Origin Energy Limited · ASX:ORG
Origin Energy — H1 FY2010 Earnings Presentation
75 slides from Origin Energy's earnings presentation, Feb 25, 2010
Slide 1: ASX transmittal cover note for results presentation
For personal use only To Company Announcements Office Facsimile 1300 300 021 Company ASX Limited Date 25 February 2010 From Bill Hundy Pages 75 Subject RESULTS FOR THE HALF YEAR ENDED 31 DECEMBER 2009 This Transmittal is confidential. If you have received this document in error, please contact Origi
Slide 2: 2010 Half Year Results: A Decade of Growth
Half Year Ended 31 December 2009 25 February 2010 For personal use only Celebrating a decade of growth 2010 Half Year Results A Decade of Growth
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: Outline
Outline For personal use only 1. Performance Highlights 2. Financial Review 3. Operational Review 4. Outlook 5. The Next Decade 6. Appendix 3
Slide 5: 1. Performance Highlights
1. Performance Highlights For personal use only
Slide 6: Ten years since listing: a decade of growth
On 21st February ten years ago, Origin was first listed on the ASX and so began a decade of growth For personal use only 10 Year CAGR: • Productive Capital: 16% • Underlying Profit: 24% • Earnings per Share: 18% • Dividends per Share: 27% • Total Shareholder Return: 30% That growth has resulted in O
Slide 7: Top performing listed company over the last decade
As a result of this growth, Origin has been one of the top performing listed companies over the last decade… For personal use only Origin TSR 1,306% Indexed to 100 from 21 February 2000 to 19 February 2010 … and is now in the ASX top 20 companies by market capitalisation, from a low of around 125th
Slide 8: Underlying Profit up 28% to $355 million
Origin enters its second decade with Underlying Profit up 28% to $355 million, continuing that record of growth For personal use only Underlying Profit $355 million up 28% Underlying Earnings 40.5 cps up 28% per Share Statutory Profit(1) $371 million down 94% Statutory 42.3 cps down 94% Earnings per
Slide 9: Performance driven by a clear and simple strategy
Origin’s performance has been driven by a clear and simple strategy that continues to deliver ongoing opportunities for growth • Progressed commissioning of the Kupe Project with steady production achieved For personal use only • APLNG increased production capacity and 2P reserves • Committed to acq
Slide 10: 2. Financial Review
For personal use only 2. Financial Review
Slide 11: 2010 Half Year Financial Highlights
2010 Half Year Financial Highlights Revenue $4,300 million up 2% For personal use only Underlying EBITDA $706 million up 3% Underlying EBIT $489 million up 1% Underlying Profit $355 million up 28% EPS – Underlying 40.5 cps up 28% Statutory Profit $371 million down 94% EPS – Statutory 42.3 cps down 9
Slide 12: Profit & Loss
Profit & Loss ($ million) Dec 09 Dec 08 Change Revenue 4,300 4,216 2% For personal use only Underlying EBITDA 706 686 3% Underlying EBIT 489 485 1% Underlying net financing income/(costs) 12 (60) 72m Underlying tax expense (110) (110) - Minority interests share of Underlying Profit (36) (38) 5% Unde
Slide 13: Underlying EBITDA by segment
Underlying EBITDA by segment Segment ($ million) Dec 09 Dec 08 Change Exploration & Production 104 174 (40%) For personal use only Generation 98 22 345% Retail 320 300 7% Contact Energy 184 190 (3%) Total 706 686 3% • Exploration & Production: Impact of the dilution of Origin’s interest in APLNG ($1
Slide 14: Underlying Financing Income/Costs
Underlying Financing Income/Costs ($ million) Dec 09 Dec 08 Interest Revenue 74 55 For personal use only Interest Expense (62) (115) Underlying Net Financing Income/(Costs) 12 (60) Financing Costs Capitalised 78 60 Weighted average interest rate on borrowings 5.9% 7.5% • Increase in interest revenue
Slide 15: Tax Reconciliation
Tax Reconciliation ($ million) Dec 09 Dec 08 Underlying Profit before Tax 501 425 For personal use only Prima facie tax on underlying profit 150 128 Recognition of tax benefits not previously brought to account (21) (14) Over provision in prior period (14) (1) Share of net profit of equity accounted
Slide 16: Operating Cash Flow
Operating Cash Flow ($ million) Dec 09 Dec 08 Underlying EBITDA 706 686 For personal use only Change in working capital (162) (73) Stay-in-business capex (85) (115) Share of APLNG OCAT net of EBITDA(4) 7 (4) Other 10 (12) Tax paid (51) (117) Group OCAT(1)(4) 425 365 Net interest paid (65) (147) Free
Slide 17: Segment Cash Flow Returns
