Origin Energy Limited · ASX:ORG
Origin Energy — Citigroup Australia and New Zealand Investment Conference 2006
64 slides from Origin Energy's conference presentation, Mar 6, 2006
Slide 1: ASX announcement: presentation to Citigroup conference
Origin energy To Company Announcements Office Facsimite 1300 300 021 Company Australian Stock Exchange Limited Date 6 March 2006 From Bill Hundy Pages 64 Subject PRESENTATION Please find attached a copy of a presentation entitled “Creating Australasia’s targest integrated energy company” that Grant
Slide 2: Creating Australasia's largest integrated energy company
Drigin energy Creating Australasia’s largest integrated energy company S ianertengeen Grant King Managing Director, “ wm March 2006 1
Slide 3: Origin and Contact Energy enter merger agreement
On 20 February 2006, Origin Energy of Australia and Contact Energy of New Zealand entered into a merger agreement « To create a trans-Tasman integrated energy group with « Over 2.6 million customers « Interests in around 3,000 MW of gross installed generation « An extensive portfolio of oil & gas ex
Slide 4: Proven track record of delivering shareholder returns
Origin Energy has a proven track record of delivering strong shareholder returns through organic growth and acquisitions Proposed construction . 6f 1,000 MW gas Tired averes - Quarantine Power station developed | power station in Qlé EHIME) | SEAGAS Pipeline comes ‘aad Vic ! an tine * . . * Acquirad
Slide 5: Origin acquired 51.4% interest in Contact Energy
Origin acquired a 51.4% interest in Contact Energy in October 2004 and has been pleased with its investment...... + Strong financial and operational performance + Greater scale and diversity added to Origin’s cash flows « Appropriate returns provided to shareholders at the price paid ...but it has b
Slide 6: Combining the business will create additional value
Combining the business will create additional value in three main areas..... « It eliminates conflicts at a strategic and operational level that arise under the current ownership structure; « It provides the ability to manage its financial position on a unified basis; « It provides the ability to be
Slide 7: Alternative options considered for combination
Origin considered alternative options for a combination of the two companies... * cash takeover offer is not viable - Tried but unsuccessful on previous occasions +a scrip offer is even less attractive - Contact shareholders would lose access to a primary listing on the NZX, would lose access to imp
Slide 8: Merger by DLC is the only viable option
As the 51.4% stakeholder in Contact it was appropriate for Origin to find a way to combine the companies A merger by way of a DLC provides: « All the benefits of merging the organisations « Preserves the listing of Contact on the NZX and Origin on the ASX and retains the involvement of over 200,000
Slide 9: Origin approached Contact with DLC proposal
Origin approached Contact with the proposal to merge by way of a dual-listed company structure... + Contact established an Independent Directors Committee (IDC) consisting of Phil Pryke - Chairman, Tim Saunders, John Milne + Advisors engaged to assess the proposal, detailed financial modeling undert
Slide 10: Merged business will eliminate conflicts
A merged business will eliminate conflicts at a strategic and operational level......... «The merged business will pursue its strategy unfettered by conflicts of interest - Aligns Origin and Contact’s interests in pursuing growth opportunities in New Zealand by combining Contact’s and Origin’s New Z
Slide 11: Merger increases scale and access to equity capital
The merger increases business scale and improves access to equity capital via shareholders in two markets... increases financial flexibility via greater liquidity in equity markets The merged Group will have ~200,000 sharehoiders S&P has advised the Group will have a BBB+ credit rating (Contact Ener
Slide 12: Operational and geographical diversity reduces financial risk
