Origin Energy Limited · ASX:ORG
Origin Energy — Non-Deal Roadshow (October 2010)
89 slides from Origin Energy's roadshow presentation, Oct 6, 2010
Slide 1: J P Morgan Asia Roadshow - Celebrating a decade of growth
4 - 6 October 2010 J P Morgan Asia Roadshow Singapore, Hong Kong Celebrating a decade of growth Origin Energy
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 1. Business Strategy 2. Performance and Growth 3. Outlook 4. Market Summary 5. Bringing Resources to Market • Australia Pacific LNG • Wind • Geothermal • Hydro • Solar 6. Appendix – FY10 Business Overview • Exploration and Production • Generation • Retail • Contact Energy • Financial Results
Slide 4: 1. Business Strategy
1. Business Strategy O origin
Slide 5: Origin Energy is Australasia's leading integrated energy company
Origin Energy is Australasia‟s leading integrated energy company ... • Listed in the ASX top 20 with a market capitalisation of over $14 billion# and over 4,300 employees • Leading producer of gas in eastern Australia • Largest owner and developer of gas-fired electricity generation in Australia • L
Slide 6: Financial objectives and business strategies provide flexibility and growth
Origin‟s financial objectives and business strategies provide flexibility, stability and significant opportunities for growth across the energy industry • Financial Objectives – Steady and predictable cashflows – EPS growth of 10-15% pa on average • Business Strategy – Positioned in the competitive
Slide 7: Fuel position allows Origin to manage wholesale risks
Origin has built its business around a fuel position which allows it to manage wholesale risks more effectively than its competitors, with the Retail customers providing the long term revenue certainty Fuel Generator Retailer Origin’s extensive position in resources Origin’s comprehensive generation
Slide 8: Integrated strategy in Australia optimising value across supply chain
Origin continues to develop its integrated strategy in Australia thereby optimising value across the energy supply chain Origin Owned/Contracted EPIC QSN Pipeline contract Gas-Fired Power Stations Enables Qld gas to be transported Uranquinty, Roma, Ladbroke to southern gas and electricity Grove, Qua
Slide 9: Long gas position underpins retail, C&I and generation operations
Origin‟s long gas position underpins its retail, C&I and gas generation operations ... Origin Sources & Uses of Gas Origin Electricity Peak Capacity and Peak Demand C&I Peak Demand Contracted Plant Mass Under Market Construction Peak Demand Operating Plant Source: Origin … while Origin‟s electricity
Slide 10: 2. Performance & Growth
2. Performance & Growth O origin
Slide 11: Strategy has delivered growth in underlying earnings
The effective implementation of Origin‟s strategy and has delivered growth in underlying earnings EBITDA CAGR 17% Underlying Profit CAGR 23% (1) Funds Employed CAGR 16% Free Cash Flow (1) CAGR 19% * * Reflects Origin’s 52% share of Contact (1) Free Cash Flow is defined here as cash available to fund
Slide 12: One of the top performing listed companies over the last decade
As a result of this growth, Origin has been one of the top performing listed companies over the last decade… Indexed to 100 from 21 February 2000 to 30 June 2010 … and is now in the ASX top 20 companies by market capitalisation, from a low of around 125th around the time of demerger Source: Origin b
Slide 13: Access to funds from dilution of CSG interest in APLNG
Access to funds as a result of the dilution of Origin‟s CSG interest in Australia Pacific LNG and their ongoing redeployment into operating assets have been a significant contribution to growth over the last two years … … initially through reductions in financing costs and increasingly through drivi
Slide 14: Underlying Profit increased by 10% in FY10
Origin‟s Underlying Profit increased by 10% in FY10 driven by strong Retail performance and contributions from new projects Statutory Profit (1) $612 million down 91% Statutory Earnings per Share (1) 69.7 cps down 91% Underlying EBITDA $1,346 million up 10% Underlying Profit $585 million up 10% Unde
Slide 15: Increase in expenditure on acquisitions led to higher total capex
A significant increase in expenditure on acquisitions led to an increase in total capital expenditure of 17% … Growth Capex • 28% lower than the prior year • Reductions in Generation resulting from Darling 2,837 Downs progressing from construction to 2,426 commissioning, completion of Uranquinty and
