Origin Energy Limited · ASX:ORG
Origin Energy — H1 FY2012 Earnings Presentation
60 slides from Origin Energy's earnings presentation, Feb 23, 2012
Slide 1: 2012 Half Year Results Announcement
2012 Half Year Results Announcement Half Year Ended 31 December 2011 Grant King, Managing Director Karen Moses, Executive Director, Finance and Strategy 23 February 2012
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. Performance Highlights Grant King 2. Financial Review Karen Moses 3. Operational Review Grant King 4. Outlook Grant King 3|
Slide 4: 1. Performance Highlights
1. Performance Highlights Grant King, Managing Director • Origin’s Statutory Profit contains a number of items that do not portray the operational performance of the business. Underlying Profit excludes the impact of these items to better illustrate the business performance of the Company • Underlyi
Slide 5: Substantial progress on two major investments
During the half Origin has made substantial progress on its two major investments … Effective integration of the NSW FID 1 taken, with binding sales acquisition with successful Retail agreements clearing the way for Transformation setting up for retail FID 2 systems integration, strengthening Constr
Slide 6: A strong increase in earnings in the half year
A strong increase in earnings in the half year reflecting the NSW acquisition … Statutory Profit / (Loss) $794 m up from ($136) m Statutory Earnings per Share 73.8 cps up from (15.0) cps1 Underlying Profit $489 m up 61% from $304 m Underlying Earnings per Share 45.5 cps up 36% from 33.5 cps2 Interim
Slide 7: Origin has undertaken a number of funding activities
Origin has undertaken a number of funding activities during the half year … 2,500 • Underwritten DRP - $266m Loans & Bank Guarantees - Undrawn • Unsecured Notes issuance in US 2,000 Loans & Bank Guarantees - Drawn 144A market – US$500m ($492m) USPP, Retail Notes & Euro Hybrid • Subordinated Notes in
Slide 8: 2. Financial Review
2. Financial Review Karen Moses, Executive Director, Finance and Strategy
Slide 9: 2012 Half Year Financial Highlights
2012 Half Year Financial Highlights ($ million) Dec 11 Dec 10 Change Statutory Profit / (Loss) 794 (136) na EPS – Statutory 73.8 cps (15.0) cps na Revenue 6,499 4,590 42% Underlying EBITDA 1,157 818 41% Underlying EBIT 832 536 55% Underlying Profit 489 304 61% EPS – Underlying 45.5 cps 33.5 cps 36%
Slide 10: Reconciliation of Statutory Profit to Underlying Profit
Reconciliation of Statutory Profit to Underlying Profit ($ million) Dec 11 Dec 10 Change Statutory Profit / (Loss) 794 (136) 930 Items Excluded from Underlying Profit1 APLNG related items 454 11 443 Increase (decrease) in fair value of financial 34 (156) 190 instruments Impairment of assets (139) (1
Slide 11: Statutory Profit of $794 million
Statutory Profit of $794 million, up $930 million from a loss of $136 million 1,000 na na 800 41% 15% 91% 47% 305 $ million 600 6% 61% 339 (43) (40) 400 (73) 2 794 200 489 304 440 - (136) -200 Dec 10 Items Dec 10 Underlying D&A Net Tax Non- Dec 11 Items Dec 11 Statutory excluded Underlying EBITDA an
Slide 12: OCAT decreased despite higher Underlying EBITDA
OCAT decreased, with the increase in Underlying EBITDA offset primarily by changes in working capital, acquisition liabilities and capex Higher working capital ($ million) Dec 11 Dec 10 Change requirements primarily Underlying EBITDA 1,157 818 339 due to additional SRES requirements and Change in wo
Slide 13: Origin has revised its operating segments
Origin has revised its operating segments • Final Investment Decision on the first phase of APLNG’s CSG to LNG project • Deepening integration within Origin’s Energy Markets business • Increased development opportunities outside of existing operations Segment Business Description Australian energy r
Slide 14: Underlying EBITDA and Assets by Segment
