Origin Energy Limited · ASX:ORG
Origin Energy — Origin Energy Ltd Ord — HY2024 Earnings Presentation
60 slides from Origin Energy's earnings presentation, Feb 15, 2024
Slide 1: Origin Energy 2024 Half Year Results
Origin Energy 2024 Half Year Results Year ended 31 December 2023 Frank Calabria, CEO & Lawrie Tremaine, CFO 15 February 2024
Slide 2: Outline
Outline 1. Introduction - Frank Calabria 2. Financial Review - Lawrie Tremaine 3. Operational Review - Frank Calabria 4. Outlook - Frank Calabria 2 15 February 2024 • 2024 Half Year Results Announcement
Slide 3: Introduction
Introduction Frank Calabria, CEO
Slide 4: Origin is a unique energy transition value proposition
• Origin is a unique energy transition value proposition − Energy Markets – retail scale and capability, flexible generation portfolio and growth from emerging businesses and transition investment − Octopus Energy – world-class enterprise software and energy transition business rapidly growing − Int
Slide 5: Financial highlights
Financial highlights Statutory Profit Underlying Profit Underlying EBITDA $995 $747 $1,995 million million million Up from $399 million in HY2023 Up from $44 million in HY2023 Up from $1,059 million from HY2023 Adjusted Net Debt / Adjusted Origin ROCE (pre-tax)1 Interim Dividend Underlying EBITDA 0.
Slide 6: Our ambition and strategy
Our ambition and strategy 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 • Accelerate growth in ren
Slide 7: Executing on our strategy
Executing on our strategy Ambition Achieved as at 31 Dec 2023 $200 - $250 million cost savings (FY2025 vs FY2018) In benefit realisation phase, facing cost headwinds Octopus 100 million licensed Kraken accounts (2027) 51 million contracted Kraken customer accounts Unrivalled >1/3 large business cust
Slide 8: Energy Markets – retail scale & capability, flexible generation and growth
Energy Markets – retail scale & capability, flexible generation and growth • Leading Australian energy retail business with scale, strong brand and leading Kraken Retail enterprise software • Growth opportunities: VPP, Origin Zero, Community Energy Services and Broadband • Underpinned by stable, lon
Slide 9: Retail – scale, strong brand and leading Kraken enterprise software
Retail – scale, strong brand and leading Kraken enterprise software Recognised brand, Leading platform and Delivering benefits today, leading scale & capability operating model more underway Customer accounts (‘000) Customer accounts migrated (m) Monthly Customer Happiness Index score post 4.0 4+ mi
Slide 10: Flexible generation portfolio with value accretive growth opportunities
Flexible generation portfolio with value accretive growth opportunities Pre-eminent thermal peaking fleet Pipeline of value accretive Origin Loop (VPP) will create value through transition battery opportunities low capital growth opportunity Thermal peaking fleet in the NEM (MW) Assets connected to
Slide 11: Changing market delivers increased value to flexible generation
Changing market delivers increased value to flexible generation NSW average capacity forward Increased intra-day volatility Higher frequency of negative prices prices Average energy price (NSW) % of half hour negative price periods (NSW) $/MWh 400 $/MWh 30% 30 300 20% 20 200 10% 10 100 - - - 2023 20
Slide 12: Increased stake in fast growing Octopus Energy
Increased stake in fast growing Octopus Energy Exceptional retail growth Exceptional Kraken growth Value appreciation Customer accounts (m) 60 Customer accounts (m) 7 Post money valuation (£bn) 14 Equity raising benchmark 12 6 50 10 5 40 8 4 30 6 3 20 4 2 10 1 2 - - - Octopus Energy customer account
Slide 13: High quality APLNG resource reliably delivering robust cash flows
High quality APLNG resource reliably delivering robust cash flows High quality resource Strong cashflow APLNG Reserves and cumulative production (PJ)1 24,000 2,000 200 20,000 1,500 150 16,000 1,000 100 A$/bbl 12,000 $m 500 50 8,000 4,000 - - - (500) FY19 FY20 FY21 FY22 FY23 Jun-17 Jun-18 Jun-19 Jun-
Slide 14: Supporting our customers and communities
Supporting our customers and communities Our Customers Our Communities ✓ We shielded customers in our Power On hardship program from ✓ >$1.4 million contributed by the Origin Energy Foundation in the July 2023 price increases HY2024 ✓ Spending up to $45 million in FY2024 to provide support to ✓ >$27
Slide 15: Financial Review
Financial Review Lawrie Tremaine, CFO
Slide 16: Underlying Profit up $703 million to $747 million
Underlying Profit up $703 million to $747 million Movements in Underlying Profit ($m) 5 6 47 296 (285) (179) 813 747 44 HY23 EM Share of Octopus IG - Share of IG - Other Corporate D&A Tax/other HY24 EBITDA Energy profit APLNG profit EBITDA EBITDA Recovery of Increase in higher wholesale customer Hig
Slide 17: Cash generation impacted by working capital build
Cash generation impacted by working capital build ($m) HY24 HY23 Change Underlying EBITDA, adj for non-cash 1,183 35 1,148 • Energy Markets’ impacts (-$625 million): Change in working capital (791) (757) (34) − Higher receivables (~$260 million) due to higher bill sizes Futures exchange collateral 3
