Origin Energy Limited · ASX:ORG
Origin Energy — Australia and New Zealand 5th Annual Investment Conference (March 2008)
55 slides from Origin Energy's conference presentation, Mar 6, 2008
Slide 1: ASX announcement cover note
For personal use only To Company Announcements Office Facsimile 1300 300 021 Company Australian Stock Exchange Limited Date 6 March 2008 From Bill Hundy Pages 55 Subject PRESENTATION Attached for your information is a presentation being made by Mr Grant King, Managing Director and Mr Frank Calabria,
Slide 2: Australia and New Zealand 5th Annual Investment Conference, London
For personal use only Australia and New Zealand 5th Annual Investment Conference London March 2008 1
Slide 3: Outline
Outline For personal use only • Origin’s strategy • Highlights • 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: Origin's strategy
For personal use only Origin’s strategy 3
Slide 5: Financial objectives and business strategies responding to energy industry changes
Origin’s financial objectives and business strategies have been established to respond to changes in the energy industry For personal use only • Financial Objective Steady and predictable cashflows EPS growth of 10-15% pa on average • Business Strategy Positioned in the competitive (rather tha
Slide 6: Ability to perform and grow across competitive segments
…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 Customers 3.5 (PJe) 4,000 (millions) 3,000 Generation Capacity 3.0 3,500 2,500 (MW) 2.5 3,000 2,
Slide 7: Managing volatility in wholesale electricity and gas prices
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 $180 $170 Victorian Spot and Forward Contract Electricity Prices $160 $150 • Origin’s risk management strategies $140 $130 hav
Slide 8: Integrated strategy provides growth opportunities, EBITDAF by business
The integrated strategy has provided a range of growth opportunities which have provided… For personal use only EBITDAF by business type • Initial growth in Retail came from (A$, millions) acquisitions and margin expansion - with 1400 further consolidation likely (eg NSW privatisation) 1200 • Longer
Slide 9: Significant growth and increasing shareholder value
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 80 CAGR 21% since listing 74 FCFPS 71 70 EPS • EPS has increased from 13 cents per share in DPS 63 60 2000 to 44 cents per share in 2007 (unde
Slide 10: Half year update
For personal use only Half year update 9
Slide 11: Last six months building the integrated business
The last six months has seen Origin continuing to build its integrated business For personal use only Exploration and Production Retail Increased CSG production Tariff increases in electricity and gas Otway commissioning commenced On track with Sun Retail integration Halladale / Blackwatch
Slide 12: Half year to December 2007 earnings and dividends
In the half year to December 2007 Origin delivered steady underlying earnings and continued increasing dividend payments to shareholders For personal use only Dividends - cents per share Performance Highlights (HY 2008) 25 Franking • Revenue $3,817 million 33% 100% 100% 40% 100% 100% 100% 100% 100%
Slide 13: Growth projects program adding to earnings
Origin has a significant program of growth projects which will add significantly to earnings… For personal use only Origin Energy growth capital expenditure profile 1,800 Darling Downs PS 1,600 Solar Cullerin Range 1,400 Capital Expenditure - A$ million Mt Stuart 1,200 Quarantine PS Geodynamics 1,00
Slide 14: Debt maturing in next 12 months less than 5%
Origin has less than 5% of its debt portfolio maturing in the next 12 months… For personal use only Origin Debt & Bank Guarantee Maturity Profile (Financial years, $ million) 2,000 MTN & PP Loans Contact 1,800 • Diversified funding base comprising domestic and US 1,600 bonds, syndicated bank 1,400 f
Slide 15: Projects and opportunities delivering ongoing growth
Origin already has in place projects and opportunities that will deliver ongoing growth… For personal use only Leading CSG reserves position and increasing production volumes Major liquids-rich offshore gas projects progressively coming on-line: BassGas producing, Otway commissioning, Kupe under
Slide 16: Strategy implementation
For personal use only Strategy implementation 15
Slide 17: 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 18: New production areas offsetting Cooper Basin decline
Over the last decade Origin has made a series of investments in new production areas to offset the anticipated decline of the Cooper Basin and other traditional gas producing areas… For personal use only 45 • The Cooper Basin is in decline as contract Origin Gas Production by Half Year volumes begin
Slide 19: Oil and liquids production declining
Oil production from the Perth Basin continues to decline, as is oil, condensate and LPG production from the Cooper Basin although at a more modest rate For personal use only 10 1.7 Origin Liquids Production by Half Year • Oil production from the mature Perth 9 1.5 Basin oil fields has followed a ste