Underlying EBITDA and Assets1 by Segment ($ million) Dec 11 Dec 10 110% $1,157m $23.9b Energy Markets 820 538 100% Exploration & Production 179 98 90% Australia Pacific LNG 16 32 80% Contact Energy 182 180 70% % split by Segment Corporate (40) (30) 60% 1,157 818 50% 40% 30% ($ million) Dec 11 Dec 10
Slide 15: Underlying EBITDA up 41% to $1,157 million
Underlying EBITDA up 41% to $1,157 million 1,400 83% 50% 1% 33% 41% 1,200 52% (16) 217 2 (10) 1,157 1,000 81 $ million 282 800 145 818 600 75 400 200 - Dec 10 Energy Expl. & Prod. Australia Contact Corporate Dec 11 Underlying Markets Pacific LNG Underlying EBITDA EBITDA Underlying EBITDA increased b
Slide 16: Segment Cash Flow Returns
Segment Cash Flow Returns Operating Cash Flow Productive Capital OCFR (%) $m % Change $m % Change Dec 11 Dec 10 Energy Markets 900 12% 8,009 73% 11.2% 17.3% Exploration & Production 388 41% 1,868 -3% 20.8% 14.3% APLNG 68 -9% 802 26% 8.4% 11.7% Contact Energy 251 -15% 3,668 7% 6.9% 8.7% • Energy Mark
Slide 17: Growth capital and APLNG contribution
During the half year Origin spent $764 million on growth capital, and contributed $173 million to APLNG 1,000 937 • Growth capital expenditure1, excluding APLNG 900 846 contribution, down 10% on prior half year 800 • Key areas of capital expenditure include: 700 - Mortlake Power Station ($96m) - Era
Slide 18: Additional capital raised to strengthen balance sheet
Origin has raised additional capital to further strengthen its balance sheet, improve liquidity and diversify its funding sources Jun 20101 ($5.6b) Dec 20112 ($9.5b) • Given facilities Origin has in place, there is no intention to raise additional equity 7% for APLNG Train 1 and other committed 5% 4
Slide 19: Future expenditure mostly APLNG related
Without additional future commitments, the majority of expenditure over the next three years will be APLNG related 5,000 4,500 NSW 4,000 Acquisition • With $5.5 billion of 3,500 committed undrawn facilities 3,000 and cash, Origin is well $ million placed to fund future 2,500 commitments 2,000 1,500
Slide 20: Fully franked interim dividend of 25 cps
A fully franked interim dividend of 25 cps has been declared, which represents a 55% payout ratio Origin Dividend History 60 • Ex-dividend date: 28 February 2012 Dec Half 50 • Record Date: 5 March 2012 Jun Half Additional • Payment Date: 30 March 2012 40 • Dividend Reinvestment plan will apply cents
Slide 21: 3. Operational Review
3. Operational Review Grant King, Managing Director
Slide 22: Energy Markets
Energy Markets Underlying EBITDA up 52% to $820 million Strong earnings growth from NSW acquisition Lower average wholesale energy costs due to deepening integration, supporting margins NSW market churn increased, as expected Successful migration of pre-NSW acquisition customer base to SAP
Slide 23: Energy Markets integrated provider of energy products
Origin’s Energy Markets business is an integrated provider of energy products • Diverse and flexible legacy • 3,075,000 electricity • Solar PV installations fuel portfolio customer accounts • Solar hot water • 5,310 MW generation portfolio • 950,000 gas customer • Heating and Cooling • Operationally
Slide 24: Large, diverse fuel portfolio and flexible gas transport
Origin’s large, diverse fuel portfolio, and flexible gas transport arrangements, are central to its integrated business model … 400 Fuel/Generation - Gas 10,000 Fuel/Generation - Coal Retail - Gas 9,000 Retail - Electricity 300 8,000 Contract or Capacity (MW) 7,000 Spot Market 6,000 200 Peak 5,000 E
Slide 25: Energy Markets strong earnings growth from NSW acquisition
Energy Markets delivered strong earnings growth from the NSW acquisition Performance Metrics, $m Non- Natural Gas Electricity LPG (% change from Dec 10) commodity Revenue1 624 (+2%) 3,827 (+78%) 136 (-36%) 350 (+5%) Gross Profit 126 (+20%) 930 (+68%) 18 (-42%) 94 (+5%) Underlying EBITDA 820 (+52%) E
Slide 26: Energy Markets EBIT/Sales margins
