Slide 1: Origin Energy results announcement transmittal
Origin energy To Company Announcements Office Facsimite 1300 300 021 Company Australian Stock Exchange Limited Date 17 August 2004 From Bill Hundy Pages 44 Subject Results Announcement Year Ended 30 June 2004 - Presentation This Transmittal is confidential. If you have received this document in erro
Slide 2: Final Results Announcement, Full year ended 30 June 2004
Final. Results Announcement Full year ended 30 June 2004 17 August 2004
Slide 3: Outline
Outline Performance Highlights Financial Review Operating Review Outlook Unless otherwise stated, all comparative data are in Page 2 relation to the prior corresponding period, the financial year ended 30 June, 2003. Origin |
Slide 4: Performance Highlights
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Slide 5: Financial highlights
Financial highlights ¢ Total Revenue ¢ EBITDA ¢ PAT ¢ Basic EPS ¢ Free Cash Flow (FCF) ¢ FCF per share ¢ Capex (incl.acquisitions) ¢ Net Debt / Capitalisation ¢ OCAT / Funds Employed ¢Total dividends per share Page 4 $3.6 billion up 6 % $532 million up 8 % $205 million up27 % 30.9¢ up 25 % $350 mill
Slide 6: Operating Review
Operating Review e Page 5 Continued growth in Perth Basin oil production Cooper Basin sales impacted by Moomba incident Steady progress on major projects including BassGas, Otway and CSG QAL gas contract signed and CSG gas swap agreed Acquisition of OCA minorities, Kupe interest and RockGas Continue
Slide 7: Financial Review
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Slide 8: Profit & Loss
Profit & Loss Jun 04 Jun03 % change ($m) ($m) Total Revenue 3,556 3,352 6% EBITDA 532 491 8% EBIT 329 295 11% Net interest expense (45) (49) (7%) Tax expense (77) (80) (4%) Outside equity interests (2) (4) PAT 205 162 27% Earnings per share (cents) 30.9¢ 24.8¢ 25% Free cash flow p s (cents) 52.8¢ 53
Slide 9: Group EBITDA is up 8% driven by Generation and Networks
Group EBITDA is up 8% driven by a strong contribution from Generation (Osborne, Mt Stuart) and Networks (SEA Gas)...... Segments Jun 04 Jun03 % change ($m) ($m) Exploration & Production 197.2 187.6 5% Retail 236.2 232.1 2% Generation 69.4 48.3 44% Networks 29.4 23.4 25% Total 532.2 491.3 8% veseene
Slide 10: Depreciation & Amortisation expense increased by only 4%
Depreciation & Amortisation expense increased by only 4% to $203 million reflecting new E&P capital ....... Jun 04 ($m) Jun 03 ($m) Buildings, plant & equipment 101.4 93.5 Producing fields 51.7 46.5 Electricity hedging contracts 11.3 22.2 Licences & Goodwill 37.2 32.3 Other 1.3 1.6 Total 203.0 196.1
Slide 11: Group EBIT rose by 11% to $329 million
Group EBIT therefore rose by 11% to $329 million....... . Segments Jun 04 Jun 03 % change ($m) ($m) Exploration & Production 105.1 103.3 2% Retail 155.1 143.8 8% Generation 42.2 26.5 59% Networks 26.9 21.6 24% Total 329.2 295.3 11% weseee .with Retails EBIT improvement of 8% more accurately reflecti
Slide 12: Funding & Interest
Funding & Interest Jun04 Jun03 % change Net debt ($m) 861 732 18% Total equity ($m) 1,939 1,790 8% Net debt to equity (%) 44% 41% Debt to (debt + equity) (%) 31% 29% Net interest expense ($m) 45.4 48.7 (7%) Net interest cover (x EBIT) 6.2 6.0 4% Average interest rate (%) 6.6% 6.7% « The cost of fina
Slide 13: The effective tax rate declined from 33% to 27%
The effective tax rate declined from 33% to 27% eeeeeee Jun 04 Jun 03 ($m) ($m) Profit before tax 283.8 246.6 Prima facie tax 85.4 74.0 add non-deductible amortisation 20.2 12.6 less non-assessable income (10.0) (6.2) less net tax benefits recognised (18.7) (0.2) equals Tax expense 76.9 80.2 Net tax
Slide 14: Origin's effective tax rate has been lower than 30%
Apart from last year, Origin’s effective tax rate has been lower than 30% 33% 29% 27% 27% | 1 . ] Year ended June 30 .and is expected to be below 30% in future 40% 35% + 30% - 25% + 20% + 15% 5 10% 5 5% + 0% - eorecee years Page #3 Prior to 2003 tax deductions transferred to Origin in respect of the
Slide 15: Little improvement in operating cash flow despite higher EBITDA
There has been little improvement in operating cash flow despite higher EBITDA and lower tax........... . Jun 04 ($m) Jun 03($m) EBITDA 532 491 Change in Working Capital (48) 39 Stay in business Capex (net) (83) (94) Non-cash items (net) 2 13 Tax/Subvention Payments (2) (50) OCAT 402 399 Net Interes
Slide 16: Capital expenditure on growth projects was higher
Capital expenditure on growth projects was higher while expenditure on acquisitions decreased Jun 04 ($m) = Jun 03($m) Stay in business 86 97 Growth Exploration & Production 207 129 Retail 30 19 Generation - 4 Networks - - Total capital expenditure 323 249 Acquisitions 185 276 Capex including acquis
