Origin Energy Limited · ASX:ORG
Origin Energy — H1 FY2005 Earnings Presentation
48 slides from Origin Energy's earnings presentation, Feb 21, 2005
Slide 1: ASX Half Yearly Results Announcement transmittal
Origin energy To Company Announcements Office Facsimite 1300 300 021 Company Australian Stock Exchange Limited Date 21 February 2005 From Bill Hundy Pages 48 Subject Half Yearly Results Announcement This Transmittal is confidential. If you have received this document in error, please contact Origin
Slide 2: Media Release: 21% increase in half year profit and Rights Issue
Origin energy Media Release 21 February 2005 Origin Energy announces a 21% increase in half year profit and Renounceable Rights Issue An initial three months of contribution from Contact Energy, increased oil production and energy retailing and profits from the sale of the Carpentaria pipeline have
Slide 3: Media Release: Rights Issue details and outlook
Origin energy Details of the Rights Issue are contained in a Prospectus lodged with ASIC and ASX today. A letter advising shareholders of the Rights Issue will be sent to shareholders today and the Prospectus will be sent no later than 7 March 2005. The Rights Issue will raise a total of approximate
Slide 4: Rights Issue
Origin energy Rights Issue The Rights Issue is being made to all Shareholders with registered addresses in Australia and New Zealand as at 7.00pm (Australian Standard Eastern Time) on 2 March 2005. The issue price for shares under the Rights Issue will be $5.70 per share. This represents a 17% disco
Slide 5: Media release contact details
Origin energy For further information on this media release, please contact: Mr Grant King Mr Angus Guthrie Managing Director Manager, Investor Relations Origin Energy Origin Energy Telephone: (02) 8345 5435 Telephone: (02) 8345 5558 4/5
Slide 6: Origin Energy Key Financials
Origin energy Origin Energy Key Financials Half year ended 31 December (om ism) % change Total revenue 2,292 1,846 24% EBITDA 440 306 44% EBIT 305 206 48% Profit before tax 251 182 38% Profit after tax 174 127 37% Profit after tax and outside equity interests 152 126 21% Free cash flow” 247 230 7% O
Slide 7: Interim Results Announcement
Interim Results Announcement Half-year ended 31 December 2004 21 February 2005 piaavesienersiberes2222 wr nme senor Jasons:
Slide 8: Outline
Outline Performance Highlights Financial Review Operating Review Outlook All comparative data are in relation to the prior corresponding period, July - December 2003, unless otherwise stated All references to $ are references to Australian dollars unless otherwise specifically marked A reference to
Slide 9: Performance Highlights
Slide 10: Financial Highlights
Financial Highlights Page 4 Revenue* EBITDA* NPAT Basic EPS Free cash flow (FCF) FCF per share Debt / (debt + equity) OCAT Ratio* Interim dividend § 2,292 million S$ 440 million § 152 million 22.6 cps S 247 million 36.8 cps 41% (31 Dec 04) 13.6% 7 cents per share fully franked # Contact consolidated
Slide 11: Operating Highlights
Operating Highlights » Acquisition of 51.4% interest in Contact effective 1 October 2004 « Higher retail margins realised despite increased levels of churn * Increased oil production from the Perth Basin « Liquids processing restored at the Moomba gas plant in August * Development drilling at Yolla
Slide 12: Rights Issue
Rights Issue Page 6 Pro-rata renounceable Rights Issue of 1 new share for every 6 existing shares at $5.70 per new share Proceeds of $641 million to repay CUPS issued to fund the Contact acquisition with the balance of net proceeds to repay debt Fully underwritten by Citigroup and Deutsche Bank Offe
Slide 13: Financial Review
Slide 14: Consolidation of 100% of Contact changes presentation of results
