Origin Energy Limited · ASX:ORG
Origin Energy — Merger or Acquisition (July 2004)
36 slides from Origin Energy's merger presentation, Jul 21, 2004
Slide 1: Presentation to Analysts fax cover sheet
Origin energy To Company Announcements Office Facsimite 1300 300 021 Company Australian Stock Exchange Limited Date 21 July 2004 From Bill Hundy Pages 36 Subject PRESENTATION TO ANALYSTS Please find attached a copy of a presentation regarding Origin’s acquisition of Contact Energy that Grant King, M
Slide 2: Acquisition of Contact Energy Analyst Briefing
prigin. Acquisition of Contact Energy Analyst Briefing -~~ 21 July 2004-— YS.
Slide 3: Outline
Outline ¢« Overview * Strategic rationale ¢ Structure and funding ¢ Financial implications « Summary * Questions Page 2 Origin |
Slide 4: Disclaimer — Origin Energy
Disclaimer — Origin Energy This presentation for Origin Energy Limited is designed to provide a high level overview of the agreement entered into by Origin Energy Limited to purchase 51.2% of the issued capital of Contact Energy of New Zealand from Edison Mission Energy . The presentation may contai
Slide 5: Overview
Slide 6: Overview
Overview Page 5 Origin has entered into an agreement to acquire Edison Mission Energy’s 51.2% interest in Contact Energy for NZ$5.67 per share The acquisition is subject to an exemption being granted by the NZ Takeovers Panel, which will allow EME to sell its NZ holding company, rather than its Cont
Slide 7: Contact Energy is an integrated energy producer and retailer
Contact Energy is an integrated energy producer and retailer... Otahuhu é gas turbine 17MW Company Overview 3*4 largest company on NZ Stock Exchange 100,000+ NZ Shareholders Otahuhu & combined cycle Retail and generation coverage across NZ gas turbine 380MW 28% of generation capacity Te Rapa © 50% t
Slide 8: The purchase of a controlling interest in Contact Energy will add size and diversity
The purchase of a controlling interest in Contact Energy will add significant size and diversity to Origin and expand opportunities for growth Last Reported full year Origin Contact results (A$ million) (YE June 30, 2003) (YE Sept 30, 2003) Revenue 3,352 1,099 EBITDA 491 326 NPAT 162 107 Net assets
Slide 9: Strategic rationale
Slide 10: Contact represents a strategically compatible business within Origin's sphere
Contact represents a strategically compatible business within Origin’s geographic sphere of operations........ « Increases markets accessible to Origin with known economic, competitive and regulatory environment « Strategically compatible business - business focussed on competitive generation and re
Slide 11: NZ economic and industry growth rates are similar to Australia
Pag New Zealand economic and industry growth rates are similar to those expected in various markets within Australia Source: Concept Consulting Group, ABARE, Ministry of Economic Development, _Dgptsche Bank Research GDP Growth in New Zealand & Australia 1.0% 2004 2006 2008 2010 2012 6.0% a ea cwosco
Slide 12: The competitive and regulatory structure of the NZ energy industry is similar to Australia
The competitive & regulatory structure of the NZ energy industry is similar to Australia, and deregulation is more advanced Contestability Ownership Structure Retail Tariff Controls Gas Electricity Gas Electricity Gas Electricity New Full Full Private & Private & x minor Zealand Gov Gov Australia Vi
Slide 13: Contact's business, like Origin's, is based on managing risk through integration
Page #2 Contact’s business, like Origin’s, is based on a model of managing risk through integration....... Contact Total generation Retail electricity sales Annual gas production Grigin Gas sales / internal use Source: Contact Energy, Origin Energy. Assumes 100% Contact Energy ~ 2003 Data ... Which
Slide 14: The acquisition adds significantly to the size and diversity of Origin's business
The acquisition adds significantly to the size and diversity of Origin’s business ......... . Origin Contact Combined Customers (‘000) - electricity 850 >500 1,350 ~ gas 980 >90 1,070 ~ LPG >200 - 200 >2,620 Generation (MW)* - Gas capable plant 883 1,821 2,704 - Hydro 752 752 - Geothermal 324 _324 3
Slide 15: Providing a better balance between business segments
... providing a better balance between business segments 6% Origin Contact* 15% 13% 38% Upstream fi Retail @ Generation f Networks 85% 43% 4% Y 36% Origin + 51.2% Contact* “Approximate: Based on Origin Funds Employed by segment and estimates of Contact value by segment 3 4% Page t4 Origin
Slide 16: The NZ energy market also provides opportunities for growth
The NZ energy market also provides opportunities for growth Residential Energy Usage Industrial and Commercial Energy Usage 4 MEtectricity BCoat Bow af 400 7--{__ mEtectricity ECool Boa Ooas OBiomess |; Residential Consumer Energy (Pu ga} 4970 BOOS Total industrial and Commercial Energy {Ful pa} W87
Slide 17: Dependence on hydro and weather cycles results in volatile wholesale prices
The dependence on hydro and weather cycles results in volatile wholesale prices.......... Seasonai Pattern of prices $/MWh 250. — 1996 v0 ‘| gay Water storage oo 4908 is limited so 190 +| Wholesale ‘80 a9 +«| Prices peak \ pp ono, =| When water 400 | ao noe shortages are Ye] = aw ae aa | expected 50
Slide 18: Increases in retail tariffs have been necessary to reflect increasing fuel costs
Increases in retail tariffs have been necessary to reflect increasing fuel costs......... Additional large hydro investment unlikely Coal is expensive and a carbon tax is likely Gas supply is limited ~ Low cost gas linked to current declining contracts ~ New gas contracts signed at higher prices - L
Slide 19: Over the past three years average retail tariffs have increased by around 10% per annum
Over the past three years average retail tariffs have increased by around 10% per annum............ . Contact Retail Pricing 1998 - May 2004 Simple Average Retail Price in Incumbent Areas* 20 18 f ; Ad Sta : 3 18 Annual EBITDA ($NZ million) & Apr-88 Apr-99 Apr-60 Apr-Of = Apr-O02) Apr-O3 = Apr-04 “E
Slide 20: Structure and Funding
Slide 21: Origin likely to purchase all shares in Mission Energy Universal Holdings (NZ)
Origin likely to purchase all the shares in Mission Energy Universal Holdings (NZ), acquiring NZ$ 535 million debt and 51.2% of Contact Origin acquisition level NZ$535m 0.6% | 3.6m shares 50.6% | 291.8m shares Contact Energy a Ltd 28% Page 20 21% Origi n .