Slide 18: APLNG cash distribution remains strong in weaker commodity price environment
APLNG cash distribution remains strong in weaker commodity price environment APLNG distribution and Origin oil, gas and FX hedging Distribution inclusive of 2,000 0.6 1.3 0.8 1.4 1.5 1.2 – 1.41 200 hedging (A$bn) • H1 distribution of $648 million and Origin hedge gains of $9 million 1,500 150 • Tax
Slide 19: Capital allocation framework refined with deleverage
Capital allocation framework refined with deleverage Leverage is very low but expected to return to lower Operating Cash Flow APLNG Distribution end of target range with planned capital investment Investment in batteries, Octopus and retail growth prioritised for on balance sheet funding Our renewab
Slide 20: Energy Markets Underlying EBITDA up $813 million to $1,044 million
Energy Markets Underlying EBITDA up $813 million to $1,044 million Movements in Underlying EBITDA ($m) 10 (92) (15) Electricity gross profit up $911 million to $950 million • Recovery of higher wholesale prices flowing into retail and business customer tariffs (+$507 million) 911 • Lower fuel costs
Slide 21: Share of Octopus Energy
Share of Octopus Energy Movements in Underlying EBITDA ($m) 11 (11) UK Retail (27) • Earnings positive business, second half earnings higher due to seasonal (12) demand • HY2023 impacted by under-recovery from tariff-lagging wholesale prices 98 (83) • HY2024 impacted by higher bad and doubtful debts
Slide 22: Integrated Gas Underlying EBITDA up 5%
Integrated Gas Underlying EBITDA up 5% Share of APLNG EBITDA down $249 million: 90 30 • Lower LNG price ($349 million), primarily driven by lower realised oil 349 266 prices of US$84/bbl (A$128/bbl) vs US$109/bbl (A$164/bbl) in HY2023 79 89 -$338 million • Lower domestic revenue ($79 million) due to
Slide 23: Operational Review
Operational Review Frank Calabria, CEO
Slide 24: Energy Markets
Energy Markets of -, -
Slide 25: Electricity margin recovery driven by tariffs repricing and lower cost of energy
Electricity margin recovery driven by tariffs repricing and lower cost of energy Electricity prices Coal prices 250 NSW electricity forward price ($/MWh) 700 A$/t 600 200 500 150 FY2024 400 FY2025 100 300 FY2023 200 50 100 - - Forward swap price Newcastle 5500 kcal Newcastle 6000 kcal Newcastle 6000
Slide 26: Gas margin underpinned by strong supply portfolio
Gas margin underpinned by strong supply portfolio Gross profit Contracted gas supply 8 A$/GJ PJ 250 200 6 150 4 100 2 50 - - H1 H2 H1 H2 H1 FY23 FY24 FY25 FY26 FY27 FY28 APLNG legacy contract 1 Fixed Price1 FY22 FY23 FY24 FY24 Price review/market Oil-linked JKM-linked Contracted Demand 2 • Moderatin
Slide 27: Strong retail competitive advantage built
Strong retail competitive advantage built Exceptional Customer Experience Leading Brand Strong Channels Monthly Customer Happiness Index score Trustpilot ratings1 % of sales using third party channels 75 post migration to Kraken 70 4.6 14% 4.0 12% 65 2.9 6% 60 Origin Average Tier 1 Other FY22 FY23 H
Slide 28: Consistent strong growth and loyal customer base in Retail
Consistent strong growth and loyal customer base in Retail Large and growing customer base Lowest churn Customer accounts (‘000) Quarterly churn rate (%) 30% 2.9% CAGR 4,525 4,580 4,459 20% +9 4,266 +6 4,181 +5 10% - Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec QTR QTR QTR QTR QTR QTR QTR QTR QTR QTR FY2
Slide 29: Scaling up growth opportunities
Scaling up growth opportunities Community Energy Services Broadband Gross Profit ($m) Customer accounts (‘000) 140 100 Customer accounts (‘000) 457 500 124 442 413 120 403 400100 96 292 74 300 80 61 50 60 46 78 200 70 71 40 54 44 100 20 0 0 0 H1 H2 H1 H2 H1 H1 H2 H1 H2 H1 FY22 FY23 FY24 FY22 FY23 FY
Slide 30: New retail business operating with benefit realisation underway
New retail business operating with benefit realisation underway Cost to Serve and Retail Capex • Completed migration for mass market customers to Kraken ($m) 800 − New operating model embedded − Improved customer experience • Subsequent stabilisation phase now complete with focus on 600 continued be
Slide 31: In house VPP (Loop) – scaling up with demonstrated value proposition
In house VPP (Loop) – scaling up with demonstrated value proposition Significant growth profile Being smarter with energy demand 2,500 2500 Assets connected to VPP (MW) Illustrative electric hot water heating profile Illustrative electric vehicle charging profiles 2 300 2,000 2,000 2000 250 1,500 15
Slide 32: Origin Zero – accelerating large business customers to net zero
Origin Zero – accelerating large business customers to net zero Large business customers on Large business customer EVs under management broader services MWs on VPP 8% 0.08 300 Assets connected (MW) 300 1,000 # of EVs 1000 250 250 800 800 6% 0.06 200 200 600 600 4% 0.04 150 150 400 400 100 100 2% 0.
