Origin Energy Limited · ASX:ORG
Origin Energy — Investor Day (November 2020)
73 slides from Origin Energy's investor day presentation, Nov 26, 2020
Slide 1: Origin Energy 2020 Investor Briefing
Origin Energy 2020 Investor Briefing 26 November 2020
Slide 2: Acknowledgement of Country
Acknowledgement of Country We acknowledge the Gadigal People of the Eora Nation as the traditional custodians of the land on which we gather today, and pay our respects to their Elders - past, present and emerging
Slide 3: Outline
Outline 1. Overview - Frank Calabria 2. Integrated Gas - Mark Schubert Break 3. Energy Markets - Supply - Greg Jarvis 4. Energy Markets - Retail - Jon Briskin, Anthony Lucas 5. Capital Management - Lawrie Tremaine Wrap-up / Q&A 3 26 November 2020 2020 Investor Briefing
Slide 4: Overview
Overview Frank Calabria, CEO 4 26 November 2020 2020 Investor Briefing
Slide 5: A customer focused energy business positioned for a low carbon future
A customer focused energy business positioned for a low carbon future Market leading assets & capabilities Preferred position for energy transition ✓ Large domestic retail customer base ✓ Most advanced digital customer strategy ✓ Leading energy wholesale & trading capability ✓ Short energy, covered
Slide 6: Social purpose is more than just a license to operate
Social purpose is more than just a license to operate Getting energy right Our Customers Our Communities Our People Our Planet ✓ Bushfire, drought and ✓ Awarded Best ✓ Top quartile staff ✓ Short term emissions COVID-19 relief Workplace to Give Back engagement in FY2020 target linked to 2020 executiv
Slide 7: Taking action on climate change
Taking action on climate change We unequivocally support the Paris Agreement to limit the world’s temperature rise to well below 2°C above pre-industrial levels and pursue efforts to further limit this increase to 1.5°C Origin’s commitments and targets1 Origin’s actions ✓ Origin announced Australia’
Slide 8: Global energy trends represent growth opportunities
Global energy trends represent growth opportunities Renewable fuels and storage Convergence of data and energy ✓ Renewables growth as coal retires ✓ Virtual Power Plants unlocking ✓ Gas and storage to play a key customer value and bolstering ‘firming’ role wholesale capability ✓ Demand growth for re
Slide 9: Our strategy to deliver value and grow
Our strategy to deliver value and grow Connecting customers to the energy and technologies of the future e Maximise value of the Pursue growth in customer value 1 2 existing businesses and low carbon solutions 9 26 November 2020 2020 Investor Briefing
Slide 10: Integrated Gas
Integrated Gas Maximise value of the Pursue growth in customer value 1 2 existing businesses and low carbon solutions Strong operating and reservoir performance at APLNG Accelerate towards clean energy • Upgraded FY2021 production guidance by 25 PJ and • Leading proponent in commercialisation of ren
Slide 11: Energy Markets
Energy Markets Maximise value of the Pursue growth in customer value 1 2 existing businesses and low carbon solutions Strong foundations in a changing landscape Lead the convergence of energy and data • Low cost retailer today, targeting further cost reduction • Grow in customer scale through low co
Slide 12: Financial performance and outlook
Financial performance and outlook Recap on FY2020 results FY2021 outlook Underlying Profit of $1,023m (58.1 cps) Reconfirming Energy Markets guidance for Stable vs FY2019 with lower Corporate and LNG hedging costs FY2021 partly offset by lower electricity margin Underlying EBITDA of A$1,150 – 1,300
Slide 13: Integrated Gas
Integrated Gas Mark Schubert, EGM Integrated Gas 13 26 November 2020 2020 Investor Briefing
Slide 14: Asia Pacific gas demand forecast to grow under low carbon environment
Asia Pacific gas demand forecast to grow under low carbon environment Asia Pacific Gas Demand (bcm) 2019 to 2040 1,700 CAGR 4.4% 1,500 • Natural gas will play a vital role in energy transition in the Asia Pacific: 1,300 3.6% – Critical to provide firming to intermittent renewables 1,100 – Decarbonis
Slide 15: APLNG continues to perform, building on strong foundations
APLNG continues to perform, building on strong foundations Quality resource Low-cost operator Record production APLNG reserves and cumulative Capex + opex3 ($m) Production (PJ) production1 (PJ) 2,800 720 18,000 700 15,000 2,600 12,000 680 9,000 2,400 660 6,000 2,200 640 3,000 620 - 2,000 FY18 FY19 F
Slide 16: Targeting further value accretion at APLNG through five levers
