Origin Energy Limited · ASX:ORG
Origin Energy — Investor Day (June 2015)
69 slides from Origin Energy's investor day presentation, Jun 10, 2015
Slide 1: ASX announcement cover note: Origin Energy Investor Day Presentation
For personal use only To Company Announcements Office Facsimile 1300 135 638 Company ASX Limited Date 10 June 2015 From Helen Hardy Pages 69 Subject Origin Energy Investor Day Presentation Please find attached a release on the above subject. Regards Helen Hardy Company Secretary 02 8345 5000 – helen
Slide 2: Origin Energy: Improving Returns in Energy Markets – Investor Day
For personal use only ORIGIN ENERGY IMPROVING RETURNS IN ENERGY MARKETS Investor Day Melbourne 10 June 2015
Slide 3: Forward looking statements
For personal use only 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 i
Slide 4: Strategy of connecting resources to markets: 3 businesses, 4 priorities, 5 measures
Origin’s strategy of connecting resources to markets is pursued through its 3 businesses, 4 priorities and 5 measures that drive continued improvement in Origin’s performance For personal use only A regionally A growing A regional leader significant position position in in energy markets in natural
Slide 5: Improving Returns in Energy Markets
For personal use only Improving Returns in Energy Markets Frank Calabria, CEO 4
Slide 6: The energy market continues to rapidly change
The energy market continues to rapidly change For personal use only Wholesale electricity market remains oversupplied Demand for gas is increasing with additional renewables required East coast gas demand1 Reserve energy margin (%)2 East Coast Total Supply Demand 30% PJ 2,000 Curtis Island Demand Ga
Slide 7: Consumers have more choice and are demanding more from their energy provider
Consumers have more choice and are demanding more from their energy provider For personal use only Strong retail competition for grid supply Distributed generation increasingly affordable 6
Slide 8: Origin aspires to become the most trusted energy solutions provider
Origin aspires to become the most trusted energy solutions provider For personal use only Customer centric organisation, using our knowledge of the customer to offer a range of energy related products and services Grid supply Distributed generation • Maintain flexibility of gas & electricity • Lever
Slide 9: Four clear Strategic Priorities for Energy Markets
Becoming the most trusted energy solutions provider and improving returns in Energy Markets require focus on four clear Strategic Priorities For personal use only A regionally A growing A regional leader significant position position in in energy markets in natural gas and renewable energy LNG produ
Slide 10: Significant progress on Strategic Priorities
Origin has made significant progress on these Strategic Priorities For personal use only Progress to date Focus going forward Increased gas margins and market share • Capture benefit of rising gas market Reduced cost to serve • Remain competitive on cost of electricity through flexibility; pivot
Slide 11: Increased operating cash flow and reduced capex are improving returns
Increased operating cash flow and reduced capital expenditure are improving returns Energy Markets EBITDA and Operating Cash Flow Energy Markets EBIT / Sales Margin For personal use only $m 1,600 15% 1,200 10% 800 5% 400 0 0% FY2011 FY2012 FY2013 FY2014 FY2015 FY2011 FY2012 FY2013 FY2014 HY2015 1H E
Slide 12: Energy Markets continuing to deliver improved returns
Energy Markets is continuing to deliver improved returns by… For personal use only Expanding Natural Gas margins • Maintain competitive cost of gas through legacy gas positions • Maximise value of ramp gas opportunities • Commencement of long dated and well priced gas sales contracts to other LNG pr
Slide 13: Energy Markets team
Energy Markets team For personal use only Frank Calabria CEO Greg Jarvis Tony Lucas David Smales Rebekah Jon Briskin Phil Mackey Andrew Bills Phil Moody GM Wholesale GM Energy GM Generation O’Flaherty GM Retail GM Solar & GM LPG & HSE GM & Trading, Risk GM Marketing, Customer Emerging Commercial & B
Slide 14: Maximising Gas Value and Flexibility
For personal use only Maximising Gas Value and Flexibility Greg Jarvis, General Manager Wholesale & Trading and Business Sales
Slide 15: Gas portfolio flexibility in rising price environment
Gas portfolio flexibility in rising price environment For personal use only 1 Competitive advantage Gas demand increasing in cost of gas 2 Gas prices rising in all markets Increased gas market 3 share Origin has a strong gas supply position ... Increased gas margins 4 ... and flexibility to manage s
