Origin Energy Limited · ASX:ORG
Origin Energy — J P Morgan Asia Roadshow 2010
90 slides from Origin Energy's conference presentation, Oct 1, 2010
Slide 1: ASX announcement cover note
For personal use only To Company Announcements Office Facsimile 1300 135 638 Company ASX Limited Date 1 October 2010 From Helen Hardy Pages 90 Subject PRESENTATION Attached for your information is a presentation being made at the J P Morgan Asia Roadshow in Singapore and Hong Kong by Karen Moses, Ex
Slide 2: J P Morgan Asia Roadshow – Celebrating a decade of growth
4 - 6 October 2010 J P Morgan Asia Roadshow Singapore, Hong Kong For personal use only Celebrating a decade of growth Origin Energy
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. Business Strategy For personal use only 2. Performance and Growth 3. Outlook 4. Market Summary 5. Bringing Resources to Market • Australia Pacific LNG • Wind • Geothermal • Hydro • Solar 6. Appendix – FY10 Business Overview • Exploration and Production • Generation • Retail • Contact Ener
Slide 5: 1. Business Strategy
For personal use only 1. Business Strategy
Slide 6: Origin Energy is Australasia's leading integrated energy company
Origin Energy is Australasia‟s leading integrated energy company ... For personal use only • Listed in the ASX top 20 with a market capitalisation of over $14 billion# and over 4,300 employees • Leading producer of gas in eastern Australia • Largest owner and developer of gas-fired electricity gener
Slide 7: Financial objectives and business strategies
Origin‟s financial objectives and business strategies provide flexibility, stability and significant opportunities for growth across the energy industry For personal use only • Financial Objectives – Steady and predictable cashflows – EPS growth of 10-15% pa on average • Business Strategy – Position
Slide 8: Fuel position manages wholesale risks
Origin has built its business around a fuel position which allows it to manage wholesale risks more effectively than its competitors, with the Retail customers providing the long term revenue certainty For personal use only Fuel Generator Retailer Origin’s extensive position in resources Origin’s co
Slide 9: Integrated strategy in Australia optimising value across supply chain
Origin continues to develop its integrated strategy in Australia thereby optimising value across the energy supply chain Origin Owned/Contracted EPIC QSN Pipeline contract For personal use only Gas-Fired Power Stations Enables Qld gas to be transported Uranquinty, Roma, Ladbroke to southern gas and
Slide 10: Long gas position underpins retail, C&I and generation
Origin‟s long gas position underpins its retail, C&I and gas generation operations ... Origin Sources & Uses of Gas Origin Electricity Peak Capacity and Peak Demand For personal use only C&I Peak Demand Contracted Plant Mass Under Market Construction Peak Demand Operating Plant Source: Origin … whil
Slide 11: 2. Performance & Growth
2. Performance & Growth For personal use only
Slide 12: Strategy has delivered growth in underlying earnings
The effective implementation of Origin‟s strategy and has delivered growth in underlying earnings EBITDA CAGR 17% Underlying Profit CAGR 23% For personal use only (1) Funds Employed CAGR 16% Free Cash Flow (1) CAGR 19% * * Reflects Origin’s 52% share of Contact (1) Free Cash Flow is defined here as
Slide 13: One of the top performing listed companies over the last decade
As a result of this growth, Origin has been one of the top performing listed companies over the last decade… For personal use only Indexed to 100 from 21 February 2000 to 30 June 2010 … and is now in the ASX top 20 companies by market capitalisation, from a low of around 125th around the time of dem
Slide 14: Access to funds from APLNG dilution redeployed into operating assets
Access to funds as a result of the dilution of Origin‟s CSG interest in Australia Pacific LNG and their ongoing redeployment into operating assets have been a significant contribution to growth over the last two years … For personal use only … initially through reductions in financing costs and incr
Slide 15: Underlying Profit increased by 10% in FY10
Origin‟s Underlying Profit increased by 10% in FY10 driven by strong Retail performance and contributions from new projects For personal use only Statutory Profit (1) $612 million down 91% Statutory Earnings per Share (1) 69.7 cps down 91% Underlying EBITDA $1,346 million up 10% Underlying Profit $5
