Origin Energy Limited · ASX:ORG
Origin Energy — FY2023 Earnings Presentation
62 slides from Origin Energy's earnings presentation, Aug 17, 2023
Slide 1: Origin Energy 2023 Full Year Results
Origin Energy 2023 Full Year Results Year ended 30 June 2023 Frank Calabria, CEO & Lawrie Tremaine, CFO 17 August 2023
Slide 2: Outline
Outline 1. Introduction - Frank Calabria 2. Financial Review - Lawrie Tremaine 3. Operational Review - Frank Calabria 4. Outlook - Frank Calabria 2 17 August 2023 2023 Full Year Results Announcement
Slide 3: Introduction
Introduction Frank Calabria, CEO
Slide 4: Strong earnings result and outlook
• Strong earnings result and outlook − Recovery in FY2023 Energy Markets’ earnings following a period of under recovery of wholesale costs − Further growth expected in Energy Markets’ FY2024 earnings, with returns recovering to earn cost of capital − Step change earnings growth in Octopus Energy − A
Slide 5: Financial highlights
Financial highlights Statutory Profit Underlying Profit Origin ROCE1 $1,055 $747 14.2% million million Up from $1,429 million Statutory Loss in Up from $407 million in FY2022 Energy Markets’ ROCE 6.7% FY2022 Integrated Gas ROCE 20.2% Adjusted Net Debt Adjusted Free Cash Flow Final Dividend $2.9 $965
Slide 6: Our ambition and strategy
Our ambition and strategy Our ambition To lead the energy transition through cleaner energy and customer solutions Unrivalled customer Accelerate renewable Deliver reliable energy solutions and cleaner energy through the transition Our • Leading brand providing lowest cost • Accelerate growth in ren
Slide 7: Executing on our strategy
Executing on our strategy Achieved to date Ambition • Kraken migration complete, remaining savings delayed to FY2025 • $200 - $250 million cost savings (FY2025 vs FY2018) • Octopus now #2 UK energy retailer, 9.7 million customer accounts • Octopus 100 million licensed Kraken accounts (2027) and 32 m
Slide 8: Well placed to capture value from the energy transition
Well placed to capture value from the energy transition ✓ Leading Retail business Advantaged ✓ Competitive gas supply, largest thermal peaking fleet portfolio ✓ High quality APLNG gas resource ✓ Simplified portfolio enabling focussed capital allocation ✓ Origin Loop (Virtual Power Plant) – multiple
Slide 9: Energy Markets and Octopus Energy targeted earnings trajectory
Energy Markets and Octopus Energy targeted earnings trajectory • FY2024 to FY2025 earnings trajectory as disclosed at the half year has been superseded by new FY2024 guidance (slide 45) • FY2024 earnings guidance is now higher than previously expected • We expect a reduction in electricity gross pro
Slide 10: Thermal peaking fleet is a growing source of earnings
Thermal peaking fleet is a growing source of earnings Capacity position NSW average capacity forward prices MW $/MWh 3,000 30 2,500 2,000 20 1,500 1,000 10 500 - - Origin Energy Energy Australia SnowyHydro AGL FY22 FY23 FY24 Source: AEMO data as at 13 July 2023 • Thermal peaking fleet covers ~ 50% o
Slide 11: In-house VPP (loop) has several value pools across wholesale and retail
In-house VPP (loop) has several value pools across wholesale and retail Targeting significant growth Virtual Power Plant value pools Wholesale Assets connected (MW) • Ability to move load to times of lower prices for a portion of assets • Near zero capital and low short run marginal cost, benefits s
Slide 12: Octopus has grown significantly with further value appreciation potential
Octopus has grown significantly with further value appreciation potential UK retail exceptional growth Growing Kraken licensing Value appreciation 10 (m) (m) 4 (£bn) 35 30 8 3 25 6 20 2 4 15 10 1 2 5 - - - May-20 Dec-20 Sep-21 Dec-21 Octopus Energy customer accounts Contracted Kraken customer accoun
Slide 13: Purpose led organisation: Getting energy right
