Origin Energy Limited · ASX:ORG
Origin Energy — H1 FY2002 Earnings Presentation
38 slides from Origin Energy's earnings presentation, Feb 18, 2002
Slide 1: Results Announcement, Six months ended 31 December 2001
Results Announcement Six months ended 31 December 2001 18 February 2002
Slide 2: Outline
Outline • Performance Highlights • Financial Review • Operational Review • Outlook Page 2
Slide 3: Performance Highlights
Performance Highlights
Slide 4: Financial highlights
Financial highlights • EBITDA up 24.1% to $192.6 million • PAT up 10.4% to $54.7 million • Capital expenditure up 97% to $138.4 million • Share Placement and Share Purchase Plan – Net $197 million raised – 71 million shares issued (approx 11% of capital) • Earnings per share of 8.7 cents constant on
Slide 5: Operating highlights
Operating highlights • Successful appraisal of Thylacine • Perth Basin discoveries • Acquisition of coal seam gas interests • Successful integration of Powercor business • Performance of wholesale trading book • Systems and processes ready for Full Retail Contestability • Quarantine power station co
Slide 6: Financial Review
Financial Review
Slide 7: Profit & Loss
Profit & Loss Dec 01 Dec 00 % change ($m) ($m) Revenue 1,237.5 850.7 + 45% EBITDA 192.6 155.2 + 24% EBIT 105.5 88.5 + 19% Net Interest 22.5 15.6 +44% Tax 25.8 20.6 +25% Outside Equity Interests 2.5 2.8 -11% PAT 54.7 49.5 + 10% Earnings per share (cents) 8.7 8.7 - Free cash flow (cents per 17.5 13.3
Slide 8: Operating cash flow after tax is the primary performance measure
Operating cash flow after tax over funds employed is used as the primary performance measure Dec 01 ($m) Dec 00 ($m) EBITDA 192.6 155.2 Change in Working Capital (0.1) (3.3) Stay in business CAPEX (36.4) (45.9) Tax/Subvention Payments (24.1) (14.2) OCAT 132.0 91.8 Net Interest Paid (22.4) (16.1) Fre
Slide 9: Capital Expenditure – focus on growth
Capital Expenditure – focus on growth Dec 01 Dec 00 ($m) ($m) Stay in business 36.4 45.9 Growth Exploration & Production 42.9 22.4 Retail & Trading 27.4 0.2 Generation 31.2 0.7 Networks 0.6 0.0 Corporate - 1.1 Total capital expenditure 138.4 70.3 Net Acquisitions and Disposals 7.0 (10.5) Capital exp
Slide 10: Tax reconciliation
Tax reconciliation Dec 01 Dec 00 ($m) ($m) Profit before tax 83.0 72.8 Prima facie tax 24.9 24.9 less Subvention benefit (5.7) (5.7) add non-deductible amortisation 8.4 4.0 less other permanent differences (1.8) (2.6) equals Tax expense 25.8 20.6 Tax paid 14.1 3.2 Subvention payments 10.0 11.0 Page
Slide 11: Funding
Funding Dec 01 Jun 01 Dec 00 Net debt $546m $727m* $397m Shareholder funds $1,569m $1,328m $1,305m Net debt to equity 35% 55% 30% Net interest expense $22.5m $16.1 $15.6m Net interest cover 4.7 times 5.3 times 5.7 times (EBIT) Average interest rate 6.8% 6.7% 7.4% * Net debt increased in June 2001 by
Slide 12: Hedging
Hedging Jan-Jun 02 2002/03 Oil price % hedged 61% 32% Average hedge price > US$26 > US$ 23 USD % hedged 70% 48% Average hedge price <57 US cents < 53 US cents Electricity % hedged – peak (capacity) 111% 109% % hedged – average (energy) 100% 99% Page 12
Slide 13: Capital Management and Distributions
Capital Management and Distributions • $123 m institutional placement • $74 m Share Purchase Plan • BBB+ Credit Rating • Debt Issuance Program • 2 cent fully franked interim dividend – DRP to apply • Share Sale Facility Page 13
Slide 14: EBITDA up 24% on pcp on strong Retail contribution
EBITDA is up 24% on prior corresponding period (pcp) as a result of a strong contribution from Retail Dec 01 Dec 00 % change ($m) ($m) Exploration & Production 102.8 105.9 -3% Retail & Trading 72.5 29.7 144% Generation 10.6 12.6 -17% Networks 12.3 11.3 9% Corporate (5.5) (4.3) -27% Total 192.6 155.2
