Origin Energy Limited · ASX:ORG
Origin Energy — FY2021 Earnings Presentation
59 slides from Origin Energy's earnings presentation, Aug 19, 2021
Slide 1: Origin Energy 2021 Full Year Results
Origin Energy 2021 Full Year Results Year ended 30 June 2021 Frank Calabria, CEO & Lawrie Tremaine, CFO 19 August 2021
Slide 2: Outline
Outline 1. Introduction - Frank Calabria 2. Financial Review - Lawrie Tremaine 3. Operational Review - Frank Calabria 4. Strategy and Outlook - Frank Calabria 2 19 August 2021 2021 Full Year Results Announcement
Slide 3: Introduction
Introduction Frank Calabria, CEO 3 19 August 2021 2021 Full Year Results Announcement
Slide 4: FY2021 financial results impacted by lower commodity prices
FY2021 financial results impacted by lower commodity prices Statutory Profit/(Loss) Underlying Profit Underlying EBITDA $(2,291) $318 $2,048 million million million (-130.2 cps) (18.1 cps) Reflecting $2.2 billion impairments in Energy Down $705 million primarily reflecting lower Down from $3,141 mil
Slide 5: Continued strong operational performance across both businesses
Continued strong operational performance across both businesses Integrated Gas Energy Markets • 94% 2P reserves replacement in FY2021 • Delivered $110 million retail cost savings since FY2018 • APLNG operational flexibility, responding to • Deal announced to boost gas supply to southern markets chan
Slide 6: Delivering good energy in FY2021
Delivering good energy in FY2021 Getting energy right Our Customers Our Communities Our Planet Our People COVID-19 support Regional procurement 8% decrease in Scope 1 & TRIFR 2.71, enhanced focus increased from 14% to 18% Scope 2 equity emissions on preventing serious harm NPS score +6 S
Slide 7: Climate change - working to a 1.5 degree emissions reduction pathway
Climate change - working to a 1.5 degree emissions reduction pathway Commitments and targets1 Actions Updating emissions reduction targets to 1.5°C pathway 8% reduction in Scope 1 and scope 2 GHG emissions2 in FY2021 from 17.8 Mt C02-e to 16.4 Mt C02-e Support ‘Say on Climate’ and intend to put
Slide 8: Financial Review
Financial Review Lawrie Tremaine, CFO 8 19 August 2021 2021 Full Year Results Announcement
Slide 9: Underlying Profit impacted by lower customer tariffs and commodity prices
Underlying Profit impacted by lower customer tariffs and commodity prices Movements in Underlying Profit ($m) (468) 1,023 (390) (19) (75) 83 164 318 FY20 EM IG - Share of IG - Other Corporate Depreciation & Other FY21 EBITDA APLNG profit EBITDA EBITDA amortisation1 Decline in wholesale prices, Lower
Slide 10: Non-cash charges in FY2021
Non-cash charges in FY2021 Energy Markets impairment Deferred tax liability (DTL) on investment in APLNG • Generation PP&E: Lower wholesale prices expected with new • Improved outlook for APLNG is expected to drive higher distributable cash flow near term renewable supply, impacting valuation of gen
Slide 11: Large-scale Generation Certificates (LGC) strategy
Large-scale Generation Certificates (LGC) strategy LGC spot and forward prices ($/certificate) • Deferred surrender of 2.5 million CY2020 certificates, 60 accounting impacts recorded in H1 FY2021 50 − Incurred shortfall charge of $65/certificate − ~2.4 million purchased to date (CY2023 forwards) at
Slide 12: Cash generation and free cash flow yield remained strong in FY2021
Cash generation and free cash flow yield remained strong in FY2021 Operating cash conversion1 Free Cash Flow ($m) 1,644 93% 96% 21% 85% 1,140 69% 15% 5% 5% FY20 FY21 FY20 FY21 Free Cash Flow Free Cash Flow Yield (ORG)2 Cash conversion Cash conversion excl futures collateral Free Cash Flow Yield (ASX
Slide 13: APLNG cash flow expected to increase in FY2022
APLNG cash flow expected to increase in FY2022 APLNG estimated distribution and Origin oil hedging >$1 billion 1,200 (Net of hedging) 110 • In FY2021, APLNG distributed $709 million 100 cash to Origin at a realised oil price of 1,000 US$43/bbl (A$58/bbl) 90 800 • FY2022 APLNG estimated to distribute
Slide 14: Focused on capital discipline as well as cost and risk management
Focused on capital discipline as well as cost and risk management • Adjusted Net Debt to EBITDA at 2.9x at June 2021 • Targeting Adjusted Net Debt to EBITDA of 2-3x and net debt below $4 billion over the medium term Capital discipline • Continued debt reduction - Adjusted Net Debt down $519 million
Slide 15: Actively managing underlying operating costs and capital expenditure