Energy Markets Underlying EBIT/Sales margins are higher than previously reported in the Retail segment • Historically, guidance for Underlying Retail EBIT margins 18 (0.6%) was 8-9% 16 1.0% (0.8%) 3.1% 13.8% 14.1% • Under new Energy Markets 14 11.1% reporting segment, margins have 12 % margin increa
Slide 27: Mild weather led to decline in gas sales volumes
Mild weather in Victoria and South Australia led to an 8% decline in Origin’s Natural Gas sales volumes EDDs PJ 1,200 100 90 83 1,000 Mild weather 80 in half year 800 60 600 40 400 20 200 0 0 Dec 10 Dec 11 2007 2008 2009 2010 2011 Half Year ended Calendar Year SA Qld Vic NSW C&I Internal Generation
Slide 28: Softening demand in the NEM
Softening demand in the NEM was intensified by mild weather this half … TWh TWh TWh 140 280 25 Jul-Dec (LHS) Fin. Year (RHS) 3.8% decline in Jul-Dec 21.8 120 240 since 2009 NEM demand 20 100 200 1.8% fall in half year 80 160 NEM demand 15 13.9 compared 60 120 with the prior half 40 80 10 year 20 40
Slide 29: Natural Gas Gross Profit up 20%
In Natural Gas, Gross Profit up 20% to $126 million Gas Performance ($/GJ) Dec 11 Dec 10 Change Revenue Combined Revenue 9.2 8.4 0.8 Recovery of higher C&I 5.4 4.8 0.6 network costs led to Mass Market 17.4 15.4 2.0 increased unit revenue Cost of Goods Sold Network costs (2.8) (1.5) (1.3) Lower gas p
Slide 30: Electricity Gross Profit up 68%
In Electricity, Gross Profit up 68% to $930 million Electricity Performance ($/MWh) Dec 11 Dec 10 Change Revenue Combined Revenue 175 154 21 C&I 114 108 6 Recovery of higher Mass Market 228 201 27 network costs led to increased unit revenue Cost of Goods Sold1 Network costs (81) (56) (25) Wholesale
Slide 31: Reduction in wholesale energy procurement costs
Electricity achieved a 10%, or $6/MWh1 reduction in wholesale energy procurement costs … 60 Spot prices Contract prices2 Green costs3 Origin’s average up 29% down 9% up 84% wholesale energy cost 50 down 10% 40 Lower energy cost attributed to: $/MWh 30 • Effective management of fuel portfolio 20 • In
Slide 32: Diverse generation portfolio and high reliability
A diverse generation portfolio and high reliability levels delivered a competitive cost of energy Eraring Eraring Power Station ERF was 86% Interm. • Load/ Base due to fire in transformer of Unit 2 Darling Downs • First of two Mortlake units available Ladbroke Grove for dispatch in January 2012 Quar
Slide 33: Origin's churn rate declined
Origin’s churn rate declined from 19.6% to 18.8% despite market churn remaining steady at 21.0% 40% 5,000 % Churn: Monthly Data Annualised Origin, HY2011 Origin, HY2012 Customer Accounts ('000) 35% 263 (375) Market, HY2011 Market, HY2012 4,000 366 362 30% 963 net loss of 112 928 25% 3,000 20% 1,156
Slide 34: Migration of 2.6 million customers to new SAP system
Energy Markets has successfully migrated 2.6 million customers to a new industry-leading billing and customer relationship management system • Four large-scale migrations of Origin’s 2.6 million pre-NSW customers onto new integrated SAP billing platform successfully completed • New online functional
Slide 35: New retail products and business lines
Origin continues to develop its new retail products and business lines to deliver innovative solutions to customers Origin’s portfolio of non-commodity products include solar electricity, solar hot water, heating, cooling, electric vehicle charging, trigeneration systems and smart meters • Revenue f
Slide 36: Exploration & Production
Exploration & Production Underlying EBITDA up 83% to $179 million Steady operational performance Completed major planned maintenance shutdowns at Kupe and Otway Commenced BassGas Mid Life Enhancement Project Lower exploration activity Total Assets Underlying ($m) less Segment EBITDA ($b) L
Slide 37: Steady operational performance despite shutdowns