Slide 20: Extensive acreage across Queensland coal seam gas fairways
Origin has established an extensive acreage position across the prime coal seam gas fairways in Queensland… For personal use only • Current key assets are: Comet Ridge (Fairview, Spring Gully) Undulla Nose (Talinga, Orana, Condabri, Argyle, Kenya, Lauren) Bowen Basin Bowen Basin CSG CSG Fairview
Slide 21: Increasing CSG production to meet contracted requirements
Origin has been increasing CSG production to meet contracted requirements For personal use only • Origin’s equity share of CSG reached 100TJ/d in mid December 2007 25 • Spring Gully continues to ramp up & Origin's CSG Production achieved peak sales of 73TJ/d (Origin share 20 ~97%) • Fairview: The op
Slide 22: Growing CSG reserves and monetising through channels to market
As well as growing its gas reserves Origin has been able to monetise these reserves through good channels to market… For personal use only Origin's CSG Reserves Origin's CSG Production 2,500 120 Half Year ended 31 December 2,250 Half Year ended 30 June 100 2,000 Darling Downs up to 44 PJ/a 1,750 80
Slide 23: Leadership in CSG production, reserves and contracting
Origin retains its clear leadership in CSG production, reserves and contracting with large 2P (2,470 PJ) and 3P (4,578 PJ) For personal use only reserve positions available to address a range of commercial opportunities 3,000 35 CSG Reserves CSG Production 30 2,500 Production 12 Months to Dec 07 (PJ
Slide 24: 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 25: Otway Gas Project commissioning
The Otway Gas Project has commenced commissioning and is expected to reach steady production during March 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 condensa
Slide 26: 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 27: New infrastructure opening 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 26 development in these and related areas 26
Slide 28: Acquisitions: Halladale/Blackwatch and Swift assets
Acquisitions: Origin recently acquired 100% interests in the Halladale/Blackwatch fields (Victoria) and Swift assets (New Zealand) For personal use only Halladale/Blackwatch Acquisition • Gas portfolio enhanced through acquisition of Woodside’s interests in the Halladale/Blackwatch permit Swift Acqu
Slide 29: Managing gas sales and purchasing to leverage upstream development
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 Origin Retail Natural Gas Supplies
Slide 30: 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 •Interests in 870 MW of gas capable plant (equity interest 704 MW) 4,000 • 1,900 MW of thermal, hydro and geothermal capacity th
Slide 31: Generation plants in Australia and New Zealand
Origin has interests in 870 MW of peaking and co-generation in Australia and over 1,900 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 32: 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 For personal use only Energy Demand 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 33: Committed gas-fired generation including Darling Downs
Origin has committed to build an additional 876 MW of gas fired power generation, including Australia’s largest For personal use only combined cycle gas turbine plant at Darling Downs… Darling Downs Power Station • 120MW expansion of Quarantine peaking power 4,000 station in Adelaide increasing Orig
Slide 34: 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 35: 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 $760 million to complete the Spring Gully RTA - Gladstone development, start the coal seam gas development in the Walloons and cons
Slide 36: Positioned to capture value from climate change developments
Origin is well positioned to capture value from key climate change developments… For personal use only Geothermal • Origin acquired a 30% stake in a JV with Geodynamics Ltd. The JV owns permits in South Australia • Geodynamics have drilled 3 wells to-date. Habanero 3 was completed in early 2008 and
Slide 37: Contact Energy opportunities in New Zealand
Contact has a similar set of opportunities which can be leveraged in the New Zealand environment For personal use only Geothermal • 500 MW of new geothermal generation in various stages of development Stage 1: 225 MW Te Mihi project – construction commencing late 2008 Stage 2: 245 MW Tauhara pro
Slide 38: One of the largest energy retailers in Australia
Origin is one of the largest energy retailers in Australia with over 3 million electricity, natural gas and LPG customers… For personal use only Fuel Retailer Generator • Origin is the second largest retailer in Australia with around 3 million customers 1,824,000 electricity 4.0 883,000 gas Cust
Slide 39: Increased share of eastern Australian energy markets
Origin Energy has increased its share of eastern Australian energy markets substantially over time as energy market reforms have seen the sector deregulated and privatised… For personal use only Eastern Australia Eastern Australia Market share customers: 1998 Market share customers: 2007 Origin Orig
Slide 40: Increasing energy retailing margins