Segment Cash Flow Returns Operating Cash Flow Productive Capital OCFR (%) For personal use only ($m) % Change ($m) % Change Dec 09 Dec 08 Exploration & Production 184 (40%) 1,410 2% 13.0 22.0 Generation 142 280% 1,087 270% 13.1 12.7 Retail 315 (15%) 2,517 5% 12.5 15.4 Contact Energy 270 (15%) 3,410
Slide 18: Capital Expenditure
Capital Expenditure Growth Capex For personal use only • 23% lower than the prior half year • Major expenditure included the Darling Downs and Mortlake Power Stations, Kupe Gas Project, Bass Basin exploration and power generation development by Contact • ConocoPhillips is funding $2.3 billion of APL
Slide 19: Balance sheet capacity deployed to grow the business
Origin has deployed $1.4 billion of balance sheet capacity over the period to grow and develop the business… For personal use only Balance Sheet Capacity as at 31 December 2009 $ billion Cash 2.8 Adjusted Gross Debt (3.5) Adjusted Net Debt(1) (0.7) Undrawn Committed Facilities 0.9 Available Funding
Slide 20: Forward committed growth capital program is declining
Origin’s forward committed growth capital program is declining For personal use only Source: Origin ConocoPhillips has funded $0.7 billion of APLNG’s capital spend to date with another $1.6 billion to be spent. Origin is not required to contribute any funding until this amount has been spent 19
Slide 21: Significant financial capacity and refinancing of maturing facilities
Origin has significant financial capacity to support its business… For personal use only • Strong expressions of interest have been received from a number of lending banks in regards to refinancing the majority of the 2010 and 2011 maturing debt • Origin expects to refinance this debt prior to the e
Slide 22: Fully franked interim dividend declared
A fully franked interim dividend of 25 cps, in line with the prior year, has been declared… For personal use only • Ex-dividend date 2 March 2010 • Date of record 9 March 2010 • Payment Date 1 April 2010 • Dividend payout ratio of 62% of Underlying EPS • Dividend Reinvestment Plan will apply to this
Slide 23: 3. Operational Review
3. Operational Review For personal use only
Slide 24: Exploration & Production
Exploration & Production For personal use only
Slide 25: Production in line with expectations; progress on new developments
Delivered production in line with expectations and continued progress on new developments including Kupe and Talinga… Exploration & Production Segment • Underlying EBITDA down 40% to $104 million, reflecting dilution of Origin’s interest in APLNG, higher exploration For personal use only expenses, l
Slide 26: Gas production continues to increase
Gas production continues to increase as CSG production grows to meet domestic contracts… For personal use only • APLNG’s CSG production continues to grow strongly and is up 24% on the Dec 08 half. APLNG’s production capacity now at more Coal Seam Gas than 240 TJ/day • Gas production commenced at the
Slide 27: Kupe and Otway to boost liquids production
Contribution from Kupe and increased share of Otway will boost liquids production going forward… For personal use only • Liquids production commenced at the Kupe Project during December with LPG and light crude produced as part of the commissioning Kupe Project process • Cooper Basin production was
Slide 28: APLNG continues to grow its reserves position
APLNG continues to grow its reserves position and remains the largest holder of CSG reserves in Australia • Current production capacity now exceeds 240 TJ/day (up to 87 PJ/year) For personal use only • Optimised LNG train design now at 4.5 MTPA with each train expected to require 270 PJ/year of gas
Slide 29: APLNG and QGC agreements evidence project collaboration
APLNG and QGC agreements evidence the value of project collaboration… Field Development Framework For personal use only • APLNG and QGC have agreed to work together to develop these jointly owned resources • Covers permits ATP 648P (APLNG interest 31.25%) and ATP 620P (APLNG interest 40.625%) • Prov
Slide 30: Origin will increase its interest in the Otway Gas Project
Origin will increase its interest in the Otway Gas Project… Otway Gas Project • Origin’s interest in the Otway Gas Project will increase to 67% For personal use only following completion of acquisition of part of Woodside’s interest for $507 million • Origin to be appointed as project operator, subj
Slide 31: Kupe Project now producing steadily
