Origin Energy Limited · ASX:ORG
Origin Energy — Citi's Australian & New Zealand 6th Annual Investment Conference 2009
68 slides from Origin Energy's conference presentation, Mar 9, 2009
Slide 1: ASX announcement cover note
For personal use only To Company Announcements Office Facsimile 1300 135 638 Company ASX Limited Date 9 March 2009 From Bill Hundy Pages 68 Subject PRESENTATION Attached for your information is a presentation being made by Mr Grant King, Managing Director to Citi’s Australian & New Zealand 6th Annua
Slide 2: Balance Sheet Strength Provides Opportunities to Grow & Develop
For personal use only Balance Sheet Strength Provides Opportunities to Grow & Develop Citi’s Australian & New Zealand 6th Annual Investment Conference London 9 March 2009 1
Slide 3: Important Notice
Important Notice This presentation does not constitute investment advice, or an inducement or recommendation to acquire or dispose of any securities in Origin, in any jurisdiction (including the USA). This presentation is for information purposes only, is in a For personal use only summary form, and
Slide 4: Outline
Outline For personal use only • Company Strategy • Strategy Implementation • Appendix 3 3
Slide 5: Company Strategy
For personal use only Company Strategy 4
Slide 6: Origin operates in domestic energy markets in Australia and New Zealand
Origin operates in the domestic energy markets in Australia and New Zealand. Growth in demand in these markets for electricity, natural gas and LPG has averaged around 4% per For personal use only annum since the 1980s even through times of recession Source: ABARE, Access Economics Origin’s share of
Slide 7: Fuel integrated generator retailer strategy
Origin’s strategy of being a fuel integrated generator retailer is designed to… For personal use only Fuel Generator Retailer A leading producer of gas in Largest owner and developer of A leading wholesaler and Eastern Australia involved in the gas fired electricity generation retailer of energy & A
Slide 8: Consistent record of underlying earnings and dividend growth
Effective implementation of this strategy has delivered a consistent record of underlying earnings and dividend growth For personal use only 9,000 Revenue 1,500 EBITDAF Compound annual growth rate: 26% Compound annual growth rate: 23% 7,500 1,200 6,000 900 $millions $millions 4,500 600 3,000 300 1,5
Slide 9: Underlying Profit for the first half up 38% to $277 million
Origin’s history of profit growth continues with Underlying Profit for the first half up 38% to $277 million For personal use only Financial Highlights – HY2009 Revenue $4,216 m up 10% • The interim dividend increased by 108% to 25 EBITDAF $686 m up 12% cps, consistent with Statutory Profit $6,663 m
Slide 10: Continued growth of the existing business
As the operating and economic environment for businesses becomes more challenging, Origin has been able to continue to grow its existing business… For personal use only • Full half year contribution from Otway Gas Project • Continued development of New Zealand upstream business with full half year c
Slide 11: CSG transaction with ConocoPhillips
In addition to the ongoing growth in earnings, the highlight of the current financial year has been the CSG transaction with ConocoPhillips… For personal use only ConocoPhillips has subscribed for a 50% interest in Australia Pacific LNG Assets Australia Pacific LNG includes all of Origin’s CSG inter
Slide 12: $6.4 billion of cash and undrawn committed debt facilities
As a result of this transaction, Origin is now in an unparalleled position with $6.4 billion of cash on deposit and undrawn committed debt facilities… For personal use only As at 31 December 2008 Undrawn Available Adjusted Committed Funding (1) (2) (1) Gross Debt Cash Debt Facilities Capacity Source
Slide 13: Significant increases in value for shareholders
The consistent pursuit of Origin’s strategy and the APLNG transaction have resulted in significant increases in value for shareholders For personal use only Origin Compound Origin’s TSR Compound AnnualRate: Annual Growth Growth 30% Rate: 30% Source: Guerdon Associates, Bloomberg • Market capitalisat
Slide 14: Strategy Implementation
For personal use only Strategy Implementation 13
