Origin Energy Limited ACN 000 051 696 • Level 45 Australia Square, 264-278 George Street, Sydney NSW 2000 GPO Box 5376, Sydney NSW 2001 • Telephone (02) 8345 5000 • Facsimile (02) 9252 1566 • www.originenergy.com.au
To Company Announcements Office Facsimile 1300 135 638
Company ASX Limited Date 20 February 2014
From Helen Hardy Pages 54
Subject INVESTOR PRESENTATION FOR HALF YEAR RESULTS
Please find attached the investor presentation relating to Origin Energy’s Results for the half year ended 31 December 2013. Regards
Helen Hardy Company Secretary 02 8345 5023 – [email protected]
2014 Half Year Results Announcement Half Year Ended 31 December 2013
Grant King, Managing Director Karen Moses, Executive Director, Finance and Strategy
20 February 2014
Important Notice
Forward looking statements
This report contains forward looking statements, including statements of current intention, statements of opinion and predictions as to possible future events. Such statements are not statements of fact and there can be no certainty of outcome in relation to the matters to which the statements relate. These forward looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause the actual outcomes to be materially different from the events or results expressed or implied by such statements. Those risks, uncertainties, assumptions and other important factors are not all within the control of Origin and cannot be predicted by Origin and include changes in circumstances or events that may cause objectives to change as well as risks, circumstances and events specific to the industry, countries and markets in which Origin and its related bodies corporate, joint ventures and associated undertakings operate. They also include general economic conditions, exchange rates, interest rates, the regulatory environment, competitive pressures, selling price, market demand and conditions in the financial markets which may cause objectives to change or may cause outcomes not to be realised.
None of Origin Energy Limited or any of its respective subsidiaries, affiliates and associated companies (or any of their respective officers, employees or agents) (the Relevant Persons) makes any representation, assurance or guarantee as to the accuracy or likelihood of fulfilment of any forward looking statement or any outcomes expressed or implied in any forward looking statements. The forward looking statements in this report reflect views held only at the date of this report.
Statements about past performance are not necessarily indicative of future performance.
Except as required by applicable law or the ASX Listing Rules, the Relevant Persons disclaim any obligation or undertaking to publicly update any forward looking statements, whether as a result of new information or future events.
No offer of securities
This presentation does not constitute investment advice, or an inducement or recommendation to acquire or dispose of any securities in Origin, in any jurisdiction.
2 |
Outline
1. Performance Highlights Grant King
2. Financial Review Karen Moses
3. Operational Review Grant King
4. Prospects Grant King
5. Appendix
3 |
1. Performance Highlights
Grant King, Managing Director
4 |
Results
Statutory Profit* $322 m down 39%
Statutory EPS* 29.3 cps down 39%
Underlying Profit* $381 m up 5%
Underlying EPS* 34.6 cps up 4%
Underlying EBITDA* $1,082 m up 3%
Interim Dividend Unfranked 25.0 cps - -
Group OCAT* $1,038 m up 125%
Free Cash Flow* $793 m up 50%
Capital Expenditure1 $460 m down 36%
Origin’s Cash Contributions to APLNG2 $1,437 m up from $119 m
Total Recordable Injury Frequency Rate 5.4 down from 7.93
* Refer to Appendix in Section 5. (1) Based on cash flow amounts rather than accrual accounting amounts; includes growth and stay-in-business capital expenditure, capitalised
interest and acquisitions. (2) Origin’s cash contributions to APLNG made via loan repayments. (3) Revised from the previously reported 8.1 due to retrospective data updates. 5 |
Improving the Performance of the Existing Businesses
Origin has made strong progress on its four key priorities …
Delivering the APLNG Project
Managing Funding and Balance Sheet Position
Creating Growth Opportunities for the Medium to Longer Term
(1) Excludes Contact Energy and bank guarantees.
Retail Transformation complete, delivering operational and cash flow improvements
Reduced discounting in NSW, improved competitive capability
Stabilised customer numbers
Expansion of gas margins
Value captured through signing of gas purchase and sale agreements
Increased availability and production from upstream assets following investments
Increased flexibility and lower generation costs at Contact Energy following period of investment
Progress continues – Upstream 58% complete, Downstream 62% complete
On track for first LNG in mid-2015
Funding initiatives have lengthened debt maturities and improved liquidity position
$6.5 billion1 of undrawn committed facilities and cash are substantially more than required to fund Origin’s remaining funding requirement for APLNG
Progressing existing opportunities to provide ongoing growth following the completion of APLNG
… setting up a solid foundation for the future 6 |
Estimated costs to complete are in line with budget
300
512
659
0
100
200
300
400
500
600
700
H1 FY2013
H2 FY2013
H1 FY2014
$ m
illio
n
Investment in Retail Transformation at an end and beginning to deliver operational and cash flow improvements
Retail Transformation
• Transition of all Mass Market customers onto SAP platform completed a year ahead of schedule, bringing TSA payments to an end
• Improvement in billing and collections performance
Customer Experience / Digital Step Change
• Increased penetration of online self-serve functionality and e-billing capability
• Improved competitive capability
Energy Markets Operating Cash Flow
Increase of $359m with $268m from
reduction in late bills, shorter billing cycles and increased
focus on collections efficiency
Focus moves to customer experience to improve customer retention and reduce discount spend
7 |
5.0
6.0
7.0
8.0
9.0
10.0
11.0
0
50,000
100,000
150,000
