Origin Energy Limited · ASX:ORG
Origin Energy — Citi Annual Australian and New Zealand Conference 2011
65 slides from Origin Energy's conference presentation, Mar 7, 2011
Slide 1: ASX announcement cover note
For personal use only To Company Announcements Office Facsimile 1300 135 638 Company ASX Limited Date 7 March 2011 From Helen Hardy Pages 65 Subject PRESENTATION Attached for your information is a presentation being made at the Citi Annual Australian & New Zealand Conference in London by Ms Karen Mo
Slide 2: Citi Annual Australian and New Zealand Conference, London
For personal use only Origin Energy Citi Annual Australian and New Zealand Conference London 7-8 March 2011
Slide 3: Important Notice
Important Notice This presentation does not constitute investment advice, or an inducement or recommendation to acquire or dispose of any securities in Origin, in any jurisdiction (including the USA). This presentation is for information purposes only, is in a summary form, and does not purport to b
Slide 4: Outline
Outline For personal use only 1. Strategy, Performance and Growth 2 Outlook 2. 3. Half Year 2011 Financial Review 4 NSW Energy Acquisition 4. 5. Australia Pacific LNG 6 Sustainable Energy 6. 7. Operational Review 8 Appendix 8. 3
Slide 5: 1. Strategy, Performance and Growth
1. Strategy, Performance and Growth For personal use only
Slide 6: Origin Energy is Australia's leading integrated energy company
Origin Energy is Australia’s leading integrated energy company1 … For personal use only • Listed in the ASX top 20 with a market capitalisation of over $14.5 billion2 and approximately 4 4,400 400 employees • Australia’s largest energy retailer servicing 4.6 million electricity, natural gas and LPG
Slide 7: Fuel position, generation and retail integration
Origin has built its business around a fuel position which allows it to manage risks in wholesale energy markets, with retail customers providing revenue stability For personal use only Fuel Generator Retailer Extensive thermal and One of Australia’s largest Australia’s largest energy renewable fuel
Slide 8: Strategy has delivered growth in underlying earnings
The implementation of Origin’s strategy has delivered growth in underlying earnings through the deployment of capital in value enhancing activities Underlying EBITDA CAGR 17%1 Underlying Profit CAGR 23%1 For personal use only (Earnings per Share CAGR: 17%1) Funds Employed CAGR 16%1 Free Cash Flow CA
Slide 9: Top performing listed company over the last decade
As a result of this growth, Origin has been one of the top performing listed companies over the last decade … For personal use only Origin has delivered 28% per annum compound average growth rate of Total Shareholder Returns from listing to 31 December 2010 … and is now in the ASX top 20 companies b
Slide 10: Pursuing two major opportunities
Building on this strong performance Origin is pursuing two major opportunities … The recent acquisition of a suite of energy assets providing an integrated position in NSW and establishing Origin as the market leader in Australia For personal use only – The Country Energy and Integral Energy retail
Slide 11: Strong performance increases for the half year
Strong increases in performance for the half year has been driven by increased capital investments in acquisitions and new projects in prior years … For personal use only • First full six month period incorporating Origin’s increased equity in the Otway Gas Project • A full f ll six month h contribu
Slide 12: Fully franked interim dividend declared
A fully franked interim dividend of 25 cps, in line with the prior half year, has been declared … For personal use only • Ex-dividend date 1 March 2011 • Date of record 7 March 2011 • Payment Date 1 April 2011 • Dividend payout ratio of 73% of Underlying EPS • Dividend Reinvestment Plan will apply t
Slide 13: 2. Outlook
For personal use only 2. Outlook
Slide 14: Full year Underlying EBITDA expected to increase around 35 per cent
