2020 Annual Report (PDF 3.1
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Annual Report 2020 2020 Annual Report Origin Energy Limited Origin Energy “ Good energy is helping ABN 30 000 051 696 Australia transition to a cleaner energy future” Scott Andreas Field Manager East Asset Services Brooke Geary Field Project Engineer Annual Report 2020 Featured on our front cover are Scott Andreas and Brooke Geary Scott is Field Manager East, Asset Services and Brooke is Field Project Engineer, both in our Integrated Gas business. Scott and Brooke work to safely deliver gas to our customers, helping support the transition to a cleaner future. Scott and Brooke were photographed at an Australia Pacific LNG well site at Condabri Central. Origin owns 37.5 per cent of Australia Pacific LNG, and as upstream operator, produces coal seam gas (CSG) from the Surat and Bowen basins in Queensland. Australia Pacific LNG provides ~30 per cent of Australian east coast gas and is a major exporter of liquefied natural gas to Asia. Contents 1 Contents Welcome to the 2020 Annual Report 2 20-year Timeline 4 About Origin 6 Where We Operate 7 Board of Directors 8 Executive Leadership Team 10 Operating and Financial Review 12 Directors’ Report 49 Remuneration Report 52 Lead Auditor’s Independence Declaration 73 Financial Statements 75 Directors’ Declaration 131 Independent Auditor’s Report 132 Share and Shareholder Information 140 Exploration and Production Permits and Data 144 Annual Reserves Report 146 Five-year Financial History 152 Glossary and Interpretation 154 2 Annual Report 2020 A message from Gordon A message from Frank Dear Shareholder, Welcome to the 2020 Annual Report. I was elected Chairman of Origin Energy in October 2013. In an extraordinary year, Origin quietly turned 20. In February As announced, I will be stepping down at this year’s AGM 2000, Origin was first listed on the ASX and today we are in October. Australia’s number one energy retailer, a significant energy producer and a major contributor to the Australian economy. I looked back at our message to shareholders in the 2014 Annual Report. We commented that our industry was at the It has taken a dedicated group of people to create our business, forefront of economic, social and political debate. We noted in and I thank our more than 5,200 people who represent Origin particular that our challenge every day was to deliver reliable, every day, from the Surat Basin to Sydney, and from Minto to affordable and cleaner energy. And we bore witness to the Melbourne. Two of those people are Scott Andreas and Brooke substantial change in energy policy settings. How prescient we Geary, who are featured on the front cover of this report. were, and how tumultuous that seven years has been. But how resilient Origin has demonstrated, in embracing the challenges Scott and Brooke were photographed at a well site at Condabri and transforming its business. Central, in Queensland. As part of our Integrated Gas team, Scott and Brooke work to safely deliver gas to our customers We are very different to the company of 2014. We have and are also helping Origin as we transition to a cleaner become a customer obsessed retailer, and our strategic energy future. investment in Octopus Energy, I am certain, will be a step change in that journey. We are pivoting to a greener future with Our philanthropic foundation also achieved a milestone, gas as the transition fuel and a leading role in renewables. We celebrating its 10-year anniversary in February. Over this have demonstrated the financial viability of investing in APLNG, time, the Origin Energy Foundation has provided more with production costs competitive with US shale gas. We are than $27 million to good causes across Australia and at the forefront of building IoT propositions to harness data supported more than 62,000 young people to achieve and to connect customers to the latest technology. We look success in education. I am exceptionally proud of the work confidently to the future with e-mobility, hydrogen and LNG the Foundation undertakes to create better lives for young for transport extending us beyond the core. Australians through the power of education. As a backdrop to all of this we have demonstrated sound capital management, maintaining our investment grade rating, Progress on our commitments reducing debt, and maintaining our dividend. The externalities have not changed, arguably have got more challenging, but we In response to significant challenges this year, Origin’s have focused on what we can control, and shown commitment focus has been on maintaining reliable energy supply, and resilience. keeping our people safe, and supporting our customers and communities. Against this backdrop, Origin’s underlying For this I owe a deep well of thanks. Firstly, to a management business performance continued to improve across the year, team, superbly led by Frank. If a Board’s first priority is to driving growth in free cash flow, which allowed