Origin Energy Limited · ASX:ORG
Origin Energy — FY2008 Earnings Presentation
52 slides from Origin Energy's earnings presentation, Aug 28, 2008
Slide 1: Final Results Announcement Full-year ended 30 June 2008
Final Results Announcement Full-year ended 30 June 2008 28 August 2008
Slide 2: 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 summary form, and does not purport to b
Slide 3: Outline
Outline • Performance Highlights • Financial Review • Operating Review • Outlook 3
Slide 4: Performance Highlights
O origin Performance Highlights
Slide 5: A year of significant development for Origin with progress on major projects
This has been a year of significant development for Origin with progress on a number of major projects and initiatives… • Significant upgrade in Origin’s gas reserves position • Commenced the CSG monetisation process to seek proposals to accelerate the development of Origin’s CSG reserves • Acquired
Slide 6: Deepened integration through increased gas reserves and generation under development
Origin has deepened the integration of its business through a substantial increase in gas reserves and generation under development Fuel Retailer Generator Largest holder of proved and Largest owner and developer A leading wholesaler and probable gas reserves in of gas fired electricity retailer of
Slide 7: Very strong second half performance in a challenging year
This has resulted in a very strong second half performance in a challenging year in wholesale gas and electricity markets… Revenue $8,275 million up 29% EBITDAF (1) (2) $1,309 million up 12% Statutory Profit $517 million up 13% Underlying Profit $443 million up 20% EPS – Statutory 59.0 cps up 8% EPS
Slide 8: Track record of underlying earnings growth
Origin’s results continue an impressive track record of underlying earnings growth Revenue EBITDAF 9,000 1,500 Compound annual growth rate: 26% Compound annual growth rate: 23% 7,500 1,200 6,000 900 $millions $millions 4,500 600 3,000 300 1,500 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2001 2002 2
Slide 9: Financial Review
O origin Financial Review
Slide 10: Profit & Loss - Statutory
Profit & Loss - Statutory ($ million) Jun 08 Jun 07 % change Revenue 8,275 6,436 29 EBITDAF 1,309 1,165 12 EBIT 1,090 943 16 Net financing costs (1) 220 215 2 Tax expense 235 157 50 Minority Interests 105 135 (22) NPAT – Statutory 517 457 13 ROE 13.4% 12.7% EPS – Statutory 59.0 cps 54.7 cps 8 Free c
Slide 11: Profit & Loss - Underlying
Profit & Loss - Underlying ($ million) Jun 08 Jun 07 % change NPAT – Statutory 517 457 13 Significant items 74 87 (15) NPAT – Underlying 443 370 20 Adjusted shareholders equity 4,972 4,683 6 Underlying ROE 11.5% 10.3% EPS – Underlying 50.6 cps 44.3 cps 14 • Significant items include the profit on sa
Slide 12: Movements in fair value of financial instruments
Movements in fair value of financial instruments Reconciliation of Balance Sheet and Profit and Loss items associated with financial instruments movements ($ million) Change in net assets (2,985) Recognised in the Balance Sheet 2,895 Recognised in the Equity Hedge Reserve (post tax) 2,030 Recognised
Slide 13: EBITDAF of $1,309m up 12% on strong Retail performance
EBITDAF of $1,309m up 12% on strong Retail performance Segments ($ million) Jun 08 Jun 07 % change Exploration & Production 264 254 4 Generation 56 79 (29) Retail 499 355 41 Contact 490 477 3 Networks - 30 - Adjustment for discontinued business+ - (30) - Total 1,309 1,165 12 Note: Corporate costs of
Slide 14: Depreciation & Amortisation
Depreciation & Amortisation ($ million) Jun 08 Jun 07 Generation property, plant and equipment 123 124 Other buildings, plant and equipment 140 130 Amortisation in producing areas (1) 78 70 Other 4 6 Total 345 330 14 (1) Amortisation of exploration and evaluation costs in producing areas
Slide 15: Interest