Based on prevailing market conditions, and taking into account the factors below, Origin expects full year Underlying EBITDA to increase by around 35 per cent for financial year 2011 compared with the prior financial year For personal use only • Origin g expects p the trend in operational p p perfor
Slide 15: Significant growth opportunities
Origin continues to develop a number of significant growth opportunities which will expand p the scale and scope p of its business and p provide earnings g growth For personal use only • Completion of Mortlake Power Station • Implementation of the retail transformation program • The BassGas mid-life
Slide 16: Managing the balance sheet to fund capital expenditure and NSW acquisition
Origin will continue to manage its balance sheet to provide flexibility to fund expected capital expenditure in addition to the NSW acquisition • Origin’s $3.25 billion acquisition of For personal use only Origin Debt and Bank Guarantee Maturity Profile as at 31 December NSW energy assets was funded
Slide 17: 3. Half Year 2011 Financial Review
3. Half Year 2011 Financial Review For personal use only
Slide 18: Underlying EBITDA increased by 16%
Underlying EBITDA increased by 16% driven by significant contributions from new investments and improved retail margins, despite a higher exploration l i expense For personal use only Statutory Loss ($136) million down 137% Statutory Earnings per Share (15.4) cps down 136% Underlying EBITDA* $818 mi
Slide 19: Underlying EBITDA increased by 16% to $818 million
Underlying EBITDA increased by 16% to $818 million Underlying U d l i EBITDA ($ million) illi ) Dec 10 D Dec 09 D Change Ch Exploration & Production 125 104 20% For personal use only Generation 144 98 47% Retail 369 320 15% Contact Energy 180 184 (2%) Total 818 706 16% Exploration & Production: Init
Slide 20: Operating Cash Flow
Operating Cash Flow ($ million) Dec 10 Dec 09 Underlying EBITDA 818 706 For personal use only Change in working capital (62) (162) Stay-in-business capex (69) (85) Share of APLNG OCAT net of EBITDA 10 7 Exploration expense 97 22 Other 8 (12) Tax paid (8) (51) Group OCAT 794 425 Net interest paid (10
Slide 21: Segment Cash Flow Returns
Segment Cash Flow Returns Operating Cash Flow Productive Capital OCFR (%) For personal use only ($m) % Change ($m) % Change Dec 10 Dec 09 Exploration & Production 345 88% 2,316 64% 14.9% 13.0% Generation 223 57% 1,807 66% 12.3% 13.1% Retail 529 68% 2,745 9% 19.3% 12.5% Contact Energy 297 10% 3,423 0
Slide 22: Capital expenditure declined as major investment draws to completion
Capital expenditure declined as a period of major investment in Exploration & Production and Generation projects draws towards completion and expenditure in APLNG continues to be funded by ConocoPhillips For personal use only Growth Capex1 • $557 million, million 30% lower lo er than in the prior ha
Slide 23: 4. NSW Energy Acquisition
4. NSW Energy Acquisition For personal use only
Slide 24: Acquisition of Integral and Country Energy retail and Eraring GenTrader
On 1 March 2011 Origin acquired the Integral Energy and Country Energy retail businesses, and entered into the Eraring GenTrader arrangements for $3 $3,250 250 million1 Integral Energy + Country Energy retail businesses For personal use only Acquisition Price: $2,300 million Customer accounts as at
Slide 25: Customer accounts increase over 50% to 4.6 million
The acquisition of the Integral Energy and Country Energy retail businesses increases Origin’s For personal use only g customer accounts byy over 50% to 4.6 million … Electricity and Natural Gas Market Customer Accounts – 30 June 2010 (‘000) Share in the NEM regions1 Integral Country Origin COMBINED
Slide 26: Eraring GenTrader arrangements generation portfolio
The Eraring GenTrader arrangements provide Origin with contractual rights over a significant portfolio of power generation … For personal use only Power Station Commissioning Date GTA Expiry Fuel Units Units Size (MW) Contract Capacity (MW) Eraring Energy Eraring 1982 – 1984 2032 Black Coal 4 660 -
Slide 27: Eraring GenTrader payment structure