Slide 16: Increase in total capital expenditure of 17%
A significant increase in expenditure on acquisitions led to an increase in total capital expenditure of 17% … For personal use only Growth Capex • 28% lower than the prior year • Reductions in Generation resulting from Darling 2,837 Downs progressing from construction to 2,426 commissioning, comple
Slide 17: Fully franked final dividend declared for FY10
A fully franked final dividend of 25 cps, in line with the prior year, was declared for FY10 … For personal use only Source: Origin … consistent with the previously announced intention to rebase dividends at 50 cps annually and target a higher payout ratio of at 16 least 60% of Underlying Profit
Slide 18: Major projects completed during the year
During the year a number of major projects were successfully completed that added to earnings in the current year … For personal use only • Completed expansion of the Mt Stuart Power Station • Commenced commercial operations of the Cullerin Range Wind Farm • Achieved full commercial production from
Slide 19: New opportunities to access additional resources
We have created new opportunities to access additional resources … • Acquired 100% interest in the Ironbark CSG exploration permit (formerly Pangaea) For personal use only • Achieved drilling success at Trefoil and Rockhopper in the Bass Basin and Redback South and Redback in the Perth Basin • Incre
Slide 20: 3. Outlook
For personal use only 3. Outlook
Slide 21: Projects and acquisitions expected to contribute in coming year
In the coming year a number of development projects and acquisitions are expected to make initial, or increased contributions, to Origin‟s performance • A full year contribution from the Kupe in New Zealand; For personal use only • A full year contribution from Origin‟s higher equity in Otway which
Slide 22: Expanded offshore and international drilling activity in 2011
In 2011 Origin will continue with the expanded level of offshore and international drilling activity seen in 2010 … For personal use only …including two appraisal wells in the Khorat Plateau in Thailand… …two exploration wells in the Northland Basin New Zealand… …and the Silvereye exploration well i
Slide 23: $3.4 billion of available liquidity
Origin has significant financial capacity to fund future growth with $3.4 billion of available liquidity including cash and undrawn facilities For personal use only Source: Origin Source: Origin Origin‟s forward committed growth capital program is declining providing funding flexibility to address n
Slide 24: Opportunities to drive continued growth
Over the next year Origin is pursuing a wide range of opportunities to drive continued growth … For personal use only • A final investment decision by Australia Pacific LNG on its LNG project • The New South Wales Government‟s energy asset sales process • Pursuit of a substantial portfolio of renewa
Slide 25: 4. Market Summary
For personal use only 4. Market Summary
Slide 26: Growth in energy demand and Origin's market share
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 Origin‟s share of Eastern Australian end use energy markets has grown from 10% in 2000 to in excess of 15% today and the Compan
Slide 27: Evolution of Australian energy markets since mid 1990s
The energy markets in Australia have evolved significantly from mid 1990s when they were regionally based… Wholesale Electricity Market Wholesale Gas Market For personal use only mid 1990s mid 1990s Dynamics Dynamics • Limited interconnection of markets • Cooper and Gippsland dominated gas supply un
Slide 28: Interconnected electricity and gas markets by 2010
By 2010 the electricity and gas markets have become largely interconnected to form an integrated electricity and gas market in eastern Australia with high levels of private ownership Wholesale Gas Market For personal use only Wholesale Electricity Market 2010 2010 Dynamics Dynamics • Eastern States
Slide 29: Market churn continues to increase
Market churn continues to increase in most segments … Market Churn: 12 Month Average For personal use only State Fuel Jun 09 Change Jun 10 Vic Electricity 27% - 27% Vic Gas 23% + 6% 29% QLD Electricity 19% + 3% 22% QLD Gas 12% - 12% SA Electricity 15% - 1% 14% SA Gas 11% - 11% NSW Electricity 12% +
Slide 30: Eastern Australia gas reserves support local demand and export
