Origin Energy Limited · ASX:ORG
Origin Energy — J.P. Morgan Australian Corporate Access Days 2009
76 slides from Origin Energy's conference presentation, Oct 6, 2009
Slide 1: ASX announcement cover note
For personal use only To Company Announcements Office Facsimile 1300 135 638 Company ASX Limited Date 6 October 2009 From Bill Hundy Pages 76 Subject PRESENTATION Attached for your information is a presentation being made by Karen Moses, Executive Director Finance and Strategy to the J.P. Morgan Aus
Slide 2: J.P. Morgan Australian Corporate Access Days
October 2009 New York & Edinburgh For personal use only J.P. Morgan Australian Corporate Access Days
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 1. Strategy, Performance, Growth For personal use only 2. Market Summary 3. Australia Pacific LNG 4. Carbon and Renewables Strategy 5. Business Strategy 6 Outlook 6. O tl k 7. Appendix - Business Overview • Exploration and Production • Generation • Retail • Co Contact tact Energy e gy 3
Slide 5: 1. Strategy, Performance, Growth
1. Strategy, Performance, Growth For personal use only 4
Slide 6: Financial objectives and business strategies
Origin’s financial objectives and business strategies have been established to respond to changes in the energy industry… industry For personal use only • Financial Objectives – Steady and predictable cashflows – EPS growth of 10-15% pa on average • Business Strategy – Positioned in the competitive
Slide 7: Origin has grown operational dimensions of each business area
Origin has grown the operational dimensions of each business area and has consistently sought to deepen integration… For personal use only Fuel Generator Retailer A leading producer of gas in Eastern Largest owner and developer of gas A leading wholesaler and retailer of Australia involved in the de
Slide 8: Managing volatility in wholesale commodity prices
The effective implementation of this strategy helps us manage the volatility in the wholesale price of commodities… QLD Spot and Forward Contract Electricity Prices International oil and condensate prices For personal use only 150 NW Shelf Condensate 140 TAPIS SPREAD 120 120 Origin Realised Price e
Slide 9: Growth in underlying earnings
… and has delivered growth in underlying earnings EBITDAF by b bbusiness i ttype 1400 For personal use only 1200 Underlying Profit CAGR 23% 1000 EBITDAF CAGR 19% $ million 800 600 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 Networks E&P Generation Retail Contact Source: Origin Origin Orig
Slide 10: Growth in earnings per share and shareholder value
The growth in earnings has translated into significant growth in underlying earnings per share and increasing value for shareholders • Free cash flow per share(1) has grown at a CAGR 12% For personal use only since listing • Underlying earnings per share has increased from 17 cents in 2001 to 60 cen
Slide 11: Full year results: statutory and underlying profit
Origin s Statutory Profit for the full year of $6.9 billion was driven by Origin’s ConocoPhillips’ investment for a 50% interest in Origin’s CSG assets… For personal use only Statutory Profit $6,941 million up 1243% Statutory Earnings per Share 791 cps up 1241% Underlying Profit $530 million up 20%
Slide 12: Cash and undrawn debt facilities of $5.3 billion
Following the APLNG transaction Origin is in a strong position to grow and develop its business with access to cash and undrawn committed debt facilities of $5.3 $5 3 billion and substantial additional balance sheet capacity For personal use only As at 30 June 2009 Undrawn Available Adjusted Adjuste
Slide 13: Debt maturity profile and committed growth capex
With access to $5.3 billion of cash and undrawn debt facilities, Origin is well placed to fund opportunities to grow and develop the business For personal use only Origin Debt & Bank Guarantee Maturity Profile Origin Committed Growth Capex Profile 2,400 2,400 2 200 2,200 Loans & Bank Guarantees - Un
Slide 14: 2. Market Summary
For personal use only 13 2. Market Summary
Slide 15: Growth in energy demand
Growth in energy demand for electricity, natural gas and LPG has averaged around 4% per annum since the 1980s even through times of economic recession For personal use only Source: Origin based on ABARE and ABS data Origin’s share of Eastern Australian end use energy markets has grown from 10% in 20
Slide 16: Evolution of Australian energy markets since mid 1990s
The energy markets in Australia have evolved significantly from mid 1990s when they were regionally based… For personal use only Wholesale Electricity Market Wholesale Gas Market mid 1990s mid 1990s Dynamics Dynamics • Limited interconnection of markets • Cooper and Gippsland dominated gas supply un