Targeting further value accretion at APLNG through five levers Five value levers Creating value Creating alignment Gas Processing Facility Workover rig Well site 1. Reduce well costs • Reduced current $/well run rate from • Focused the organisation around FY2019: delivering activities that provide t
Slide 17: APLNG responding to recent market demand outlook for FY2021
APLNG responding to recent market demand outlook for FY2021 • Ability to ramp up to meet market demand with record APLNG average production TJ/day (100%) operated asset production of 1,614 TJ/day achieved in November 2020 2,100 Production flexibility – strong well recovery post production curtailmen
Slide 18: APLNG CSG resource base continues to improve
APLNG CSG resource base continues to improve Field production: Talinga and Orana • Talinga / Orana fields: – improved reservoir performance in developed areas – prioritised highest value areas TJ/d (6 month rolling average) – optimised online wells • Reedy Creek / Combabula fields: – improved reserv
Slide 19: Strong APLNG field performance enables less capex to sustain production
Strong APLNG field performance enables less capex to sustain production Wells drilled and production • Strong operated field performance coupled with 800 350 reserve increases enables: - a reduction in drilling rigs from three shallow rigs 700 300 in FY2020 to one 600 - deferral or non-participation
Slide 20: Updating FY2021 guidance & re-setting medium term outlook
Updating FY2021 guidance & re-setting medium term outlook FY21 previous FY21 updated APLNG (100%) FY19 FY20 guidance guidance Production (PJ) 679 708 650-680 675-705 Capex + opex, excl. purchases1 (A$b) 2.7 2.5 2.0-2.2 2.1-2.3 Unit capex + opex, excl. purchases1 (A$/GJ) 4.0 3.5 2.9-3.4 3.0-3.4 Distr
Slide 21: APLNG actively reducing operational emissions
APLNG actively reducing operational emissions Successful Scope 1 emissions reduction activities Further opportunity to reduce emissions APLNG Scope 1 operational emissions (kt CO2e) 1,100 950 800 650 500 Knock out drum 1 FY17 FY18 FY19 FY20 • 29% reduction in Scope 1 operational emissions from • Emi
Slide 22: Beetaloo – adding value through E&A, focused on liquids-rich gas plays
Beetaloo – adding value through E&A, focused on liquids-rich gas plays • Kyalla 117 well successfully drilled and fracture stimulated – mud logs indicate liquids-rich1 gas – 11-stage fracture stimulation executed to plan - extensive fracture network – core analysis ongoing - good porosity and permea
Slide 23: Beetaloo – engaging with host Traditional Owners
Beetaloo – engaging with host Traditional Owners • We recognise and respect the connection of all Aboriginal and Torres Strait Islander peoples have to their country • Our relationship and engagement with our Native Title holders and host Traditional Owners (those who speak for the areas where we op
Slide 24: Australian green hydrogen demand to be customer led
Australian green hydrogen demand to be customer led National Hydrogen Strategy - hydrogen demand (mtpa) Green gaseous hydrogen production cost (US$/Kg) 40.0 6.0 Energy of the Future (export + domestic) 5.0 30.0 -60% 4.0 20.0 3.0 Targeted Deployment (export + domestic) 2.0 Green 10.0 1.0 Optimal gree
Slide 25: Participating in hydrogen is a natural extension of Origin's core capabilities
Participating in hydrogen is a natural extension of Origin’s core capabilities Green hydrogen and ammonia value chain Origin adds value through access to low cost renewable power and wholesale electricity trading expertise, including demand response and grid services Electrolysis Natural gas network
Slide 26: Green hydrogen and ammonia partnerships and projects underway
Green hydrogen and ammonia partnerships and projects underway Green hydrogen Green liquid hydrogen export Green ammonia for export – domestic demonstration NH3 and H2 for domestic H2 injection into green manufacturing domestic gas network Renewable energy with grid H2 mobility connection Sustainable
Slide 27: Integrated Gas value opportunities
Integrated Gas value opportunities APLNG Asset • Improved gas recovery and field performance • Upgraded FY2021 production guidance • Targeting 10% - 20% reduction in capex + opex unit costs over FY2022-24 from previous outlook • Pursuing further value creation through APLNG lever program E&A Assets
Slide 28: Break
Break 28 26 November 2020 2020 Investor Briefing
Slide 29: Energy Markets – Supply
Energy Markets – Supply Greg Jarvis, EGM Energy Supply and Operations 29 26 November 2020 2020 Investor Briefing
Slide 30: Strong assets, capabilities and market position
