Origin Energy Limited · ASX:ORG
Origin Energy — H1 FY2013 Earnings Presentation
63 slides from Origin Energy's earnings presentation, Feb 21, 2013
Slide 1: ASX transmittal of half year results
For personal use only To Company Announcements Office Facsimile 1300 300 021 Company ASX Limited Date 21 February 2013 From Helen Hardy Pages 63 Subject RESULTS FOR THE HALF YEAR ENDED 31 DECEMBER 2012 This Transmittal is confidential. If you have received this document in error, please contact Orig
Slide 2: 2013 Half Year Results Announcement
For personal use only 2013 Half Year Results Announcement Half Year Ended 31 December 2012 Grant King, Managing Director Karen Moses, Executive Director, Finance and Strategy 21 February 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. Outlook Grant King 5. Glossary 6. Appendix 3|
Slide 5: 1. Performance Highlights
For personal use only 1. Performance Highlights Grant King, Managing Director 4|
Slide 6: Origin is focusing on maximising cash flow, progressing APLNG and strengthening funding
Origin is focusing on maximising cash flow from the existing business, progressing the APLNG project and strengthening its funding position For personal use only Existing Business APLNG Funding Responding to Challenges Confidence in Schedule & Cost Strengthened • Reduced sales volumes and • Upstream
Slide 7: Results
Results For personal use only Statutory Profit* $524 m down 34% Statutory EPS* 48.0 cps down 35% Net items excluded from Underlying Profit1 $162 m down 47% Underlying Profit* $362 m down 26% Underlying EPS* 33.2 cps down 27% Underlying EBITDA* $1,055 m down 9% Interim Dividend Fully Franked 25.0 cps
Slide 8: Energy Markets performance impacted by lower volumes and reduced margins
Energy Markets performance was impacted by lower volumes and reduced margins in Electricity For personal use only TWh 25.0 15% C&I MM 14.1% (1.2%) 20.0 (3.5%) Underlying EBIT Margin (%) 10% 15.0 9.4% 10.0 5% 5.0 0.0 0% H1 FY2012 H2 FY2012 H1 FY2013 HY2012 0.0% Carbon 0.0% Other HY2013 • Origin‟s ave
Slide 9: Stabilisation of the new SAP billing system well advanced
Stabilisation of the new SAP billing and customer management system is well advanced, enabling increased win and retention activity … For personal use only 120 200 Number of Late Bills ('000) 112 89,000 improvement 100 in net customer losses 150 Customer Accounts ('000) 80 100 60 40 48 50 20 23 0 1
Slide 10: Origin is undertaking restructuring initiatives to lower costs
Origin is undertaking restructuring initiatives to lower costs … For personal use only OPERATIONAL EFFECTIVENESS ASSET CONSOLIDATION A review of investment activities and 600 assets has resulted in: • Discontinued investment in Transform 500 Solar and Geodynamics Number of Employees • Suspension of
Slide 11: Confidence in delivery of the APLNG project confirmed through project review
Confidence in the delivery of the APLNG project was confirmed through a project review, resulting in acceleration of the schedule for Train 2 … For personal use only SCHEDULE • Train 1 on track to be complete on, or ahead of schedule, with first LNG sales expected in mid calendar year 2015 • Train 2
Slide 12: Undrawn debt facilities and cash provide sufficient liquidity to fund APLNG
Committed undrawn debt facilities and cash, combined with cash flows from operations, provide sufficient liquidity for Origin to fund its investment in APLNG … For personal use only 1,200 Reduced spend 1,000 as the existing business matures Free cash flow $4.4 billion3 800 from existing funding busi
Slide 13: Expected FY2013 performance within guidance except Queensland price events
