Origin Energy Limited · ASX:ORG
Origin Energy — Investor Presentation (November 2008)
51 slides from Origin Energy's investor presentation, Nov 3, 2008
Slide 1: ASX announcement cover note: Presentation
For personal use only To Company Announcements Office Facsimile 1300 300 021 Company Australian Securities Exchange Limited Date 3 November 2008 From Bill Hundy Pages 51 Subject PRESENTATION Attached for your information is a presentation being made by Mr Grant King, Managing Director and Mr Frank C
Slide 2: 2008 – Deepened Integration Leads to Company Transformation
For personal use only 2008 – Deepened Integration Leads to Company Transformation November 2008
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: Agenda
Agenda For personal use only • Highlights • Australia Pacific LNG - CSG to LNG Joint Venture with ConocoPhillips • Valuation of Origin • Operating Review • Outlook 3
Slide 5: Highlights
For personal use only Highlights
Slide 6: A year of significant developments with progress on major projects
This has been a year of significant developments for Origin with progress on a number of major projects and initiatives… For personal use only • Commenced construction of the 630 MW Darling Downs Power Station and the Quarantine and Mt Stuart power station expansions • Acquired a number of producing
Slide 7: Origin has deepened the integration of its business
Origin has deepened the integration of its business through a substantial increase in gas reserves and generation under development For personal use only Fuel Retailer Generator A leading producer of gas in Largest owner and developer A leading wholesaler and Eastern Australia involved in of gas fir
Slide 8: A strong financial performance in a challenging year
A strong financial performance in a challenging year in wholesale gas and electricity markets… Revenue $8,275 million up 29% For personal use only EBITDAF (1) (2) $1,309 million up 12% Statutory Profit $517 million up 13% Underlying Profit $443 million up 20% EPS – Statutory 59.0 cps up 8% EPS – Und
Slide 9: Track record of underlying earnings growth
This strong result continues Origin’s impressive track record of underlying earnings growth 9,000 Revenue 1,500 EBITDAF For personal use only Compound annual growth rate: 26% Compound annual growth rate: 23% 7,500 1,200 6,000 900 $millions $millions 4,500 600 3,000 300 1,500 0 0 2001 2002 2003 2004
Slide 10: Total Shareholder Return in excess of ASX 100
Origin’s Total Shareholder Return has been significantly in excess of returns from the ASX 100… Origin Total Shareholder Return Vs ASX 100 Total Return For personal use only 1,600 Origin TSR and ASX 100 Accumulation Index 1,400 Origin's Compund Origin’s CompoundAnnual Growth Annual Growth 35% Rate:
Slide 11: Australia Pacific LNG - CSG to LNG Joint Venture with ConocoPhillips
For personal use only Australia Pacific LNG - CSG to LNG Joint Venture with ConocoPhillips
Slide 12: Transaction confirms the value and quality of Origin's CSG position
Transaction with ConocoPhillips confirms the value and quality of Origin’s CSG position… • ConocoPhillips acquired a 50% share in Australia Pacific LNG, a CSG to LNG For personal use only Joint Venture with Origin, for A$8 billion including an up-front cash payment of A$6.9 billion and a carry on ex
Slide 13: Transaction Overview
Transaction Overview ConocoPhillips has subscribed for a 50% interest in Australia Pacific LNG Assets Australia Pacific LNG includes all of Origin’s CSG interests, related production For personal use only facilities and existing CSG sales contracts ConocoPhillips to initially invest A$8 billion for
Slide 14: Transaction includes all of Origin's CSG reserves & resources
Transaction includes all of Origin’s CSG reserves & resources… For personal use only The transaction also includes: • CSG-related production facilities • Origin’s conventional interests of 44 PJe in the Denison Trough • Existing CSG sales contracts to Origin and third parties Some of Origin’s CSG re
Slide 15: Transaction confirms increasing valuations for CSG resources
Transaction confirms increasing valuations for large scale, high quality, well developed CSG resources capable of supporting multiple train LNG projects… For personal use only Trains 3 & 4 Additional Payments: A$1.4 billion Train 2 Additional Payment: A$690 million Train 1 Additional Payment:
Slide 16: Significant exploration upside in acreage
… that also have significant exploration upside in acreage with attractive development economics Reserves & Resources Included in Transactions For personal use only Source: Origin based on company announced reserves position at the time of transaction announcements Notes: On 7/10/08 Arrow announced
Slide 17: Fully aligned transaction across the value chain
Fully aligned transaction that combines Origin’s leading position in Australia’s largest CSG to LNG 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 gas production LNG
Slide 18: Joint Venture will target first production in 2014
Joint Venture will target first production in 2014… Period Milestone • ConocoPhillips’ recent For personal use only development of Darwin LNG on 2009 Commence FEED time and on budget demonstrates Late 2010 Train 1 FID that it is well placed to fast track 2010/11 Train 2 FID this development 2014 Tra
Slide 19: The joint venture aligns interests of Origin and ConocoPhillips