200,000
250,000
300,000
Resi
dent
ial
& c
omm
erci
al c
onsu
mpt
ion
per
capi
ta
Annu
al e
nerg
y co
nsum
ptio
n
2013 High 2013 Medium 2013 Low Actuals2012 High 2012 Medium 2012 Low R+C per capita
(GWh) (MWh)
Source: AEMO 2013 Electricity Statement of Opportunities
-30
5
14
-40
-30
-20
-10
-
10
20
H1 FY2013
H2 FY2013
H1 FY2014
Cust
omer
Acc
ount
s ('0
00)
The reduction in household consumption is expected to moderate and be largely offset by growth in households, with Origin’s focus on maintaining market share
Net Movement in Customer Accounts (Natural Gas & Electricity)
Stabilisation of Origin’s customer position through more effective customer retention and acquisition
NEM Energy Demand Projections
Annual energy consumption increasing (LHS) as lower household consumption is
offset by population growth
Household consumption declining at a subdued rate (RHS)
8 |
0%
2%
4%
6%
8%
10%
12%
14%
SA VIC NSW QLD
Deregulation Timeline
South Australia Victoria New South Wales Queensland
Gas 1 Feb 2013 1 Jan 2009 Recommended by AEMC 1 July 2007
Electricity 1 Feb 2013 1 Jan 2009 Under consideration, decision expected in FY2014
Under review, potential to commence 1 July 2015
Status
Origin’s Average Signed Discount Offers for Electricity and Natural Gas (%)
Deregulation would allow the industry to more effectively compete on prices that appropriately reflect the costs and risks of energy retailing
While intense discounting is moderating in NSW, improvements in retail margins in the short term will be driven by discounts offered in prior and current periods
9 |
24
26
25
0
20
40
60
80
H1 FY2013
H2 FY2013
H1 FY2014
Gas
Cus
tom
er A
ccou
nts
('000
)
0
50
100
150
200
250
300
2014 2015 2016 2017 2018 2019 2020 2021Calendar Year
Ironbark (new equity gas) Other purchasesAPLNG purchases Origin's existing equity gas
PJ/a
Origin has strengthened its diverse gas supply portfolio …
Sources of Energy Markets’ East Coast Gas Portfolio
… and continues to capture benefits of rising gas prices through recent oil price-linked gas sale agreements with other LNG projects and increasing penetration of Mass Market Natural Gas customers
• Gas purchase agreement with Esso/BHPB for 432 PJ of gas over 9 years from 2014
• Oil price-linked gas sale agreements with LNG projects: • QCLNG – up to 30 PJ in calendar year 2014 & 2015 • GLNG – up to 194 PJ over 5 years from 2016
Increase in Natural Gas Customer Accounts
• 75,000 additional gas customers over last 18 months
10 |
*
* Potential development.
0%
20%
40%
60%
80%
100%
Otway BassGas Kupe
Investments in upstream assets have delivered increased availability and production
Medium term focus will be on offsetting natural field decline through near field development and exploration
Availability of Origin Operated Plant for 6 month period
POTENTIAL DEVELOPMENT • Ironbark in Surat Basin • Halladale/Black Watch in
Otway Basin • Further drilling at BassGas
(Yolla 5 & 6)
EXPLORATION • Caravel-1 well in
Canterbury Basin • Speculant well in Otway
Basin
11 |
Downstream 62% Complete
$6.51 billion of committed undrawn debt facilities provides more than sufficient liquidity to fund Origin’s remaining funding requirement
APLNG is on track to deliver first LNG in mid-2015, creating a step change in Origin’s earnings and cash flows
Upstream 58% Complete
• Estimated costs to complete are in line with budget • Planning underway for transitioning from project phase to investing in sustaining
production and ongoing operations • With current good progress in the drilling and completions, and gathering parts of the
project, resources will continue to be used and costs incurred in advance of first LNG in mid-2015 to sustain production
• As the project progresses to completion, estimates of Origin's remaining capital contribution to APLNG in advance of first LNG in mid-2015 will become more dependent on the month of the first LNG shipment, exploration costs and the amount of investment in sustaining production spent prior to first LNG shipment
(1) Excludes Contact Energy and bank guarantees. 12 |
Despite operational improvements and the moderating of intense discounting in NSW, impact of prior and current period discounts will continue to impact margin recovery in the short term …
… with Origin’s gas position and APLNG driving earnings growth beyond FY2015
Improving operational
performance of existing business
Industry begins LNG production
APLNG and GLNG start up
Full production from APLNG
FY2014 FY2015 FY2016 FY2017 +
Operational effectiveness, improved competitive capability and benefits of legacy gas position to drive margin improvement
• Earnings and cash flow benefits from RT and operational improvements
• More effective customer retention and acquisition
• Lower levels of discounting in NSW
• Improved availability of, and production from, upstream assets
• Revenue from QCLNG gas sales
• Further operational improvements
• Maintaining market share through effective customer retention and acquisition
• Margin management
• Removal of carbon
• Revenues from APLNG LNG sales
• Revenue from GLNG gas sales
• Halladale/Black Watch and Yolla 5 & 6*
• Full year revenue from two APLNG trains
• Ironbark* • Stockyard Hill*
13 | * Potential developments
2. Financial Review
Karen Moses, Executive Director, Finance and Strategy
2014 Half Year Financial Highlights
($ million) Dec 13 Dec 12 Change
Statutory Profit 322 524 (39%)
Statutory EPS 29.3 cps 48.0 cps (39%)
Revenue 7,238 7,450 (3%)
Underlying EBITDA 1,082 1,055 3%
Underlying EBIT* 694 698 (1%)
Underlying Profit 381 362 5%
Underlying EPS 34.6 cps 33.2 cps 4%
Group OCAT 1,038 461 125%
Free Cash Flow 793 527 50%
Capital Expenditure1 460 720 (36%)
Origin’s Cash Contributions to APLNG2 1,437 119 1,108%
Origin Undrawn Committed Debt Facilities and Cash3 6,544 5,431 20%
* Refer to Appendix in Section 5. (1) Based on cash flow amounts rather than accrual accounting amounts; includes growth and stay-in-business capital expenditure,
capitalised interest and acquisitions. (2) Origin’s cash contributions to APLNG made via loan repayments. (3) Excluding Contact Energy and bank guarantees.
