Origin Energy Limited · ASX:ORG
Origin Energy — Investor Day (November 2020)
74 slides from Origin Energy's investor day presentation, Nov 26, 2020
Slide 1: ASX announcement cover fax: 2020 Investor Briefing
To Company Announcements Office Facsimile 1300 135 638 For personal use only Company ASX Limited Date 26 November 2020 From Helen Hardy Pages 74 Subject 2020 Investor Briefing Please find attached a release on the above subject. Regards Authorised by: Helen Hardy Company Secretary 02 8345 5000 Origi
Slide 2: Origin Energy 2020 Investor Briefing
For personal use only Origin Energy 2020 Investor Briefing 26 November 2020
Slide 3: Acknowledgement of Country
For personal use only Acknowledgement of Country We acknowledge the Gadigal People of the Eora Nation as the traditional custodians of the land on which we gather today, and pay our respects to their Elders - past, present and emerging
Slide 4: Outline
Outline For personal use only 1. Overview - Frank Calabria 2. Integrated Gas - Mark Schubert Break 3. Energy Markets - Supply - Greg Jarvis 4. Energy Markets - Retail - Jon Briskin, Anthony Lucas 5. Capital Management - Lawrie Tremaine Wrap-up / Q&A 3 26 November 2020 2020 Investor Briefing
Slide 5: Overview
For personal use only Overview Frank Calabria, CEO 4 26 November 2020 2020 Investor Briefing
Slide 6: 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 ✓ Most advanced digital customer strategy ✓ Leading energy wholesale & trading capability ✓
Slide 7: Social purpose is more than just a license to operate
Social purpose is more than just a license to operate Getting energy right For personal use only Our Customers Our Communities Our People Our Planet ✓ Bushfire, drought and ✓ Awarded Best ✓ Top quartile staff ✓ Short term emissions COVID-19 relief Workplace to Give Back engagement in FY2020 target l
Slide 8: 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 For personal use only pre-industrial levels and pursue efforts to further limit this increase to 1.5°C Origin’s commitments and targets1 Origin’s actions ✓ Origi
Slide 9: Global energy trends represent growth opportunities
Global energy trends represent growth opportunities Renewable fuels and storage Convergence of data and energy For personal use only ✓ Renewables growth as coal retires ✓ Virtual Power Plants unlocking ✓ Gas and storage to play a key customer value and bolstering ‘firming’ role wholesale capability
Slide 10: Our strategy to deliver value and grow
Our strategy to deliver value and grow 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 9 26 November 2020 2020 Investor Briefing
Slide 11: Integrated Gas
Integrated Gas For personal use only Maximise value of the Pursue growth in customer value 1 2 existing businesses and low carbon solutions Strong operating and reservoir performance at APLNG Accelerate towards clean energy • Upgraded FY2021 production guidance by 25 PJ and • Leading proponent in co
Slide 12: Energy Markets
Energy Markets For personal use only Maximise value of the Pursue growth in customer value 1 2 existing businesses and low carbon solutions Strong foundations in a changing landscape Lead the convergence of energy and data • Low cost retailer today, targeting further cost reduction • Grow in custome
Slide 13: Financial performance and outlook
Financial performance and outlook FY2021 outlook For personal use only Recap on FY2020 results Underlying Profit of $1,023m (58.1 cps) Reconfirming Energy Markets guidance for Stable vs FY2019 with lower Corporate and LNG hedging costs FY2021 partly offset by lower electricity margin Underlying EBIT
Slide 14: Integrated Gas
For personal use only Integrated Gas Mark Schubert, EGM Integrated Gas 13 26 November 2020 2020 Investor Briefing
Slide 15: Asia Pacific gas demand forecast to grow under low carbon environment
Asia Pacific gas demand forecast to grow under low carbon environment For personal use only Asia Pacific Gas Demand (bcm) 2019 to 2040 1,700 CAGR 4.4% 1,500 • Natural gas will play a vital role in energy transition in the Asia Pacific: 1,300 3.6% – Critical to provide firming to intermittent renewab
Slide 16: APLNG continues to perform, building on strong foundations
APLNG continues to perform, building on strong foundations Quality resource Low-cost operator Record production For personal use only APLNG reserves and cumulative Capex + opex3 ($m) Production (PJ) production1 (PJ) 2,800 720 18,000 700 15,000 2,600 12,000 680 9,000 2,400 660 6,000 2,200 640 3,000 6
Slide 17: Targeting further value accretion at APLNG through five levers
