Origin Energy Limited · ASX:ORG
Origin Energy — H1 FY2021 Earnings Presentation
59 slides from Origin Energy's earnings presentation, Feb 18, 2021
Slide 1: ASX cover note for half year results presentation
To Company Announcements Office Facsimile 1300 135 638 For personal use only Company ASX Limited Date 18 February 2021 From Helen Hardy Pages 59 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: 2021 Half Year Results
Origin Energy For personal use only 2021 Half Year Results Half year ended 31 December 2020 Frank Calabria, CEO & Lawrie Tremaine, CFO 18 February 2021
Slide 3: Outline
Outline 1. Performance Highlights For personal use only - Frank Calabria 2. Financial Review - Lawrie Tremaine 3. Operational Review - Frank Calabria 4. Outlook - Frank Calabria 2 18 February 2021 2021 Half Year Results Announcement
Slide 4: Performance Highlights
For personal use only Performance Highlights Frank Calabria, CEO 3 18 February 2021 2021 Half Year Results Announcement
Slide 5: HY2021 financial summary
HY2021 financial summary For personal use only Statutory Profit Underlying Profit Underlying ROCE $13 $224 6.8% million million (0.7 cps) (12.7 cps) Down from 8.3% in HY2020 Down $586 million on lower commodity Down $304 million primarily reflecting lower oil, (12 month rolling basis) prices and sub
Slide 6: Economic conditions impacting key commodity markets
Economic conditions impacting key commodity markets East coast gas demand - 4 week rolling avg Origin electricity demand - weather corrected For personal use only (% change vs 2019) (% change vs 2019) 10% 10% 5% - - (5%) (10%) (10%) (20%) (15%) (20%) (30%) (25%) East Coast - all states VIC demand C&
Slide 7: Oil and LNG markets were volatile, domestic energy prices remain subdued
Oil and LNG markets were volatile, domestic energy prices remain subdued LNG netback and domestic gas prices NSW electricity forward price Japan Customs-Cleared Crude (A$/GJ) ($/MWh) For personal use only 20 100 ($US/bbl) 80 18 90 70 16 80 14 70 60 ACCC forward 60 12 JKM netback price 50 ~$7.30/GJ 5
Slide 8: Continued strong operational performance in HY2021
Continued strong operational performance in HY2021 Integrated Gas Energy Markets For personal use only • APLNG record production in the Dec-20 quarter • Strong EBITDA to cash conversion at 119% • Record low APLNG capex + opex in HY2021 • Reduced demand partly offset by business customer account wins
Slide 9: Delivering for our stakeholders
Delivering for our stakeholders Getting energy right For personal use only Our Customers Our Communities Our People Our Planet COVID-19 support Regional procurement Continued support for our Short term emissions initiatives in place until at increased to 18% people during COVID-19 target lin
Slide 10: A customer focused energy business positioned for a low carbon future
A customer focused energy business positioned for a low carbon future For personal use only Market leading assets & capabilities Preferred position for energy transition Large domestic retail customer base Low-cost, digital-first retailer Leading energy wholesale & trading capability Short e
Slide 11: We remain focused on our strategy to deliver value and growth
We remain focused on our strategy to deliver value and growth For personal use only Connecting customers to the energy and technologies of the future e Maximise value of the Pursue growth in customer value 1 2 existing businesses and low carbon solutions 10 18 February 2021 2021 Half Year Results An
Slide 12: Energy Markets – strategic priorities
Energy Markets – strategic priorities For personal use only Maximise value of the Pursue growth in customer value 1 2 existing businesses and low carbon solutions Building on strong foundations in a changing landscape Lead the convergence of energy and data • Low cost retailer: FY2021 cost-out targe
Slide 13: Integrated Gas – strategic priorities
Integrated Gas – strategic priorities For personal use only Maximise value of the Pursue growth in customer value 1 2 existing businesses and low carbon solutions Continued strong upstream performance at APLNG Accelerate towards clean energy • Record production in December quarter • Progressing oppo
Slide 14: Financial Review
For personal use only Financial Review Lawrie Tremaine, CFO 13 18 February 2021 2021 Half Year Results Announcement
Slide 15: HY2021 financial overview
HY2021 financial overview For personal use only Statutory Profit Underlying Profit Underlying EBITDA $599M $528M $1,590M 30.0 cps 34.0 cps $1,154M $224M 12.7 cps $13M 0.7 cps HY20 HY21 HY20 HY21 HY20 HY21 Energy Markets Integrated Gas Corporate Underlying ROCE Free Cash Flow1 Adjusted Net Debt (roll