15 |
1,055 1,082
694
-
200
400
600
800
1,000
1,200
HY2013Underlying
EBITDA
Energy Markets
E&P LNG Contact Energy
Corporate HY2014Underlying
EBITDA
UnderlyingD&A
and ITDA
HY2014Underlying
EBIT
$ m
illio
n
145
Underlying EBITDA up 3% to $1,082 million Underlying EBIT down 1% to $694 million
Energy Markets decline due to: • Lower volumes due to warm
winter weather, prior year customer losses, solar PV and energy efficiency
• Effects of prior period discounting
E&P improvement due to: • Higher production volumes
• Higher commodity prices
($ million) Underlying EBITDA Underlying EBIT
Dec 13 Dec12 Change Dec 13 Dec 12 Change
Energy Markets 505 660 (23%) 372 516 (28%)
Exploration & Production 302 1921 57% 162 79 105%
LNG 35 271 30% 2 1 100%
Contact Energy 232 198 17% 150 124 21%
Corporate 8 (22) N/A 8 (22) N/A
Total 1,082 1,055 3% 694 698 (1%)
* Refer to Appendix in Section 5. (1) Restated due to internal restructure of the LNG segment at 30 June 2013. (2) Share of interest, tax, depreciation and amortisation of equity accounted investees.
(743)
Underlying EBITDA Movement – Dec 12 to Dec 13
(155) 110 8 34 30
(388)
16 |
2*
Reconciliation of Statutory Profit to Underlying Profit
($ million) Dec 13 Dec 12 Change
Statutory Profit 322 524 (202)
Items Excluded from Underlying Profit
LNG related items (250) 294 (544)
Decrease in fair value of financial instruments (99) (86) (13)
Impairment of assets (52) (2) (50)
Other 342 (44) 386
Total Items Excluded from Underlying Profit (59) 162 (221)
Underlying Profit 381 362 19
• LNG related items: financing costs related to APLNG funding (-$107m) and non-cash foreign currency losses (-$141m)
• Fair value of financial instruments: electricity and other commodities (-$161m) and cross currency derivatives (+$62m)
• Other:
Net gain on cancellation of the Cobbora Coal Supply agreement and settlement of the GenTrader arrangements (+$267m)
Tax benefit relating to amendment of the tax treatment of unbilled income (+$103m)
NSW energy assets transition and stabilisation costs, including Eraring Energy acquisition (-$43m)
No gain on dilution (-$358m), foreign currency impacts (-$129m) and financing costs (-$42m)
Settlement of Cobbora and GenTrader agreements (+$267m), changes to tax treatment of unbilled income (+$103m)
17 |
524
362 381
322
-
100
200
300
400
500
600
HY2013Statutory
Profit
Net Itemsexcluded
fromUnderlying
Profit
HY2013Underlying
Profit
Underlying EBITDA
Underlying D&A
and ITDA
UnderlyingNet
financingcosts
UnderlyingTax
Expense
UnderlyingNon-
controllinginterests
HY2014Underlying
Profit
Net itemsexcluded
fromUnderlying
Profit
HY2014Statutory
Profit
$ m
illio
n
193
Statutory Profit down 39%, from $524 million to $322 million
Underlying Profit increased 5% reflecting a 3% increase in Underlying EBITDA (up $27m to $1,082m) and: • Underlying D&A (up $27m to $363m) increased amortisation from the Otway, Bass and Kupe basins
reflecting higher production • Underlying net financing costs (down $18m to $108m) – primarily Ironbark capitalised interest and
lower average interest rates
Underlying Profit up 5%, from $362 million to $381 million
* Refer to Appendix in Section 5.
* *
(162)
27 (31) 18
11 (6)
(59)
*
Statutory Profit Movement – Dec 12 to Dec 13
18 |
Group OCAT increased due to improved billing and collections performance
($ million) Dec 13 Dec 12 Change
Underlying EBITDA 1,082 1,055 27
Change in working capital 217 (268) 485
Stay-in-business capex (125) (124) (1)
Share of APLNG OCAT net of EBITDA (30) (7) (23)
Exploration (benefit)/expense (7) 2 (9)
NSW acquisition related liabilities (50) (95) 45
Other1 27 (22) 49
Tax paid (76) (80) 4
Group OCAT 1,038 461 577
Net interest paid (245) (218) (27)
Oil Sale Agreement - 284 (284)
Free cash flow 793 527 266
Productive Capital* 16,174 15,116 1,058
Group OCAT Ratio* 9.6% 9.1% 0.5%
* Refer to Appendix in Section 5. (1) The add-back of non–cash equity accounted profits excluding APLNG and movements in other provision balances are included within the
“Other” line item.
Decrease in utilisation of non-cash provisions for TSA and onerous hedge contracts
Decreased Energy Markets debtors from billing & collections improvements (+$268m), lower sales and green certificate payments, partially offset by lower network costs
Mortlake commissioned in August 2012 and capital expenditure in the Otway and Bass basins
Higher average net debt balances relating to funding, principally APLNG
Higher SIB capex at Spring Gully
19 |
As a result of a number of funding initiatives during the period, Origin has $6.51 billion of committed undrawn debt facilities and cash as at 31 December 2013
(1) Excludes Contact Energy and bank guarantees. (2) Excludes Contact Energy.