The consolidation of 100% of Contact produces a number of significant changes in the presentation of Origin’s results Consolidation of Contact - Origin has consolidated 100% of Contact Energy as required by Australian accounting standards. - Outside equity interests are recognised in reporting of ne
Slide 15: Profit & Loss
Profit & Loss Dec 04 Dec 03 % change ($m) ($m) Revenue 2,291.8 1,845.8 24% EBITDA 440.4 306.5 44% EBIT 304.6 205.9 48% Net interest expense (53.3) (24.0) 123% Tax expense (77.2) (54.8) 41% Outside Equity Interests (22.0) (1.5) 1387% NPAT 152.1 125.6 21% Earnings per share (cents) 22.6¢ 19.2¢ 18% Fre
Slide 16: EBITDA of $440.4 million is 44% higher
EBITDA of $440.4 million is 44% higher primarily due to the inclusion of 100% of Contact Divisions Dec 04 Dec 03 % change ($m) ($m) Exploration & Production 121.0 102.9 18% Retail 157.4 147.2 7% Generation 30.0 43.2 (31%) Networks 16.5 13.2 25% Contact 115.5 “ “ Total 440.4 306.5 44% * * * * Page #0
Slide 17: Depreciation & Amortisation
Depreciation & Amortisation Dec 04 Dec 03 ($m) ($m) Buildings, plant & equipment 81.2 46.2 Amortisation of exploration and 33.3 27.2 evaluation costs in producing areas Electricity hedging contracts 2.2 4.6 Intangibles 18.3 21.7 Other 0.8 0.9 Total 135.8 100.6 - Contact consolidation primarily impac
Slide 18: Profit & Loss
Profit & Loss Dec 04 Dec 03 % change ($m) ($m) Revenue 2,291.8 1,845.8 24% EBITDA 440.4 306.5 44% EBIT 304.6 205.9 48% Net interest expense (53.3) (24.0) 123% Tax expense (77.2) (54.8) 41% Outside Equity Interests (22.0) (1.5) 1387% NPAT 152.1 125.6 21% Earnings per share (cents) 22.6¢ 19.2¢ 18% Fre
Slide 19: Funding & Interest
Funding & Interest Six months ended Dec 04 Jun04 #£2Dec 03 ($m) ($m) ($m) Net debt ($m) 2,742 861 744 Total equity ($m) 3,915 1,939 1,870 Net debt to equity (%) 70% 44% 40% Debt to (debt + equity) (%) 41% 31% 28% Net interest expense ($m) 53.3 21.4 24.0 Net interest cover (x EBIT)* 4.9 6.2 8.5 Avera
Slide 20: Convertible Undated Preference Shares (CUPS)
Convertible Undated Preference Shares (CUPS) Page 14 Facility drawn $600 million Subscriber Deutsche Bank Dividends BBSW + 100 bps, discounted for franking payable on reset dates Term Perpetual First Reset Date 31 May 2005 Issuer Redemption At face value plus accrued dividend Holder Conversion On re
Slide 21: Tax Reconciliation
Tax Reconciliation Dec 04 Dec 03 ($m) ($m) Profit before tax 251.3 181.9 Prima facie tax 77.4 54.7 add non deductible amortisation 12.0 6.9 less one-off items (8.6) (4.1) less other permanent differences (3.6) (2.7) equals Tax expense 77,2 54.8 Tax paid (64.2) (3.8) Subvention payments - (4.0) ° * P
Slide 22: Operating cash flow after tax has increased
Operating cash flow after tax has increased with the inclusion of 3 months of Contact Dec 04 ($m) Dec 03 ($m) EBITDA 440 306 Change in working capital (38) (7) Stay-in-business capex (net*) (55) (39) Other (incl. non-cash items) 18 1 Tax / subvention payments (64) (8) OCAT 301 254 Net interest paid
Slide 23: Growth capex for major development projects increased
Growth capex for major development projects increased weenes Dec 04 ($m) Dec 03 ($m) Stay-in-business 56.4 39.7 Growth Exploration & Production 142.4 105.7 Retail 11.4 7.5 Generation 3.5 4.8 Networks 0.0 0.0 Contact 10.3 0.0 Total capital expenditure 224.0 157.7 Acquisitions 967.5 83.5 Capex includi
Slide 24: Cash flow return from business segments
Cash flow return from the business segments is measured pre-tax and targets 14.3% over a full year Funds Operating OCFR OCFR Employed Cashflow Dec04 Dec 03 ($m) ($m) (%) (%) Half year returns* Exploration & 1,239 77.4 6.3% 8.5% Production Retail 1,259 140.1 11.1% 11.1% Generation 335 24.3 7.3% 7.2%