Natural gas reserves in eastern Australia are sufficient to support both local demand growth and an export channel to market… For personal use only Source: 2007 – 2009 EnergyQuest; pre 2007 Origin Energy from company announcements …with continuing growth in CSG reserves expected through the maturati
Slide 31: Asia Pacific LNG demand continues to grow
Asia Pacific LNG demand continues to grow strongly with growth forecast to continue at an average annual rate of around 5% For personal use only • Asia Pacific LNG demand is forecast to Scott Ison ? grow from under 100 mmtpa in 2005 to almost 250 mmtpa in 2025 • The Pacific Basin looks set to remain
Slide 32: 5. Bringing Resources to Market – Australia Pacific LNG
5. Bringing Resources to Market - Australia Pacific LNG For personal use only
Slide 33: APLNG Structure
APLNG Structure For personal use only 50% 50% Upstream Pipeline LNG Plant LNG Marketing •Operated by Origin Energy •450 km (280 miles) •Operated by ConocoPhillips •Top Tier Asia-Pacific •CSG permits cover around pipeline from CSG fields •Located on Curtis Island in customers targeted for 38,000 km2
Slide 34: APLNG progressing toward final investment decision
Australia Pacific LNG project continues to progress on track in readiness for a final investment decision at the end of the year Timing For personal use only Milestone (Calendar Years) Initial Advice Statement (IAS) submitted Q1 2009 Project declared as Significant by the Queensland Government Q
Slide 35: Surat and Bowen Basins – largest CSG position
Surat and Bowen Basins - Largest and most developed CSG position in Queensland Curtis Island For personal use only • Australia Pacific LNG has the leading Bowen Basin CSG position in Australia Largest CSG reserves position Most developed resource base Prime acreage in both Queensland CSG sweet
Slide 36: Increased production capacity for Darling Downs and Rio Tinto contracts
Australia Pacific LNG has increased production capacity to supply the Darling Downs and Rio Tinto contracts … • APLNG remains Australia‟s largest producer of For personal use only CSG as it meets domestic market contracts • Production capacity has increased to over 300 TJ/day, and is expected to inc
Slide 37: 2P reserves increasing by 40%
APLNG continues to mature its reserves and resources base with Proved plus Probable reserves increasing by 40% over the year For personal use only • APLNG remains the largest holder of CSG reserves in Australia • APLNG participated in 317 wells during the year • 2P reserves increased by 2,878 PJe to
Slide 38: Progress on regulatory approvals, FEED and early works
Significant progress has been made on regulatory approvals, FEED studies and early works contracts … For personal use only Significant FEED and Early Works Contracts Awarded • $220 million contract signed with Savanna Energy Services for the provision of proprietary hybrid drilling and workover rigs
Slide 39: New LNG projects well placed to meet growing demand
New LNG projects coming online from 2015 are well placed to meet the expected growing worldwide demand for gas … bcm Capacity of New LNG Projects 100 • Substantial volumes of new LNG capacity For personal use only 80 has reached the market in recent years, however relatively limited capacity will be
Slide 40: Australian LNG projects largely contracted
Australian LNG projects that have planned project commencement dates prior to APLNG have now largely been contracted … LNG Agreements by Project and Buyer (Mtpa) For personal use only Pluto 1 Tokyo Gas Pluto 2 Kansai Electric Fisherman‟s Landing Osaka Gas TEPCO PNG LNG Chubu Electric QCLNG Kyushu El
Slide 41: Wind
For personal use only Wind
Slide 42: Renewable energy target drives generation development
Without a price on carbon the renewable energy target will drive the type of generation developed between now and 2020 to meet underlying growth in demand For personal use only • Origin‟s modelling suggests 6,000 MW of Represents mandated 2020 renewable energy target new wind capacity required to be
Slide 43: Portfolio of renewable energy supply
Origin has positioned itself to respond to the RET with a portfolio of renewable energy supply… For personal use only • Origin has sufficient RECs to meet its mass market customer requirements for the medium term • Origin initially invested in wind through third parties by underwriting wind farm dev
Slide 44: Thermal generation capacity over 3,600 MW
The completion of Mortlake Power Station in FY 2011 will take thermal generation capacity available to Origin to over 3,600 MW … For personal use only MW Origin's Thermal Generation Portfolio 7,000 • Darling Downs Power Station increased 6,000 Origin‟s operating thermal generation capacity to 2,220