Slide 16: East Coast demand increasing through LNG start up
East Coast demand increasing through LNG start up East Coast Total Supply Demand For personal use only PJ East Coast Gas Demand1 2,000 1,500 1,000 500 - 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Curtis Island Demand Gas Fired Generation Industrial Residential The tripling of d
Slide 17: Changing east coast gas market and rising gas prices
Changing nature of east coast gas market and increasing production costs leading to higher wholesale and retail gas prices For personal use only Australian domestic gas prices Wholesale component of are moving towards export parity retail tariff (NSW)3 14.00 12.00 10.00 2014 prices 10.00 unusually l
Slide 18: Origin's gas for power generation sold into higher priced LNG market
Origin’s gas for power generation will be sold into the higher priced LNG market ... For personal use only NEM Prices from 1 January 2015 to 8 June 2015 300 250 Options to call back gas to run generation at 200 prices above $100/MWh, or $/MWh 150 $10/GJ1 100 Average NEM pool 50 price of around $35/M
Slide 19: Access to reserves at competitive prices is an advantage
In an increasingly tight market, access to reserves at competitive prices is an advantage For personal use only Sources of Energy Markets‟ East Coast Gas Portfolio Equity resources (Bass PJ/a 300 Gas and Otway) and long Ironbark Other Purchases (Price Review) Other Purchases (Oil Linked) Other Purch
Slide 20: Access to gas reserves complemented by transport capacity and flexibility
Access to gas reserves is complemented by transport capacity and flexibility For personal use only • Historically Queensland gas has flowed to the southern states, however this will reverse once LNG trains are operational Moomba • During ramp phase, gas flows between Wallumbilla and Moomba can Wallu
Slide 21: Flexible gas transportation and generation monetise ramp gas
Flexible gas transportation and generation portfolios have allowed Origin to monetise available ramp gas in Queensland For personal use only Energy Markets Sources and Uses of Gas PJ Sources 120 Uses +28 PJ of ramp 100 gas +6 PJ into generation 80 -14 PJ of internal sales from E&P 60 +13 PJ of Busin
Slide 22: Competitive advantages capture benefits of rising gas prices
Origin’s competitive advantages will allow it to continue to capture benefits of rising gas prices, near term ramp gas opportunities, increasing sales volumes and market share ... For personal use only Natural Gas Gross Margin • Continued rising domestic gas prices and cost 400 of gas benefit from l
Slide 23: Maximising Fuel and Generation Flexibility
For personal use only Maximising Fuel and Generation Flexibility Tony Lucas, General Manager Energy Risk Management
Slide 24: Fuel and generation flexibility amid uncertain demand and increasing renewables
Fuel and generation flexibility in a market with uncertain demand outlook and increasing renewable supply For personal use only 1 Downside risk to the demand outlook 2 Increasing energy supply & volatility in the NEM Competitive cost of 3 electricity Electricity portfolio flexibility 4 Fuel flexibil
Slide 25: Demand growth from LNG; solar penetration and efficiency continue
While some demand growth will come from LNG, increased solar penetration and energy efficiency is expected to continue For personal use only Rooftop solar penetration continuing, with batteries Demand growth primarily in Queensland on the horizon Electricity NEMNEM Grid Demand1 Demand NEM Rooftop So
Slide 26: Gas-fired generation to decrease as gas prices rise; renewables build required
Gas-fired generation will decrease as gas prices rise, however with more certainty on the 33 TWh RET, energy supply will increase as wind and/or utility scale solar are built For personal use only Gas fired generation reduces in Queensland and Renewables build required NSW as gas prices rise Wind Bu
Slide 27: Renewables increases extend the supply curve and pressure wholesale prices
Increases in renewables to achieve a 2020 RET will extend the supply curve and place downward pressure on wholesale prices For personal use only Supply curve changes with additional 14 TWh of Origin able to continue buying from the pool in a renewables suppressed wholesale price environment Tier One
Slide 28: Origin's LRET portfolio has flexibility to contract or build