Slide 17: Returns by segment: operating cash flow on funds employed
E&P returns are lower than target as a result of the Moomba incident, reduced benefits from Powercor contracts and working capital movements have impacted Retail ...... Funds Operating OCFR OCFR Employed Cashflow Jun04 Jun03 ($m) ($m) (%) (%) Exploration & 1,065 144 13.5% 14.2% Production Retail 1,2
Slide 18: Origin has improved returns per share significantly
Origin has improved returns per share significantly over the last four years......... . 60 per share « A final dividend per i FCFPS a 53 share of 7¢ (fully 50 | | GEPS franked) brings total m@ DPS 40 dividend per share to 40 13¢ (fully franked) ¢ Total dividend payout ratio of 42% is consistent with
Slide 19: Operating Review
Operating Review
Slide 20: E&P: EBITDA of $197 million was up 5%
E&P: EBITDA of $197 million was up 5% largely due to increase oil production from the Perth Basin.......... 300 400 350 300 + 250 + 200 + 150 4 100 + Total Sales Revenue & EBITDA ($m) Bi Jun-04 | ?Jun-03 | Revenue EBITDA Capex ‘7 200 (wis) xadez ° Perth Basin oil sales of 1.2 million bbis (increase
Slide 21: Higher oil production from the Perth Basin and co-mingling
Higher oil production from the Perth Basin and co-mingling of condensate and crude in the Cooper lifted oil sales..... Perth Basin delivered record production, which will increase further as Jingemia 4 is commissioned through August and September 2004 Reinstatement of LRP train B at the Moomba plant
Slide 22: Net 2P reserves increased by 647 PJe
Net 2P reserves increased by 647 PJe (8 times production) Proved and Probable Reserves (PJe*) 2P reserves at 30 June, 2003 1,573 Net effect of additions, revisions & adjustments plus CSG 572 plus Kupe acquisition 169 plus other (WA, Otway, central Qld) 25 less Cooper Basin (39) less production (80)
Slide 23: Origin continued to add value to its CSG assets
Origin continued to add value to its CSG assets by contracting gas, progressing development plans and adding reserves....... ; « Gas supply contract signed with QAL for 180 e PJ of gas over 15 years from 2007, adding to | 10 the 340 PJ to be supplied to AGL from May 2005 « Engineering design for the
Slide 24: The BassGas project has completed offshore installation and drilling
The BassGas project has successfully completed offshore installation and drilling of the first well...... + Platform installed successfully « Yotla 4 drilling complete with three major gas zones intersected much as anticipated with a new oil zone discovered + Production tests delivered strong flows
Slide 25: BassGas and Otway Gas Project
. BassGas~* Pipeline LEGE: E23) ore ‘Batont! “Yiomeaes | E&P activities in the region Page 24 The Otway Gas Project (Thylacine & Geographe development) has been approved to proceed weenes Otway Gas Project development approved in May 04 and will produce - 60PJ of sales gas 100,000 tonnes of LPG - 80
Slide 26: Perth Basin development activities delivered increasing oil production
Perth Basin development activities have delivered increasing oil production levels........ y Gil production from the Perth Baisn increased to 1.2 million barrels (Origin net}, or an average of 3,200 bopd 10 appraisai/development wells were drilled on the Hovea, Eremia and Jingemia fields. Facilities
Slide 27: Retail: EBITDA increased 2% to $236 million
Retail: EBITDA increased 2% to $236 million while EBIT increased 8% to $155 million........ 3,500 3,000 2,500 + 2,000 + 1,500 + 1,000 + Total Sales Revenue ($m) 500 + 0-4 os) h6UumelUC«OSS o [we oS (ws) xede> 8 VOLIGa Total sales down 3% to 196 Ple, but revenues up due to change in product mix Natur
Slide 28: Diversity of Retail business keeps EBIT/sales margins constant
The diversity of the Retail business has seen EBIT/sales margins constant at 5%...... Natural Gas_ Electricity LPG Revenue (A$m) 856 1,663 398 Gross Margin (A$m) 142 243 131 Sales - (PJ) 114 Sales - (TWh) 15.9 LPG (Ktonnes) 490 Total Sales (PJe) 114 57 24 Customer # (‘000) 967 887 289 esas .. despit
Slide 29: Integration cost reductions and efficiency gains reduced unit cost to serve
Integration cost reductions and efficiency gains have reduced the 25% 10% % Churn: Monthly data annualised 0% 20% + 15% 4 5% + unit cost to serve......... ee Mass Market Churn: Completed & Pending om Vie Elec sooonywvone Vic Gas —=@—SA Elec == = NSW Elec — —NSW Gas & Origin Natural Electricity Custo
Slide 30: Colder winter weather in Victoria led to increased retail gas sales
