Origin Energy Limited · ASX:ORG
Origin Energy — FY2003 Earnings Presentation
40 slides from Origin Energy's earnings presentation, Aug 20, 2003
Slide 1: Final Results Announcement, Full year ended 30 June 2003
Final Results Announcement Full year ended 30 June 2003 20 August 2003
Slide 2: Outline
Outline • Performance Highlights • Financial Review • Operational Review • Outlook Unless otherwise stated, all comparative data are in relation to the prior corresponding period, the financial year ended 30 June, 2002. Page 2
Slide 3: Performance Highlights
Origin Performance Highlights
Slide 4: Financial highlights
Financial highlights • Total Revenue $3.4 billion up 38% • EBITDA $491 million up 21% • PAT $162 million up 26% • Basic EPS 24.8¢ up 23% • Free Cash Flow (FCF) $350 million up 37% • FCF per share 53.7¢ up 34% • Capex (incl.acquisitions) $524 million up 30% • Net Debt / Capitalisation 29% up from 28%
Slide 5: Operating highlights
Operating highlights • Higher contributions from retail following acquisition of CitiPower, favourable wholesale position and cessation of Gascor agency payments • Generation result boosted by Mt Stuart acquisition • Net oil production from the Perth Basin exceeds 500,000 barrels to date – strong pr
Slide 6: Financial Review
Financial Review
Slide 7: Profit & Loss
Profit & Loss Jun 03 Jun 02 % change ($m) ($m) Total Revenue 3,352.3 2,428.8 38% EBITDA 491.3 404.6 21% EBIT 295.3 230.7 28% Net interest expense (48.7) (42.8) 14% Tax expense (80.2) (54.3) 48% Outside equity interests (4.4) (4.9) (12%) PAT 162.0 128.7 26% Earnings per share (cents) 24.8¢ 20.2¢ 23%
Slide 8: Gascor agency payments
Gascor agency payments Jun 03 ($m) Jun 02 ($m) Origin reported revenue 3,352 2,429 Retained by Gascor 61 147 Embedded Revenue 3,413 2,576 Group EBIT as reported 295 231 Profit Retained by Gascor 14 29 ~ EBIT if Ret. Profit included 309 260 • The agency agreement ended in October 2002 and no further
Slide 9: Group EBITDA up 21% on strong Retail performance and Mt Stuart
Group EBITDA up 21% on strong Retail performance and contribution from Mt Stuart……... Segments* Jun 03 Jun 02 % change ($m) ($m) Exploration & Production 187.6 185.2 1% Retail 232.1 166.8 39% Generation 48.3 30.2 60% Networks 23.4 22.5 4% Total 491.4 404.6 21% …….while Generation segment has benefit
Slide 10: Depreciation & Amortisation expense increased 13%
Depreciation & Amortisation expense increased 13% to $196 million reflecting new capital expenditure……. Jun 03 ($m) Jun 02 ($m) Buildings, plant & equipment 84.8 79.5 Producing fields 46.5 44.5 Electricity hedging contracts 22.2 25.9 Licences and Goodwill 32.3 20.4 Retail Systems for FRC 8.7 2.1 Oth
Slide 11: Profit & Loss
Profit & Loss Jun 03 Jun 02 % change ($m) ($m) Total Revenue 3,352.3 2,428.8 38% EBITDA 491.3 404.6 21% EBIT 295.3 230.7 28% Net interest expense (48.7) (42.8) 14% Tax expense (80.2) (54.3) 48% Outside equity interests (4.4) (4.9) (12%) PAT 162.0 128.7 26% Earnings per share (cents) 24.8¢ 20.2¢ 23%
Slide 12: Funding & Interest
Funding & Interest Jun 03 Jun 02 % change Net debt ($m) 732 633 16% Total equity ($m) 1,790 1,626 10% Net debt to equity (%) 41% 39% 5% Debt to (debt + equity) (%) 29% 28% 4% Net interest expense ($m) 48.7 42.8 14% Net interest cover (x EBIT) 6.1 5.4 12% Average interest rate (%) 6.7% 6.6% 2% • Comp
Slide 13: Tax reconciliation
Tax reconciliation Jun 03 Jun 02 ($m) ($m) Profit before tax 246.6 187.9 Prima facie tax 74.0 56.4 add non-deductible amortisation 12.6 16.5 less tax loss benefit 0.0 (11.3) less tax free income (6.2) (4.6) less other permanent differences (0.2) (2.7) equals Tax expense 80.2 54.3 Tax paid* (39.6) (2
Slide 14: OCAT ratio improved due to immediate cash flow from acquisitions
The OCAT ratio improved largely due to immediate cash flow from acquisitions Jun 03 ($m) Jun 02($m) EBITDA 491 405 Non-cash items (net) 13 (17) Change in Working Capital 39 16 Stay in business Capex (net) (94) (65) Tax/Subvention Payments (50) (40) OCAT 399 299 Net Interest Paid (49) (43) Free cash
Slide 15: Capital expenditure increased on higher SIB and acquisitions