..while the increased operational and geographical diversity reduces financial risk. Origin Contact ContactOrigin Nets rk: Networks aoa Upeareon oe 4 Upstream 238 Generation Business mix a Australia ewe Si fy Zealand i Geography 38K las Based on EBITDA modetting Ibi Origin based os partial cossplida
Slide 13: Historically low dividend payout relative to peers
Origin Energy has historically maintained a low dividend payout to gearing relative to peers Dividend payout ratio vs gearing 20.4373 » 140% GasNet 12% 2 APT 0% ves Rie a “ Origin 40% Gil Seach ae som * 4 ert” antes Payout Ratio Pre Goodwill (June 05) oo g g o 2% P -2Re 10% 0% 10% DN 308% M8 50% 20%
Slide 14: More growth options and managing Contact's fuel challenges
The merger provides more options for growth and alternatives to better manage Contact’s future fuel challenges 13 ¢ Contact’s growth relies primarily on new thermal generation « Contact has a limited timeframe to identify whether more gas will be found in NZ or commit to an imported fuel strategy ¢
Slide 15: Description of the DLC
Description of the DLC * ADLC is a merger achieved by contract Creates a single economic group in which Origin and Contact shareholders have an identical economic interest « The economic interests of each group of shareholders is fixed by the merger ratio at the time of entering the DLC « The compan
Slide 16: On implementing the DLC
On implementing the DLC.... « No shareholder will have to sell or exchange their shares « The companies will each retain their current stock exchange listing - Origin Energy will remain listed on the ASX with ticker ORG - Contact Energy will remain listed on the NZX with ticker CEN « Each share in O
Slide 17: The merger ratio
The merger ratio « The merger ratio is determined by the relative economic value brought to the DLC by each company + The merger ratio has been agreed between the companies on the basis of the market capitalisation of the two entities over the last nine months as determined by the 9 month volume wei
Slide 18: Benefits to Contact Shareholders
Benefits to Contact Shareholders « Contact shareholders will benefit immediately from a special dividend which will be paid by way of taxable bonus share of 7.3 shares per 100 existing shares and a dividend of NZ 5 cents per share « Contact Directors expect to declare a final dividend for current fi
Slide 19: Benefits to Origin shareholders
Benefits to Origin shareholders * Origin Energy shareholders will receive a bonus issue of 18.3 shares per 100 shares currently held to give effect to the equalisation ratio + Origin shareholders will benefit from the DLC having improved cashflows while maintaining gearing on an enlarged capital bas
Slide 20: Merger focused on creating additional value
The ContactOrigin merger is focused on creating additional value... + No immediate impact on operating activities of either business * Merged group should expand job opportunities for employees + Sydney and Wellington offices will remain + Origin and Contact brands to be retained + Business as usual
Slide 21: Implementation steps
Implementation steps « No action is required immediately by shareholders in either country « Shareholders will be sent explanation letters in the next week « After due approval processes have been followed shareholders in each company will be sent a detailed Explanatory Memorandum (expected to be se
Slide 22: What will the merged business look like
What will the merged business look like « Origin Energy currently consolidates Contact Energy within its accounts « As a guide to shareholders, Origin Energy’s financial statements prior to the elimination of minorities serve as a useful starting point for the financial position of ContactOrigin. Th
Slide 23: Profit & Loss
Profit & Loss Dec 05 Dec 04 ($m) % change ($m) Revenue and other 3,008 2,291 31% EBITDA 589 441 34% EBIT 442 327 35% Net interest expense (87) (60) 46% Tax expense (92) (74) 25% NPAT (pre OE!) 263 194 36% Outside Equity Interests (69) (24) 190% NPAT (after OEl) 194 170 14% Basic earnings per share (
