Origin Energy Limited · ASX:ORG
Origin Energy — FY2017 Earnings Presentation
55 slides from Origin Energy's earnings presentation, Aug 16, 2017
Slide 1: 2017 Full Year Results
2017 FULL YEAR RESULTS Full year ended 30 June 2017 Frank Calabria CEO, Lawrie Tremaine CFO 16 August 2017 Origin Energy | 2017 Full Year Results Announcement 1
Slide 2: 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 3: Outline
Outline Performance Highlights Frank Calabria Financial Review Lawrie Tremaine Operational Review Frank Calabria Outlook Frank Calabria Appendix Origin Energy | 2017 Full Year Results Announcement 3
Slide 4: Performance Highlights
PERFORMANCE HIGHLIGHTS Frank Calabria Origin Energy | 2017 Full Year Results Announcement 4
Slide 5: 2017 Full Year Highlights
2017 Full Year Highlights Statutory Loss Underlying EBITDA Underlying Profit $(2,226) million $2,530 million $550 million (126.9) cps 31.3 cps Including impairments of $3,064 Up $834 million on FY2016 Up $185 million on FY2016 million after tax NCOIA Adjusted Net Debt TRIFR $1,378 million $8.1 billi
Slide 6: Good progress against key priorities
Good progress against key priorities REDUCING DEBT AND LEADERSHIP IN LEADERSHIP IN IMPROVING RETURNS ENERGY MARKETS INTEGRATED GAS Adjusted Net Debt reduced to $8.1 12% increase in EBITDA to $1,492m 186% increase in EBITDA to $1,104m billion Improvement in customer satisfaction 40% increas
Slide 7: Asset sales reducing debt
Asset sales reducing debt Assets sales completed NCOIA $m Asset Proceeds (A$m) 1,400 Mortlake Pipeline 245 1,378 1,350 Mortlake Terminal Station 110 Cullerin Range Wind Farm 72 1,300 International renewable assets 50 1,250 Upstream assets 16 1,200 1,215 Darling Downs Solar Farm 10 Stockyard Hill Win
Slide 8: Lattice IPO / trade sale progressing well
Lattice IPO / trade sale progressing well, expected by end of CY17 Established Lattice as a stand-alone entity Established Lattice management team Completed IPO non-deal roadshow Received indicative trade sale bids Launched bank facility process Origin Energy | 2017 Full Year Results Annou
Slide 9: Strong gas position underpins volume growth and sustainable earnings
Strong gas position underpins volume growth and sustainable earnings Energy Markets East Coast Gas Supply Portfolio PJ/a • Strong gas position with length beyond 300 2022 and flexible transport underpins 250 o Increased gas sales volumes in FY2017 200 o Support for customers and energy 150 security
Slide 10: Electricity portfolio supporting earnings as energy markets transition
Electricity portfolio supporting earnings as energy markets transition Electricity spot / forward prices $/MWh 160 Electricity Portfolio 140 • Delivers improved returns in a period of high wholesale prices 120 • Supports earnings as wholesale prices ease 100 with the addition of low cost renewable e
Slide 11: Increased generation output in response to high wholesale prices
Increased generation output in response to high wholesale prices Monthly Generation Output GWh 1,800 • Eraring capacity utilisation at 64% in 2H FY2017 1,600 • Eraring coal contracting and supply chain enhanced 1,400 and optimised to support increased generation output 1,200 1 in 20 year maintenance
Slide 12: Accelerating transition to low cost renewables
Accelerating transition to low cost renewables Origin Installed Renewable Capacity Bundled PPA Prices1 (Large scale wind and solar) MW $/MWh 2,000 160 1,800 530 1,868 1,600 120 1,400 110 1,200 496 1,000 80 800 600 732 40 400 Renewables are the lowest cost new 200 build generation today 0 0 at June F
Slide 13: Transforming customer experience and automating processes through digital
Transforming customer experience and automating processes through digital Simplified A CHOICE OF CHANNELS Experiences - Personalised Mobile Voice Social, Chat Bot → Increase customer - Effortless satisfaction Core Products Simple, data-led and integrated propositions → Improve customer Customer acqu
Slide 14: Customer ambition focused on the smarter energy future
Customer ambition focused on the smarter energy future Future connected, Future Future smart connected, connected, homes smart and homes smart homes and and Our ambitio Our Connected Connected Connected businesses businesses businesses Customer Champion bran Customer Cham Cus Simple, frictionless cu