Targeting further value accretion at APLNG through five levers Five value levers Creating value Creating alignment For personal use only Gas Processing Facility Workover rig Well site 1. Reduce well costs • Reduced current $/well run rate from • Focused the organisation around FY2019: delivering act
Slide 18: APLNG responding to recent market demand outlook for FY2021
APLNG responding to recent market demand outlook for FY2021 For personal use only • Ability to ramp up to meet market demand with record APLNG average production TJ/day (100%) operated asset production of 1,614 TJ/day achieved in November 2020 2,100 Production flexibility – strong well recovery post
Slide 19: APLNG CSG resource base continues to improve
APLNG CSG resource base continues to improve Field production: Talinga and Orana For personal use only • Talinga / Orana fields: – improved reservoir performance in developed areas – prioritised highest value areas TJ/d (6 month rolling average) – optimised online wells • Reedy Creek / Combabula fie
Slide 20: Strong APLNG field performance enables less capex to sustain production
Strong APLNG field performance enables less capex to sustain production For personal use only Wells drilled and production • Strong operated field performance coupled with 800 350 reserve increases enables: - a reduction in drilling rigs from three shallow rigs 700 300 in FY2020 to one 600 - deferra
Slide 21: Updating FY2021 guidance & re-setting medium term outlook
Updating FY2021 guidance & re-setting medium term outlook FY21 previous FY21 updated For personal use only APLNG (100%) FY19 FY20 guidance guidance Production (PJ) 679 708 650-680 675-705 Capex + opex, excl. purchases1 (A$b) 2.7 2.5 2.0-2.2 2.1-2.3 Unit capex + opex, excl. purchases1 (A$/GJ) 4.0 3.5
Slide 22: APLNG actively reducing operational emissions
APLNG actively reducing operational emissions Successful Scope 1 emissions reduction activities Further opportunity to reduce emissions For personal use only APLNG Scope 1 operational emissions (kt CO2e) 1,100 950 800 650 500 Knock out drum 1 FY17 FY18 FY19 FY20 • 29% reduction in Scope 1 operationa
Slide 23: Beetaloo – adding value through E&A, focused on liquids-rich gas plays
Beetaloo – adding value through E&A, focused on liquids-rich gas plays Kyalla 117 well successfully drilled and fracture stimulated For personal use only • – mud logs indicate liquids-rich1 gas – 11-stage fracture stimulation executed to plan - extensive fracture network – core analysis ongoing - go
Slide 24: Beetaloo – engaging with host Traditional Owners
Beetaloo – engaging with host Traditional Owners For personal use only • We recognise and respect the connection of all Aboriginal and Torres Strait Islander peoples have to their country • Our relationship and engagement with our Native Title holders and host Traditional Owners (those who speak for
Slide 25: Australian green hydrogen demand to be customer led
Australian green hydrogen demand to be customer led National Hydrogen Strategy - hydrogen demand (mtpa) Green gaseous hydrogen production cost (US$/Kg) For personal use only 40.0 6.0 Energy of the Future (export + domestic) 5.0 30.0 -60% 4.0 20.0 3.0 Targeted Deployment (export + domestic) 2.0 Green
Slide 26: Participating in hydrogen is a natural extension of Origin's core capabilities
Participating in hydrogen is a natural extension of Origin’s core capabilities Green hydrogen and ammonia value chain For personal use only Origin adds value through access to low cost renewable power and wholesale electricity trading expertise, including demand response and grid services Electrolys
Slide 27: Green hydrogen and ammonia partnerships and projects underway
Green hydrogen and ammonia partnerships and projects underway Green hydrogen Green liquid hydrogen export Green ammonia for export For personal use only – domestic demonstration NH3 and H2 for domestic H2 injection into green manufacturing domestic gas network Renewable energy with grid H2 mobility
Slide 28: Integrated Gas value opportunities
Integrated Gas value opportunities APLNG Asset • Improved gas recovery and field performance For personal use only • Upgraded FY2021 production guidance • Targeting 10% - 20% reduction in capex + opex unit costs over FY2022-24 from previous outlook • Pursuing further value creation through APLNG lev
Slide 29: Break
For personal use only Break 28 26 November 2020 2020 Investor Briefing
Slide 30: Energy Markets – Supply
For personal use only Energy Markets – Supply Greg Jarvis, EGM Energy Supply and Operations 29 26 November 2020 2020 Investor Briefing