Slide 45: Geothermal
For personal use only Geothermal
Slide 46: Developing geothermal technologies in Australia
Origin is pursuing the development of geothermal technologies in Australia … For personal use only • 30% non-operated interest in Innamincka Deeps Joint Venture with Geodynamics Ltd, targeting a world class heat resource of deep fractured granites • 50% operated interest in Innamincka Shallows Joint
Slide 47: Geothermal exposure through Contact Energy
Through its 52% interest in subsidiary Contact Energy, Origin has exposure to significant amounts of geothermal generation For personal use only • Contact is New Zealand‟s largest producer of geothermal electricity, now contributing over 2,000 GWh of energy into the market each year • Geothermal is
Slide 48: Geothermal opportunities in offshore growing markets
Origin is pursuing the untapped potential of geothermal opportunities in offshore growing markets • Origin and Tata Power of India, in consortium with PT For personal use only Supraco Indonesia, have been awarded the Sorik Marapi geothermal exploration • It is estimated the Sorik Marapi concession c
Slide 49: Hydro
For personal use only Hydro
Slide 50: Purari River hydro-electric scheme in PNG
Origin is evaluating the development of a hydro-electric scheme on the Purari River in western PNG … For personal use only • Capacity to generate approximately 1800 MW of renewable baseload electricity • Reliable source of power for remote villages and rural communities in Papua New Guinea, transfor
Slide 51: Purari project and Queensland's minerals potential
The Purari project will enable development of Queensland‟s outstanding minerals potential as well as access some of Queensland‟s best solar and renewable energy resources Demand from For personal use only alumina smelting and aluminium refining in the Cape potentially up to Demand from NW thousands
Slide 52: Hydro generation through Contact Energy
Origin has interests in large amounts of hydro generation through its subsidiary, Contact Energy For personal use only • Around 60% of New Zealand‟s electricity is generated through large hydro power stations • Contact‟s two large hydro dams on the Clutha River – the Clyde and Roxburgh power station
Slide 53: Solar
For personal use only Solar
Slide 54: Joint venture with Micron on photovoltaic technology
Joint venture with Micron seeks to build on Origin‟s photovoltaic development opportunities… For personal use only • Transform Solar is a 50:50 joint venture between Origin and Micron Technology Inc to focus on the development of photovoltaic technologies • Micron is a US listed company and one of t
Slide 55: Sales of solar photovoltaic panels more than doubled
Sales of solar photovoltaic panels in the year has more than doubled … For personal use only • Origin has grown its solar business over the past five years and is beginning to see the benefits of this strategy with a doubling of residential and commercial sales revenue over the last 12 months to in
Slide 56: FY10 Business Overview
6. FY10 Business Overview For personal use only
Slide 57: Exploration & Production
Exploration & Production For personal use only
Slide 58: Exploration & Production: EBITDA reduced 5%
Exploration & Production: EBITDA reduced 5% as contributions from new assets were offset by APLNG dilution, production constraints and higher exploration expense … For personal use only • Underlying EBITDA reduced 5% to $250 million with positive contributions from Kupe and Otway offset by APLNG dil
Slide 59: Gas production from Kupe and Otway
Increases in gas production from Kupe and Otway have offset production constraints in the Bass and Cooper basins and declines in other minor assets For personal use only • APLNG has increased production rates to in excess of 270 TJ/day • Kupe commenced production in January 2010; Origin‟s share of g
Slide 60: Liquids production increased
Liquids production increased over the year with contributions from Kupe and increased equity in Otway … For personal use only • Production of liquids from Kupe commenced in December 2009 Kupe • BassGas production reduced due to planned maintenance outage from 22 November to early April 2010 and subs
Slide 61: 2P reserves increased 38% to 6,207 PJe
