Origin delivers solid underlying profit and strong outlook for growth in 2011.
Appendix 4E (2 pages)
Full Financial Statements (86 pages)
Management Discussion and Analysis (40 pages)
Directors’ Report and remuneration report (14 pages)
Presentation to investors and analysts (74 slides)
Presentation to media (50 slides)
Origin Energy (“Origin”) today announced a 10 per cent increase in Underlying Profit to $585 million for the financial year ended 30 June 2010 when compared with the prior year, including expenses associated with an expanded level of domestic offshore and international exploration. Excluding these expenses, Underlying Profit increased by 15 per cent to $609 million for the 2010 financial year.
During the financial year to 30 June 2010, Statutory Net Profit After Tax was $612 million, compared with $6.9 billion for the prior year which contained a number of items including a benefit from the gain on the dilution of Origin’s interest in Australia Pacific LNG of $6.7 billion.
|Financial Highlights||FY 2010||FY 2009||Change|
|Underlying Profit||$585 million||$530 million||10%|
|Underlying EBITDA||$1.35 billion||$1.22 billion||10%|
|Underlying EPS||66.6 cents||60.4 cents||10%|
|Operating Cash flow After Tax||$965 million||$797 million||21%|
|Final fully franked dividend||25 cps||25 cps||steady|
Origin Chairman, Mr Kevin McCann said, “Origin is in a strong financial position and continues to deliver solid profit growth with gearing at 20 per cent and Operating Cash flow After Tax approaching $1 billion. This provides significant financial flexibility and enables investment in the continued growth of the company.
“The Board has declared a final fully franked dividend of 25 cents per share, taking full year dividends to 50 cents per share representing 75 per cent of underlying earnings,” he said.
The dividend will be paid on 28 September 2010 to shareholders of record on 6 September 2010.
Underlying Business Performance
Underlying EBITDA for the year to 30 June 2010 increased 10 per cent or $127 million to $1.35 billion.
Origin Managing Director, Mr Grant King said, “During the past two years, Origin has progressively redeployed some of the benefits of the Australia Pacific LNG transaction to fund the development of operating assets. As a result of this, a number of projects and acquisitions have made initial or increased contributions to Origin’s financial performance this year,” he said.
Exploration & Production Underlying EBITDA was $250 million, five per cent or $14 million lower than the prior year. The contribution from the recently commissioned Kupe Gas Project and Origin’s increased equity interest in the Otway Gas Project was more than offset by the dilution of Origin’s CSG interests in Australia Pacific LNG, production constraints in the Bass and Cooper basins, production decline in the Perth Basin and expenses relating to the expanded offshore and international exploration program undertaken during the year.
Origin undertook an expanded exploration program in the offshore Bass and Otway basins in southern Australia and in South-East Asia, which involved the drilling of six significant wells during the year. Unsuccessful exploration expenses associated with the expanded program are included in these results.
Generation Underlying EBITDA increased 70 per cent or $75 million to $182 million. This reflected higher capacity payments from the Retail segment as Origin increased its generation fleet. During the 2009 calendar year, commissioning of four new generation facilities was completed increasing generation capacity from 704 MW to 1,620 MW. This resulted in full year contributions this year from Uranquinty, Quarantine expansion and Cullerin Range and a part year contribution from the Mt Stuart expansion.
In addition, the 630 MW Darling Downs Power Station – Australia’s largest combined cycle gas fired power station – was commissioned in July 2010 and will make a full year contribution to the 2011 financial year. This takes Origin’s total installed generation capacity to 2,250 MW.
Retail Underlying EBITDA increased 19 per cent or $89 million to $568 million. This was achieved through increased gross profit in electricity and gas while maintaining cost to serve. There was substantial growth in the sales of the company’s retail solar systems which has increased its contribution to earnings.
Contact Energy contributed $346 million to Underlying EBITDA, a six per cent reduction on the $369 million reported in the prior year. Higher than normal rainfall during the year has resulted in lower wholesale electricity prices which has made it harder for Contact to recover higher gas costs and network charges.
Origin has funded a number of projects and acquisitions during the past two years which will contribute to Origin’s financial performance in 2011. These include:
- Full year contributions from the Kupe and Otway Gas Projects and the continued expansion of Australia Pacific LNG’s domestic CSG production which is expected to reach more than 100 PJ per annum;
- Full year contribution from the new Darling Downs Power Station and one quarter contribution from the Mortlake Power Station currently under construction; and
- Increased contribution by Contact Energy from new investments in the Stratford peaking plant and the Ahuroa gas storage facility which will reduce Contact’s exposure to periods of high rainfall.
Mr King said, “Origin expects these major capital projects will provide substantial additional cash flows and contribution to Underlying EBITDA, and will result in a commensurate increase in depreciation and amortisation expense.
“Origin continues to invest in projects which will contribute to the growth of the company over the long term. This will include a continuation of the high level of total exploration and appraisal expenditure seen in 2010,” he said.
Total expenditure on gas and oil exploration activities is expected to be around $170 million with the majority of expenditure in the first half of the 2011 financial year. Embedded in the guidance is an assumption that some elements of this program may be unsuccessful and will therefore be expensed as part of the underlying performance of the business in the 2011 financial year.
“Taking all these factors into account and based on current market conditions, Origin expects that Underlying EBITDA will increase by approximately 35 per cent in the 2011 financial year when compared with the prior year,” he said.
“As a consequence, Underlying Profit for the 2011 financial year is expected to be around 15 per cent higher than the prior year,” Mr King said.
Over the next year Origin will address a number of opportunities with the potential to create significant additional value for shareholders. These include:
- A final investment decision by Australia Pacific LNG on its LNG project;
- The NSW Government’s energy asset sales process;
- Pursuit of a substantial portfolio of renewable energy opportunities including;
– an extensive pipeline of wind development options,
– geothermal opportunities in Australia and overseas,
– further development of solar photovoltaic technology
through Transform Solar, in joint venture with Micron Inc,
- Gas and oil exploration opportunities including prospects in Australia, New Zealand, South East Asia and Kenya;
- Implementation of the Retail Transformation program; and
- Expansion of Contact’s geothermal and peaking generation.
Mr King said, “Looking forward, Origin is well-placed to benefit from the growing demand for energy both domestically and overseas.”
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