Slide 31: Strong assets, capabilities and market position
Strong assets, capabilities and market position For personal use only Flexible generation assets Competitive gas supply Leading trading capability Owned/contracted dispatchable External gas sales (PJ) generation (MW) Strategic NPS 282 214 222 204 664 188 SWQP 167 Moomba Wallumbilla 2,880 423 Custome
Slide 32: Market is going through transition
Market is going through transition Strong investment in renewables… … but not matched by investment in … and the ageing coal fleet For personal use only dispatchable capacity is approaching retirement Recently commissioned and committed NEM generation capacity by type Forecast NEM coal capacity (GW)
Slide 33: Preferred portfolio for the transition: short energy, balanced capacity
Preferred portfolio for the transition: short energy, balanced capacity TWh GW Short energy Covered for peak demand For personal use only 40 10 35 Long-Term Losses Short Contracts position 8 30 ~11 TWh variable Short-term cost supply Business Short-Term 25 Business contracts Contracts recontract 6 o
Slide 34: Evolving Eraring to better position it for increasing renewables
Evolving Eraring to better position it for increasing renewables Operational strategies and their timing will be dependent on changes in market conditions For personal use only TODAY NEAR TERM MEDIUM TERM Increased intra-day ramping of Greater intra-day ramping with Units phased out of operation 4 u
Slide 35: Peaking portfolio is well placed but with enhancement opportunities
Peaking portfolio is well placed but with enhancement opportunities Origin firming portfolio today Future opportunities For personal use only Thermal peaking generation Pumped hydro Batteries • 3,149 MW of thermal peaking • 240 MW of pumped hydro long • Provide very fast start short assets providing
Slide 36: Progressing development opportunities to enhance our portfolio
Progressing development opportunities to enhance our portfolio For personal use only Existing generation Contracted renewable PPAs Darling Downs (644 MW CCGT) Development opportunities Expansion potential • Government taking an (battery and fast start gas) active role in underwriting Morgan and dire
Slide 37: Competitive gas supply
Competitive gas supply Energy Markets contracted gas (PJ) For personal use only Scale, integration and trading ability are our key strengths 300 • Scale to contract with major supply fields and commit to large capacity (transport and storage), enabling us to 250 shift gas to where it is needed most
Slide 38: Maximising value and pursuing growth opportunities
Maximising value and pursuing growth opportunities For personal use only Maintain competitive • Maintain short energy position to benefit from low-cost renewables cost of energy • Evolving Eraring to better position it for increasing renewables Gas portfolio a • Strong gas supply underpinned by cont
Slide 39: Energy Markets - Retail
For personal use only Energy Markets - Retail Jon Briskin, EGM Retail Anthony Lucas, EGM Future Energy and Technology 38 26 November 2020 2020 Investor Briefing
Slide 40: Delivering the fundamentals of a great retail business
Delivering the fundamentals of a great retail business For personal use only Large customer base Leading customer experience Low-cost operator Customer accounts ('000) Strategic NPS Retail cost estimates (A$m) FY17 FY18 FY19 FY20 ~$200-250 million 3,900 +33K 3,871 2 1000 reduction +27K 3,838 (6) 800
Slide 41: Growing revenue streams
Growing revenue streams For personal use only Community Energy Services & Solar Broadband 20% share in Octopus Energy CES and Solar gross profit ($m) Broadband customer accounts ('000) 120 106 Strategic NPS 20 100 83 31 80 66 26 60 10 20 22 40 75 57 20 44 8 0 0 - FY18 FY19 FY20 FY18 FY19 FY20 CES So
Slide 42: Strategic partnership with Octopus Energy to accelerate our strategy
Strategic partnership with Octopus Energy to accelerate our strategy Adopting Octopus’ disruptive operating model Significant upside potential from 20% equity interest in For personal use only and proven IT platform (“Kraken”) Octopus Energy • Delivering a radical improvement in customer experience
Slide 43: On track for 50,000 customer migrations to Kraken in 2020
On track for 50,000 customer migrations to Kraken in 2020 Setup MVP Scale up Complete Closeout in FY2023 For personal use only • Planning • Build MVP • Build out platform and operations teams • 100% of customers migrated • Decommissioning of legacy platform and systems • Design operating • Majority
Slide 44: Changing energy landscape as Data and Energy converge