Slide 17: Interconnected electricity and gas markets by 2009
By 2009 the electricity and gas markets have become largely interconnected to form an integrated electricity and gas market in eastern Australia with g levels of private high p ownershipp For personal use only Interconnectors in the NEM Wholesale Electricity Market Wholesale Gas Market 2009 2009 Int
Slide 18: Leading positions in exploration, generation and retail
Over the last decade Origin has established leading positions in the Exploration and Production, Generation and Retail markets in which it operates… PJe Eastern Australia Gas Reserves 35,000 Others For personal use only 30,000 Origin is still one of the largest holders of upstream Origin 25,000 gas
Slide 19: Gas position as key strength
Origin’s key strength in its core Australian business is its gas position which allows it to manage wholesale risks in both gas supply and generation more effectively than its competitors… For personal use only Fuel Generator Retailer Origin’s long gas position Origin’s comprehensive physical and co
Slide 20: 3. Australia Pacific LNG
3. Australia Pacific LNG For personal use only
Slide 21: ConocoPhillips transaction to establish APLNG
In September 2008 Origin entered into a transaction with ConocoPhillips to establish a CSG to LNG joint venture known as Australia Pacific LNG (APLNG)… For personal use only ConocoPhillips has subscribed for a 50% interest in Australia Pacific LNG Assets Australia Pacific LNG includes all of Origin’
Slide 22: APLNG project progress and Gladstone site
APLNG is progressing well with the development of its CSG to LNG project and has now selected a site at Gladstone for its downstream operations For personal use only • APLNG has secured the Laird Point site on Curtis Island in the Port of Gladstone for its proposed p p CSG to LNG pplant • 230 hectar
Slide 23: APLNG CSG reserves increases
APLNG continues to grow its CSG reserves with significant reserves increases that demonstrate the size and quality of APLNG’s CSG resource… For personal use only 3C 2C 3P 2P Source: Origin g APLNG’s Reserves (PJ) 30 Jun 2008 30 Jun 2009(1) Change Increase 2P Reserves 4,793 7,265 + 2,472 + 52% 3P Res
Slide 24: APLNG as Australia's largest CSG producer
APLNG is Australia’s largest producer of CSG, representing around one third of total CSG production… p For personal use only • Production capacity is growing significantly and by 2011 annual CSG production of over 100 PJ is i ttargeted t d tto service i d domestic ti contracts • In meeting this grow
Slide 25: Asian trend towards oil price parity for LNG
In the Asian market in particular there has been a trend towards oil price parity which has resulted in higher LNG prices for gas and has been a key driver of emerging interest in CSG For personal use only Asian Term Prices Late 2006 $18 2007 Oil Parity $16 Asian Prices Converge 2008-09 p LNG Price
Slide 26: APLNG Project Update
APLNG Project Update For personal use only Milestone Timing ConocoPhillips Optimised CascadeSM Q3 2008 process selected Initial Advice Statement (IAS) Q1 2009 submitted Project declared as Significant by Q2 2009 the Queensland Government APLNG Resources increased to 7,265 , Q2 2009 Q PJ (2P) Curtis
Slide 27: 4. Carbon and Renewables Strategy
4. Carbon and Renewables Strategy For personal use only
Slide 28: Portfolio positioned for carbon constrained environment
Origin’s portfolio is well positioned for a carbon constrained environment… Fuel Retailer For personal use only Generator Origin has a significant, diverse Established generation capacity Australia’s leading GreenPower and balanced range of renewable in hydro and geothermal with a provider with a gr
Slide 29: Increased renewable energy target
In August 2009 the Federal Government legislated an increased renewable energy target in response to climate change … For personal use only (2) • Starting in January 2010 with a target of 12,500 GWh • 2020 target will be ~45,000(1) GWh (from the prior 9,500 GWh target) • Target maintained until 2030
Slide 30: RET to drive investment in wind and peaking generation
The RET will drive significant investment in wind power generation and will require a significant capacity of peaking generation to be built to support its intermittency… For personal use only Forecast Additional NEM Generation by • Wind is currently the most cost effective Fuel Type to Meet Demand
Slide 31: Portfolio of renewable energy supply