Interest ($ million) Jun 08 Jun 07 Net financing costs 220 215 Unwinding of discount on provisions (18) (15) Net interest expense 202 200 Capitalised interest 55 30 Net interest expense + capitalised interest 257 230 Net interest cover (EBIT) (1) 4.2 4.1 Weighted average interest rate 7.7% 7.5% • Ca
Slide 16: Tax Reconciliation
Tax Reconciliation ($ million) Jun 08 Jun 07 Profit before tax 856 748 Prima facie tax 265 233 less recognition of change in net loss position (3) (13) less over provision in prior period (20) (9) less reduction in tax rates New Zealand (33% to 30%) - (57) less Net Gain on disposal of Capital Asset
Slide 17: Growth capex rose with CSG developments and Kupe
Growth capex rose as spending on CSG developments and the Kupe project increased, and new Generation projects were initiated… ($ million) Jun 08 Jun 07 Stay-in-business 178 179 Growth Exploration & Production 714 401 Retail 72 39 Generation 484 82 Networks - - Contact 128 58 Total capital expenditur
Slide 18: Cash flow return from the business segments
Cash flow return from the business segments is measured pre-tax and targets 14.2% over a full year Av. Funds Operating OCFR (%)+ Employed Cash flow ($m) ($m) Jun 08 Jun 07 Exploration & Production 1,104 241 21.8 25.7 Generation 258 58 22.3 35.8 Retail 2,408 336 14.0 11.4 Contact Energy 3,495 384 11.
Slide 19: Operating cash flow after tax increased by 7%
Operating cash flow after tax increased by 7% while funds employed increased by 19%. OCAT Ratio remains above target of 9.4% ($ million) Jun 08 Jun 07 EBITDAF 1,309 1,165 Discontinued Networks business - 30 Change in working capital (125) (36) Stay-in-business capex(1) (152) (175) Other (14) (1) Tax
Slide 20: Balance Sheet and Gearing
Balance Sheet and Gearing ($ million) Jun 08 Jun 07 Net debt 3,283 2,958 Add back fair value adjustment (m-t-m) 325 431 Adjusted net debt 3,608 3,389 Total equity 5,176 6,969 Equity adjustment to remove fair value reserves 204 2,286 Adjusted total equity 4,972 4,683 Net debt to (net debt + equity) 3
Slide 21: Final fully franked dividend of 13 cps declared
A final fully franked dividend of 13 cps has been declared, bringing the full year dividend to 25 cps fully franked Dividends - cents per share Franking 100% 100% 40% 100% 100% 100% 100% 100% Payment and DRP 25 • Ex-dividend date 3 September 2008 20 • Date of record 9 September 2008 13 • Payable 3 O
Slide 22: Operating Review
O origin Operating Review
Slide 23: Exploration & Production: Record Production, Sales and Revenue
Exploration & Production: Record Production, Sales and Revenue underpin growth in earnings… 600 800 Jun-08 • EBITDAF of $264m, up 4% as new projects Total Revenue & EBITDAF ($m) 500 Jun-07 more than offset mature basin decline 600 • Total 2P reserves up 66% to 5,770 PJ 400 CAPEX ($m) • CSG 3P reserv
Slide 24: Origin's CSG reserves have grown significantly in 2008
Origin’s CSG reserves have grown significantly in 2008… Origin's CSG Origin’s CSG Reserves Reserves and and Resources Resources as as at at 30 30June June 2008 20,000 17,947 PJ 16,000 15,869 PJ 12,000 PJ 10,138 PJ 8,000 4,000 4,751 PJ 1,375 PJ 0 Reserves Contingent Prospective Proved Probable Possib
Slide 25: Increasing CSG production to meet contracted requirements
Origin has been increasing CSG production to meet contracted requirements… 45 • Origin’s equity share of CSG production 40 reached 131 TJ/d by the year ending 30 June 2008, reinforcing the Company’s position as the 35 largest CSG producer in Australia Annual Production (PJ) 30 • At Spring Gully prod
Slide 26: BassGas and Otway Gas Project production
After addressing a number of capacity constraints at BassGas, 10.5 PJe was produced over the financial year including 320 kbbls of condensate and 19 Ktonnes of LPG BassGas Project (42.5%) Otway Gas Project (30.75%) • The Yolla 3 well was shut during the first • Production facilities commenced half o
Slide 27: Gas production by half year
Over the last decade Origin has made a series of investments in new production areas to offset the anticipated decline of the Cooper Basin and other mature producing areas… PJe 50 Origin Gas Production by Half Year Gas 45 • The Cooper Basin is in decline as contract 40 volumes begin to decrease 35 •