The payment structure for the Eraring GenTrader arrangements include an Annual Capacity Charge, Ongoing Payments and Fuel Costs Annual Capacity Charge/Tolling For personal use only Pool Revenue • Origin has placed $867 million1 of funds on deposit to cover the Annual Capacity Charge payment for the
Slide 28: NSW acquisition expected retail margin contribution
The value of the NSW acquisition reflects an expectation that it will make a contribution to the Retail segment g in line with the current EBIT to sales margins of 8% to 9% in Origin’s existing Retail business For personal use only • The Eraring and Shoalhaven GenTrader arrangements support margins
Slide 29: Generation portfolio operational flexibility
With the addition of the Eraring GenTrader arrangements Origin’s generation portfolio provides increasing operational flexibility … For personal use only • Origin has 1,974 MW2 of fast-start thermal peaking generation that can turn on and ramp up to full capacity in around 30 minutes • Origin’s comb
Slide 30: Growth in retail and generation segments
The NSW acquisition provides Origin with significant growth in both its retail and generation segments, enhancing Origin’s existing vertically integrated portfolio tf li … For personal use only MW Before NSW After NSW Including Development Acquisition Acquisition Options 1 … and with the ability to
Slide 31: 5. Australia Pacific LNG
5. Australia Pacific LNG For personal use only
Slide 32: Substantial progress across Australia Pacific LNG project
Substantial progress continues to be made by Australia Pacific LNG across all areas of the project For personal use only • Following responses to public submissions received on the Environmental Impact Statement (EIS) the Queensland Coordinator-General granted state approval on 9 November 2010. The
Slide 33: APLNG continues to mature its reserves positions
APLNG continues to mature its reserves positions … For personal use only PJe Reserves & Resources (Gross APLNG) 28,000 3P = 14,602 24,000 3C = 11,478 3C = 10,446 • APLNG remains the largest holder of CSG reserves in Australia 20,000 2C = 4,844 2C = 4,329 4 329 • APLNG participated in 100 wells durin
Slide 34: Heads of Agreement with Sinopec for LNG supply
On 25 February 2011 Australia Pacific LNG and Sinopec1 signed a Heads of Agreement establishing non non-binding binding terms for the supply of LNG For personal use only • Supply of up to 4.3 million tonnes per annum of LNG from APLNG’s processing plant at Gladstone over a 20 year period • First LNG
Slide 35: APLNG on track for first LNG production in 2015
The APLNG project is on track for first LNG production in 2015 Timing Milestone (Calendar For personal use only Years) 9 Initial Advice Statement (IAS) submitted Q1 2009 Project declared as Significant by the 9 Queensland Government Q2 2009 9 Curtis Island Site selected Q3 2009 Q 9 Commenced FEED wo
Slide 36: 6. Sustainable Energy
6. Sustainable Energy For personal use only
Slide 37: Positioned to respond to carbon-related legislation
Origin is well positioned to respond to existing and potential carbon-related legislation … • Australia has a renewable energy scheme in operation that obligates energy retailers to For personal use only purchase a minimum proportion of their energy supply from renewable sources • The Australian Gov
Slide 38: Meeting medium term LRET obligations
Origin is able to comfortably meet its medium term LRET obligations, including those of the acquired NSW energy assets, with its existing portfolio of renewable certificates For personal use only • On 1 January 2011 the Renewable Energy Target was split into two parts: the Large-Scale The REC price
Slide 39: Over 3,000 MW of wind development options
Origin has over 3,000 MW of wind development options which may be developed to support Origin’s renewable energy obligations … 2 For personal use only Feasibility 1 Planning and Permitting DA Approved pp • Origin received Victorian Government approval for the 300-450 MW Stockyard Hill Wind Farm near
Slide 40: Geothermal technologies in Australia
Origin is pursuing the development of geothermal technologies in Australia … • Origin’s Australian geothermal interests include: For personal use only ¾ 30% non-operated interest in Innamincka Deeps Joint Venture ¾ 50% operated interest in Innamincka Shallows Joint Venture ¾ 100% interest in a large
