Origin Energy Limited · ASX:ORG
Origin Energy — Non-Deal Roadshow (May 2007)
43 slides from Origin Energy's roadshow presentation, May 2007
Slide 1: Australia's leading fuel integrated generator retailer
Australia’s leading fuel integrated generator retailer US Roadshow May 2007 1
Slide 2: Important Notice
Important Notice Any forward looking information in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect and these statements speak only as of the date of this presentation. This presentation should not be relied upon as a recommendation to buy
Slide 3: Origin's financial objectives and business strategy
Origin’s financial objectives and business strategy have been established to respond to changes in the energy industry that began in the mid 1990s… • Financial Objective – Steady and predictable cashflows – EPS growth of 10-15% pa on average • Business Strategy – Positioned as a fuel integrated gene
Slide 4: Origin as the leading fuel integrated generator retailer
The effective implementation of these strategies has resulted in Origin becoming the leading fuel integrated generator retailer in the Australian and NZ markets… Fuel Retailer Generator 3,000 4.0 2P Reserves Customers 3.5 2,500 (PJe) 3,500 (millions) Generation Capacity 3.0 2,000 3,000 (MW) 2.5 1,50
Slide 5: Total shareholder return since listing
Since listing Origin has delivered a total shareholder return (TSR) of 37.5%(1) per annum on a compound basis… 80 FCFPS 74 • Free cash flow per share(2) has grown at a CAGR 25% 70 EPS DPS 63 since listing 60 54 • EPS has increased from 13 cents per share in 2000 to cents per share (A$) 53 50 40 42 4
Slide 6: Market capitalisation growth and energy index peers
This performance has seen Origin increase its market capitalisation from around $700 million to over $7 billion… • S&P/ASX 200 Energy Index • S&P/ASX 200 Utilities Index Market Cap Market Cap Ticker Company Name Ticker Company Name $ million* $ million* WPL Woodside Petroleum 26,849 AAN Alinta 7,408
Slide 7: Australia and New Zealand Energy Market
Australia and New Zealand Energy Market 7
Slide 8: Australian and NZ energy market size and growth
The Australian and New Zealand energy market has end use sales of electricity, gas, and related products and services of over A$40 billion per annum Australian End Use Energy Sales A GROWING MARKET and Growth in GDP A GROWING COMPANY • Growth in domestic Energy Sales (PJe) GDP (%) • Revenues up 21%
Slide 9: Energy markets in the mid 1990s were regionally based
The energy markets in Australia have evolved significantly from mid 1990s when they were regionally based… Electricity Market Gas Market QLD Dynamics Dynamics • Limited • Cooper and Gippsland NSW interconnection of dominated gas supply markets under long term (30 3000MW year) contracts Snowy to NSW
Slide 10: Electricity and gas markets interconnected by 2007
By 2007 the electricity and gas markets have become largely interconnected to form an integrated electricity and gas market in eastern Australia… Electricity Market Gas Market Dynamics 2007 Dynamics 2007 • Interconnected National • Eastern States Electricity Market for all interconnected with partic
Slide 11: Market volatility introduces risk; integration provides a hedge
These markets now exhibit significant volatility which introduces risk to market participants Victorian Spot and Forward $100 Contract Electricity Prices • The underlying characteristics of the $95 Forward Curve Monthly Average Apr 07 Spot Price $90 FPC end Mar 07 $85 $80 FPC end Jun 06 electricity
Slide 12: Industry consolidation and business integration
Over this time deregulation and privatisation has resulted in industry consolidation and business integration being the dominant drivers of activity in the energy sector… QLD/VIC/SA Energy Market Ownership Evolution* 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Ikon Government Un
Slide 13: Description of Existing Business
Description of Existing Business 13
Slide 14: Acquisitions built a leading retail channel to market
Through acquisitions Origin has grown its retail business and secured a leading channel to market Eastern Australia 4.0 Share of gas and electricity accounts 3.5 Customers Ergon , 6% (millions) Country , 7% Origin, 23% 3.0 2.5 Integral , 7% 2.0 1.5 EnergyAustralia, 1.0 16% 0.5 Contact Red, VEPL, Jac
Slide 15: Generation interests in Australia and New Zealand