Origin Debt & Bank Guarantee Maturity Profile as at 31 December 20132
Over the last 6 months, Origin undertook a number of funding initiatives to lengthen debt maturities and improve liquidity position
• New $7.4 billion bank loan facility to refinance all existing bank debt, which was subsequently upsized by $1.2 billion due to strong demand
• €800 million eight year medium term notes issuance, maturing in FY2022
• US$800 million five year senior unsecured notes, maturing in FY2019
• Proceeds of the two note issuances above were swapped into AUD and used to repay and cancel approximately $2 billion of the new facility, fund Origin’s contribution to APLNG and for general corporate purposes
20 |
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
FY20
14
FY20
15
FY20
16
FY20
17
FY20
18
FY20
19
FY20
20
FY20
21
FY20
22
FY20
23
FY20
24
FY20
25+
A$ m
illio
n
Loans & Bank Guarantees - Undrawn
Loans & Bank Guarantees - Drawn
Capital Markets Instruments
An unfranked interim dividend of 25 cps has been determined, representing a payout ratio of 72% of Underlying EPS
• Ex-dividend date: 25 February 2014
• Record Date: 3 March 2014
• Payment Date: 4 April 2014
• The Dividend Reinvestment Plan will apply to this interim dividend with zero discount
• The Dividend Reinvestment Plan will not be underwritten
• The interim dividend is unfranked
Origin policy is to pay annual dividends set at the minimum of 50 cents or a payout ratio of 60% of annual Underlying EPS
21 |
25 25 25 25 25
25 25 25 25
0
10
20
30
40
50
60
FY2010 FY2011 FY2012 FY2013 FY2014
100% 100% 100% 50% 0%
77% 70% 61% 72% 72%
cent
s pe
r sh
are
Dec Half
Jun Half
Franking
Payout Ratio
3. Operational Review
Grant King, Managing Director
Gas Gross Profit up $7 million
Electricity Gross Profit down $130 million
Energy Markets
Underlying EBIT margin* reduced from 9.4% to 7.2% predominantly due to impact of prior period discounting
Operating cash flow up 120%, or $359 million, to $659 million primarily due to billing improvements Customer numbers stabilised with 14,000 net gains during the period Servicing all Mass Market customers on SAP, a year ahead of schedule, with the system delivering
improved operating effectiveness and competitive capability Strengthened gas position through gas purchase agreement with Esso/BHP Capturing benefits of rising gas prices through oil price-linked gas sale agreements with QCLNG and
GLNG * Refer to Appendix in Section 5.
660
505
0
200
400
600
800
Dec 12 Dec 13
Underlying EBITDA($m)
23 |
660
505
0
100
200
300
400
500
600
700
$ m
illio
nEnergy Markets EBITDA down $155 million primarily due to lower Mass Market volumes and impact of discounts from prior period …
• Mass Market volumes impacted by warmest recorded winter (-$30m)
• Mass Market Electricity volumes also down due to solar PV, energy efficiency and prior year customer losses (-$52m)
• Compressed margins due to effects of prior period discounting (-$55m)
• Expanding Natural Gas margin reflecting rising gas prices and benefit of legacy portfolio (+$12m)
• Lower Non-Commodity and LPG Gross Profit due to fewer solar PV installations and lower volumes (-$31m)
… partly offset by expanding Natural Gas margin
(30) (52)
(55) 12 (31)
Underlying EBITDA Bridge
24 |
585 471
860783
360345
214
122
0
500
1,000
1,500
2,000
2,500
H1 FY2013 H1 FY2014
SA - HDD VIC - EDDNSW - HDD QLD - HDD
Both Electricity and Natural Gas Mass Market demand impacted by warmest September quarter in recorded history
Cumulative Degree Days
Down 15%
0
2
4
6
8
10
12
H1 FY2013 H1 FY2014
TWh
0
5
10
15
20
25
H1 FY2013 H1 FY2014
PJ
Electricity Mass Market Volumes
Gas Mass Market Volumes
NSW Vic Qld SA
(1) Heating Degree Day (HDD) is the number of degrees that day’s average temperature is below 18 degrees Celsius. (2) Effective Degree Day (EDD) is used in the Victorian gas industry to measure coldness which is directly related to gas demand for area heating.
It is a composite measure incorporating the effect of temperature, wind-chill, insolation and season.
1 2
10.3
9.1
23.0 22.4
25 |
0.0
2.0
4.0
6.0
8.0
FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
MWh
-60
-50
-40
-30
-20
-10
0
H1 FY2013
H2 FY2013
H1 FY2014
Elec
tric
ity
Cust
omer
Acc
ount
s ('0
00)
Electricity Mass Market volumes also impacted by prior year customer losses, solar PV and energy efficiency …
… however customer losses have abated, solar installation rates are declining & energy efficiency trends are expected to be offset by new household formations
Net Movements in Electricity Customer Accounts
• Improved acquisition and retention activity stabilised net customer position
NEM Electricity Consumption per Capita
• Per capita usage decline forecast to stabilise with reducing solar PV growth and electricity prices moderating
Source: AEMO 2013 Electricity SOO
-
400
800
1,200
1,600
GWh
Annual Change in Solar PV Output
26 |
(54)
(21)
(11)
Electricity Performance ($/MWh) Dec 13 Dec 12 Change
Revenue
C&I 137.1 136.3 0.8
Mass Market 279.3 265.1 14.2
Combined Revenue 205.3 200.7 4.6
Cost of goods sold
Network costs (93.0) (87.6) (5.4)
Wholesale energy portfolio costs (73.6) (71.1) (2.5)
Generation operating costs (6.3) (6.4) 0.1
Energy procurement costs (79.9) (77.5) (2.4)
Total Cost of Goods Sold (172.9) (165.1) (7.8)
Gross Profit 32.4 35.6 (3.2)
Gross profit per customer ($)1 217 258 (41)
Prior period discounting and competitive pressures compressing Electricity unit Gross Profit margin
Reduced unit gross profit
(1) Based on average customer accounts.
• Published electricity tariffs have moved largely in line with increases in network, green and energy costs
• Higher energy procurement costs due to increased hedging and use of internal generation
• Impact of discounts as a percentage of Mass Market Electricity revenue increased from 2.0% to 3.9%, reflecting higher levels and penetration of discounts offered in the prior period
27 |
0%
5%
10%
15%
20%
25%
30%
35%
40%
Vic Qld SA NSW NEM
% C
hurn
Origin, H1 FY2013 Origin, H1 FY2014
Market, H1 FY2013 Market, H1 FY2014
Origin has reduced discounts in NSW, supported by a decrease in churn, while intense competition remains in VIC
Incumbency value evident in Origin’s churn levels relative to market 28 |
Electricity and Natural Gas Churn Rates
NSW: sustained reductions in discounts in NSW since May 2013 VIC: intense competition continued to support discount levels
NSW: significant reduction in churn, with Origin’s more pronounced than the market VIC: small increase in market churn, while Origin’s churn declined
0%
2%
4%
6%
8%
10%
12%
14%
SA VIC NSW QLD
Origin’s Average Signed Discount Offers for Electricity and Natural Gas (%)
During the period internal generation covered 39% of Origin’s load, including 44% of peak load, up from 36% and 38% in the prior corresponding period, with continued high levels of reliability
The Eraring and Cobbora transactions, along with the Centennial Coal agreement, consolidated Origin’s generation and fuel position
• Acquisition of the assets of Eraring Energy on 1 August 2013, providing generation and fuel flexibility
• Cancellation of Cobbora Coal Supply Agreement
• Signing of a coal supply agreement with Centennial Coal for 24.5 million tonnes over 8 years from FY2015
Generation Portfolio Performance Eraring and Cobbora
29 |
0% 50% 100%
Bulwer Island
Osborne
Worsley
Cullerin Range
Mt Stuart
Shoalhaven
Uranquinty
Roma
Quarantine
Ladbroke Grove
Mortlake
Darling Downs
Eraring
Exte
rnal
lyCo
ntra
cted
Win
dPe
akin
g
Base
Lo
ad/
Inte
rm.
