gas Project has commenced commissioning and is expected to be in steady production by January For personal use only Otway Gas Project: Onshore plant near Port Campbell, Western Victoria • Gross annual production will be approximately 60 PJ of sales gas and 1.8 million barrels of condensate
Slide 20: Kupe Gas Project construction progress
In Work New Zealand construction has significantly of the Kupe progressed GasKupe on the Project Gasis progressing to schedule… Project which remains on schedule for commercial gas in For personal use only the first half of 2009 •Top Left – Topside fabrication in Singapore •Top Right – installation
Slide 21: New infrastructure opening up prospective acreage
The BassGas Project, Otway Gas Project, Kupe Gas Project and CSG developments are each establishing new production infrastructure in areas where we hold prospective acreage… For personal use only …opening up the potential for further exploration and 20 development in these and related areas 20
Slide 22: Generation position: peaking and co-generation units
Origin’s generation position in Australia has to date comprised peaking and co-generation units… For personal use only Fuel Retailer Generator Existing Generation capacity plants • Interests in 870 MW of gas capable cogeneration and peaking 4,000 plants in Australia 3,500 Generation Capacity • 2,200
Slide 23: Generation plants in Australia and New Zealand
Origin has interests in 870 MW of peaking and co-generation in Australia and over 2,200 MW through Contact Energy in New Zealand, and is creating new development opportunities For personal use only Australia Plants Capacity (MW) Operation Fuel Osborne 180 (Cogen) Base Gas Worsley 120 (Cogen) Base Ga
Slide 24: Development opportunities requiring around $3 billion in Australia
These development opportunities could require investment of around $3 billion in Australia and over $2 billion in New Zealand For personal use only Australia Plants Fuel Scale Indicative gross cost Status (and Origin equity%) Quarantine Power Station expans’n Gas 120 MW $0.08 billion (100%) Under Co
Slide 25: Retail business as channel to market for generation
In Australia Origin’s retail business provides a substantial channel to market and opportunity for growth in generation Energy Demand For personal use only Peak Demand 35 7,000 Annual Demand and Generation dispatched (Twh) Peak Demand and Installed capacity (MW) 30 6,000 25 5,000 20 4,000 15 3,000 1
Slide 26: Darling Downs combined cycle power station
At 630 MW the Darling Downs combined cycle power station will be the largest CCGT on the NEM… For personal use only •Located at Braemar in Queensland on the NSW / QLD transmission interconnector •Low life cycle cost, one of the lowest short-run-marginal-costs in the National Electricity Market • 630
Slide 27: Spring Gully and Talinga expansion
… and expansion of the Spring Gully and Talinga fields will provide a low cost flexible gas supply… For personal use only •There will be a combined investment of around $760 million to complete the Spring Gully RTA - Gladstone development, start the coal seam gas development in the Walloons and cons
Slide 28: Investing in renewable technologies
Origin is also investing in renewable technologies to meet future energy needs Solar For personal use only • $30m investment in a solar photovoltaic SLIVER project, with product successfully scaled up to 75 and 150 watt modules • Technical milestones continue to be met – including product certificat
Slide 29: One of the largest energy retailers in Australia
Origin is one of the largest energy retailers in Australia with over 3 million electricity, natural gas and LPG customers… For personal use only Fuel Retailer Generator • Origin is the second largest retailer in Australia with around 3 million customers 4.0 1,815,000 electricity 3.5 Customers 88
Slide 30: Increased share of eastern Australian energy markets
Origin Energy has increased its share of eastern Australian energy markets substantially over time as energy market reforms have seen the sector deregulated and privatised… For personal use only Eastern Australia Eastern Australia Market share customers: 1998 Market share customers: 2007 Origin Orig
Slide 31: Leadership in green energy sales
Origin has clearly established its leadership position in green energy sales and carbon responsibility… For personal use only Other Jackgreen 600,000 2% 3% Integral Green Power Customers in Australia 4% Country Energy 5% 500,000 Market Origin Energy 33% Origin AGL 400,000 10% 300,000 TruEnergy 8% 20
Slide 32: Advocacy on climate change and carbon regime
Over many years Origin has taken an advocacy role in the debate surrounding climate change and a carbon regime… For personal use only Researching CO2 sequestration technologies Carbon Neutral by 2009 We’re planting 100,000 trees to say thank you … as carbon emissions are currently a largely unrecogn
Slide 33: Churn rates and customer account numbers
Churn rates remain high. Origin acquired over 386,000 new accounts in FY 07 for a net gain of 22,000 gas and electricity accounts in addition to Sun Retail June 2007 Origin Energy Customer Numbers For personal use only 45% (in thousands) Vic Elec Mass Market Churn: Completed & Pending* Vic Gas 40% Q