Origin currently has interests in 870 MW of baseload and peaking generation in Australia and over 2,200 MW through Contact Energy in New Zealand Australia Plants Capacity (MW) Operation Fuel Osborne 180 (Cogen) Base Gas Worsley 120 (Cogen) Base Gas Bulwer Island 32 (Cogen) Base Gas Mt Stuart 288 (OC
Slide 16: Acquired wholesale contracts at historically low prices
When acquiring the retail businesses in Australia Origin also acquired wholesale contracts that supplied the majority of Origin’s electricity purchasing requirements at a time of historically low electricity prices 3,500 3,000 Generation Capacity (MW) 2,500 Energy Demand Peak Demand 2,000 35 7,000 A
Slide 17: Finding and developing gas close to markets
For many years Origin has been focused on finding and developing gas close to markets… 3,000 2P Reserves 2,500 (PJe) 2,000 1,500 1,000 500 0 Jun Jun Jun Jun Jun Jun Jun CSG 00 01 02 03 04 05 06 developments Kupe Gas Project BassGas Otway Gas Project Project … and has significantly increased its rese
Slide 18: Reserves approximately 90% natural gas
Approximately 90% of Origin’s reserves are natural gas, with production growing quickly as new projects come on line… Sales gas & LPG Condensate Crude oil Total ethane PJ Kt Kbbl Kbbl PJe Mmboe 2P at 30 June 2005 1,986 1,667 20,266 6,992 2,220 381 Additions and revisions 277 207 304 840 294 50 Produ
Slide 19: CSG reserves and production
Origin currently carries around 1,400 PJ of 2P CSG reserves and is likely to book significant additional reserves over the next few years 2000 24 CSG Reserves CSG Production 1750 21 Annual Production (PJ) 1500 18 2P Reserves (PJ) 1250 15 1000 12 750 9 500 6 250 3 0 0 2000 2001 2002 2003 2004 2005 20
Slide 20: Gas supply for the retail business
Gas for Origin’s retail business has historically been supplied from contracts with third parties Origin Energy - Gas Retail Contractual Position (FY 2007) 160 • Origin’s Retail division sells 120 to 127 PJ of gas per annum 140 • Origin procures gas to service its Retail operations from a variety of
Slide 21: Financial Review
Financial Review 21
Slide 22: Reporting across five business segments
Origin has reported its business across four segments covering its operations in Australia with Origin’s 51.4% interest in Contact being reported as a fifth segment EBITDA FE (1) Retail •Over 3 million customers, Australia’s 2nd largest energy retailer 273 1,229 •National business covering electrici
Slide 23: Profit & Loss
Profit & Loss Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 ($m) ($m) ($m) ($m) ($m) ($m) Revenue 1,679 2,429 3,352 3,556 4,902 5,950 EBITDA 305 405 491 532 918 1,087 EBIT 173 231 295 329 656 791 Net Financing Cost(1) (32) (43) (49) (45) (148) (167) Tax expense (38) (54) (80) (77) (137) (169) Minority I
Slide 24: Capital expenditure on growth and acquisitions
Origin’s growth has required significant capital expenditure. Acquisitions in the Retail and Generation areas and Contact Energy providing immediate contributions… Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 ($m) ($m) ($m) ($m) ($m) ($m) Growth & Acquisitions E&P 56 129 179 313 335 600 Retail 344 78 1
Slide 25: Cash flow as primary measure of performance
Origin uses cash flow measures as the primary measure of performance within the business… Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 ($m) ($m) ($m) ($m) ($m) ($m) EBITDA 305 405 491 532 918 1,087 Non-cash items(1) (8) (17) 13 2 4 (10) Change in Working 11 16 39 (48) (31) 16 Capital Stay in business C
Slide 26: Conservatively geared balance sheet
This has allowed Origin to maintain a conservatively geared balance sheet and take on the extra debt to fund ongoing investment in growth Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Net debt ($m) 727 633 732 861 2,743 2,411 Total equity ($m) 1,328 1,626 1,790 1,939 3,519 3,646 Adjusted Debt / (debt +
Slide 27: Growth Opportunities
Growth Opportunities 27
Slide 28: East coast market of 12 million accounts accessible
Once FRC for gas and electricity is introduced in Queensland in July 2007, the entire east coast energy market of approximately 12 million accounts is accessible to retailers Eastern Australia Market share customers: 2007 400,000 Green Pow er Customers in Australia Country 350,000 Energy M arket 300
Slide 29: Retail provides opportunity for growth in generation
Origin’s electricity retail business provides a substantial opportunity for growth in generation Energy Demand Peak Demand 35 7,000 Annual Demand and Generation dispatched (Twh) Peak Demand and Installed capacity (MW) 30 6,000 25 5,000 20 4,000 15 3,000 10 2,000 5 1,000 0 0 Origin Retail Load Origin