Equivalent Reliability Factor (ERF) Capacity Factor
Natural Gas Performance ($/GJ) Dec 13 Dec 12 Change
Revenue
C&I 7.5 6.0 1.5
Mass Market 21.4 20.4 1.0
Combined Revenue 13.0 10.8 2.3
Cost of goods sold
Network costs (5.4) (4.3) (1.1)
Gas procurement costs (4.9) (4.4) (0.6)
Total Cost of Goods Sold (10.3) (8.7) (1.7)
Gross Profit 2.7 2.1 0.6
Gross profit per customer ($)1 150 151 (1)
(1) Based on average customer accounts.
Increased unit gross profit
Tariff increases reflecting higher wholesale energy costs more than offset increases in Origin’s purchase costs
Lower demand from extremely warm winter weather
Natural Gas unit Gross Profit expanded by $0.60/GJ reflecting the cost benefit of Origin’s diverse gas supply portfolio
30 |
1,542 1,547 1,565
1,086 1,076 1,078
923 926 916
358 366 369
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
H1 FY2013 H2 FY2013 H1 FY2014
Cust
omer
Acc
ount
s ('0
00)
Origin has continued to gain customers, particularly in Natural Gas through dual fuel penetration in NSW
Electricity and Natural Gas Customer Accounts
31 |
NSW
VIC
QLD
SA
-30
-20
-10
0
10
20
30
Cust
omer
Acc
ount
s ('0
00)
H2 FY2013 H1 FY2014
Gas
Electricity
Customer Account Movements
51,000 more gas customers over last 12 months
32,000 less electricity customers over last 12 months
Net gain of 5,000
Net gain of 14,000
325 312 294
384 457 437
0
200
400
600
800
1000
H1 FY2013 H2 FY2013 H1 FY2014
Cus
tom
er w
ins
and
reta
ins
('000
)
Retains Wins
Flat cost-to-serve per customer reflects efficiency of leveraging internal sales channels and new systems capability with a focus on customer retention …
Cost to serve Dec 13 Dec 12 Change
Natural Gas, Electricity & Non-commodity cost to serve (excl. TSA unwind) ($m) (344) (361) 17
TSA provision unwind ($m) 30 52 (22)
Total Natural Gas, Electricity & non-commodity cost to serve ($m) (314) (309) (5)
Maintenance costs ($m) (263) (249) (14)
Acquisition & retention costs ($m) (51) (60) 9
Cost to serve ($ per customer) (80) (79) (1)
Cost to maintain (67) (64) (3)
Cost to acquire/retain (13) (15) 2
Cost per acquire/retain ($ per acquire/retain) (70) (85) 15
Customer Wins and Retains
COST TO ACQUIRE/RETAIN
• Lower cost to acquire/retain: • Greater use of internal channels for
customer acquisition • Increased focus on customer retention • Reduced customer churn
COST TO MAINTAIN
• Cost savings from reduced headcount and operational improvements
• Increased costs from additional credit collection activities with focus on cash flow improvements
• Unwind of remainder of the TSA provision with all Country and Integral customers migrated to SAP
… moderated by increased costs associated with credit collections
32 |
709 769
731
Exploration & Production
Higher production at Otway, BassGas and Kupe basins following completion of investments and planned shutdowns
Unit general operating costs down by 20% to $1.65/GJe predominantly due to increased production
Higher production (+27%) and sales volumes (+26%)
Higher commodity prices
Flat operating costs
192
302
0
100
200
300
400
Dec 12 Dec 13
Underlying EBITDA($m)
(1) Restated due to internal restructure of the LNG segment at 30 June 2013.
1
33 |
Total Liquids SA Cooper & SWQ Perth SuratTaranaki - Onshore Otway - Offshore
Bass
Kupe
Investments made in prior periods and higher availability in the current period have resulted in a 27% increase in production
(1) Excluding APLNG.
Otway
• Production from Geographe 2 commenced in July 2013, offsetting natural decline in the Thylacine reservoir
• Production up 33% due to Geographe 2 coming online and additional Origin equity volumes being produced
BassGas
• Production up 166% due to the extended shutdown for the Yolla MLE project
• Yolla 3 shut-in in January for monitoring and assessment following increasing water production
Kupe
• Production up 28% due to additional gas contracts
Cooper
• Drilling program continued, with 26 development wells and 10 exploration wells
• Production down 7% due to natural field decline
0.0
1.7
3.4
5.1
6.9
8.6
10.3
0
10
20
30
40
50
60
Dec Jun Dec Jun Dec Jun Dec Jun Dec
FY10 FY11 FY12 FY13 FY14
mmboePJeOrigin Gas and Liquids Production1
34 |
Activity is focused on offsetting natural decline in production from existing assets through near field development and exploration activities …
… while growth opportunities are being progressed in the Canterbury Basin and at Ironbark
Otway Basin
• Drilling plans and site preparations are underway for the Halladale/Black Watch and Speculant wells
Bass Basin
• Planning for drilling of Yolla 5 and 6 continues
• Rig contracting at an advanced stage, anticipate mobilising the rig in Q2 FY2015
Ironbark
• Pilot testing at Duke 2 and 3 pilot wells progressing
• Progress towards a development and investment decision for the Ironbark field continues
Canterbury Basin
• The Caravel-1 well spudded on 10 February 2014 using the Noble Bob Douglas drillship
• Drilling is expected to take around 40 days
35 |
27
35
0
10
20
30
40
Dec 12 Dec 13
Underlying EBITDA($m)
LNG
Substantial progress made on the project
• Upstream 58% complete
• Downstream 62% complete
On track for first LNG in mid-2015
Estimated costs to complete in line with budget
Increased production and sales volumes
Higher gas prices
Higher operating costs reflecting higher labour costs from increased activity to prepare for first LNG
36 |
1
(1) Restated due to internal restructure of the LNG segment at 30 June 2013.
