Origin Energy Limited · ASX:ORG
Origin Energy — Investor Day (February 2016)
69 slides from Origin Energy's investor day presentation, Feb 11, 2016
Slide 1: ASX company announcement cover note
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.hardy@originenergy.co
Slide 2: Origin Energy Investor Day: Improving Returns in Energy Markets
ORIGIN ENERGY IMPROVING RETURNS IN ENERGY MARKETS Investor Day Melbourne 10 June 2015
Slide 3: Forward looking statements
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 in relation to the matt
Slide 4: Origin's strategy: 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 A regionally A growing A regional leader significant position position in in energy markets in natural gas and renewable ener
Slide 5: Improving Returns in Energy Markets
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 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 Gas Fired Generation Ind
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 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 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 • Leverage existing capabilit
Slide 9: Strategic priorities
Becoming the most trusted energy solutions provider and improving returns in Energy Markets require focus on four clear Strategic Priorities A regionally A growing A regional leader significant position position in in energy markets in natural gas and renewable energy LNG production Improving return
Slide 10: Origin has made significant progress on these Strategic Priorities
Origin has made significant progress on these Strategic Priorities 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 to Maximise value of
Slide 11: Increased operating cash flow and reduced capital expenditure are improving returns
Increased operating cash flow and reduced capital expenditure are improving returns $m Energy Markets EBITDA and Operating Cash Flow Energy Markets EBIT / Sales Margin 1,600 15% 1,200 10% 800 5% 400 0 0% FY2011 FY2012 FY2013 FY2014 FY2015 FY2011 FY2012 FY2013 FY2014 HY2015 1H EBITDA 2H EBITDA 1H OCF
Slide 12: Energy Markets is continuing to deliver improved returns
Energy Markets is continuing to deliver improved returns by… 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 projects Maintaining Ele
Slide 13: Energy Markets team
Energy Markets team 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 & Business Management Sal
Slide 14: Maximising Gas Value and Flexibility
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 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 shifting market dynamic
Slide 16: East Coast demand increasing through LNG start up
East Coast demand increasing through LNG start up East Coast Total Supply Demand 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 demand has presented Or
Slide 17: Changing east coast gas market and increasing production costs
Changing nature of east coast gas market and increasing production costs leading to higher wholesale and retail gas prices 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 low due A$/GJ 8.00 8.00
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 ... 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/MWh equates to $3.50/GJ
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 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 Purchases (Fixed Price) dat
Slide 20: Access to gas reserves complemented by transport capacity and flexibility
Access to gas reserves is complemented by transport capacity and flexibility • 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 Wallumbilla swing up to 300
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 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 Business sales 40 +5 PJ of
Slide 22: Competitive advantages to capture rising gas prices and ramp gas
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 ... Natural Gas Gross Margin • Continued rising domestic gas prices and cost 400 of gas benefit from legacy portfolio • Shor
Slide 23: Maximising Fuel and Generation Flexibility
Maximising Fuel and Generation Flexibility Tony Lucas, General Manager Energy Risk Management
Slide 24: Fuel and generation flexibility with uncertain demand outlook
Fuel and generation flexibility in a market with uncertain demand outlook and increasing renewable supply 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 flexibility 23
Slide 25: Demand growth from LNG; solar and efficiency continue
While some demand growth will come from LNG, increased solar penetration and energy efficiency is expected to continue Rooftop solar penetration continuing, with batteries Demand growth primarily in Queensland on the horizon Electricity NEMNEM Grid Demand1 Demand NEM Rooftop Solar PV Uptake2 250 20
Slide 26: Gas-fired generation to decrease; renewables build required for 33 TWh RET
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 Gas fired generation reduces in Queensland and Renewables build required NSW as gas prices rise Wind Build Equivalent Require
Slide 27: Renewables increase to extend 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 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 Retailer - Level of v
Slide 28: Origin's LRET portfolio has flexibility to contract or build
Origin’s LRET portfolio has flexibility to contract or build longer term 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 contracts ORG call options (no
Slide 29: Wind intermittency increases volatility; gas-peaking portfolio benefits
The intermittency of wind will likely increase volatility for which Origin is well placed to benefit through its gas-peaking portfolio Intermittency of renewables increases reliance on Wind variability driving volatility in SA peaking generation support Number of 5-minute periods per day where requi
Slide 30: Enough wind has DA approval to meet the 33 TWh target
Enough wind has received DA approval to meet the 5 GW of new wind equivalent required under a 33 TWh target 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 Options1 Required Breakeven
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 ... Origin’s Generation Flexibility Capacity Energy 9,000 40 • Limited coal exposure 8,000 35 Hedge 7,000 Contracts 30 Pool or
Slide 32: Fuel position weighted to gas; coal contracted to 2022
Origin’s fuel position is heavily weighted to gas where market prices are increasing $3.50/GJ+ 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 Ironbark (new equity ga
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 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 6 prices 4 Limited 2 T
Slide 34: Energy costs expected highest in Queensland given LNG load
Across the NEM energy costs are expected to be highest in Queensland given LNG load and gas price increase 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 Wales • Reduced southerly