Origin has positioned itself to respond to the RET with a portfolio of renewable energygy supply… pp y For personal use only • Origin initially invested in wind through third parties by underwriting wind farm developments p byy others through g long g term power purchase agreements • Origin’s first
Slide 32: Portfolio of peaking gas fired generation sites
In addition, Origin has a significant portfolio of developing and permitted peaking gas fired generation sites… For personal use only • By late 2010 Origin will have around 1,600 MW of operating gas fired peaking generation • Origin has another 855 MW of gas fired peaking capacity available under lo
Slide 33: Emerging renewable technologies: geothermal and solar
Origin is a long time supporter and developer of emerging renewable technologies… Geothermal For personal use only • Origin believes that hot rock geothermal power developed at scale could provide a superior long term solution to meeting RET targets • Origin considers the Innamincka Joint Venture to
Slide 34: Carbon Pollution Reduction Scheme
The Federal Government’s policy response to climate change also includes the Carbon Pollution Reduction Scheme (CPRS) For personal use only • The CPRS is an emissions trading scheme designed to create a market price for carbon • Commencement deferred to July 2011 (originally 2010) • Permit price fix
Slide 35: Gas economics versus coal as carbon prices increase
As carbon prices increase, the economics of gas will surpass coal as the lowest cost fuel for generation making it an attractive option for future base load generation requirements… For personal use only Long g Run Marginal g Cost of Black Coal vs CCGT with $6 $ GJ Gas 200 Carbon Intensity by Fuel T
Slide 36: CPRS uncertainty complicating generation investment
Uncertainty around the Carbon Pollution Reduction Scheme is complicating investment decisions for generation for many market participants… MW O i i ' G Origin's Generation ti C Capacity it For personal use only • The likelihood of an ETS is discouraging 8,000 investment in new coal fired baseload ge
Slide 37: 5. Business Strategy
For personal use only 5. Business Strategy
Slide 38: Deepening integration of each business area
Within Australia Origin has grown the operational dimensions of each business area and has consistently sought to deepen integration For personal use only Fuel Generator Retailer A leading producer of gas in Eastern Largest owner and developer of gas A leading wholesaler and retailer of Australia in
Slide 39: Natural hedge across the energy value chain
Origin’s operations provide an effective natural hedge and optionality to manage risk across the full energy value chain. Origin centrally monitors and manages theh portfolio f li For personal use only Wholesale gas International Domestic Gas customers LNG customers Market Sale Sale Purchase of thir
Slide 40: Domestic gas supply portfolio
Origin’s domestic gas supply portfolio includes ownership of conventional gas reserves and contracts for purchases from third parties PJ Gas Available l bl for Domestic Energy Portfolio l For personal use only 4,000 3,500 3,000 2,500 2,000 1,500 1,000 , 500 0 Origin O i i EEquity i C Contracted d Co
Slide 41: South West Queensland Pipeline expansion
The expansion of the South West Queensland Pipeline will provide Origin with long term gas pipeline capacity to link its Eastern Australian portfolio… • IIn June J 2009 Origin O i i entered t d iinto t a conditional diti l For personal use only agreement with Epic Energy to underpin construction of
Slide 42: Offshore exploration programme
Origin has commenced a significant offshore exploration programme this year targeting substantial reserves increases near domestic markets in Australia and New Zealand For personal use only Northland Basin Origin, as Operator of permit PEP 38619, has secured the semi submersible rig “Kan Kan Tan IV
Slide 43: Growing generation portfolio to meet retail requirements
Origin continues to grow its Generation portfolio to meet its Retail requirements For personal use only Peak Demand vs Peak Capacity Annual Demand vs Annual Generation 7,000 35 Wh) patched (TW acity (MW) 6,000 30 5 000 5,000 25 mand and Insstalled Capa neration Disp 4,000 20 and and Gen 3,000 15 2,0
Slide 44: Managing energy retailing margins
Origin has been able to effectively manage its energy retailing margins through building scale and effectively managing tariffs, churn, cost to serve and risk For personal use only • With around 3 million customers, Origin is able to achieve significant scale advantages • Origin has worked with gove