Strong assets, capabilities and market position Flexible generation assets Competitive gas supply Leading trading capability Owned/contracted dispatchable External gas sales (PJ) generation (MW) Strategic NPS 282 214 222 204 664 188 SWQP 167 Moomba Wallumbilla 2,880 423 Customer interaction NPS 566
Slide 31: Market is going through transition
Market is going through transition Strong investment in renewables… … but not matched by investment in … and the ageing coal fleet dispatchable capacity is approaching retirement Recently commissioned and committed NEM generation capacity by type Forecast NEM coal capacity (GW) NEM generation capaci
Slide 32: Preferred portfolio for the transition: short energy, balanced capacity
Preferred portfolio for the transition: short energy, balanced capacity TWh GW Short energy Covered for peak demand 40 10 35 Long-Term Losses Short Contracts position 8 30 ~11 TWh variable Short-term cost supply Business Short-Term 25 Business contracts Contracts recontract 6 over 1 – 3 Gas Gas can
Slide 33: Evolving Eraring to better position it for increasing renewables
Evolving Eraring to better position it for increasing renewables Operational strategies and their timing will be dependent on changes in market conditions TODAY NEAR TERM MEDIUM TERM Increased intra-day ramping of Greater intra-day ramping with Units phased out of operation 4 units with potential fo
Slide 34: Peaking portfolio is well placed but with enhancement opportunities
Peaking portfolio is well placed but with enhancement opportunities Origin firming portfolio today Future opportunities Thermal peaking generation Pumped hydro Batteries • 3,149 MW of thermal peaking • 240 MW of pumped hydro long • Provide very fast start short assets providing long duration duratio
Slide 35: Progressing development opportunities to enhance our portfolio
Progressing development opportunities to enhance our portfolio Existing generation Contracted renewable PPAs Darling Downs (644 MW CCGT) Development opportunities Expansion potential • Government taking an (battery and fast start gas) active role in underwriting Morgan and direct energy market Solar
Slide 36: Competitive gas supply
Competitive gas supply Energy Markets contracted gas (PJ) Scale, integration and trading ability are our key strengths 300 • Scale to contract with major supply fields and commit to large capacity (transport and storage), enabling us to 250 shift gas to where it is needed most • Integration with the
Slide 37: Maximising value and pursuing growth opportunities
Maximising value and pursuing growth opportunities Maintain competitive • Maintain short energy position to benefit from low-cost renewables cost of energy • Evolving Eraring to better position it for increasing renewables Gas portfolio a • Strong gas supply underpinned by contract length and transp
Slide 38: Energy Markets - Retail
Energy Markets - Retail Jon Briskin, EGM Retail Anthony Lucas, EGM Future Energy and Technology 38 26 November 2020 2020 Investor Briefing
Slide 39: Delivering the fundamentals of a great retail business
Delivering the fundamentals of a great retail business Large customer base Leading customer experience Low-cost operator Customer accounts ('000) Strategic NPS Retail cost estimates (A$m) FY17 FY18 FY19 FY20 ~$200-250 million 3,900 +33K 3,871 2 1000 reduction +27K 3,838 (6) 800 3,811 (13) 3,800 (16)
Slide 40: Growing revenue streams
Growing revenue streams Community Energy Services & Solar Broadband 20% share in Octopus Energy CES and Solar gross profit ($m) Broadband customer accounts ('000) 120 106 Strategic NPS 20 100 83 31 80 66 26 60 10 20 22 40 75 57 20 44 8 0 0 - FY18 FY19 FY20 FY18 FY19 FY20 CES Solar CES gross profit u
Slide 41: Strategic partnership with Octopus Energy to accelerate our strategy
Strategic partnership with Octopus Energy to accelerate our strategy Adopting Octopus’ disruptive operating model Significant upside potential from 20% equity interest in and proven IT platform (“Kraken”) Octopus Energy • Delivering a radical improvement in customer experience Energy business and dr
Slide 42: On track for 50,000 customer migrations to Kraken in 2020
On track for 50,000 customer migrations to Kraken in 2020 Setup MVP Scale up Complete Closeout in FY2023 • Planning • Build MVP • Build out platform and operations teams • 100% of customers migrated • Decommissioning of legacy platform and systems • Design operating • Majority of customers migrated
Slide 43: Changing energy landscape as Data and Energy converge
