Origin Energy Limited · ASX:ORG
Origin Energy — Investor Day (November 2017)
62 slides from Origin Energy's investor day presentation, Nov 28, 2017
Slide 1: ASX announcement cover note: ORG 2017 Investor Day Presentation
For personal use only To Company Announcements Office Facsimile 1300 135 638 Company ASX Limited Date 28 November 2017 From Helen Hardy Pages 62 Subject ORG 2017 Investor Day Presentation Please find attached a release on the above subject. Regards Helen Hardy Company Secretary 02 8345 5000 Origin E
Slide 2: 2017 Investor Day
For personal use only 2017 Investor Day 28 November 2017 Origin Energy | November 2017 Investor Day 1
Slide 3: Safety moment
Safety moment For personal use only • Alert tone (“beep, beep, beep”) − Follow instructions of Wardens − Be ready to evacuate • Evacuation tone (“whoop, whoop, whoop”) − Evacuate via nearest exit − Proceed calmly to assembly area Origin Energy | November 2017 Investor Day 2
Slide 4: Schedule
Schedule 28 November (Sydney - Dexus, Level 15, 1 Farrer Place) For personal use only Time Duration Topic Presenter 10:00 5 mins Introduction Peter Rice (GM, Capital Markets) 10:05 15 mins Strategic overview Frank Calabria (CEO) 10:20 15 mins Capital management Lawrie Tremaine (CFO) 10:35 30 mins Up
Slide 5: Strategic Overview
For personal use only STRATEGIC OVERVIEW Frank Calabria Origin Energy | November 2017 Investor Day 4
Slide 6: Context
Context For personal use only 1. Delivering on near term priorities 2. Rebuilding the right to grow 3. Global energy markets accelerating to a low carbon future 4. Origin part of the energy solution and positioned to prosper in a changing energy world 5. Near term catalysts Origin Energy | November
Slide 7: Delivering on FY2018 priorities
Delivering on FY2018 priorities For personal use only REDUCING DEBT AND LEADERSHIP IN LEADERSHIP IN IMPROVING RETURNS ENERGY MARKETS INTEGRATED GAS Sale of Lattice for $1,585 million Secured 41PJ of additional gas for Business reset (zero base) On track for Adjusted Net Debt the domestic mar
Slide 8: Rebuilding the right to grow
Rebuilding the right to grow For personal use only Asset sale program largely complete Making good progress on balance sheet repair Capital discipline strengthened Renewing efforts to lift the bar on organisation complexity and cost Origin Energy | November 2017 Investor Day 7
Slide 9: Changing global energy markets
Changing global energy markets Renewables expected to be the fastest growing source of energy with gas For personal use only continuing to play an important role under all IEA carbon reduction scenarios World primary energy demand by fuel and scenario (Btoe) 20 16% 20% 15 24% 14% 25% 29% Btoe 5% 22%
Slide 10: Changing global energy markets: LNG supply and demand
Changing global energy markets LNG market is forecast to be oversupplied near term, but moving into a deficit For personal use only position from early 2020s 600 Global LNG Supply and Demand Balance (mtpa) Under Construction Current Capacity LNG Demand 500 400 mtpa 300 200 100 0 2013 14 15 16 17 18
Slide 11: Changing global energy markets
Changing global energy markets For personal use only ‒ Efforts to tackle climate change continue to support strong Decarbonisation growth in renewables and gas as a partner of renewables ‒ Technological advancement enabling consumer empowerment Decentralisation and transition towards a decentralised
Slide 12: Australian energy market
Australian energy market As markets transition there is heightened concern for reliability & affordability For personal use only Historical Monthly Average Wholesale Gas Prices1 Historical Monthly Average Wholesale Electricity Prices 16 250 14 200 12 10 150 A$/MWh A$/GJ 8 6 100 4 50 2 0 Nov-15 Nov-1
Slide 13: Origin is focused on being part of the energy solution
Origin is focused on being part of the energy solution For personal use only Increasing Eraring output (to 15.5 – 16 TWh) Recently secured 41 PJ of additional gas from APLNG for the domestic market Brought 240 MW of generation back on line in SA Providing energy reliability via Australia’s l
Slide 14: Origin's strategy to capture value in the future energy world
Origin’s strategy is designed to capture value in the future energy world For personal use only Leading the transition to a cleaner, smarter and customer-centric energy future Connecting customers to the energy and technologies of the future Develop Leading customer Accelerate Embrace a resources to
Slide 15: Near-term catalysts
Near-term catalysts For personal use only Continued deleverage Capturing value from our energy market position Running Eraring harder in response to high wholesale prices Gas supply position to grow market share and support generation Growing renewables, partnered with existing gas fleet
Slide 16: FY2018 guidance reaffirmed
