Origin Energy Limited · ASX:ORG
Origin Energy — Non-Deal Roadshow (March 2010)
72 slides from Origin Energy's roadshow presentation, March 2010
Slide 1: Origin Energy: A Decade of Growth
March 2010 Celebrating a decade of growth Origin Energy A Decade of Growth
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 2. Business Overview 3. Australia Pacific LNG 4. Exploration 5. The Next Decade 6. Appendix 3
Slide 4: 1. Performance Highlights
1. Performance Highlights @) origin
Slide 5: A decade of growth since ASX listing
On 21st February ten years ago, Origin was first listed on the ASX and so began a decade of growth 10 Year CAGR: • Productive Capital: 16% • Underlying Profit: 24% • Earnings per Share: 18% • Dividends per Share: 27% • Total Shareholder Return: 30% Source: Origin That growth has resulted in Origin’s
Slide 6: Top performing listed company over the last decade
As a result of this growth, Origin has been one of the top performing listed companies over the last decade… Origin TSR 1,306% Indexed to 100 from 21 February 2000 to 19 February 2010 … and is now in the ASX top 20 companies by market capitalisation, from a low of around 125th around the time of dem
Slide 7: Underlying Profit up 28% to $355 million
Origin enters its second decade with Underlying Profit up 28% to $355 million, continuing that record of growth Underlying Profit $355 million up 28% Underlying Earnings 40.5 cps up 28% per Share Statutory Profit(1) $371 million down 94% Statutory 42.3 cps down 94% Earnings per Share(1) Interim divi
Slide 8: Performance driven by a clear and simple strategy
Origin’s performance has been driven by a clear and simple strategy that continues to deliver ongoing opportunities for growth • Progressed commissioning of the Kupe Project with steady production achieved • APLNG increased production capacity and 2P reserves • Committed to acquisition of increased
Slide 9: $1.4 billion of balance sheet capacity deployed
Origin has deployed $1.4 billion of balance sheet capacity over the period to grow and develop the business… Growth Capex • 23% lower than the prior half year • Major expenditure included the Darling Downs and Mortlake Power Stations, Kupe Gas Project, Bass Basin exploration and power generation dev
Slide 10: Forward committed growth capital program is declining
Origin’s forward committed growth capital program is declining Source: Origin ConocoPhillips has funded $0.7 billion of APLNG’s capital spend to date with another $1.6 billion to be spent. Origin is not required to contribute any funding until this amount has been spent 10
Slide 11: Significant financial capacity and refinancing
Origin has significant financial capacity to support its business… • Strong expressions of interest have been received from a number of lending banks in regards to refinancing the majority of the 2010 and 2011 maturing debt • Origin expects to refinance this debt prior to the end of the current fina
Slide 12: Full Year Outlook
Full Year Outlook While results for the first half were up 28 per cent compared with the prior half year, Origin still expects, based on current market conditions, that the full year result will be around 15 per cent higher than the prior year. 12
Slide 13: Previous guidance and full year profit expectation
Previous guidance given was that the 2010 full year profit would be around 15% higher than the prior year. Excluded from that guidance was any expense arising from this year’s greenfield exploration program • In respect of this exploration program, Bass Basin wells found oil and gas and the drilling
Slide 14: 2. Business Overview
2. Business Overview @) origin
Slide 15: Financial objectives and business strategies
Origin’s financial objectives and business strategies have been established to respond to changes in the energy industry Strategy • Positioned in the competitive segments of the energy chain • Integrated across these segments to better manage risk and enhance the range of growth opportunities • Focu
Slide 16: Core Australian business built around a fuel position