Slide 34: Electricity price increases and hedging strategy
Electricity prices increased significantly through the first half of 2007. However Origin’s unit cost of goods sold increased by only 2% reflecting our long term hedging strategy. For personal use only $180 Monthly Average Spot Price $170 Forward $160 Victorian Spot and Forward Contract Curve Jun- c
Slide 35: Customer numbers and margins per customer increased
Despite high churn and wholesale price volatility customer numbers and margins per customer have increased… For personal use only Gas and Electricity Jun 07 Jun 06 YE customer numbers (’000) 2,704 1,835 Weighted av customer no (‘000) 2,210 EBITDAF / Sales - % 9.2% 9.5% EBITF / Sales % 8.4% 8.7% $ Pe
Slide 36: Gas sales and purchasing management
In gas, Origin has managed its sales and purchasing to leverage additional upstream development by reducing contracts to buy gas and securing new loads - particularly in Queensland For personal use only 300 ToP to ACQ buy from Origin buy from Origin JV partners 250 buy from 3rd parties Power generat
Slide 37: Contact Energy integrated position in New Zealand
In New Zealand Contact Energy also has an integrated position which provides a natural hedge to seasonal variations in the wholesale electricity (where hydro is the dominant fuel)… For personal use only Fuel Retailer Generator • Extensive portfolio of gas • 10 power stations with • 513,000 electrici
Slide 38: Contact Energy integrated strategy as internal hedge
The integrated strategy of Contact Energy also provides a significant internal hedge for its business For personal use only …providing stable year on year earnings despite large changes in wholesale electricity prices 37 37
Slide 39: Deepening integration across the business
Origin continues to deepen the integration across its business… For personal use only Fuel Retailer Generator 300 ToP to ACQ Energy Demand Peak Demand buy from Origin 35 7,000 Annual Demand and Generation dispatched (Twh) buy from Origin JV partners 250 buy from 3rd parties Peak Demand and Installed
Slide 40: Growth capital expenditure profile
In turn this is reflected in a significant program of growth capital going forward… For personal use only Origin Energy growth capital expenditure profile 1800 1600 CSG 1400 Capital Expenditure - A$ million Otway Gas Project 1200 Kupe Gas Project E&P General 1000 Darling Downs PS Quarantine PS 800 O
Slide 41: Continuing to add value to shareholders
…and will continue to add value to shareholders in the years to come For personal use only 80 74 FCFPS 71 70 EPS DPS 63 60 54 cents per share (A$) 53 50 44 42 42 40 40 30 31 30 25 20 21 19 17 18 20 13 15 13 10 10 6 5 4 0 '00 '01 '02 '03 '04 '05 '06 '07 900 10,000 Origin Energy Origin Energy Share Pr
Slide 42: Appendix – Reserves position and five year financials
For personal use only Appendix – Reserves position and five year financials 41
Slide 43: 2P reserves increased by 42% year-on-year
Origin’s 2P reserves increased by 42% year-on-year with the reserves growth coming predominantly from CSG… For personal use only Origin 2P reserves by Product GAS LPG CONDENSATE OIL TOTAL 1/07/2007 (PJ) (KT) (KBBLS) (KBBLS) (PJe) Reserves at 1/7/06 2,199 1,821 20,275 6,276 2,436 Net additions & revi
Slide 44: Profit & Loss
Profit & Loss Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 For personal use only ($m) ($m) ($m) ($m) ($m) ($m) Revenue 2,429 3,352 3,556 4,902 5,880 6,456 EBITDAF 405 941 532 918 1,076 1,201 EBIT 231 295 329 656 791 943 Net Financing Cost(1) (43) (49) (45) (148) (175) (215) Tax expense (54) (80) (77) (
Slide 45: Growth requires significant capital expenditure
Origin’s growth has required significant capital expenditure. Acquisitions in the Retail and Generation areas have provided immediate contributions… For personal use only Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 ($m) ($m) ($m) ($m) ($m) ($m) Growth & Acquisitions E&P 129 179 313 335 600 414 Retail
Slide 46: Cash flow measures as primary performance measure
Origin uses cash flow measures as the primary measure of performance within the business… For personal use only Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 ($m) ($m) ($m) ($m) ($m) ($m) EBITDAF 405 491 532 918 1,076 1,201 Non-cash items(1) (17) 13 2 4 1 (7) Change in Working Capital 16 39 (48) (31) 16
Slide 47: Conservatively geared balance sheet
This has allowed Origin to maintain a conservatively geared balance sheet and take on the extra debt to fund ongoing investment in growth For personal use only Jun Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 02 Net debt ($m) 633 732 861 2,743 2,411 2,958 Total equity ($m) 1,626 1,790 1,939 3,519 3,646 6,969
Slide 48: For more information
For more information For personal use only For more information on Origin Energy please contact Angus Guthrie Manager, Investor Relations Email: angus.guthrie@originenergy.com.au Office: +61-2-8345 5558 Mobile: + 61-4-1786 4255 Alternatively visit our website www.originenergy.com.au and follow the p
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