Slide 1: Presentation to analysts and financial markets (ASX cover fax)
For personal use only To Company Announcements Office Facsimile 1300 135 638 Company ASX Limited Date 22 August 2013 From Helen Hardy Pages 58 Subject PRESENTATION TO ANALYSTS AND FINANCIAL MARKETS Please find attached a release on the above subject. Regards Helen Hardy Company Secretary 02 8345 502
Slide 2: 2013 Full Year Results Announcement
For personal use only 2013 Full Year Results Announcement Financial Year Ended 30 June 2013 Grant King, Managing Director Karen Moses, Executive Director, Finance and Strategy 22 August 2013
Slide 3: Important Notice
Important Notice For personal use only Forward looking statements This report 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 o
Slide 4: Outline
Outline For personal use only 1. Performance Highlights Grant King 2. Financial Review Karen Moses 3. Operational Review Grant King 4. Prospects Grant King 5. Glossary 3|
Slide 5: 1. Performance Highlights
For personal use only 1. Performance Highlights Grant King, Managing Director 4|
Slide 6: Results
Results For personal use only Statutory Profit* $378 m down 61% Statutory EPS* 34.6 cps down 62% Net items excluded from Underlying Profit1 ($382) m down from $87m Underlying Profit* $760 m down 15% Underlying EPS* 69.5 cps down 16% Underlying EBITDA* $2,181 m down 3% Final Dividend Unfranked 25.0 c
Slide 7: Origin is focusing on four key priorities
Origin is focusing on four key priorities Improving the Performance of the Existing Businesses For personal use only Removal of controls on retail pricing reduces risk and improves earnings potential Stabilising competitive environment reduces churn and improves longer term outlook for margin
Slide 8: In FY2013 price controls reduced earnings and increased risk
In FY2013 price controls reduced earnings and increased risk Retail price controls must be removed: Regulation of wholesale cost of energy discourages competition around ownership of generation For personal use only • and energy procurement, and encourages shadow bidding of regulators • As prices ar
Slide 9: Changing competitive environment sees reduced churn and improved margin outlook
Changing competitive environment sees reduced churn and improved margin outlook … Increased competition following the NSW acquisition For personal use only • at a time when Origin’s marketing capacity was constrained resulted in reduced average electricity 20 customers of 160,000 and $80 million imp
Slide 10: Implementation of retail systems and completion of NSW customer migration
Implementation of retail systems and completion of NSW customer migration improves operating effectiveness Following the NSW acquisition in Q3 FY2011 Origin had approximately 2.6m customers being serviced on For personal use only • Origin’s legacy systems and 1.6m NSW customers serviced on governmen
Slide 11: Completion of investments in Upstream assets improves reliability
Completion of investments in Upstream assets improves reliability and increases production capacity … For personal use only 140 200 Additional 120 volumes that can be sold into 100 150 the gas market Maximum Production Max Production Potential Potential 80 if none used in TJe/d FY2013 Production ex
Slide 12: Completion of Contact's investment in generation and HVDC interconnector
Completion of Contact’s investment in lower cost and flexible generation and commissioning of HVDC interconnector reduces exposure to hydrology and improves reliability of earnings For personal use only • Contact expects to benefit from resolution of two issues that have previously impacted earnings
Slide 13: Reduction in employee numbers, plant closures and asset sales
Reduction in employee numbers, plant closures and asset sales achieved as part of restructuring program will improve cash flow and reduce the cost base For personal use only OPERATIONAL EFFECTIVENESS ASSET CONSOLIDATION A review of investment activities and assets 600 has resulted in: 500 • Disconti
Slide 14: APLNG on track to deliver first LNG by mid-2015
APLNG is on track to deliver first LNG by mid-2015, creating a step change in Origin’s earnings and cash flows For personal use only Milestones Timing (FY) Origin and ConocoPhillips form APLNG incorporated JV Q2 2009 Environmental approvals Q3 2011 Sinopec – 4.3 mtpa foundation customer Q4 201
Slide 15: $5.3 billion of committed undrawn debt facilities and cash
$5.3 billion1 of committed undrawn debt facilities and cash, along with free cash flow from the business, provide sufficient liquidity to fund Origin’s investment in APLNG For personal use only 3,500 6,000 Loans & Bank Guarantees - Undrawn 3,000 Loans & Bank Guarantees - Drawn 5,000 USPP, Retail Not