Changing energy landscape as Data and Energy converge Current market trends Emerging market trends • Market remains highly competitive • Greater customer empowerment and engagement • Increasingly variable and decentralised generation • Electrification of other sectors (rooftop solar) • Decentralisat
Slide 44: Platform business to fundamentally transform the customer relationship
Platform business to fundamentally transform the customer relationship Traditional Business Platform Business Customer • 4 interaction points per year • Customers home continually interacting with the platform (quarterly bills) • Level of engagement driven by customer • Relationship not defined by e
Slide 45: Core elements for a world class platform business and customer experience
Core elements for a world class platform business and customer experience Traditional Utility Business 2017 2018 2019 2020 NOW Platform Business In house Agile Kraken Flexible, low cost Basic quarterly SAP SAP in cloud Retailing CRM and billing billing transformation layer Capability Cloud analytics
Slide 46: Origin developing leading connected customer Engagement Layer
Origin developing leading connected customer Engagement Layer In market Market testing 20k customers • Behavioural gamified demand response Battery solutions program with rewards, launched in August • Gamified and incentivised ‘self • High customer engagement – 70% sufficiency’ management participat
Slide 47: Capital management
Capital management Lawrie Tremaine, CFO 47 26 November 2020 2020 Investor Briefing
Slide 48: Consistent approach to Capital Management
Consistent approach to Capital Management • Strong free cash flow generation Cash from Cash from Interest operating investing paid • Asset portfolio well positioned for energy transition activities activities1 • Dividend policy of 30-50% of free cash flow unchanged Free cash flow • Maintain target c
Slide 49: Responding to the current economic and policy environment
Responding to the current economic and policy environment 1 Reducing sustaining capital and APLNG development spend 2 Lowering operating costs and managing commodity price risk 3 Managing debt book to lower cost and eliminating funding risk 4 Investigating new models to capture investment opportunit
Slide 50: Responding to commodity cycle by managing our spend down
Responding to commodity cycle by managing our spend down Origin Capex ($m) - Excluding investment in Octopus Origin gross controllable opex1 APLNG Opex2 + Capex ($m) 500 ($m) 3,000 1,000 2,500 400 900 2,000 300 1,500 800 200 1,000 100 700 500 - 600 - FY20 FY21 Medium FY19 FY20 FY21 Guidance term out
Slide 51: Managing oil price exposure
Managing oil price exposure Oil hedging program designed to preserve cash and protect capital structure against commodity cycles FY2021 Full Year Oil Price Sensitivity FY2021 • Origin share of APLNG JCC oil price exposure is ~24 mmboe 55 FY2021 effective price after contract lag & hedging Effective
Slide 52: Generating significant cash even at current low commodity prices
Generating significant cash even at current low commodity prices Estimated FY2021 Origin Free Cash Flow Yield1 16% • Continuing strong free cash flow • Reflects resilience of our businesses 14% Estimated range of 12-15% − Low cost operations 12% − Limited near-term investment required − Diversificat
Slide 53: Managing capital structure and debt book
Managing capital structure and debt book • Committed to investment grade credit rating through cycle Adjusted Net Debt / Adjusted Underlying 4x − Target BBB/Baa2 EBITDA − Gearing of 20-30% 3x − Net Debt/EBITDA 2-3x Target capital structure • Achieved low end of target capital range in FY2020 2x • Ex
Slide 54: Committed to shareholder returns
Committed to shareholder returns Dividends • Dividend policy of 30-50% of Free Cash Flow reaffirmed Dividends declared FY19 FY20 • ~$880 million of dividends paid since dividends recommenced Interim dividend 10cps 15cps • FY2020 dividend yield of 5.6%1 (ASX200 3% 2) Final dividend 15cps 10cps Franki
Slide 55: Investment framework supports value accretive decisions
Investment framework supports value accretive decisions Principles Application Centralised capital allocation process Octopus investment and platform licensing Governance Ranked on returns, risk and strategic fit leading to positive returns and great strategic fit Independent validation of economics
Slide 56: Wrap-up
Wrap-up Frank Calabria, CEO 56 26 November 2020 2020 Investor Briefing
Slide 57: FY2021 guidance update
