Origin reports strong result: full year profit $980m and underlying profit up 33% to $893m.
Appendix 4E (2 pages)
Full Financial Statements (115 pages)
Management Discussion and Analysis (60 pages)
Directors’ Report (18 pages)
Remuneration Report (36 pages)
Presentation to investors and analysts (69 slides)
Presentation to media (50 slides)
Origin Energy Limited (Origin) today announced a Statutory Profit1 of $980 million for the financial year ended 30 June 2012, up from $186 million reported in the prior year.
The primary factors contributing to an increase in Statutory Profit include a higher Underlying Profit11,2, a gain on dilution of Origin’s shareholding in Australia Pacific LNG and a substantial increase in the fair value of financial instruments, partially offset by a larger impairment of assets when compared to the prior year.
Underlying Profit increased by 33 per cent or $220 million to $893 million. Growth in Underlying Profit was driven by a full year contribution from the NSW energy assets3 acquired in March 2011, a lower exploration expense and higher commodity prices.
|Financial Highlights||FY 2012||FY 2011||Change|
|Statutory Profit||$980 million||$186 million||up 427%|
|Underlying Profit||$893 million||$673 million||up 33%|
|Underlying EBIT1||$1,598 million||$1,194 million||up 34%|
|Underlying EBITDA1||$2,257 million||$1,782 million||up 27%|
|Underlying EPS1||82.6 cps||71.0 cps||up 16%|
|Group Operating Cash Flow After Tax1||$1,781 million||$1,585 million||up 12%|
|Final fully franked dividend||25 cps||25 cps||Steady|
|Full year fully franked dividend||50 cps||50 cps||Steady|
|Capital Expenditure||$1,680 million||$4,954 million||down 66%|
|APLNG expenditure4||$1,167 million||–||n/a|
Origin Chairman, Mr Kevin McCann said, "In the past year, Origin has delivered strong growth across its operating businesses.
"In the first full year since the NSW acquisition, the assets have made a strong contribution to increases in earnings and profit. The Company also delivered increased contributions from its Exploration and Production and Contact Energy segments.
"The Australia Pacific LNG project stands to deliver significant value to shareholders over time, and continues to make significant progress towards first LNG in 2015. The two-train $23 billion project has now been fully sanctioned and in July 2012, Origin diluted its shareholding to 37.5 per cent.
"Australia Pacific LNG signed US$8.5 billion of project financing agreements5. This, together with Origin’s strong operating cash flow after tax and $4.2 billion in cash and undrawn facilities, provides sufficient liquidity for Origin’s remaining funding requirement for Australia Pacific LNG of approximately $3.6 billion to first LNG for both trains, as well as the ongoing needs of Origin’s business.
"If we achieve the planned dilution in Australia Pacific LNG below Origin’s current shareholding of 37.5 per cent, our funding position will further improve.
"The Board has declared a final fully franked dividend of 25 cents per share, taking total dividends for the year to 50 cents per share, which represents 61 per cent of Underlying earnings per share," Mr McCann said.
The final dividend will be paid on 27 September 2012 to shareholders of record on 31 August 2012.
Origin’s Dividend Reinvestment Plan (DRP) will apply to this dividend. No discount will be applied in the calculation of the DRP price and the final dividend will not be underwritten.
Underlying business performance
Origin Managing Director, Mr Grant King said, "Origin’s growth in Underlying Profit and Underlying EBIT was driven by a 27 per cent increase in Underlying EBITDA to $2,257 million. Operating Cash Flow After Tax also increased by 12 per cent to $1,781 million, reflecting the continued strength of Origin’s underlying business."
Energy Markets Underlying EBITDA increased by 33 per cent or $388 million to $1,562 million, which was largely attributable to a full year contribution from the acquired NSW energy assets.
Exploration and Production Underlying EBITDA increased by 23 per cent or $61 million to $329 million, primarily due to lower exploration expense and higher commodity prices, partially offset by higher operating costs.
Australia Pacific LNG Underlying EBITDA decreased by 25 per cent or $16 million to $47 million, primarily due to the dilution of Origin’s shareholding in Australia Pacific LNG from 50 per cent to 42.5 per cent following the first Sinopec subscription in July 2011, together with higher operating costs to support the expanded operations and meet increased regulatory requirements.
Contact Energy Underlying EBITDA increased by 16 per cent or $55 million to $400 million, primarily due to reductions in gas and carbon unit costs and improved commercial and industrial margins.
Corporate expenses increased by 19 per cent or $13 million resulting in an Underlying EBITDA loss of $81 million. The largest contributor was increased expenditure on development opportunities in Chile, Indonesia and Papua New Guinea.
"We continued to make good progress on the integration of the NSW energy assets and have now successfully completed a major SAP billing and customer relationship management system implementation, which will increase the efficiency of our operations, improve competitiveness and allow us to respond more effectively to customer needs," Mr King said.
"In the first half, there were a range of factors constraining Origin in its ability to attract and retain customers relating to the SAP implementation. These constraints, which included a freeze on new product development and call centre system availability, have since been released. As a result, second half net customer losses were 48,000, a 57 per cent improvement on the first half.
"With new rate freeze and easy payment products and with technology supporting self service, electronic billing and smart energy management, Origin’s intention is to maintain customer numbers throughout the coming year," Mr King said.
