Origin Energy Limited · ASX:ORG
Origin Energy — FY2007 Earnings Presentation
57 slides from Origin Energy's earnings presentation, Aug 29, 2007
Slide 1: Final Results Announcement Full-year ended 30 June 2007
Final Results Announcement Full-year ended 30 June 2007 29 August 2007 1
Slide 2: Outline
Outline • Performance Highlights • Financial Review • Operating Review • Outlook - All references to $ are references to Australian dollars unless otherwise specifically marked - All comparative data are in relation to the prior corresponding period, 1 July 2005 to 30 June 2006, unless otherwise sta
Slide 3: Disclaimer
Disclaimer 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 or sel
Slide 4: Performance Highlights
origin energy Performance Highlights )
Slide 5: A year of transformation with progress on significant projects
This year has been a year of transformation for Origin with progress on a number of significant projects and initiatives… • BassGas Project commissioned achieving targeted rates of production • Negotiated early termination of Mt Stuart Power Purchase Agreement, providing Origin with greater flexibil
Slide 6: Origin has delivered a strong result
In a challenging year in wholesale gas and electricity markets… • Revenue $6,456 million up 10% • EBITDAF(1) $1,201 million up 12% • Statutory Profit $457 million up 38% • Underlying Profit $370 million up 10% • EPS – Statutory 54.7 cps up 30% • EPS – Underlying 44.3 cps up 4% • Free cash flow(2) $5
Slide 7: Financial Review
u rgin Financial Review
Slide 8: Profit & Loss - Statutory
Profit & Loss - Statutory ($ million) Jun 07 Jun 06 % change Revenue 6,456 5,880 10 EBITDAF 1,201 1,077 12 EBIT 943 791 19 Net financing costs(1) (215) (175) 23 Tax expense (157) (169) (7) Minority Interests (135) (122) 10 NPAT – Statutory 457 332 38 ROE 7.8% 12.3% - EPS – Statutory 54.7 cps 41.9 cp
Slide 9: Profit & Loss - Underlying
Profit & Loss - Underlying ($ million) Jun 07 Jun 06 % change NPAT – Statutory 457 332 38 Significant items (87) 6 - NPAT - Underlying 370 338 10 Adjusted shareholders equity 3,595 2,627 31 Underlying ROE 10.3% 12.9% - EPS – Underlying 44.3 cps 42.7 cps 4 Free cash flow per share 71.2 cps 73.6 cps (
Slide 10: Reconciliation of Statutory Profit and Underlying Profit
Reconciliation of Statutory Profit and Underlying Profit Before Minority After 2007 Reconciliation tax Tax interests tax NPAT impact ($m) ($m) impact ($m) ($m) ($m) Statutory Profit 456.9 Significant items Change in FV of fin. instruments 52.2 (16.3) (6.9) 29.1 Commodity instruments 32.1 (9.6) (0.1)
Slide 11: Movements in fair value of financial instruments
Movements in fair value of financial instruments Reconciliation of Balance Sheet and Profit and Loss items associated with financial instruments movements ($m) Change in net assets 3,193 Recognition of “effective” instruments in Balance Sheet 3,140 Recognised in Equity (Hedge Reserve post tax) 2,197
Slide 12: EBITDAF of $1,201m up 12%
EBITDAF of $1,201m up 12% on strong Exploration & Production, Generation and Retail performance Divisions ($ million) Jun 07 Jun 06(1) % change Exploration & Production 254 209 22 Generation 99 58 69 Retail 341 292 17 Contact 477 488 (2) Networks 30 29 1 Total 1,201 1,077 12 • E&P: Higher production
Slide 13: Depreciation & Amortisation
Depreciation & Amortisation ($ million) Jun 07 Jun 06 Generation property, plant and equipment 124 125 Other buildings, plant and equipment 130 110 Amortisation in producing areas(1) 70 59 Other 6 3 Total 330 297 • Increase in Depreciation & Amortisation reflects production commencing at BassGas, ra
Slide 14: Interest
Interest ($ million) Jun 07 Jun 06 Net financing costs 215 175 Unwinding of discount on provisions (15) (12) Net interest expense 200 163 Capitalised interest 30 27 Net interest expense + capitalised interest 230 190 Net interest cover (EBIT)(1) 4.1 4.2 Weighted average interest rate 7.5% 6.9% • Net
Slide 15: Tax Reconciliation
Tax Reconciliation ($ million) Jun 07 Jun 06 Profit before tax 748 623 Prima facie tax 233 197 less recognition of change in net loss . (13) (13) position less tax exempt profit on disposal of Valley - (10) Power by Contact Energy less reduction in tax rates New Zealand (33% (57) - to 30%) less othe
Slide 16: Growth capex rose as CSG and Kupe spending increased