Origin‟s 2P reserves increased by 38% over the year to 6,207 PJe with a 40% increase in CSG reserves … Proved plus Probable Gas LPG Cond Oil TOTAL Reserves (PJ) (kT) (kbbls) (kbbls) (PJe) For personal use only 30-Jun-09 4,267 1,650 17,312 6,691 4,484 Additions & revisions 1,774 510 5,887 (395) 1,827
Slide 62: Kupe production and Otway interest
Kupe has delivered six months production and an increase in initial reserves … Kupe • Construction and commissioning completed For personal use only • Reliable plant operation established • Origin share of 6 months production was 4.8 PJ of gas, and around 620 kbbls of liquids • Initial 2P reserves i
Slide 63: Bass Basin and Cooper Basin production constraints
Production from the Bass Basin was constrained due to an extended maintenance program and subsequently recommenced production from one well … For personal use only Maintenance activities being undertaken at BassGas Floodwaters in Coopers Creek BassGas Project Cooper Basin • Maintenance campaign at B
Slide 64: Expanded offshore and international exploration program
In FY 2010 Origin commenced an expanded offshore and international exploration program Khorat Plateau Bang Nouan-1 was suspended in May 2010 pending testing of the gas encountered in the Triassic For personal use only Kachanarai sands. Costs capitalised at 30 June. Tested in August 2010 and found to
Slide 65: Continued elevated drilling activity in FY 2011
In FY 2011 Origin will continue with the elevated level of offshore and international drilling activity seen in FY 2010 Khorat Plateau Two onshore appraisal wells on the For personal use only Dao Ruang gas discovery in Block L15/50, Northeast Thailand, will be drilled towards the end of calendar yea
Slide 66: Generation
For personal use only Generation
Slide 67: Generation: 70% increase in EBITDA
Generation: Investments in new generation capacity provided a 70% increase in EBITDA with all new capacity contracted to the Retail segment … For personal use only • Underlying EBITDA increased 70% or $75 million to $182 million reflecting increased capacity payments from the Retail segment as Origi
Slide 68: Cullerin Range Wind Farm and Mt Stuart expansion
The Cullerin Range Wind Farm commenced commercial operations on 1 July 2009 and provided a full year‟s contribution … For personal use only Cullerin Range Wind Farm Mt Stuart Power Station Expansion • Commercial Operation date of 1 July 2009 • Completed in November 2009 • Annual capacity factor of 4
Slide 69: Darling Downs Power Station commissioned
Darling Downs Power Station was successfully commissioned in June 2010 becoming the largest combined cycle gas turbine plant in Australia For personal use only • 630 MW baseload combined cycle gas plant including three 120 MW gas turbines and a 270 MW steam turbine • Emits less than half the greenho
Slide 70: Mortlake development progress
The Mortlake development continues to progress with commissioning expected to commence in the December Quarter 2010 … For personal use only Mortlake PS • 550 MW gas-fired peaking plant • Designed for conversion to CCGT at a later stage if required • Final project costs approximately $710 million(1)
Slide 71: Thermal generation capacity over 3,600 MW
The completion of Mortlake Power Station in FY 2011 will take thermal generation capacity available to Origin to over 3,600 MW … For personal use only MW Origin's Thermal Generation Portfolio 7,000 • Darling Downs Power Station increased 6,000 Origin‟s operating thermal generation capacity to 2,220
Slide 72: Retail
For personal use only Retail
Slide 73: Retail: gross profit increased
Retail: Gross profit for gas and electricity increased from the combined impact of effective wholesale portfolio management and tariff increases … • Underlying EBITDA increased 19% to $568 million For personal use only driven by higher gross profit and contributions from solar PV sales, while cost t
Slide 74: Low average electricity pool prices reduced energy costs
Low average electricity pool prices during the year reduced energy costs for Origin‟s net load … For personal use only (1) (1) (1) … while volatility over the summer period provided additional returns from cap contracts and internal generation 73 (1) Average of pool prices capped at $300/MWh
Slide 75: Electricity gross profit up 8%
Effective management of wholesale energy costs together with the revised QCA decision and other electricity tariff increases, resulted in an 8% increase in electricity gross profit For personal use only Performance Metrics and Electricity Natural Gas LPG % change from Jun 09 Commodity Revenue ($m) 4
