22 September 2009

Sustainability Report 2009

The objective of this report is to provide an understanding of our financial, environmental and social performance as it affects our key stakeholders.

Download 2009 report (68 pages)


A message from the Managing Director

The 2009 financial year was one to remember. Unprecedented volatility in global financial markets led to severe economic slowdown in most of the world’s major developed economies. While Australia has avoided recession, unemployment increased during the year and the finances of many Australian families were impacted by declines in stock market valuations and the collapse of a number of companies with significant exposure to debt markets. Many Australian companies experienced a lack of liquidity and there was a sharp increase in the number of equity raisings as companies sought to pay down debt and reduce gearing levels.

In a year that so challenged the economic sustainability of many Australian companies, the highlight for Origin was the ConocoPhillips transaction in October 2008 that established Australia Pacific LNG. Australia Pacific LNG, owned 50-50 by Origin and ConocoPhillips, is targeting a Final Investment Decision (FID) for a coal seam gas to liquefied natural gas project in Queensland by late 2010. The investment by ConocoPhillips as part of that deal, which included an upfront cash payment of $6.9 billion and an additional $2.3 billion to enable Australia Pacific LNG to reach FID, has been a major factor in Origin closing the financial year with no net debt and with cash reserves and undrawn committed debt facilities of $5.3 billion.

Origin ended the 2009 financial year with the economic foundations for sustainable growth firmly in place. With growth and opportunity, however, and with many of our customers, communities and investors struggling in the current economic climate, significant choices and challenges confronted us during the year and will continue to do so in the year ahead.

Overview

While the year was marked by economic uncertainty, it was also a year of considerable uncertainty for companies affected by climate change policy. The Renewable Energy Target was passed by federal parliament after the close of the financial year, thereby creating a more certain investment environment for renewable technologies such as wind, solar and geothermal. The future of the Carbon Pollution Reduction Scheme (CPRS) is less clear.

The CPRS is the government’s proposed mechanism for introducing an economy-wide price on carbon. Without a carbon price, there is no incentive for electricity generators to shift over time from carbon-intensive coal to lower-emission fuels such as gas for base-load electricity. Without such a shift, there is no chance of Australia meeting its emission reduction goals. The uncertain investment environment is also reducing the incentive for companies to invest in the long-term base-load electricity required to meet Australia’s projected long-term growth in demand. During the year, Origin was very active in the policy debate around these issues, through industry associations, directly with government and in the public arena. One measure of our commitment to contributing to this debate is that our CPRS Green Paper submission was cited in the subsequent White Paper more times and on a wider range of topics than that of any other company.

The health and safety of our people continues to be Origin’s highest priority. Our intention is to provide a safe working environment for all employees and contractors. While we achieved improvements in safety performance among employees during the past year, regrettably the safety performance of our contractors did not match our own performance and consequently our overall safety performance deteriorated. As a result, no pay-outs were made during the year under our Employee Share Plan, which is only triggered when our safety targets are met. There were signs towards the end of the year that work to identify contributing causes and actions taken as a result had started to improve our safety performance. We must build on these early signs of progress in 2010.

Origin continued to provide customers with a range of ways to reduce or offset their carbon emissions, and remained the market leader in accredited green energy sales. Our total customer base for GreenPower and Green Gas increased 21 per cent over the reporting period. At the end of the reporting period, we served 36 per cent of all Green Power customers. Sales of carbon offsets and solar rooftop products also increased, with more than 7.5MW of photovoltaic (PV) installations completed over the year, an increase of 200 per cent on the prior year. We established a new business unit – Origin Solutions – to bring together people from our carbon, serviced hot water and energy services areas, to provide a one-stop service for business customers looking to simplify and improve their energy management. Work with Connex on train stations across Melbourne, for example, resulted in lighting re-fits that have cut energy consumption and greenhouse gas emissions by over 15 per cent.


“Continuing to deliver attractive returns while building the foundations for future growth will be at the core of Origin’s sustainability over the coming decade, just as it has been over the last ten years.”


In a year that was difficult for some in the community, Origin’s community investments grew to $5 million as measured by the London Benchmarking Group, just over half in the form of payment support through our Power On program to customers having trouble paying bills. We also ran pilot programs to test the application of lessons learned from the Power On program with vulnerable members of the community outside our customer base. We began a financial stability and energy efficiency program in January 2009 in partnership with the Aborigine Advancement League in Thornbury, Victoria, and in December 2008 launched a partnership with the Salvation Army’s Indigenous Ministry in Ipswich, Queensland, to assist in the delivery of the Ministry’s Transitional Housing Program.

In addition to these and other new small-scale programs, we continued to grow our major community investment initiatives. The energy safety and energy savings programs we provide for schoolteachers in Victoria, Queensland and South Australia were rolled out to New South Wales. The community skills scholarships we provide in our coal seam gas communities in south-central Queensland more than doubled to support 32 apprentices this year and we also extended the reach of our driver safety program in regional Queensland.

Looking forward

Continued expansion of the company will bring very real challenges in the 2010 financial year. So too will the broader economic environment, which has adversely affected many of our stakeholders.

Our highest priority for 2010 will be improving our safety performance, targeting a 25 per cent improvement. We will also be among the small number of Australian companies that set public targets in the area of gender diversity.

The introduction of the Renewable Energy Target and potentially increased clarity around the CPRS will have implications for Origin’s market-leading suite of retail products that help customers make a voluntary contribution to the fight against climate change. While seeking to maintain or increase market share in Green Gas, GreenPower and voluntary offsets, at the same time we will continue to work with government on the policy detail of the CPRS, to help create a sustainable policy framework that acknowledges the direct contribution that our customers can make to addressing climate change by purchasing our products. 

Competitive pricing and reliable customer service will continue to be important in attracting and retaining retail customers. A major focus for the 2010 financial year will be continuation of the three-year Retail Transformation and Transition program, designed to improve our billing systems and customer service capability. While this program will not be completed in the coming year, we have set targets for ourselves for the year of a greater than 10 per cent reduction in ombudsman complaints and of halving the average time taken to clear retail customer enquiries not resolved at the first point of contact.

The combination of challenging economic circumstances and the increasing impact of our major development projects on specific communities will make our community engagement and investment activities a particular area of focus in the year ahead. We are committing in this year’s report to a fundamental review and upscaling of our community investment program, which includes matched donations and employee volunteering, and of the associated governance arrangements. We are also committing to increased investment in dedicated on-the-ground representation in local communities around our major projects.

February 2010 marks the tenth anniversary of Origin’s listing on the ASX. Since listing, Origin shareholders have enjoyed Total Shareholder Returns of 1,306 per cent, which equates to a compound annual growth rate of 30 per cent(1). We will be marking our anniversary in a way that engages existing employees and involves some of the external stakeholders who have travelled with us on our journey so far. Continuing to deliver attractive returns while building the foundations for future growth will be at the core of Origin’s sustainability over the coming decade, just as it has been over the last ten years.

Grant King
Managing Director