Origin Energy Limited · ASX:ORG
Origin Energy — FY2022 Earnings Presentation
64 slides from Origin Energy's earnings presentation, Aug 18, 2022
Slide 1: Origin Energy 2022 Full Year Results
Origin Energy 2022 Full Year Results Year ended 30 June 2022 Frank Calabria, CEO & Lawrie Tremaine, CFO 18 August 2022
Slide 2: Outline
Outline 1. Introduction - Frank Calabria 2. Financial Review - Lawrie Tremaine 3. Operational Review - Frank Calabria 4. Strategy and Outlook - Frank Calabria 2 18 August 2022 2022 Full Year Results Announcement
Slide 3: Introduction
Introduction Frank Calabria, CEO
Slide 4: Financial highlights
Financial highlights Underlying Profit Underlying EBITDA Free Cash Flow $407 $2,114 $1,062 million million million (23.2 cps) Up $32 million with higher APLNG Up $93 million. Statutory loss of -$1,429 distributions partly offset by lower Energy Up from $2,036 million in FY2021 million reflecting non
Slide 5: Extraordinary year in global and Australian energy markets
• Extraordinary year in global and Australian energy markets • Action needed to sustain system reliability and accelerate transition • Actively engaged with Government and regulators on future policy settings • We are taking the lead in driving the energy transition • Execution of our strategy is pr
Slide 6: Elevated and volatile commodity price environment
Elevated and volatile commodity price environment Electricity spot price Coal price Gas price 400 $/MWh 700 A$/t 50 A$/GJ 350 600 40 300 500 250 30 400 200 300 20 150 200 100 10 50 100 - - - Jul-21 Jul-20 Jul-22 Jul-22 Jul-20 Jul-21 Jan-22 Jan-21 Jan-21 Jan-22 Jul-20 Jul-21 Jul-22 Jan-22 Jan-21 JKM
Slide 7: Unprecedented energy market conditions
Unprecedented energy market conditions NEM coal output • Lower output from baseload coal as plant reliability issues saw over 33 4,000 MW of coal generation off line in June • Weather increased customer demand, particularly in June 32 • Gas and renewables filled the supply gap in Q4 FY2022, driving:
Slide 8: Urgent action required to sustain system reliability and accelerate transition
Urgent action required to sustain system reliability and accelerate transition Sustain system reliability Accelerate transition • Recent acute crisis has abated • Significant investment is required in renewable energy, firming generation and transmission to underpin the new • Highlights the critical
Slide 9: Our ambition and strategy were refreshed in March
Our ambition and strategy were refreshed in March Our ambition To lead the energy transition through cleaner energy and customer solutions Unrivalled customer Accelerate renewable Deliver reliable energy solutions and cleaner energy through the transition Our • Leading brand providing lowest cost •
Slide 10: Good progress executing our strategy
Good progress executing our strategy Achieved to date Ambition Unrivalled • Strategic NPS1 +20 by FY2026 • Strategic NPS of 51, top score among Tier 1 energy providers • $200 - $250 million cash costs saving FY2024 vs FY2018 customer • 2.2 million accounts on Kraken • 600k Broadband customer account
Slide 11: Our strategy creates value for shareholders and lowers emissions
Our strategy creates value for shareholders and lowers emissions • Climate Transition Action Plan to be put to shareholder advisory vote at AGM • The plan details updated targets to accelerate emissions reduction • New target consistent with 1.5°C pathway to be announced • Outlines our approach to J
Slide 12: Purpose led organisation
Purpose led organisation Getting energy right Our Customers Our Communities Our Planet Our People ✓ COVID-19 and flood support ✓ Spent $318 million with regional ✓ Announced potential earlier ✓ TRIFR up to 4.01, number of ✓ APLNG continued to support suppliers, or 20% of our Eraring closure injuries
Slide 13: Financial Review
Financial Review Lawrie Tremaine, CFO
Slide 14: Underlying Profit up 30% to $407 million