Slide 16: Progressing existing development opportunities for medium term growth
Progressing existing development opportunities to provide medium term growth following completion of APLNG … For personal use only Existing development opportunities Origin continues to prepare existing gas and renewable energy development opportunities for FID to be taken in the medium term: • Gas
Slide 17: Lagged effect of FY2013 discounts will delay earnings recovery in FY2014
Whilst there are many improving trends in Energy Markets, the lagged effect of FY2013 discounts will delay earnings recovery in FY2014 … For personal use only Improving Industry APLNG and GLNG operational Full production begins LNG start up performance of from APLNG production Deregulation in QLD ex
Slide 18: 2. Financial Review
For personal use only 2. Financial Review Karen Moses, Executive Director, Finance and Strategy
Slide 19: 2013 Financial Highlights
2013 Financial Highlights For personal use only ($ million) June 13 June 12 Change Statutory Profit 378 980 (61%) Statutory EPS 34.6 cps 90.6 cps (62%) Revenue 14,619 12,935 13% Underlying EBITDA* 2,181 2,257 (3%) Underlying EBIT* 1,438 1,598 (10%) Underlying Profit 760 893 (15%) Underlying EPS 69.5
Slide 20: Underlying EBITDA down 3% to $2,181 million
Underlying EBITDA down 3% to $2,181 million Underlying EBIT down 10% to $1,438 million Underlying EBITDA Underlying EBIT For personal use only ($ million) Jun 13 Jun 12 change Jun 13 Jun 12 change Energy Markets 1,333 1,562 (15%) 1,038 1,317 (21%) Exploration & Production 395 3221 23% 162 105 54% LN
Slide 21: Reconciliation of Statutory Profit to Underlying Profit
Reconciliation of Statutory Profit to Underlying Profit For personal use only ($ million) Jun 13 Jun 12 Change Statutory Profit 378 980 (602) Unfavourable foreign exchange movement Items Excluded from Underlying Profit (-$187m), higher APLNG related items 96 452 (356) financing costs not able to be
Slide 22: Statutory Profit down 61%, from $980 million to $378 million
Statutory Profit down 61%, from $980 million to $378 million 1,200 For personal use only 1,000 193 980 (87) 893 800 (76) (11) $ million (84) 760 (382) (38) 76 600 400 378 200 - FY2012 Net Items FY2012 Underlying Underlying Underlying Underlying Underlying FY2013 Net items FY2013 Statutory excluded U
Slide 23: Group OCAT reduced due to lower Underlying EBITDA
Group OCAT reduced due to lower Underlying EBITDA, higher working capital, SIB capex and tax paid For personal use only ($ million) Jun 13 Jun 12 Change Underlying EBITDA 2,181 2,257 (76) Increased Energy Markets and E&P Change in working capital (298) (120) (178) receivables Stay-in-business capex
Slide 24: Segment Cash Flow Returns
Segment Cash Flow Returns For personal use only Operating Cash Flow*1 Productive Capital1 OCFR*1 (%) Jun 13 Jun 12 % Jun 13 Jun 12 % Jun 13 Jun 12 ($m) ($m) Change ($m) ($m) Change ($m) ($m) Energy Markets 812 1,141 (29%) 9,845 8,651 14% 8.2% 13.2% Exploration & 233 371 (37%) 2,063 1,796 15% 11.3% 2
Slide 25: New $7.4 billion bank loan facility to refinance existing bank debt
Origin has entered into a new $7.4 billion bank loan facility to refinance all existing bank debt on new terms and pricing • Strong debt market support For personal use only • Origin has also replaced its standard banking terms, which date back to 2004, with terms that reflect the current scope, siz
Slide 26: Unfranked final dividend of 25 cps, 72% payout ratio
An unfranked final dividend of 25 cps has been determined, representing a payout ratio of 72% of Underlying EPS 60 For personal use only Dec Half Jun Half • Ex-dividend date: 27 August 2013 50 • Record Date: 2 September 2013 • Payment Date: 27 September 2013 40 cents per share 25 25 25 25 • The Divi
Slide 27: 3. Operational Review
For personal use only 3. Operational Review Grant King, Managing Director
Slide 28: Energy Markets
Energy Markets ($m) Underlying EBITDA For personal use only 2,000 1,500 1,562 1,333 1,000 Higher Gross Profit in Natural Gas (+$35m), Non- 500 commodity and LPG (+$23m) Electricity Gross Profit down $277m 0 Jun 12 Jun 13 Underlying EBIT margin* reduced from 13.6% to 9.6% Customer numbers stabili
Slide 29: Decrease in Energy Markets EBITDA due to decline in Electricity Gross Profit
The decrease in Energy Markets Underlying EBITDA was due to a decline in Electricity Gross Profit … For personal use only • Lower electricity volumes due to Underlying EBITDA Bridge lower usage per mass market 1,800 customer (-$27m) 1,600 (27) (110)1 • Unfavourable tariff determination in (100) 1,40
Slide 30: Improvement in billing performance contributed to operating cash flow