Expected performance for FY2013 is within guidance provided in November 2012, with the exception of high electricity price events that occurred in Queensland in January 2013 For personal use only Half-year Underlying NPAT 600 In the second half of FY2013 Origin expects: • Regulatory pressures and ma
Slide 14: 2. Financial Review
For personal use only 2. Financial Review Karen Moses, Executive Director, Finance and Strategy
Slide 15: 2013 Half Year Financial Highlights
2013 Half Year Financial Highlights For personal use only ($ million) Dec 12 Dec 11 Change Statutory Profit 524 794 (34%) Statutory EPS 48.0 cps 73.8 cps (35%) Revenue 7,379 6,499 14% Underlying EBITDA* 1,055 1,157 (9%) Underlying EBIT* 698 832 (16%) Underlying Profit 362 489 (26%) Underlying EPS 33
Slide 16: Reconciliation of Statutory Profit to Underlying Profit
Reconciliation of Statutory Profit to Underlying Profit For personal use only ($ million) Dec 12 Dec 11 Change Statutory Profit 524 794 (270) Items Excluded from Underlying Profit APLNG related items 291 454 (163) (Decrease) / increase in fair value of financial (83) 34 (117) instruments Impairment
Slide 17: Statutory Profit down 34%, from $794 million to $524 million
Statutory Profit down 34%, from $794 million to $524 million 900 For personal use only 800 794 (305) 193 700 600 ($ million) 500 162 524 489 (102) 400 55 (6) 362 300 (32) (42) 200 100 - HY2012 Net Items HY2012 Underlying Underlying Underlying Underlying Underlying HY2013 Net items HY2013 Statutory e
Slide 18: Underlying EBITDA down 9% to $1,055 million
Underlying EBITDA down 9% to $1,055 million Underlying EBIT down 16% to $698 million Underlying EBITDA Underlying EBIT For personal use only ($ million) Dec 12 Dec 11 % change Dec 12 Dec 11 % change Energy Markets 660 820 (20%) 516 697 (26%) Exploration & Production 200 179 12% 79 67 18% Australia P
Slide 19: Group OCAT reduced due to lower EBITDA, working capital and tax paid
Group OCAT reduced due to lower Underlying EBITDA, higher working capital and tax paid … For personal use only ($ million) Dec 12 Dec 11 Change Underlying EBITDA 1,055 1,157 (102) Primarily due to billing delays Change in working capital (268) (192) (76) and collections, offset by a carbon benefit S
Slide 20: Capital expenditure, including cash contributions to APLNG, significantly lower
Capital expenditure, including cash contributions to APLNG, was significantly lower than the prior half year … Growth Capital and APLNG Expenditure by Segment (includes capitalised interest) For personal use only 1,200 GROWTH Key areas of total growth capex of $596m 1,000 included: • Mortlake Power
Slide 21: Funding initiatives increased undrawn committed debt facilities and cash
Origin‟s funding initiatives during the half year have increased undrawn committed debt facilities and cash from $4.2 billion1 at June 2012 to $5.4 billion1 at December 2012 For personal use only Origin Debt (excluding Contact) & Bank Guarantee Maturity Profile as at 30 June 2012 2,500 2,500 Loan &
Slide 22: Fully franked interim dividend of 25 cps determined
A fully franked interim dividend of 25 cps has been determined, representing a payout ratio of 75% of Underlying EPS Origin Dividend History For personal use only 60 Dec Half Jun Half 50 40 • Ex-dividend date: 26 February 2013 cents per share 25 25 25 • Record Date: 4 March 2013 30 • Payment Date: 4
Slide 23: 3. Operational Review
For personal use only 3. Operational Review Grant King, Managing Director
Slide 24: Energy Markets
Energy Markets Underlying EBITDA down 20% to $660 million For personal use only Reduced Electricity Gross Profit (-18%) partially offset by increases in Natural Gas (+15%), Non-Commodity (+61%) and LPG (+10%) Electricity volumes down 2% or 0.4 TWh Underlying EBIT margin* contraction from 14.