Upstream Project Progress - 58% complete and on track
Talinga pipeline compression facility
Upstream Operated Goals FY2014 Plan Actual Progress to 31 December 2013
First gas and water production from Condabri Central (eastern area) Q1 Accomplished: Reservoir performance is in line with expectations
500 wells drilled Q2 Accomplished: 564 wells drilled
295 diameter-kilometres1 of gathering line installed (equivalent to 500 wells) Q2 Accomplished: 356 diameter-kilometres of gathering line
installed (equivalent to 603 wells)
Condabri Central Train 1 commissioned Q2
Partially accomplished: The critical path components of Condabri Train 1 (substation and flare) were commissioned in Q2 enabling production from the Condabri gas field to commence. Commissioning is expected to be complete in Q4. There is no consequential impact to achievement of first LNG by mid-2015
First gas and water production from Reedy Creek (western area) Q3 On Track: The early switchyard and flare at Reedy Creek are
complete and are on track to be commissioned in Q3
Main pipelines complete Q3 On Track: 91% complete
Condabri Central gas processing facility Reedy Creek water treatment facility
37 | (1) Calculated by multiplying the diameter of the pipe by the length of the pipe.
Downstream Project Progress - 62% complete and on track
Curtis Island including the LNG jetty Curtis Island LNG trains Curtis Island
Downstream Operated Goals
FY2014 Plan Actual Progress to 31 December 2013
Final Train 1 refrigeration compressor set Q1 Accomplished: All LNG refrigeration compressors (methane, ethylene
and propane) for Train 1 have been set
Accommodation camp complete Q1 Accomplished: 2,600-bed accommodation facility completed and handed over to operations
Complete Train 2 compressor table tops Q2 Accomplished
Complete loading platform for LNG jetty Q2 To be completed in Q4: There is no consequential impact to
achievement of first LNG by mid-2015
First Train 1 cold boxes (methane and ethylene) delivered to site and set
Q2 Accomplished in January 2014: There is no consequential impact to achievement of first LNG by mid-2015
Last Train 1 Module set Q3
To be completed in Q4: Fabrication of some modules at the Batam yard are behind plan. Consequently, the last Train 1 module is expected to be set in May 2014. There are no consequential impacts to achievement of first LNG by mid-2015
38 |
Construction, commissioning and operations of upstream assets will continue through calendar year 2014 …
Upstream Operated FY2014 Plan Downstream FY2014
Plan First gas and water production from Reedy Creek (western area) Q3 First cryo modules set Q3
Main pipelines complete Q3 Last Train 2 refrigeration compressor set Q3
Condabri Central Train 1 commissioned Q4 Complete loading platform for LNG jetty Q4
First gas and water production from Orana (eastern area) Q4 All OSBL1 modules set Q4
Talinga pipeline compression station mechanical completion Q4 LNG Tank A hydrostatic test complete Q4
Orana Train 1 mechanical completion Q1 FY15 Last Train 1 module set Q4
Reedy Creek Train 1 mechanical completion Q1 FY15 Last Train 2 module set Q2 FY15
Key near term project goals and milestones
39 | (1) Outside battery limit: LNG tank area, pipe rack area, flare area, LNG jetty.
… and pre-commissioning on Curtis Island will commence
APLNG capital expenditure for the year was $5.3 billion, with Origin’s cash contribution $1.4 billion
(1) APLNG capital expenditure (100%) derived from APLNG’s Financial Statements; on an accruals basis. (2) Made via loan repayments. (3) At 31 December 2012 exchange rates.
(A$m) Half Year to
31 December 2013
Cumulative from FID1 to December
2013
Estimate from FID1 to 1st sales from Train 2
(A$b)
Project Capex 4,6701 17,167 24.73
Non-Project Capex:
Capitalised O&M 105
Domestic 446
Exploration 39
Total APLNG Capex 5,260
Origin cash contribution 1,4372 3,1662
As at 31 December 2013, APLNG had drawn down US$7.3 billion of the US$8.5 billion project finance facility
Planning is underway for transitioning from the project phase to investing in sustaining production and ongoing operations
40 |
Contact Energy
180
Lower cost of generation
Lower carbon and gas costs
Strengthening of the NZ dollar
198
232
0
100
200
300
Dec 12 Dec 13
Underlying EBITDA($m)
Lower generation costs with hydro displacing more expensive thermal generation
Te Mihi in final stages of commissioning, expected to run at full capacity in Q4 FY2014
Retail Transformation at final stages of testing and training
Maintaining market share in a highly competitive market
Refinancing programme complete, reducing costs and increasing diversity and tenor
41 |
Benefits of favourable fuel mix and upgraded infrastructure realised during the period
• Net purchase cost improved by NZ$5/MWh
• Higher rainfall enabled increased hydro generation
• Without take-or-pay gas constraints Contact Energy used increased hydro generation and purchase of cheaper spot electricity to displace more expensive gas generation
• Initial signs of improved connectivity between North and South islands following completion of additional HVDC inter-island transmission link and associated upgrades in November 2013, reducing portfolio risk
Return to gas flexibility enables benefits from increased hydro generation …
… with completion of Te Mihi and further roll off of gas take-or-pay contracts set to further decrease generation costs
Te Mihi
42 |
Retail Transformation
• CY2014 will see the completion of the Retail Transformation project
• Expected to provide new capabilities to offer products and solutions that better meet customer needs
4. Prospects
Grant King, Managing Director
Despite operational improvements and the moderating of intense discounting in NSW, impact of prior and current period discounts will continue to impact margin recovery in the short term …
… with Origin’s gas position and APLNG driving earnings growth beyond FY2015
Improving operational
performance of existing business
Industry begins LNG production
APLNG and GLNG start up
Full production from APLNG
FY2014 FY2015 FY2016 FY2017 +
Operational effectiveness, improved competitive capability and benefits of legacy gas position to drive margin improvement
• Earnings and cash flow benefits from RT and operational improvements
• More effective customer retention and acquisition
• Lower levels of discounting in NSW
• Improved availability of, and production from, upstream assets
• Revenue from QCLNG gas sales
• Further operational improvements
• Maintaining market share through effective customer retention and acquisition
• Margin management
• Removal of carbon
• Revenues from APLNG LNG sales
• Revenue from GLNG gas sales
• Halladale/Black Watch and Yolla 5 & 6*
• Full year revenue from two APLNG trains
• Ironbark* • Stockyard Hill*
44 | * Potential developments
5. Appendix
Important Notice
Financial information
All figures in this report relate to businesses of the Origin Energy Group (Origin, or the Company), being Origin Energy Limited and its controlled entities, for the half year ended 31 December 2013 (the period) compared with the half year ended 31 December 2012 (the prior corresponding period), except where otherwise stated.