Slide 15: Annualised operating cash flow return by segment
Annualised operating cash flow return before tax is used to assess performance of the business segments Segments Funds Operating OCFR Employed Cash flow (%) ($m) ($m) Exploration & Production 725.9 70.7 19.5% Retail & Trading 1079.5 68.6 12.7% Generation 184.4 10.6 11.5% Networks 153.2 12.1 15.8% Re
Slide 16: Operating Review
Operating Review
Slide 17: Exploration & Production: EBITDA down 3% to $102.8 million
Exploration & Production: EBITDA down 3% to $102.8 million 160 80 • Higher gas volumes offset by Dec-01 lower liquids volumes & External Sales Revenue & EBITDA ($m) 140 70 Dec-00 prices 120 60 • Higher capital expenditure 100 50 associated with Cooper Basin Capex ($m) SIB, Greenfields exploration 80
Slide 18: Average Australian dollar oil price received
The average Australian dollar oil price received was down marginally, with volatility reduced by hedging. Tapis monthly average spot price vs Origin Energy Hedge position $60 Average Price Re ceiv ed A$ (inclusive o f hedg ing ) • Average prices realised by D ec '00 half $ 4 5.51 Origin Energy throu
Slide 19: Significant reserves added through acquisition and exploration
Origin has added significant reserves through acquisition and exploration • Acquisition of coal seam gas assets adds significant reserves and potential – 180 PJ 2P reserves* – Over 2 TCF potential in existing fields* • Thylacine 2 confirmed early assessment of Scope for Recovery of around 260 PJ* in
Slide 20: BassGas and Otway projects proceeding to schedule
The BassGas and Otway projects are currently proceeding to schedule BassGas Otway • EPC tender submissions • Review of development being reviewed – decision options to be complete expected this quarter second quarter 2002 • EES / EIS on public • Detailed development exhibition – submissions studies
Slide 21: Retail & Trading: EBITDA up 144% to $72.5 million
Retail & Trading: EBITDA increased by 144% to $72.5 million on the back of electricity retail and LPG gains 1000 100 • Gas volumes increased but mild Dec-01 weather continues to depress 900 90 External Sales Revenue & EBITDA ($m) Dec-00 overall sales 800 80 700 70 • Strong 6 month contribution from
Slide 22: Retail business: all areas contributed to the result
Retail business: all areas contributed to the result Natural Electricity LPG Total* Gas ** Revenue (A$M) 431 410 216 1,057 Gross Margin 53 62 77 192 (A$M) Sales – (PJ) 61.8 Sales – (TWh) 6.9 Sales – (k tonnes) 259 Total Sales (PJe) 61.8 24.7 12.7 99.2 Customer # (‘000) 980 590 200 1,770 * Does not i
Slide 23: Degree Day Variation
Average weather conditions were again warmer than the 10 year average Cumulative Degree Day Variation (from 10 year average) • Effective degree days 9% Jul Aug Sep Oct Nov Dec below ten year average in 0 Melbourne, and slightly lower in Adelaide -20 • Gas volumes up on prior -40 corresponding period
Slide 24: Electricity retailing contribution above expectations
The maiden six month contribution from the electricity retailing business has been above expectations $400 • Successful integration of retail Daily Victorian Average Pool Prices $350 electricity business acquired from Powercor $300 • Strong performance from $250 hedge book $/MWh $200 • Origin grante
Slide 25: Margins increased in the LPG business
Margins have increased in the LPG business reflecting lower supply costs Average International Propane Price 1000 • Autogas volumes down 19% FY 00/01 - A$574 Half Year 800 Dec -01 • LPG volumes to residential A$463 and I&C customers Propane Price ($A) 600 marginally lower • Management focus on 400 i
Slide 26: The company is well prepared for FRC