Capital expenditure increased on the back of higher SIB and significant acquisitions Jun 03 ($m) Jun 02($m) Stay in business 97.1 64.9 Growth Exploration & Production 128.8 74.3 Retail 19.2 69.8 Generation 3.7 46.0 Networks 0.0 0.1 Total capital expenditure 248.8 255.2 Acquisitions 275.6 148.0 Capex
Slide 16: OCFR for the E&P segment is lower due to up-front capex
OCFR for the E&P segment is lower due to high up-front capex on development projects ………… Funds Operating OCFR OCFR Employed Cash flow Jun 03 Jun 02 ($m) ($m) (%) (%) Exploration & 888 126 14.2% 16.7% Production Retail 1,117 243 21.8% 16.4% Generation 309 50 16.1% 10.7% Networks 152 26 17.1% 16.8% …
Slide 17: Origin has steadily grown returns per share
Origin has steadily grown returns per share Cents per share 60 54 • Free cash flow per share up FCF* PS EPS DPS 34% reflecting the strong 50 contribution of the Retail 40 business and Mt Stuart 40 • EPS is up 23% 30 30 25 • A final dividend per share of 20 5¢ (franked to 2¢) brings total 20 17 divid
Slide 18: Operating Review
Operating Review
Slide 19: E&P: EBITDA reflects steady gas production and Perth Basin oil
E&P: EBITDA reflects steady gas production while oil from the Perth Basin makes initial contribution • Perth Basin oil offsets sale of Bodalla assets and decline in oil 350 300 production External Sales Revenue & EBITDA ($m) Jun-03 300 Jun-02 • 2P reserves increased by 433PJe 250 to 1,573 PJe net of
Slide 20: Oil production from the Perth Basin has reversed liquids decline
Oil production from the Perth Basin has reversed the decline in liquids production of the last few years 8.0 • Bodalla assets sold in FY ’02 Liquids Sales by Product by Half Year (PJE) for $16 million 7.0 • $24 million invested in the Petajoule Equivalent (PJE) 6.0 Perth Basin in FY ’03 has 5.0 repl
Slide 21: Net 2P reserves increase of 433 PJe
Net 2P reserves increase of 433 PJe (5 times production) positions Origin to address gas market opportunities Proved and Probable Reserves (PJe*) 2P reserves at 30 June, 2002 1,140 plus Exploration success 82 plus Otway reserves upgrade 232 plus CSG acquisition (July ’02) 164 plus revisions & adjust
Slide 22: Progress on commercialisation of CSG resources
Origin and OCA have continued to progress the commercialisation of CSG resources……….. • July ’02 - increased equity in the Fairview (24%) and Durham (89%- 99%) fields • Dec ’02 – Origin/OCA agreement with AGL to supply 340 PJ of gas over 13 years • Gas supply agreement with AMC unlikely to proceed •
Slide 23: Progress in the Otway and Bass Basins
Significant progress has continued to be made in the Otway and Bass Basins BassGas Project (37.5%) Otway Gas Project (29.75%) • Final Government & JV • Reserves in the Thylacine approval given and Geographe fields now • Construction commenced booked as 2P (298 PJe) in January 2003 – now 45% • 3-phas
Slide 24: Additional permits secured in the Otway Basin
Additional permits have been secured in the Otway Basin in joint venture with Woodside………… • Near-shore permit Vic/P37(V) on trend between Minerva and Port Campbell fields • Deep-water permit T/34P adjacent to Thylacine field and prospective for both gas and oil • Exploration programs will be integr
Slide 25: Perth Basin oil and gas developments
Oil and gas developments in the Perth Basin have been commercialised with further drilling to come • Hovea field successfully developed with facilities capable of producing in excess of 5000 bopd • Long term production tests at Eremia and Jingemia established flow rates of around 1000 and 1800 bopd
Slide 26: Retail: EBITDA up 39% to $232 million
Retail: EBITDA up 39% to $232 million on contributions from CitiPower, favourable wholesale position and cessation of agency payments • Retail revenues increase 46% on the 3,000 300 back of CitiPower acquisition, the cessation of the Gascor agency Jun-03 agreement, and a full year of 2002 2,500 Jun-
Slide 27: Retail business: all areas contributed to the result