Purpose led organisation Getting energy right Our Customers Our Communities Our Planet Our People ✓ Customer Happiness Index1 of ✓ Regional procurement 20% of ✓ Climate Transition Action Plan ✓ TRIFR down to 3.83 from 4.0 at 65% our total procurement spend received 94.5% shareholder June 2022 suppor
Slide 14: Policy must support investment and a sustainable transition
Policy must support investment and a sustainable transition • Substantial investment is required to underpin the new energy system – Investors require stable policy and adequate returns reflecting the risk profile • Investment in new gas supply is urgently needed • Any further Government interventio
Slide 15: Financial Review
Financial Review Lawrie Tremaine, CFO
Slide 16: Underlying Profit up $340 million to $747 million
Underlying Profit up $340 million to $747 million Movements in Underlying Profit ($m) (30) (2) (78) 140 226 (553) 637 747 407 FY22 EM Share of Octopus IG - Share of IG - Other Corporate D&A Tax/other FY23 EBITDA Energy profit APLNG profit EBITDA EBITDA Higher income Higher oil and tax expense Increa
Slide 17: Cash flow improved from H1 FY2023
Cash flow improved from H1 FY2023 ($m) FY23 FY22 Change Underlying EBITDA, adjusted for • Higher earnings from Energy Markets (up $637 million) 803 135 668 non-cash items Change in working capital (771) 119 (890) • Energy Markets impacts from the extreme wholesale price Futures exchange collateral (
Slide 18: Energy Markets cash conversion – expected to recover in FY2024
Energy Markets cash conversion – expected to recover in FY2024 Energy Markets segment results ($m) 2,000 • Price volatility positively impacted working capital 1,500 and collateral in FY2022 (see previous slide) • This position moved towards more normal levels in 1,000 FY2023 as wholesale prices aba
Slide 19: Record APLNG cash distribution
Record APLNG cash distribution APLNG distribution and Origin oil, gas and FX hedging 2,000 • APLNG distributed $1,783 million cash to Origin by way of unfranked dividends in FY2023, 1,500 $1,489 million net of Origin hedging • Strong operating cash flow of $8.2 billion after 1,000 $0.9 billion Queen
Slide 20: Dividend and capital management
Dividend and capital management Adjusted Net Debt / Adjusted Underlying EBITDA 4x 3x Final FY2023 dividend of 20 cps, fully franked, determined for a total FY2023 dividend 36.5cps 2x • 66% Adjusted Free Cash Flow payout ratio 1x • Payout ratio is above the target range, reflecting: - FY19 FY20 FY21
Slide 21: Energy Markets Underlying EBITDA up $637 million to $1,038 million
Energy Markets Underlying EBITDA up $637 million to $1,038 million Movements in Underlying EBITDA ($m) Electricity gross profit up $366 million to $574 million (89) (18) 379 • Higher wholesale prices flowing into business (+$395 million) and retail (+$366 million) customer tariffs • Increased fuel c
Slide 22: Share of Octopus Energy increased to significant positive contribution
Share of Octopus Energy increased to significant positive contribution Movements in Underlying EBITDA ($m) Retail (72) • The result reflects an increase in customer accounts and the lag in reset of tariffs – Prior year loss resulted from incurring higher cost of energy with an inability to pass onto
Slide 23: Integrated Gas Underlying EBITDA up 4% on higher export LNG prices
Integrated Gas Underlying EBITDA up 4% on higher export LNG prices Movements Underlying EBITDA ($m) 81 (176) Share of APLNG EBITDA up $355 million, excluding the impact of (243) the sell down: 684 18 (234) (47) • Higher realised oil prices of US$103/bbl (A$154/bbl) vs US$74/bbl (A$103/bbl) in FY2022
Slide 24: Operational Review
Operational Review Frank Calabria, CEO
Slide 25: Energy Markets
Energy Markets of -, -
Slide 26: Electricity margin was suppressed in H1 FY2023, now improving