Slide 24: EBITDA of $589.3 million up 34%
EBITDA of $589.3 million is 34% higher due to the inclusion of Contact for a full six months Divisions Dec 05 Dec04 % change ($m) ($m) Exploration & Production 98.7 117.7 (16%) Retail 142.2 158.9 (10%) Generation 43.1 29.7 45% Networks 15.8 18.8 (16%) Contact 289.5 115.5 151% Total 589.3 440.6 34% E
Slide 25: Funding & Interest
Funding & Interest Six months ended Dec 05 ($m) Jun 05 Dec 04 ($m) ($m) Net debt ($m) 2,673 2,743 2,742 Total equity ($m) 3,782 3,516 3,389 Net debt to equity (%) 71% 78% 81% Debt to (debt + equity) (%) 41% 44% 45% Net interest expense ($m) 87 135 53 Net interest cover (x EBIT)* 4.5 4.2 5.3 Average
Slide 26: Operating cash flow
Operating cash flow Dec 05 ($m) Dec 04 ($m) EBITDA 589 441 Change in working capital (9) (38) Stay-in-business capex (net*) (134) (55) Other (incl, non-cash items) 19 18 Tax (44) (64) OCAT 421 301 Net interest paid (93) (54) Free cash flow 328 247 * Net of proceeds on sale « OCAT ratio for calendar
Slide 27: Outlook
Outlook Profit over the first half was enhanced by a full six months contribution from Contact and an increased contribution from Generation Assuming current market conditions prevail, earnings for the full year are expected to be 10-15% higher than the recurring A-IFRS earnings in the prior period
Slide 28: Merger provides unique opportunity to benefit shareholders
Looking further ahead, the merger provides a unique opportunity for the shareholders of both companies to benefit from the increased value arising from combining the businesses e Will create Australasia’s largest integrated energy group with a market capitalisation of AS7 billion and more than 200,0
Slide 29: Disclaimer
Disclaimer 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 statements speak only as of the date of the announcement. This presentation should not be relied upon as a recommendation to buy or sell
Slide 30: Appendix: Interim Results Announcement
arigin energy Appendix interim Results Announcement Half-year ended 31 December 2005 vor ateamyy 20 February, 2006 ete
Slide 31: Outline
Outline « Performance Highlights « Financial Review Operating Review « Outlook - All comparative data are in relation to the prior corresponding period, July - December 2004 and have been restated for A-IFRS, unless otherwise stated - All references to $ are references to Australian dollars unless o
Slide 32: Performance Highlights
Aris Nn energy Performance Highlights
Slide 33: Financial Highlights
Financial Highlights Revenue and other EBITDA NPAT Normalised basic EPS Free cash flow (FCF) FCF per share Debt / (debt + equity) OCAT Ratio? Interim dividend (fully franked) (1} Compared to financial year end June 2605 (2} Calendar year 2005 32 $3,008 million $589 million $194 million 25.5 cps $328
Slide 34: Operating Highlights
Operating Highlights * Increased capacity of sales gas from Spring Gully to 35 TJ/day * Otway Gas Project on target for commissioning in June 2006 * Commissioning of the Lang Lang gas processing plant commenced in December 2005 * Seismic survey acquired over the Trefoil discovery « Major onshore and
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Slide 36: Profit & Loss
Profit & Loss Dec 05 Dec 04 ($m) % change ($m) Revenue and other 3,008 2,291 31% EBITDA 589 441 34% EBIT 442 327 35% Net interest expense (87) (60) 46% Tax expense (92) (74) 25% NPAT (pre OEI) 263 194 36% Outside Equity Interests (69) (24) 190% NPAT (after OEI) 194 170 14% Basic earnings per share (
Slide 37: EBITDA of $589.3 million up 34%
EBITDA of $589.3 million is 34% higher due to the inclusion of Contact for a full six months Divisions Dec 05 Dec04 % change ($m) ($m) Exploration & Production 98.7 117.7 (16%) Retail 142.2 158.9 (10%) Generation 43.1 29.7 45% Networks 15.8 18.8 (16%) Contact 289.5 115.5 151% Total 589.3 440.6 34% E
Slide 38: A-IFRS Impact on EBIT and Profit
A-IFRS Impact on EBIT and Profit Dec 05 Total under A-GAAP Total A-IFRS adjustments (pre-Successful Efforts) Successful Efforts Total A-IFRS adjustments Total reported under ACIERS Contingent asset (Moomba claim*) 442 Effective interest basis for Envestra distributions received* Total recurring unde