Slide 28: Liquids production by half year
The rate of decline of oil production from the Perth Basin was partially offset with increased production of condensate and LPG as the BassGas and Otway projects commenced production PJe 10 Origin Liquids Production by Half Year Liquids 9 • Perth Basin oil production continued on a natural decline d
Slide 29: Swift acquisition and Kupe Gas Project in New Zealand
In New Zealand, completion of the Swift acquisition will add to earnings… Swift Acquisition • Completed acquisition of a number of producing assets and exploration permits in the Taranaki Basin • Joint arrangement with Contact to develop an underground gas storage facility Kupe Gas Project (50%) • S
Slide 30: Generation: focused on high plant availability
Generation: focused on high plant availability to deliver maximum value capture opportunity to the Retail business… 120 600 Jun-08 Jun-07 • EBITDAF of $56m, down 29% from $79m* 100 500 primarily reflecting the transition of Mt Total Revenue, EBITDAF ($m) Stuart to an internally contracted plant 80 4
Slide 31: Mt Stuart transitioned to an internally contracted plant
Mt Stuart transitioned from an externally to an internally contracted plant • Mt Stuart PPA with Enertrade terminated in Dec 06 for a fee of $19.6 million (recognised as a Significant Item) • Under PPA, Enertrade was required to take a minimum output. Failure to take resulted in a compensation payme
Slide 32: Existing and near term generation developments
Origin’s existing and near term developments will continue to add value… 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 9
Slide 33: Committed to build additional 2,096 MW of generation
Origin has committed to build an additional 2,096 MW of power generation, quadrupling generation capacity by 2010… MW Origin's Generation Capacity 6,000 Darling Downs Power Station 560 • 704 MW of Operating capacity 5,000 • 1,850 MW of Committed capacity under 1,450 construction 4,000 • 246 MW of ca
Slide 34: Developing renewable energy options
In addition to the expansion of Origin’s portfolio of gas-fired power projects, the Company is also developing a number of renewable energy options Geothermal • Origin acquired a 30% joint-venture interest in Geodynamics main project in the Cooper Basin • Geodynamics have drilled three wells to-date
Slide 35: Retail: Successful integration of Sun Retail
Retail: Successful integration of Sun Retail and effective management of wholesale position… 8,000 550 • EBITDAF of $499m, up 41%, mainly due to Sun Retail acquisition 500 Jun-08 7,000 • Prudent gas and electricity purchasing Jun-07 450 strategies coupled with tariff increases, 6,000 400 integration
Slide 36: Sun Retail boosted scale of Retail business
Sun Retail has boosted the scale of the Retail business with product revenue up $1.4 billion… Performance Metrics and % Natural Gas Electricity LPG change from June 07 (1) Product Revenue ($m) 928 +5% 3,781 +53% 613 +6% Gross Profit ($m) 132 -2% 644 +50% 121 -14% EBITDAF ($m) 464 +51% 34 -27% Underl
Slide 37: Forward electricity prices have stabilised
Forward electricity prices have stabilised and returned to a rising forward price compared with the steep backwardation of June and December 2007 $160 $150 Victorian Spot and Forward Contract Electricity Prices $140 $130 Forward Curve Forward Curve $120 Jun-07 Dec 07 $110 $100 $90 $/MWh $80 Indicati
Slide 38: Volatility increased in second half and average prices decreased
Volatility increased during the second half of the year and average prices decreased… NEM Average daily price maximum (Vic, SA, NSW, Qld) 1,000 NEM Pool Prices ($ per Megawatt - logarithmic scale) Legend Time period Average price (capped at $300) Days average excedes $300 * 300 100 50 Half to Dec 06
Slide 39: Victorian gas market and wholesale gas costs