Slide 22: Origin's funding requirement will depend on minority shareholder acceptances
Origin’s funding requirement will depend on minority shareholder acceptances ... Contact Shareholder Acceptance EME 51.2% 65% 100% Total funding (NZD'm) 1,699 2,152 3,302 Universal debt (535) (535) (535) Net requirement (NZD'm)} 1,164 1,617 2,767 Net requirement (AUD'm) 1,058 1,470 2,515 To be funde
Slide 23: Convertible Undated Preference Shares (CUPS)
Convertible Undated Preference Shares (CUPS) Page 22 Facility A $1.2 billion Subscriber Deutsche Bank Dividends BBSW + 100 bps, discounted for franking payable on reset dates Term Perpetual First Reset Date 31 May 2005 Issuer Redemption At face value plus accrued dividend Holder Conversion On reset
Slide 24: Bridging Finance
Bridging Finance Facility NZ $1.8 billion Providers Citigroup and Westpac Term 364 days Interest Rate BBSW + margin Terms and Conditions Same as existing Origin facilities Facility limit large enough to allow for 100% acceptances and direct purchase of Contact shares Page 23 Origin |
Slide 25: Origin has time and multiple options to refinance the transaction funding
Origin has both time and multiple options available to refinance the transaction funding US capital markets Debt facility Domestic capital markets * = NZ Hybrid instrument Rights issue CUPS Share Purchase Plan Asset Sales A share placement will not be required and is not contemplated Origin Page 24
Slide 26: Regulatory Issues
Regulatory Issues «NZ Takeovers Panel exemption required for EME to accept offer by tendering Universal shares «NZ Overseas Investment Commission approval obtained «NZ Commerce Commission approval not required « Australian Securities Exchange Listing Rules clearances - No need for shareholder approv
Slide 27: Financial impact
Slide 28: Financial Impact
Financial Impact Page 27 Based on internal financial models and forward- looking estimates Origin Energy expects the acquisition of Contact to be EPS accretive from year one both pre and post goodwill Neither Origin nor Contact provide specific forward estimates of financial results for their compan
Slide 29: Assumptions
Assumptions Page 28 Origin and Contact forecasts are consensus estimates from Multex Contact forecasts converted to June year end and Australian dollars (exchange rate 1.10) Completion on 1 October, 2004 (therefore 9 months contribution from Contact in figures for FY 2005) CUPS replaced by rights is
Slide 30: Using consensus estimates the purchase is mildly dilutive after goodwill amortisation
Origin believes that earnings will be higher than consensus. Using consensus estimates the purchase is mildly dilutive after goodwill amortisation........ c 2005 - Year to June Consolidated at n Post goodwill Origin Contact# 51.2%* 100%* : EBIT 388 239 612 600 n Interest and tax (154) (124) (278) (2
Slide 31: Based on consensus estimates the acquisition is strongly EPS accretive excluding goodwill
Based on consensus estimates the acquisition is strongly EPS accretive excluding goodwill amortisation weemesnes C o 2005 - Year to June Consolidated at n Pre goodwill* Origin Contact# 51.2% 100% s EBIT 412 244 656 656 n Interest and tax (154) (124) (278) (278) s Acquisition funding after tax (33) (
Slide 32: In 2006, after IFRS, goodwill is no longer amortised
in 2006, after IFRS is introduced, goodwill is no longer amortised, and the consensus estimates are......... . Cc 2006 - Year to June Consolidated at n Pre goodwill* Origin Contact 51.2% 100% $ EBIT 426 349 775 775 n Interest and tax (153) (171) (324) (324) s Acquisition funding after tax (41) (78)
Slide 33: Summary
Slide 34: Next Steps
Next Steps Page 33 Origin will apply to the NZ Takeovers Panel for an exemption to acquire EME’s interest in Contact by acquiring Universal Holdings Subject to the Exemption being granted Origin will make a takeover offer for Contact at an offer price of $NZ5.67 per share If the exemption is not gra
Slide 35: Summary
Summary Page 34 Strategically compatible business acquisition that adds scale and diversity to Origin with expanded opportunities for growth EPS accretive from year 1 Strong cash flow contribution Compliments Origin’s value proposition for investors ~ Strong predictable cash flows ~ 10-15% EPS growt
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