Growth capex rose as spending on CSG developments and the Kupe project increased, and new Generation projects were initiated… ($ million) Jun 07 Jun 06 Stay-in-business 179 209 Growth Exploration & Production 401 452 Retail 39 24 Generation 82 11 Networks - - Contact 58 20 Total capital expenditure
Slide 17: 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 Jun OCFR Jun Employed Cash flow 07 (%) 06 (%) ($m) ($m) Exploration & 1,858 263 14.1 13.4 Production Generation 325 108 33.2 13.2 Retail 1,772 195 11.0 14.9 Contact Energy 3,3
Slide 18: Operating cash flow after tax increased by 7%
Operating cash flow after tax increased by 7% while funds employed increased by 15% as a result of the Sun Retail acquisition and continuing E&P capital expenditure ($ million) Jun 07 Jun 06 EBITDAF 1,201 1,076 Change in working capital (35) 16 Stay-in-business capex(1) (175) (206) Other (7) 1 Tax p
Slide 19: Balance Sheet and Gearing
Balance Sheet and Gearing ($ million) Jun 07 Jun 06 Net debt 2,958 2,411 Added back fair value adjustment (m-t-m) 431 226 Adjusted net debt 3,389 2,637 Total equity 6,969 3,646 Equity adjustment to remove fair value reserves 2,286 64 Adjusted total equity 4,683 3,582 Net debt to (debt + equity) 30%
Slide 20: Final dividend of 11 cps declared
A final dividend of 11 cps has been declared, bringing the full year dividend to 21 cps fully franked Dividends - cents per share Payment and DRP 25 Franking • Ex-dividend date 3 September 2007 100% 100% 40% 100% 100% 100% 100% • Date of record 10 September 2007 20 • Payable 3 October 2007 11 • DRP
Slide 21: Operating Review
origin energy Operating Review 21
Slide 22: Exploration & Production: major capital program now delivering
Exploration & Production: major capital program now delivering record earnings… • EBITDAF of $254m, up 22% 600 600 • EBIT down 58% reflecting write-down in Total Revenue, EBITDAF & Capex ($m) Jun-07 carrying value of Cooper Basin 500 Jun-06 500 • BassGas Project commenced production • Ramp-up of CSG
Slide 23: BassGas production profile
BassGas commenced production during June 2006 with recognition of revenue and costs from the project from September 2006 120 BassGas Production Profile - seven day running average BassGas Project (42.5%) 100 • First contribution from BassGas Plant maintenance Shut down for plant Shut down project of
Slide 24: Origin increasing CSG production to meet contracts
Origin has been increasing CSG production to meet contracted requirements… • CSG production from Spring Gully ramped up to 2500 CSG Reserves meet requirements for the AGL and QAL contracts 2250 (commenced September 2006) and is preparing to 2000 1750 meet requirements of Incitec Pivot from the 2P Re
Slide 25: Liquids production
The rate of decline of oil production from the Perth Basin was reduced while production of condensate and LPG increased as the BassGas project came online… Origin Energy Production of Liquids • Perth Basin oil production decline was slowed 2500 after successful wells in each of the three producing f
Slide 26: Otway Gas Project commissioning
The Otway Gas Project has commenced commissioning and is expected to commence sale of product in September Otway Gas Project (30.75%) • Successful introduction of gas into the plant in July • Operator, Woodside Petroleum, granted a full 5 year unconditional Licence to Operate a Major Hazard Facility
Slide 27: Kupe Gas Project construction progressing
In New Zealand construction of the Kupe Gas Project is progressing to schedule… Kupe Gas Project (50%) • Fabrication of the platform jacket in Thailand completed, now in New Zealand awaiting installation • Fabrication of topsides remains on schedule to be completed in Thailand in September • The Ens
Slide 28: 2P reserves increased by 42%
Origin’s 2P reserves increased by 42% year-on-year with the reserves growth coming predominantly from CSG… Proved and Probable Reserves (PJe)(1) 2P reserves at 30 June 2006 2,436 add reserves addition 1,118 add net adjustments 4 less production (87) 2P reserves at 30 June 2007 3,471 • New exploratio
Slide 29: Adding value to CSG resources
Origin is adding value to its CSG resources by acquiring new acreage, turning resources into reserves, developing production capacity and signing contracts to monetise reserves • CSG assets are: Bowen Basin (Fairview, Spring Gully) Undulla Nose (Talinga, Orana, Condabri, Argyle, Kenya/East, Laur