Origin has been able to increase its energy retailing margins through building scale and effectively managing tariffs, churn, cost to serve and risk… For personal use only • Origin is the second largest energy retailer in Retail Profit Margin ($) and EBIT Margin (%) Australia with over 3 million cus
Slide 41: Highest churn rates in the world moderating
Over the last several years Origin has operated in markets with the highest churn rates in the world. In late 2007 high wholesale prices began to moderate churn rates … For personal use only Mass Market Churn: Completed and Pending# December 2007 Origin Energy Accounts Numbers 45% Vic Elec Vic Gas (
Slide 42: Victorian gas market higher wholesale costs
The gas market in Victoria experienced higher wholesale gas costs, accentuated by unexpected delays in Otway Gas Project commissioning after construction was complete For personal use only Victorian Gas Weighted Average Spot Price and Demand 45 (01 Jan 2006 to 15 Feb 2008) 1,400,000 40 Daily weighte
Slide 43: Forward curve movements and mark-to-market values
Large movements in the forward curve have caused significant movements in mark-to-market values For personal use only $180 $170 Victorian Spot and Forward Contract Electricity Prices $160 • Forward curve (FC) for Jun 07 high and $150 backwardated in response to drought conditions (large positive cha
Slide 44: Leadership in green energy sales and carbon responsibility
Origin has clearly established its leadership position in green energy sales and carbon responsibility… For personal use only A leading market position* and leading market products Origin Energy 33% • In December 2007 Origin had signed 361,000 GreenPower customers • Unit sales of grid-connected sola
Slide 45: Contact Energy integrated position in New Zealand
In New Zealand Contact Energy also has an integrated position which provides a natural hedge to seasonal variations in the wholesale electricity (where hydro is the dominant fuel)… For personal use only Fuel Retailer Generator • Extensive portfolio of gas • 9 power stations with • 514,000 electricit
Slide 46: Contact Energy integrated strategy as internal hedge
The integrated strategy of Contact Energy also provides a significant internal hedge for its business For personal use only …providing stable year on year earnings despite large changes in wholesale electricity prices 45 45
Slide 47: Deepening integration across the business
Origin continues to deepen the integration across its business… For personal use only Fuel Retailer Generator 300 ToP to ACQ Energy Demand Peak Demand buy from Origin 35 7,000 Annual Demand and Generation dispatched (Twh) buy from Origin JV partners Peak Demand and Installed capacity (MW) 250 Origin
Slide 48: Continuing to add value for shareholders
…and will continue to add value for shareholders in the years to come For personal use only 80 74 1400 FCFPS 71 EBITDAF by business type 70 EPS 1200 ($ millions) DPS 63 60 54 cents per share (A$) 53 1000 50 44 42 42 800 40 40 30 31 600 30 25 20 21 19 18 400 17 20 13 15 13 10 200 10 6 5 4 0 0 Jun 00
Slide 49: Appendix – Reserves position and five year financials
For personal use only Appendix – Reserves position and five year financials 48
Slide 50: 2P reserves increased 42% year-on-year
Origin’s 2P reserves increased by 42% year-on-year with the reserves growth coming predominantly from CSG… For personal use only Origin 2P reserves by Product GAS LPG CONDENSATE OIL TOTAL 1/07/2007 (PJ) (KT) (KBBLS) (KBBLS) (PJe) Reserves at 1/7/06 2,199 1,821 20,275 6,276 2,436 Net additions & revi
Slide 51: Profit & Loss
Profit & Loss Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 For personal use only ($m) ($m) ($m) ($m) ($m) ($m) Revenue 2,429 3,352 3,556 4,902 5,880 6,456 EBITDAF 405 941 532 918 1,076 1,201 EBIT 231 295 329 656 791 943 Net Financing Cost(1) (43) (49) (45) (148) (175) (215) Tax expense (54) (80) (77) (
Slide 52: Growth requiring significant capital expenditure
Origin’s growth has required significant capital expenditure. Acquisitions in the Retail and Generation areas have provided immediate contributions… For personal use only Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 ($m) ($m) ($m) ($m) ($m) ($m) Growth & Acquisitions E&P 129 179 313 335 600 414 Retail
Slide 53: Cash flow measures as primary performance measure
Origin uses cash flow measures as the primary measure of performance within the business… For personal use only Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 ($m) ($m) ($m) ($m) ($m) ($m) EBITDAF 405 491 532 918 1,076 1,201 Non-cash items(1) (17) 13 2 4 1 (7) Change in Working Capital 16 39 (48) (31) 16
Slide 54: Conservatively geared balance sheet
This has allowed Origin to maintain a conservatively geared balance sheet and take on the extra debt to fund ongoing investment in growth For personal use only Jun Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 02 Net debt ($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 55: 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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