FY2018 guidance reaffirmed For personal use only Energy Markets FY2018 EBITDA is expected to be in the range of $1.7 - $1.8 billion, provided that market conditions and the regulatory environment do not materially change Origin’s share of APLNG production is expected to be 245 - 265 PJ In FY20
Slide 17: Capital Management
For personal use only CAPITAL MANAGEMENT Lawrie Tremaine Origin Energy | November 2017 Investor Day 16
Slide 18: Performance highlights
Performance highlights For personal use only $m $m 3,000 Underlying EBITDA 5,000 Capex plus net APLNG contribution 4,000 2,000 3,000 1,000 2,000 1,000 - FY2015 FY2016 FY2017 - FY2015 FY2016 FY2017 Contact Share of APLNG Origin (remaining) Contact Net conribution to APLNG Origin remaining $m $m Asset
Slide 19: Resilient capital structure: target capital structure
Resilient capital structure Target capital structure Manage Capital asset allocation portfolio For personal use only Maximise cash generation Debt/EBITDA1 7x 6x Goal to achieve stable investment grade rating • BBB/Baa2 • Debt/EBITDA times 5x Upgraded rating action following Lattice Energy sale and F
Slide 20: Management of debt portfolio
Resilient capital structure Management of debt portfolio Manage Capital asset allocation portfolio For personal use only Debt & bank guarantee maturity profile Debt composition Maximise cash (as at 31-Oct-17) (as at 31-Oct-17) generation 14 6,000 Average interest rate 12 5,000 10 0.79% 4,000 8 3,000
Slide 21: Capital investment
Resilient capital structure Capital investment Manage Capital asset allocation portfolio Rebuilding the right to grow For personal use only Maximise cash generation • Disciplined capital allocation process established • Improved business case and economic analysis tools and methods • Opportunities r
Slide 22: Priorities for use of capital
Resilient capital structure Priorities for use of capital Manage Capital asset allocation portfolio For personal use only Maximise cash generation Debt reduction and servicing Sustaining capital to stay in business Growth capital Dividends Will pursue high quality growth Triggered by target capital
Slide 23: Disciplined capital spend
Resilient capital structure Disciplined capital spend Manage Capital asset allocation portfolio For personal use only Maximise cash generation Capital expenditure 2,000 FY2018 capital expenditure • Mandatory spend ($80 -100 million) • Digital metering (retail system upgrade) 1,500 • Upstream commitm
Slide 24: Oil price risk management
Resilient capital structure Oil price risk management Manage Capital asset allocation portfolio Principles For personal use only • Objective to protect cash flow to ensure target deleveraging Maximise cash generation • Structured to protect downside and may include capping some upside • Will reasses
Slide 25: Manage asset portfolio
Resilient capital structure Manage asset portfolio Manage Capital asset allocation portfolio For personal use only Maximise cash Sale of Lattice Energy generation • $1,585 million sale of Lattice Energy announced on 28 September 2017 • Transition planning including managing stranded costs progressin
Slide 26: Upstream
For personal use only UPSTREAM Mark Schubert Origin Energy | November 2017 Investor Day 25
Slide 27: Building a low cost operating model
Building a low cost operating model over 18 months For personal use only Delivered In Focus Targets Strong resource position Aligned and simplified June 2019 run rate targets: supplying organisation Long term LNG contracts A$500m+ p.a. reduction in Streamlined processes capital and operati
Slide 28: APLNG project complete and exceeding performance expectations
APLNG project is complete and exceeding performance expectations For personal use only TJ/d APLNG upstream supply1 2,500 Train 1 Two-train • 175+ LNG cargoes delivered 2,000 operational operational test test • Proven production performance >10% above nameplate capacity 1,500 • >95% upstream plant re
Slide 29: APLNG FY2018 breakeven guidance maintained
APLNG FY2018 breakeven guidance maintained For personal use only FY2018 Guidance @ Capital expenditure (breakdown %) 100% APLNG (A$bn) 0.75 AUD/USD Capital expenditure – Sustain 1.4 Capital expenditure – E&A 0.3 Operated Sustain Operating expenses – pre capitalisation 1.6 E&A Operated SIB (Stay-in-b
Slide 30: Implementing a new operating model
Implementing a new operating model To achieve a step change reduction in cost and breakeven within 18 months For personal use only Approach Key focus areas • In scope: Capex, opex, production and A Aligned & simplified organisation, project finance interest streamlined processes • Starting point: Ze
Slide 31: Aligned and simplified organisation, streamlined processes
A Aligned and simplified organisation, streamlined processes For personal use only Today Tomorrow FY19 Functional Structure Asset Structure Organisational Supporting a multiple conventional & Unconventional operating model replicating Structure unconventional asset portfolio independent US shale