Slide 16: Fully franked final dividend of 25 cps
A fully franked final dividend of 25 cps, in line with the prior year, was declared for FY10 … Source: Origin … consistent with the previously announced intention to rebase dividends at 50 cps annually and target a higher payout ratio of at 16 least 60% of Underlying Profit
Slide 17: Major projects successfully completed during the year
During the year a number of major projects were successfully completed that added to earnings in the current year … • Completed expansion of the Mt Stuart Power Station • Commenced commercial operations of the Cullerin Range Wind Farm • Achieved full commercial production from Kupe • Contact complet
Slide 18: New opportunities to access additional resources
We have created new opportunities to access additional resources … • Acquired 100% interest in the Ironbark CSG exploration permit (formerly Pangaea) • Achieved drilling success at Trefoil and Rockhopper in the Bass Basin and Redback South and Redback in the Perth Basin • Increased interest in shall
Slide 19: 3. Outlook
3. Outlook origin
Slide 20: Development projects and acquisitions to contribute in the coming year
In the coming year a number of development projects and acquisitions are expected to make initial, or increased contributions, to Origin‟s performance • A full year contribution from the Kupe in New Zealand; • A full year contribution from Origin‟s higher equity in Otway which increased from 31% to
Slide 21: Continued offshore and international drilling activity in 2011
In 2011 Origin will continue with the expanded level of offshore and international drilling activity seen in 2010 … …including two appraisal wells in the Khorat Plateau in Thailand… …two exploration wells in the Northland Basin New Zealand… …and the Silvereye exploration well in the Bass Basin… … an
Slide 22: $3.4 billion of available liquidity to fund growth
Origin has significant financial capacity to fund future growth with $3.4 billion of available liquidity including cash and undrawn facilities Source: Origin Source: Origin Origin‟s forward committed growth capital program is declining providing funding flexibility to address new opportunities 22
Slide 23: Pursuing a wide range of opportunities to drive growth
Over the next year Origin is pursuing a wide range of opportunities to drive continued growth … • A final investment decision by Australia Pacific LNG on its LNG project • The New South Wales Government‟s energy asset sales process • Pursuit of a substantial portfolio of renewable energy opportuniti
Slide 24: 4. Market Summary
4. Market Summary origin
Slide 25: Energy demand growth averaging around 4% per annum
Growth in energy demand for electricity, natural gas and LPG has averaged around 4% per annum since the 1980s even through times of economic recession Origin‟s share of Eastern Australian end use energy markets has grown from 10% in 2000 to in excess of 15% today and the Company is well placed to co
Slide 26: Australian energy markets evolution since mid 1990s
The energy markets in Australia have evolved significantly from mid 1990s when they were regionally based… Wholesale Electricity Market Wholesale Gas Market mid 1990s mid 1990s Dynamics Dynamics • Limited interconnection of markets • Cooper and Gippsland dominated gas supply under long term (30 year
Slide 27: Electricity and gas markets now largely interconnected
By 2010 the electricity and gas markets have become largely interconnected to form an integrated electricity and gas market in eastern Australia with high levels of private ownership Wholesale Gas Market Wholesale Electricity Market 2010 2010 Dynamics Dynamics • Eastern States • Interconnected Natio
Slide 28: Market churn continues to increase
Market churn continues to increase in most segments … Market Churn: 12 Month Average State Fuel Jun 09 Change Jun 10 Vic Electricity 27% - 27% Vic Gas 23% + 6% 29% QLD Electricity 19% + 3% 22% QLD Gas 12% - 12% SA Electricity 15% - 1% 14% SA Gas 11% - 11% NSW Electricity 12% + 2% 14% NSW Gas 4% + 3%
Slide 29: Eastern Australia gas reserves support local demand and export
Natural gas reserves in eastern Australia are sufficient to support both local demand growth and an export channel to market… Source: 2007 – 2009 EnergyQuest; pre 2007 Origin Energy from company announcements …with continuing growth in CSG reserves expected through the maturation of Contingent Resou
Slide 30: Asia Pacific LNG demand continues to grow strongly