The gas market in Victoria experienced higher wholesale gas costs, accentuated by unexpected delays in the Otway Gas Project commissioning after construction was complete… (for period 01 Jul 2005 to 30 Jun 2007) Daily weighted average spot market price (A$/GJ) 45 Victorian Gas Weighted Average Spot
Slide 40: Churn rates remain high; customer numbers
Churn rates remain high. Origin acquired over 482,000 new gas and electricity accounts for a net decline of 22,000 accounts Mass Market Churn: Completed & Pending June 2008 Origin Customer Numbers 45% VIC Elec Vic Gas Natural QLD Elec QLD Gas (000’s) Electricity Total 40% SA Elec SA Gas Gas % Churn:
Slide 41: Gross margin and EBITDAF per customer improved
Gross margin and EBITDAF per customer both improved on prior year despite increased energy costs Gas & Electricity Customers Jun 08 Jun 07 Year end customer numbers (’000) 2,653 2,675 EBITDAF / Sales 9.9 % 9.2 % EBITF / Sales 9.2 % 8.4 % $ Per Customer: Gross Margin / Customer 293 258 Opex / Custome
Slide 42: Leadership position in green energy sales
Origin has clearly established its leadership position in green energy sales… A leading market position* and leading market products Origin 30% • At 30 June 2008, Origin had more than 423,000 • Origin launched its Carbon Pollution Reduction + green energy customers (up from 270,000 at 30 Scheme and
Slide 43: LPG purchasing costs increased by 25%
LPG purchasing costs increased by 25% or $225/tonne compared with last year… Average Australian Dollar Propane Price 1200 2007/08 A$840 • Underlying sales volumes 1000 2006/07 decreased by 5% due to higher A$673 LPG costs and unfavourable 800 weather conditions • Customer accounts accounts Propane p
Slide 44: Contact Energy: Higher retail volumes, price and generation
Contact Energy: Higher retail volumes, price and increased generation… 2,500 600 • EBITDAF of $490 million, 3% higher Jun-08 • Significant operating factors that Jun-07 contributed were: 500 2,000 total wholesale electricity revenue EBITDAF & Capex ($m) increased by 82% however this was Total Reve
Slide 45: Outlook
O origin '@ Vinee 4
Slide 46: Projects expected to make initial or increased contributions
In the coming year a number of the projects Origin has been developing are expected to make initial, or significantly increased, contributions to financial performance • A full year contribution from the Otway Gas Project • A full year contribution from the oil and gas production assets purchased fr
Slide 47: Issues expected to be resolved or progressed during the year
During the year it is also expected that a number of issues that could create substantial opportunities for Origin will either be resolved or progressed substantially • Completion of the CSG monetisation process which will allow Origin to determine whether direct participation in a CSG to LNG projec
Slide 48: Major projects expected to contribute after current financial year
Origin will continue to progress the development of several major projects which are expected to make contributions following the end of the current financial year • The Kupe Gas Project in New Zealand which is targeting to commence gas production in mid 2009 • Continued development of CSG operation
Slide 49: Origin
O origin
Slide 50: For more information
For more information For more information on Origin Energy please contact Angus Guthrie Manager, Investor Relations Email: [email protected] Office: +61-2-8345 5558 Mobile: + 61-4-1786 4255 Alternatively visit our website www.originenergy.com.au and follow the prompts to the Investor
Slide 51: Appendix
O origin Appendix
Slide 52: Underlying Profit $443 million, 20% higher than the prior year
Underlying Profit $443 million, 20% higher than the prior year Jun 08 Jun 07 After After Tax Tax and Change NPAT and OEI NPAT ($ million) OEI (%) Impact Impact Statutory Profit 517 457 13 Significant items Asset Sales - Networks 145 76 – Mokai geothermal assets 9 - Changes in FV of financial instrum