Slide 25: Decrease in Energy Markets EBITDA due to decline in Electricity Gross Profit
The decrease in Energy Markets Underlying EBITDA was largely due to a decline in Electricity Gross Profit … For personal use only Underlying EBITDA Bridge 900 (28) 800 (58)1 • Lower electricity volumes (53) (30) 20 (32) • Unfavourable tariff determination 700 19 in Queensland, reducing revenue 600 L
Slide 26: Electricity Gross Profit down due to reduction in volume and margin
Electricity Gross Profit was down due to a reduction in volume and margin … Performance metrics, $m Non- For personal use only Natural Gas Electricity LPG (% change from Dec 11) commodity Revenue ($m)1 749 (+20%) 4,284 (+12%) 102 (-25%) 371 (+6%) Decline in Gross Profit* ($m) 145 (+15%) 762 (-18%) 2
Slide 27: Retail Transformation constraints reduced mass market customers and volumes
During the implementation of Retail Transformation, constraints on retention and acquisition activity led to reduced mass market customers and volumes … For personal use only TWh TWh 1.3 TWh lower mass market 0.9 TWh higher 14.0 volume with average 14.0 C&I volume customers down 179,000 12.0 11.6 12
Slide 28: Regulatory constraints and higher energy costs drove lower Electricity margin
Regulatory constraints and higher wholesale energy costs were the primary drivers of lower Electricity margin For personal use only Electricity Performance ($/MWh) Dec 12 Dec 11 Change Revenue uplift reflects: • recovery of carbon Revenue • recovery of network costs Combined Revenue 200 175 25 The r
Slide 29: QCA tariff determination reduced the wholesale energy cost allowance
The QCA tariff determination 80 reduced the wholesale energy cost allowance … 70 Average NEM Pool Price ($/MWh) 120 80 For personal use only 60 Higher prices in July due to 70 reduced generation availability 100 Average NEM Pool Price ($/MWh) 50 Average NEM Pool Price ($/MWh) 60 Average prices less
Slide 30: Natural Gas Gross Profit up 15%
Natural Gas Gross Profit up 15% due to increased volumes in Victoria and customers in New South Wales … For personal use only Gas Performance ($/GJ) Dec 12 Dec 11 Change Revenue Combined Revenue 10.7 9.2 1.5 C&I 5.9 5.4 0.5 Tariff increases include Mass Market 20.4 17.4 3.0 recovery of network, whol
Slide 31: Higher customer wins and restructuring increased operating costs
Higher customer wins and retention, combined with business restructuring, increased operating costs … For personal use only Cost-to-serve Dec 12 Dec 11 Change Total Natural Gas, Electricity & non- Increased operating costs (309) (283) (26) commodity operating costs ($m)1 Maintenance costs ($m) (249)
Slide 32: Energy Markets restructure and rationalisation programs underway
Energy Markets restructure and rationalisation programs are underway … For personal use only 4,000 • Energy Markets full time employee (FTE) 3,500 3568 numbers reduced by 372 during the (372) 120 (127) current period 3,000 3189 No of Employees 2,500 • An additional 120 FTEs to service the Integral E
Slide 33: Origin lifted acquisition and retention activity and reduced churn
Origin has successfully lifted acquisition and retention activity, and reduced Origin churn relative to market … Combined Electricity and Natural Gas Churn Rates For personal use only 40% 800 Customer wins and retains ('000) 29% increase in Origin, HY2012 Origin, HY2013 700 wins & retains 35% Market
Slide 34: Origin now servicing 3.3 million customers through SAP
Origin is now servicing 3.3 million customers through SAP, following the migration of Integral Energy NSW customers in January … For personal use only CAL YEAR • Jun – SA customer accounts transferred to SAP Eraring • Oct – VIC customer accounts transferred to SAP Power 2011 • Dec – NSW & QLD custom
Slide 35: Stabilisation of the new SAP billing system well advanced
Stabilisation of the new SAP billing and customer management system is well advanced, enabling increased win and retention activity … For personal use only 120 200 Number of Late Bills ('000) 112 89,000 improvement 100 in net customer losses 150 Customer Accounts ('000) 80 100 60 40 48 50 20 23 0 1
Slide 36: Energy Markets positioned to capture value through legacy fuel position