In New Zealand, the Kupe Project is now producing steadily… Kupe Project • Construction complete and commissioning of facilities underway For personal use only • Commissioning has progressed very well and the plant has achieved design throughput of gas sales • The second marine cargo of light crude
Slide 32: Offshore exploration program yielded results in Bass Basin
Offshore exploration program has yielded positive results in the Bass Basin… For personal use only Northland Basin Origin, as operator of permit PEP 38619, plans to drill the exploration wells Korimako 1 and Tarapunga 1. Drilling operations are expected to commence in Q2 2010. Otway Basin Woodside d
Slide 33: Working with Anadarko in the Canterbury Basin
Origin is working with Anadarko to explore in the highly prospective Canterbury Basin in New Zealand… • Origin has attracted Anadarko Petroleum Corporation to farm in for a 50% interest in For personal use only exploration permit PEP 38262 • Prior to agreement to farm in, Anadarko completed speciali
Slide 34: Exploration opportunities in Asia
Exploration opportunities in the fast growing energy markets of Asia are being pursued… • Origin to farm in to portfolio of five exploration blocks For personal use only operated by Salamander Energy across north east Thailand, Lao PDR and Vietnam • Salamander will also have the option to acquire an
Slide 35: Generation
For personal use only Generation
Slide 36: Delivering new projects has led to earnings growth
Delivering new projects has led to significant earnings growth… Generation Segment For personal use only • Underlying EBITDA increased from $22 million to $98 million, as operating capacity more than doubled compared to Dec 08 half • Operating capacity increased to 1,620 MW. Expected to increase to
Slide 37: Mt Stuart expanded and Cullerin Range Wind Farm operational
Peaking capacity at Mt Stuart has been increased… For personal use only Mt Stuart Power Station Expansion Cullerin Range Wind Farm • Located in Townsville, Queensland • Located near Goulburn, New South Wales • 126 MW expansion • 30 MW across 15 turbines • 45% increase in plant capacity to 414 MW • $
Slide 38: Commissioning of Darling Downs underway
Commissioning of Darling Downs is now underway… For personal use only Darling Downs PS Gas Turbine Hall Mortlake PS Darling Downs Power Station Mortlake Power Station • 630 MW Base Load plant • 550 MW Peaking plant • Largest CCGT plant in Australia • Expected to be completed in late 2010 • Commissio
Slide 39: Developing the power generation portfolio
Origin continues to develop its power generation portfolio both to support its Retail business and to respond to carbon policies For personal use only 2,896 MW increase • Operating capacity increased to 1,620 since Dec 08 MW following acquisition of Uranquinty, completion of Mt Stuart and Quarantine
Slide 40: Portfolio of wind generation development options
Origin has a portfolio of high quality wind generation development options that provide the flexibility to address long term requirements… • Origin has secured sufficient RECs to meet its mass market customer requirements for For personal use only the medium term • Development of a number of Origin’
Slide 41: Pursuing development of geothermal power
Origin continues to pursue the development of geothermal power which could provide a long term base load solution to meeting renewable targets For personal use only • Origin considers the Innamincka Joint Venture to have the most prospective acreage of its kind in Australia • Origin holds a 30% non-
Slide 42: Joint venture with Micron on photovoltaic development
Joint venture with Micron seeks to build on Origin’s photovoltaic development opportunities… • Transform Solar is a 50:50 joint venture between For personal use only Origin and Micron Technology Inc to focus on the development of photovoltaic technologies • Micron is a US listed company and one of t
Slide 43: Retail
For personal use only Retail
Slide 44: Strong increase in Retail Underlying EBITDA
Strong increase in Underlying EBITDA driven by increased margins in gas and LPG, partially offset by increased wholesale electricity and network costs Retail Segment For personal use only • Underlying EBITDA increased 7% to $320 million primarily due to improved gross profit for natural gas and LPG,
Slide 45: Improved gross profit in gas and LPG
Increased volumes together with lower purchase costs led to improved Gross Profit in gas and LPG… For personal use only Performance Metrics and % change Natural Gas Electricity LPG from Dec 08 Commodity Revenue ($m) 590 +9% 2,102 +7% 321 -9% Gross Profit ($m) 116 +30% 329 -13% 83 +14% Underlying EBI
