Origin Energy Limited · ASX:ORG
Origin Energy — H1 FY2018 Earnings Presentation
48 slides from Origin Energy's earnings presentation, Feb 15, 2018
Slide 1: ASX cover fax: Investor Presentation for Half Year Results
For personal use only To Company Announcements Office Facsimile 1300 135 638 Company ASX Limited Date 15 February 2018 From Helen Hardy Pages 48 Subject Investor Presentation for Half Year Results Please find attached the investor presentation relating to Origin Energy’s Results for the half year en
Slide 2: 2018 Half Year Results
For personal use only 2018 HALF YEAR RESULTS Half year ended 31 December 2017 Frank Calabria CEO, Lawrie Tremaine CFO 15Origin February 2018 Energy | 2018 Half Year Results Announcement 1
Slide 3: Important Notices
Important Notices 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 cert
Slide 4: Outline
Outline For personal use only Performance Highlights Frank Calabria Financial Review Lawrie Tremaine Operational Review Frank Calabria Outlook Frank Calabria Appendix Origin Energy | 2018 Half Year Results Announcement 3
Slide 5: Performance Highlights
For personal use only PERFORMANCE HIGHLIGHTS Frank Calabria Origin Energy | 2018 Half Year Results Announcement 4
Slide 6: Financial summary
Financial summary For personal use only Statutory Loss Underlying Profit Underlying EBITDA (continuing operations) (continuing operations) $(207) million $428 million $1,492 million (11.8) cps 24.3 cps Including impairments of $533 Up $255 million on H1 FY2017 Up $502 million on H1 FY2017 million af
Slide 7: Highlights
Highlights Improved earnings in electricity and natural gas For personal use only − Energy Markets EBITDA up 21% on HY2017 − 33% increase in owned and contracted electricity generation on HY2017 − 20% increase in gas sales volume on HY 2017 Increasing production and revenue at APLNG − Integrated
Slide 8: Near term focus
Near term focus For personal use only • Continued balance sheet repair Rebuilding the right to grow • Disciplined capital management • Reducing organisational complexity and cost • Taking action on affordability Addressing energy security • Making energy simple and transparent and prices • Increasin
Slide 9: How we are helping our customers
How we are helping our customers For personal use only Taking action on Making energy simpler Continuing to transform the affordability and transparent customer experience − New low rate products for − Online comparator tool, an − Digital channels, making it concession customers easy way to find the
Slide 10: Increasing supply in a tight energy market
Increasing supply in a tight energy market For personal use only • 37% increase in generation output at Eraring Thermal − Average availability factor in 2017 was 87% (well above NEM average) generation • Increasing flexibility at our Quarantine Power Station in South Australia • Supplying gas to bri
Slide 11: Leading the transition to a cleaner, smarter energy future
Leading the transition to a cleaner, smarter energy future For personal use only Committed to halving emissions in line Embracing technologies of the future with the Paris 2°C goal − Out of coal by 2032 − Trialling a range of future energy solutions − Continued focus on gas for energy security to ma
Slide 12: Financial Review
For personal use only FINANCIAL REVIEW Lawrie Tremaine Origin Energy | 2018 Half Year Results Announcement 11
Slide 13: Strong financial performance
Strong financial performance For personal use only HY2018 HY2017 Change Statutory profit/(loss) $m (207) (1,559) Continuing operations Underlying profit $m 428 173 147% Underlying EPS cps 24.3 9.9 147% Operating cash flow $m 552 386 43% Capital expenditure $m 138 185 (25%) Total operations Underlyin
Slide 14: Underlying profit from continuing operations more than doubled to $428 million
Underlying profit from continuing operations more than doubled to $428 million For personal use only Movements in Underlying Profit 700 343 (187) 600 154 582 500 (57) $ million 400 428 300 156 200 173 100 - HY2017 EM EBITDA IG EBITDA Share of Tax/Other H1 FY18 Discontinued HY2017 (Total (Continuing
Slide 15: Energy Markets EBITDA increased by 21% to $891 million
Energy Markets EBITDA increased by 21% to $891 million For personal use only Movements in Energy Markets Underlying EBITDA 1,000 Electricity (+$135 million) Gas (+$55 million) 950 25 (16) 900 (19) 1 30 891 850 158 800 $ million 750 735 (23) 700 650 600 550 500 HY2017 Electricity - Electricity - Gas
Slide 16: Integrated Gas EBITDA (ex-Lattice) increased 120% to $630 million
Integrated Gas EBITDA (ex-Lattice) increased 120% to $630 million For personal use only Movements in Integrated Gas Underlying EBITDA (ex-Lattice) 700 20 (5) 600 630 140 500 188 400 $ million 300 287 200 100 - HY2017 LNG Volume LNG Price Domestic Revenue Other HY2018 Origin Energy | 2018 Half Year R