Slide 33: Octopus Energy
Octopus Energy of -, -
Slide 34: Leading brand and service excellence strengthens competitive advantage
Leading brand and service excellence strengthens competitive advantage Outstanding customer satisfaction Strong and trusted brand Customer wins NPS # of net customer wins (m) 30 2.0 20 1.5 10 - 1.0 (10) 0.5 (20) (30) - Octopus British Gas EDF Ovo 2021 2022 2 2023 Source: UK Consumer Trends Study 202
Slide 35: Leading enterprise software platform a key enabler for the energy transition
Leading enterprise software platform a key enabler for the energy transition Kraken Core Kraken Flex Contracted customer accounts (m) Smartflex devices connected (000’s) Infraflex capacity (GW) 60 120 7 50 6 5 40 80 4 30 3 20 40 2 10 1 - - - Contracted Kraken customer accounts Smart Devices Under Ma
Slide 36: Scaling International Retail and Services businesses
Scaling International Retail and Services businesses International Retail Services Customer accounts (‘000) # 1,000 2,500 25,000 2,500 2,000 20,000 2,000 800 57% CAGR 1,500 15,000 1,500 600 1,000 1,000 10,000 400 500 5,000 500 200 - - H1 H2 H1 H2 H1 FY22 FY23 FY24 - Jun-22 Dec-22 Jun-23 Dec-23 Heat
Slide 37: Integrated Gas
Integrated Gas of -, -
Slide 38: Sustained strong production
Sustained strong production Stable production from quality assets over long term Production recovery APLNG production (100%) (PJ) Daily operated production Operated production record of 1,632TJ/day in 400 1,700 December 350 1,600 300 1,500 250 1,400 Sustained daily 200 1,300 operated 150 Workovers,
Slide 39: Revenue down driven by lower average oil prices on export contracts
Revenue down driven by lower average oil prices on export contracts Commodity Prices Revenue Costs A$/GJ 8000 $m $m Capex + Opex2 $/GJ 60 3,000 5.0 50 6000 2,500 4.0 40 2,000 3.0 30 4000 1,500 2.0 20 1,000 2000 10 1.0 500 - 0 - - H1 H2 H1 H2 H1 H1 H1 H2 H1 H2 H1 FY19 FY20 FY21 FY22 FY23 FY24 FY22 FY
Slide 40: Production levers
Continued focus on short cycle, low-cost supply initiatives Lowest cost / Optimise existing ✓ Continued focus on optimising well performance, wells with artificial lift pumps operating improved 8% Short cycle HY24 v HY23, and further reductions of well flowing bottomhole pressures (FBHP) to improve
Slide 41: Regulatory certainty under the Gas Market Code
Regulatory certainty under the Gas Market Code APLNG domestic sales • APLNG continues to play an important role in providing PJ secure gas supply to customers on Australia’s East Coast 200 25.00% • Domestic sales volume remains consistent as a percentage of total sales 160 20.00% – APLNG supplied mo
Slide 42: Outlook
Outlook Frank Calabria, CEO of -, -
Slide 43: Improved Guidance – Energy Markets and Octopus Energy
Improved Guidance – Energy Markets and Octopus Energy The following guidance is provided on the basis that market conditions and the regulatory environment do not materially change FY2024 • Energy Markets EBITDA is expected to be $1,600 – $1,800 million, excluding Octopus Energy − The improved guida
Slide 44: Guidance – Integrated Gas
Guidance – Integrated Gas The following guidance is provided on the basis that market conditions and the regulatory environment do not materially change Integrated Gas - APLNG 100% FY2023 FY2024 guidance Production PJ 674 680 – 710 Capex and opex, excluding purchases1 A$b 2.6 2.8 – 3.0 Unit capex +
Slide 45: Appendix
Appendix -, -
Slide 46: Items excluded from Underlying Profit
Items excluded from Underlying Profit Reconciliation from Statutory to Underlying Profit ($m) • $477 million reversal of prior APLNG impairment • $97 million business restructuring, (43) including costs relating to the (3) (477) proposed takeover ($50 million post 184 tax), and Kraken stabilisation
Slide 47: Capex