The company is well prepared for FRC Electricity • FRC implemented – 14 January in Victoria – 1 January NSW • Integrated customer service, marketing, sales and market management systems on time and on budget • Call centre staff trained and ready • Churn levels to date low – NEMMCO reported less than
Slide 27: Generation: EBITDA decreased by 17% to $10.5m
Generation: EBITDA decreased by 17% to $10.5m 30 35 • Quarantine power station on Dec-01 line in late December 2001 but External Sales Revenue & EBITDA ($m) Dec-00 30 25 no material contribution this 25 half 20 • Lower pool prices have Capex ($m) 20 15 significantly reduced 15 performance 10 10 • Wo
Slide 28: Generation prices significantly lower than 2000
Generation prices during 2001 have been significantly lower than during 2000 60 • Prices in Qld and SA lower Average Price ($/Mwhr) following commissioning of 50 new base load plant 40 • SA experienced mildest start to a summer since 30 1969. • SA average price for the 20 half was $26.40 – 52% down
Slide 29: Quarantine Project: 95 MW open cycle gas turbines
Quarantine Project: 95 MW open cycle gas turbines. All four new turbines in place on budget and on schedule for the summer peak period…….. …….now just waiting for a “normal” summer Page 29
Slide 30: SEAGas project granted pipeline licence in South Australia
SEAGas project granted pipeline licence in South Australia on 12 February • 680 km route fully surveyed & easement options concluded with the vast majority of landholders • Community consultation on environmental impact completed in both States • Negotiations with construction contractors and financ
Slide 31: Networks: EBITDA increased from $11.3 to $12.3 million
Networks: EBITDA increased from $11.3 to $12.3 million. 15 0.9 • 10,400 new natural gas Dec-01 0.8 consumers connected to Dec-00 networks under management 0.7 • 136 km of new mains laid, 10 0.6 56 km of existing mains EBITDA ($m) Capex ($m) 0.5 replaced 0.4 • Management fee on SA, QLD & NT networks
Slide 32: Outlook
Outlook
Slide 33: Trends in first half expected to be maintained in second half
Expect trends evident in the first half of the 2001/02 financial year to be maintained in the second half • Lower oil volumes (Bodalla sale) & lower oil prices • Increased contribution from higher electricity and gas prices (offset by additional payment to CKI) • Initial contribution from Quarantine
Slide 34: Origin continues to identify and develop acquisitions and projects
Origin continues to identify and develop acquisitions and projects that will drive growth * Projects contributing Projects initiated but in the coming half not yet contributing Submission for Townsville gas and power project Acquisition of coal seam gas assets * Perth Basin gas and oil discoveries *
Slide 35: Full retail contestability has commenced but is in its infancy
Implementation of full retail contestability has commenced but is in its infancy State Natural Gas Electricity Victoria Likely October 2002 Implemented January 2002 South Delayed to Jul 02 at Although contestable Australia earliest most major customers recontracted for 3 year. All customers Jan 03.
Slide 36: Growth capital expenditure funded from strong cash flow
Capital expenditure on growth projects can be largely funded from Origin’s strong cash flow position Growth Capital Expenditure Requirements Compared with Dec-01 Free Cash Flow $200 • Ongoing Projects include exploration and Capital Expenditure by Period (A$,million) development around $150 Current
Slide 37: Delivering Value to Shareholders
Delivering Value to Shareholders • Origin Energy has delivered increased profit and cash flows • Sound strategic positioning and effective operational management continue to deliver new opportunities for growth • Recent capital raising and strong cash flow ensure growth opportunities can be funded S
Slide 38: Slide 38