Actively managing underlying operating costs and capital expenditure Origin controllable support costs ($m) Origin capex ($m) 450 600 500 400 400 350 300 200 300 100 250 - FY18 FY19 FY20 FY21 FY22 FY19 FY20 FY21 FY22 Guidance estimate mid-point Generation sustain Other sustain Productivity/growth E&
Slide 16: Managing oil price exposure
Managing oil price exposure Oil hedging program designed to protect capital structure through commodity cycles FY2022 Full Year Oil Price Sensitivity 80 FY2022 Effective Oil Price (US$/bbl) 70 • Origin share of APLNG JCC oil price exposure is ~23 mmboe 60 • As at 28 July 2021, 11.7 mmboe priced at U
Slide 17: Energy Markets Underlying EBITDA down 32%
Energy Markets Underlying EBITDA down 32% Movements in Underlying EBITDA ($m) Electricity gross profit down $288 million or 24% to $899 million: (288) • Margin impacts (-$296 million) 1,459 − Lower wholesale electricity and LGC prices flowing into tariffs (297) 36 81 (net -$220 million impact) − Net
Slide 18: Integrated Gas Underlying EBITDA down 35%
Integrated Gas Underlying EBITDA down 35% Movements Underlying EBITDA ($m) 80 (945) 17 147 (71) 1,741 1,741 166 1,118 1,135 876 971 Integrated 805 805 Share of APLNG Gas - Other (-$770 million) (+$164 million) FY2020 LNG volume LNG price Domestic revenue Opex/other income Oil & LNG hedging Origin co
Slide 19: FY2021 Operational Review
FY2021 Operational Review Frank Calabria, CEO 19 19 August 2021 2021 Full Year Results Announcement
Slide 20: Energy Markets
Energy Markets 20 19 August 2021 2021 Full Year Results Announcement
Slide 21: Lower wholesale prices flowed through to tariffs in FY2021
Lower wholesale prices flowed through to tariffs in FY2021 NSW electricity forward price LGC spot price ($/MWh) ($/certificate) 100 90 80 90 70 80 -$10/MWh 60 70 50 60 40 30 -$15/cert flowing into customer tariffs 50 20 40 10 30 - Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Jul-18
Slide 22: Eraring provided value in peak periods in FY2021
Eraring provided value in peak periods in FY2021 Eraring output compared with pool price GWh • Eraring able to respond to lower demand, as well $/MWh as seasonal and intra-day swings 3,000 Lower generation 180 during period of mild Covering peak pricing – FY2021 realised price $76/MWh (NSW weather a
Slide 23: Domestic gas prices rebounding and supply price reviews complete
Domestic gas prices rebounding and supply price reviews complete LNG netback and domestic gas prices (A$/GJ) Gas gross profit movement ($m) 20 (25) 18 Prices begin to fall 16 from 2018 based on (105) linkage to international 14 prices Prices fall 744 (51) significantly as (78) 12 COVID-19 impacts de
Slide 24: Transformation of our retail business
Transformation of our retail business Leading customer Growing future revenue Low-cost retailer Retail X experience streams Strategic NPS Retail cost base ($m) Gross profit ($m) 75% >850k ~$200-250m Customer happiness index accounts 140 83% growth 800 250k 6 120 accounts 2 600 100 >100k accounts 80
Slide 25: Strong customer loyalty and growing scale
Strong customer loyalty and growing scale Customer churn (monthly %) Customer accounts (‘000) 4,181 4,200 4,236 4,266 30% 4,300 20 33 8 25% 365 359 4,000 370 362 20% 3,700 15% 3,400 10% 3,811 3,830 3,851 3,874 3,100 5% - 2,800 Jul Jul Jul Mar May Mar May Jul Mar May Mar May Sep Sep Sep Sep Nov Jan N
Slide 26: Our digital capability is a competitive strength
Our digital capability is a competitive strength Extending our leadership in technology to drive premium customer experience at low cost Technology enhancements New products and services Partnerships & Alliances Origin’s platform-based model 159 MW VPP Gamified demand Customer first, data driven pro
Slide 27: 20% stake in Octopus, a global renewable energy business
20% stake in Octopus, a global renewable energy, services & technology business Exponential customer growth Outstanding performance Global reach increasing Customer accounts (‘000, LHS) % customer churn after one year and revenue growth (£bn, RHS) 30% TG 9.7% 25% 10,000 investment 2,500 8,000 Origin
Slide 28: Integrated Gas
Integrated Gas 28 19 August 2021 2021 Full Year Results Announcement
Slide 29: APLNG reserves and production continued to perform at or above expectations
APLNG reserves and production continued to perform at or above expectations APLNG 100% 2P reserves movements in FY2021 (PJ) 11,381 11,339 (163) 95 • 94% APLNG 2P reserves replacement during FY2021 (operated and non-operated) 564 • Operated 2P reserves replacement ~105% (537) during FY2021 (~90% sinc