FY2021 guidance update Provided on the basis that market conditions and the regulatory environment do not materially change, adversely impacting operations. Considerable uncertainty exists relating to potential ongoing impacts of COVID-19 and this guidance is subject to any further material impact o
Slide 58: A customer focused energy business positioned for a low carbon future
A customer focused energy business positioned for a low carbon future Energy Markets Integrated Gas Grow customer scale through low cost position and Strong operating and reservoir performance at leverage platform to sell a broader suite of products APLNG driving the unit cost base lower again and s
Slide 59: Questions
Questions 59 26 November 2020 2020 Investor Briefing
Slide 60: Appendix
Appendix 60 26 November 2020 2020 Investor Briefing
Slide 61: Origin: our business
Origin: our business Leading Australian energy retailer, with 4.2 million Energy sales to 4.2 million accounts and a low-cost, customer centric delivery model customer accounts Preferred short energy position, but covered for peak demand via >7,400MW of owned and contracted generation Renewable ener
Slide 62: FY2020 sustainability performance
FY2020 sustainability performance Customers Communities Strategic Net Promoter Score Regional procurement spend 2 as % of total spend 33,100 >$2.9m 14% 12% Customers successfully completed Contributed by the (6) 5% our Power On hardship program Origin Energy Foundation (13) FY18 FY19 FY20 FY18 FY19
Slide 63: HS&E
HS&E Committed to keeping our people safe and engaged • Pandemic response plans implemented Origin wide to protect the health and safety of our employees, contractors, and TRIFR customers, and maintain energy continuity as an essential 4.4 service 2.6 2.6 • Strengthened our focus on supporting the m
Slide 64: Sustainability Report
Sustainability Report • More information can be found in our FY2020 Sustainability Report • Our Sustainability Report includes our TCFD and UN Sustainable Development Goals disclosures 64 26 November 2020 2020 Investor Briefing
Slide 65: COVID-19 has contributed to near term commodity headwinds
COVID-19 has contributed to near term commodity headwinds Japan Customs-Cleared Crude ($US/bbl) ACCC JKM Netback Gas Price Series NEM forward prices (NSW $/MWh) (A$/GJ) 80 10 130 70 8 110 60 6 90 50 4 70 40 2 50 30 0 30 20 Sep-17 Sep-18 Sep-19 Jul-16 Sep-16 Jun-17 Jun-18 Jun-19 Mar-20 Dec-19 Dec-16
Slide 66: Oil hedging
Oil hedging FY2021 Origin hedging As at 31 October 2020 Realised Unrealised FY2021 Hedge Instrument Volume (mmbbl) Average Price Volume (mmbbl) Average Price Brent AUD swaps 3.8 A$85/bbl 0.6 A$61/bbl • Origin share of APLNG JCC oil price exposure is ~24 mmboe Brent USD Swaps 0.2 US$57/bbl 0.2 US$57/
Slide 67: APLNG sales mix and domestic legacy contracts
APLNG sales mix and domestic legacy contracts Legacy domestic contracts: FY2020 FY2019 • ~40 PJ p.a. to Origin ending 2034 Sales mix (100%) • 472 PJ over 21 years to Rio Tinto ending 2031 PJ % PJ % • ~16 PJ p.a. to QAL ending 2041 Contract LNG 449 67% 464 69% • 25 PJ p.a. to AGL ending 2020 Legacy d
Slide 68: Beetaloo Basin E&A – multiple stacked plays
Beetaloo Basin E&A – multiple stacked plays Facts: • 77.5% interest in 18,500km2 permit • Four, stacked, unconventional hydrocarbons plays identified • Booked 6.6 TCF contingent resource relating to Velkerri B shale dry gas play • Undertaking Stage 2 appraisal, currently targeting Kyalla and Velkerr
Slide 69: 'Firming' technologies will have differing roles in the future portfolio
‘Firming’ technologies will have differing roles in the future portfolio Batteries Pumped Hydro Gas Peakers Role Supplier of grid security Shifts large volumes of low-priced Cap price exposure in peak periods and services energy to peak periods during prolonged low renewable periods Daily firming Da
Slide 70: Glossary
Glossary Financial Term Meaning Adjusted Net Debt Net Debt adjusted to remove fair value adjustments on hedged borrowings. Adjusted Underlying EBITDA Underlying EBITDA – Share of APLNG Underlying EBITDA + net cash from APLNG CAGR Compound annual growth rate CPS Cents Per Share Free Cash Flow Net cas
Slide 71: Glossary
Glossary Non-financial Term Meaning CSG Coal Seam Gas CY Calendar Year DCF Discounted Cash Flow DMO Default Market Offer DQT Downward Quantity Tolerance E&A Exploration and Appraisal ERIC Eurombah Reedy Creek Interconnect ERP Enterprise Resource Planning EV Electric Vehicle FEED Front End Engineerin
Slide 72: 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 73: 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