Capex Origin capex ($m) HY2024 Capex 400 • Generation sustain: Eraring Unit 2 maintenance outage ($61 million), Eraring Ash Dam ($18 million) Mortlake major inspection ($26 million) 300 • Other sustaining capital: LPG, CES and other assets 200 • Productivity/growth: Eraring Battery, early stage rene
Slide 48: Large-scale Generation Certificates strategy – refund of shortfall charge
Large-scale Generation Certificates strategy – refund of shortfall charge LGC strategy benefit $/certificate • Over FY2021 to FY2023, we deferred the surrender of ~9 million 80 certificates, incurring a shortfall charge of $65/certificate or $602 million in total 70 • This shortfall charge was inclu
Slide 49: Large-scale Generation Certificates (LGC) strategy
Large-scale Generation Certificates (LGC) strategy Adjustments to Statutory Profit Statutory Shortfall CY2020 CY2021 CY2022 Underlying Impact across various financial years ($m) Profit charge/(refund) surrender cost surrender cost surrender cost Profit FY2021 CY2020 and CY2021 certificates shortfall
Slide 50: Customer account movements
Customer account movements Electricity ('000) 31 December 30 June 10 Customer accounts ('000) as at Change 2023 2023 5 Electricity 2,752 2,742 10 Business 28 28 (1) - Retail – Mass Market 2,531 2,528 3 (5) Retail – Community Energy Services 193 185 8 (10) NSW QLD VIC SA Gas 1,298 1,282 17 Business 1
Slide 51: Electricity forward price by State ($/MWh)
Electricity forward price by State ($/MWh) 250 NSW 250 QLD 200 200 150 150 100 100 50 50 - - May-21 Sep-21 Jan-22 May-22 Sep-22 Jan-23 May-23 Sep-23 Jan-24 250 SA 200 VIC 200 150 150 100 100 50 50 - - May-21 Sep-21 Jan-22 May-22 Sep-22 Jan-23 May-23 Sep-23 Jan-24 Source: AEMO/Bloomberg as at 12 Febr
Slide 52: 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, Solar & Energy Services and Future Energy tables. HY24 HY23 Change Change ($m) ($m) ($m) (%) Energy Markets segment rev
Slide 53: Managing oil price exposure
Managing oil price exposure FY2024 FY2024 Oil Price Sensitivity • Origin share of APLNG JCC oil price and JKM gas price exposure is ~17 MMboe and ~21 tBtu 95 Effective Oil Price US$/bbl 90 • As at 5 February 2024, we estimate that 84 per cent of JCC and 57 per cent of JKM 85 FY2024 exposure has been
Slide 54: Segment summary
Segment summary Energy Markets Share of Octopus Integrated Gas Integrated Corporate Total Energy - Share of APLNG Gas - Other ($m) HY24 HY23 HY24 HY23 HY24 HY23 HY24 HY23 HY24 HY23 HY24 HY23 Underlying EBITDA 1,044 231 (12) (83) 944 1,193 57 (239) (38) (43) 1,995 1,059 Underlying EBIT 798 (19) (41)
Slide 55: Underlying ROCE – 24 month rolling
Underlying ROCE – 24 month rolling 31 December 2023 31 December 2022 Change Change As at ($m) ($m) ($m) (%) Capital Employed Net Assets 9,236 8,679 557 6% Adjusted Net Debt 3,177 3,280 (103) (3%) Net derivative (asset)/liability (144) (1,198) 1,054 (88%) Origin's share of APLNG net debt (project fin
Slide 56: Reconciliation of Adjusted Net Debt
Reconciliation of Adjusted Net Debt Issue Issue Hedged Hedged AUD $m AUD $m AUD $m $m Currency Notional Currency Notional Dec-23 Dec-23 Dec-23 Interest bearing Debt & CCIRS FV Adjusted net debt liabilities2 adjustments AUD debt AUD 1,026 AUD 1,026 1,017 1,017 USD Debt left in USD USD 525 USD 525 766
Slide 57: Financial Instruments and fair value adjustments
Financial Instruments and fair value adjustments Balance Sheet Impact Income Statement Impact Financial asset/(liability) Pre-tax Post-tax Gain/(loss) Inc/(dec) in Inc/(dec) in Gain/(loss) Gain/(loss) Total inc/(dec) included in financial other net excluded from excluded from ($m) 31 Dec 2023 30 Jun
Slide 58: 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 59: 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 2023 (the period) compared with the reporting period ended 31 December 2022
Slide 60: 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