Slide 15: Exploration & Production
For personal use only Exploration & Production 14
Slide 16: Developing gas reserves close to markets
Developing gas reserves close to markets has been a key component of Origin’s strategy… For personal use only Origin’s 2P Reserves (1) • Extensive portfolio of gas and oil exploration and production interests near key markets in Australia and New Zealand • Leading operator and largest producer of CS
Slide 17: Investments in new production areas offset declining assets
Investments in new production areas over the last decade have more than offset the anticipated decline of maturing assets… For personal use only • Underlying CSG production continued to grow, although Origin interests in CSG and Denison Trough diluted by 50% from November 2008 due to APLNG transacti
Slide 18: Liquids production from Cooper and Perth basins declining
Liquids production from the mature Cooper and Perth basins continues to decline… • Whilst the Cooper basin is in decline, the For personal use only Cooper Oil Program has delivered incremental growth to oil production • Perth Basin production continues to decline • Otway Gas Project and Taranki have
Slide 19: APLNG is progressing well
APLNG is progressing well APLNG Established For personal use only • Origin & ConocoPhillips senior executives appointed to APLNG Board • Board has appointed Project Director, Chief Financial Officer, Commercial Manager and LNG Marketing Manager • Initial Advice Statement seeking significant project
Slide 20: APLNG strong growth in CSG production and reserves
APLNG continues strong growth in CSG production and reserves… For personal use only Source: Origin APLNG’s CSG Interests(1) (PJ) 30 Jun 2008 31 Dec 2008 Change(2) Increase 1P Reserves 1,375 1,527 + 152 + 11% 2P Reserves 4,751 5,482 + 731 + 15% 3P Reserves 10,138 11,110 + 972 + 10% Contingent Resourc
Slide 21: APLNG has the leading CSG reserves position
APLNG has the leading CSG reserves position… For personal use only Eastern Australia 2P CSG Reserves by Company Eastern Australia 3P CSG Reserves by Company Source: RLMS Eastern Australia CSG Reserves 27 February 2009 … both on a 2P and 3P basis 20 20
Slide 22: Kupe Gas Project and Ahuroa Gas Storage update
With the next phase of APLNG’s CSG development to be funded by ConocoPhillips, and a number of development projects nearing completion… For personal use only Kupe Gas Project • Offshore operations were successfully completed early in the half year • Project is 90% complete with commercial operations
Slide 23: Exploration program review and surrendered acreage
Origin has reviewed its exploration program and reduced exposure by surrendering areas assessed to have low prospectivity… For personal use only Kenya Origin surrendered one permit and renegotiated work program on Block L8 to acquire 300 sq km of 3D seismic instead of a drilling a well. Farminees wi
Slide 24: Significant exploration opportunities to be drilled
Notwithstanding the review of exploration opportunities and expenditure… For personal use only An active seismic exploration program is being undertaken in New Zealand, including 2D Piwakawaka 2D SS surveys in the Northland and Canterbury basins, and a large 3D survey over the prospective Carrack an
Slide 25: HY2009 Exploration & Production results
HY2009: Record Production, Sales and Revenue reflect contributions from new assets… For personal use only • EBITDAF of $175m up 32% with increased 400 400 production from Otway Gas Project, Taranaki Dec-08 assets and CSG partially offset by lower 350 Dec-07 350 Total Revenue & EBITDAF ($m) productio
Slide 26: Generation
For personal use only Generation 25
Slide 27: Developments increasing generation capacity
Major developments and acquisitions are significantly increasing Origin’s generation capacity… For personal use only Origin’s Generation Capacity • Largest owner and developer of gas fired electricity generation in Australia • Investing over $1.5 billion in generation, doubling capacity to 2,800MW b
Slide 28: Origin's Electricity Generation Portfolio
Origin’s Electricity Generation Portfolio For personal use only Capacity Origin’s Generation Plants State Operation Status (MW) Externally Contracted* Worsley WA 60 Cogen Operational Bulwer Island QLD 16 Cogen Operational Osborne SA 90 Cogen Operational Internally Contracted Quarantine SA 216 Peak O