Underlying Profit up 30% to $407 million Movements in Underlying Profit ($m) (287) 820 (614) 105 (10) 79 407 314 FY21 IG - Share of IG - Other EM Corporate Depreciation & Other FY22 APLNG profit EBITDA EBITDA EBITDA amortisation 1 Impact of coal supply Lower depreciation on Higher commodity Lower in
Slide 15: Market conditions have had a number of material impacts on financial results
Market conditions have had a number of material impacts on financial results Item Impact • Energy Markets electricity and gas ~$4.4 billion uplift recognised Mark to market of partially in income statement & partially in equity Effective risk derivatives and management impairment1 • Resulted in $2.2
Slide 16: APLNG record cash distribution
APLNG record cash distribution APLNG distribution and Origin oil hedging 1,600 110 • APLNG distributed $1,595 million cash to Origin 1,400 100 with $433 million received as unfranked dividend 1,200 90 • Realised oil price was US$74/bbl (A$103/bbl) 1,000 80 • The cash proceeds net of oil hedging was
Slide 17: APLNG sell down and distributions main drivers of stronger free cash flow
APLNG sell down and distributions main drivers of stronger free cash flow ($m) FY22 FY21 Change • Lower earnings from Energy Markets ($614 million) Underlying EBITDA, adjusted for 135 1,009 (874) • Oil hedging loss on higher prices vs gain in prior year ($257 non-cash items million) Change in workin
Slide 18: Capital management flexibility restored
Capital management flexibility restored Capital structure Free Cash Flow1 and Free Cash Flow Yield2 ($m) 6.0 3.5x 10.5% 10.1% 5.0 3.0x Adj. Net Debt / EBITDA 2.5x Adj. Net Debt ($b) 4.0 6.6% 2.0x 3.0 4.9% 1,062 1.5x 2.0 1,030 1.0x 1.0 0.5x 0.0 0.0x FY19 FY20 FY21 FY22 FY21 FY22 Free Cash Flow Free C
Slide 19: Dividend and capital management
Dividend and capital management • Final dividend of 16.5 cps, franked to 75%, determined for total FY2022 dividend of 29 cps − 47% Adjusted Free Cash Flow payout ratio − Expect to be tax paying going forward • $250 million share buyback completed in June • ~ $750 million combined FY2022 dividend and
Slide 20: Energy Markets Underlying EBITDA impacted by coal supply disruption
Energy Markets Underlying EBITDA impacted by coal supply disruption and lower electricity customer tariffs Movements in Underlying EBITDA ($m) Electricity gross profit down $692 million to $207 million: • Margin impacts (-$693 million): − Coal supply disruption resulted in increased fuel cost (-$315
Slide 21: Integrated Gas Underlying EBITDA up 62%
Integrated Gas Underlying EBITDA up 62% Movements Underlying EBITDA ($m) 119 (331) (444) 1,622 (244) (43) 2,780 2,568 23 2,125 1,881 1,837 1,837 1,135 1,135 1,158 Share of APLNG Integrated Gas - Other (+$989 million) (-$287 million) FY21 LNG volume LNG price Domestic Opex/other Divestment Oil hedgin
Slide 22: FY2022 Operational Review
FY2022 Operational Review Frank Calabria, CEO
Slide 23: Energy Markets
Q Energy Markets
Slide 24: FY2022 electricity margin impacted by lower tariffs and coal supply constraints
FY2022 electricity margin impacted by lower tariffs and coal supply constraints Lower tariffs due to COVID-19 • FY2022 tariffs impacted by low wholesale prices during FY2021 • Entered FY2022 with a well contracted legacy coal position Coal supply disruption • Material under-delivery of contracted co
Slide 25: FY2023 customer tariffs rising but offset by higher fuel costs
FY2023 customer tariffs rising but offset by higher fuel costs Customer tariffs increasing Eraring coal costs rising 300 $/MWh 700 A$/t 250 600 DMO cut-off 13 May 500 200 400 150 300 100 200 50 100 - - FY22 Swap FY22 Avg FY23 Swap Newcastle 5500 kcal Newcastle 6000 kcal FY23 Avg FY24 Swap FY24 Avg N
Slide 26: Positive gas outlook with cost of supply locked in for FY2023