Slide 16: Items excluded from Underlying Profit
Items excluded from Underlying Profit Reconciliation from Statutory to Underlying Profit ($m) For personal use only Large-scale Generation Certificates trading strategy 22 • $112 million net cost relating to a decision to defer the surrender of ~2.35 million Large-scale generation 124 certificates (
Slide 17: Large-scale Generation Certificates (LGC) strategy
Large-scale Generation Certificates (LGC) strategy Forecast LGC surplus LGC spot and forward prices ($/certificate) 160 (million certificates) 80 For personal use only 140 70 120 60 100 50 80 $40/Cert 40 60 $36/Cert 40 30 $27/Cert 20 20 $19/Cert - $9/Cert 10 - Jul-18 Jul-19 Jul-20 Jul-21 Jul-22 Jul-
Slide 18: Lower Underlying Profit due to lower customer tariffs and commodity prices
Lower Underlying Profit due to lower customer tariffs and commodity prices For personal use only Movements in Underlying Profit ($m) (88) (8) (48) (303) (37) 528 180 Lower electricity & Lower realised oil Mostly net hedge Decommissioning 224 Primarily Higher tax expense gas customer price, partially
Slide 19: Energy Markets Underlying EBITDA down 12%
Energy Markets Underlying EBITDA down 12% Movements in Underlying EBITDA ($m) For personal use only (46) Electricity gross profit down $46 million or 8% to $503 million: (56) 13 • Margin impacts (-$47 million) 723 635 − Lower wholesale prices flowing into tariffs (-$134 million) − Network costs not
Slide 20: Integrated Gas Underlying EBITDA down 38%
Integrated Gas Underlying EBITDA down 38% Movements Underlying EBITDA ($m) (53) For personal use only 15 (550) 906 165 853 (30) 113 551 566 Integrated Share of APLNG 386 Gas - Other 303 (-$520 million) 273 273 (+$180 million) HY2020 LNG volume LNG price Domestic revenue Opex/other income Oil & LNG h
Slide 21: Delivering robust returns in low oil price environment
Delivering robust returns in low oil price environment For personal use only APLNG estimated distribution and Origin oil hedging and trading • HY2021 cash distributions from APLNG of $265 million 1,400 80 (US$38/bbl realised oil price) 1,200 – Second half expected to improve with estimated 70 FY2021
Slide 22: Capex down due to lower generation spend
Capex down due to lower generation spend For personal use only Capex ($m) 600 500 • HY2021 capex down $86 million or 33% 400 • FY2021 capex of $400 - $440 million (down $60 - $100 million, or ~15%) 300 – Includes ~$60 million relating to Kraken implementation – Excludes $140-150 million deferred pay
Slide 23: Higher operating cash flow in H1, expected FY2021 free cash flow yield >10%
Higher operating cash flow in H1, expected FY2021 free cash flow yield >10% For personal use only ($m) HY21 HY20 Change Underlying EBITDA 1,154 1,590 (436) Estimated FY2021 Origin Free Cash Flow 1 Non cash items (primarily APLNG EBITDA) (452) (974) 522 Yield Working cap and other 16 (77) 94 Tax paid
Slide 24: Capital structure and dividend
Capital structure and dividend • Committed to investment grade credit rating through the cycle For personal use only Adjusted Net Debt / Adjusted Underlying − Target BBB/Baa2 4x EBITDA − Gearing of 20-30% • Expect capital structure to increase to the top of our 2-3x target 3x range by the end of FY2
Slide 25: Operational Review
For personal use only Operational Review Frank Calabria, CEO 24 18 February 2021 2021 Half Year Results Announcement
Slide 26: Energy Markets
For personal use only Energy Markets 25 18 February 2021 2021 Half Year Results Announcement
Slide 27: Lower wholesale electricity prices impacting on margins
Lower wholesale electricity prices impacting on margins NSW electricity forward price Annual supply and demand position ($/MWh) For personal use only 100 90 Short Losses ~10 TWh ~17TWh 80 position Swap/short ~$10/MWh Average 70 Swap contracts contract 60 ~$15-20/MWh Business duration ~5 TWh Commodit
Slide 28: Domestic gas prices also impacting margins but signs of recovery
Domestic gas prices also impacting margins but signs of recovery LNG netback and domestic gas prices (A$/GJ) Annual sources and Uses of gas (PJ) For personal use only 20 18 Prices begin to Supply largely Generation ~40-50 PJ fall from 2018 offset by 16 based on Prices fall oil/JKM linked linkage to
Slide 29: In a transitioning market we will maximise value and pursue growth options
In a transitioning market we will maximise value and pursue growth options Electricity portfolio Gas portfolio For personal use only Near term outlook Near term outlook • Challenging operating conditions expected to persist in • Margins impacted by timing of tariff repricing compared FY2022 based on