Slide 32: Capex - targeting material reductions in new well costs
B Capex - targeting material reductions in new well costs For personal use only Simplified and streamlined well delivery Lower cost Surat wells1 targeted by June 2019 • Well factory approach • Simple, standardised surface facilities allow rebased service and supply contracts ~50% A$M/WELL • Lower co
Slide 33: Opex - targeting operational efficiency improvements
C Opex - targeting material improvements in operational efficiency For personal use only Lower unit operating costs1 Lean and simplified operations: • Reducing amount of work (e.g. rationalised maintenance strategy) • Lean, agile and multi-skilled workforce ~20% • Front line asset responsibility dri
Slide 34: Production optimisation gets more from existing assets
D Production optimisation gets more from existing assets Debottleneck existing assets For personal use only • Existing constrained wells can be debottlenecked to improve production o Installation of surface facilities, pumps and loop lines to reduce surface pressure o Downhole solutions to increase
Slide 35: Targeting step change reduction in cost from June 2019
Targeting step change reduction in cost from June 2019 With further reductions targeted beyond 2019 For personal use only Key Outcomes Initial Targets Metric FY18 Guidance June 2019 Run Rate Cost reduction and Well cost1 A$m/well 2.4 1.2 productivity improvement Operating cost2 A$/GJ 1.3 1.0 Opex an
Slide 36: APLNG exploration upside
APLNG exploration upside Material plays are being explored to: For personal use only • Lower the cost of future production • Increase incremental sales • Extend the life of operations past LNG contract periods East Bowen Deep prospect confirmed as a new CSG play with pilots planned for 2018/2019 Net
Slide 37: Revisiting Ironbark development in preparation for FEED
Origin is revisiting Ironbark development and value in preparation for FEED For personal use only Ironbark • 100% owned Queensland CSG resource, adjacent to APLNG and QGC infrastructure • Adopting a lean operating model • Ironbark is ideally located to supply to the east coast domestic market via th
Slide 38: Leveraging improvements for Beetaloo economics
Improvements can also be leveraged to improve economics of Beetaloo For personal use only Beetaloo • 70% owned Northern Territory resource • Upstream capital and operating cost savings can be applied to all project stages • 2C Resource 6.6Tcf1 (gross) • Origin continues to support the NT Government’
Slide 39: Energy Supply & Operations
For personal use only ENERGY SUPPLY & OPERATIONS Greg Jarvis Origin Energy | November 2017 Investor Day 38
Slide 40: Energy supply and operations
Energy supply and operations For personal use only • Flexible generation portfolio running harder in high wholesale price Electricity environment • Growing customer volumes Gas • Monetising gas through electricity generation • Lowest cost new build generation today Renewables • Target 1,500 MW of ne
Slide 41: Electricity: Eraring running harder
Electricity Eraring Eraring isplays running harder than a significant roleever in portfolio in the response to high and wholesale the focus prices is on coal supply For personal use only Eraring monthly generation output 1,800 1,500 • FY2018 output expected to be 15.5 – 16 TWh 1,200 (higher than pre
Slide 42: Gas: strong and flexible portfolio
Gas Strong and flexible portfolio enabling growth in sales volumes For personal use only Energy Markets East Coast Gas Supply Portfolio Energy Markets gas sales 200 300 250 150 200 PJ PJ 150 100 100 50 50 - - FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY15 FY16 FY17 LTM Oct-17 Retail Business & Tradi
Slide 43: Renewables: capturing benefit of falling costs
Renewables Origin is capturing the benefit of falling renewable costs For personal use only Bundled PPA Prices1 Origin Installed Renewable Capacity2 (Large scale wind and solar) MW $/MWh 2,000 160 1,800 530 1868 1,600 120 1,400 1,200 371 80 1,000 235 800 600 732 40 Costs continuing 400 to fall 200 0
Slide 44: Flexible portfolio well positioned in changing market
Flexible portfolio well positioned in a changing energy market For personal use only Flexible energy position Balanced capacity position 45 10,000 40 Exposure managed Short position via peakers and cap 35 products 8,000 Business (recontract 30 Contracts Hedging matching over 1-3 customer contracts 6
Slide 45: Gas will play a significant firming role
As renewable penetration increases, gas will play a significant firming role For personal use only Generator response times Potential impact of distributed solar penetration on NEM demand 27,000 Batteries 25,000 23,000 Pumped 100% Load Hydro 21,000 OCGT With increased solar, gas will play 19,000 a k