Changing energy landscape as Data and Energy converge For personal use only Current market trends Emerging market trends • Market remains highly competitive • Greater customer empowerment and engagement • Increasingly variable and decentralised generation • Electrification of other sectors (rooftop
Slide 45: Platform business to fundamentally transform the customer relationship
Platform business to fundamentally transform the customer relationship For personal use only Traditional Business Platform Business Customer • 4 interaction points per year • Customers home continually interacting with the platform (quarterly bills) • Level of engagement driven by customer • Relatio
Slide 46: Core elements for a world class platform business and customer experience
Core elements for a world class platform business and customer experience Traditional Utility For personal use only Business 2017 2018 2019 2020 NOW Platform Business In house Agile Kraken Flexible, low cost Basic quarterly SAP SAP in cloud Retailing CRM and billing billing transformation layer Capa
Slide 47: Origin developing leading connected customer Engagement Layer
Origin developing leading connected customer Engagement Layer For personal use only In market Market testing 20k customers • Behavioural gamified demand response Battery solutions program with rewards, launched in August • Gamified and incentivised ‘self • High customer engagement – 70% sufficiency’
Slide 48: Capital management
For personal use only Capital management Lawrie Tremaine, CFO 47 26 November 2020 2020 Investor Briefing
Slide 49: Consistent approach to Capital Management
Consistent approach to Capital Management For personal use only • Strong free cash flow generation Cash from Cash from Interest operating investing paid • Asset portfolio well positioned for energy transition activities activities1 • Dividend policy of 30-50% of free cash flow unchanged Free cash fl
Slide 50: Responding to the current economic and policy environment
Responding to the current economic and policy environment For personal use only 1 Reducing sustaining capital and APLNG development spend 2 Lowering operating costs and managing commodity price risk 3 Managing debt book to lower cost and eliminating funding risk 4 Investigating new models to capture
Slide 51: Responding to commodity cycle by managing our spend down
Responding to commodity cycle by managing our spend down Origin Capex ($m) Origin gross controllable opex1 APLNG Opex2 + Capex ($m) For personal use only - Excluding investment in Octopus 500 ($m) 3,000 1,000 2,500 400 900 2,000 300 1,500 800 200 1,000 100 700 500 - 600 - FY20 FY21 Medium FY19 FY20
Slide 52: Managing oil price exposure
Managing oil price exposure Oil hedging program designed to preserve cash and protect capital structure against commodity cycles For personal use only FY2021 Full Year Oil Price Sensitivity FY2021 • Origin share of APLNG JCC oil price exposure is ~24 mmboe 55 FY2021 effective price after contract la
Slide 53: Generating significant cash even at current low commodity prices
Generating significant cash even at current low commodity prices For personal use only Estimated FY2021 Origin Free Cash Flow Yield1 16% • Continuing strong free cash flow • Reflects resilience of our businesses 14% Estimated range of 12-15% − Low cost operations 12% − Limited near-term investment r
Slide 54: Managing capital structure and debt book
Managing capital structure and debt book For personal use only • Committed to investment grade credit rating through cycle Adjusted Net Debt / Adjusted Underlying 4x − Target BBB/Baa2 EBITDA − Gearing of 20-30% 3x − Net Debt/EBITDA 2-3x Target capital structure • Achieved low end of target capital r
Slide 55: Committed to shareholder returns
Committed to shareholder returns Dividends For personal use only • Dividend policy of 30-50% of Free Cash Flow reaffirmed Dividends declared FY19 FY20 • ~$880 million of dividends paid since dividends recommenced Interim dividend 10cps 15cps • FY2020 dividend yield of 5.6%1 (ASX200 3% 2) Final divid
Slide 56: Investment framework supports value accretive decisions
Investment framework supports value accretive decisions Principles Application For personal use only Centralised capital allocation process Octopus investment and platform licensing Governance Ranked on returns, risk and strategic fit leading to positive returns and great strategic fit Independent v
Slide 57: Wrap-up
For personal use only Wrap-up Frank Calabria, CEO 56 26 November 2020 2020 Investor Briefing
Slide 58: FY2021 guidance update
