- Underlying Profit: Increased from $747 million to $1.183 billion.
- Underlying EBITDA: Achieved $3.528 billion for the year.
- Return on Capital Employed: Overall 15%, with energy market at just above 10% and integrated gas above 20%.
- Dividend: Final fully franked dividend at $0.275 per share, totaling $0.55 fully franked for the full year.
- Operating Cash Flow: Up $1.7 billion to $1.1 billion.
- APLNG Distribution: $1.38 billion to Origin, with $7 billion of cash generated after paying Queensland royalties.
- Debt-to-EBITDA Ratio: About 1 times.
- Electricity Profit: Increased by $1.1 billion.
- Gas Profits: Declined by $263 million to $689 million.
- Customer Growth: Increased by 135,000 accounts.
- Octopus Energy Growth: 35% increase in UK retail customers, with international retail customer accounts growing by almost 1 million.
- Kraken Platform: Contracted to 51 million accounts, targeting 100 million.
- Integrated Gas Production: Up 3%.
- Cost to Serve: Increased by $214 million, driven by higher bad and doubtful debts and labor costs.
- Energy Markets EBITDA: $1.65 billion.
- Electricity Gross Profit Margin: Very strong in FY24, in excess of $40 per megawatt hour.
- Gas Gross Profit Margin: Expected to be in the range of $3 to $4 per gigajoule in FY25.
- Broadband Accounts: Grown to 152,000 accounts.
- EV Fleet Management: 20,000 contracted vehicles in the UK.
- LNG Trading EBITDA: Expected to be between $400 million and $450 million in FY25.
Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Significant uplift in earnings since 2023, driven by higher wholesale electricity prices and increased LNG production.
- Statutory profit, underlying profit, and underlying EBITDA all saw substantial increases, with underlying profit rising from $747 million to $1.183 billion.
- Strong cash flow performance, with operating cash flow up $1.7 billion to $1.1 billion, reflecting higher cash flow from energy markets and LNG trading.
- Increased shareholder distributions, with a fully franked final dividend of $0.275 per share, totaling $0.55 for the full year.
- Continued investment in energy transition strategy, including storage and renewables, with 1.5 gigawatts of committed battery projects under construction.
Negative Points
- Lower earnings from Octopus Energy and APLNG, partly offsetting gains in other areas.
- Higher bad and doubtful debts, driven by increased bill sizes and cost-of-living pressures, impacting cost to serve.
- Increased labor costs due to higher volume of activity and additional temporary resources post-Kraken system migration.
- Challenges in achieving the original cost-to-serve target for FY25, with expectations of only modest improvements.
- Potential risks from market competition and the reliability of plant operations, which could impact future earnings.
Q & A Highlights
Q: Are you guiding a moderation from $4.20 gigajoule in FY24 into a $3 to $4 gigajoule target range next year and into the medium term? Is that gas margin guidance based on assuming gas procurement costs remain unchanged from current levels? And how should we interpret the upside risk to those margins, given that Origin has a large inexpensive gas sales contract at GLNG that we estimate expires in May next year?
A: Thanks, Tom, for the question. The core is really predicated on where gas prices are. You are correct that the GLNG will come out in '26. We do set that range, and you've seen that we've moved within that range. It remains our medium-term target, but you are correct to point out that there would be a benefit from GLNG coming off as we currently see it. We had quite a large trading gain in the energy markets gas book as a function of that dislocation of gas prices that you saw in '22, and those contracts have sort of wound out and that's caused us to come back towards long-term average. And as Frank highlighted, the GLNG contract would impact fin year '26 rather than fin year '25.
Q: Over the last 12 months, Origins announced the Walter Energy and Yanco Delta transactions committed to Eraring Phase 2 and the Mortlake battery. Have you secured all the development options that you need, or are there further scale opportunities on the horizon that might be incremental to the potential opportunity that you've called out at Golden Beach?