Slide 46: Opportunities in renewables, fast-start gas and storage
Opportunities for investment in renewables, fast-start gas and storage For personal use only Queensland • Opportunities to increase flexibility and expand capacity at Darling Downs (largest gas generator in QLD today) • > 400 MW of solar expected to come online by FY2019 • Opportunities for large-sc
Slide 47: Retail
For personal use only RETAIL Jon Briskin Origin Energy | November 2017 Investor Day 46
Slide 48: Retail overview
Retail overview For personal use only • Customer activity increasing driven by price rises and spotlight on affordability Market Dynamics • Market remains highly competitive • Defending share and managing for value • Leading customer experience and service • Low cost business model Customer Strategy
Slide 49: Increasing customer activity
Increasing customer activity Driven by affordability and price-based competition For personal use only Customer switching rates in market Defending share and managing for value Electricity and Natural Gas Churn Rates 30% 25% • Campaigning in market 20% 15% 10% 5% 0% Origin Churn Market Churn Source:
Slide 50: Building a leading digitally-enabled customer experience
Responding by building a leading digitally-enabled customer experience Innovative products and services that increase customer lifetime value For personal use only Innovative & Leading customer Low cost Increase customer differentiated experience and business model lifetime value products and servic
Slide 51: Digital-first design
Digital-first design Customer experiences that are simple, smart, personalised, connected and For personal use only empowering Price transparency with Origin App New digital channels Origin Savernator Facebook Livechat Messenger Artificial Digital intelligence marketing AI • New personalised online
Slide 52: Digitisation and automation driving cost reduction
Digitisation and automation driving continued focus on cost reduction Process innovation, optimisation and removal of effort For personal use only Increasing digital interactions Managing operational performance Online sales up 33% MyAccount registrations Reducing back office FTE Increase in front o
Slide 53: Managing for value
Managing for value Customer differentiation driving value For personal use only Data and analytics underpinning deep Driving value-based customer strategies customer knowledge Targeted acquisition Customer lifetime value Tiered product architecture Behavioural segmentation Targeted retention Tailore
Slide 54: Growth opportunities
Growth opportunities New markets and adjacencies creating new revenue streams For personal use only Centralised Energy Services WA market entry Adjacencies Integrated energy solutions for high- Partnering to provide a value-add rise residential developments Moving Services proposition Serviced hot
Slide 55: Future-focussed innovation
Future-focussed innovation Pipeline of new solutions For personal use only Incubate new ideas and trial fast Focus areas Putting customers in the picture on use Explore future needs of customers Launching into smart home with Home HQ Connect connected customers with home market leading solutions
Slide 56: Wrap Up / Q&A
For personal use only WRAP UP / Q&A Origin Energy | November 2017 Investor Day 55
Slide 57: Wrap Up
Wrap Up For personal use only Continuing to deleverage and rebuilding the right to grow Moving to a simpler and leaner operating model Capturing value from our energy market position (Eraring, gas supply, renewables) Step change cost reduction in APLNG Transforming customer experience thro
Slide 58: Appendix
For personal use only APPENDIX Origin Energy | November 2017 Investor Day 57
Slide 59: Important Notices
Important Notices For personal use only 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 cert
Slide 60: Important Notices (cont)
Important Notices (cont) For personal use only Reserves and resources Disclosures of Origin and APLNG’s reserves and resources are as at 30 June 2017. These reserves and resources were announced on 16 August 2017 in the Annual Reserves Report. Origin confirms that it is not aware of any new informat
Slide 61: Glossary - Non-Financial Terms
Glossary - Non-Financial Terms Term Meaning For personal use only A reference to Australia Pacific LNG or APLNG is a reference to Australia Pacific LNG Pty Limited (and its related entities), an APLNG incorporated Joint Venture between Origin, ConocoPhillips and Sinopec in which Origin holds a 37.5%
Slide 62: For more information
For personal use only For more information Peter Rice Liam Barry Jeremy McNally General Manager, Capital Markets Manager, Investor Relations Manager, Investor Relations Email: peter.rice@originenergy.com.au Email: liam.barry@originenergy.com.au Email: Jeremy.mcnally@originenergy.com.au Office: +61 2