Origin Energy Limited · ASX:ORG
Origin Energy — FY2002 Earnings Presentation
42 slides from Origin Energy's earnings presentation, Aug 26, 2002
Slide 1: Results Announcement, Twelve months ended 30 June 2002
Results Announcement Twelve months ended 30 June 2002 26 August 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 33% to $404.6 million • PAT up 31% to $128.7 million • Basic EPS up 18% to 20.2 cents on expanded capital base • Final dividend 3.0 cents per share fully franked – (5.0 cps for the full year – 25% payout ratio) • Operating cash flow after tax (OCAT) up 49% to $299 mi
Slide 5: Operating highlights
Operating highlights • Significant growth in scope of operations: – Reserves: Increased 17% to 1,140 PJe – Customers: 1.78 million (over 2 million after CitiPower acquisition) – Generation: capacity increased from 380MW to 598 MW • Joint Venture approval for development of BassGas • Acquisition of C
Slide 6: Financial Review
Financial Review
Slide 7: Profit & Loss
Profit & Loss Jun 02 Jun 01 % change ($m) ($m) Total revenue 2,437 1,687 44% EBITDA 404.6 305.2 33% EBIT 230.7 173.3 33% Net interest expense (42.8) (31.7) 35% Tax expense (54.3) (38.0) 43% Outside equity interests (4.9) (5.6) (12%) PAT 128.7 98.0 31% Earnings per share (cents) 20.2 17.1 18% Free ca
Slide 8: Retained Profit Impact
Retained Profit Impact FY 01/02 FY 02/03* ($m) ($m) Total Revenue Reported 2,437 Retained by Gascor 147 56 Gross Revenue 2,584 EBIT Reported 231 Profit Retained by Gascor 29 11 Gross EBIT 260 No profit retained after October 1, 2002 * Estimate Page 8
Slide 9: EBITDA is up 33% on the prior year due to strong retail contributions
EBITDA is up 33% on the prior year due to strong retail contributions from electricity and LPG….. Jun 02 Jun 01 % change ($m) ($m) Exploration & Production 186.2 201.3 (7%) Retail 173.5 66.5 161% Generation 30.4 25.0 22% Networks 22.9 21.9 4% Corporate (8.4) (9.5) 11% Total 404.6 305.2 33% …….offset
Slide 10: Depreciation & Amortisation
Depreciation & Amortisation Jun 02 ($m) Jun 01($m) Buildings, plant & equipment 79.5 73.4 Retail systems 2.1 0.2 Exploration in producing fields 44.5 41.2 Electricity hedging contracts 25.9 0.5 Licences 14.8 9.9 Goodwill 5.6 5.7 Other 1.5 1.0 Total 173.9 131.9 •Origin is quickly amortising commodity
Slide 11: Profit & Loss
Profit & Loss Jun 02 Jun 01 % change ($m) ($m) Total revenue 2,437 1,687 44% EBITDA 404.6 305.2 33% EBIT 230.7 173.3 33% Net interest expense (42.8) (31.7) 35% Tax expense (54.3) (38.0) 43% Outside equity interests (4.9) (5.6) (12%) PAT 128.7 98.0 31% Earnings per share (cents) 20.2 17.1 18% Free ca
Slide 12: Funding & Interest
Funding & Interest Jun 02 Jun 01 Change Net debt ($m) 633 727 (13%) Total equity ($m) 1,626 1,328 22% Net debt to equity (%) 39%* 55% (29%) Net interest expense ($m) (42.8) (31.7) 35% Net interest cover (x EBIT) 5.4 5.5 Average interest rate 6.6% 6.7% • January 2002 - Debt Issuance Program announced
Slide 13: Tax reconciliation
Tax reconciliation Jun 02 Jun 01 ($m) ($m) Profit before tax 187.9 141.6 Prima facie tax 57.3 48.0 less Subvention benefit (11.3) (11.3) add non-deductible amortisation 16.5 8.4 less other permanent differences (8.2) (7.1) equals Tax expense 54.3 38.0 Tax paid (22.5) (5.3) Subvention payments (18.0)
Slide 14: Operating cash flow after tax over funds employed
Operating cash flow after tax over funds employed is used as the primary performance measure Jun 02 ($m) Jun 01 ($m) EBITDA 405 305 Non-cash items (17) (8) Change in Working Capital 16 11 Stay in business CAPEX (65) (83) Tax/Subvention Payments (40) (24) OCAT 299 201 Net Interest Paid (43) (31) Free
Slide 15: Capital expenditure has focussed on growth
Capital expenditure has focussed on growth with higher expenditure on exploration and retail systems…….. Jun 02 ($m) Jun 01 ($m) Stay in business 64.9 83.4 Growth Exploration & Production 74.3 55.8 Retail 69.8 11.1 Generation 46.0 46.2 Networks 0.1 0.1 Corporate 0.0 2.3 Total capital expenditure 255
Slide 16: The target of 15% OCFR was met by all segments except generation
The target of 15% OCFR was met by all segments except generation. Segments Funds Operating OCFR Employed Cash flow (%) ($m) ($m) Exploration & Production 750.4 125.2 16.7% Retail 1,093.0 179.1 16.4% Generation 213.3 22.7 10.7% Networks 151.6 25.5 16.8% Retail & Generation 1306.3 201.8 15.5% Low summ