Electricity margin was suppressed in H1 FY2023, now improving 1H FY2023 • Customer tariffs did not allow for full wholesale cost recovery • Improved coal deliveries reduced exposure to high spot prices, but coal costs remained high • Market volatility high in Q1 FY2023 2H FY2023 • No change in mass
Slide 27: Electricity margin recovery driven by higher tariffs and lower fuel costs
Electricity margin recovery driven by higher tariffs and lower fuel costs Customer tariffs increasing Coal prices have moderated Eraring contribution improved NSW electricity forward price ($/MWh) A$/t $/MWh 250 700 120 600 100 200 500 80 150 400 60 FY2024 300 100 FY2023 FY2025 40 200 50 100 20 - -
Slide 28: Gas margin higher on tariffs repricing and trading gains
Gas margin higher on tariffs repricing and trading gains Energy Markets Gross profit Trading gains on JKM supply contracted gas supply A$/GJ A$/GJ PJ 70 250 Majority Optimised JKM 60 of JKM physical and hedge hedge positions 200 50 purchase activity 150 40 5.1 30 100 3.7 3.0 20 2.3 50 10 - - FY20 FY
Slide 29: Competition trending higher, continuing to grow customer base
Competition trending higher, continuing to grow customer base Competition Large and growing customer base 25% Market offer discount % off DMO / VDO Customer accounts (‘000) 4,458 4,525 4,236 4,266 20% 15% 10% 5% - May-22 Oct-22 Mar-23 Aug-23 FY20 FY21 FY22 FY23 Discount % off DMO (Ausgrid - NSW) Ele
Slide 30: Kraken migration complete, savings targeted for FY2025
Kraken migration complete, savings targeted for FY2025 Cost savings $m • Successful migration of all mass market customers to Kraken, 800 currently in a period of operations stabilisation $200 – 250m • Kraken platform and unique operating model are designed to reduction 600 enable the delivery of ex
Slide 31: Scaling up growth opportunities
Scaling up growth opportunities Community Energy Services Broadband Origin Loop (VPP) 200 Gross Profit ($m) 500 Customer accounts (‘000) Assets connected (MW) Customer accounts (‘000) 3x +216% 442 400 150 403 300 100 280 96 257 815 200 148 61 50 98 75 82 100 33 258 20 159 85 - - FY20 FY21 FY22 FY23
Slide 32: Origin Zero – Accelerating large business customers to net zero
Origin Zero – Accelerating large business customers to net zero Large business customers on Large business customer EVs under management broader services MWs on VPP 8% 300 Assets connected (MW) 1,000 # of EVs 250 800 6% 200 600 4% 150 400 100 2% 200 50 - - - FY22 FY23 FY24 target FY22 FY23 FY24 targ
Slide 33: Octopus Energy
Octopus Energy of -, -
Slide 34: Octopus Energy successfully navigated unprecedented market volatility
Octopus Energy successfully navigated unprecedented market volatility UK wholesale electricity volatility £/MWh UK market volatility 600 • War in Ukraine resulted in gas shortages and energy price spikes across Europe 500 • Significant market consolidation as unhedged retailers unable to sustain hig
Slide 35: Exceptional growth, underpinned by outstanding customer satisfaction
Exceptional growth, underpinned by outstanding customer satisfaction Exponential growth in retail Outstanding customer satisfaction Trusted brand 12 Customer accounts (m, LHS) and 16 30 NPS % of customers who trust their energy supplier revenue (£bn, RHS) 80% 10 20 60% 12 40% 8 10 20% 6 8 - - (20%)
Slide 36: Kraken: Next-gen technology platform for the energy and utility sectors
Kraken: Next-gen technology platform for the energy and utility sectors Kraken tech licensing Customers on Kraken today Kraken flexibility (m) 60 # of devices on Intelligent Octopus (‘000) 35 UK Germany 30 50 25 US - Texas France 40 20 30 15 New Zealand Japan 20 10 Australia Spain 10 5 - - Italy Bel
Slide 37: Integrated Gas
Integrated Gas of -, -
Slide 38: Strong resource base