Origin’s LRET portfolio has flexibility to contract or build longer term For personal use only ORG LRET Origin‟s position LRET position1- 33 TWh 8 7 Number of LRECs (millions) 6 5 4 3 2 1 - 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 ORG existing PPAs and contract
Slide 29: Wind intermittency increases volatility; gas-peaking portfolio well placed
The intermittency of wind will likely increase volatility for which Origin is well placed to benefit through its gas-peaking portfolio For personal use only Intermittency of renewables increases reliance on Wind variability driving volatility in SA peaking generation support Number of 5-minute perio
Slide 30: Enough wind has DA approval to meet 33 TWh target
Enough wind has received DA approval to meet the 5 GW of new wind equivalent required under a 33 TWh target For personal use only 5GW of wind required to be built, with 6GW already More economic to build wind rather than pay having required approvals in place penalty Status of Wind Development Optio
Slide 31: Competitive cost of electricity through flexible generation portfolio
In a market which is expected to remain oversupplied Origin has a competitive cost of electricity through its flexible generation portfolio with a short position to the pool ... For personal use only Origin’s Generation Flexibility Capacity Energy 9,000 40 • Limited coal exposure 8,000 35 Hedge 7,00
Slide 32: Fuel position heavily weighted to gas; coal contracted to 2022
Origin’s fuel position is heavily weighted to gas where market prices are increasing $3.50/GJ+ For personal use only Large portion of fixed priced gas in Origin‟s supply Coal currently contracted to 2022, with options to position increase at low prices Gas supply 2016 - 2030 Coal supply 2,500 2500 I
Slide 33: Eraring's fuel position contracted at less than 40% of capacity
Eraring’s fuel position is contracted at less than 40% of its total capacity with high quality coal For personal use only Power station flexibility Coal supply flexibility & increased ability to stockpile Eraring fuel position (2017) 12 10 Ability to source Coal tonnes p.a. 8 additional coal at low
Slide 34: Energy costs expected to be highest in Queensland across the NEM
Across the NEM energy costs are expected to be highest in Queensland given LNG load and gas price increase For personal use only Queensland • Strongest energy growth due to LNG load and withdrawn gas-powered generation • Highest capacity value due to significant demand flex on hot days New South Wal
Slide 35: Generation Operations
For personal use only Generation Operations David Smales, General Manager Generation
Slide 36: Increasing performance and lowering costs through asset management strategies
Continuing to increase performance and lower costs through the development and execution of effective asset management strategies For personal use only 1 Effective asset management Increased asset performance 2 Portfolio flexibility, scale & diversity Increased capability & productivity 3 Integratio
Slide 37: Asset management strategies maintain flexibility and performance at lowest cost
Continued execution of asset management strategies to maintain portfolio flexibility and performance at lowest optimal cost For personal use only Controlling & optimising costs Lowering capital requirements Generation Generation Capital Expenditure Generation Operating Costs Operating Costs Generati
Slide 38: Generation portfolio provides flexibility, scale and diversity
Origin’s Generation portfolio provides flexibility, scale and diversity to support a competitive cost of electricity whilst also leveraging gas transportation capability For personal use only A highly flexible Generation Portfolio with scale1 A proven capability to capitalise on market opportunities
Slide 39: Eraring contributes significantly to Generation portfolio
Eraring continues to make a significant contribution to Origin’s Generation portfolio and lowers its overall cost of energy For personal use only Improving asset management performance Contributing to Origin‟s lower cost of energy Eraring Operating Costs • Achieved 37% improvement in safety performa
Slide 40: Gas fleet underpins strong portfolio performance
Origin’s gas fleet continues to underpin the portfolio’s strong performance track record, responding well to rapidly emerging market opportunities For personal use only Improving asset management performance Sustained high performance and flexibility • Summer availability >99% over the last four yea
Slide 41: Monitoring & Support Centre underpins asset management strategies