Origin has built its core Australian business around a fuel position which allows it to manage wholesale risks in both supply and generation more effectively than its competitors… Fuel Generator Retailer Origin’s long gas position Origin’s comprehensive physical and contracted Origin is a market lea
Slide 17: Exploration & Production
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Slide 18: Resources near markets with increasing gas demand
Origin seeks to find and develop resources near markets with increasing demand for gas 18
Slide 19: Gas production continues to increase
Gas production continues to increase as CSG production grows to meet domestic contracts… • APLNG’s CSG production continues to grow strongly and is up 24% on the Dec 08 half. Coal Seam Gas APLNG’s production capacity now at more than 240 TJ/day • Gas production commenced at the Kupe Project during D
Slide 20: Kupe and Otway boost liquids production
Contribution from Kupe and increased share of Otway will boost liquids production going forward… • Liquids production commenced at the Kupe Project during December with LPG and light crude produced as part of the commissioning Kupe Project process • Cooper Basin production was lower primarily due to
Slide 21: Increased interest in the Otway Gas Project
Origin will increase its interest in the Otway Gas Project… Otway Gas Project • Origin’s interest in the Otway Gas Project will increase to 67% following completion of acquisition of part of Woodside’s interest for $507 million • Origin to be appointed as project operator, subject to regulatory and
Slide 22: Kupe Project producing steadily in New Zealand
In New Zealand, the Kupe Project is now producing steadily… Kupe Project • Construction complete and commissioning of facilities underway • Commissioning has progressed very well and the plant has achieved design throughput of gas sales • The second marine cargo of light crude oil is currently being
Slide 23: Generation
Generation re) origin
Slide 24: Developing the power generation portfolio
Origin continues to develop its power generation portfolio both to support its Retail business and to respond to carbon policies • Operating capacity increased to 1,620 MW following acquisition of Uranquinty, completion of Mt Stuart and Quarantine expansions and Cullerin Range wind farm (from 704 MW
Slide 25: Mt Stuart expansion and Cullerin Range Wind Farm
Peaking capacity at Mt Stuart has been increased… Mt Stuart Power Station Expansion Cullerin Range Wind Farm • Located in Townsville, Queensland • Located near Goulburn, New South Wales • 126 MW expansion • 30 MW across 15 turbines • 45% increase in plant capacity to 414 MW • $95 million project • $
Slide 26: Darling Downs commissioning and Mortlake construction
Commissioning of Darling Downs is now underway… Darling Downs PS Gas Turbine Hall Mortlake PS Darling Downs Power Station Mortlake Power Station • 630 MW Base Load plant • 550 MW Peaking plant • Largest CCGT plant in Australia • Expected to be completed in late 2010 • Commissioning well underway and
Slide 27: Retail
Retail
Slide 28: Second largest energy retailer with 2.6 million customers
Origin is Australia’s second largest energy retailer in both Electricity and Gas, with around 2.6 million customers providing scale and geographic diversity Electricity Market Share Gas Market Share Retail Customer Numbers (1), (2) Retail Customer Numbers (1), (2) NSW Government Owned Retailers 35%
Slide 29: Retail tariff deregulation progressing in each State
Retail tariff deregulation is progressing in each State. In respect of those States that continue to have a form of regulation, the regulatory regime is stable and transparent and has an appropriate risk management margin embedded State Current Regulatory Regime Comment / Outlook Victoria • Unregula
Slide 30: Markets with attractive margins have higher churn
Markets with more attractive margins tend to have higher levels of churn Market Churn: 6 Month Average Account Numbers State Fuel Dec 08 Change Dec 09 (000’s) Natural Gas Electricity Total Vic Electricity 26% + 2% 28% Jun 2009 867 1,743 2,610 Vic Gas 24% + 6% 30% Change +1 -5 -4 QLD Electricity 21%
Slide 31: Leading retailer of green energy