Retail business: all areas contributed to the result Natural Gas Electricity LPG * Revenue (A$m) 841 1,547 417 Gross Margin (A$m) 131 285 114 Sales – (PJ) 123 Sales – (TWh) 15 LPG (Ktonnes) 479 Total Sales (PJe) 123 54 24 Customer # (‘000) 986 851 200+ * Gross revenue received from customers (includ
Slide 28: Annualised churn rate and customer numbers
The gradual introduction of FRC has produced variable churn data, but annualised rates appear to be stabilising. 16% Annualised monthly churn rate Origin Natural Electricity (Monthly churn rate *12) 14% Customer Gas Numbers 12% (‘000) Annualised Churn Rate (%) VIC Elec Jun ‘02 986 582 VIC Gas 10% NS
Slide 29: Structured contract portfolio and electricity prices
A well structured portfolio of contracts enabled access to low pool prices whilst maintaining a well covered position Victorian Spot and Forward Contract Electricity Prices • The pool price is not a $60 good indication of true Historic Forward Curves - tend to purchasing costs reflect rolling $50 av
Slide 30: LPG margins maintained despite higher purchasing costs
LPG margins have been maintained despite increased purchasing costs Weighted Average International • Cost of LPG benchmark CP Propane Price up $74 per tonne (17%) on 800 Jul 02 - Jun 03 previous year Jul 01-Jun 02 A$517 A$443 • Pacific volumes up but 600 Australian volumes affected Propane Price ($A
Slide 31: Generation: EBITDA up 60% to $48.3 million
Generation: EBITDA up 60% to $48.3 million on contributions from Mt Stuart and tolling agreement with Retail 100 130 • Acquired Mt Stuart in December 2002 #Total Sales Revenue & EBITDA ($m) 90 Jun-03 120 Jun-02 110 80 100 • Tolling agreement 70 90 means all plant is 80 Capex ($m) 60 contracted with
Slide 32: Generation capacity with interests in over 880MW
Origin continues to add capacity in its Generation business with interests in over 880MW of installed capacity………… Major Origin Origin Capacity Type Operation Contracting Party Power Plants Int. % Mwe Osborne 50 180 Cogen Base NRG Flinders & Penrice Worsley 50 120 Cogen Base Western Power & Worsley
Slide 33: Portfolio of renewable generation projects
Origin has established a portfolio of renewable generation projects that provide value in an uncertain environment Renewables - MRET GWh • Solar: Origin SLIVER® Solar Cell Possible requirements technology tested and commercial 25,000 viability established. Planning for 20,000 pilot plant well advanc
Slide 34: Networks: EBITDA up 4% to $23.4 million
Networks: EBITDA up 4% to $23.4 million including higher distributions from Envestra • Distributions from Envestra were $1.2 million higher due to 25 1 increased shareholding Jun-03 Jun-02 • Steady increase in Management 20 0.8 fees offset by changes to other fees earned from Envestra EBITDA ($m) Ca
Slide 35: SEA Gas pipeline construction progress
SEA Gas pipeline: Steady progress made in construction – on budget and on schedule with 530 km laid to mid August • • • Commissioning scheduled for October 2003 and first commercial gas January 2004 Page 35
Slide 36: Outlook
Outlook
Slide 37: Factors influencing the profit outlook for FY04
There are a number of factors influencing the profit outlook for FY ’04……….. Positives Negatives • Increased oil production • Gas production volumes will from the Perth Basin remain steady prior to • Full integration of the additional sales from BassGas CitiPower business will and CSG in FY ‘05 redu
Slide 38: Capital expenditure largely covered by cash flows
This Capital expenditure will be largely covered by cash flows from the business over the next few years Growth capital expenditure estimates and acquisitions compared with free cash flow for FY ‘03 • Committed or highly likely 500 development projects Estimated Annual Expenditure (A$ million) . 450
Slide 39: Long term goal of EPS growth of 10-15% pa
Origin maintains the long term goal of achieving EPS growth of 10-15% pa through sound strategy, effective acquisitions and internally generated growth………… 600 • Growth of the retail business has delivered significant value and may 500 now plateau for a period . EBITDA by Segment (A$m) 400 • A modes
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