Slide 41: Offshore geothermal and hydro opportunities
Origin is also pursuing the untapped potential of geothermal opportunities in growing markets offshore … For personal use only Indonesia Geothermal • Origin and Tata Power of India, in consortium with PT Supraco Indonesia, were awarded th Sorik the S ik Marapi M i geothermal th l exploration l ti •
Slide 42: Solar photovoltaic investment via Transform Solar
Origin is continuing to invest in solar photovoltaic technology through its 50:50 joint venture with Micron in the US … For personal use only • Transform Solar is a 50:50 joint venture between Origin and Micron Technology Inc to focus on the development of photovoltaic technologies • The near term o
Slide 43: 7. Operational Review
7. Operational Review For personal use only
Slide 44: Exploration & Production delivered 20% EBITDA growth
Exploration & Production: delivered 20% Underlying EBITDA growth despite higher exploration expenses … Exploration and Production Segment For personal use only • Underlying EBITDA up 20% reflecting additional 400 200 contributions from Kupe and Otway, increased Dec-10 APLNG production production, pa
Slide 45: Gas and liquids production at record levels
Gas and liquids production increased to record levels … For personal use only 1 PJe Origin Gas Production by Half Year mmboe PJe Origin Liquids Production by Half Year mmboe 60 10.3 10 1.7 9 1.5 50 8.6 8 1.4 7 1.2 40 6.9 6 1.0 30 52 5.2 5 0.9 4 0.7 20 3.4 3 0.5 10 1.7 2 0.3 1 0.2 0 0.0 0 0.0 Dec Jun
Slide 46: Expanded exploration drilling campaign
An expanded offshore and international exploration drilling campaign was conducted in the half together with domestic and overseas evaluation activities Other Exploration Activities (1H 2011) Khorat Plateau, Laos (1H 2011) Domestic Onshore: Testing of Bang Nouan-1 Aug 2010; For personal use only • I
Slide 47: Generation: 47% increase in Underlying EBITDA
Generation: the commencement of Darling Downs Power Station drove a 47% increase in Underlying EBITDA Generation Segment For personal use only 250 500 Dec-10 • Underlying y g EBITDA increased 47% or $ $46 million Dec-09 to $144 million reflecting increased capacity TDA ($m) payments due to the incre
Slide 48: Darling Downs Power Station commenced commercial operations
Darling Downs Power Station commenced commercial operations in July 2010 and plays an integral role in risk minimisation and portfolio optimisation across Origin’ss gas, Origin gas electricity and carbon positions For personal use only Darling Downs Power Station steam turbine Aerial shot of Mortlak
Slide 49: Retail: Underlying EBITDA increased 15%
Retail: Underlying EBITDA increased 15% as a result of lower energy costs due to effective wholesale portfolio management, higher tariffs largely driven by the pass through of higher network costs, costs and strong growth in solar sales … For personal use only Retail Segment • Underlying EBITDA incr
Slide 50: Wholesale electricity prices decreased significantly
Wholesale electricity prices decreased significantly compared with the prior half year as a result of increased generation capacity, high hydro levels and mild weather For personal use only 1 Prices exclude Tasmania • Sustained periods of low market prices during the period resulted from increased g
Slide 51: Higher tariffs led to increased churn rates
Higher Victorian and Queensland electricity tariffs led to increased market activity and higher churn rates while market average gas churn also increased over the period Combined Gas and Electricity Churn Rates For personal use only Market Churn: 6 Month Average 30% State Fuel Dec 09 Change Dec 10 %
Slide 52: Contact: Underlying EBITDA flat in NZ dollars
Contact: Underlying EBITDA in New Zealand was flat at NZ$225 million, however declined by 2% in AUD terms due to foreign exchange translation Contact Segment For personal use only 1000 250 • Encouraging performance in a challenging environment Dec-10 of high hydrology and portfolio inflexibility 900