Slide 17: Capital Management and Distributions
Capital Management and Distributions • July 2001 - $123m institutional equity placement • August 2001 - $74m Share Purchase Plan • 2 cent per share fully franked interim dividend • Share Sale Facility following Interim Results • 3 cent per share fully franked final dividend – DRP to apply to final d
Slide 18: Significant Provisions
Significant Provisions • Ladbroke Grove Insurance – $6.3m provision created in 2001 – Not reversed in 2002 – Available to cover future uninsured events • Solar development – Expenditure to date fully provided – $4.7m expensed in 2002 – $2.0m relates to prior year Page 18
Slide 19: Operating Review
Operating Review
Slide 20: Exploration & Production: EBITDA decreased 7% to $186.2m
Exploration & Production: EBITDA decreased 7% to $186.2m following asset sales and lower oil prices 300 140 • Lower sales volumes and prices for External Sales Revenue & EBITDA ($m) Jun-02 oil decreased revenue by $15m 250 Jun-01 120 ($34m before hedging) 100 • Increased gas sales from Cooper 200 an
Slide 21: Oil and foreign exchange hedging dampened impact of volatile oil prices
Origin’s oil and foreign exchange hedging policy has dampened the impact of volatile oil prices Tapis monthly average spot price vs Origin Energy Hedge position • Sales volumes marginally $52 Average Price Received A$ lower than last year at $50 (inclusive of hedging) 86.3 PJe (vs. 86.8 PJe in ’01)
Slide 22: Origin has significantly increased 2P reserves through the year
Origin has significantly increased 2P reserves through the year Proved and Probable Reserves (PJe*) Jun 02 2P reserves at start of year 975 + Additions and Revisions 248 - Production 83 2P reserves at end of year 1,140 Net 2P reserves added 165 Net increase in 2P reserves 17% Scope For Recovery cate
Slide 23: OCA continues to build its CSG capabilities
OCA continues to build its CSG capabilities and enhance its position as the largest CSG producer in Australia • Full year of gas sales from the 22 50 00 S Peat OCA CSGfield to Bulwer Island Permits Lilyvale Gladstone • Invested $49 m during FY 02 in acquiring interests in the 24 00 00 S Harcourt Fai
Slide 24: Commercialisation of offshore gas resources in SE Australia
Steady progress has been made in the commercialisation of offshore gas resources in SE Australia BassGas Project Offshore Otway Basin • Origin Energy entered into • Thylacine discovery GSA to purchase all sales gas appraised in Sept 01, from 95% of JV Geographe Nth Oct 01 • Equity in the Yolla field
Slide 25: Perth Basin discoveries in 01/02
Origin’s long term commitment to the Perth Basin was rewarded in 01/02 with several discoveries 0 20 40 60 80 100 • Beharra Springs North 1 – new KILOMETRES field gas discovery commenced WA226P sw-regional production in July 02 Location Map • Hovea 1 – 8 metre oil column in the first commercial oil
Slide 26: Retail: EBITDA increased 161% to $173.5 million
Retail: EBITDA increased 161% to $173.5 million primarily as a result of increased electricity sales • Contributions from electricity retail business ahead of expectations, plus 2000 200 strong contribution from LPG and 1800 Jun-02 180 natural gas despite mild weather Jun-01 • EBITDA enhanced by fav
Slide 27: Retail business: all areas contributed to the result
Retail business: all areas contributed to the result Natural Gas Electricity LPG * ** Revenue (A$M) 803 825 (650) 402 Gross Margin (A$M) 96 160 (60) 113 Sales – (PJ) 118 - - Sales – (TWh) - 8.4 (6) - LPG (Ktonnes) - - 489 Total Sales (PJe) 118 30.4 (22) 24.1 Customer # (‘000) 986 582 (260) 209 * Gro
Slide 28: Weather conditions were milder than average
Weather conditions were milder than average in both summer and winter Melbourne Temperature data 30 30 Summer: Energy • Temperature variations sales highest if temperatures were towards mild weather, depressing retail earnings. . exceed average 25 (but were lower in 25 Average daily temperature ( oC
Slide 29: LPG has benefited from a focus on costs and disciplined pricing