The joint-venture aligns the interests of Origin and ConocoPhillips and leverages the strengths of each company For personal use only Origin ConocoPhillips Outstanding Value: Transaction benchmark of up to Outstanding Value: Leverages ConocoPhillips’ A$2.12/GJ 3P reserves strengths and experience an
Slide 20: Transaction transforms Origin's financial position
The transaction with ConocoPhillips transforms the financial position of Origin and provides immediate benefit to Origin’s shareholders For personal use only • Origin has declared an additional dividend of 25 cents per share fully franked to double the 2008 dividend (~A$225 million), providing a new
Slide 21: Valuation of Origin
For personal use only Valuation of Origin
Slide 22: Independent Expert valued Origin at $28.55 to $30.71/share
In September 2008 following the ConocoPhillips transaction the Independent Expert valued Origin at $28.55 to $30.71/share For personal use only $35.00 $30.71 Cash received from $28.55 ConocoPhillips $30.00 CSG Business • In response to the takeover $25.00 offer from BG Grant Samuel Non-CSG Business
Slide 23: Operating Review
For personal use only Operating Review
Slide 24: Exploration & Production: Record Production, Sales and Revenue
Exploration & Production: Record Production, Sales and Revenue underpin growth in earnings… For personal use only 600 800 Jun-08 • EBITDAF of $264m, up 4% as new projects Total Revenue & EBITDAF ($m) 500 Jun-07 more than offset mature basin decline 600 • Total 2P reserves up 66% to 5,770 PJ 400 CAPE
Slide 25: Increasing CSG production to meet contracted requirements
Origin has been increasing CSG production to meet contracted requirements… For personal use only 45 • Origin’s equity share of CSG production 40 reached 131 TJ/d by the year ending 30 June 2008, reinforcing the Company’s position as the 35 largest CSG producer in Australia Annual Production (PJ) 30
Slide 26: BassGas and Otway Gas Project
After addressing a number of capacity constraints at BassGas, 10.5 PJe was produced over the financial year including 320 kbbls of condensate and 19 Ktonnes of LPG For personal use only BassGas Project (42.5%) Otway Gas Project (30.75%) • The Yolla 3 well was shut during the first • Production facil
Slide 27: Investments in new production areas offset mature basin decline
Over the last decade Origin has made a series of investments in new production areas to offset the anticipated decline of the Cooper Basin and other mature producing areas… For personal use only PJe Origin Gas Production by Half Year Gas 50 45 • The Cooper Basin is in decline as contract volumes beg
Slide 28: Liquids production by half year
The rate of decline of oil production from the Perth Basin was partially offset with increased production of condensate and LPG as the BassGas and Otway projects commenced production For personal use only PJe Origin Liquids Production by Half Year Liquids 10 • Perth Basin oil production continued on
Slide 29: New Zealand: Swift acquisition and Kupe Gas Project
In New Zealand, completion of the Swift acquisition will add to earnings… Swift Acquisition For personal use only • Completed acquisition of a number of producing assets and exploration permits in the Taranaki Basin • Joint arrangement with Contact to develop an underground gas storage facility Kupe
Slide 30: Generation: focused on high plant availability
Generation: focused on high plant availability to deliver maximum value capture opportunity to the Retail business… For personal use only 120 600 Jun-08 Jun-07 • EBITDAF of $56m, down 29% from $79m* 100 500 primarily reflecting the transition of Mt Total Revenue, EBITDAF ($m) Stuart to an internally
Slide 31: Mt Stuart transitioned to an internally contracted plant
Mt Stuart transitioned from an externally to an internally contracted plant For personal use only • Mt Stuart PPA with Enertrade terminated in Dec 06 for a fee of $19.6 million (recognised as a Significant Item) • Under PPA, Enertrade was required to take a minimum output. Failure to take resulted i
Slide 32: Existing and near term developments will continue to add value
Origin’s existing and near term developments will continue to add value… Capacity Origin’s Generation Plants State Operation Status For personal use only (MW) Externally Contracted* Worsley WA 60 Cogen Operational Bulwer Island QLD 16 Cogen Operational Osborne SA 90 Cogen Operational Internally Cont
Slide 33: Additional 2,096 MW of power generation, quadrupling capacity by 2010
Origin has committed to build an additional 2,096 MW of power generation, quadrupling generation capacity by 2010… MW Origin's Generation Capacity For personal use only 6,000 Darling Downs Power Station 560 • 704 MW of Operating capacity 5,000 • 1,850 MW of Committed capacity under 1,450 constructio
Slide 34: Developing renewable energy options
In addition to the expansion of Origin’s portfolio of gas-fired power projects, the Company is also developing a number of renewable energy options Geothermal For personal use only • Origin acquired a 30% joint-venture interest in Geodynamics main project in the Cooper Basin • Geodynamics have drill
Slide 35: Retail: Successful integration of Sun Retail
Retail: Successful integration of Sun Retail and effective management of wholesale position… • EBITDAF of $499m, up 41%, mainly due to Sun For personal use only 8,000 550 Retail acquisition Jun-08 500 • Prudent gas and electricity purchasing 7,000 Jun-07 strategies coupled with tariff increases, 450