Asia Pacific LNG demand continues to grow strongly with growth forecast to continue at an average annual rate of around 5% • Asia Pacific LNG demand is forecast to Scott Ison ? grow from under 100 mmtpa in 2005 to almost 250 mmtpa in 2025 • The Pacific Basin looks set to remain a long-term contract
Slide 31: 5. Bringing Resources to Market - Australia Pacific LNG
5. Bringing Resources to Market - Australia Pacific LNG
Slide 32: APLNG Structure
APLNG Structure 50% 50% Upstream Pipeline LNG Plant LNG Marketing •Operated by Origin Energy •450 km (280 miles) •Operated by ConocoPhillips •Top Tier Asia-Pacific •CSG permits cover around pipeline from CSG fields •Located on Curtis Island in customers targeted for 38,000 km2 ¹ to LNG plant the Por
Slide 33: Australia Pacific LNG progressing towards final investment decision
Australia Pacific LNG project continues to progress on track in readiness for a final investment decision at the end of the year Timing Milestone (Calendar Years) Initial Advice Statement (IAS) submitted Q1 2009 Project declared as Significant by the Queensland Government Q2 2009 Curtis Island
Slide 34: Surat and Bowen Basins - largest CSG position in Queensland
Surat and Bowen Basins - Largest and most developed CSG position in Queensland Curtis Island • Australia Pacific LNG has the leading Bowen Basin CSG position in Australia Largest CSG reserves position Most developed resource base Prime acreage in both Queensland CSG sweet spots High quality
Slide 35: Increased production capacity to supply Darling Downs and Rio Tinto contracts
Australia Pacific LNG has increased production capacity to supply the Darling Downs and Rio Tinto contracts … • APLNG remains Australia‟s largest producer of CSG as it meets domestic market contracts • Production capacity has increased to over 300 TJ/day, and is expected to increase to 350 TJ/day or
Slide 36: 2P reserves increasing by 40% over the year
APLNG continues to mature its reserves and resources base with Proved plus Probable reserves increasing by 40% over the year • APLNG remains the largest holder of CSG reserves in Australia • APLNG participated in 317 wells during the year • 2P reserves increased by 2,878 PJe to 10,143 PJe (Origin sh
Slide 37: Progress on regulatory approvals, FEED studies and early works contracts
Significant progress has been made on regulatory approvals, FEED studies and early works contracts … Significant FEED and Early Works Contracts Awarded • $220 million contract signed with Savanna Energy Services for the provision of proprietary hybrid drilling and workover rigs for a five year term
Slide 38: New LNG projects from 2015 placed to meet growing demand
New LNG projects coming online from 2015 are well placed to meet the expected growing worldwide demand for gas … bcm Capacity of New LNG Projects 100 • Substantial volumes of new LNG capacity 80 has reached the market in recent years, however relatively limited capacity will be 60 added between now
Slide 39: Australian LNG projects largely contracted ahead of APLNG
Australian LNG projects that have planned project commencement dates prior to APLNG have now largely been contracted … LNG Agreements by Project and Buyer (Mtpa) Pluto 1 Tokyo Gas Pluto 2 Kansai Electric Fisherman‟s Landing Osaka Gas TEPCO PNG LNG Chubu Electric QCLNG Kyushu Electric Nippon Oil Gorg
Slide 40: Wind
Wind origin
Slide 41: Renewable energy target will drive generation development to 2020
Without a price on carbon the renewable energy target will drive the type of generation developed between now and 2020 to meet underlying growth in demand • Origin‟s modelling suggests 6,000 MW of Represents mandated 2020 renewable energy target new wind capacity required to be built by 2020 to meet
Slide 42: Portfolio of renewable energy supply positioned for the RET
Origin has positioned itself to respond to the RET with a portfolio of renewable energy supply… • Origin has sufficient RECs to meet its mass market customer requirements for the medium term • Origin initially invested in wind through third parties by underwriting wind farm developments by others th
Slide 43: Mortlake completion lifts thermal generation capacity over 3,600 MW
The completion of Mortlake Power Station in FY 2011 will take thermal generation capacity available to Origin to over 3,600 MW … MW Origin's Thermal Generation Portfolio 7,000 • Darling Downs Power Station increased 6,000 Origin‟s operating thermal generation capacity to 2,220 MW 5,000 2,670 • The M