Energy Markets is well positioned to capture significant value through its legacy fuel position … For personal use only • Value of legacy fuel contracts at • Increased customer wins and low domestic prices in a rising retentions gas price environment, already • Improved customer satisfaction evidenc
Slide 37: Exploration & Production
Exploration & Production Underlying EBITDA up 12% to $200 million For personal use only Yolla platform returned to production after an extended shutdown for the Mid-Life Enhancement Project Successful completion of major planned maintenance shutdowns at Kupe and Otway, with Otway accelerated i
Slide 38: Production 5% down as capacity limited by shutdowns
Production was 5% down on the prior half year as capacity was limited by shutdowns … For personal use only PJe mmboe 50 mmboe mmboe Origin Gas Production Origin 8.6 Year by Half Gas Production by Half Year 8.6 8.6 7.7 7.7 Production from all three of Origin‟s key upstream 40 6.9 assets was impacted
Slide 39: Major planned maintenance outages completed, none planned for rest of FY2013
With the successful completion of major planned maintenance outages, and none planned for the remainder of FY2013 … For personal use only Geographe well test Jascon 25 construction vessel at Yolla Kupe processing plant Otway BassGas Kupe • Successful completion of a 23 day • The Yolla platform retur
Slide 40: Exploration activity in Kenya, Botswana, South East Asia and New Zealand
Exploration activity continued in the half, with an exploration well drilled in Kenya and the commencement of the CSG drilling program in Botswana For personal use only Kenya Botswana • Mbawa-1 well in the Lamu Basin was • An aero-magnetic survey in Botswana was drilled to a total depth of 3,150m. c
Slide 41: Australia Pacific LNG
Australia Pacific LNG Origin‟s share of Underlying EBITDA up 19% to $19 million Upstream Project 29% complete and Downstream Project 31% complete For personal use only FID2 taken in July 2012 with Origin‟s shareholding in APLNG diluted from 42.5% to 37.5% on 12 July 2012 Recent project revie
Slide 42: Increase in Underlying EBITDA reflects higher domestic gas sales
An increase in Underlying EBITDA reflects higher domestic gas sales and increased production in the domestic business … Dec 12 Dec 11 For personal use only Financial Performance ($ million) Origin’s Origin’s Total Total share1 share2 Higher sales volumes Operating Revenue 197 165 and carbon recovery
Slide 43: Project progress - Upstream 29% complete and on track
Project progress - Upstream 29% complete and on track For personal use only Coil-tubing drill rig Laying of gathering pipe Condabri North Switchyard Laying of pipe Drilling Gathering Facilities Pipeline & Electrification • 141 Phase 1 operated • 967 of 1,100 operated • 5 of 15 gas plant units • Pipe
Slide 44: Project Progress - Downstream 31% complete and on track
Project Progress - Downstream 31% complete and on track For personal use only Curtis Island site, January 2013 LNG Tanks, January 2013 Overview of Train 1 Inside Battery Limits (ISBL) Curtis Island LNG plant Module yard in Batam • Site works 95% complete • Methane compressor string test • Steel deli
Slide 45: APLNG on track to achieve key project milestones
APLNG is on track to achieve key project milestones Target For personal use only Key Project Milestones Status Update Date at FID First gas field facility complete Mid 2013 On Track Pipeline complete Early 2014 On Track First LNG from Train 1 Mid 2015 On Track First LNG from Train 2 Early 2016 Ahead
Slide 46: Confidence in APLNG delivery increased through project review
Confidence in the delivery of APLNG‟s project increased through a project review … For personal use only SCOPE • Project capital costs were reviewed based on actual costs incurred through to late 2012 and revised forecasts SCHEDULE • Train 1 on track to be complete on, or ahead of schedule, with fir
Slide 47: APLNG capital expenditure for the half year was $4.0 billion
APLNG capital expenditure for the half year was $4.0 billion1, with Origin‟s cash contribution $119 million For personal use only Cumulative Estimate from FID1 to Half year to Dec (A$m) from FID1 1st sales from Train 2 2012 to Dec 2012 (A$b) Project Capex 3,519 8,174 24.7 Non-Project Capex: Annual s