Slide 46: Margin pressure partly offset by lower cost to serve
Margin pressure due to increased wholesale and network costs has been partly offset by a decrease in cost to serve… Gas & Electricity Customers Dec 09 Dec 08 Change For personal use only Customer numbers (’000) 2,606 2,613 - Underlying EBITDA / Sales 10.4% 11.6% (1.2)% Underlying EBIT / Sales 9.7% 1
Slide 47: Customer numbers maintained despite increased competition
Customer numbers maintained, despite increased competition in most states Market Churn: 6 Month Average Account Numbers State Fuel Dec 08 Change Dec 09 (000’s) Natural Gas Electricity Total For personal use only Vic Electricity 26% + 2% 28% Jun 2009 867 1,743 2,610 Vic Gas 24% + 6% 30% Change +1 -5
Slide 48: Leading retailer of green energy
Origin is the leading retailer of green energy with over 15% of its electricity and gas customers electing to purchase green energy products For personal use only Market Share of GreenPower® Customers • Accredited green energy customer base grew to 516,000 Market Share of GreenPower Customers accoun
Slide 49: Retail transformation progressing well
Retail transformation is progressing well with key milestones met to date For personal use only • Origin is transforming its Retail business to improve business process efficiency, optimise cost to serve and further enhance customer service • Origin’s transformation includes the implementation of ne
Slide 50: LPG Underlying EBITDA increase
In LPG, lower wholesale costs and growth in sales volumes have provided a significant increase in Underlying EBITDA For personal use only • Underlying EBITDA was $36 million, up $27 million on the prior half due primarily to a reduction in US dollar denominated costs • Sales volume of 262 ktonnes, u
Slide 51: Contact Energy
For personal use only Contact Energy
Slide 52: Contact Underlying EBITDA in line in local currency
Underlying EBITDA was in line with the prior half in local New Zealand currency… Contact Segment For personal use only • Underlying EBITDA decreased by 3%. Operational performance in line with prior half in local currency. EBITDA lower on consolidation due to stronger Australian dollar • Non-recurre
Slide 53: Contact pursuing opportunities to expand generation
Contact continues to pursue the development of a number of opportunities to expand its generation interests… For personal use only Geothermal • Tauhara 1 (23 MW) – Expected to be operational in mid 2010 • Te Mihi (220 MW) – FEED being updated • Tauhara 2 (250 MW) – Consent application lodged • Tahek
Slide 54: 4. Outlook
For personal use only 4. Outlook
Slide 55: Full year result expected around 15% higher
Previous guidance given was that the full year profit would be around 15% higher than the prior year. Excluded from that guidance was any expense arising from this year’s greenfield exploration program • In respect of this exploration program, Bass Basin wells found oil and gas and the For personal
Slide 56: 5. The Next Decade
For personal use only 5. The Next Decade
Slide 57: Fuel integrated generator retailer strategy
Origin will continue to pursue a clear and simple strategy of being a fuel integrated generator retailer For personal use only Electrification Continued economic growth, efficiency improvements and industrialisation in Asia are likely to increase electricity’s share of final energy consumption Decar
Slide 58: Retail market share growth over the last decade
In Australia, Origin’s retail business has grown its market share substantially over the last decade and this growth has been a key driver of Origin’s growth Pre Demerger Retail Market Share(1) For personal use only Origin: 4% Retail Market Share 2010(1) Origin: 21% Source: AEMO’s 2009 SOO Medium Ec
Slide 59: Renewable energy target to drive investment
Whilst it remains unclear how the world will respond to climate change, in Australia the renewable energy target has been set and will drive significant investment in renewable energy… For personal use only • Origin’s modelling suggests over 6,000 MW Represents mandated 2020 of new wind capacity to
Slide 60: Pipeline of generation opportunities
Origin has developed a substantial pipeline of generation opportunities to support a growing retail business • Baseload and peaking portfolio with a For personal use only lower average emissions intensity than the market • Gas fired generation development options, provide Origin with opportunities m