A: We set out with an objective coming on the back of the bid, we were pretty confident about moving on the battery storage opportunities and you'll see now that we've set our position in New South Wales, Victoria and Queensland and we have South Australia underway. We don't have immediate plans to build or contract more beyond that, but it is a dynamic market. We have also got the luxury that we have a lot of sites where we've got expansion capacity, so we haven't had to think about that other than when we want to take those opportunities. But our focus right now is delivering on that, call it the 1.5 gigawatt into the portfolio and the South Australia opportunity. And then we remain able to invest more in that should we choose. But at the moment, you shouldn't interpret that we're actually committing to anything beyond.
Q: You've called out the price review with Sinopec can be called into view this year. Are we right to assume that the LNG contract with Sinopec has customary constraints around the maximum price change that could be passed through the LNG SPA at this point?
A: I can't give any further detail on the contract based on that, Tom, so I don't think you should make assumptions about what's in the contract, but it's certainly got clauses in there that are familiar to the LNG market, but yeah, I don't think you should make assumptions about what terms are in there.
Q: When you assess yourselves versus your competitors, where do you think that you are versus particularly the Tier 1s on how mature that VPP is?
A: What Origin has done really is concentrate on mopping up really all of the, I guess, latent controllable demand that already exists in the market. And that's why we've quickly grown to the 1.4 gigawatts. We would have the largest VPP, I think, in Australia, certainly on a residential basis, even perhaps globally on a residential basis to compare us to the number that Frank called out for Octopus. We have some 390,000 devices connected. So I feel like we're quite advanced. We've also got a strong offering into the Origin Zero business. We control a number of assets in both the FCAS markets as well as the energy market. So I feel like we're in a pretty good position on that.
Q: Energy markets guidance for FY25 presentation deck suggesting this is assuming top half of gross margin ranges in electricity and gas already. I know you've called out the cost out and PPP benefits, but the risk is that's industry-related and it's competed away. So when you look at FY25 EBITDA guidance, is that a good medium-term outlook for the business? If not, why not?
A: What you saw this year really was you had a dislocation in energy prices which lagged through to the tariffs and so we would look at fin year '25 is more sort of a normalized year. There's probably elevated cost to serve in fin year '25, which we think will get out of the business. And so really, any of the growth that we call out, whether it's the investment in the Eraring batteries, Mortlake batteries, and some of the opportunistic aggregators that we've brought would all add to that gross margin. I think if you thought about the business on a long-run basis, you'd have to think about it as what's base and then what we're adding is growth. And when we talk about that long-term margin, we refer to it as the base.
Q: Can you just talk about how much you intend to invest in FY25 into growth projects and then also just on Octopus, you called out the fact that it is cash flow positive at the moment, but if there is a desire by Octopus to further accelerate growth, do you expect Origin will continue to maintain its 23% shareholding?
A: We've called out, obviously, the Eraring Stage 1 battery. We've got Eraring Stage 2 and Mortlake batteries. I think we've called out -- I'm trying to think exactly what the number is for fin year '25, what falls in fin year '25, because we've called out the total CapEx spend on that. As it relates to Octopus, I think the base case is that we would hold our shareholding, but we do assess that quite objectively every year, every opportunity that comes before us. And so that's -- it's therefore -- it's -- I think it's the best base case assumption to make but it's not automatic that you would think that we would just follow every investment but it just comes down once again about the valuation the attractiveness of that and the opportunities before us. Today, you can see we have followed our money and we've grown to that 23%.
Q: Just following the agreement with the government about the extension, they made the call on early closure date now of August '27. but it could potentially be as late as April '29. Just wondering about the implications for coal contracting, workforce retention, depreciation rates, et cetera, in terms of the timeline, when do you make a decision on when the right closure date actually is, or how late can you make that call, if you like?
A: Clearly what we've done is we've announced that the closure will now be August '27. We would have to continue to assess that over the coming years. We certainly are now focused on FY26 coal. So that's
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