Slide 48: Contact Energy
Contact Energy Underlying EBITDA up 9% to $198 million For personal use only Improved price competitiveness has stabilised customer numbers Lower wholesale prices more than offset by lower generation costs from diverse fuel and asset portfolio Te Mihi enters commissioning phase with completi
Slide 49: Investments in Contact's generation portfolio delivered improved flexibility
Recent investments in Contact‟s generation portfolio have delivered improved portfolio flexibility … 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 storage increased Contact‟s
Slide 50: Corporate
Corporate For personal use only Underlying EBITDA improved 45% to ($22) million Development activities to focus on early stage overseas development opportunities ($m) Underlying EBITDA 0 -20 -22 Lower remediation expenses and -40 unallocated corporate costs -40 Higher foreign exchange loss -60 D
Slide 51: Origin develops portfolio of renewable energy opportunities in offshore markets
Origin continues to develop a portfolio of high quality renewable energy opportunities in offshore markets … For personal use only Chile Chile • 40% interest in Chile‟s leading geothermal • Energía Austral, one of Chile‟s leading exploration company, Energía Andina S.A. hydroelectric development com
Slide 52: 4. Outlook
For personal use only 4. Outlook Grant King, Managing Director
Slide 53: Expected FY2013 performance within guidance except Queensland price events
Expected performance for FY2013 is within guidance provided in November 2012, with the exception of high electricity price events that occurred in Queensland in January 2013 For personal use only Half-year Underlying NPAT 600 In the second half of FY2013 Origin expects: • Regulatory pressures and ma
Slide 54: January weather, demand and plant availability caused high Queensland prices
In January, a combination of weather, demand and plant availability resulted in an extended period of high prices in Queensland For personal use only 120 Driven by higher 100 average prices in Queensland • During the month almost 20% of half Average NEM Pool Price ($/MWh) 80 hourly Queensland electr
Slide 55: Higher plant availability expected to drive strong increase in Exploration and Production
Higher levels of plant availability and production in the second half is expected to drive a strong increase in Exploration and Production … For personal use only H1 FY2013 H2 FY2013 July Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Bass Otway Kupe Producing, actual data Unscheduled acceleration of
Slide 56: Primary driver of growth will be investment in APLNG
The primary driver of growth for Origin over the coming years will be its investment in APLNG For personal use only • Two-train CSG to LNG project • Australia‟s largest 2P reserves base • Prime acreage in both of the Queensland‟s CSG “sweet spots” • ConocoPhillips-Bechtel experience in developing LN
Slide 57: Undrawn debt facilities and cash provide sufficient liquidity to fund APLNG
Committed undrawn debt facilities and cash, combined with cash flows from operations, provide sufficient liquidity for Origin to fund its investment in APLNG … For personal use only 3,500 3,000 2,500 Free cash flow $4.4 billion1 from existing funding 2,000 business requirement for Origin’s 1,500 sha
Slide 58: 5. Glossary
For personal use only 5. Glossary
Slide 59: 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 half year ended 31 December 2012 (the half year) compared with the half y
Slide 60: Statutory Financial Measures
Statutory Financial Measures Term Meaning For personal use only 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 Non-controlling interest held by the Parent entity
Slide 61: 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 62: 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 63: Thank you
For personal use only Thank you For more information Kylie Springall Group Manager, Investor Relations Email: kylie.springall@originenergy.com.au Office: +61 2 8345 5288 Mobile: + 61 400 477 393 www.originenergy.com.au 62 |