Positive gas outlook with cost of supply locked in for FY2023 LNG netback and domestic gas prices Energy Markets contracted gas supply 50 A$/GJ 250 PJ 40 200 30 150 20 100 10 50 - - FY22 FY23 FY24 FY25 FY26 1 1 APLNG legacy contract Fixed Price JKM netback price - Wallumbilla (ACCC) Price review/mar
Slide 27: Retail market environment
Retail market environment Customer churn Share of NEM customer accounts Monthly churn rate (%) Electricity and gas1 (%) 30% 25% 21% 20% 15% Series 1 10% Tier 1 peers Oct Oct Oct Oct Oct Apr Apr Apr Apr Apr Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Tier 2 retailers (~10) FY18 FY19 FY20 FY21 FY22 Other
Slide 28: Leading retail business
Leading retail business Large and growing customer base Superior customer experience Low-cost operator Customer accounts (‘000) Strategic NPS (12-month average) Cash cost savings ($m) 4,458 4,236 4,266 4 5 (3) (9) (19) FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 FY18 FY21 FY22 FY24 Target Electricity an
Slide 29: Growing scale while delivering higher customer value
Growing scale while delivering higher customer value Growing future revenue streams Broadband Retail X Gross profit ($m) Broadband customer accounts (‘000) Customers accounts migrated to Kraken (‘000) +98% 2,200 Solar 68% 61 Customer happiness index Community Energy Services 33 8.5 out of 10 39 CAGR
Slide 30: Octopus – global enterprise software platform in energy and other utilities
Octopus – global enterprise software platform in energy and other utilities Exponential growth Global reach increasing Future energy services Customer accounts (‘000, LHS) and Market size (# of households) 20,000 revenue growth (£m, RHS) 5,000 4,000 15,000 3,000 10,000 2,000 5,000 1,000 - - Jun-18 J
Slide 31: Integrated Gas
© Integrated Gas
Slide 32: APLNG strong operated reserves replacement of ~100% over 5 years
APLNG strong operated reserves replacement of ~ 100% over 5 years APLNG reserves and cumulative production (PJ) 20,000 • Reserve base significantly de-risked: 1P now ~60% of 3P 16,000 • 116% operated and non operated 2P reserves replacement during FY2022 12,000 • 129% Operated 2P reserve replacement
Slide 33: APLNG continued stable production and low cost operations
APLNG continued stable production and low cost operations Quality resource and assets Low cost base PJ $m Capex + Opex $/GJ 800 3,000 4.5 2,500 600 4.0 2,000 400 1,500 3.5 1,000 200 3.0 500 - - 2.5 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 Operated Production Non-operated Production Capex Breakeven op
Slide 34: APLNG strong field performance allowed focus on optimising operations
APLNG strong field performance allowed focus on optimising operations Reduced sustain activity and Network infrastructure investment Strong well and facility reliability capital costs enabling accelerated production # of wells $m PJ 300 600 100% 45 40 250 450 95% 35 200 30 25 150 300 90% 20 100 15 1
Slide 35: APLNG strong operational performance and high commodity prices led to record revenue
APLNG strong operational performance and high commodity prices led to record revenue Strong commodity prices Record revenue A$/GJ $m PJ 50 10,000 700 40 8,000 650 30 6,000 600 20 4,000 550 10 2,000 - - 500 H1 H2 H1 H2 H1 H2 FY20 FY21 FY22 FY20 FY21 FY22 Average LNG price Average domestic price LNG r
Slide 36: Guidance
Guidance Frank Calabria, CEO
Slide 37: FY2023 Guidance – Integrated Gas
FY2023 Guidance – Integrated Gas Provided on the basis that market conditions and the regulatory environment do not materially change, adversely impacting operations. The following guidance is based on current market conditions and the regulatory environment. Ongoing volatility in market conditions
Slide 38: Outlook – Energy Markets
Outlook – Energy Markets FY2023 • There remains a wide range of potential earnings outcomes. We will continue to assess the outlook with a view to providing an update when there is less uncertainty • We expect higher earnings in FY2023 • The gas business is expected to deliver higher earnings on a l
