26 March 2007
On 28 February we announced a net profit after tax and minority interests for the six months to 31 December 2006 of $233 million, a 20 percent increase on December 2005. Earnings before interest, tax, depreciation and amortisation (EBITDA) increased nine percent to $640 million from $589 million.
The result was achieved on a healthy underlying operating performance with strong contributions from the Exploration and Production, Retail and Generation segments. It benefited from a positive mark-to marketi valuation of our retail electricity hedge book, a contract termination payment at the Mount Stuart Power Station and lower exploration expenses.
Shareholders at the record date of 9 March 2007 will receive a fully franked 10 cents per share interim dividend on 30 March 2007. This is an increase from nine cents in the prior period and continues Origin Energy’s record of steadily growing dividends.
Employees, health and safety
Our employee numbers increased by 98 to 3,456 during the half-year. Our combined lost-time-injury and moderate medical injuries ratio per million hours worked deteriorated from 4.7 to 6.1 in December 2006. While disappointed with the safety result for this period, we are committed to progressing programs to improve safety performance.
Merger proposal from AGL
You will no doubt have read in the media that AGL approached Origin Energy proposing a nil premium merger of equals between the two companies. The Board conducted an evaluation of the proposal and after careful consideration determined that the benefits that Origin Energy brought to the potential merger would not have been adequately recognised in a nil premium merger. The Board therefore rejected this proposal on 23 February 2007. AGL has since informed the Australian Stock Exchange that it does not intend to pursue its proposal.
Consistent with prior years, the natural seasonality in earnings will see second half earnings lower than the first half. However, the strong underlying performance of the company will result in an increase in year-on-year earnings for financial year 2007. Origin Energy has also been successful with a number of important initiatives to strengthen and grow the company, including:
- acquisition of Sun Retail which provides significant scale and purchasing benefits to our Retail business nationally and a power station development opportunity in the Darling Downs; Kevin McCann Grant King Chairman Managing Director Half-year in brief
- basic earnings per share 29 cents, up 13%
- dividend of 10 cents per share fully franked to be paid on 30 March 2007
- announcement of the proposed sale of our Networks assets. The proceeds of the sale will be reinvested in our core business;
- termination of the power purchase agreement for the Mount Stuart Power Station, paving the way for realising greater value from this asset; and
- acquisition of new exploration acreage in the Bass Basin in Australia and in New Zealand together with substantial seismic acquisition in greenfields exploration permits. This creates additional opportunities for growth in our upstream business.
This year is a year of transition as the capital expenditure program on coal seam gas at Spring Gully, BassGas and the offshore Otway is essentially completed. A full year of contributions from these projects together with Sun Retail will significantly increase earnings in 2008.
Development of the Kupe Gas Project in New Zealand is progressing well and we have announced the acceleration of development efforts on the Darling Downs power station in Queensland. If approved, this will also accelerate coal seam gas production.
Contact Energy has announced it is considering development opportunities in renewable energy in New Zealand. We are well positioned as a fuel integrated generator/retailer. We are looking forward with confidence to continued growth in returns to shareholders.