Slide 17: Improving cash flow
Improving cash flow For personal use only Change ($ million) HY2018 HY2017 ($m) Operating cash flow – continuing operations 552 386 166 Capital expenditure – continuing operations (138) (185) 47 $453 million cash improvement Net cash flow from/(to) APLNG 116 (124) 240 Net disposals - 365 (365) Inter
Slide 18: Ironbark assessment
Ironbark assessment For personal use only Non-cash impairment of $360 million post-tax reflecting: − Downward reserves revision Applies assumptions and experience from analogous APLNG fields − Updated field development plan Revised 31 December 2017 carrying value of $279 million Expected to
Slide 19: Lattice sale completed January 2018
Lattice sale completed 31 January 2018 For personal use only $1,585 million sale of Lattice Energy completed on 31 January 2018 with an effective date of 1 July 2017 Consistent with ongoing commitments to reduce debt and move to a leaner, simpler operating model Approximately $1 billion direct
Slide 20: Capital management
Capital management For personal use only Adjusted net debt Debt reducing towards our target capital structure of 9 2.5–3.0x Debt/EBITDA Cancelled $2 billion of surplus undrawn debt − further $900 million to be cancelled in H2 FY2018 6 − cumulative interest saving of ~$20 million p.a. A$bn 3 In
Slide 21: Operational Review
For personal use only OPERATIONAL REVIEW Frank Calabria Origin Energy | 2018 Half Year Results Announcement 20
Slide 22: Energy Markets
For personal use only ENERGY MARKETS Origin Energy | 2018 Half Year Results Announcement 21
Slide 23: Running generation harder
Running generation harder For personal use only Monthly generation output1 Electricity supply 1,600 20 1,400 1,200 1 in 20 year 15 maintenance 1,000 outage GWh TWh 800 10 600 400 5 200 - - 1H17 1H18 Jul-15 Jul-16 Jul-17 Nov-15 May-16 Nov-16 May-17 Nov-17 Sep-15 Jan-16 Mar-16 Sep-16 Jan-17 Mar-17 Sep
Slide 24: Delivering a competitive cost of energy in a rising wholesale market
Delivering a competitive cost of energy in a rising wholesale market Origin’s Energy Procurement Costs For personal use only 100 90 87.3 80 $/MWh 70 67.6 60 50 40 HY2017 Market movement - Market movement - Wholesale porfolio Higher green costs HY2018 Origin cost Origin cost Spot LREC benefits Flex
Slide 25: Growing natural gas sales volumes to customers and to generation
Growing natural gas sales volumes to customers and to generation For personal use only Energy Markets Natural Gas sales 160 Additional 15.1 PJ of gas sales to external Business customers Flexibility to direct gas through Origin’s electricity generation fleet (volumes up 9.5 PJ) 120 Underpinned
Slide 26: Origin responding to increased customer activity
Origin responding to increased customer activity Market churn Monthly net customer position For personal use only 22% 10 5 21% 0 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 (5) 20% (10) (15) 19% Dec-16 Jun-17 Dec-17 (20) 6 monthly average market churn Market churn increased substantially in 6
Slide 27: Operating cost pressures driven by increased customer activity
Operating cost pressures driven by increased customer activity For personal use only Electricity and Natural Gas Cost to Serve Customer activity 350 1,400 8 (7) 300 14 307 1,200 20 250 272 1,000 200 $ million 800 975 150 730 600 100 400 50 200 283 285 - - HY2017 Competition/ Bad debts Digital/ Cost
Slide 28: Continuing to transform the customer experience
Continuing to transform the customer experience For personal use only Price transparency with Origin Increasing digital interactions Savernator Online sales up 41% MyAccount registrations up 14% (wins & retains) 175k 1,171k 124k 1,026k HY2017 HY2018 HY2017 HY2018 Origin App eBilling accounts up 19%
Slide 29: Integrated Gas
For personal use only INTEGRATED GAS Origin Energy | 2018 Half Year Results Announcement 28
Slide 30: APLNG delivering increased production and revenue
APLNG delivering increased production and revenue For personal use only APLNG upstream supply1 APLNG domestic price APLNG LNG price TJ/d Two-train 8 8 2,500 Train 1 operational operational test 7 7 7.23 test 2,000 6 6 5.97 US/mmbtu 5 5 1,500 A$/GJ 4 4 4.13 1,000 3 3 2 2.55 2 500 1 1 - - - May-17 Feb
Slide 31: APLNG sources and uses of cash
APLNG sources and uses of cash For personal use only APLNG cashflow (100%) 3,000 $0.4 billion free cash flow1 generated Operating costs 2,500 HY2018 unit operating costs were A$1.33/GJ, in line with expectations 2,000 Capital expenditure 137 operated wells drilled (55 non-operated) 1,500 130 o
Slide 32: APLNG FY2018 breakeven update