Slide 35: Generation Operations
Generation Operations David Smales, General Manager Generation
Slide 36: Increasing performance and lowering costs through asset management
Continuing to increase performance and lower costs through the development and execution of effective asset management strategies 1 Effective asset management Increased asset performance 2 Portfolio flexibility, scale & diversity Increased capability & productivity 3 Integration of Eraring Reduced o
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 Controlling & optimising costs Lowering capital requirements Generation Generation Capital Expenditure Generation Operating Costs Operating Costs Generation Capital Expenditure
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 A highly flexible Generation Portfolio with scale1 A proven capability to capitalise on market opportunities From minimum output t
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 Improving asset management performance Contributing to Origin‟s lower cost of energy Eraring Operating Costs • Achieved 37% improvement in safety performance Eraring Operating
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 Improving asset management performance Sustained high performance and flexibility • Summer availability >99% over the last four years Electricity Electri
Slide 41: Generation's Monitoring & Support Centre underpins asset management
Generation’s Monitoring & Support Centre underpins asset management strategies and operating model, providing systemic ongoing performance improvement across the portfolio Leveraging technology to help drive performance Employing industry-leading asset management practices • Smart power generation d
Slide 42: Building Loyalty and Trust
Building Loyalty and Trust Rebekah O‟Flaherty, General Manager Marketing, Sales & Service Jon Briskin, General Manager Retail Customer Operations
Slide 43: 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 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 4 World class operati
Slide 44: Competition is price led; Origin meets market on discounts
Competition today is predominantly price led. Origin will continue to meet the market on discounts to defend market share 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 Sep-14 May-14 Nov-14 Dec
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 Based on Customer Lifetime Value Delivering benefits for customers and Origin Proactive retention of all customers Differentiated treatments based on customer value
Slide 46: Digital platform enables 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 Dedicated sales and service Higher internal sales channel mix New integrated digital capability Higher internal sales channel mix centres Sales Channels 100% 80
Slide 47: Moving towards an 'OMNI' customer experience
Origin is moving towards an ‘OMNI’ customer experience ... ... offering customers greater flexibility and enabling an integrated experience across channels with deeper customer insight 46
Slide 48: Origin is improving communication with its customers
Origin is improving communication with its customers 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 set for Elect ricit y
Slide 49: Retail Transformation improves operational metrics and bad debt
Executing on the Retail Transformation project has enabled Origin to improve operational metrics and bad debt exposure 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 25 3.0% Days Sales Ou
Slide 50: Retail Transformation benefits evident in reducing cost to serve
Benefits of Retail Transformation are evident in reducing cost to serve 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 • Reduction in call volum
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 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 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 Origin website Solar as a S
Slide 53: Origin grows core energy business into new areas
Origin continues to grow the core energy business into new areas 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 services to high density co
Slide 54: Leveraging our Capability
Leveraging our Capability 53
Slide 55: Deepening customer knowledge through data and analytics
Deepening knowledge of the customer enabled through growing capabilities in data and analytics ... 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 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
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 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: Solar will play a significant role; 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 Residential SME / Commercial • Remaining addressable market greater than • Delivered commercial solar projects and built 5 million homes (owner occupied and a substantial pipeline of which ove
Slide 60: Origin's solar track record provides experience and capability
59 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 Juice Pty Ltd AGL Sola
Slide 61: Origin has been trialling and building new energy capabilities
Origin has been trialling, learning and building new capabilities across new energy technologies, products and business models 2002: Origin delivers its 2010: Origin installs its 2014: Mitsubishi EV first solar offer in the 10,000th system. Installs relationships Australian market first commercial s
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 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 year terms for 3, 4 a
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 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 increased products per
Slide 64: Leveraging retail experience to deliver home energy services
Origin is leveraging its retail experience and harnessing opportunities to deliver home energy services 10 years+ experience Extending service offers Moving to a deep delivering services into customer relationship homes Appliances Retailing Servicing Market TODAY Retail solar and HOT WATER SOLUTIONS
Slide 65: Extending into other energy services and products, including batteries
Extending into other energy services and products, including batteries 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 needs for battery vary
Slide 66: Improving Returns in Energy Markets
Improving Returns in Energy Markets Frank Calabria, CEO 65
Slide 67: Energy Markets Strategic Priorities
Energy Markets Strategic Priorities 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 renewables the core business
Slide 68: Energy Markets is continuing to deliver improved returns
Energy Markets is continuing to deliver improved returns by… 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 projects Maintaining Ele
Slide 69: Thank you
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