Strong resource base 24,000 APLNG Reserves and cumulative production (PJ)1 20,000 • Continuing confidence in resource base with net positive reserves revision before production 16,000 • Non-operated positive reserves revision (219PJ) 12,000 reflecting better than expected performance 8,000 • Reserve
Slide 39: Strong production rebound following La Niña weather
Strong production rebound following La Niña weather Stable production from quality assets Production rebound Daily operated APLNG production (100%) (PJ) TJ/Day Operated production production record of 800 1,618TJ/day in May 1,600 700 Increased workover activity 600 1,550 La Niña Weather 500 Impacts
Slide 40: Record revenue driven by higher average oil prices on export contracts
Record revenue driven by higher average oil prices on export contracts Higher commodity prices over 1H FY2023 Record revenue 60 A$/GJ 12,000 $m 50 10,000 40 8,000 30 6,000 20 4,000 10 2,000 - 0 FY21 FY22 FY23 FY21 FY22 FY23 Average LNG contract price Average domestic price LNG revenue Domestic reven
Slide 41: APLNG is a reliable & significant contributor to domestic markets
APLNG is a reliable & significant contributor to domestic markets Domestic sales PJ 200 25% • APLNG continues to play an important role in providing secure gas supply to customers on Australia’s East Coast 160 20% • >150PJ sales for each of the last three years 120 15% • Domestic sales volume was lo
Slide 42: Costs up due to increased activity and cyclical maintenance
Costs up due to increased activity and cyclical maintenance Cyclical costs impacting cost base APLNG Capex + Opex (100%)1 $bn Higher costs from FY2022 predominantly driven by: • Increased workover activity focused on reducing La Niña weather inventory backlog. Final year of elevated workover program
Slide 43: Production levers
Strategy focused on short cycle, low-cost supply initiatives Lowest cost / • Successful program to increase percentage of wells operating at optimal pressures over 2H Short cycle Optimise existing FY2023 wells • Opportunity to further optimise, and to drive lower pressures to improve network flow ra
Slide 44: Outlook
Outlook Frank Calabria, CEO of -, -
Slide 45: Guidance – Energy Markets and Octopus Energy
Guidance – Energy Markets and Octopus Energy The following guidance is provided on the basis that market conditions and the regulatory environment do not materially change FY2024 • Energy Markets EBITDA is expected to be $1,300 – $1,700 million, excluding Energy Markets returns are Octopus Energy re
Slide 46: Guidance – Integrated Gas
Guidance – Integrated Gas The following guidance is provided on the basis that market conditions and the regulatory environment do not materially change Integrated Gas - APLNG 100% FY2023 FY2024 guidance Production PJ 674 680 – 710 Capex and opex, excluding purchases1 A$b 2.6 2.8 – 3.0 Unit capex +
Slide 47: Appendix
Appendix -, -
Slide 48: Items excluded from Underlying Profit
Items excluded from Underlying Profit Reconciliation from Statutory to Underlying Profit ($m) • $88 million business restructuring costs, including $55 million relating to the Kraken implementation 13 • $13 million relating to disposals - loss on 88 (180) disposal of interests in the Beetaloo Basin
Slide 49: Capex
Capex Origin capex ($m) FY23 Capex 500 • Managing sustaining capex on key assets: costs associated with the Ash Dam at Eraring ($69 million); 400 Darling Downs Power Station capital spares and major outage along with other maintenance activities across the 300 fleet. Spend in FY2021 and FY2022 was m
Slide 50: Large-scale Generation Certificates strategy – refund of shortfall charge
Large-scale Generation Certificates strategy – refund of shortfall charge LGC strategy benefit $/certificate • Over FY2021 to FY2023, we deferred the surrender of ~9 million 80 certificates, incurring a shortfall charge of $65/certificate or $602 million in total 70 • This shortfall charge was inclu