Slide 25: Interim fully franked dividend of 7 cents per share
An interim fully franked dividend of 7 cents per share has been declared (prior period 6 cents fully franked) Dividends - cents per share Franking Payment and DRP 14 + 100% 100% 40% 100% 100% « Ex-dividend date 24 February 2005 « Date of record 2 March 2005 « Payable 23 March 2005 « DRP to apply at
Slide 26: Operating Review
Slide 27: Executive Management Team reorganised and streamlined
The Executive Management Team of Origin has been reorganised and streamlined ......... . | | Lt = ..... to ensure clear accountabilities for continued improvement of performance in existing businesses and identifying and implementing new opportunities fo growth Page 21 ‘Ongin,
Slide 28: Exploration & Production: EBITDA of $121.0 million up 18%
Exploration & Production: EBITDA of $121.0 million up 18% on higher oil revenues and sale of Carpentaria gas pipeline 200 180 * Oil production rates in the Perth Basin HiDec-04 . continued to increase averaging over Dec-03 | y 160 4,200 bopd. Average oil price | 440 marginally higher net of hedges M
Slide 29: Oil sales from Perth Basin rose; Moomba liquids restored
Oil sales from the Perth Basin continued to rise and Moomba liquids production was restored for 4 months of the half 100 « Liquids sales should increase , Liquids Sales by Product by Half Year (PJE) again in the coming half: - Perth Basin approaching 5,000 bopd net to Origin - Moomba liquids process
Slide 30: Reserves revisions in Cooper and Otway Basins
Specific events in the Cooper and Otway Basins led to reserves revisions with no impact on asset carrying values Proved and Probable Reserves (PJe*) 2P reserves at 30 June 2004 2,220 less Cooper & Otway reserves revisions* (39) less Production to 31 Dec 2004 (41) Approximate current 2P reserves# 2,1
Slide 31: BassGas project construction delays
The BassGas project experienced significant construction delays with gas introduced onto the platform in January 2005 Page 25 BassGas Project (37.5%) + Development drilling completed in September. Several zones tested and new hydrocarbon pools discovered + Some impurities detected in the gas stream
Slide 32: Spring Gully Project on schedule
The Spring Gully Project is continuing on schedule for delivery of gas in July 2005...... wo voed « Construction at Spring Gully F “nif Rackhampton approaching 80% complete mid February Basin. < 2005 Gladstone « 21 wells commissioned representing nearly half of required wells, with flow ious rates e
Slide 33: Otway Gas Project and Kupe Gas Project progress
Planning and development of the Otway Gas Project and Kupe Gas Project progressed steadily during the half..... Otway Gas Project (29.75%) ° Project 16% complete at 31 December 2004 Regulatory approvals received on time Gas plant site work commenced in October 2004 Platform design 87% complete at 31
Slide 34: Retail: EBITDA of $157.4 million up 7%
Retail: EBITDA of $157.4 million up 7% as stronger electricity margins offset lower gas volumes and higher LPG purchasing costs 1,800 1,600 - Total Segment Revenue ($m) Page 28 1,400 5 1,200 1,000 5 800 - Revenue EBITDA Capex+ + excludes acquisitions Segment revenues increased 5% as the net impact o
Slide 35: Average prices higher for electricity and LPG
Average prices higher for electricity and LPG. Gross margin increased for both products, but decreased for natural gas Product information and % Natural Gas Electricity LPG change from Dec 03 Revenue (A$m) 455 (-2%) 868 (43%) = 255 (432%) Gross margin (A$m) 78 (-12%) 153 (414%) 74 (419%) Sales (PJ)
Slide 36: Pool prices have risen but contract prices steady