Slide 36: Sun Retail has boosted the scale of the Retail business
Sun Retail has boosted the scale of the Retail business with product revenue up $1.4 billion… For personal use only Performance Metrics and % Natural Gas Electricity LPG change from June 07 (1) Product Revenue ($m) 928 +5% 3,781 +53% 613 +6% Gross Profit ($m) 132 -2% 644 +50% 121 -14% EBITDAF ($m) 4
Slide 37: Forward electricity prices have stabilised
Forward electricity prices have stabilised and returned to a rising forward price compared with the steep backwardation of June and December 2007 For personal use only $160 $150 Victorian Spot and Forward Contract Electricity Prices $140 $130 Forward Curve Forward Curve $120 Jun-07 Dec 07 $110 $100
Slide 38: Volatility increased and average prices decreased
Volatility increased during the second half of the year and average prices decreased… For personal use only NEM Average daily price maximum (Vic, SA, NSW, Qld) 1,000 NEM Pool Prices ($ per Megawatt - logarithmic scale) Legend Time period Average price (capped at $300) Days average excedes $300 * 300
Slide 39: Victorian gas market experienced higher wholesale gas costs
The gas market in Victoria experienced higher wholesale gas costs, accentuated by unexpected delays in the Otway Gas Project commissioning after construction was complete… For personal use only (for period 01 Jul 2005 to 30 Jun 2007) Daily weighted average spot market price (A$/GJ) 45 Victorian Gas
Slide 40: Churn rates remain high; customer numbers
Churn rates remain high. Origin acquired over 482,000 new gas and electricity accounts for a net decline of 22,000 accounts For personal use only Mass Market Churn: Completed & Pending June 2008 Origin Customer Numbers 45% VIC Elec Vic Gas Natural QLD Elec QLD Gas (000’s) Electricity Total 40% SA El
Slide 41: Gross margin and EBITDAF per customer improved
Gross margin and EBITDAF per customer both improved on prior year despite increased energy costs For personal use only Gas & Electricity Customers Jun 08 Jun 07 Year end customer numbers (’000) 2,653 2,675 EBITDAF / Sales 9.9 % 9.2 % EBITF / Sales 9.2 % 8.4 % $ Per Customer: Gross Margin / Customer
Slide 42: Wipro Technologies selected as preferred partner for Retail systems
Origin has selected Wipro Technologies as its preferred partner for the next step in evolution of its Retail systems For personal use only • Wipro Technologies, the global IT services business of Wipro Limited (NYSE:WIT) has been selected as the preferred partner in an ongoing project to transform O
Slide 43: Leadership position in green energy sales
Origin has clearly established its leadership position in green energy sales… A leading market position* and leading market products For personal use only Origin 30% • At 30 June 2008, Origin had more than 423,000 green energy • Origin launched its Carbon Pollution Reduction customers+ (up from 270,
Slide 44: LPG purchasing costs increased
LPG purchasing costs increased by 25% or $225/tonne compared with last year… For personal use only Average Australian Dollar Propane Price 1200 2007/08 A$840 • Underlying sales volumes 1000 2006/07 decreased by 5% due to higher A$673 LPG costs and unfavourable 800 weather conditions • Customer accou
Slide 45: Contact Energy: Higher retail volumes, price and generation
Contact Energy: Higher retail volumes, price and increased generation… For personal use only 2,500 600 • EBITDAF of $490 million, 3% higher Jun-08 • Significant operating factors that Jun-07 contributed were: 500 2,000 total wholesale electricity revenue EBITDAF & Capex ($m) increased by 82% howev
Slide 46: Outlook
For personal use only Outlook
Slide 47: Strategy of being a fuel integrated generator and retailer
The continued growth of Origin is based on our strategy of being a fuel integrated generator and retailer of energy For personal use only Origin continues to invest in assets that grow the business, particularly in the upstream, generation and eventually LNG 46
Slide 48: Projects expected to make increased contributions in the coming year
In the coming year a number of the projects Origin has been developing are expected to make initial, or significantly increased, contributions to financial performance For personal use only • A full year contribution from the Otway Gas Project • A full year contribution from the oil and gas producti
Slide 49: Major projects to contribute after the current financial year
Origin will continue to progress the development of several major projects which are expected to make contributions following the end of the current financial year For personal use only • The Kupe Gas Project in New Zealand which is targeting to commence gas production in mid 2009 • Continued develo
Slide 50: 2008 has been a transforming year for Origin
2008 has been a transforming year for Origin and its strengthened financial position will enable the company to fund its current growth programme… For personal use only • Origin’s integrated business provides a platform for strong financial performance and continuing growth • Following completion of
Slide 51: Further Information
Further Information For personal use only For more information on Origin please contact Angus Guthrie Manager, Investor Relations Email: angus.guthrie@originenergy.com.au Office: +61-2-8345 5558 Mobile: + 61-4-1786 4255 Alternatively visit our website www.originenergy.com.au and follow the prompts t
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