Slide 30: Generation expansion opportunities and investment required
These expansion opportunities would require investment of approximately $3 billion in Australia and $2 billion in New Zealand Australia Plants Fuel Scale Indicative gross cost Status (and Origin equity%) Quarantine Power Station expans’n Gas 120 MW $0.08 billion (100%) Under Construction Darling Dow
Slide 31: Retail and generation drive gas production opportunity
Origin’s gas retail business together with planned growth in generation provides a major opportunity to increase gas production… ToP to ACQ 250 Buy from Origin Buy from Origin JV partners Buy from 3rd parties Power Generation Retail Sales Origin Retail Natural Gas Supplies (PJ) 200 Power generation
Slide 32: Major expansion in CSG production
Origin is currently investing in a major expansion in CSG production… • Since 2002 major CSG based contracts have been signed with: – AGL (340 PJ over 15 years commenced June 2005 – Origin net share approx 52%) – QAL (180 PJ over 15 years commenced Sept 2006) – Incitec Pivot (70 PJ over 10 years com
Slide 33: BassGas and Otway offshore projects
Capex on major offshore projects is now largely complete with BassGas commencing production… BassGas Project (42.5%) • Commenced production in June and completed commissioning in September • A 19 day shutdown of the BassGas Plant in late February / early March lifted sales gas production to 60-65 TJ
Slide 34: Kupe project progressing
The Kupe project is progressing with production expected in mid 2009 Kupe Gas Project (50%) • Fabrication of the platform jacket in Thailand is near completion. Jacket will be shipped mid year to coincide with arrival of the jack-up drilling rig which will be used to install the jacket • Fabrication
Slide 35: Upstream projects capex and status
Origin’s upstream projects comprise a capex spend of approximately $1.3 billion and have only just begun to contribute to earnings in the current financial year Origin Energy Projects Scale Indicative gross cost Status (and Origin equity%) BassGas Project 20 PJ/a plus liquids $0.75 billion (42.5%) I
Slide 36: Exploration drives continued reserves growth
As production increases Origin will drive continued growth in reserves through exploration in the Otway and Bass basins, CSG development in Queensland, the Taranaki and Canterbury basins in New Zealand and prospective acreage in east Africa It is expected that these areas will provide major opportun
Slide 37: Advocacy on climate change and carbon regime
Over many years Origin has taken an advocacy role in the debate surrounding climate change and a carbon regime… Researching CO2 sequestration technologies Carbon Neutral by 2009 We’re planting 100,000 trees to say thank you …as we believe carbon emissions are an unrecognised cost in energy productio
Slide 38: Investing in low carbon emission technologies
Origin is investing in low carbon emission technologies to meet future energy needs Solar • $30m investment in a solar photovoltaic SLIVER project • Produced 75 and 150 watt SLIVER modules • Seeking partnership to accelerate the large-scale production of SLIVER technology Geothermal • 14.3% investme
Slide 39: Potential capital expenditure on growth projects
These projects potentially represent up to $5 billion of investment for Origin and $2 billion for Contact Origin Energy potential capital expenditure profile on growth projects 800 FY 06 free 700 cash flow A$583 million Capital expenditure (A$,million) 600 Darling Downs PS (1) FY 05 free Quarantine
Slide 40: Leading fuel integrated generator retailer position
Origin has secured the leading position as a fuel integrated generator retailer across Australian and New Zealand markets Fuel Retailer Generator 3,000 4.0 2P Reserves Customers 3.5 2,500 (PJe) 3,500 (millions) Generation Capacity 3.0 2,000 3,000 (MW) 2.5 1,500 2,500 2.0 1,000 2,000 1.5 1,500 1.0 50
Slide 41: Continuing integration will drive growth
The continuing integration of Origin’s business is increasingly evident… Fuel Retailer Generator ToP to ACQ 250 Buy from Origin Buy from Origin JV partners Energy Demand Peak Demand Buy from 3rd parties 35 7,000 Annual Demand and Generation dispatched (Twh) Power Generation Peak Demand and Installed
Slide 42: Origin energy
Origin energy
Slide 43: 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 Investo