Origin’s Interim Financial Statements for the half year ended 31 December 2013 are presented in accordance with Australian Accounting Standards. The Segment results, which are used to measure segment performance, are disclosed in Note 2 of the Interim Financial Statements and are disclosed on a basis consistent with the information provided internally to the Managing Director. Origin’s Statutory Profit contains a number of items that when excluded provide a different perspective on the financial and operational performance of the business. Income Statement amounts presented on an underlying basis such as Underlying Consolidated Profit, are non-IFRS financial measures, and exclude the impact of these items consistent with the manner in which the Managing Director reviews the financial and operating performance of the business. Each underlying measure disclosed has been adjusted to remove the impact of these items on a consistent basis. A reconciliation and description of the items that contribute to the difference between Statutory Profit and Underlying Consolidated Profit is provided in slide 17.
This report also includes certain other non-IFRS financial measures. These non-IFRS financial measures are used internally by management to assess the performance of Origin’s business and make decisions on allocation of resources. Further information regarding the non-IFRS financial measures and other key terms used in this presentation is included in the Appendix. Non-IFRS measures have not been subject to audit or review. Certain comparative amounts form the prior corresponding period have been re-presented to conform to the current period’s presentation and/or to reflect the adoption of new accounting standards (specifically AASB 11 Joint Arrangements). A reference to Contact Energy is a reference to Origin’s controlled entity (53.1% ownership) Contact Energy Limited in New Zealand. In accordance with Australian Accounting Standards, Origin consolidates Contact Energy within its result. A reference to Australia Pacific LNG or APLNG is a reference to Australia Pacific LNG Pty Ltd in which Origin had a 50% shareholding until 9 August 2011, when completion of a share subscription agreement between Australia Pacific LNG and Sinopec resulted in a dilution in Origin’s shareholding to 42.5%. This shareholding was subsequently diluted to 37.5% upon completion of Sinopec’s increased share subscription in Australia Pacific LNG on 12 July 2012. Origin’s shareholding in Australia Pacific LNG is equity accounted. A reference to the NSW acquisition or NSW energy assets is a reference to the Integral Energy and Country Energy retail businesses and the Eraring GenTrader arrangements acquired by Origin in March 2011. The Eraring Energy GenTrader arrangements were settled as part of the acquisition of the Eraring Power Station completed on 1 August 2013. A reference to $ is a reference to Australian dollars unless specifically marked otherwise. All references to debt are a reference to interest bearing debt only (excludes Australia Pacific LNG shareholder loans). Individual items and totals are rounded to the nearest appropriate number or decimal. Some totals may not add down the page due to rounding of individual components. When calculating a percentage change, a positive or negative percentage change denotes the mathematical movement in the underlying metric, rather than a positive or a detrimental impact. Measures for which the underlying numbers change from negative to positive, or vice versa, are labelled as not applicable.
46 |
Glossary - Statutory Financial Measures
Term Meaning
Net Debt Total current and non-current interest bearing liabilities only less cash and cash equivalents.
Non-controlling interest Economic interest in a controlled entity of the consolidated entity that is not held by the Parent entity or a controlled entity of the consolidated entity.
Shareholders’ Equity Shareholders’ residual interest in the assets of the consolidated entity after deducting all liabilities, including non-controlling interests.
Statutory EBIT Earnings before interest and tax (EBIT) as calculated from the Origin Consolidated Interim Financial Statements.
Statutory EBITDA Earnings before interest, tax, depreciation and amortisation (EBITDA) as calculated from the Origin Consolidated Interim Financial Statements.
Statutory effective tax rate Statutory income tax expense divided by Statutory Profit before tax.
Statutory earnings per share Statutory profit divided by weighted average number of shares.
Statutory income tax expense Income tax expense as disclosed in the Interim Income Statement of the Origin Consolidated Interim Financial Statements.
Statutory net financing costs Interest expense net of interest income as disclosed in the Origin Consolidated Interim Financial Statements.
Statutory Profit Net profit after tax and non-controlling interests as disclosed in the Interim Income Statement of the Origin Consolidated Interim Financial Statements.
Statutory profit before tax Profit before tax as disclosed in the Income Statement of the Origin Consolidated Interim Financial Statements.
Statutory share of ITDA The consolidated entity’s share of interest, tax, depreciation and amortisation (ITDA) of equity accounted investees as disclosed in the Origin Consolidated Interim Financial Statements.
Statutory Financial Measures are measures included in the Interim Financial Statements for the Origin Consolidated Group, which are measured and disclosed in accordance with applicable Australian Accounting Standards. Statutory Financial Measures also include measures that have been directly calculated from, or disaggregated directly from financial information included in the Interim Financial Statements for the Origin Consolidated Group.