FY2021 guidance update Provided on the basis that market conditions and the regulatory environment do not materially change, adversely impacting For personal use only operations. Considerable uncertainty exists relating to potential ongoing impacts of COVID-19 and this guidance is subject to any fur
Slide 59: 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 Energy Markets Integrated Gas Grow customer scale through low cost position and Strong operating and reservoir performance at leverage platform to sell a broader suite of products APLNG driving the unit cost
Slide 60: Questions
For personal use only Questions 59 26 November 2020 2020 Investor Briefing
Slide 61: Appendix
For personal use only Appendix 60 26 November 2020 2020 Investor Briefing
Slide 62: Origin: our business
Origin: our business For personal use only Leading Australian energy retailer, with 4.2 million Energy sales to 4.2 million accounts and a low-cost, customer centric delivery model customer accounts Preferred short energy position, but covered for peak demand via >7,400MW of owned and contracted gen
Slide 63: FY2020 sustainability performance
FY2020 sustainability performance For personal use only Customers Communities Strategic Net Promoter Score Regional procurement spend 2 as % of total spend 33,100 >$2.9m 14% 12% Customers successfully completed Contributed by the (6) 5% our Power On hardship program Origin Energy Foundation (13) FY1
Slide 64: HS&E
HS&E For personal use only Committed to keeping our people safe and engaged • Pandemic response plans implemented Origin wide to protect the health and safety of our employees, contractors, and TRIFR customers, and maintain energy continuity as an essential 4.4 service 2.6 2.6 • Strengthened our foc
Slide 65: Sustainability Report
Sustainability Report For personal use only • More information can be found in our FY2020 Sustainability Report • Our Sustainability Report includes our TCFD and UN Sustainable Development Goals disclosures 64 26 November 2020 2020 Investor Briefing
Slide 66: COVID-19 has contributed to near term commodity headwinds
COVID-19 has contributed to near term commodity headwinds Japan Customs-Cleared Crude ($US/bbl) ACCC JKM Netback Gas Price Series NEM forward prices (NSW $/MWh) For personal use only (A$/GJ) 80 10 130 70 8 110 60 6 90 50 4 70 40 2 50 30 0 30 20 Sep-17 Sep-18 Sep-19 Jul-16 Sep-16 Jun-17 Jun-18 Jun-19
Slide 67: Oil hedging
Oil hedging For personal use only FY2021 Origin hedging As at 31 October 2020 Realised Unrealised FY2021 Hedge Instrument Volume (mmbbl) Average Price Volume (mmbbl) Average Price Brent AUD swaps 3.8 A$85/bbl 0.6 A$61/bbl • Origin share of APLNG JCC oil price exposure is ~24 mmboe Brent USD Swaps 0.
Slide 68: APLNG sales mix and domestic legacy contracts
APLNG sales mix and domestic legacy contracts For personal use only Legacy domestic contracts: FY2020 FY2019 • ~40 PJ p.a. to Origin ending 2034 Sales mix (100%) • 472 PJ over 21 years to Rio Tinto ending 2031 PJ % PJ % • ~16 PJ p.a. to QAL ending 2041 Contract LNG 449 67% 464 69% • 25 PJ p.a. to AG
Slide 69: Beetaloo Basin E&A – multiple stacked plays
Beetaloo Basin E&A – multiple stacked plays Facts: For personal use only • 77.5% interest in 18,500km2 permit • Four, stacked, unconventional hydrocarbons plays identified • Booked 6.6 TCF contingent resource relating to Velkerri B shale dry gas play • Undertaking Stage 2 appraisal, currently target
Slide 70: 'Firming' technologies will have differing roles in the future portfolio
‘Firming’ technologies will have differing roles in the future portfolio For personal use only Batteries Pumped Hydro Gas Peakers Role Supplier of grid security Shifts large volumes of low-priced Cap price exposure in peak periods and services energy to peak periods during prolonged low renewable pe
Slide 71: Glossary
Glossary Financial Term Meaning Adjusted Net Debt Net Debt adjusted to remove fair value adjustments on hedged borrowings. For personal use only Adjusted Underlying EBITDA Underlying EBITDA – Share of APLNG Underlying EBITDA + net cash from APLNG CAGR Compound annual growth rate CPS Cents Per Share
Slide 72: Glossary
Glossary Non-financial Term Meaning CSG Coal Seam Gas CY Calendar Year For personal use only DCF Discounted Cash Flow DMO Default Market Offer DQT Downward Quantity Tolerance E&A Exploration and Appraisal ERIC Eurombah Reedy Creek Interconnect ERP Enterprise Resource Planning EV Electric Vehicle FEE
Slide 73: 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 74: 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