Slide 45: Contact Energy integrated position
Contact Energy(1) also has an integrated position which provides a natural hedge to seasonal variations in the wholesale electricity market (where hydro is the dominant fuel)… For personal use only Fuell Generator R Retailer il • Extensive portfolio of gas • 9 power stations with • 600,000 customers
Slide 46: Contact projects committed for development
Contact has a number of projects committed for development with substantial additional opportunities, particularly in geothermal development Projects to restore flexibility back into the portfolio are on track for commercial operation in mid-2010 For personal use only • Stratford peakers (200 MW, NZ
Slide 47: 6. Outlook
For personal use only 6. Outlook
Slide 48: Projects contributing in the coming financial year
A number of projects Origin has been developing are expected to make initial or significantly increased contributions to financial performance in the coming financial year For personal use only • Full year contribution from the Uranquinty and expanded Quarantine Power Stations • Full year contributi
Slide 49: Major projects contributing in the years ahead
Origin g will continue to progress p g the development p of several major j projects in its existing business which are expected to make For personal use only contributions in the years ahead • Development D l off the h 550 MW M Mortlake l k Power P Station S i which hi h iis d due for f completion
Slide 50: Access to capital and $5.3 billion liquidity
The past year has been challenging for financial markets and many companies have been severely constrained in accessing capital to fund their businesses… businesses For personal use only As at 30 June 2009 Undrawn Available Adjusted Adjusted Committed Cash Funding N C Net Cash h(1) G Gross D Debt b
Slide 51: J.P. Morgan Australian Corporate Access Days
October 2009 New York & Edinburgh For personal use only J.P. Morgan Australian Corporate Access Days
Slide 52: Further Information
Further Information Investors For personal use only Angus Guthrie g , Investor Relations Manager, Email: angus.guthrie@originenergy.com.au Office: +61-2-8345 5558 Mobile: +61-4-1786 61 4 1786 4255 Website www.originenergy.com.au 51
Slide 53: 7. Appendix - Business Overview
7. Appendix - Business Overview For personal use only
Slide 54: Exploration & Production
Exploration & Production For personal use only
Slide 55: Gas production increased
Gas production increased on full year contributions from the Otway Gas Project and Taranaki Basin… For personal use only Dilution of Origin’s • Underlying CSG production continued to grow interest in APLNG strongly. Despite the 50% dilution in Origin’s CSG iinterests t t ffrom N November b d due tto
Slide 56: Liquids production grew significantly
Liquids production grew significantly during the year with contributions from new projects and the Cooper oil program… For personal use only • First full year contribution from both the Offshore Otway Otway Gas Project and Taranaki Basin • The Cooper Oil Program resulted in increased annual Cooper B
Slide 57: Offshore production interests in Australia
Offshore production interests in Australia support the domestic business… Otway Gas Project • 30.75% equity interest For personal use only • Operating reliably at or around peak capacity during high demand periods • Annual production((1)) of 18 PJ of gas and 190,000 190 000 barrels of liquids • Orig
Slide 58: Kupe Gas Project nearing completion
In New Zealand, the Kupe Gas Project is nearing completion… Kupe Gas Project For personal use only • Construction of the offshore facilities, wells and associated infrastructure is complete • Onshore production station near Hawera is nearing completion • Expecting to open the wells and bring raw gas
Slide 59: APLNG aligned structure
APLNG provides a fully aligned and function structure that combines Origin’s leading position in Australian CSG development… For personal use only Upstream LNG Plant LNG Marketing Domestic Gas Operator Origin ConocoPhillips Joint Venture Origin Ownership 50:50 50:50 50:50 50:50 Extent of All g gas p
Slide 60: ConocoPhillips and Bechtel technology and experience
APLNG will leverage the technology and experience of ConocoPhillips and Bechtel in project delivery and design… • ConocoPhillips and Bechtel Global formed a Global LNG Collaboration in 1996 For personal use only • The collaboration centre is staffed by employees from both companies and utilises Cono
Slide 61: Generation