Pool prices have risen over the last half but contract prices have remained reasonably steady....... $70 Victorian Spot and ForwardiContract Electricity Prices $50 ecb peg -}------paip--------- ccc crc - rc r rc rrr z Forward Forward 2 Curve end | | Curve end & 94050 + Ay - eo P-paccapc ccc cnr --71
Slide 37: Focus on margins lifts EBITDA and EBIT margins
Origin’s focus on margins has seen EBITDA and EBIT margins increase this half despite customer losses.... Mass Market Churn: Completed & Pending # Origin Natural Electricity 50% Customers Gas 45% + ©=VIC Elec NSW Elec (‘000) 40% | =" SA Elec Vic Gas Jun ‘04 979% 894* 359% {| me NSW Gas ==SA Gas Dec
Slide 38: New products and sales channels
Origin has continued to investigate and develop new products and sales channels....... ~s * Origin has run a number of targeted campaigns emphasising customer choice, augmented products, value and incentives to stay + Separate and exclusive offerings include: $50 off AFL club membership 1 month’s fr
Slide 39: Acquisition of remaining 50% of Rockgas in New Zealand
The acquisition of the remaining 50% of Rockgas in New Zealand added significant sales volumes ....... Weighted Average International + Rockgas added 26 ktonnes but Propane Price (CP) Australian volumes declined by around 11 kt, mostly in autogas International Propane Price + Cost of LPG benchmark C
Slide 40: Generation: EBITDA of $30 million
Generation: EBITDA of $30 million, $13 million lower than last year due to non-recurrence of Dec 03 benefits....... F454 _ cL Dec-04 : 2 Dec-03 154 4 = a 5, @ 10; Fe o Ee Revenue EBITDA Capex* * excludes acquisitions 25 (tig) xade> T _ oS T Nw oS * Lower result for Dec 04 reflects non- recurrence of
Slide 41: Availability for externally contracted plants
Availability for externally contracted plants was high with the exception of Osborne (major planned outage Oct & Nov) Major Origin | Origin | Capacity | Type | Operation | Availability | Contracting Power Int. % MW Party Plants Worsley 50 120 Cogen | Base 98% Western Power & Worsley Bulwer ls. 50 32
Slide 42: Networks: EBITDA of $16.5 million up 25%
Networks: EBITDA of $16.5 million up 25% on six month contribution from SEA Gas pipeline......... . 100 1.2 SEA Gas contribution of $3.3 million 90 4 @ Dec-04 Higher network management fees 80 5 received from Envestra were more 70 4 than offset by lower incentive fees 60 4 Consumers connected increa
Slide 43: Contact: EBITDA of $115.5 million
Contact: EBITDA of $115.5 million in line with Origin’s expectations at the time of acquisition..... 400 140.0 « Acquisition completed on 1 October @ Dec-04 2004 350 5 'Dec-03 | 120.0 « Changes to Board and senior 300 | + 400.0 management 250 4 . stuti | $0.0 Constitution changed 200 | + Change of b
Slide 44: Retail prices in NZ continue to increase
Retail prices in NZ have continued to increase since Origin announced acquisition of an interest in Contact......... . Contact Retail Pricing 1998 - Nov 2004 Simple Average Retail Price in Incumbent Areas* 20 18 SEP: é.. ad . Tie 10 8 Apr-98 Apr-99 Apr-O0O Apr-61 Apr-02 Apr-03 Apr-04 * Exel GST. inc
Slide 45: Outlook
Slide 46: Outlook: second half and full year EPS expectations
Profit over the first half was enhanced by three months contribution from Contact and increased contributions from E&P, Retail and Networks. Results for the second half are expected to be higher than the corresponding period last year due to: ¢ The inclusion of six months of Contact ¢ The return to
Slide 47: Strong prospects for continued growth through major projects
Looking further ahead there are strong prospects for continued growth through a range of major projects Growth capital expenditure compared with calendar * Estimated Annual Expenditure {A$ million) 992004 free cash flow (excluding Contact}* 5i 450 400 4 free cash flaw* 350 $329 million 2004 Calendar
Slide 48: Slide 48