Slide 61: World energy demand projected to increase
World demand for energy is projected to increase by 1.4% a year on average, with electricity demand projected to grow more quickly at 2.5% a year… For personal use only • World demand for gas is projected to grow by around 1.5% a year (BAU) • Asian electricity consumption is projected to grow at 4.7
Slide 62: World LNG trade projected to triple by 2030
This increasing demand for gas is projected to result in world LNG trade tripling by 2030 as LNG is favoured over pipeline solutions due to supply security concerns Estimated Interregional Gas Flows 2030 For personal use only (billion cubic metres) Gas will play an increasing role in providing the f
Slide 63: Developing resources near growing gas demand markets
In this context, Origin seeks to find and develop resources near markets with increasing demand for gas For personal use only LNG is opening a significant channel to export markets 62 for gas which Origin will access through APLNG
Slide 64: Responding to demand for renewable energy
Origin is a also responding to the increasing demand for renewable energy both locally and globally… Geothermal For personal use only • Conventional – Contact is pursuing the development of a number of geothermal opportunities • Shallows – Origin is seeking to develop shallow geothermal resources •
Slide 65: Strong joint venture partners
Strong joint venture partners reflect the quality and potential of these new opportunities and complement Origin’s development capability For personal use only Australia Pacific LNG – CSG to LNG joint venture with ConocoPhillips Transform Solar – Joint venture with Micron to focus on the development
Slide 66: Opportunities to grow over the next decade
Looking further ahead Origin has many opportunities to continue to grow and develop its business over the next decade For personal use only • Increased share of growing energy markets in Australia and New Zealand • Continued development by APLNG of its CSG to LNG project which is a primary focus for
Slide 67: 2010 Half Year Results: A Decade of Growth
Half Year Ended 31 December 2009 25 February 2010 For personal use only Celebrating a decade of growth 2010 Half Year Results A Decade of Growth
Slide 68: Further Information
Further Information For personal use only Investors Angus Guthrie Group Manager, Investor Relations Email: angus.guthrie@originenergy.com.au Office: +61 2 8345 5558 Mobile: + 61 4 1786 4255 Website www.originenergy.com.au 67
Slide 69: 6. Appendix
For personal use only 6. Appendix
Slide 70: Profit & Loss – Reconciliation of Statutory and Underlying
Profit & Loss – Reconciliation of Statutory and Underlying ($ million) Dec 09 Dec 08 Change Statutory NPAT 371 6,663 (94%) For personal use only Significant items Pre Tax Post Tax Gain on dilution of Origin’s interest in subsidiaries 42 27 6,690 Unwinding of discounted receivables/payables in (1) 27
Slide 71: Asset Impairments
Asset Impairments Asset Impairments ($ million) Pre-tax Post-tax For personal use only Hovea Assets 5 3 Jingemia Assets 3 2 Brompton Site 4 3 Impairment of Assets 12 8 70
Slide 72: Changes in fair value of financial instruments
Changes in fair value of financial instruments Reconciliation of Balance Sheet and Income Statement items associated with financial instruments movements For personal use only ($ million) Dec 09 Change in net assets 20 Recognised in the Balance Sheet 42 Recognised in the Equity Hedge Reserve (post t
Slide 73: Profit & Loss - APLNG
Profit & Loss - APLNG Summary of APLNG’s performance Total Origin’s 50% For personal use only ($ million) Dec09 Dec 09 Dec08 Operating Revenue 121 Operating Expenses (74) Underlying EBITDA 47 24 6 Depreciation & Amortisation Expense (22) Income Tax Expense (12) Underlying Profit After Tax 13 6 2 Unw
Slide 74: Capital Expenditure by Segment
Capital Expenditure by Segment ($ million) Dec 09 Dec 08 Stay-in-business 85 115 For personal use only Growth Exploration & Production 119 286 Generation 477 555 Retail 45 59 Contact Energy 155 129 Total Capital Expenditure 881 1,144 Acquisitions (net of cash) 669 131 Capex including Acquisitions 1,
Slide 75: Depreciation & Amortisation
Depreciation & Amortisation ($ million) Dec 09 Dec 08 For personal use only Exploration & Production 71 89 Generation 20 5 Retail 34 29 Contact Energy 69 66 Total 194 189 • Exploration & Production: Decrease due to impact of APLNG transaction, prior year impairments and lower production • Generation