Slide 76: Gross profit per customer improved
Gross profit for gas and electricity customers improved by 9% over the year to $323/customer … Gas & Electricity Customers Jun 10 Jun 09 Change For personal use only Customer numbers (‟000) 2,589 2,610 (21) Underlying EBITDA / Sales 9.5% 8.8% 0.7% Underlying EBIT / Sales 8.8% 8.1% 0.7% $ Per Custome
Slide 77: Market churn continues to increase
Market churn continues to increase in most segments … Market Churn: 12 Month Average State Fuel Jun 09 Change Jun 10 For personal use only Vic Electricity 27% - 27% Vic Gas 23% + 6% 29% QLD Electricity 19% + 3% 22% QLD Gas 12% - 12% SA Electricity 15% - 1% 14% SA Gas 11% - 11% NSW Electricity 12% +
Slide 78: Customer numbers remained largely stable
Customer numbers remained largely stable against increasing market competition with a decline of 0.8% relative to June 2009 Account Numbers For personal use only (000’s) Natural Gas Electricity Total • A marginal net increase in gas customers was Jun 2009 867 1,743 2,610 more than offset by a net de
Slide 79: Retail Transformation program progressing as planned
The Retail Transformation program is progressing as planned For personal use only • Retail Transformation is Origin‟s long term investment in transforming the Retail business to build capability that will support an improved customer experience and future market flexibility, and to improve underlyin
Slide 80: Additional sustainable energy offerings
Origin has introduced additional sustainable energy offerings … • During the year Origin completed the For personal use only acquisition of Cogent Energy, a niche provider of co- and tri-generation solutions • The business was integrated into the Origin business and two new plants installed and comm
Slide 81: Increasing options available to customers
Properly supported, the increasing options available to customers may result in more active engagement in energy management For personal use only 80
Slide 82: LPG underlying EBITDA up 11%
Underlying EBITDA was $50 million, up 11% from $45 million in the prior year For personal use only • Sales volumes were 491 ktonnes for the year, up 3% on the prior year • Customer accounts currently 349,000, up 2,000 compared to June 2009 • CP prices increased $22/tonne 81
Slide 83: Contact Energy
For personal use only Contact Energy
Slide 84: Contact Energy: earnings lower
Contact Energy: Earnings were lower due to higher energy, network and take-or-pay gas costs not fully recovered in the wholesale and retail markets due mainly to higher than normal rainfall For personal use only • EBITDA was $346 million, down 6% on last year, primarily due to a lower margins in the
Slide 85: Major projects to restore portfolio flexibility
A number of major projects due for completion in the coming year will restore flexibility to the portfolio … For personal use only • Te Huka (23 MW, NZ$100m): The first phase of low- variable cost geothermal generation from the Tauhara resource area completed early, below budget and operating above
Slide 86: Financial Results
For personal use only Financial Results
Slide 87: 2010 Financial Highlights
2010 Financial Highlights Statutory Profit $612 million down 91% For personal use only EPS – Statutory 69.7 cps down 91% Revenue $8,534 million up 6% Underlying EBITDA $1,346 million up 10% Underlying EBIT $896 million up 9% Underlying Profit $585 million up 10% EPS – Underlying 66.6 cps up 10% Grou
Slide 88: Reconciliation of Statutory and Underlying Profit
Profit & Loss – Reconciliation of Statutory and Underlying ($ million) Jun 10 Jun 09 Change Statutory NPAT 612 6,941 -91% For personal use only Items Excluded from Underlying Profit(1)(2) Impairment of assets (23) (218) Increase (decrease) in fair value of financial instruments 10 (114) Gain on dilu
Slide 89: Underlying EBITDA up 10% to $1,346 million
Underlying EBITDA up 10% to $1,346 million Segment ($ million) Jun 10 Jun 09 Change Exploration & Production 250 264 -5% For personal use only Generation 182 107 70% Retail 568 479 19% Contact Energy 346 369 -6% Total 1,346 1,219 10% • Exploration & Production: Contributions from Kupe and increased
Slide 90: Balance sheet capacity as at 30 June 2010
Over the year Origin has invested $2.8 billion in growth projects, stay in business capital and acquisitions … For personal use only Balance Sheet Capacity as at 30 June 2010 $ billion Cash 0.8 Adjusted Gross Debt (2.5) Adjusted Net Debt(1) (2) (1.7) Undrawn Committed Facilities 2.6 Available Fundin