Slide 29: Gas-fired fleet well placed in carbon-constrained environment
Origin’s fleet of gas-fired power stations is well placed to benefit in a carbon-constrained environment… For personal use only • Addition of Uranquinty and Quarantine expansion has more than doubled Origin’s generation equity interests to 1,465 MW • Origin has committed to build an additional 1,340
Slide 30: Electricity price volatility increasing
Origin is doubling the capacity of its generation fleet at a time when electricity price volatility is increasing… For personal use only … and higher forward prices provide significant 29 opportunities Source: NEMMCO, ICAP & Origin 29
Slide 31: Uranquinty complete; Quarantine expansion commissioning
Uranquinty Power Station is now completed and fully operational… For personal use only All 4 completed Uranquinty PS turbines New unit at Quarantine PS Uranquinty Power Station Quarantine Power Station Expansion • 640 MW Peaking Plant (4 x 160 MW OCGT) • 120 MW expansion (1 x 120 MW OCGT) • Located
Slide 32: Darling Downs and Mortlake power stations
Darling Downs Power Station is progressing well… For personal use only Darling Downs PS Turbine Building steel erection Impression of Mortlake PS once constructed Darling Downs Power Station Mortlake Power Station • 630 MW Base Load plant • 550 MW Peaking plant • Largest CCGT plant in Australia • Ex
Slide 33: Renewable energy options: wind, geothermal, solar
Origin also continues to develop a number of renewable energy options… Wind For personal use only • Construction of the 30 MW wind farm at Cullerin Range is well progressed with commissioning expected in mid-2009 • Origin has development sites for another 58 MW and an option over up to 500 MW of win
Slide 34: HY2009 Generation EBITDAF lower due to Worsley outage
HY2009: EBITDAF was lower primarily due to the Worsley plant outage… For personal use only 50 600 • EBITDAF was $21 million, $11 million lower Dec-08 than the prior half year 45 Dec-07 540 • The Worsley cogeneration plant in WA had Total Revenue & EBITDAF ($m) 40 480 an extended outage after a power
Slide 35: Retail
For personal use only Retail 34
Slide 36: Leading wholesaler and retailer of energy with around 3 million customers
Origin is a leading wholesaler and retailer of energy in Australia with around 3 million customers providing significant scale and geographic diversity… For personal use only Origin’s Energy Sales • Around 3 million customers across Australia • Margins maintained despite high levels of churn and inc
Slide 37: Increased energy retailing margins
Origin has been able to increase its energy retailing margins through building scale and effectively managing tariffs, churn, cost to serve and risk… For personal use only • With around 3 million customers, Origin is able to achieve significant scale advantages • Origin has worked with governments o
Slide 38: Churn remains high in most segments
Even after higher wholesale prices moderated churn rates from their peaks in 2007, churn still remains high in most segments… For personal use only December 2008 Origin Customer Numbers(1) Natural (000’s) Electricity Total Gas Jun 2008 880 1,729 2,609 Change -2 +7 +4 Dec 2008 878 1,735 2,613 Source:
Slide 39: Volatile electricity markets and rising forward curve
Electricity markets continue to be volatile, whilst the forward curve continues to signal increasing wholesale prices For personal use only Source: NEMMCO, ICAP & Origin 38 38
Slide 40: HY2009 Retail EBITDAF grew $99 million to $300 million
HY2009: EBITDAF grew by $99 million to $300 million. Higher gas and electricity revenues were realised following tariff increases in the prior period leading to a very strong first half… For personal use only 3,500 350 • EBITDAF grew by $99 million or 49% from $201 Dec-08 million to $300 million 3,0
Slide 41: Contact Energy
For personal use only Contact Energy 40
Slide 42: Contact is New Zealand's leading fuel integrated energy company