Generation’s Monitoring & Support Centre underpins asset management strategies and operating model, providing systemic ongoing performance improvement across the portfolio For personal use only Leveraging technology to help drive performance Employing industry-leading asset management practices • Sm
Slide 42: Building Loyalty and Trust
For personal use only Building Loyalty and Trust Rebekah O‟Flaherty, General Manager Marketing, Sales & Service Jon Briskin, General Manager Retail Customer Operations
Slide 43: Execution of customer agenda improving loyalty and trust while lowering cost to serve
Continued execution of Origin’s customer agenda, improving loyalty and trust while lowering cost to serve For personal use only 1 Value-based retention Improved net promoter score 2 Origin branded channels Improved churn relative to market 3 Enhance customer experience Increase products per customer
Slide 44: Competition is predominantly price led
Competition today is predominantly price led. Origin will continue to meet the market on discounts to defend market share For personal use only Origin‟s Average Signed Discount Offers for Electricity and Competitor offers in market Natural Gas (%) VIC NSW SA QLD Aug-13 Sep-13 Nov-13 Dec-13 Aug-14 Se
Slide 45: Data and analytics identify high value customers
Data and analytics enable identification of high value customers, providing a basis upon which Origin tailors offers and service levels For personal use only Based on Customer Lifetime Value Delivering benefits for customers and Origin Proactive retention of all customers Differentiated treatments b
Slide 46: Digital platform and sales operating model enable Origin branded channels
Origin’s digital platform and sales / service operating model has enabled customers to use Origin branded channels as the channel of choice For personal use only Dedicated sales and service Higher internal sales channel mix New integrated digital capability Higher internal sales channel mix centres
Slide 47: Moving towards an 'OMNI' customer experience
Origin is moving towards an ‘OMNI’ customer experience ... For personal use only ... offering customers greater flexibility and enabling an integrated experience across channels with deeper customer insight 46
Slide 48: Improving communication with customers
Origin is improving communication with its customers For personal use only Simpler, shorter communications Keeping customers informed Bill due reminder Connection reminder Origin Origin Hi. Just a friendly Hi. Your elect r icit y reminder t hat t he connect ion for balance of your 1 Smith St is all
Slide 49: Retail Transformation improves operational metrics and bad debt exposure
Executing on the Retail Transformation project has enabled Origin to improve operational metrics and bad debt exposure For personal use only Improving our operational performance Favourable movement in core metrics to date Days Sales Outstanding and 90+ Day Debt to Billed Revenue Ratio Jun 13 May 15
Slide 50: Retail Transformation benefits evident in reducing cost to serve
Benefits of Retail Transformation are evident in reducing cost to serve For personal use only Cash cost to serve down ... ... with further reduction from Cash Cost to Serve ($m)1 • Continued reduction in bad and doubtful debts 800 • More efficient and streamlined credit collections processes 600 • R
Slide 51: Building loyalty and trust starts with our people
Building loyalty and trust starts with our people, and our cultural transformation is well under way For personal use only Reward & recognition tied to New ways for our people to NPS operating model customer experience help our customers 50
Slide 52: Origin's journey to build customer loyalty and trust continues
Origin’s journey to build customer loyalty and trust continues For personal use only Earlier FY15 Coming up Expansion into Entered ACT Open Innovative new Embedded Electricity market Saturdays energy products Networks Contact Centre Customer Service Digital analytics New look weekday hours New Origi
Slide 53: Origin continues to grow the core energy business into new areas
Origin continues to grow the core energy business into new areas For personal use only Growing Origin water and Entered ACT market Growing multi product holdings embedded energy solutions • Entered ACT market September 2014 • Leading provider of centralised hot • Offering our customers a water servi
Slide 54: Leveraging our Capability
For personal use only Leveraging our Capability 53
Slide 55: Deepening knowledge of the customer through data and analytics