Notwithstanding planned shutdowns at Otway, BassGas and Kupe … PJe mmboe PJe mmboe 50 8.6 10 1.7 40 6.9 8 1.4 30 5.1 6 1.0 20 3.4 4 0.7 10 1.7 2 0.3 0 0.0 0 0.0 Dec Jun Dec Jun Dec Jun Dec Jun Dec Dec Jun Dec Jun Dec Jun Dec Jun Dec FY 08 FY09 FY10 FY11 FY12 FY 08 FY09 FY10 FY11 FY12 Total Liquids S
Slide 38: Planned maintenance shutdowns on offshore assets
Major planned maintenance shutdowns have been undertaken on Origin’s key offshore producing assets … Australian Offshore - Otway • Lower production (-9%) resulting from planned maintenance shutdown in November 2011 • Inlet compression project being commissioned, planned to be operational in March 20
Slide 39: Asset reliability ahead of tripling gas demand
Asset reliability is currently being optimised in anticipation of industry gas demand tripling over the next 5 years PJ 2,500 • Origin currently supplies around 15% of East coast gas production 2000-2017 (PJ) eastern Australia’s gas • Maintenance & enhancement of offshore assets 2,000 creates flexib
Slide 40: Exploring in regions with high prospectivity
Origin is exploring for resources in regions that offer high prospectivity and access to growing markets… New Zealand • Anadarko, as operator, continued preparations to drill Caravel-1 in the offshore Canterbury Basin in late 2012 targeting significant gas and liquids • Manutahi oil project deliveri
Slide 41: Australia Pacific LNG
Australia Pacific LNG Underlying EBITDA down 50% to $16 million FID on LNG Train 1 and infrastructure to support Train 2 taken in July 2011 Origin equity share in APLNG JV reduced from 50% to 42.5% Binding agreements signed with Kansai and Sinopec for Train 2 LNG sales Sinopec to take addi
Slide 42: APLNG one of Australia's largest CSG to LNG projects
Origin, as part of the APLNG joint venture, is developing one of Australia’s largest CSG to LNG projects Compelling Project • Leverages strong growth in Asia • Oil-linked revenues • Strong and aligned joint venture • Large, quality reserves base • Successful history of working sustainably with commu
Slide 43: APLNG production growth and large reserves base
APLNG’s CSG to LNG project is underpinned by a long history of production growth and a large, high quality reserves base PJ 30,000 25,000 • APLNG production up 4% on the prior half year to 52 PJ 20,000 • Production capacity from both operated and non-operated 15,000 assets increased to 323 TJ/day 10
Slide 44: APLNG sales reduced while costs increased
APLNG sales reduced on lower customer demand, while costs increased with the growth in project activities, resulting in lower Underlying EBITDA Dec 11 Dec 10 ($ million) Origin’s Origin’s Total Total share1 share2 Lower customer Operating Revenue 165 178 demand Increased activity Operating Expenses
Slide 45: APLNG progress against project milestones
APLNG continues to make good progress against project milestones • FID 1 in July 2011 • Marketing agreements in place to underpin two trains – Train 1 - Sinopec (4.3 mtpa)1 – Train 2 - Kansai (1.0 mtpa)2 – Train 2 – Sinopec (3.3 mtpa)2 • Sinopec to increase holding to 25%3 • Major contracts awarded
Slide 46: Upstream activities ramping up
Upstream activities are ramping up with land access, drilling and gas processing facilities tracking within plan • Participated in over 200 wells during the half • Two hybrid coil tubing drilling rigs now in operation; capability to drill wells in less than 4 days per rig; more rigs to be added prog
Slide 47: Pipeline construction and electrification on track
Preparations for the major pipeline construction activities and gas field electrification project are on track • EPC pipeline contract awarded to McConnell Dowell, Consolidated Contracting Co. joint venture in July 2011 • Line pipe awarded to MetalOne in Japan; first delivery made in January 2012 •
Slide 48: Curtis Island site preparations progressing
Curtis Island site preparations are progressing well, and major downstream contracts have been awarded • Bechtel responsible for all activity on Curtis Island under a fixed price contract • Costs confirmed for key Train 2 contracts, including Bechtel EPC contract; long lead items awarded • Engineeri