Slide 39: Origin is strategically positioned to benefit from the energy transition
Origin is strategically positioned to benefit from the energy transition • Energy retailing – leading customer scale and technology will create improved margins and grow value through low cost, superior customer experience and new products. • Energy supply – diverse portfolio and proven risk managem
Slide 40: Questions
@) Questions
Slide 41: Appendix
oO Oo Appendix
Slide 42: Administered and suspended market in June will have an ongoing impact
Administered and suspended market in June will have an ongoing impact into FY2023 and FY2024 • Late FY2022 was a volatile period in east coast electricity and gas markets, with a number of unprecedented steps taken by the market operator • AEMO applied administered pricing (capping the price at $300
Slide 43: Domestic gas supply expected to satisfy demand in 2023
Domestic gas supply expected to satisfy demand in 2023 • The Commonwealth Government has indicated it will consider invoking the ADGSM following the release of the latest ACCC Gas Inquiry Report • The report noted there is 167 PJ of uncontracted gas from the LNG producers • The LNG industry has made
Slide 44: Items excluded from Underlying Profit
Items excluded from Underlying Profit • $2.2 billion non-cash post-tax impairment of goodwill – Reconciliation from Statutory to Underlying Profit discussed on slide 45 ($m) • $114 million in disposals, relating primarily to the $113m loss on divestment of 10% of APLNG – discussed on slide 46 (791)
Slide 45: Energy Markets impairment
Energy Markets impairment Statutory Loss of $1,429 million for FY2022 was driven primarily by the non-cash impairment of Energy Markets • Non-cash impairment of Energy Markets (-$2,196 million): − Recent extraordinary market conditions have resulted in an uplift in the value of in-the money derivati
Slide 46: Completion of APLNG sale
Completion of APLNG sale • Loss on divestment of APLNG (-$113 million): − Non-cash impairment of APLNG recognised HY2022 (-$193 million) − No impairment of remaining 27.5% − Total completion adjustments (+$80 million): being reversal of foreign currency translation reserve (+$105 million) partly off
Slide 47: Large-scale Generation Certificates (LGC) strategy
Large-scale Generation Certificates (LGC) strategy Adjustments to Statutory Profit Statutory Shortfall CY2020 CY2021 CY2022 Underlying Impact across various financial years ($m) Profit charge/(refund) surrender cost surrender cost surrender cost Profit FY2021 CY2020 and CY2021 certificates shortfall
Slide 48: Electricity forward price by state (A$/MWh)
Electricity forward price by state (A$/MWh) 300 NSW 300 QLD 250 250 200 200 150 150 100 100 50 50 - - Jul-20 Nov-20 Mar-21 Jul-21 Nov-21 Mar-22 Jul-22 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 200 VIC 250 SA 200 150 150 100 100 50 50 - - Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21
Slide 49: Strong liquidity position with low interest costs
Strong liquidity position with low interest costs Interest paid ($m) and average interest rate 500 8% 400 6% Interest 300 4% • FY2022 interest expense lower by $52 million due to a 200 lower debt balance and debt refinancing activity 2% 100 • Average interest rate of 4.3% for FY2022 in line with the
Slide 50: APLNG Project Finance
APLNG Project Finance 7.5 40% 7.0 35% 6.5 US$ bn 30% 6.0 25% 5.5 5.0 20% Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Project finance debt (LHS) Gearing (RHS) • $US3.1 billion project debt repaid since project inception • Gearing1 ratio of 21% and Adjusted Net Debt/Adjusted Underly
Slide 51: APLNG sales mix and legacy domestic contracts
APLNG sales mix and legacy domestic contracts Legacy domestic contracts: FY2022 FY2021 • ~40 PJ p.a. to Origin ending 2034 Sales mix (100%) PJ % PJ % • 472 PJ over 21 years to Rio Tinto ending 2031 • ~16 PJ p.a. to QAL ending 2041 Contract LNG 450 68% 450 69% • ~25 PJ p.a. to QGC ending 2035, oil li