47 |
Glossary - Non-IFRS Financial Measures
Term Meaning Adjusted Net Debt Net Debt adjusted to remove fair value adjustments on borrowings in hedge relationships.
Free cash flow Cash available to fund distributions to shareholders and growth capital expenditure.
Free cash flow per share Free cash flow divided by the closing number of shares on issue. Gearing Ratio Net Debt divided by Net Debt plus Shareholders’ Equity. Gross Margin Gross profit divided by Revenue. Gross Profit Revenue less cost of goods sold.
Group OCAT Group Operating cash flow after tax (OCAT) of the consolidated entity (including Origin’s share of Australia Pacific LNG OCAT).
Group OCAT ratio (Calendar Year Group OCAT - interest tax shield) / Productive Capital. Interest tax shield The tax deduction for interest paid. Operating cash flow Operating cash flow before tax.
Operating cash flow return (OCFR) Operating cash flow / Productive Capital excluding tax balances.
Prior corresponding period Six months period ended 31 December 2012.
Prior period Six months period ended 30 June 2013.
Productive Capital Funds employed including Origin’s share of Australia Pacific LNG and excluding capital works in progress for projects under development which are not yet contributing to earnings. Calculated on a rolling 12 month basis.
Share of ITDA Share of interest, tax, depreciation and amortisation (ITDA) of equity accounted investees
Total Segment Revenue Total revenue for the Energy Markets, Exploration & Production, LNG, Contact Energy and Corporate segments, including inter-segment sales, as disclosed in note 2 of the Origin Consolidated Interim Financial Statements.
Underlying average interest rate Underlying interest expense for the current period divided by Origin’s average drawn debt during the year (excluding funding related to Australia Pacific LNG).
Underlying profit and loss measures: - Consolidated Profit/Segment Result - Depreciation and Amortisation - EBIT - EBIT margin - EBITDA - Effective tax rate - EPS - Income tax expense / benefit - Net financing costs/income - Non-controlling interests - Profit before tax - Share of ITDA
Underlying measures are measures used internally by management to assess the profitability of the Origin business. The Underlying profit and loss measures are derived from the equivalent Statutory profit measures disclosed in the Consolidated Interim Financial Statements and exclude the impact of certain items that do not align with the manner in which the Managing Director reviews the financial and operating performance of the business. Underlying EBIT, Underlying EBITDA, Segment Result and Underlying Profit are disclosed in note 2 of the Origin Consolidated Interim Financial Statements. Underlying EPS is disclosed in note 16 of the Origin Consolidated Interim Financial Statements.
Non-IFRS Financial measures are defined as financial measures that are presented other than in accordance with all relevant Accounting Standards. Non-IFRS Financial measures are used internally by management to assess the performance of Origin’s business, and to make decisions on allocation of resources.
48 |
Glossary - Non-Financial Terms
Term Meaning
1P reserves Proved Reserves are those reserves which analysis of geological and engineering data can be estimated with reasonable certainty to be commercially recoverable. There should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate.
2P reserves The sum of Proved plus Probable Reserves. Probable Reserves are those reserves which analysis of geological and engineering data indicate are less likely to be recovered than Proved Reserves but more certain than Possible Reserves. It is equally likely that the actual remaining quantities recovered will be greater than or less than the sum of the estimated Proved plus Probable Reserves (2P).
3P reserves
Proved plus Probable plus Possible Reserves. Possible Reserves are those additional Reserves which analysis of geological and engineering data suggest are less likely to be recoverable than Probable Reserves. The total quantities ultimately recovered from the project have a low probability to exceed the sum of Proved plus Probable plus Possible (3P), which is equivalent to the high estimate scenario.
Capacity factor A generation plant’s output over a period compared with the expected maximum output from the plant in the period based on 100% availability at the manufacturer’s operating specifications.
Discounting For Energy Markets, discounting refers to offers made to customers at a reduced price to the published tariffs. While a customer bill comprises a fixed and a variable component, Origin’s discounts only apply to the variable portion. In some cases, these discounts are conditional, such as requiring direct debit payment or on-time payment.
Equivalent reliability factor Equivalent reliability factor is the availability of the plant after scheduled outages.
GJ Gigajoule = 109 joules
GJe Gigajoules equivalent = 10-6 PJe
Joule Primary measure of energy in the metric system.
kT kilo tonnes = 1,000 tonnes
kW Kilowatt = 103 watts
kWh Kilowatt hour = standard unit of electrical energy representing consumption of one kilowatt over one hour.
MW Megawatt = 106 watts
MWh Megawatt hour = 103 kilowatt hours
Oil Sale Agreement Agreements to sell a portion of future oil and condensate production from July 2015 for 72 months at prices linked to the oil forward pricing curve at the agreement date
PJ Petajoule = 1015 joules
PJe Petajoules equivalent = an energy measurement Origin uses to represent the equivalent energy in different products so the amount of energy contained in these products can be compared. The factors used by Origin to convert to PJe are: 1 million barrels crude oil = 5.8 PJe; 1 million barrels condensate = 5.4 PJe; 1 million tonnes LPG = 49.3 PJe; 1 TWh of electricity = 3.6 PJe.
TW Terawatt = 1012 watts
TWh Terawatt hour = 109 kilowatt hours
Watt A measure of power when a one ampere of current flows under one volt of pressure. 49 |
Upstream Project Progress – Condabri Central, North and South
50 |
Condabri Central - Gas Processing Facility Condabri Central - water and brine ponds
Condabri North - Gas Processing Facility Condabri South - Gas Processing Facility
Upstream Project Progress – Talinga, Orana, Reedy Creek and Eurombah Creek
51 |
Talinga – Pipeline Compression Facility, Gas Processing Facility in background
Orana – Gas Processing Facility
Reedy Creek – Gas and Water Processing Facilities Eurombah Creek – Gas Processing Facility
Downstream Project – Curtis Island
Curtis Island February 2013 Curtis Island December 2013
52 |
Thank you
For more information
Chau Le Group Manager, Investor Relations Email: [email protected] Office: +61 2 9375 5816 Mobile: + 61 467 799 642 www.originenergy.com.au