Colder winter weather in Victoria led to increased retail gas sales ......... Victorian Effective Degree Days Comparison of fast two years to 10 year average * Cold weather in Victoria from August through October and again from May through June resulted in Effective Degree Days exceeding both last y
Slide 31: Electricity supply costs increased as hedge book rolled off
Electricity supply costs increased as the favourable hedge book purchased from Powercor started to roll off...... Victorian Spot and Forward Contract Electricity Prices $70 7 i ; + Electricity revenue was up 6% in line Pal with increased sales volumes $60 « Electricity supply costs increased by arou
Slide 32: LPG focussing on solid returns through acquisition and improvements
LPG is focussing on contributing solid returns through acquisition and improvements to existing businesses 800 + Propane price ($A per tonne) international Propane Contract Price (CP} 600 + $00 + 400 + FY 02/03 FY 03/04 AS518 AS415 A A Jub-Gi Jan-2 Page 31 NE Jul-02 Jan-G3 « LPG volumes up 11,000 to
Slide 33: Generation: EBITDA up 44% to $69.4 million
Generation: EBITDA up 44% to $69.4 million on contributions from Mt Stuart and Osborne’s entry into tax consolidation 150 30 100 + 50 + Total Sales Revenue & EBITDA ($m) Page 32 Revenue @ Jun-04 ' Jun-03 EBITDA Capex Availability of all plants except Ladbroke Grove was high during the period Pool pr
Slide 34: Generation plants performed within expectations
Generation plants performed within expectations with the exception of Ladbroke Grove (turbine failure)........... Major Crigin Capacity | Type | Operation | Availabi | Capacity Contracting Party Power Int. % MW lity (%) | Factor (%) Plants Osborne 50 180 Cogen | Base 98 77 NRG Flinders & Penrice Wor
Slide 35: Pursuing further growth in Generation through development and renewables
Origin is pursuing further growth in the Generation business through power plant development and renewables...... Annuai Demand and Generation dispatched (Twh) a yw Ss Energy Demand ny wa Peak Demand 4,000 we ° ° wn 3,000 BGCrigin Generation El Crigin Retail Load Peak Demand and Instalied Capacity (
Slide 36: Networks: EBITDA up 25% to $29.4 million
Networks: EBITDA up 25% to $29.4 million largely due to initial contribution from SEA Gas EBITDA ($m) Page 35 EBITDA @ Jun-04 Capex Maiden contribution from SEA Gas to EBIT of $4.5 million Management fees from Envestra were consistent with last year and the CAMS JV contributed $0.5 million Distribut
Slide 37: The SEA Gas pipeline became operational in January 2004
The SEA Gas pipeline became operational on 1 January 2004, on time and on budget............ + Pipeline in place and operational in time to meet the gas supply crisis resulting from the fire in the Moomba processing plant on 1 January and has made a significant contribution to South Australian gas r
Slide 38: Acquisition of Edison Mission's 51.2% interest in Contact
The acquisition of Edison Mission’s 51.2% interest in Contact remains conditional but is progressing as expected * On July 20, 2004 Origin entered into an agreement to acquire Edison Mission Energy’s (EME) 51.2% interest in Contact Energy of New Zealand for NZ$5.67 per share, to be adjusted by any d
Slide 39: Outlook
Outlook
Slide 40: Factors influencing the profit outlook for FY05
There are a number of factors influencing the profit outlook for FY ’05......... . + Prerrerrry Cooper Basin production capacity will be fully restored Full year contribution from SEA Gas and Rockgas Perth Basin oil production will increase The BassGas project will start contributing to earnings Fur
Slide 41: Growth driven largely by E&P projects already disclosed
Growth within Origin will continue to be driven largely by E&P projects already disclosed to the market... Growth capital expenditure estimates and acquisitions compared with free cash flow for FY ‘04 450 « FY ‘04 growth capex and 400 | : 7 acquisitions totalling y Fy 200e ree J $422 million funded
Slide 42: Long term goal of EPS growth of 10-15% pa
Origin maintains the long term goal of achieving EPS growth of 10-15% pa through sound strategy, effective acquisitions and internally generated growth 1600 900 - EBITDA by Segment (A$m) BE&P GRetail @ Generation H Networks The combined growth across growth across Origin’s existing businesses remain
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Slide 44: Appendix: Restatement of Retail product splits from Jun 2003
Appendix: Restatement of Retail product splits from Jun 2003 Natural Gas Electricity LPG Revenue (A$m) 841 1,573 417 Gross Margin (A$m) 131 266 114 Sales - (PJ) 123 Sales - (TWh) 15.0 LPG (Ktonnes) 479 Total Sales (PJe) 123 54 24 Customer # (‘000) 967 851 200+ « Product revenue and gross margin for