Origin is the leading retailer of green energy with over 15% of its electricity and gas customers electing to purchase green energy products Market Share of GreenPower® Customers • Accredited green energy customer base grew to 516,000 Market Share of GreenPower Customers accounts (398,000 GreenPower
Slide 32: Retail transformation progressing with milestones met
Retail transformation is progressing well with key milestones met to date • Origin is transforming its Retail business to improve business process efficiency, optimise cost to serve and further enhance customer service • Origin’s transformation includes the implementation of new technology together
Slide 33: Contact Energy
Contact Energy re) origin |
Slide 34: Contact is New Zealand's leading fuel integrated energy company
Contact is New Zealand’s leading fuel integrated energy company… • 600,000 gas, electricity and LPG customers • Generates approximately 10 TWh - 26% of New Zealand’s electricity annually • Mix of renewable and lower emissions generation – 15% geothermal, 35% hydro and 50% natural gas • 25% share of
Slide 35: Contact pursuing generation expansion opportunities
Contact continues to pursue the development of a number of opportunities to expand its generation interests… Geothermal • Tauhara 1 (23 MW) – Expected to be operational in mid 2010 • Te Mihi (220 MW) – FEED being updated • Tauhara 2 (250 MW) – Consent application lodged • Taheke 8C – Emerging opport
Slide 36: 3. Australia Pacific LNG
3. Australia Pacific LNG re) origin
Slide 37: APLNG combines Origin CSG and ConocoPhillips LNG capabilities
APLNG brings together Origin’s leading position in Australian CSG development and ConocoPhillips’ proven LNG and CSG capabilities… • Australia Pacific LNG is a 50:50 incorporated joint venture formed in October 2008 between Origin and ConocoPhillips to develop a fully-integrated coal seam gas-to-liq
Slide 38: Prime acreage in the CSG sweet spots
APLNG is uniquely positioned with prime acreage in both of the known CSG sweet spots and along the known CSG fairway… • Current production capacity now exceeds 240 TJ/day (up to 87 PJ/year) • Key upstream design, engineering and construction contracts awarded • McConnell Dowell Constructors (Aust) P
Slide 39: APLNG grows reserves position
APLNG continues to grow its reserves position and remains the largest holder of CSG reserves in Australia • Reserves maturation program on track to meet FID requirements at the end of 2010 • APLNG participated in the drilling of 177 wells in the December half and expects to have participated in a to
Slide 40: APLNG and QGC agreements
APLNG and QGC agreements evidence the value of project cooperation… Field Development Framework • APLNG and QGC have agreed to work together to develop these jointly owned resources • Covers permits ATP 648P (APLNG interest 31.25%) and ATP 620P (APLNG interest 40.625%) • Provides mechanisms to progr
Slide 41: Downstream planning and final investment decision in late 2010
Planning of downstream facilities is progressing well… • ConocoPhillips is the downstream LNG operator • Optimised LNG train design now at 4.5 MTPA, with each train expected to require 270 PJ/year of gas • Project using ConocoPhillips Optimized Cascade® technology • 230 hectare site supports a world
Slide 42: 4. Exploration
4. Exploration O origin
Slide 43: Resources near markets with increasing gas demand
Origin seeks to find and develop resources near markets with increasing demand for gas LNG is opening a significant channel to export markets 43 for gas which Origin will access through APLNG
Slide 44: Offshore exploration results in the Bass Basin
Offshore exploration program has yielded positive results in the Bass Basin… Northland Basin Origin, as operator of permit PEP 38619, plans to drill the exploration wells Korimako 1 and Tarapunga 1. Drilling operations are expected to commence in Q2 2010. Otway Basin Woodside drilled Somerset-1 in N
Slide 45: Exploring with Anadarko in the Canterbury Basin
Origin is working with Anadarko to explore in the highly prospective Canterbury Basin in New Zealand… • Origin has attracted Anadarko Petroleum Corporation to farm in for a 50% interest in exploration permit PEP 38262 • Prior to agreement to farm in, Anadarko completed specialist processing of a 3D