Contact is New Zealand’s leading fuel integrated energy company… For personal use only • 650,000 gas, electricity and LPG customers • 28% of New Zealand’s generation capacity • Mix of renewable and lower emissions generation – 15% geothermal, 35% hydro and 50% natural gas • 27% share of retail elect
Slide 43: Contact's committed projects and geothermal opportunities
Contact has a number of projects committed for development with substantial additional opportunities, particularly in geothermal generation • Gas-fired peaking plant For personal use only Construction of 200 MW of peaking capacity at Stratford, Taranaki well advanced. Operational in 2010 • Gas sto
Slide 44: Contact capital raising initiatives
Contact has implemented a number of capital raising initiatives to fund these opportunities and maintain a strong financial position For personal use only • Net debt as at 31 December 2008 was $1,031m NZD equivalent of borrowings, net of FX hedging and short-term deposits 26% higher than as at 3
Slide 45: HY2009 Contact earnings reduced
HY2009: While earnings were significantly reduced due to the combined impact of weather conditions and transmission constraints… For personal use only • EBITDAF was $190m, 24% lower than the prior half 3000 300 year primarily due to an unusual combination of Dec-08 weather events and transmission co
Slide 46: Outlook
For personal use only Outlook 45
Slide 47: Second half expected to be more challenging
The second half of the financial year is expected to be more challenging than the first half For personal use only • Lower margins in the Retail business due to higher wholesale electricity costs, although margins for the full year are expected to be consistent with the prior year • Future well comm
Slide 48: Major projects contributing after current financial year
Origin will continue to progress the development of several major projects which are expected to make contributions For personal use only following the end of the current financial year… • Construction of the 30 MW Cullerin Range wind farm in New South Wales which is due for completion in mid 2009 •
Slide 49: Strategy creates opportunities; APLNG a new export channel
Origin’s strategy as a fuel-integrated generator retailer will continue to create opportunities for the existing business and APLNG creates a major opportunity for growth by establishing a For personal use only new export channel to market Source: Origin Source: Origin Note: Excluding Contact With a
Slide 50: Balance Sheet Strength Provides Opportunities to Grow & Develop
For personal use only Balance Sheet Strength Provides Opportunities to Grow & Develop Citi’s Australian & New Zealand 6th Annual Investment Conference London 9 March 2009 49
Slide 51: Further Information
Further Information For personal use only Investors Angus Guthrie Manager, Investor Relations Email: angus.guthrie@originenergy.com.au Office: +61-2-8345 5558 Mobile: +61-4-1786 4255 Website www.originenergy.com.au Other recent presentations include: • Half Year Results http://www.originenergy.com.a
Slide 52: Appendix
For personal use only Appendix 51
Slide 53: Profit & Loss - Statutory
Profit & Loss - Statutory ($ million) Dec 08 Dec 07 Change For personal use only Revenue 4,216 3,817 10% EBITDAF(1) 686 614 12% EBIT 7,590 634 1098% Net financing costs(2) (95) (104) (9)% Tax expense (676) (146) 363% Minority Interests (16) (49) (68)% NPAT – Statutory 6,663 335 1891% EPS – Statutory
Slide 54: Profit & Loss - Underlying
Profit & Loss - Underlying For personal use only ($ million) Dec 08 Dec 07 Change Statutory NPAT 6,663 335 1891% Significant items Changes in fair value of financial instruments (102) Impairment of assets (217) Net Impact of APLNG Transaction 6,706 Total significant items 6,386 (134) Underlying NPAT
Slide 55: Movements in fair value of financial instruments
Movements in fair value of financial instruments Reconciliation of Balance Sheet and Income Statement items associated For personal use only with financial instruments movements ($ million) Dec 08 Change in net assets (420) Recognised in the Balance Sheet (242) Recognised in the Equity Hedge Reserve
Slide 56: Asset impairments
A review of the carrying value of assets has led to asset impairments including producing assets impacted by the decline in oil price… For personal use only Impairment ($ million) Assets Pre-tax Post-tax Cooper Basin Assets 71 50 BassGas Assets 66 46 Perth Basin Assets 16 11 Heytesbury Gas Storage 2