Slide 30: Large, loyal customer base
Large, loyal customer base Customer accounts (‘000) For personal use only Customer churn (% monthly) 30% 4,236 4,240 4,193 4,400 25% 14 20 26 4,100 359 365 367 20% 3,800 15% 3,500 3,200 10% 2,900 3,820 3,851 3,847 5% 2,600 - 2,300 Mar Mar May May Dec Dec Dec Sep Sep Sep Nov Nov Nov Oct Jul Aug Oct J
Slide 31: Transforming our retail business
Transforming our retail business Growing future revenue Low-cost retailer For personal use only Leading customer experience streams Cost estimates ($m) Solar & Community Energy Services Digital / Call Interactions Gross profit ($m) +90% 1000 $100-$150m 106 reduction 800 83 54 600 44 400 $85m of $100
Slide 32: Octopus provides global growth exposure and accelerates our strategy
Octopus provides global growth exposure and accelerates our strategy Global growth strategy For personal use only • Octopus targeting 100 million customer accounts on its platform, Kraken, by 2027 – 17 million licensed accounts contracted to Kraken and >£300 million in licensing revenue over next 3
Slide 33: Integrated Gas
For personal use only Integrated Gas 32 18 February 2021 2021 Half Year Results Announcement
Slide 34: APLNG continues to outperform operationally
APLNG continues to outperform operationally Quality resource and assets Record low cost Lower realised oil price For personal use only APLNG Production (100%) (PJ) Capex + Opex1 $m APLNG Domestic & LNG Revenue (100%) 400 $m $A/bbl 1,400 4.0 4,000 120 350 1,200 100 300 1,000 3,000 3.5 80 800 250 2,00
Slide 35: APLNG demonstrating flexibility to adapt to market demand
APLNG demonstrating flexibility to adapt to market demand APLNG (100%) average production TJ/day For personal use only 2,100 Prior Qtrly record New Qtrly record 180 PJ Production flexibilty 182 PJ 2,000 • Strong field capability provides flexibility to ramp up production to respond to demand 1,900 •
Slide 36: Guidance update
Guidance update FY21 previous FY21 updated For personal use only APLNG (100%) FY20 guidance guidance Production (PJ) 708 675-705 685-705 Capex + opex, excl. purchases1 (A$b) 2.5 2.1-2.3 2.1-2.3 Unit capex + opex, excl. purchases1 (A$/GJ) 3.5 3.0-3.4 3.0-3.4 Distribution breakeven (US$/boe) 29 25-29²
Slide 37: Replicating CSG exploration success in Australia’s leading shale portfolio
Replicating CSG exploration success in Australia’s leading shale portfolio APLNG – Bowen and Surat Basins Leading shale portfolio For personal use only A strong history of exploration success Beetaloo Basin • Early exploration identified gas resource • Leading acreage position in Beetaloo Basin • Ev
Slide 38: Early signs from the clean-up phase of Kyalla-117 are encouraging
Early signs from the clean-up phase of Kyalla-117 are encouraging Operation For personal use only • First exploration and appraisal well targeting Kyalla shale – met goal to flow liquids- rich gas • Initial announcement, based on early data, lodged in accordance with NT regulations • Initial results
Slide 39: Outlook
For personal use only Outlook Frank Calabria, CEO 38 18 February 2021 2021 Half Year Results Announcement
Slide 40: FY2021 Guidance
FY2021 Guidance Provided on the basis that market conditions and the regulatory environment do not materially change, adversely For personal use only impacting operations. Considerable uncertainty exists relating to potential ongoing impacts of COVID-19 and this guidance is subject to any further ma
Slide 41: FY2021 Guidance continued
FY2021 Guidance continued Energy Markets Integrated Gas Corporate For personal use only • Lower underlying EBITDA of $1,000 APLNG 100% • Underlying costs of $90–100 million - $1,140 million reflecting: with declining functional costs more • Upgraded production guidance to than offset by higher insur
Slide 42: Questions
For personal use only Questions 41 18 February 2021 2021 Half Year Results Announcement
Slide 43: Appendix
For personal use only Appendix 42 18 February 2021 2021 Half Year Results Announcement
Slide 44: Recent growth opportunities
Recent growth opportunities Investing in continued expansion of Octopus Energy as Farm-in to Canning Basin with Buru Energy it launches into Asian market For personal use only • 40-50% interest in 7 permits covering 20,000km2 • Investing further ~A$65 million to maintain 20% stake • Origin to carry
Slide 45: Taking action on climate change
Taking action on climate change We unequivocally support the Paris Agreement to limit the world’s temperature rise to well below 2°C above pre- industrial levels and pursue efforts to further limit this increase to 1.5°C For personal use only Origin’s commitments and targets1 Origin’s actions Orig