For personal use only Generation
Slide 62: Peaking and co-generation interests
Origin has interests in 1,464 MW of peaking and co-generation in Australia and over 1,900 MW through Contact Energy in New Zealand… Australia For personal use only Plants Capacity (MW) Operation Fuel Osborne 180 (Cogen) Base Gas Worsleyy 120 ((Cogen) g ) Base Gas Bulwer Island 32 (Cogen) Base Gas Mt
Slide 63: Expansion of Australian generation portfolio
In Australia Origin is undergoing a major expansion of its electricity generation portfolio For personal use only Generation Plant State Operation Capacity (MW) Type Ladbroke Grove SA Base/Peak 80 Merchant Quarantine SA Peak 216 Merchant Roma QLD Peak 74 Merchant Mt Stuart QLD Peak 288 Merchant Uran
Slide 64: Developments increasing generation capacity
Major developments and acquisitions are significantly increasing Origin’s generation capacity to provide greater hedge support, and position Origin’s generation portfolio for potential base load opportunities as the impact of carbon costs flows through wholesale energy prices For personal use only M
Slide 65: Darling Downs and Mortlake Power Stations
The completion of Darling Downs and Mortlake Power Stations will add 1,180 MW to Origin’s generation portfolio For personal use only View from Darling Downs Steam Turbine Building showing Gas Turbine building Mortlake PS gas turbine at final assembly in Germany Darling Downs Power Station Mortlake P
Slide 66: Retail
For personal use only Retail
Slide 67: Retail energy sales and customer numbers
Origin’s retail energy sales and customer numbers have grown through acquisition providing significant scale and geographic diversity and a channel to market for its Generation and Fuel businesses For personal use only Origin Energy Sales • Around 3 million gas gas, electricity and LPG customers acr
Slide 68: Second largest energy retailer in electricity and gas
Origin is Australia’s second largest energy retailer in both Electricity and Gas, with around 22.66 million customers providing scale and geographic diversity For personal use only Electricity y Market Share Gas Market Share Retail Customer Numbers (1), (2) Retail Customer Numbers (1), (2) (1) Share
Slide 69: Retail tariff deregulation by state
Retail tariff deregulation is progressing in each state. In respect of those states that continue to have a form of regulation, the regulatory regime is stable and transparent and has an appropriate risk management margin embedded For personal use only State Current Regulatory Regime Comment / Outlo
Slide 70: Higher margin markets have higher churn
Markets with more attractive margins tend to have higher levels of churn For personal use only Year End Customer Numbers (000’s) (000 s) Natural Gas Electricity Total June 2008 880 1,729 2,609 Change -13 +14 +1 J June 2009 867 1 743 1,743 2 610 2,610 Source: Various websites including VENCorp, NEMMC
Slide 71: Brand awareness versus competitors
Origin has established strong brand awareness across the Eastern Australian market, and has obtained higher recognition than its competitors For personal use only Retailer Retailer Retailer Retailer Retailer Origin A B C D E Top of Mind 26 18 5 8 2 1 37 37 41 41 47 47 46 46 49 49 50 50 44 7 3 Total
Slide 72: Retail systems transformation with Wipro
Origin is undertaking a transformation of its Retail systems and has partnered with Wipro to move to an integrated SAP billing and customer management platform platform… For personal use only • Origin has partnered with Wipro in a program to transform Origin’s Retail systems • Seeking to improve Ori
Slide 73: Contact Energy
For personal use only Contact Energy
Slide 74: Contact is New Zealand's leading fuel integrated energy company
Contact is New Zealand’s leading fuel integrated energy company… For personal use only • 600,000 gas, electricity and LPG customers • Generates approximately 10 TWh - 26% of New Zealand’s electricity annually • Mix of renewable and lower emissions generation – 15% geothermal, 35% hydro and 50% natur
Slide 75: South Island drought and wholesale prices
South Island drought conditions and transmission constraints in the first half limited Contact’s ability to generate electricity during periods of high wholesale prices and resulted in Contact p p paying y g more for its energygy p purchases… For personal use only South Island prices remain high as
Slide 76: Origin Energy Assets - Australia and New Zealand
Origin Energy Assets - Australia and New Zealand For personal use only 75
Origin Energy — J.P. Morgan Australian Corporate Access Days 2009 on 6ix