Origin Energy Limited

Good morning everyone and welcome to the 2026 half year results for Origin Energy. It's Frank Calabria here and I'm joined by my executive leadership team. I'll provide a brief overview of the performance and outlook. Tony Lucas will also provide an overview of the financial results and we'll follow that with questions and answers. And you may already be aware, but you'll see that we've got additional detail included in the appendices. Okay, so then turning to the highlights, I think the overall message for Origin in this half is a half year results that have been solid, allowing an upgrade to the full year guidance for energy markets. Our retail performance continued to strengthen. Grid scale batteries added further portfolio flexibility. Gas production was steady and we continued to maintain cost management discipline. Turning to the summary of the financial result, Overall, we've got EBITDA of $860 million for energy markets, which is higher than expected with continued strong operational performance. Integrated Gas also had an EBITDA of $860 million, which was in line with expectations for APLNG and LNG trading. Octopus recorded an EBITDA loss of $89 million for the half, reflecting seasonality in their earnings, UK regulatory costs. They've invested in smart tariffs to grow connected customers, and they continue to invest in the scaling of their non-UK retail and energy services businesses. Turning to the business highlights, operational performance across the portfolio has been strong. We grew our customer base by 96,000. We reduced our cost to serve by 32 million. We brought the Uraring Battery Stage 1 online and it's generating revenue since December and it was delivered on time and on budget. Super Node 1 is in commissioning in January and we've been earning revenue on that battery as well. All other battery developments remain on track. And we've committed through the half, we committed a further $80 million to expand Araring Stage 2 battery, which will now be nearly six hours of storage. As you probably all know, we've announced that the Araring Power Station operations have been extended to April 2029. And during the period, we continue to progress the Golden Beach gas storage project and have committed a further $25 million to that project. As announced in late December, Kraken announced its first standalone equity raise at a look-through valuation of US$8.65 billion alongside a major licensing agreement that increased contracted accounts to the Kraken platform to $90 million and they now have doubled their contracted annual recurring revenue in the last 18 months. Octopus continued its rapid growth. It added 1.2 million customer accounts in the half with 0.8 million, 800,000 of those accounts growing outside of the UK. The board determined a 30 cent fully franked interim dividend which is really supported by our strong cash flow and balance sheet strength. So now turning to the financial highlights, statutory profit for the half was $5.57 million. The underlying profit was $5.93 million. The underlying EBITDA was $1589 million that you can see there with higher than expected energy markets earnings offset by the lower integrated gas earnings, as I say, which was in line with expectations and also a lower contribution from Octopus Energy. Good to see our adjusted free cash flow lifting. It's up by $187 million to $705 million. The balance sheet continues to be strength reflected by a net debt to adjusted underlying EBITDA of two times. And as I said, we've declared a 30 cent interim dividend fully franked. Okay, turning to our purpose, which we continue to make sure we focus on getting energy right for our customers, communities and planet. Just very briefly during the half, what we've achieved. $23 million spent on customer hardship lifted our customer happiness to 71%. We've expanded use of AI to improve customer experience and outcomes. We've launched new battery products and we continue to be one of the largest East Coast gas suppliers through APL&G. For communities, we spent $232 million with regional suppliers, $14.4 million with First Nations suppliers. We committed $1.5 million of the $5 million Araring Community and Investment Fund in the period, and through our foundation, made contributions of $2.1 million and pleasingly 3,500 employee hours as we continue to contribute to the community more broadly. When it comes to the planet, we received very strong support for our second climate transition action plan with a 94.67% vote and the Araring Power Station extension is not expected to impact our climate targets or ambitions. As I said, they are offering batteries online for stage one, and we've continued to grow that through stage two. We now have over 30 megawatts of community batteries under operation, and we continue to progress the pre-FID activities for our 1.5 gigawatt Ganko Delta project. Looking to the next slide, Origin's strategy remains to lead the energy transition through cleaner energy and customer solutions, and we do that with a clear focus of continuing to deliver reliable and affordable energy along the way. To achieve that, we've established differentiated assets and capabilities that we continue to build upon, and you can see that that ranges from customer, energy supply, energy resource, Octopus and Kraken. And that turns us to our investment proposition which combines two things, a leading Australian energy businesses with strong cash flows that are being generated and fully franked dividends and continuing to enable us to invest in the transition and in addition to that we have a significant global growth potential through these businesses, Octopus Energy and Kraken Technologies. Energy markets benefits from a leading brand, advanced technology platforms, advantaged assets and cost position and there are lots of opportunities for growth across customers, products, renewables and storage that we remain very firmly focused on executing. Through APL&G we have very low cost of supply, We have very strong reserves and exciting exploration opportunities and our reserves are well beyond the export contracts we have today, so a very long runway and valuable asset. Our dividend yield is 5.3% and that is before you take into account the franking benefit. Turning to Octopus and Kraken, Octopus is now the largest UK energy retailer. and it's scaling both in the non-UK markets and also in energy services and that brand which is very strong in the UK is now building itself in more than one market. In Kraken Technologies we have a global technology platform that's growing rapidly and has a significant addressable market ahead of it. I'll now hand over to Tony Lucas and he will take you through the financial results.