Slide 46: Exploration opportunities in Asia
Exploration opportunities in the fast growing energy markets of Asia are being pursued… • Origin to farm in to portfolio of five exploration blocks operated by Salamander Energy across north east Thailand, Lao PDR and Vietnam • Salamander will also have the option to acquire an interest in one explo
Slide 47: 5. The Next Decade
5. The Next Decade @) origin
Slide 48: Continuing a clear strategy as a fuel integrated generator retailer
Origin will continue to pursue a clear and simple strategy of being a fuel integrated generator retailer Electrification Continued economic growth, efficiency improvements and industrialisation in Asia are likely to increase electricity’s share of final energy consumption Decarbonisation Reduced car
Slide 49: Retail business has grown market share substantially
In Australia, Origin’s retail business has grown its market share substantially over the last decade and this growth has been a key driver of Origin’s growth Pre Demerger Retail Market Share(1) Origin: 4% Retail Market Share 2010(1) Origin: 21% Source: AEMO’s 2009 SOO Medium Economic Growth Scenario
Slide 50: Renewable energy target to drive investment
Whilst it remains unclear how the world will respond to climate change, in Australia the renewable energy target has been set and will drive significant investment in renewable energy… • Origin’s modelling suggests over 6,000 MW Represents mandated 2020 of new wind capacity to be built by 2020 in re
Slide 51: Portfolio of high quality wind development options
Origin has a portfolio of high quality wind generation development options that provide the flexibility to address long term requirements… • Origin has secured sufficient RECs to meet its mass market customer requirements for the medium term • Development of a number of Origin’s projects has progres
Slide 52: Development of geothermal power
Origin continues to pursue the development of geothermal power which could provide a long term base load solution to meeting renewable targets • Origin considers the Innamincka Joint Venture to have the most prospective acreage of its kind in Australia • Origin holds a 30% non-operated interest in t
Slide 53: Joint venture with Micron on photovoltaics
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: Pipeline of generation opportunities
Origin has developed a substantial pipeline of generation opportunities to support a growing retail business • Baseload and peaking portfolio with a lower average emissions intensity than the market • Gas fired generation development options, provide Origin with opportunities meet growing demand • H
Slide 55: World energy demand projected to increase
World demand for energy is projected to increase by 1.4% a year on average, with electricity demand projected to grow more quickly at 2.5% a year… • World demand for gas is projected to grow by around 1.5% a year (BAU) • Asian electricity consumption is projected to grow at 4.7% a year, with China a
Slide 56: World LNG trade projected to triple by 2030
This increasing demand for gas is projected to result in world LNG trade tripling by 2030 as LNG is favoured over pipeline solutions due to supply security concerns Estimated Interregional Gas Flows 2030 (billion cubic metres) Gas will play an increasing role in providing the flexibility to balance
Slide 57: Resources near markets with increasing gas demand
In this context, Origin seeks to find and develop resources near markets with increasing demand for gas LNG is opening a significant channel to export markets 57 for gas which Origin will access through APLNG
Slide 58: Responding to demand for renewable energy
Origin is also responding to the increasing demand for renewable energy both locally and globally… Geothermal • Conventional – Contact is pursuing the development of a number of geothermal opportunities • Shallows – Origin is seeking to develop shallow geothermal resources • Deeps – Origin is pursui
Slide 59: Strong joint venture partners