Slide 53: Contact's strategy to add portfolio flexibility
Contact’s strategy is to continue to add portfolio flexibility and grow market share through increasing its generation footprint Geothermal For personal use only ¾ 166 MW Te Mihi project committed ¾ Up U to 250 MW Tauhara T h 2 project j consented d– follows Te Mihi in national merit order ¾ Taheke
Slide 54: Half Year Ended December 2010 Results
Half Year Ended 31 December 2010 24 Februaryy 2011 For personal use only 2011 Half Year Results
Slide 55: Further Information
Further Information For personal use only Investors Angus Guthrie Kylie Springall Group Manager, Investor Relations Manager, Investor Communications Email: angus.guthrie@originenergy.com.au angus guthrie@originenergy com au Email: kylie.springall@originenergy.com.au kylie springall@originenergy com
Slide 56: 8. Appendix
For personal use only 8. Appendix
Slide 57: Income Statement – Reconciliation of Statutory and Underlying
Income Statement – Reconciliation of Statutory and Underlying ($ million) Dec 10 Dec 09 Change Statutory NPAT (136) 371 (507) For personal use only Items Excluded from Underlying Profit(1) Impairment of assets (154) (8) (146) Decrease in fair value of financial instruments (156) (19) (137) Gain on d
Slide 58: Underlying Financial Performance
Underlying Financial Performance ($ million) Dec 10 Dec 09 Change Revenue 4,603 4,300 7% For personal use only Underlying EBITDA before exploration expense 915 728 26% Exploration Expense (97) (22) (340%) Underlying EBITDA 818 706 16% Depreciation and amortisation, and ITDA of equity (282) (217) (30
Slide 59: Depreciation and amortisation increased 30%
In combination, Underlying depreciation and amortisation, and ITDA of equity accounted investees increased by $65 million or 30% to $282 million For personal use only Depreciation and Amortisation ($ million) Dec 10 Dec 09 Change Exploration & Production 113 71 59% Generation 48 20 140% Retail 32 34
Slide 60: Underlying financing costs increased
Underlying financing costs increased by $56 million reflective of the increased investment in the business ($ million) Dec 10 Dec 09 For personal use only Interest Revenue 18 74 Interest Expense (62) (62) Underlying Financing (Costs)/Income (44) 12 Financing Costs Capitalised 74 78 Weighted average
Slide 61: Tax Reconciliation
Tax Reconciliation ($ million) Dec 10 Dec 09 Underlying Profit before Tax 492 501 For personal use only Prima facie tax on Underlying Profit at standard rates 151 150 Recognition of tax benefits not previously brought to account - (21) Share of net profit of equity accounted investees (5) (4) Tax lo
Slide 62: Income Statement – Australia Pacific LNG
Income Statement – Australia Pacific LNG Summary of Australia Pacific LNG’s performance Total Origin’s 50% ($ million) For personal use only Dec 10 Dec 10 Dec 09 Operating Revenue 178 Operating Expenses (114) Underlying EBITDA 64 32 24 D Depreciation i ti & A Amortisation ti ti E Expense (35) Unwind
Slide 63: Changes in fair value of financial instruments
Changes in fair value of financial instruments Reconciliation of Statement of Financial Position and Income Statement items associated with financial instruments movements For personal use only ($ million) Dec 10 Change in net assets (243) Recognised in the Statement of Financial Position 22 Recogni
Slide 64: Capital Expenditure by Segment
Capital Expenditure by Segment ($ million) Dec 10 Dec 09 Stay-in-business 69 85 For personal use only Growth1 Exploration & Production 162 119 Generation 210 477 Retail 61 45 Contact Energy 124 155 Total Capital Expenditure 626 881 Acquisitions (net of cash) - 669 Capex including Acquisitions 626 1,
Slide 65: Available funding capacity as at 31 December 2010
Origin invested $0.6 billion in growth projects, stay in business capital For personal use only and acquisitions q … Available Funding Capacity as at 31 December 2010 $ billion Cash 0.7 Adjusted Gross Debt (2.7) Adj t d N Adjusted Nett D Debt bt(1) (2) (2 0) (2.0) Undrawn Committed Facilities 2.3 Av
Origin Energy — Citi Annual Australian and New Zealand Conference 2011 on 6ix