Slide 15: Investing in and trialling new technology
Investing in and trialling new technology to increase customer engagement and create additional revenue streams COLLABORATING Sharing Silicon Valley Partnering with 7 other utilities Sponsoring startup energy office and co-investing globally to select and support innovation hub in Australia with inn
Slide 16: What Origin is doing for customers
What Origin is doing for customers • Assisting customers in hardship o no price rises o putting customers on the best offer with no conditions attached o expanding programs for matching bill payments and financial support • Competitive offers for customers o notify customers when discounts are expir
Slide 17: APLNG operating above design nameplate capacity
APLNG operating above design nameplate capacity APLNG Upstream Supply1 TJ/d 2,500 Train 1 • Concluded the 90 day operational operational Two-train phase of the two train project finance operational 2,000 test test lenders’ test in July 2017 o Averaged more than 10% above 1,500 nameplate capacity dur
Slide 18: APLNG's post lenders' test focus is to significantly reduce costs
APLNG’s post lenders’ test focus is to significantly reduce costs APLNG capex and opex (100%) A$bn • Committed to significant and comprehensive upstream 3.5 cost reduction, initiatives include: o Lean operating model 3.0 o Advanced analytics 2.5 o Debottlenecking o Well productivity improvements 2.0
Slide 19: FY2018 Priorities
FY2018 Priorities REDUCING DEBT AND LEADERSHIP IN LEADERSHIP IN IMPROVING RETURNS ENERGY MARKETS INTEGRATED GAS • Execute divestment of Lattice Energy • Increase gas volumes supported by • Increase APLNG production strength of supply portfolio • Improve productivity and reduce costs in • Target Adju
Slide 20: Financial Review
FINANCIAL REVIEW Lawrie Tremaine Origin Energy | 2017 Full Year Results Announcement 20
Slide 21: Improved earnings and cash flow driving lower debt
Improved earnings and cash flow driving lower debt Underlying EBITDA Capex plus net APLNG contribution $m $m 3,000 4,500 4,000 2,500 3,500 2,000 3,000 1,500 2,500 2,000 1,000 1,500 500 1,000 500 0 0 FY2013 FY2014 FY2015 FY2016 FY2017 FY2013 FY2014 FY2015 FY2016 FY2017 Contact Origin ex Contact Conta
Slide 22: Statutory Loss of $2,226 million includes $3,064 million non-cash impairment
Statutory Loss of $2,226 million includes $3,064 million non-cash impairment • Impairment charges of $1,172 million Year ended 30 June ($m) FY2017 recognised in H2 FY2017 Statutory Profit / (Loss) (2,226) o APLNG (Origin share): $815 million Items Excluded from Underlying Profit reduction in the l
Slide 23: Underlying Profit of $550 million increased by $185 million
Underlying Profit of $550 million increased by $185 million Movements in Underlying Profit 1,600 1,400 632 (632) 1,200 163 1,000 57 $ million 154 800 129 (167) 600 (25) 86 550 162 400 365 200 0 Underlying EM EBITDA E&P EBITDA E&P D&A LNG EBITDA Share of ORG interest Other Underlying Profit FY2016 AP
Slide 24: Energy Markets EBITDA increased $162 million to $1,492 million
Energy Markets EBITDA increased $162 million to $1,492 million Movements in Energy Markets Underlying EBITDA Electricity +144 1,600 (25) 1,500 199 (30) (14) 22 1,492 1,400 10 $ million 1,300 1,330 1,200 1,100 1,000 FY2016 Natural gas Electricity Contract costs Feb weather Future Energy LPG / S&ES /
Slide 25: Integrated Gas EBITDA increased $718 million to $1,104 million
Integrated Gas EBITDA increased $718 million to $1,104 million Movements in Integrated Gas Underlying EBITDA LNG +632 E&P +86 1,200 (103) (13) 97 12 (23) 1,104 1,000 283 800 465 $ million 600 400 386 200 0 FY2016 LNG Segment LNG Segment Oil hedging Other E&P E&P Other FY2017 Volume Price Volume Pric
Slide 26: Operating cash flow (ex Contact) decreased by $44 million
Operating cash flow (ex Contact) decreased by $44 million 2017 2016 Change Year ended 30 June ($m) ($m) ($m) Movements excluding Contact Energy Cash EBITDA1 1,709 1,448 261 Change in working capital (319) 161 (480) Working capital increase ($480 million) primarily in Oil Puts premium paid (64) (117)
Slide 27: Adjusted Net Debt decreased $1 billion to $8.1 billion
Adjusted Net Debt decreased $1 billion to $8.1 billion Movements in Adjusted Net Debt - 30 June 2016 to 30 June 2017 10 9 9.1 (1.3) 9.1 8.9 $ billion 8 0.5 8.1 0.2 (0.9) 0.5 7 6 5 30-Jun-16 Cash Flow from Asset Capital Cash contributions Interest 30-Jun-17 Adjusted 1 Adjusted Net Debt Operations sal