Thank you, Frank. Tony Lucas here, CFO of Origin. Good morning, everyone, and thank you for joining. I'll spend a few minutes with you digging a little deeper into the segment results, as well as our cash and balance sheet positions. Today's result reflects three consistent themes, the strength of our diverse portfolio, our disciplined approach to capital management, and our continued delivery of sustainable returns for our shareholders. Starting with EBITDA, group earnings were supported by stronger than expected performance in energy markets and an integrated gas contribution that was in line with expectations. In energy markets, our strong and diverse portfolio resulted in a 17% increase in EBITDA, Electricity was higher, reflecting the lagged flow-through of higher wholesale pricing into retail customer tariffs, combined with lower green scheme costs and solar feed-in costs. Gas was lower on the prior period. This reflected lower trading volumes and some legacy contracts rolling off. Importantly, we continue to expect full-year gas earnings to be moderately higher than thin-year 25, as both sale and purchase contracts reprice in the second half. Pleasingly, reduction in cost to serve continued with ongoing Kraken benefits and we remain on track to deliver the midpoint of our cost out targets. As we continue to grow the customer base, bring additional grid scale batteries online, progress the Yanko Delta development, the business remains very well positioned to deliver through the energy transition. Turning to the integrated gas business, the contribution was in line with expectations with lower realised prices and volumes at APLNG and lower LNG trading gains. Realised prices in APLNG reflected softer oil and spot LNG markets and also the impact of the Sinopec price review, which was effective 1 January 2025. APLNG continues to focus on field optimisation activities, including improved production forecasting, which informs low-cost drilling opportunities. APLNG remains a world-class asset and a significant contributor to the East Coast gas market, with 22% of sales volumes delivered to domestic customers. Turning to Octopus Energy, Kraken revenue growth continued, However, EBITDA was lower. This was due to investment in accelerated client delivery and growth opportunities, as well as a change in the capitalisation policy for technology development costs. The contribution from the UK retail business was lower due to investment in smart tariffs to grow flex customers and the expansion of the UK government's warm home discount scheme, where we expect some recovery in fin year 27 of those costs. Octopus continues to invest in its non-UK expansion and in its scaling of its energy services business. With continued customer growth across the UK and non-UK markets and the global expansion of Kraken, Origin's investment in both Octopus and Kraken continue to build substantial long-term value for our shareholders. Moving on to cash, we delivered a strong cash generation in this period. Energy markets cash conversion was above 100% and fully franked dividends from APL&G of $542 million. CapEx reduced $400 million in the period. This reflected the fact that we've passed the peak of our spend on the battery growth projects. Tax paid was $500 million lower due to a higher balancing payment last year for the Fin Year 24 tax return. That was a function of the higher earnings and partially franked APL&G dividends in that return. Also worth noting, we expect a net tax refund in the second half, and this should result in tax paid of around $160 million for Fin Year 26. Our two strong businesses continue to generate the cash required to deliver our strategy execution and shareholder returns. Now focusing on the balance sheet, we saw a small reduction in adjusted net debt to $4.59 billion. This reflected strong operating cash flows and APL&G distributions, largely offset by the CapEx and dividend. We're currently the bottom end of our two to three times target range of adjusted net debt to adjusted underlying EBITDA. As we deliver the battery programs, we expect to move further into the target range over Fin Year 26 and Fin Year 27, noting a lease liability will be recognised in relation to the total batteries as they come online. Overall, the balance sheet remains strong and flexible. Finally, capital allocation. The board is determined to pay a steady, fully-franked dividend of 30 cents per share, reflecting continued balance sheet strength and the cash generation from two strong businesses. As Frank mentioned, this represents a 5.3% dividend yield before franking benefits and is consistent with our policy to deliver sustainable distributions to shareholders through the business cycle. When I reflect on this result, what stands out to me is that we're consistently delivering what we said we would. We're investing selectively and thoughtfully. We remain disciplined and we're keeping the business well positioned to deliver for shareholders and customers through the energy transition. I'll hand back to Frank now to delve deeper into underlying business drivers.