Slide 39: Successful Efforts
Successful Efforts Dec:05 Dec 04 SM SM EBITDA before Successful Efforts 604 455 increase in Expioration Expense (15) (14) Restated EBITDA 589 444 NPAT after Minorities before Successful Efforts 201 176 increase in Expioration Expense (15) (14) Decrease in Amortisation Expense 5 5 Decrease in Tax Exp
Slide 40: AASB Financial Instruments
AASB 139 Financial Instruments « Comparatives for December 2004 and June 2005 are not required to be restated under AASB 139 Financial Instruments « Net impact on profit for the December 2005 half year is small due to a number of offsetting impacts « The impact on profit in future periods may be mor
Slide 41: Depreciation & Amortisation
Depreciation & Amortisation Dec 05 ($m) Dec 04 ($m) Property plant & equipment 117.5 81.3 Producing fields 29.3 27.9 Other 0.8 4,4 Total 147.6 113.6 « Increase in PPE depreciation due to full six months contribution of Contact « Goodwill no longer amortised under A-IFRS Origin 40
Slide 42: Funding & Interest
Funding & Interest Six months ended Dec 05 Jun 05 Dec 04 ($m) ($m) ($m) Net debt ($m) 2,673 2,743 2,742 Total equity ($m) 3,782 3,516 3,389 Net debt to equity (%) 71% 78% 81% Debt to (debt + equity) (%) 41% 44% 45% Net interest expense ($m) 87 135 53 Net interest cover (x EBIT)* 4.5 4.2 5.3 Average
Slide 43: Operating cash flow
Operating cash flow Dec 05 ($m) Dec 04 ($m) EBITDA 589 441 Change in working capital (9) (38) Stay-in-business capex (net*) (134) (55) Other (incl, non-cash items) 19 18 Tax (44) (64) OCAT 421 301 Net interest paid (93) (54) Free cash flow 328 247 * Net of proceeds on sale * * * OCAT ratio for calen
Slide 44: Growth capex for major development projects increased
Growth capex for major development projects increased... Dec 05 ($m) Dec 04 ($m) Stay-in-business 105.5 56.4 Growth Exploration & Production 223.9 142.4 Retail 11.0 11.4 Generation 6.7 3.5 Networks - - Contact 12.0 10.3 Total capital expenditure 359.1 224.0 Acquisitions 66.5 967.5 Capex including ac
Slide 45: Cash flow returns from business segments
Cash flow returns from business segments are measured at pre- tax and targets of 14.3% over a full year Funds Operating OCFRDec OCFR Dec Employed Cash flow 05 (%) 04 (%) ($m) ($m) Half year returns* Exploration & 1,357 104.9 7.7% 6.3% Production Retail 1,262 94.2 7.5% 11.1% Generation 323 23.1 7.1%
Slide 46: Interim fully franked dividend declared
An interim fully franked dividend of 9 cents per share has been declared (prior period 7 cents fully franked) 18 Dividends - cents per share 16 - 400% 100% 40% 100% 160% 100% 144 Franking Payment and DRP + Ex-dividend date 23 February + Date of record 1 March + Payable 20 March + DRP to apply at no
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Slide 48: Exploration & Production: EBITDA of $98.7m
Total Segment Revenue BEBSITDA m} Exploration & Production: EBITDA of $98.7m down 16% due to non-recurring items in 2004 ... 250 300 mi Dec-05 ¢ 2004 includes a $9,4m adjustment of + 250 Moomba insurance claim under A-IFRS and $10.5m benefit from CGP sale t20o * Total production of 39.7PJ down 8% du
Slide 49: Development of Otway Gas and BassGas projects
Development of the Otway Gas and BassGas projects progressed during the half... Otway Gas Project (30.75%) BassGas Project (42.5%) » Project 70% complete at 31 December =» Acquired an additional 5% interest 2005 « With the Safe Astoria on site, defect and * HDD 100% complete rectification work has r
Slide 50: Coal Seam Gas developments
Coal Seam Gas developments 49 « Spring Gully production increased to 35 TJ/day « Ongoing investment in the Spring Gully project will increase capacity to 75 TJ/day in the medium term « Acquired 42% interest in the Argyle Coal Seam Gas Project with net 2P reserves of 117 PJ in February 2006 (adjacent
Slide 51: Kupe Gas Project planning and development