Slide 30: Generation: committed to 86% increase in capacity
Generation: committed to 86% increase in installed generation capacity in Australia… • EBITDAF of $99m, up 69% from $58m 180 180 178 176 174 172 170 • Termination payment for Mt Stuart Power Total Revenue,EBITDAF & Capex($m) Jun-07 168 166 164 160 162 160 158 Purchase Agreement Jun-06 156 154 152 15
Slide 31: High planned availability across all plants
There was high planned availability across all plants… Major Origin Origin Capacity Type Operation Availability Contracting Power Plants Int. % MW Party Worsley 50 120 Cogen Base 97% Verve Energy & Worsley Aluminia Bulwer Is. 50 32 Cogen Base 98% BP Osborne 50 180 Cogen Base 95% NRG Flinders & Penri
Slide 32: Low emission and renewable generation sources
Over 90% of Origin’s generation capacity and over 99% of electricity generated in Australia and New Zealand comes from low emission or renewable sources Electricity Generated - 2007 (Australian Capacity 870 MW) Electricity Generated - 2007 (Australia and New Zealand) Jet fuel, 3% Hydro, 29% Gas, 97%
Slide 33: Largest CCGT approved and Quarantine expansion
Origin has approved and contracted for the construction of Australia’s largest CCGT (630 MW) in Queensland… Power Plant Developments • In May, Origin committed to expanding its 95MW OCGT Quarantine power station in SA by an additional 120MW of peaking capacity to be completed in the December quarter
Slide 34: Long term need to reduce carbon from power
There is increasing recognition of the long term need to reduce carbon from power generation…. Solar • SLIVER® modules continue to be scaled up • 75W module undergoing reliability testing, 150W module developed • Origin is continuing to seek an international partner for this project Geothermal • 10.
Slide 35: Retail: successful integration of Sun Retail
Successful integration of Sun Retail and net customer gain delivers step change in Retail… 4,500 350 • EBITDAF of $341m up 17% 4,000 Jun-07 • Acquisition and integration of Sun Retail, 300 adding over 900,000 customers Jun-06 3,500 • Excluding the Sun Retail acquisition, EBITDAF & Capex ($m) 250 Tot
Slide 36: Sun Retail acquisition scale and integration
The acquisition of Sun Retail has brought a step change to the scale of Origin’s Retail business and presence in the fast growing Queensland market Purchased 841,000 electricity customers Business integration continuing and 55,000 LPG customers successfully Tariff increase reflecting higher wholesal
Slide 37: Churn and customer numbers
Churn rates remain high. Origin acquired over 386,000 new accounts for a net gain of 22,000 gas and electricity accounts in addition to Sun Retail June 2007 Origin Energy Customer Numbers Mass Market Churn: Completed & Pending* (in thousands) 45% VIC Elec Natural Electricity Total 40% Vic Gas Gas NS
Slide 38: Wholesale electricity price increases
Wholesale electricity markets have experienced significant short-term price increases. Origin’s unit cost of goods sold in electricity increased by only 2% $150 $140 Forward Curve $130 Jun 07 $120 Victorian Spot and Forward Contract Electricity Prices $110 $100 Monthly Average Spot Price $90 curve a
Slide 39: Victorian gas pool price volatility
Gas pool prices in Victoria have also been volatile as cold weather in June and gas fired generation responding to peak electricity requirements usually met by hydro created record demand for gas Victorian Gas Weighted Average Spot Price and Demand (for period 01 Jul 2005 to 30 Jun 2007) 40 1,400,00
Slide 40: Effective degree days below average
Cold weather in June increased sales late in the year but year-on-year EDDs(1) were significantly below average… 350 FY 2007 Victorian EDD Comparison FY 2006 300 10 year Ave 250 EDD's per month 200 150 100 50 0 ch r r ry t r ay y ril e ly r be be be us be ar n Ju ua Ap M ar Ju g nu to em em m Au M b
Slide 41: Sun Retail boosted scale of Retail
Sun Retail has boosted the scale of the Retail business Product information and % Natural Gas Electricity LPG change from Jun 06 Product Revenue ($m) 883 (-0%) 2,477 (+48%) 577 (+4%) Gross margin ($m) 136 (-8%) 427 (+38%) 143 (-1%) Adjusted EBITDAF ($m) 308 (+27%) 47 (-4%) Adjusted EBITF ($m) 283 (+