Slide 44: Geothermal
Geothermal origin
Slide 45: Pursuing development of geothermal technologies in Australia
Origin is pursuing the development of geothermal technologies in Australia … • 30% non-operated interest in Innamincka Deeps Joint Venture with Geodynamics Ltd, targeting a world class heat resource of deep fractured granites • 50% operated interest in Innamincka Shallows Joint Venture with Geodynam
Slide 46: Geothermal exposure through 52% interest in Contact Energy
Through its 52% interest in subsidiary Contact Energy, Origin has exposure to significant amounts of geothermal generation • Contact is New Zealand‟s largest producer of geothermal electricity, now contributing over 2,000 GWh of energy into the market each year • Geothermal is New Zealand's most rel
Slide 47: Geothermal opportunities in offshore growing markets
Origin is pursuing the untapped potential of geothermal opportunities in offshore growing markets • Origin and Tata Power of India, in consortium with PT Supraco Indonesia, have been awarded the Sorik Marapi geothermal exploration • It is estimated the Sorik Marapi concession could support the devel
Slide 48: Hydro
Hydro origin
Slide 49: Evaluating hydro-electric scheme on the Purari River in PNG
Origin is evaluating the development of a hydro-electric scheme on the Purari River in western PNG … • Capacity to generate approximately 1800 MW of renewable baseload electricity • Reliable source of power for remote villages and rural communities in Papua New Guinea, transforming the area‟s econom
Slide 50: Purari project to enable Queensland minerals development
The Purari project will enable development of Queensland‟s outstanding minerals potential as well as access some of Queensland‟s best solar and renewable energy resources Demand from alumina smelting and aluminium refining in the Cape potentially up to Demand from NW thousands of MW, Queensland with
Slide 51: Hydro generation through Contact Energy
Origin has interests in large amounts of hydro generation through its subsidiary, Contact Energy • Around 60% of New Zealand‟s electricity is generated through large hydro power stations • Contact‟s two large hydro dams on the Clutha River – the Clyde and Roxburgh power stations – have become iconic
Slide 52: Solar
Solar origin
Slide 53: Joint venture with Micron builds on photovoltaic opportunities
Joint venture with Micron seeks to build on Origin‟s photovoltaic development opportunities… • Transform Solar is a 50:50 joint venture between Origin and Micron Technology Inc to focus on the development of photovoltaic technologies • Micron is a US listed company and one of the world‟s leading pro
Slide 54: Sales of solar photovoltaic panels more than doubled
Sales of solar photovoltaic panels in the year has more than doubled … • Origin has grown its solar business over the past five years and is beginning to see the benefits of this strategy with a doubling of residential and commercial sales revenue over the last 12 months to in excess of $100 million
Slide 55: 6. FY10 Business Overview
6. FY10 Business Overview O origin
Slide 56: Exploration & Production
Exploration & Production O origin
Slide 57: Exploration & Production: EBITDA reduced 5%
Exploration & Production: EBITDA reduced 5% as contributions from new assets were offset by APLNG dilution, production constraints and higher exploration expense … • Underlying EBITDA reduced 5% to $250 million with positive contributions from Kupe and Otway offset by APLNG dilution, production cons
Slide 58: Gas production from Kupe and Otway offset constraints
Increases in gas production from Kupe and Otway have offset production constraints in the Bass and Cooper basins and declines in other minor assets • APLNG has increased production rates to in excess of 270 TJ/day • Kupe commenced production in January 2010; Origin‟s share of gas production totalled
Slide 59: Liquids production increased with Kupe and Otway
Liquids production increased over the year with contributions from Kupe and increased equity in Otway … • Production of liquids from Kupe commenced in December 2009 Kupe • BassGas production reduced due to planned maintenance outage from 22 November to early April 2010 and subsequent unavailability
Slide 60: 2P reserves increased by 38% to 6,207 PJe