Slide 49: Community engagement and minimising environmental impacts
The APLNG Project is committed to community engagement, education and minimising environmental impacts … Example Programs include • Independently chaired community consultative committees operating in regional centres • Skills Queensland program to enable farmers to support CSG infrastructure on the
Slide 50: APLNG capital expenditure for the half year
APLNG 100% capital expenditure for the half year was $2.5 billion … APLNG Capital Expenditure for the half year to Dec 11 A$m Upstream Downstream Total Development expenditure 852 1,550 2,402 Exploration & appraisal 91 - 91 Total 943 1,550 2,493 Origin cash contribution 173 • APLNG capital expenditu
Slide 51: Contact Energy
Contact Energy Underlying EBITDA up 1% to $182 million Flexibility delivering savings benefits Low hydro volumes and high retail competition Te Mihi and Enterprise Transformation projects on track Balance Sheet strengthened Total Assets Underlying less Segment ($b) ($m) EBITDA Liabilities
Slide 52: Contact is one of New Zealand's leading energy companies
Contact is one of New Zealand’s leading energy companies, supplying gas, electricity and LPG products across the country Generation Portfolio • 290 MW geothermal generation • 752 MW hydro generation • 1,176 MW gas generation • Over 2,000 MW in generation development opportunities Energy Retailer • 4
Slide 53: Portfolio flexibility offset by fuel mix and retail competition
Increased portfolio flexibility and improved wholesale prices were offset by an unfavourable fuel mix and retail competition Solid operational progress under challenging market conditions • Wholesale market prices responded to below- average hydro storage levels • Ahuroa Gas Storage and lower contra
Slide 54: Positive outlook for Contact
Increased portfolio diversity and flexibility, along with strategic development opportunities provide a positive outlook Lower Average Cost of Generation and increased portfolio flexibility • 166 MW Te Mihi geothermal power station, under development • Peaking power stations • Diverse generation fue
Slide 55: Corporate
Corporate Underlying EBITDA down 33% to ($40) million Commenced geothermal exploration in Chile, and acquired additional concessions Technical feasibility of PNG hydroelectric development confirmed Total Assets Underlying less Segment ($b) ($m) EBITDA Liabilities 50 1.2 0.9 1.0 25 0.6 0 0.0 -2
Slide 56: Exploring for resources in markets with growing demand
Building on its domestic success, Origin is exploring for resources in markets that offer high prospectivity and access to growing demand • Low cost resources • Low cost market entry • Fuel source of the future • Growing demand for energy • Leverage existing experience • Low regulatory environment •
Slide 57: 4. Outlook
4. Outlook Grant King, Managing Director
Slide 58: Origin confirms FY2012 guidance
Based on prevailing market conditions, Origin confirms its FY2012 guidance provided in August 2011 • Origin provided FY2012 guidance based on prevailing business conditions and following assumptions: - Full year contribution from NSW acquisition - Initial contribution from Mortlake Power Station - L
Slide 59: Origin continues to deepen integration of its business
Origin continues to deepen the integration of its business … … which is delivering strong growth in earnings and a robust business in challenging markets … • Extensive fuel position • Large, flexible and diverse generation portfolio • Australia’s leading energy retailer • Integration across the ener
Slide 60: Thank you
Thank you Further Information Angus Guthrie Group Manager, Investor Relations Email: [email protected] Office: +61 2 8345 5558 Mobile: + 61 417 864 255 Website www.originenergy.com.au 60 |