Improvement in billing performance contributed significantly to increased operating cash flow in the second half For personal use only 600 200 No.of Unbilled Customers ('000) 500 512 150 400 $ million 100 300 300 50 200 100 0 Oct-12 Sep-12 May-13 Mar-13 Feb-13 Jul-12 Aug-12 Apr-13 Dec-12 Jan-13 Nov-
Slide 31: Regulatory constraints and competitive pressures restricted cost recovery
Regulatory constraints and competitive pressures restricted the ability to recover higher wholesale energy costs … For personal use only Electricity Performance ($/MWh) Jun 13 Jun 12 Change Revenue Revenue uplift reflects: Combined Revenue 201 177 24 • recovery of carbon C&I 137 116 22 • recovery of
Slide 32: Electricity Mass Market customer and volume losses
Electricity Mass Market customer and volume losses predominantly as a result of increased competition during systems implementation have been largely offset by successful tendering of C&I customers For personal use only TWh H1 H2 H1 H2 25.0 42.7 TWh 42.3 TWh FY2012 FY2012 FY2013 FY2013 0 Electricity
Slide 33: QCA tariff determination reduced allowance for wholesale electricity cost
QCA tariff determination reduced the allowance for the wholesale cost of electricity … For personal use only 100 100 Higher average pool prices Flooding at Yallourn (July 2012), QLD trading events (Jan 2013) and planned capacity withdrawals Average NEM Pool Price ($/MWh) Average NEM Pool Price ($/MW
Slide 34: Internal generation covered 37% of Origin's load
In FY2013 internal generation covered 37% of Origin’s load, including 40% of peak demand, and forms a key part in managing energy procurement costs For personal use only Eraring Energy • On 1 August 2013 Origin acquired the assets of Eraring Energy • provides scale and generation flexibility benefit
Slide 35: Natural Gas Gross Profit up 15%
Natural Gas Gross Profit up 15%, or $35 million, due to increased Gross Profit per customer … For personal use only Gas Performance ($/GJ) Jun 13 Jun 12 Change Revenue Combined Revenue 10.9 9.3 1.6 C&I 6.2 5.5 0.7 Tariff increases include Mass Market 21.1 18.0 3.1 recovery of network, wholesale ener
Slide 36: Scale and diversity of gas position enables benefit from rising gas prices
Scale and diversity of Origin’s gas position enables Origin to benefit from rising gas prices … For personal use only PJ/a • Energy Markets’ gas portfolio 200 includes Origin’s equity gas and Ironbark Other purchases APLNG purchases Origin equity gas contracted gas, some of which is set at legacy pr
Slide 37: Operational improvements offset by higher acquisition and retention costs
Underlying operational improvements offset by higher acquisition and retention costs to improve the net customer position For personal use only Cost to serve Jun 13 Jun 12 Change Higher Underlying bad & Natural Gas, Electricity & Non-commodity cost doubtful debt expense (697) (649) (48) to serve (ex
Slide 38: Increased acquisition and retention activity reduced Origin churn
Increased acquisition and retention activity contributed to reduced Origin churn relative to market For personal use only 900 Customer wins and retains ('000) 30% 39% increase in 800 wins & retains 25% % Churn: Monthly Data Annualised 700 20% 600 384 457 500 15% 347 400 287 300 10% 200 263 282 325 3
Slide 39: Origin lost customers in VIC but gained in other states
Origin lost customers in VIC where competition and churn intensified, but gained customers in the other states, with overall customer numbers stabilising For personal use only 100 4,500 Net loss of 16,000 4,000 50 354 363 +9,000 Electricity Customer Accounts ('000) 3,500 Customer Accounts ('000) 0 9
Slide 40: All customers serviced on new SAP system by October 2013
All customers will be serviced on the new SAP system by October 2013, one year ahead of schedule, driving scale benefits and improving competitive capability For personal use only The new SAP system has provided new capabilities in channel management and products and services to customers including
Slide 41: Exploration & Production
Exploration & Production ($m) Underlying EBITDA For personal use only 500 400 395 300 322 Higher commodity prices 200 Lower operating costs including exploration expense 100 Lower production and sales volumes 0 Jun 12 Jun 13 Activities at key producing assets completed Higher production at Otway
Slide 42: Production was marginally down on the prior year
Production was marginally down on the prior year … For personal use only PJe mmboe 100 17.2 Otway • Successful completion of a 23-day major planned maintenance shutdown 80 13.7 • Production from Geographe 2 commenced in July 2013, offsetting the natural decline in the Thylacine reservoir 60 10.3 Bas
Slide 43: International exploration commitments coming to a close