Origin‟s 2P reserves increased by 38% over the year to 6,207 PJe with a 40% increase in CSG reserves … Proved plus Probable Gas LPG Cond Oil TOTAL Reserves (PJ) (kT) (kbbls) (kbbls) (PJe) 30-Jun-09 4,267 1,650 17,312 6,691 4,484 Additions & revisions 1,774 510 5,887 (395) 1,827 Production (89) (94)
Slide 61: Kupe production and increased Otway interest
Kupe has delivered six months production and an increase in initial reserves … Kupe • Construction and commissioning completed • Reliable plant operation established • Origin share of 6 months production was 4.8 PJ of gas, and around 620 kbbls of liquids • Initial 2P reserves increased by 11% in agg
Slide 62: Bass Basin constrained by maintenance; Cooper Basin flooding
Production from the Bass Basin was constrained due to an extended maintenance program and subsequently recommenced production from one well … Maintenance activities being undertaken at BassGas Floodwaters in Coopers Creek BassGas Project Cooper Basin • Maintenance campaign at BassGas completed durin
Slide 63: Expanded offshore and international exploration program
In FY 2010 Origin commenced an expanded offshore and international exploration program Khorat Plateau Bang Nouan-1 was suspended in May 2010 pending testing of the gas encountered in the Triassic Kachanarai sands. Costs capitalised at 30 June. Tested in August 2010 and found to be tight. Further wel
Slide 64: Elevated offshore and international drilling in FY2011
In FY 2011 Origin will continue with the elevated level of offshore and international drilling activity seen in FY 2010 Khorat Plateau Two onshore appraisal wells on the Dao Ruang gas discovery in Block L15/50, Northeast Thailand, will be drilled towards the end of calendar year 2010 Offshore Vietna
Slide 65: Generation
Generation e) origin
Slide 66: Generation: 70% increase in EBITDA
Generation: Investments in new generation capacity provided a 70% increase in EBITDA with all new capacity contracted to the Retail segment … • Underlying EBITDA increased 70% or $75 million to $182 million reflecting increased capacity payments from the Retail segment as Origin increased the operat
Slide 67: Cullerin Range Wind Farm and Mt Stuart expansion
The Cullerin Range Wind Farm commenced commercial operations on 1 July 2009 and provided a full year‟s contribution … Cullerin Range Wind Farm Mt Stuart Power Station Expansion • Commercial Operation date of 1 July 2009 • Completed in November 2009 • Annual capacity factor of 41% for full year • Loc
Slide 68: Darling Downs Power Station commissioned
Darling Downs Power Station was successfully commissioned in June 2010 becoming the largest combined cycle gas turbine plant in Australia • 630 MW baseload combined cycle gas plant including three 120 MW gas turbines and a 270 MW steam turbine • Emits less than half the greenhouse gas and requires l
Slide 69: Mortlake development progressing
The Mortlake development continues to progress with commissioning expected to commence in the December Quarter 2010 … Mortlake PS • 550 MW gas-fired peaking plant • Designed for conversion to CCGT at a later stage if required • Final project costs approximately $710 million(1) • Enables Origin to ma
Slide 70: Mortlake completion lifts thermal generation capacity
The completion of Mortlake Power Station in FY 2011 will take thermal generation capacity available to Origin to over 3,600 MW … MW Origin's Thermal Generation Portfolio 7,000 • Darling Downs Power Station increased 6,000 Origin‟s operating thermal generation capacity to 2,220 MW 5,000 2,670 • The M
Slide 71: Retail
Retail origin
Slide 72: Retail: Gross profit for gas and electricity increased
Retail: Gross profit for gas and electricity increased from the combined impact of effective wholesale portfolio management and tariff increases … • Underlying EBITDA increased 19% to $568 million driven by higher gross profit and contributions from solar PV sales, while cost to serve per customer r
Slide 73: Low average electricity pool prices reduced energy costs
Low average electricity pool prices during the year reduced energy costs for Origin‟s net load … (1) (1) (1) … while volatility over the summer period provided additional returns from cap contracts and internal generation 73 (1) Average of pool prices capped at $300/MWh
Slide 74: 8% increase in electricity gross profit
Effective management of wholesale energy costs together with the revised QCA decision and other electricity tariff increases, resulted in an 8% increase in electricity gross profit Performance Metrics and Electricity Natural Gas LPG % change from Jun 09 Commodity Revenue ($m) 4,210(2) +6% 1,044(1) +