LPG has benefited from a focus on costs and disciplined pricing, improving returns despite lower volumes Average International • Business improved from Propane Price marginal profitability to in 1000 excess of 20% OCFR FY 00 / 01 A$574 FY 01 / 02 • Debtor performance 800 A$443 improved significantly
Slide 30: The company is well prepared for FRC in mass markets
The company is well prepared for FRC in mass markets Electricity • Major systems enhancement and consolidation project completed – gives a compliant marketing, sales and customer service capability for existing contestable markets – will be further enhanced to manage natural gas contestability in Vi
Slide 31: Generation: EBITDA up 22% to $30 million
Generation: EBITDA up 22% to $30 million largely due to contributions from Worsley and Quarantine 70 50 • Quarantine power station on External Sales Revenue & EBITDA ($m) Jun-02 line in late December 2001 on 60 Jun-01 40 time and under budget 50 • Mild summer resulted in low pool prices depressing e
Slide 32: Significant reduction in electricity pool prices across all States
FY 01 / 02 saw a significant reduction in electricity pool prices across all States 60 • The trend for lower average power prices evident in the Average Price ($/Mwhr) 50 first half has continued into the second half 40 • South Australia has experienced lower average 30 prices than NSW – a situation
Slide 33: Merchant plant operated to expectations in low price environment
Merchant plant has operated to expectations in the low price environment caused by the mild summer. Origin Capacity Capacity Av. price Interest Factor received % MWe % $/MWh Merchant Plant Ladbroke 100 80 72 31 Quarantine 100 96 10 97 Roma 100 74 3 194 Page 33
Slide 34: Networks: EBITDA increased 4% to $22.9 million
Networks: EBITDA increased 4% to $22.9 million as a result of increased management fees and higher distributions from Envestra 30 0.8 • Investment in Envestra increased Jun-02 by $15.2 million as part of rights 0.7 25 Jun-01 issue 0.6 • Higher distributions from 20 Envestra EBITDA ($m) 0.5 Capex ($m
Slide 35: SEAGas project met financial close
SEAGas project met financial close late May 2002 and is on target to deliver first gas in early 2004 • 680 km pipeline • Initial capacity 45 PJ/a increasing to SEA Gas 70 PJ/a fully Pipeline $300m compressed • Origin has entered into long term contracts for up to 35 PJ/a capacity • Discussions with
Slide 36: Outlook
Outlook
Slide 37: Origin has increased profit by over 70% since the demerger
Origin has increased profit by over 70% since the demerger. The profit outlook includes….. 140 Positives • Contribution from the CitiPower 120 retail business from July 02 Profit After Tax (A$ million) • Full year contribution from higher 100 electricity & natural gas tariffs 80 • Retained Profit ce
Slide 38: Profit sensitivities and hedging
Profit sensitivities and hedging Sensitivities (inclusive of hedging) Oil price US$1 inc/dec A$1.2 m inc/dec US$ 0.01 inc/dec A$0.8 m dec/inc 1 degree day colder/warmer $0.05m inc/dec (natural gas only) Interest rate 1% inc/dec A$1.8 m dec/inc Hedging 2002/03 Natural hedging Oil price in the busines
Slide 39: Strategic focus continues to provide opportunities for growth
Origin’s strategic focus continues to provide opportunities for growth * Projects contributing Projects initiated but in the FY 01 / 02 not yet contributing * Acquisition of New CSG Contract Fairview / Durham Perth Basin gas and (AMC) coal seam gas assets oil discoveries * Quarantine power station :
Slide 40: Growth will be driven by development of new projects
Growth will be driven by development of new projects from balance sheet and strong cash flows Growth capital expenditure estimates • Growth opportunities will 350 compared with FY 02 free cash flow require significant capital expenditure over the next few 300 years Annual Expenditure (A$ million) .
Slide 41: Origin will continue to deliver value to shareholders
Origin will continue to deliver value to shareholders through: • A strategic position that has differentiated Origin from other energy companies in Australia • A focus on risk management and improving the performance of existing businesses • Growth from prospects generated within the business and ac
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