Slide 28: Operational Review
OPERATIONAL REVIEW Frank Calabria Origin Energy | 2017 Full Year Results Announcement 28
Slide 29: Energy Markets
ENERGY MARKETS Origin Energy | 2017 Full Year Results Announcement 29
Slide 30: Customer experience and cost improvements
Customer experience and cost improvements Improving customer Increasing online interaction and improving cost to experience maintain Consumer & SME MyAccount registrations up 5% Online sales up 23% Interaction NPS up 3.8 pts 16.1 1,069k 1,014k 270k 12.3 9.7 219k Dec-15 Jun-16 Jun-17 Jun-16 Jun-17 Ju
Slide 31: Strong focus on customer value, retention and reducing cost to maintain
Strong focus on customer value, retention and reducing cost to maintain Customer Numbers Electricity & Natural Gas CTS $m 000’s 4,000 600 3,500 1,089 1,112 500 107 114 3,000 400 435 427 2,500 2,000 300 1,500 2,741 2,716 200 1,000 100 500 - 0 FY2016 FY2017 FY2016 FY2017 Gas Electricity Cost to mainta
Slide 32: Natural Gas Gross Profit growth reflecting increased sales volumes
Natural Gas Gross Profit growth reflecting increased sales volumes Energy Markets’ Sources and Uses of Gas PJ 300 250 200 150 100 50 0 FY16 FY17 FY16 FY17 Sources Uses LNG Customers Generation Business Retail Ramp Gas Equity Contracted Origin Energy | 2017 Full Year Results Announcement 32
Slide 33: Improving earnings and returns in electricity
Improving earnings and returns in electricity Electricity Gross Profit Electricity Sales Volumes $m TWh 1,600 Higher Electricity Gross Profit 50 • Higher electricity wholesale prices providing 1,400 Business Retail improved earnings and returns on the 1,426 1,282 40 substantial investment in generat
Slide 34: Integrated Gas
INTEGRATED GAS Origin Energy | 2017 Full Year Results Announcement 34
Slide 35: Strong E&P production and cash flow
Strong E&P production and cash flow E&P production Capital Expenditure NCOIA PJe $m $m 120 450 600 400 500 412 100 483 350 400 17 80 300 300 16 78 250 200 60 59 200 100 200 40 150 0 100 (100) 20 50 (200) (262) 0 0 (300) 1 FY2016 FY2017 FY2016 FY2017 FY2016 FY2017 Liquids Natural gas and ethane • 27%
Slide 36: Strong operational performance at APLNG
Strong operational performance at APLNG • Train 2 start-up in October 2016 • Completed Bechtel Performance Test and hand-over to Operator in December 2016 • Completed 90-day operational phase of two-train project finance lenders’ test o LNG facility produced more than 10% above nameplate capacity o
Slide 37: Strong production and improved realised price from APLNG
Strong production and improved realised price from APLNG APLNG production (ORG share) APLNG realised price PJe $/GJ 250 7.00 6.00 6.42 200 156 5.00 150 46 4.00 100 111 3.00 3.35 73 2.00 50 1.00 0 FY16 FY17 0.00 Directed to LNG Domestic FY16 FY17 • 46% production increase reflecting ramp up of • 92%
Slide 38: APLNG delivered on FY2017 guidance
APLNG delivered on FY2017 guidance FY2017 FY2017 • Origin’s net contribution to APLNG of $170 million 100% APLNG (A$bn) Guidance Actual was lower than guidance due to lower sustain Capital expenditure – Sustain 1.4 1.0 capex reflecting: Capital expenditure – E&A 0.1 0.1 o Savings achieved from reduc
Slide 39: APLNG FY2018 operating and distribution breakeven
APLNG FY2018 operating and distribution breakeven Prior Guidance Current Guidance 100% APLNG (A$bn) 0.70 AUD/USD 0.75 AUD/USD • At AUD/USD rate of 0.75 Capital expenditure – Sustain 1.4 1.4 o Operating breakeven is US$30/bbl Capital expenditure – E&A 0.3 0.3 o Distribution breakeven of US$48/bbl Ope
Slide 40: APLNG reserves support commitments with potential upside from maturing 2C resource
APLNG reserves support commitments with potential upside from maturing 2C resource 100% APLNG Reserves, 2C Resource and Requirements1 PJ Cumulative production of 1,544PJ over period • Activity during FY2017 focused on increasing 25,000 near term production ahead of the two-train lenders’ test 20,000
Slide 41: Outlook
OUTLOOK Frank Calabria Origin Energy | 2017 Full Year Results Announcement 41
Slide 42: Growth expected in FY2018