Slide 46: Large-scale Generation Certificates strategy – further detail
Large-scale Generation Certificates strategy – further detail For personal use only ~2.35 million Statutory Underlying 9 CY2020 Profit $m Adjustment Profit $m 8 surrender CY2020 (incurred in FY2021) ~2.35 million 7 Shortfall charge accrued (~2.35 million certs x $65) (152) 152 - CY2020 Expected surr
Slide 47: Reducing interest cost through on-going debt refinancing
Reducing interest cost through on-going debt refinancing Interest paid ($m) and average interest rate For personal use only 400 6% 5% 300 4% • Estimated FY2021 net interest saving $60-70 million 200 3% 2% • Average HY2021 interest rate of 4.3%, down from 4.8% 100 1% - 0% • More than 36 months commit
Slide 48: Electricity forward price by state (A$/MWh)
Electricity forward price by state (A$/MWh) NSW QLD For personal use only 100 100 80 80 60 60 40 40 20 20 - - Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 VIC SA 100 100 80 80 60 60 40 40 20
Slide 49: APLNG sales mix and realised prices
APLNG sales mix and realised prices Sales Mix (PJ) Average realised gas Price (A$/GJ) For personal use only 400 14 300 91 88 104 99 81 12 3 7 10 14 36 200 25 8 6 222 241 248 100 202 208 4 2 - - FY19 H1 FY19 H2 FY20 H1 FY20 H2 FY21 H1 FY19 H1 FY19 H2 FY20 H1 FY20 H2 FY21 H1 LNG contract LNG spot Dome
Slide 50: Segment summary
Segment summary For personal use only Energy Markets Integrated Gas Integrated Corporate Total ($m) - Share of APLNG Gas - Other HY21 HY20 HY21 HY20 HY21 HY20 HY21 HY20 HY21 HY20 Underlying EBITDA 635 723 513 1,033 53 (127) (47) (39) 1,154 1,590 Underlying EBIT 353 484 57 359 38 (139) (50) (39) 398
Slide 51: Underlying ROCE – month rolling
Underlying ROCE – 12 month rolling For personal use only 31 December 2020 31 December 2019 Change Change As at ($m) ($m) ($m) (%) Capital Employed Net Assets 11,830 13,733 (1,903) (14%) including: Investment in APLNG 6,184 7,323 (1,139) (16%) MRCPS issued by APLNG 1,679 2,662 (983) (37%) Non-cash fa
Slide 52: Proportionate Free Cash Flow
Proportionate Free Cash Flow For personal use only Free cash flow prepared on the basis of proportionate consolidation of APLNG. Energy Markets Integrated Gas Integrated Corporate Proportionate Total ($m) - Share of APLNG Gas - Other HY21 HY20 HY21 HY20 HY21 HY20 HY21 HY20 HY21 HY20 Underlying EBITD
Slide 53: Reconciliation of Adjusted Net Debt
Reconciliation of Adjusted Net Debt For personal use only Issue Issue Hedged Hedged AUD $m AUD $m AUD $m Currency Notional Currency Notional $m $m Dec-20 Dec-20 Dec-20 Interest bearing Debt & CCIRS FV Adjusted net debt liabilities2 adjustments AUD debt AUD 826 AUD 826 806 - 806 USD Debt left in USD
Slide 54: Energy Markets segment revenue reconciliation
For personal use only Energy Markets segment revenue reconciliation The table below reconciles the difference between segment revenue and customer revenue disclosed in the Electricity, Natural Gas, LPG and Solar & Energy Services tables. HY21 HY20 Change Change ($m) ($m) ($m) (%) Energy Markets segm
Slide 55: APLNG Project Finance debt amortisation profile
APLNG Project Finance debt amortisation profile For personal use only The table below outlines APLNG’s US$ project finance debt amortisation profile. APLNG’s average interest rate associated with its project finance debt portfolio was 3.6% for FY2020, FY2021 is expected to be ~3.0% Closing balance a
Slide 56: Financial Instruments and fair value adjustments
Financial Instruments and fair value adjustments Balance Sheet Impact Income Statement Impact Financial Gain/(loss) Post-tax Inc/(dec) Inc/(dec) in Total Pre-tax Gain/(loss) For personal use only asset/(liability) included in Gain/(loss) in financial other net inc/(dec) in excluded from 31 Dec 30 Ju
Slide 57: Important notices
Important notices Forward looking statements For personal use only 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 58: Important notices
Important notices All figures in this presentation relate to businesses of the Origin Energy Group (Origin, or the Company), being Origin Energy Limited and its controlled entities, for the reporting period ended 31 December 2020 (the period) compared with the reporting period ended 31 December 2019
Slide 59: For more information
For more information For personal use only Peter Rice General Manager, Capital Markets Email: peter.rice@originenergy.com.au Office: +61 2 8345 5308 Mobile: + 61 417 230 306 Liam Barry Group Manager, Investor Relations Email: liam.barry@originenergy.com.au Office: +61 2 9375 5991 Mobile: + 61 401 71