further debt appoint the right CEO, we succeeded. reduction, disciplined investment in growth opportunities and distributions to shareholders. Secondly, to a wonderful Board of fellow directors who demonstrate every day the value of our mantra “the obligation Origin delivered a stable underlying profit of $1,023 million in to dissent”. This constructive contestability has made for better FY2020, and our capital structure continued to improve, with decisions. And finally, to our shareholders and their proxy adjusted net debt of $5,158 million at 30 June 2020. Through advisors. I have enjoyed our regular interactions, listened and our Integrated Gas business, strong field production helped learned, and we as a company are the better for their counsel. drive record production for Australia Pacific LNG and a record cash distribution to Origin of $1,275 million. In Energy Markets, And so I leave optimistic about the future of Origin. Board electricity gross profit was lower following the introduction renewal has been front of mind for the Board for some time, of retail price regulation, while we were able to utilise the and after a rigorous chair development and succession flexibility of our generation fleet and wholesale gas portfolio to program, Scott Perkins was the unanimous choice of his fellow adapt to the reduced demand caused by the pandemic. directors. We have worked together closely over the past five years and he and I will ensure a seamless handover. Scott and Importantly, our focus on a safety culture based on learning has Frank will form a formidable team, as the leadership of the yielded strong improvements this year. Our Total Recordable company, shaping this future. Injury Frequency Rate (TRIFR) reduced to 2.6, from 4.4 the previous year. I will cheer from the sidelines. Gordon Cairns Chairman Welcome to the 2020 Annual Report 3 In keeping with our commitment to progressively decarbonise Outlook our business, we have announced a new short-term target to reduce our Scope 1 emissions by 10 per cent on average between Origin provided the following guidance at our annual results on FY2021 and FY2023. This reduction will be done from an FY2017 20 August 2020 on the basis that market conditions and the baseline. Our commitment remains to halve our Scope 1 and regulatory environment do not materially change, adversely Scope 2 emissions by 2032 and we are aiming to achieve net-zero impacting on operations. Considerable uncertainty exists relating emissions across the business by 2050. to the potential ongoing impacts of COVID-19 and this guidance is subject to any further material impact on demand and customer Supporting customers and communities affordability. Energy Markets Underlying EBITDA is expected to be $1,150- I am proud of Origin’s efforts to support our customers throughout $1,300 million. This guidance reflects lower electricity gross profit the year, including in times of bushfires, floods and then the due to passthrough of reduced wholesale prices to customers, COVID-19 pandemic. Our people have gone above and beyond higher network costs absorbed in the regulated tariffs and lower for our customers; helping with energy bills including payment natural gas gross profit, partially offset by a targeted $70 million extensions and access to hardship services. We also passed on reduction in cost to serve. lower wholesale costs to customers and further improved our digital platforms to make it easier to engage with us. Australia Pacific LNG’s FY2021 production is expected to be lower at 650-680 petajoules, reflecting anticipated reduced demand Over the summer, volunteers through the Origin Energy Foundation with strong field capability to increase production to respond to provided practical support to bushfire-affected communities cut changes in demand. Distribution breakeven is expected to be in the off from power by assembling over 1,500 portable SolarBuddy range of US$27-US$31 a barrel. lights for distribution. It is this giving back to the community by our people which supports our ‘good energy’ brand position. Looking forward Our gas exploration in the Beetaloo Basin was paused in March in response to the COVID-19 pandemic to help protect Northern In January, Origin welcomed Kate Jordan to our executive Territory communities and people. The project is expected to leadership team as General Counsel and Executive General resume later this year. Origin remains committed to the Beetaloo Manager, Company Secretariat, Risk and Governance. Kate brings which, if successful, has the potential to deliver long-term extensive corporate advisory and commercial experience in what is economic and social benefits for the Northern Territory, Australia a fast-moving and competitive industry landscape. and the Asia Pacific region. As you will be aware, our chairman Gordon Cairns, will be retiring from the board in October. Gordon has served as a director since Our business performance 2007 and as chairman for the last seven years.