Growth expected in FY2018 • FY2018 earnings is expected to be driven by growth in both Energy Markets and Integrated Gas, subject to market conditions and regulatory environment • Energy Markets EBITDA is expected to increase to $1.70 – $1.80 billion (up 14 - 21% on FY2017) o Driven by improved retu
Slide 43: Appendix
APPENDIX Origin Energy | 2017 Full Year Results Announcement 43
Slide 44: Origin continues to hold sufficient liquidity
Origin continues to hold sufficient liquidity Debt & Bank Guarantee Maturity Profile as at 30 June 2017 Loans & Bank Guarantees - Undrawn • $6.6 billion1 of undrawn committed bank facilities Loans & Bank Guarantees - Drawn and cash at 30 June 2017 7,000 Capital Markets Debt & Hybrid • 2017 activity:
Slide 45: Reconciliation of adjusted net debt
Reconciliation of adjusted net debt Issue Issue Hedged Hedged AUD $'m AUD $'m AUD $'m Currency Notional Currency Notional Jun-17 Jun-17 Jun-17 Interest-bearing Fair value adjustments Adjusted net liabilities on FX hedging debt transactions AUD Debt AUD 517 AUD 517 517 0 517 USD Debt Left in USD USD
Slide 46: Energy Markets sales volumes
Energy Markets sales volumes Natural Gas sales volume (PJ) Year ended 30 June 2017 2016 Change Change Volumes sold (PJ) Retail Business Total Retail Business Total PJ % NSW 9.4 23.4 32.8 8.2 16.7 24.9 7.9 32 Victoria 25.6 40.9 66.5 25.6 39.3 64.9 1.6 2 Queensland 2.9 69.1 72.0 3.0 57.5 60.5 11.5 19
Slide 47: Energy Markets customer accounts
Energy Markets customer accounts Customer Accounts As at 30June 2017 30June 2016 Customer Natural Natural Electricity Total Electricity Total Change Accounts ('000) Gas Gas NSW 1 1,213 262 1,475 1,240 252 1,492 (17) Victoria 553 478 1,031 566 478 1,044 (13) Queensland 752 168 920 761 160 921 (1) Sou
Slide 48: Energy Markets generation
Energy Markets generation Generation portfolio Equivalent Pool Pool Nameplate Capacity Electricity Year ended 30 June 2017 Type1 Reliability Revenue Revenue Capacity (MW) Factor Output (GWh) Factor2 ($m) ($/MWh) Eraring 2,880 Black Coal 89.6% 55% 13,882 1,197 86 Darling Downs 644 CCGT 99.0% 55% 3,12
Slide 49: Renewable Power Purchase Agreements
Renewable Power Purchase Agreements Origin’s LRET position1 8 Number of RECS (millions) 7 6 5 4 3 2 1 - 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Calendar Year Existing PPAs & Contract Recent Solar deals Stockyard Hill Wind Mass Market Total demand (1) REC liability based
Slide 50: Important Notices
Important Notices All figures in this report relate to businesses of the Origin Energy Group (Origin, or the Company), being Origin Energy Limited and its controlled entities, for the financial year ended 30 June 2017 (the period) compared with the financial year ended 30 June 2016 (the prior corres
Slide 51: Important Notices (cont)
Important Notices (cont) Reserves Disclosures of Origin and APLNG’s reserves and resources are as at 30 June 2017. These reserves and resources were announced on the same date as the release of this Operating and Financial Review in Origin’s Annual Reserves Report for the year ended 30 June 2017. Pe
Slide 52: Glossary - Statutory Financial Measures
Glossary - Statutory Financial Measures Statutory Financial Measures are measures included in the Financial Statements for the Origin Consolidated Group, which are measured and disclosed in accordance with applicable Australian Accounting Standards. Statutory Financial Measures also include measures
Slide 53: Glossary - Non-IFRS Financial Measures
Glossary - Non-IFRS Financial Measures Non-IFRS Financial measures are defined as financial measures that are presented other than in accordance with all relevant Accounting Standards. Non-IFRS Financial measures are used internally by management to assess the performance of Origin’s business, and t
Slide 54: Glossary - Non-Financial Terms
Glossary - Non-Financial Terms Term Meaning APLNG Australia Pacific LNG – an incorporated Joint Venture between Origin, ConocoPhillips and Sinopec Bbl Barrel – An international measure of oil production. 1 barrel = 159 litres Boe Barrel of oil equivalent A generation plant’s output over a period com
Slide 55: For more information
For more information Peter Rice Chau Le General Manager, Capital Markets Group Manager, Investor Relations Email: peter.rice@originenergy.com.au Email: chau.le@originenergy.com.au Office: +61 2 8345 5308 Office: +61 2 9375 5816 Mobile: + 61 417 230 306 Mobile: + 61 467 799 642 www.originenergy.com.a