Thanks very much, Tony. Now we'll turn to business performance, which drops into a little bit more detail based on the summary you've just heard from Tony and I before. Turning firstly to energy markets, we continue to track in line with our medium term targets there. Our electricity earnings were above the $25 to $40 a megawatt hour target range that we set for the half. We expect to be above that range also for the full year 2026. And in 2027, we'll benefit from the ramp up of batteries coming online, but we're also seeing some lower wholesale electricity prices in recent times, so that has an offsetting impact. For gas earnings, they remain in line with budget at $3 to $4 a gigajoule, and we are on track to deliver the $100 to $150 million cost savings in FY26, or by FY26, That's driven by a range of things, good deployment of technology, organisational improvements, efficiency more broadly, and what we are seeing even throughout that, despite the fact that we've achieved such a good cost reduction, is that with the non-repeat of the energy bill relief, we've got some higher bad and awful debts that have come through this period of time. Then turning to customer, The momentum remains very strong. We've now had more than 10 consecutive halves of customer growth. We increased customers by 96,000 in this half. It does include a 52,000 customer accounts from the energy locals acquisition. And in February, we also completed a further acquisition of First Energy, which will add an additional 80,000 customers to what you see on that chart. We have an unrivalled brand. We've got the number one community energy services or embedded networks business with 484,000 customers and we've grown the internet on a compound annual growth rate by 37% over the last three years and that continues to grow. We've got market leading churn and continued improvement in customer experience, including the introduction of new propositions. And we have leading tech and product. And AI continues to scale, particularly for our customer business. And you can see there in terms of messages sent, but in voice, we're now serving over 100,000 customers, up from 25,000 customers. We've grown digital interactions to our customers for decades. up to 80% from 75% and our market leading virtual power plant has continued to grow. Turning to energy supply, the generation performance has been strong. We talked about bringing the Araring Stage 1 battery online and you can see good early performance as shown on that left hand chart. More broadly, for generation performance, we've had high reliability for the gas peaking and hydro fleet. We've contracted the coal for the 2026 final financial year. It's largely fully contracted and that's at prices lower than the prior financial year. And for our R ring, we generated 6.4 terawatt hours in the half at an availability of 72.26%, which is measured after both planned and unplanned outages. On the right hand side our investments in storage are on track. They're both on time and on budget. It's a 1.7 gigawatt or 6.3 gigawatt hour program underway and once again we are confirming our target post-tax returns of between 8 and 11% with the front end of those asset lives at the upper end. APLNG revenue declined due to lower realised LNG prices. I'm now on slide 16, primarily reflecting oil price movements and also a contribution to that by the Sinopec Price Review. Our costs remain stable at $4.30 a gigajoule compared to the second half of FY25. We've got higher optimisation activity. We've completed key infrastructure projects and exploration through that half. And then that's been offset by reduced power costs and some lower non-operated development. But good to see we're holding that discipline of $4.30 that we gave guidance to the market last time we issued results. Slide 17 takes us into a little bit more depth around that production optimisation and mid-term supply options. Production of 339 petajoules for the half is on track to deliver 645 to 680 petajoule guidance for the full financial year. It really is a story of continued field optimisation and us progressing our mid-term supply options. When we talk field optimisation activity, we're really talking about well availability, which is good to see that it's grown to 95% over the last year. That's driven by increased workovers, deployment of artificial lift systems, formation stabilisation, and we're now performing the majority of those, of our major workovers being performed live, which has a production benefit. We've also completed several gathering lines. So a very extensive program being executed by the team there. At the same time, in terms of mid-term supply options, they include additional processing capacity in the western asset and we're also awaiting EPBC and other approvals to drill further wells in the eastern asset, most notably the ironbark program. Over the last 12 months, production forecasting has continued to improve and that's giving more and more confidence and information for us to be choosing the right opportunities to be drilled and the right optimisation activity to be carried out. Just dropping into well exploration and certainly made reference before but we're providing further information on that and in particular the advancing exploration opportunities in the Taroom Trough. where APLNG holds a large tenure footprint across both our operated and non-operated holdings, and most of those are near our existing gas infrastructure. To date, our activity has been concentrated along the shallower eastern margins of the trough, with the initial exploration wells delivering encouraging gas flows, And three additional pilot wells have been drilled and are to be fracture stimulated with production testing to commence this calendar year. So we've got a bit of activity underway there. And in separate or other