Slide 52: Managing oil price exposure
Managing oil price exposure Oil hedging program designed to protect capital structure through commodity cycles FY2023 FY2023 Full Year Oil Price Sensitivity • Origin share of APLNG JCC oil price exposure is ~17 MMboe 120 As at 2 August, approximately 43% priced at US$108/bbl based on Effective Oil P
Slide 53: Capex stable, and investing in growth
Capex stable, and investing in growth Origin capex ($m) Capex 500 450 • Managing sustaining capex on key assets: major 400 outage at Eraring and other maintenance activities 350 • Other sustaining capital: regulatory market reforms 300 (5 minute settlement), LPG 250 • Productivity/growth: Octopus En
Slide 54: Customer accounts’ movements
Customer accounts’ movements 50 Electricity ('000) (‘000) FY22 FY21 Change 40 30 Electricity1 2,733 2,625 108 20 Business 31 30 1 10 Retail – Residential 2,243 2,246 (4) - Retail – SME 291 259 32 (10) Retail – Community Energy Services 168 90 78 (20) Gas 1,277 1,249 29 NSW QLD VIC SA Business 1 1 -
Slide 55: Cost to serve and bad and doubtful debts
Cost to serve and bad and doubtful debts Cost to serve Bad and doubtful debts 700 168 300 1.09% 164 159 600 250 136 135 0.87% 38 500 0.74% 0.73% 200 0.70% 0.71% 0.69% 400 10 150 300 110 114 108 0.59% 90 93 100 83 80 83 72 75 200 58 100 50 - - FY18 FY19 FY20 FY21 FY22 FY24 FY17 FY18 FY19 FY20 FY21 FY
Slide 56: Segment summary
Segment summary Energy Markets Integrated Gas Integrated Corporate Total - Share of APLNG Gas - Other ($m) FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 Underlying EBITDA 365 979 2,134 1,145 (297) (10) (88) (78) 2,114 2,036 Underlying EBIT (111) 427 1,044 224 (316) (36) (90) (76) 527 539 Underly
Slide 57: Underlying ROCE – 12 month rolling
Underlying ROCE – 12 month rolling 30 June 2022 30 June 2021 Change As at Change ($m) ($m) ($m) (%) Capital Employed Net Assets 10,022 9,479 543 6% Adjusted Net Debt 2,838 4,639 (1,801) (39%) Net derivative (assets) / liabilities (2,935) 1,147 (4,082) (356%) Origin's share of APLNG net debt (project
Slide 58: Proportionate Free Cash Flow
Proportionate Free Cash Flow 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 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 Underlying EBITDA 365 979 2,134 1,145
Slide 59: Reconciliation of Adjusted Net Debt
Reconciliation of Adjusted Net Debt Issue Issue Hedged Hedged AUD $m AUD $m AUD $m $m Currency Notional Currency Notional Jun-22 Jun-22 Jun-22 Interest bearing Debt & CCIRS FV Adjusted net debt liabilities2 adjustments AUD debt AUD 826 AUD 826 807 - 807 USD Debt left in USD USD 630 USD 630 913 - 913
Slide 60: Energy Markets segment revenue reconciliation
Energy Markets segment revenue reconciliation The table below reconciles the difference between segment revenue and customer revenue disclosed in the Electricity, Natural Gas, LPG and Solar & Energy Services tables. FY22 FY21 Change Change ($m) ($m) ($m) (%) Energy Markets segment revenue 13,634 11,
Slide 61: Financial Instruments and fair value adjustments
Financial Instruments and fair value adjustments Balance Sheet Impact Income Statement Impact Financial asset/(liability) Pre-tax Post-tax Gain/(loss) Inc/(dec) in Inc/(dec) in Gain/(loss) Gain/(loss) Total inc/(dec) included in 30 Jun 2021 financial other net excluded from excluded from ($m) 30 Jun
Slide 62: Important notices
Important notices 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 re
Slide 63: 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 30 June 2022 (the period) compared with the reporting period ended 30 June 2021 (the pr
Slide 64: For more information
For more information Peter Rice General Manager, Capital Markets Email: peter.rice@originenergy.com.au Office: +61 2 8345 5308 Mobile: + 61 417 230 306 Lindsay Donnelly Group Manager, Investor Relations Email: lindsay.donnelly@originenergy.com.au Office: +61 2 8345 5502 Mobile: + 61 414 697 070 orig