Slide 75: Gross profit per customer improved to $323
Gross profit for gas and electricity customers improved by 9% over the year to $323/customer … Gas & Electricity Customers Jun 10 Jun 09 Change Customer numbers (‟000) 2,589 2,610 (21) Underlying EBITDA / Sales 9.5% 8.8% 0.7% Underlying EBIT / Sales 8.8% 8.1% 0.7% $ Per Customer: Gross Profit / Cust
Slide 76: Market churn continues to increase
Market churn continues to increase in most segments … Market Churn: 12 Month Average State Fuel Jun 09 Change Jun 10 Vic Electricity 27% - 27% Vic Gas 23% + 6% 29% QLD Electricity 19% + 3% 22% QLD Gas 12% - 12% SA Electricity 15% - 1% 14% SA Gas 11% - 11% NSW Electricity 12% + 2% 14% NSW Gas 4% + 3%
Slide 77: Customer numbers remained largely stable
Customer numbers remained largely stable against increasing market competition with a decline of 0.8% relative to June 2009 Account Numbers (000’s) Natural Gas Electricity Total • A marginal net increase in gas customers was Jun 2009 867 1,743 2,610 more than offset by a net decrease in Change +1 -2
Slide 78: Retail Transformation program progressing as planned
The Retail Transformation program is progressing as planned • Retail Transformation is Origin‟s long term investment in transforming the Retail business to build capability that will support an improved customer experience and future market flexibility, and to improve underlying operating efficiency
Slide 79: Additional sustainable energy offerings
Origin has introduced additional sustainable energy offerings … • During the year Origin completed the acquisition of Cogent Energy, a niche provider of co- and tri-generation solutions • The business was integrated into the Origin business and two new plants installed and commissioned Illustration
Slide 80: Increasing options available to customers
Properly supported, the increasing options available to customers may result in more active engagement in energy management 80
Slide 81: LPG underlying EBITDA up 11%
Underlying EBITDA was $50 million, up 11% from $45 million in the prior year • Sales volumes were 491 ktonnes for the year, up 3% on the prior year • Customer accounts currently 349,000, up 2,000 compared to June 2009 • CP prices increased $22/tonne 81
Slide 82: Contact Energy
Contact Energy
Slide 83: Contact Energy: Earnings were lower
Contact Energy: Earnings were lower due to higher energy, network and take-or-pay gas costs not fully recovered in the wholesale and retail markets due mainly to higher than normal rainfall • EBITDA was $346 million, down 6% on last year, primarily due to a lower margins in the Electricity segment p
Slide 84: Major projects to restore flexibility to the portfolio
A number of major projects due for completion in the coming year will restore flexibility to the portfolio … • Te Huka (23 MW, NZ$100m): The first phase of low- variable cost geothermal generation from the Tauhara resource area completed early, below budget and operating above expected capacity • St
Slide 85: Financial Results
Financial Results origin
Slide 86: 2010 Financial Highlights
2010 Financial Highlights Statutory Profit $612 million down 91% EPS – Statutory 69.7 cps down 91% Revenue $8,534 million up 6% Underlying EBITDA $1,346 million up 10% Underlying EBIT $896 million up 9% Underlying Profit $585 million up 10% EPS – Underlying 66.6 cps up 10% Group OCAT(1) $965 million
Slide 87: Profit & Loss - Reconciliation of Statutory and Underlying
Profit & Loss – Reconciliation of Statutory and Underlying ($ million) Jun 10 Jun 09 Change Statutory NPAT 612 6,941 -91% Items Excluded from Underlying Profit(1)(2) Impairment of assets (23) (218) Increase (decrease) in fair value of financial instruments 10 (114) Gain on dilution of Origin‟s inter
Slide 88: Underlying EBITDA up 10% to $1,346 million
Underlying EBITDA up 10% to $1,346 million Segment ($ million) Jun 10 Jun 09 Change Exploration & Production 250 264 -5% Generation 182 107 70% Retail 568 479 19% Contact Energy 346 369 -6% Total 1,346 1,219 10% • Exploration & Production: Contributions from Kupe and increased interest in Otway were
Slide 89: $2.8 billion invested; $3.4 billion funding capacity
Over the year Origin has invested $2.8 billion in growth projects, stay in business capital and acquisitions … Balance Sheet Capacity as at 30 June 2010 $ billion Cash 0.8 Adjusted Gross Debt (2.5) Adjusted Net Debt(1) (2) (1.7) Undrawn Committed Facilities 2.6 Available Funding Capacity 3.4 (1) Net