Origin Energy Limited · ASX:ORG
Origin Energy — Merger or Acquisition (May 2020)
23 slides from Origin Energy's merger presentation, May 1, 2020
Slide 1: Strategic partnership with Octopus Energy
Strategic partnership with Octopus Energy Frank Calabria, CEO & Jon Briskin, EGM, Retail 1 May 2020
Slide 2: Partnership with disruptive UK energy retailer and technology company
Partnership with disruptive UK energy retailer and technology company • Collaboration with Octopus to adopt its globally distinctive operating model and proprietary “Kraken” Unlocking value in partnership with platform, delivering superior customer experience and driving a material reduction in cost
Slide 3: Partnership aligns to our strategy and opens up future growth
Partnership aligns to our strategy and opens up future growth Connecting customers to the energy and • The partnership enables Origin to differentiate, accelerate its technologies of the future retail strategy and open up future growth opportunities − Radical improvement in customer experience − Mat
Slide 4: Octopus is a globally distinctive, best in class energy retailer and technology business
Octopus is a globally distinctive, best in class energy retailer and technology business through its proprietary Kraken platform Launched in 2016 600 employees ~£1.5bn annualised revenue Top-scoring 4.8/5 customer Founded by tech and (~10% monthly growth satisfaction rating on Trustpilot1 consumer e
Slide 5: Octopus has a proven track record of growth as a UK energy retailer
Octopus has a proven track record of growth as a UK energy retailer… Growing customers organically at Cost to serve ~40% lower than next Churn differential to the market 40-50K per month on average best major peer (£/customer1) (quarterly churn, annualised %) Grown from <100k to ~1.5 25% million cus
Slide 6: A track record in licensing its proprietary technology
… as well as a track record in licensing its proprietary technology Octopus expects >£300 million in contracted licensing revenue over the next 3 years, with further upside potential1 Kraken licensed customer accounts (m) • ~17 million accounts through licensing deals to date 20 ‒ E.ON: Migrating ~6
Slide 7: We will adopt Octopus' proven operating model and Kraken platform
We will adopt Octopus’ proven operating model and “Kraken” platform • Small autonomous teams take full accountability by managing their own specific group of ~50k customers and looking after the end-to- end customer lifecycle Operating • Teams are given 2 objectives based on outputs model built arou
Slide 8: Good progress to date on our retail strategy
Good progress to date on our retail strategy Transforming Target market Embrace a Grow new customer leading cost decentralised & revenue streams experience position digital future ✓ Personalised, ✓ Increasing automation ✓ Community Energy ✓ Data analytics capability effortless digital Services – emb
Slide 9: Octopus' proven model will deliver the next wave of our strategy
Octopus’ proven model will deliver the next wave of our strategy Transforming Target market Embrace a Grow new customer leading cost decentralised & revenue streams experience position digital future • Radically simplified • Lower technology • Rapid and seamless • Builds on existing digital processe
Slide 10: The retail redesign unlocks four competitive strengths for Origin
The retail redesign unlocks four competitive strengths for Origin… 1. Agile operations • A unique model, empowering lean teams with accountability for the end-to-end lifecycle of 4. Customer experience specific customer groups 2. Data centricity • Premium experience online • Providing real-time and
Slide 11: Targeting a step change in customer experience and costs
Targeting a step change in customer experience and costs Origin retail cost estimates (A$m) 1,000 ~$200-250 million Octopus customer experience highlights reduction 800 overall from ➢ Best-in-class award by Which?1 FY2018 base ➢ Highest Trustpilot2 score of 4.8/5 600 Targeting ➢ Churn of 1.2%/month
Slide 12: Executable plan to deliver savings
Executable plan to deliver savings Setup MVP Scale up Complete Closeout in FY2023 • Customer • Build MVP • Build out platform and operations teams • 100% of customers migrated • Decommissioning of legacy migration platform and systems planning operating • Majority of customers migrated in cohorts •
Slide 13: Consideration phased over four financial years, benefits from FY2022
Consideration phased over four financial years, benefits from FY2022 • Consideration1 of ~$134 million on completion and ~$373 million staged over four financial years Estimate of phased cash costs and savings1 (A$m) − ~$48 million contingent on delivery milestones (e.g. successful migrations) 200 •
Slide 14: Transaction summary
Transaction summary Origin retail 20% equity interest • Origin and Octopus will collaborate to: • Exposure to leading edge retail practices and technology enhancements ‒ adopt Octopus’ best in class operating model across Origin's customer divisions • Exposure to Octopus’ growth plans: ‒ implement K
Slide 15: Disciplined capital framework to maintain resilience & maximise returns
Disciplined capital framework to maintain resilience & maximise returns • Strong cash generation from existing business ‒ Large customer base and flexible wholesale portfolio in Energy Markets Cash from Cash from Interest ‒ APLNG self-funding in FY2021 at oil prices at or above US$25/bbl operating i
Slide 16: Questions?
Questions? 16 1 May 2020 Strategic partnership with Octopus Energy
Slide 17: Appendix
Appendix 17 1 May 2020 Strategic partnership with Octopus Energy
Slide 18: UK market context
UK market context UK electricity market size and Market Competition Avg Ofgem Default Tariff (£) concentration (Quarterly churn, annualised %) (for direct debit dual fuel customer) 120% 25% 1,162 100% 33 20% Margin Cost to serve 190 80% 15% 60% 408 Wholesale 10% 40% 5% 20% Networks 307 0% 0% 2010 20
Slide 19: Kraken enables delivery of premium experience at lowest cost
Kraken enables delivery of premium experience at lowest cost • Market leading end-to-end, single utility software platform developed in-house (rated in the top 1% of all software by assurance specialists, CAST) • Cloud-based system with machine learning and digitalisation at its core, spanning billi
Slide 20: Octopus builds technology to bring lower and more transparent pricing
Octopus builds technology to bring lower and more transparent pricing, better service and more sustainable energy to customers Greg Jackson, 48, Founder & CEO • ~1.5 million UK retail customers (~2.7 million accounts, or ~5% market share): Growing organically at an average of • Serial technology ent
Slide 21: Estimate of phased transaction costs and savings
Estimate of phased transaction costs and savings Cash cost/savings (A$m) Total FY20 FY21 FY22 FY23 FY24 Upfront consideration (134) (134) - - - - Staged consideration1 (325) - (114) (76) (135) - Contingent consideration2 (48) (10) (19) - (19) - Implementation cost estimates3 (80-100) ~(10) ~(15) (30
Slide 22: Important Notices
Important Notices Forward looking statements This presentation contains forward looking statements, including statements of current intention, statements of opinion and predictions as to possible future events. Such statements are not statements of fact and there can be no certainty of outcome in re
Slide 23: For more information
For more information Peter Rice General Manager, Capital Markets Email: peter.rice@originenergy.com.au Office: +61 2 8345 5308 Mobile: + 61 417 230 306 Liam Barry Group Manager, Investor Relations Email: liam.barry@originenergy.com.au Office: +61 2 9375 5991 Mobile: + 61 401 710 367 originenergy.com