exploration activity, we've successfully fracture stimulated and completed the horizontal CSG wells in the peat, which is the first in Queensland. So another achievement there. So very excited by our exploration opportunities and the activity we have underway. Now turning to Kraken and Octopus Energy, I did talk about the fact that these transactions at the commencement of the presentation, the net outcome of those is that Origin maintains or retains a 22.7% economic interest in Kraken and Octopus Energy. And by the way, there will be an investor day with the CEO of Kraken on the 28th of April in Sydney, which is good and gives an opportunity for investors to get a much deeper dive into that business as well. Those series of transactions are summarised on the right hand side and I did go through those before. Key highlights, Kraken did its first stand-alone raise at $1 billion US. It's a valuation of $8.65 billion US. Origin will invest $210 million Aussie as part of that and get 1.5% in exchange for releasing exclusivity to the Kraken platform in energy in Australia. That major licensing agreement is another step along the way, gives line of sight to those 100 million accounts and give a bit of guidance as to where that 1 billion US raise funds will be deployed, 150 retained in CRAC and 850 retained in Octopus. Octopus Capital and other investors have injected a further 320 million funding in Octopus Energy and that will also support future growth and other requirements. Just probably prior to the slide 20, just to give some context that you can see just really what's happened over time for this investment and as much to identify also the investors that have come along at various points on the journey and I think it's been a very deliberate strategy to introduce investors with key capabilities that benefit the organisation over time and you can see they're very credible and also to highlight what we've committed which is 1.4 billion Aussie over the journey. Now turning to Octopus Energy's results on slide 21, they grew UK customer accounts by 400,000. They now have 14.5 million UK customer accounts. They capture 35% of switchers, churns 40% below peers, and the customer base is high quality and they have much better than market collection performance. And as we highlighted before, they've invested in smart tariffs to really grow that flex customers and further customer lifetime value. On international they've grown that customer account base by 28% so that's up by 800,000. They have now 3.5 million accounts in those markets. They continue to be deliberate about the choices where they invest for the growth in those markets and they make those decisions pretty actively and you can see there are emerging scale benefits and we give an example there about direct acquisitions that are occurring in Italy and Spain. Germany has also I think notably reached 1 million customer accounts. For energy services, they're increasing cross-sell, increasing scale and they've improved efficiencies since the start of the year, which has contributed to a halving of the energy services investment compared to the prior comparable half period and good to see the progress there. Turning to Kraken, Kraken continues to scale. That competitive advantage that they have with the software platform track record in migrations is very strong. The revenue growth matches these completion of those migrations, so therefore it's not always linear. And there has been a margin impact this year by lower capitalisation of development costs as the customers move into the operations phase. So we've sort of guided what's really happened over the last three years to give you a sense for the EBITDA margin, which has been 40% over the last three plus years. Continue to invest in future growth for Kraken. That's a delivery capacity that's capabilities including AI talent. It is really an enterprise-grade platform that's very well set up and therefore is non-public data. It's actually a very strong proprietary platform. system with deep integrations and regulatory compliance. So that's hard earned and therefore puts them in a very strong position as they continue to benefit from coding technologies to accelerate product development. And the introduction of very knowledgeable investors like D1 Capital at that last raise is also good to see as we bring public crossover investors onto the register. Strong sales momentum, we're at 90 million accounts and well on our way to the 100 and I've talked about that major licensing agreement before. Just now turning to guidance, which I'm sure you're all waiting for. Pleasingly, energy markets EBITDA guidance has been upgraded to 1.55 billion to 1.75 billion range and that is up from the previous guidance range of 1.4 to 1.7 billion. LNG trading and octopus guidance remains unchanged. The group capex is expected to be between $900 and $1.1 billion. We updated APLNG production guidance when we released our quarterly and that is now 645 to 680 petajoules. APLNG CAPEX and OPEX guidance remains unchanged and we've provided now APLNG cast distributions, which is what come to origin, of between 700 and 950 million. The appendix has got further commentary on guidance for all of your information. So in closing, Origin, we still have a strong belief that we're very well positioned for the transition with advanced assets and capabilities. We've got strong cash flows and returns from two diversified businesses in energy markets and integrated gas. And we've got global growth exposure and value upside through Kraken and Octopus. continued balance sheet strength at two times debt to EBITDA and been able to declare a stable fully franked dividend which is delivering 5.3% yield to shareholders before you take into account the franking benefit. So on that note, we are very happy to now hand over to questions.