Slide 57: Equity accounting method for APLNG investment
Origin will use the equity accounting method for its investment in APLNG For personal use only The equity accounting treatment to be used on the Income Statement in relation to APLNG will include: • The EBITDAF contribution of 50% interest in APLNG recorded at the EBITDAF line on consolidation withi
Slide 58: APLNG Balance Sheet
APLNG Balance Sheet ($ billion) Dec 08 For personal use only Receivables from Shareholders 0.8 Other current assets 0.2 Current Assets 1.0 Receivables from Shareholders 7.9 Property, plant & equipment(1) 1.0 Other non-current assets 0.2 Non-Current Assets 9.1 Total Assets 10.2 Total Liabilities (0.2
Slide 59: Gain on APLNG transaction
Gain on APLNG transaction ($billion) Dec 08 Pre-Completion For personal use only Increase in cash 6.9 - 50% equity accounted investment in APLNG 5.0 - Discounted payable to APLNG (3.3) 1.7 - Consolidation of APLNG (formerly known as OECSG) - 1.0 Tax payable on transaction (0.8) Total 7.8 1.0 Movemen
Slide 60: APLNG transaction has transformed Origin's Balance Sheet
APLNG transaction has transformed Origin’s Balance Sheet ($ billion) Dec 08 Jun 08 For personal use only Cash 4.1 0.1 Other Current Assets 2.1 2.4 Total Current Assets 6.2 2.5 Investment in Equity Accounted Investees 5.0 - Other Non-Current Assets 10.8 10.0 Total Non-Current Assets 15.8 10.0 Tax Pay
Slide 61: Substantial funding capacity
APLNG transaction has provided Origin with substantial funding capacity… As at 31 December 2008 For personal use only Undrawn Available Adjusted Committed Funding (1) (2) (1) Gross Debt Cash Debt Facilities Capacity Source: Origin … with cash and undrawn committed debt facilities of $6.4 billion (1)
Slide 62: EBITDAF of $686m up 12%
EBITDAF of $686m is up 12% primarily due to growth in the Retail and Exploration & Production segments For personal use only Segments ($ million) Dec 08 Dec 07 Change Exploration & Production 175 133 32% Generation 21 33 (34)% Retail 300 201 49% Contact 190 248 (24)% Total 686 614 12% Note: Corporat
Slide 63: Depreciation & Amortisation
Depreciation & Amortisation For personal use only ($ million) Dec 08 Dec 07 Generation property, plant and equipment 59 65 Non-generation property, plant and equipment 79 62 Amortisation in producing areas (1) 50 42 Other 1 2 Total 189 171 • Higher depreciation and amortisation resulting from: Otw
Slide 64: Interest
Interest ($ million) Dec 08 Dec 07 For personal use only Interest revenue 55 6 Net Financing costs 95 104 Unwinding of discount on provisions (13) (7) Unwinding of discounted liability payable to APLNG (35) - Net interest expense 48 97 Capitalised interest 60 24 Net interest expense + capitalised in
Slide 65: Tax Reconciliation
Tax Reconciliation ($ million) Dec 08 Dec 07 For personal use only Profit before tax 7,355 530 Prima facie tax 2,207 163 less non-assessable gain on APLNG transaction (1,501) - less recognition of change in net loss position (14) (2) less share of net profit after tax of associates (14) (1) less oth
Slide 66: Capital Expenditure
Capital Expenditure ($ million) Dec 08 Dec 07 For personal use only Stay-in-business 115 70 Growth Exploration & Production 286 305 Retail 59 38 Generation 556 240 Contact 129 56 Total capital expenditure 1,144 708 Acquisitions (net of cash) 131 6 Capex including acquisitions 1,275 714 • Growth cape
Slide 67: Operating Cash Flow
Operating Cash Flow ($ million) Dec 08 Dec 07 For personal use only EBITDAF 686 614 Equity Accounted Investees (EBITDAF less dividends) (14) (9) Exploration Write-Off 4 16 Change in working capital (51) (61) Stay-in-business capex(1) (115) (70) Other (29) (23) Tax paid (117) (83) OCAT 363 385 Net in
Slide 68: Segment Cash Flow & Cash Flow Returns
Segment Cash Flow & Cash Flow Returns For personal use only Operating Av. Funds OCFR (%)(2) Cash flow(2) Employed(3) ($m) ($m) Dec 08 Dec 07 Exploration & Production(1) 305 1,267 24.0 22.9 Generation 37 294 12.7 30.3 Retail 369 2,402 15.4 9.2 Contact Energy 319 3,444 9.3 11.2 • E&P: Increased operat
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