Slide 30: Strong field performance and resource maturation resulted in improved reserves
Strong field performance and resource maturation resulted in improved reserves Higher estimated ultimate recovery Maturation of resources to reserves Indicative life of field production: Talinga and Orana Peat Flank Cumulative production (PJ) Spring Gully North East Flank Ramyard South FY2021 ~35 ye
Slide 31: APLNG sustained strong production with record low costs in FY2021
APLNG sustained strong production with record low costs in FY2021 Quality resource and assets Record low cost Breakeven APLNG Production (100%) (PJ) A$m APLNG Capex + Opex (100%)1 A$/GJ Distribution Breakeven 2 ($US/bbl) 800 3,000 4.5 80 700 70 2,500 4.0 600 60 2,000 500 3.5 50 400 1,500 40 3.0 30 3
Slide 32: APLNG operational performance continued to improve
APLNG operational performance continued to improve Reduced activity and costs Flexibility to adapt to market Outstanding facility reliability Well activity (# of wells) APLNG (100%) average production (TJ/day) Gas Processing Facility Reliability 1 300 2,100 Production Qtly record Managing flexibilty
Slide 33: Maximise value of the existing business
Maximise value of the existing business APLNG Prospective acreage Continued strong upstream performance Beetaloo Basin • Strong field performance enabling reduced • Kyalla 117 flowed liquids-rich gas to surface with development activity medium term unassisted gas flow rates of 0.6–0.9 TJ/d • Prepari
Slide 34: Strategy and Outlook
Strategy and Outlook Frank Calabria, CEO 34 19 August 2021 2021 Full Year Results Announcement
Slide 35: Key commodity markets rebounding but the benefit will be lagged
Key commodity markets rebounding but the benefit will be lagged Oil price LNG netback and domestic gas prices NSW electricity forward price 80 (US$/bbl) (A$/GJ) ($/MWh) 25 100 70 20 80 60 15 60 50 10 40 40 30 5 20 20 - - Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Jul-20 Oct-20 Ju
Slide 36: Our strategic priorities are clear
Our strategic priorities are clear Maximising value of the Pursuing growth in customer value 1 2 existing businesses and low carbon solutions • Disciplined capital and cost management – Low cost • Growing integrated customer solutions operator, reducing capital, operating and finance costs − Grow cu
Slide 37: Connecting customers to the energy and technologies of the future
Connecting customers to the energy and technologies of the future Market leading assets & capabilities Preferred position for energy transition Large domestic retail customer base Low-cost, digital-first retailer Leading energy wholesale & trading capability Short energy, covered for peak de
Slide 38: FY2022 Guidance
FY2022 Guidance 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 on deman
Slide 39: Guidance continued
Guidance continued Origin - consolidated Energy Markets Integrated Gas (APLNG) • Underlying FY2022 EBITDA relatively stable • Lower FY2022 Underlying EBITDA: • FY2022 - increased earnings in Integrated Gas largely − Electricity reduction of $400-$480 − Continued stable production offset headwinds in
Slide 40: Questions
Questions 40 19 August 2021 2021 Full Year Results Announcement
Slide 41: Appendix
Appendix 41 19 August 2021 2021 Full Year Results Announcement
Slide 42: Items excluded from Underlying Profit
Items excluded from Underlying Profit Non-cash charges (previously announced) Reconciliation from Statutory to Underlying Profit ($m) • $1.6 billion post-tax impairment of goodwill and generation 28 318 assets due to lower wholesale prices and higher gas supply (123) 259 costs 198 • $0.7 billion def
Slide 43: Large-scale Generation Certificates (LGC) strategy
Large-scale Generation Certificates (LGC) strategy LGC Adjustments to statutory profit Statutory Reversal of shortfall Estimated CY20 Estimated CY21 Underlying Profit charge/ (refund) surrender cost surrender cost Profit ($m) ($m) ($m) ($m) ($m) FY2021 impact: CY2020 and CY2021 certificate shortfall
Slide 44: Electricity forward price by state
Electricity forward price by state (A$/MWh) 100 NSW 100 QLD 80 80 60 60 40 40 20 20 - - Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 100 VIC 100 SA 80 80 60 60 40 40 20 20 - - Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 J
Slide 45: Energy Markets contracted gas supply