Planning and development of the Kupe Gas Project has progressed and new exploration permits secured in ... Kupe Gas Project (50%) « Two new permits granted adjacent to PEP 38485 « Offshore drilling contract awarded for the development of three wells. Drilling program planned for first half 2007 « Bi
Slide 52: Retail: EBITDA of $142.2 million
Retail: EBITDA of $142.2 million down 11% due to lower electricity margins and higher customer acquisition costs... Total Segment Revenue ($m) 1,800 200 1,600 4 wi Dec-05 + 180 @ Dec-04 1,400 4 7 160 1,200 4 7 140 + 120 1,000 4 + 100 goo 4 + 80 600 | L 60 400 4 | 40 200 4 | 20 o4 + 0 51 Revenue EBIT
Slide 53: Gas and LPG volumes slightly higher, electricity down
Gas and LPG volumes slightly higher however electricity volumes down ... Product information and % Natural Gas Electricity LPG change from Dec 04 Revenue (A$m) 460 (41%) 843 6.3% 277 (49%) Gross margin (A$m) 85 (49%) 139 (9%) 73 (1%) Sales (PJ) 62 (+1%) - ~ Sales (TWh) - 7.8 (-5%) - LPG (Ktonnes) -
Slide 54: Contract market softened short term, strengthened longer dates
The contract market has softened in the short term but strengthened in longer dates Victorian Spot and Forward Contract Electricity Prices PL ---b-f]----P------L------ ---| June ss | fpurpley End Jun b¢ | Forword Curve sft PYAGIT Pyare —FYaq@nH §3
Slide 55: Customer numbers increased by 39,000
Customer numbers increased by 39,000 since December 2004... dhass Market Churn: Compteted & Pending 60% Customers | Natural Gas | Electricity 55% -— vic Elec ——¥ie Gas {'000) soe | [tee mew iN Dec-04 18 856 - | Dec-05 904 909 Net Change (14} 53 35% \ o | \ 3x -Continued to expand inte NSW & SA marke
Slide 56: Warmer temperatures and high LPG prices curtailed contributions
Warmer temperatures and continued high LPG prices has curtailed contributions ... Average International Propane Price (CP) Jul-bec-05 « Cost of LPG (CP) averaged seo 1 jubecod Ag6IS A$615/tonne over period ; ASS34 —_—_, {increase of 15% on prior year) y A “3503 and 27% on 3 year average z °°] —_ + W
Slide 57: Generation: EBITDA of $43.1 million up 45%
Generation: EBITDA of $43.1 million up 45% from higher capacity payment and higher plant availability 80 wy a “a io] o °o L Total Segment Revenue & EBITDA ($m) a Fe) 56 Revenue EBITDA * excludes acquisitions i Dec-05 @ Dec-04 Capex* 25 ; 20 + 5 + Ladbroke Grove converted to operate on gas supplied f
Slide 58: Power plants exceeded contracted and market targets
Exceeded all contracted and market targets with the exception of Bulwer Island and Ladbroke Grove ... Major Origin Origin | Capacity Type Operation Availability Contracting Power Plants Int. % MW Party Worsley 50 120 Cogen | Base 98% Western Power & Worsley Bulwer Is, 50 32 Cogen | Base 91% BP Osbor
Slide 59: Networks: EBITDA of $15.8 million
Networks: EBITDA of $15.8 million down 16% due to change in accounting treatment of the Envestra distribution 90 0.6 & 80 4 % Dec-05 ~ M@ Dec-04 | 9.5 & 704 a Fa WwW 60- p 0.4 a § 504 & L 9,3 & 40 = b 30 4 + 0.2 & 204 a + 0.1 104 ko o4 + 0.0 Revenue EBITDA Capex* * excludes acquisitions 58 (ug) xade
Slide 60: Contact: EBITDA of $289.5 million up 151%
Contact: EBITDA of $289.5 million up 151% ... 1200 : wDec-05 350 + Completed acquisition of 51.4% interest | mDec-04 on 1 October 2004. Results for Dec-05 = 1000 4 7 300 includes full six months compared to & three months in Dec-04 g + 250 & 5 800 5 3 » Sale of Valley Power peaker station in & + 200
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Slide 62: Outlook
Outlook Profit over the first half was enhanced by a full six months contribution from Contact and an increased contribution from Generation Assuming current market conditions prevail, earnings for the full year are expected to be 10-15% higher than the recurring A-IFRS earnings in the prior period
Slide 63: For more information
For more information: 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 fotlow the prompts to the Investo
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Origin Energy — Citigroup Australia and New Zealand Investment Conference 2006 on 6ix