Deepening knowledge of the customer enabled through growing capabilities in data and analytics For personal use only ... together with core ...deepening our knowledge Core data sources ... platforms ... of the customer Digital Product Meter Weather Other external 54
Slide 56: Leveraging Capability – Floor Walks
Leveraging Capability – Floor Walks For personal use only Metering capability through our Social media managing engagement Leveraging our capability in SAP established Acumen Metering with our stakeholders business 55
Slide 57: Growing Solar and Energy Services
For personal use only Growing Solar and Energy Services Phil Mackey, General Manager Solar and Emerging Businesses
Slide 58: Growing new products and services
Growing new products and services For personal use only 1 Origin will lead the solar market Market share 2 Deliver Solar as a Service Customer experience 3 Expand service offerings 4 Harness new technology Products per customer 57 57
Slide 59: Origin aspires to be #1 in rooftop solar
Solar will play a significant role in the future energy landscape; Origin aspires to be #1 in rooftop solar For personal use only Residential SME / Commercial • Remaining addressable market greater than • Delivered commercial solar projects and built 5 million homes (owner occupied and a substantial
Slide 60: Origin's solar track record provides significant experience and capability
59 For personal use only 40,000 60,000 80,000 100,000 120,000 20,000 0 True Value Solar Source: Origin, SunWiz Origin Energy SolarGain SolarpowerRex Modern Solar NU Energy Premier Solar Shop Green Engineering P&N (Euro Solar, Sun solar) Chromagen Pty Ltd Beyond Building Energy Matters Pty Ltd Solar
Slide 61: Trialling and building capabilities across new energy technologies
Origin has been trialling, learning and building new capabilities across new energy technologies, products and business models For personal use only 2002: Origin delivers its 2010: Origin installs its 2014: Mitsubishi EV first solar offer in the 10,000th system. Installs relationships Australian mar
Slide 62: Solar as a Service creates long term customer relationships
Solar as a Service creates long term relationships with our customers and delivers increased value for both parties For personal use only TODAY & THE FUTURE Solar as a Service ... „Don‟t Waste Your Roof‟ • Delivers solar at $0 upfront - customer pays for kWh‟s generate • Products offered: 7, 10 & 15
Slide 63: Origin aspires to be #1 in solar by delivering key value drivers
Origin aspires to be #1 in the solar market by delivering on the key value drivers For personal use only Value created Lowest Cost To Acquire • Large, investable portfolio of energy assets Lowest cost of • Deeper, longer term customer relationships ownership • Greater value from each customer with i
Slide 64: Leveraging retail experience to deliver home energy services
Origin is leveraging its retail experience and harnessing opportunities to deliver home energy services For personal use only 10 years+ experience Extending service offers Moving to a deep delivering services into customer relationship homes Appliances Retailing Servicing Market TODAY Retail solar a
Slide 65: Extending into other energy services and products, including batteries
Extending into other energy services and products, including batteries For personal use only Our insights into battery use confirm that there Origin is developing solutions that match is not one battery that fits all customer need with the right battery • >12months of extensive analysis • Customer n
Slide 66: Improving Returns in Energy Markets
For personal use only Improving Returns in Energy Markets Frank Calabria, CEO 65
Slide 67: Energy Markets Strategic Priorities
Energy Markets Strategic Priorities For personal use only Progress to date Focus going forward Increased gas margins and market • Capture benefit of rising gas market share • Remain competitive on cost of Reduced cost to serve electricity through flexibility; pivot to Maximise value of renewable
Slide 68: Energy Markets continuing to deliver improved returns
Energy Markets is continuing to deliver improved returns by… For personal use only Expanding Natural Gas margins • Maintain competitive cost of gas through legacy gas positions • Maximise value of ramp gas opportunities • Commencement of long dated and well priced gas sales contracts to other LNG pr
Slide 69: Thank you
For personal use only Thank you For more information Chau Le Group Manager, Investor Relations Email: chau.le@originenergy.com.au Office: +61 2 9375 5816 Mobile: + 61 467 799 642 www.originenergy.com.au 68