Energy Markets contracted gas supply Energy Markets contracted gas (PJ) 250 200 • Oil/JKM linked supply largely offset by oil/JKM linked sales and hedging 150 • Next contract price review in FY2024 • Contracted demand shown is net of 100 gas directed to generation 50 - FY21 FY22 FY23 FY24 FY25 APLNG
Slide 46: Reducing interest cost through on-going debt refinancing
Reducing interest cost through on-going debt refinancing Interest paid ($m) and average interest rate 500 8% 400 6% 300 4% 200 • Average FY2021 interest rate of 4.3%, down from 4.8% 100 2% • More than 36 months committed and undrawn liquidity - 0% FY18 FY19 FY20 FY21 FY22 • Planned repayment of FY20
Slide 47: Capex summary
Capex summary Origin capex ($m) 600 FY2021 capex • Generation maintenance and sustaining capital 500 ($63 million) includes major overhauls at Eraring power station, ash dam and Shoalhaven power 400 station • Other sustaining capital ($136 million) includes ERP replacement, regulatory market reforms
Slide 48: Customer movements
Customer movements Electricity ('000) (‘000) FY21 FY20 Change 10 Electricity 5 Business 30 29 1 - Retail – Residential 2,246 2,261 (15) (5) Retail – SME 259 264 (5) (10) Retail – Community Energy Services 90 77 13 (15) Total 2,625 2,631 (6) (20) (25) NSW QLD VIC SA (‘000) FY21 FY20 Change Retail - r
Slide 49: APLNG sales mix and legacy domestic contracts
APLNG sales mix and legacy domestic contracts Legacy domestic contracts: FY2021 FY2020 • ~40 PJ p.a. to Origin ending 2034 Sales mix (100%) PJ % PJ % • 472 PJ over 21 years to Rio Tinto ending 2031 • ~16 PJ p.a. to QAL ending 2041 Contract LNG 450 69% 449 67% • ~25 PJ p.a. to QGC ending 2035, oil li
Slide 50: Cost to serve and bad and doubtful debts over time
Cost to serve and bad and doubtful debts over time Cost to serve Bad and doubtful debts ($m) (adjusted for COVID-19) 1.09% 38 0.87% 171 169 0.74% 0.70% 0.71% 0.73% 0.66% 1471 136 117 114 96 89.5 83 83 80 72 75 61 FY18 FY19 FY20 FY21 FY24 Target FY16 FY17 FY18 FY19 FY20 FY21 Retail and Business ($m)
Slide 51: Segment summary
Segment summary Energy Markets Integrated Gas Integrated Corporate Total ($m) - Share of APLNG Gas - Other FY21 FY20 FY21 FY20 FY21 FY20 FY21 FY20 FY21 FY20 Underlying EBITDA 991 1,459 1,145 1,915 (10) (174) (78) (59) 2,048 3,141 Underlying EBIT 432 974 224 614 (36) (197) (80) (62) 540 1,329 Underly
Slide 52: Underlying ROCE – 12 month rolling
Underlying ROCE – 12 month rolling 30 June 2021 30 June 2020 Change As at Change ($m) ($m) ($m) (%) Capital Employed Net Assets 9,815 12,701 (2,886) (23%) Adjusted Net Debt 4,639 5,158 (519) (10%) Net derivative liabilities 258 588 (330) (56%) Origin's share of APLNG net debt (project finance less c
Slide 53: Proportionate Free Cash Flow
Proportionate Free Cash Flow Free cash flow prepared on the basis of proportionate consolidation of APLNG. Energy Markets Integrated Gas Integrated Corporate Proportionate Total ($m) - Share of APLNG Gas - Other FY21 FY20 FY21 FY20 FY21 FY20 FY21 FY20 FY21 FY20 Underlying EBITDA 991 1,459 1,145 1,91
Slide 54: Reconciliation of Adjusted Net Debt
Reconciliation of Adjusted Net Debt Issue Issue Hedged Hedged AUD $m AUD $m AUD $m Currency Notional Currency Notional $m $m Jun-21 Jun-21 Jun-21 Interest bearing Debt & CCIRS FV Adjusted net debt liabilities2 adjustments AUD debt AUD 826 AUD 826 809 - 809 USD Debt left in USD USD 1,130 USD 1,130 1,
Slide 55: Energy Markets segment revenue reconciliation
Energy Markets segment revenue reconciliation The table below reconciles the difference between segment revenue and customer revenue disclosed in the Electricity, Natural Gas, LPG and Solar & Energy Services tables. FY21 FY20 Change Change ($m) ($m) ($m) (%) Energy Markets segment revenue 11,931 12,
Slide 56: Financial Instruments and fair value adjustments
Financial Instruments and fair value adjustments Balance Sheet Impact Income Statement Impact Financial Post-tax Gain/(loss) asset/(liability) Inc/(dec) Inc/(dec) in Gain/(loss) Pre-tax Gain/(loss) excluded from Total inc/(dec) in financial other net included in excluded from Underlying Underlying P
Slide 57: 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 58: Important notices
Important notices All figures in this presentation relate to businesses of the Origin Energy Group (Origin, or the Company), being Origin Energy Limited and its controlled entities, for the reporting period ended 30 June 2021 (the period) compared with the reporting period ended 30 June 2020 (the pr
Slide 59: 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