Current international exploration commitments coming to a close with the drilling of the Canterbury well in New Zealand in FY2014 … For personal use only DEVELOPMENT – Otway and Bass basins & Ironbark • Drilling of Yolla 5 and 6 wells in Bass Basin in FY2014 subject to rig availability, with timing
Slide 44: LNG
LNG ($m) Underlying EBITDA For personal use only 70 60 60 1 50 54 40 Increased production and sales volumes (100% APLNG) 30 Higher gas prices 20 Dilution of Origin’s interest from 42.5% to 37.5% 10 Higher operating costs reflecting higher gas purchases 0 Jun 12 Jun 13 Substantial progress made on
Slide 45: Upstream Project progress - 45% complete and on track
Upstream Project progress - 45% complete and on track For personal use only Upstream Operated Goals Actual Progress 320 operated well drilled Accomplished: 343 wells drilled 100 diameter-kilometres1 of gathering Accomplished: 161 diameter-kilometres of gathering pipe installed installed (equivalent
Slide 46: Downstream Project progress - 45% complete and on track
Downstream Project progress - 45% complete and on track For personal use only Downstream Operated Goals Actual Progress First compressor delivered to site Accomplished: February 2013 First LNG modules delivered to site Accomplished: March 2013 Set first refrigeration compressor Accomplished: May 201
Slide 47: APLNG on track for first LNG from Train 1 in mid-2015
APLNG is on track to achieve first LNG from Train 1 in mid-2015 and from Train 2 in late 2015 For personal use only Key near term project goals and milestones FY2014 FY2014 Upstream Operated Downstream Plan Plan First gas and water production from Q1 Final Train 1 refrigeration compressor set Q1 Con
Slide 48: APLNG capital expenditure for the year was $7.8 billion
APLNG capital expenditure for the year was $7.8 billion, with Origin’s cash contribution $561 million For personal use only Cumulative Estimate from FID1 to Year to 30 (A$m) from FID1 to 1st sales from Train 2 June 2013 June 2013 (A$b) Project Capex 7,8431 12,497 24.75 Non-Project Capex: Annual spen
Slide 49: Contact Energy
Contact Energy ($m) Underlying EBITDA For personal use only 500 400 435 180 400 300 200 Favourable fuel mix 100 Lower operating costs 0 Jun 12 Jun 13 Lower cost of generation with hydro displacing more expensive thermal generation and lower carbon and gas costs Divestment of non-core gas meterin
Slide 50: Recent investments in Contact's generation portfolio
Recent investments in Contact’s generation portfolio have delivered improved portfolio flexibility and lower generation costs For personal use only Benefits of favourable fuel mix realised during the period • Higher rainfall resulted in increased hydro generation • Stratford Peaker and Ahuroa gas st
Slide 51: 4. Prospects
For personal use only 4. Prospects Grant King, Managing Director
Slide 52: Lagged effect of FY2013 discounts will delay earnings recovery in FY2014
Whilst there are many improving trends in Energy Markets, the lagged effect of FY2013 discounts will delay earnings recovery in FY2014 … For personal use only Improving Industry APLNG and GLNG operational Full production begins LNG start up performance of from APLNG production Deregulation in QLD ex
Slide 53: 5. Glossary
For personal use only 5. Glossary
Slide 54: Important Notice
Important Notice Financial information All figures in this report relate to businesses of the Origin Energy Group (Origin, or the Company), being Origin Energy Limited For personal use only and its controlled entities, for the year ended 30 June 2013 compared with the year ended 30 June 2012 (the pr
Slide 55: Statutory Financial Measures
Statutory Financial Measures For personal use only Term Meaning Total current and non-current interest bearing liabilities only less cash and cash Net Debt equivalents. Economic interest in a controlled entity of the consolidated entity that is not held by the Non-controlling interest Parent entity
Slide 56: Non-IFRS Financial Measures
Non-IFRS Financial Measures Non-IFRS Financial measures are financial measures that are presented other than in accordance with all relevant Accounting Standards. Non-IFRS Financial measures are used internally by management to assess the performance of Origin’s business, and to make decisions on al
Slide 57: Non-Financial Terms
Non-Financial Terms For personal use only Term Meaning Proved Reserves are those reserves which analysis of geological and engineering data can be estimated with reasonable 1P reserves certainty to be commercially recoverable. There should be at least a 90% probability that the quantities actually r
Slide 58: Thank you
For personal use only Thank you 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 www.originenergy.com.au 57 |