Slide 42: Customer numbers and margins support long term value
Maintaining and increasing both customer numbers and customer margins supports growth in long term value Gas and Electricity Jun 07 Jun 06 YE customer numbers (’000) 2,704 1,835 Weighted av customer no (‘000) 2,210 EBITDAF / Sales - % 9.2% 9.5% EBITF / Sales % 8.4% 8.7% $ Per Customer: Gross Margin
Slide 43: LPG business
Sun Retail LPG acquired and Rockgas business sold. Active price management has seen a 4% increase in revenue… • Active price management helped control margins squeeze as wholesale purchasing costs rose by $22 per tonne • Speed-E-Gas and Sun Retail provide improved penetration in NSW and Qld markets
Slide 44: 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 Energy 33% • Wide range of products including first Green Gas and LPG products • Carbon Reduction Scheme introduced early 2007 • GreenEarth Wind and GreenEarth S
Slide 45: Contact Energy: maintained contribution
Contact Energy: maintained contribution… • EBITDAF of $477 million, 2% lower 2,500 600 Jun-07 • The main operating factors that Jun-06 contributed were: 500 2,000 A 20% increase in the unit cost of EBITDAF & Capex ($m) natural gas, both for internal use in Total Revenue ($m) 400 Contact Energy’s t
Slide 46: Networks (Discontinued Business)
Networks (Discontinued Business): EBITDAF of $30m in line with last year • In April 2007, Origin entered into an 250 20.0 agreement to sell its Networks business to Total Revenue, EBITDAF & Capex ($m) APA for $556.5 million Jun-07 18.0 200 Jun-06 16.0 • The Networks business included Origin Energy A
Slide 47: Well prepared for a carbon constrained future
Origin is well prepared for a carbon constrained future… • Australia’s leading green product retailer with a 33% share of the fastest growing segment of the energy market • Reached a milestone of 250,000 green customers signed • Selected for the first Solar Cities project in Adelaide and subsequentl
Slide 48: Outlook
u rgin Outlook
Slide 49: Expected significant increase in Australian earnings
In the coming year we expect significant increase in earnings from our Australian Operations and a consistent contribution from Contact • Sun Retail will provide a full year contribution • Spring Gully and Walloons CSG will continue ramp-up and BassGas will provide a full year of production • Otway
Slide 50: Deepening integration in Origin's business
Each year sees a deepening integration in Origin’s business… Fuel Retailer Generator 300 ToP to ACQ Energy Demand Peak Demand buy from Origin 35 7,000 Annual Demand and Generation dispatched (Twh) buy from Origin JV partners 250 buy from 3rd parties Peak Demand and Installed capacity (MW) Power gene
Slide 51: Over $5 billion of investment opportunities
These opportunities represent over $5 billion of investment for Origin, and potentially a further $2 billion for Contact Origin Energy Projects Scale (gross) Indicative gross cost Status (and Origin equity%) Spring Gully CSG stages 1 to 4 85 TJ/d capacity $0.3 billion (100%) In production BassGas Pr
Slide 52: Benefit from projects already committed
Looking further ahead Origin will benefit from a number of projects already committed… • Expansion of Quarantine power station, due on line in December 2008 • Completion of the Kupe Gas Project which is scheduled to commence production by mid 2009 • Completion of the Darling Downs power project and
Slide 53: Appendix
u rgin Appendix 53
Slide 54: Appendix 1 - Reconciliation of Statutory and Underlying Profit
Appendix 1 - Reconciliation of Statutory Profit and Underlying Profit Before Minority After 2006 Reconciliation tax Tax interests tax NPAT impact ($m) ($m) impact ($m) ($m) ($m) Statutory Profit 331.9 Significant items Change in FV of fin. instruments (12.7) 3.6 (2.4) (11.5) Commodity instruments (2
Slide 55: Appendix 2 - Reconciliation EBITDA 2006 to EBITDAF 2006
Appendix 2 - Reconciliation EBITDA 2006 to EBITDAF 2006 2006 Gain on sale Re-statement 2006 FV adj. EBITDA of business Networks sale EBITDAF Exploration & Production 205 3 - - 209 Generation 60 - - (1) 58 Retail 273 17 - 1 292 Contact 519 - (31) - 488 Networks 30 - - - 29 Total 1,087 20 (31) - 1,076
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Slide 57: 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