APLNG FY2018 breakeven update Benefiting from higher spot LNG and domestic revenue and deferral of activity For personal use only Previous Updated Guidance update based on AUD/USD of 0.78 Guidance @ Guidance @ 100% APLNG (A$bn) 0.75 AUD/USD 0.78 AUD/USD Capital expenditure – Sustain 1.4 1.3 Sust
Slide 33: Increased exploration activity from H2 FY2018 as material plays progress
Increased exploration activity from H2 FY2018 as material plays progress For personal use only • Drill Westgrove 9 • Deep conventional exploration play • H1 FY2019 • Drill South Burunga 2 • Deep conventional exploration play • H2 FY2018 • Peat 3D Seismic Survey • FY19 • East Bowen Deep pilots on tra
Slide 34: Committed to delivering a step change reduction in upstream costs at APLNG
Committed to delivering a step change reduction in upstream costs at APLNG Key Outcomes Initial Targets Metric June 2019 For personal use only target run rate Cost reduction and Well cost1 A$m/well 1.2 productivity improvement Operating cost2 A$/GJ 1.0 Opex and Capex A$bn <2.8 Operating breakeven3 U
Slide 35: Outlook
For personal use only OUTLOOK Frank Calabria Origin Energy | 2018 Half Year Results Announcement 34
Slide 36: FY2018 guidance update
FY2018 guidance update For personal use only Energy Markets FY2018 EBITDA is expected to be in the range of $1.78 - $1.85 billion (increased from $1.7 - $1.8 billion), provided that market conditions and the regulatory environment do not materially change − Increase driven by increased generation
Slide 37: Wrap Up
Wrap Up For personal use only Deleveraging on track Moving to a simpler and leaner operating model Improved earnings in electricity and natural gas Continuing to address energy security and prices Transforming customer experience Increased production and revenue at APLNG Committed to a
Slide 38: Appendix
For personal use only APPENDIX Origin Energy | 2018 Half Year Results Announcement 37
Slide 39: Underlying profit
Underlying profit For personal use only Continuing operations ($ million) HY2018 HY2017 Change Energy Markets 891 735 156 Integrated Gas 630 287 343 Corporate (29) (32) 3 Underlying EBITDA 1,492 990 502 Underlying D&A (181) (167) (14) Underlying share of APLNG ITDA (587) (400) (187) Underlying EBIT
Slide 40: Reconciliation from statutory to underlying profit
Reconciliation from statutory to underlying profit For personal use only Half year ended 31 December ($m) HY2018 Statutory Profit / (Loss) (207) Items Excluded from Underlying Profit (post-tax) - Fair value and foreign exchange movements (194) - Disposals, impairments and business restructuring (595
Slide 41: Reconciliation of net debt
Reconciliation of net debt For personal use only Issue Issue Hedged Hedged AUD $'m AUD $'m AUD $'m Currency Notional Currency Notional Dec-17 Dec-17 Dec-17 Interest-bearing Fair value adjustments on Adjusted net liabilities FX hedging transactions debt AUD Debt AUD 517 AUD 517 517 0 517 USD Debt Lef
Slide 42: Energy Markets sales volumes
Energy Markets sales volumes For personal use only Natural Gas sales volume (PJ) Half year ended 31 2017 2016 Change Change December Volumes sold (PJ) Retail Business Total Retail Business Total PJ % NSW 5.1 11.0 16.1 5.1 8.9 14.0 2.1 15 Queensland 1 1.6 61.4 63.0 1.5 53.5 55.0 8.0 15 Victoria 14.5
Slide 43: Energy Markets customer accounts
Energy Markets customer accounts For personal use only Customer Accounts As at 31 December 2017 30 June 2017 Customer Natural Natural Electricity Total Electricity Total Change Accounts ('000) Gas Gas NSW 1 1,189 265 1,455 1,213 262 1,475 (20) Queensland 721 172 893 752 168 920 (27) Victoria 551 475
Slide 44: Energy Markets generation
Energy Markets generation For personal use only Generation portfolio Equivalent Pool Pool Half year ended 31 December Nameplate Capacity Electricity Type1 Reliability Revenue Revenue 2017 Capacity (MW) Factor Output (GWh) Factor2 ($m) ($/MWh) Eraring 2,880 Black Coal 92.3% 63.0% 8,007 701 88 Darling
Slide 45: Glossary - Statutory Financial Measures
Glossary - Statutory Financial Measures For personal use only 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
Slide 46: 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 For personal use only used internally by management to assess the performance of Or
Slide 47: Glossary - Non-Financial Terms
Glossary - Non-Financial Terms Term Meaning For personal use only The sum of Proved plus Probable Reserves. Probable Reserves are those additional reserves which analysis of geological and engineering data 2P reserves indicate are less likely to be recovered than Proved Reserves but more certain tha
Slide 48: For more information
For personal use only For more information Peter Rice Liam Barry Jeremy McNally General Manager, Capital Markets Senior Manager, Investor Relations Manager, Investor Relations Email: peter.rice@originenergy.com.au Email: liam.barry@originenergy.com.au Email: Jeremy.mcnally@originenergy.com.au Office