Since separately listing in 2000, Origin has pursued a strategy of developing a fuel integrated generation and retail business through acquisitions, major development projects and organic growth.

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This year has been significant for Origin. By pursuing our fuel integrated generator and retailer strategy Origin has become a leading integrated energy company with interests in oil and gas production, merchant and contracted power generation and energy retailing.

Our long term focus on establishing an extensive gas resource base with unequalled access to energy markets in eastern Australia is delivering signiÞ cant value to you – our shareholders. As the largest holder and leading developer of CSG reserves, Origin is well placed to beneÞ t from rising energy prices and increasing demand for gas in eastern Australia.

Your Board has been working hard to look after your interests in light of BG Group’s hostile and conditional takeover offer. The Target’s Statement that was recently mailed to you outlines our rationale for unanimously recommending that shareholders reject BG Group’s offer.

Importantly, during this time, we have continued to deliver strong financial performance and we have further consolidated a solid platform for the ongoing growth of your company.

Financial performance

We reported an underlying profit of $443 million for the year ended 30 June 2008, up 20% on the prior year, highlighting the strength of our existing businesses.

Our statutory profit for the financial year to 30 June 2008 was $517 million, an increase of 13% compared with $457 million reported last year. In addition to the underlying profit this statutory profit contains a number of significant items, including the sale of our Networks business and Mokai geothermal assets, the impact of fair value changes to financial instruments (predominantly associated with our energy procurement activities), and one-off costs associated with the New Plymouth Power Station and the purchase of the Sun Retail business.

Basic earnings per share calculated from the underlying profit increased 14% to 50.6 cents on an expanded weighted average capital base of 875 million shares. This compares to 44.3 cents based on the same calculation from last year.

We have declared a fully franked Þ nal dividend of 13 cents per share in view of the strength of our underlying profit and sound financial position. This brings the total fully franked dividend for the year to 25 cents per share, an increase of 19% over the prior year.

To provide a clearer understanding of operational performance for our stakeholders, we report earnings before interest, tax, depreciation, amortisation, significant items and the impact of fair value changes to financial instruments (EBITDAF). For the year to 30 June 2008, EBITDAF from continuing businesses was $1,309 million, a 12% increase from the prior year of $1,165 million.

Record production, sales and revenues have resulted in higher earnings from the Exploration and Production segment. This reflected our growing coal seam gas operations, a full year contribution from the BassGas Project and an initial contribution from the Otway Gas Project.

Earnings for the Generation business were in line with the prior year after adjusting for the Mt Stuart Power Station transition to an internal contract.

The Retail segment signiÞ cantly increased earnings, predominantly due to a full year contribution from Sun Retail, despite continuing high churn in gas and electricity markets and tighter margins in the LPG business. Customer numbers were maintained across the year and dual fuel accounts increased. We continue to be the market leader in green energy customers.

Contact Energy increased its contribution to our profits primarily due to increases in retail volumes and tariffs.

The continued growth of your company requires that capital investment decisions, that will maintain and add value to your company, continue to be made. This year total capital expenditure including acquisitions was $1,685 million, compared with $2,027 million last year.

Stay-in-business capital expenditure associated with the maintenance of ongoing operations was $178 million for the year of which $80 million was attributable to Contact Energy, $49 million related to Exploration and Production and $42 million related to Retail (customer systems and LPG).

Growth capital expenditure was $1,398 million, 141% higher than the prior period. This included expenditure of over $40 million in the following areas: Kupe Gas Project ($291 million); CSG assets in Queensland ($273 million); Darling Downs Power Station ($248 million); Contact Energy ($128 million); Geodynamics ($105 million); Otway Gas Project ($48 million); and expansion of the Quarantine Power Station ($45 million).

Capital expenditure on acquisitions totalled $109 million covering acquisition of exploration and production assets from Swift Energy in New Zealand and the Halladale and Black Watch exploration leases off the south west Victorian coast. This compares with $1,268 million in the prior year, predominantly associated with the acquisition of Sun Retail.

The sale of our Networks business took place in two parts. The second part settled on 2 July 2007 and the proceeds from this part are reflected in the accounts for this year.

Coal Seam Gas

The interest of global energy companies in Australian CSG reserves has increased materially during 2008, with recent investments by BG Group, PETRONAS and Shell.

We are pleased to be able to state clearly that after more than a decade of investment in this area your company has the largest reserves and is the leading developer of CSG in Australia.

Over the year we announced a 92% increase in 2P CSG reserves to 4,751 PJ and a 121% increase in 3P CSG reserves to 10,138 PJ. The 2C or best estimate contingent resource in Origin’s acreage is an additional 15,869 PJ, over and above the 3P reserves assessment, while the assessment of prospective resources is a further 17,947 PJ, located in the Galilee Basin in Central Queensland.

These reserves and resources were certified by internationally recognised petroleum consultant Netherland, Sewell & Associates, Inc. and make your company the largest holder of CSG reserves in Australia.

Origin is proud to have the longest history of CSG production experience in Australia. During the year we increased our CSG production by 75% to 39 PJ per annum when compared with production for the year ended 30 June 2007, with production reaching 131 TJ per day by 30 June 2008 – both records for Australian CSG production by one company.

Positioned for a carbon-constrained future

Since listing on the ASX in 2000 Origin has made a series of investments that, in our view, position the company well for a carbon-constrained future. In addition to gas fired generation. Origin has long supported the development of renewable technologies such as wind, geothermal and solar power.

We welcomed the release of the Federal Government’s Green Paper on climate change and we strongly endorse the Government’s view that it is in the national interest to help forge an effective global response to climate change and to begin in earnest the transformation towards a lower-emissions future for Australia. We are also pleased to see an emissions trading scheme at the heart of the Government’s plans. While we strongly support the implementation of an emissions trading scheme, we are conscious of the impact this will have on households through increased energy costs. Origin is very heartened to see that strong measures have been suggested to help vulnerable households manage under an emissions trading scheme.

Our people

The continued effort, skill and dedication of our people are paramount to our success. Origin employee numbers, excluding Contact Energy, increased by 189 to 3,940 this year, with increased stafÞ ng in the Retail business and in Exploration and Production project areas. We maintain a strong focus on the health and safety of our people. Since June 2007, our total recordable incident frequency rate has decreased from 16.3 to 8.5, improving over 47%. We would like to take this opportunity to thank our people for their ongoing contribution to Origin’s continued performance year in year out.

Kevin McCann
Grant King
Managing Director