Australia Pacific LNG
"Significant progress continues to be made on the Australia Pacific LNG project. Australia Pacific LNG increased 2P reserves from 11,775 petajoules equivalent (PJe) at 30 June 2011 to 13,111 PJe at 30 June 2012, with 3P reserves increasing from 14,742 PJe to 16,047 PJe," Mr King said.
"Australia Pacific LNG remains on track to deliver first LNG in mid-2015. The overall progress of work completed to date is 14 per cent for the Upstream and 17 per cent complete for the Downstream.
"There has been no change to the $23 billion estimated project costs, and the ratio of fixed versus variable costs provides a high level of certainty and enables risks to be appropriately managed. More than two thirds of the total project cost is fixed or unit rate, with the remainder variable and already largely agreed with contractors," Mr King said.
In looking ahead Mr King said, "A key focus of the Company over the next few years is delivering the Australia Pacific LNG project on schedule and budget. To fund Origin’s share of that investment, we have been significantly reducing our committed capital expenditure on other projects, will be focusing on maximising cash flow from the existing business and managing the maturity of our existing debt facilities.
"We are today announcing the launch of a $625 million four and five year syndicated bank loan to refinance debt maturing in the 2013 financial year. The syndication is expected to close at the end of September 2012.
"The outlook for the coming year is more challenging than in prior years with less growth coming from new capital investments, regulatory uncertainty particularly related to pricing decisions made by the Queensland Competition Authority for which the Company has initiated a judicial review, as well as more uncertainty in forecasting earnings driven by volatile global commodity prices and changing patterns in the demand for energy in Australia.
"In the Energy Markets segment, we will respond to the uncertainties by focusing on reducing costs, winning and retaining customers, realising benefits of the new SAP billing and customer relationship management system and continuing to capture benefits from Origin’s integrated portfolio. In this segment, we are targeting an Underlying EBIT margin6 of around 11 per cent.
"We expect a higher contribution from our Exploration and Production business with BassGas expected to recommence production in the September Quarter 2012. We are scheduling a shutdown for Otway to allow for the tie-in of the Geographe project.
"We are also expecting a higher contribution from Contact Energy as it continues to benefit from greater flexibility in its generation portfolio and its gas purchasing position," Mr King said.
Depreciation and amortisation costs will increase in line with the increased asset base, following the completion of Mortlake Power Station, upgrades to Eraring Power Station, implementation of the new SAP billing and customer relationship management system, a return to production at BassGas and increased production.
Underlying net financing costs6 are expected to increase substantially in the 2013 financial year compared with the prior year due to interest on completed projects and the Ironbark development no longer being capitalised. Interest associated with Origin’s cash contributions via shareholder loan repayments to Australia Pacific LNG will continue to be excluded from Underlying Profit.
Origin’s Underlying effective tax6 rate is expected to remain at around 30 per cent for the coming year.
"Taking all of these factors into account, and based on prevailing market conditions, Origin anticipates Underlying EBITDA for the 2013 financial year to increase by around 10 per cent and Underlying Profit to be in line with the 2012 financial year," Mr King said.
"While Origin intends to reduce its shareholding in Australia Pacific LNG to below 37.5 per cent, this guidance does not include any impact of a change in Origin’s shareholding."
Future growth opportunities
Origin continues to pursue a number of opportunities in Australia and internationally that will drive growth in the medium to long-term.
"Origin is well positioned to capitalise on the expected rise in domestic gas prices, with a diverse and flexible portfolio of physical and contracted fuel resources, as evidenced by the recent gas sale to the GLNG project at international oil-linked pricing," Mr King said.
"Gas demand in eastern Australia is expected to triple over the next five years and Origin continues to invest in a targeted number of exploration opportunities in and around existing permits in anticipation of this growth.
"Origin is also exploring for resources in attractive international markets including New Zealand, South East Asia, Kenya and Botswana, providing access to both potential resources and growing demand.
"We continue to develop our portfolio of high quality, large-scale renewable energy opportunities in offshore markets which offer strong growth prospects. This includes a potential hydro project and geothermal exploration in Chile, geothermal exploration in Indonesia and a potential hydro project in Papua New Guinea.
"Looking to the long-term, Origin continues to target growth in Underlying earnings per share of 10 to 15 per cent per annum on average," Mr King said.
General Manager, External Affairs
Ph: +61 2 8345 5217
Mobile: +61 427 017 798
Group Manager, Investor Relations
Ph: +61 2 8345 5288
Mobile: +61 400 477 393
About Origin Energy
Origin Energy (ASX: ORG) is the leading Australian integrated energy company with market leading positions in energy retailing (approximately 4.2 million customers), power generation (approximately 6,000 MW of capacity owned and contracted) and natural gas production (1,093 PJ of 2P reserves and annual production of 82 PJe). Through Australia Pacific LNG, its incorporated joint venture with ConocoPhillips and Sinopec, Origin is developing Australia’s biggest CSG to LNG project based on the country’s largest 2P CSG reserves base.
- Refer to Glossary in Appendix 6 of the Management Discussion & Analysis, attached.
- Refer to Section 3 of the Management Discussion & Analysis for a reconciliation between Statutory Profit and Underlying Profit.
- Refers to Origin’s acquisition of the Integral Energy and Country Energy retail businesses and the Eraring GenTrader arrangements in March 2011.
- Cash contributions made via shareholder loan repayments.
- Subject to customary conditions precedent, including certain government approvals.
- Refer to Glossary in Appendix 6 of the Management Discussion & Analysis, attached.