Slide 51: Large-scale Generation Certificates (LGC) strategy
Large-scale Generation Certificates (LGC) strategy Adjustments to Statutory Profit Statutory Shortfall CY2020 CY2021 CY2022 Underlying Impact across various financial years ($m) Profit charge/(refund) surrender cost surrender cost surrender cost Profit FY2021 CY2020 and CY2021 certificates shortfall
Slide 52: Customer account movements
Customer account movements Electricity ('000) 20 Customer accounts ('000) as at 30 June 2023 30 June 2022 Change 10 Electricity 2,742 2,733 9 - Business 28 31 (2) (10) Retail – Residential 2,240 2,243 (2) (20) Retail – SME 288 291 (4) (30) Retail – Community Energy Services 185 168 17 (40) Gas 1,282
Slide 53: Electricity forward price by State ($/MWh)
Electricity forward price by State ($/MWh) 250 NSW 250 QLD 200 200 150 150 100 100 50 50 - - May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22 Nov-22 Feb-23 May-23 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22 Nov-22 Feb-23 May-23 VIC 250 SA 200 200 150 150 100 100 50 50 - - May-21 Aug-21 Nov-21 Feb-22 May-22 A
Slide 54: Energy Markets segment revenue reconciliation
Energy Markets segment revenue reconciliation The table below reconciles the difference between segment revenue and customer revenue disclosed in the Electricity, Natural Gas, LPG and Solar & Energy Services tables. FY23 FY22 Change Change ($m) ($m) ($m) (%) Energy Markets segment revenue 15,405 13,
Slide 55: Managing oil price exposure
Managing oil price exposure FY2024 120 FY2024 Oil Price Sensitivity Effective Oil Price US$/bbl • Origin share of APLNG JCC oil price and JKM gas price exposure is ~17 MMboe and ~18 tBtu • As at 7 August 2023, we estimate that 41 per cent of JCC and 23 per cent of JKM 70 FY2024 exposure has been pri
Slide 56: Segment summary
Segment summary Energy Markets Share of Octopus Integrated Gas Integrated Corporate Total Energy - Share of APLNG Gas - Other ($m) FY23 FY22 FY23 FY22 FY23 FY22 FY23 FY22 FY23 FY22 FY23 FY22 Underlying EBITDA 1,038 401 240 (36) 2,246 2,134 (327) (297) (90) (88) 3,107 2,114 Underlying EBIT 535 (24) 1
Slide 57: Underlying ROCE – 12 month rolling
Underlying ROCE – 12 month rolling 30 June 2023 30 June 2022 Change Change As at ($m) ($m) ($m) (%) Capital Employed Net Assets 8,911 10,022 (1,111) (11%) Adjusted Net Debt 2,877 2,838 39 1% Net derivative (asset)/liability (601) (2,915) 2,314 (79%) Origin's share of APLNG net debt (project finance
Slide 58: Reconciliation of Adjusted Net Debt
Reconciliation of Adjusted Net Debt Issue Issue Hedged Hedged AUD $m AUD $m AUD $m $m Currency Notional Currency Notional Jun-23 Jun-23 Jun-23 Interest bearing Debt & CCIRS FV Adjusted net debt liabilities2 adjustments AUD debt AUD 826 AUD 826 814 814 USD Debt left in USD USD 610 USD 610 919 919 EUR
Slide 59: Financial Instruments and fair value adjustments
Financial Instruments and fair value adjustments Balance Sheet Impact Income Statement Impact Financial asset/(liability) Pre-tax Post-tax Gain/(loss) Inc/(dec) in Inc/(dec) in Gain/(loss) Gain/(loss) Total inc/(dec) included in financial other net excluded from excluded from ($m) 30 Jun 2023 30 Jun
Slide 60: Important notices
Important notices 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 certainty of outcome in re
Slide 61: Important notices
Important notices All figures in this presentation relate to businesses of the Origin Energy Group (Origin, or the Company), being Origin Energy Limited and its controlled entities, for the reporting period ended 30 June 2023 (the period) compared with the reporting period ended 30 June 2022 (the pr
Slide 62: For more information
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 Lindsay Donnelly Group Manager, Investor Relations Email: lindsay.donnelly@originenergy.com.au Office: +61 2 8345 5502 Mobile: + 61 414 697 070 orig