Strong joint venture partners reflect the quality and potential of these new opportunities and complement Origin’s development capability Australia Pacific LNG – CSG to LNG joint venture with ConocoPhillips Transform Solar – Joint venture with Micron to focus on the development of solar photovoltaic
Slide 60: Opportunities to grow over the next decade
Looking further ahead Origin has many opportunities to continue to grow and develop its business over the next decade • Increased share of growing energy markets in Australia and New Zealand • Continued development by APLNG of its CSG to LNG project which is a primary focus for activity in the comin
Slide 61: Further Information
Further Information Investors Angus Guthrie Chris Giaouris Group Manager, Investor Relations Manager, Investor Communications Email: [email protected] Email: [email protected] Office: +61 2 8345 5558 Office: +61 2 8345 5556 Mobile: + 61 417 864 255 Mobile: + 61 417 2
Slide 62: 6. Appendix
6. Appendix @) origin
Slide 63: 2010 Half Year Financial Highlights
2010 Half Year Financial Highlights Revenue $4,300 million up 2% Underlying EBITDA $706 million up 3% Underlying EBIT $489 million up 1% Underlying Profit $355 million up 28% EPS – Underlying 40.5 cps up 28% Statutory Profit $371 million down 94% EPS – Statutory 42.3 cps down 94% Group OCAT(1) $425
Slide 64: Profit & Loss
Profit & Loss ($ million) Dec 09 Dec 08 Change Revenue 4,300 4,216 2% Underlying EBITDA 706 686 3% Underlying EBIT 489 485 1% Underlying net financing income/(costs) 12 (60) 72m Underlying tax expense (110) (110) - Minority interests share of Underlying Profit (36) (38) 5% Underlying Profit 355 277
Slide 65: Underlying EBITDA by segment
Underlying EBITDA by segment Segment ($ million) Dec 09 Dec 08 Change Exploration & Production 104 174 (40%) Generation 98 22 345% Retail 320 300 7% Contact Energy 184 190 (3%) Total 706 686 3% • Exploration & Production: Impact of the dilution of Origin’s interest in APLNG ($17m), higher exploratio
Slide 66: Underlying Financing Income/Costs
Underlying Financing Income/Costs ($ million) Dec 09 Dec 08 Interest Revenue 74 55 Interest Expense (62) (115) Underlying Net Financing Income/(Costs) 12 (60) Financing Costs Capitalised 78 60 Weighted average interest rate on borrowings 5.9% 7.5% • Increase in interest revenue reflects cash balance
Slide 67: Tax Reconciliation
Tax Reconciliation ($ million) Dec 09 Dec 08 Underlying Profit before Tax 501 425 Prima facie tax on underlying profit 150 128 Recognition of tax benefits not previously brought to account (21) (14) Over provision in prior period (14) (1) Share of net profit of equity accounted investees (4) (3) Oth
Slide 68: Operating Cash Flow
Operating Cash Flow ($ million) Dec 09 Dec 08 Underlying EBITDA 706 686 Change in working capital (162) (73) Stay-in-business capex (85) (115) Share of APLNG OCAT net of EBITDA(4) 7 (4) Other 10 (12) Tax paid (51) (117) Group OCAT(1)(4) 425 365 Net interest paid (65) (147) Free cash flow(4) 360 218
Slide 69: Segment Cash Flow Returns
Segment Cash Flow Returns Operating Cash Flow Productive Capital OCFR (%) ($m) % Change ($m) % Change Dec 09 Dec 08 Exploration & Production 184 (40%) 1,410 2% 13.0 22.0 Generation 142 280% 1,087 270% 13.1 12.7 Retail 315 (15%) 2,517 5% 12.5 15.4 Contact Energy 270 (15%) 3,410 (1%) 7.9 9.3 Note: Pro
Slide 70: Balance sheet capacity as at 31 December 2009
Origin has deployed $1.4 billion of balance sheet capacity over the period to grow and develop the business… Balance Sheet Capacity as at 31 December 2009 $ billion Cash 2.8 Adjusted Gross Debt (3.5) Adjusted Net Debt(1) (0.7) Undrawn Committed Facilities 0.9 Available Funding Capacity 3.7 (1) Net D
Slide 71: Fully franked interim dividend of 25 cps
A fully franked interim dividend of 25 cps, in line with the prior year, has been declared… • Ex-dividend date 2 March 2010 • Date of record 9 March 2010 • Payment Date 1 April 2010 • Dividend payout ratio of 62% of Underlying EPS • Dividend Reinvestment Plan will apply to this interim dividend with
Slide 72: Origin Assets – Australia & New Zealand
Origin Assets – Australia & New Zealand 72