Origin Energy Limited

Okay, good morning everyone and welcome to Origin Energy's results for the 2026 financial year. It's Frank Calabria here and I'm joined by my executive leadership team. I want to welcome a few people. Firstly, you'll all know Andrew Thornton but welcome him in his new role of Executive General Manager Energy Supply and Operations. We welcome Alita Nicol as the Energy General Manager for Integrated Gas and also welcome Alicia Purtell, our new Executive General Manager of People and Culture. I'll provide a brief overview of performance and outlooks. Tony will speak to the financial results and this will be followed by an opportunity for all of you to ask questions. Turning to slide two, Origin's delivered a good result for the 2026 financial year. The energy markets EBITDA of 1.701 million EBITDA is towards the upper end of guidance. integrated gas at $1.62 billion. EBITDA is in line with expectations for APLNG and LNG trading. And in relation to Octopus Energy and Kraken, it recorded a combined EBITDA of minus $8 million, with the UK retail contributing $134 million, and that's enabled funding investment in growth as they scale the non-UK retail markets, energy services and also Kraken migrations. There are a number of business highlights for the year. Customer accounts increased by 243,000. We achieved our 100 million to 150 million cost out target. The batteries are on time and budget and we now have 1.3 gigawatts operational. Origin received $911 million fully franked dividends from APLNG and increased its 2p reserves at 100% there by 332 petajoules and that's before production. The Octopus Energy team have grown their customer accounts by 2.2 million, 800,000 those in the UK, but now 1.4 million of them are outside the UK. Kraken increased its revenue by 19% through the year and now has contracted accounts at 95 million at the end of June. The Kraken and Octopus legal separation is complete and as part of that, the equity raise of $1 billion by Kraken was completed in July. On the back of that, the board have determined the 30 cent fully franked interim dividend and that's obviously supported by strong cash flow and balance sheet strength. Turning to the financial highlights, you can see there that the statutory profit is $1.574 billion. The underlying profit is $1.159 billion and the underlying EBITDA are $3.22 billion. which comprises improvements in energy markets and octopus energy and the expected lower earnings in integrated gas. The adjusted free cash flow was very strong. It increased by over $700 million to be in excess of $2 billion for the year. That strong cash flow has led to a reduction in our net debt to EBITDA metric which now sits at 1.6 times. and I mentioned the final dividend that takes the full year dividends for the year consistent with 2025 to be 60 cents fully franked. I wanted to touch on the data security incident. In July we advised there'd been an unauthorised access to customer information to 900,000 customers. Our priority right now is supporting those affected customers. Initial notifications have gone out. We're continuing to communicate with them. We're providing support through extended customer support hours, dedicated contact number, web page and access to specialist identity and cyber support services. We've taken steps to secure our systems. We've been working with cyber security and forensic specialists. We continue our review, continue to work closely with the authorities and regulators and as I commented when I last spoke to this, the matter does remain subject to an ongoing criminal investigation which does will limit some of the things I can say today, but I understand there'll be some interest in that. Turning to our purpose on the next slide, five, of getting energy right for our customers, communities and planet, and firstly for customers, our focus right now is on supporting those impacted by the data security incident. I'm pleased that we were able to pass through our lower average prices in July for the 2027 financial year. We continue to support customers in hardship, spending $40 million. and we have new energy plans being introduced that are tailored to customer usage patterns and we remain one of the largest East Coast gas suppliers through APL&G. For the communities, it's good to see that we continue to support regional procurement and First Nations suppliers in a meaningful way and also community benefits through our Raring Community Fund and our foundation where we contribute both dollars and also volunteer hours by our employees. continues to be a key part of what ORIGIN stands for. I'm also pleased to advise that our recordable injury frequency rate at 2.9 is an improvement on last year. When it comes to planet, our Scope 1 to 3 equity emissions are down 2% and included in that is a reduction of our Scope 1 emissions by 7%. Our batteries, it's good to see both Super Node 2 and Mortlake are now operational and that's earlier than anticipated. Also pleased to see that the ash reuse at Eraring has jumped to 77% up from 61% last year. And we continue to apply 85% of the produced water at APLNG to a beneficial use, including agriculture. And we now have 50 megawatts of community batteries under operation. Turning to slide six, we have established assets and capabilities that we continue to build on but differentiate us. They span customer, energy supply, energy resource, international markets through Octopus and also global technology through Kraken and that's something we continue to focus on as we want to deliver the best outcomes through the energy transition. Our investment proposition on slide seven remains consistent. We have energy markets and APL&G both leading Australian energy businesses generating strong cash flows, fully franked dividends, and an ability to continue to invest in the energy transition and our dividend yield is 5.7% before franking benefit. In addition to that, we now have significant global growth potential through two independent businesses following separation, Octopus and Kraken. I wanted to turn just to the commodity markets because they have shifted significantly so far in 2026 and that's highlighted by the charts on slide 8. Recent electricity prices have been impacted by both cyclical and structural drivers. We've seen unseasonably mild weather, very high base load availability and also increased renewables and battery storage. At the same time, what we're seeing is the cost of new build is rising and that just makes it more challenging to invest at these prices. In relation to East Coast gas prices, while there's been a rise in global LNG prices, you can see the East Coast remains well supplied. and has been insulated from those rises, and we've seen the domestic demand be lower over the last 12 months, particularly in relation to gas-fired generation and the demand from LNG producers. Now, we also include the Japanese Customs Cleared Crude, and for people, as most will be familiar, that's the index that actually flows through to our long-term LNG export contracts. It's obviously risen sharply since the commencement of the Middle East crisis. You can see on the right-hand chart But given the time lag that exists in our LNG export contracts, those higher oil prices will be realised in the 2027 financial year. And based on the current forward prices, Origin expects continued strong cash flows from APLNG in FY27, and there will be some losses from the oil hedges in place that will partially offset this. And then just a reminder, we've communicated this previously as part of our quarterly presentation, but it's a significant event. The separation of Octopus and Kraken has now been completed. You can see there the stake in Origin economically in both of those businesses remains at 22.7%. The graphic on the left, though, is to highlight the fact that Octopus holds a 13.7% stake in Kraken when you're calculating that. Both of those businesses are well positioned to pursue ambitious growth and it was pleasing that Kraken was able to raise that $1 billion equity and that was completed in July at a look through valuation of US dollars $8.65 billion. We'll talk more about those businesses later. So on that note, I'm going to hand over to Tony Lucas to talk through the financial review.

Thank you Frank. Tony Lucas here, CFO of Origin. Good morning everyone and thank you for joining. I'll spend the next few minutes on the segment results, our cash generation and then our balance sheet. Today's strong result reflects three consistent themes. Firstly, we delivered what we said we would on earnings, on cost and on the battery program. Second, we had strong cash conversion and we strengthened an already strong balance sheet. And finally, we kept investing in the portfolio through the energy transition for what it needs, while maintaining disciplined, sustainable returns to shareholders. So starting with the EBITDA, Group EBITDA of $3.2 billion reflects strong growth in energy markets and an improved contribution from Octopus, and as expected, a reduction from integrated gas. Energy markets EBITDA of $1.7 billion was up 21% and at the upper end of guidance. Electricity was $179 million higher. There was really three drivers. We had higher wholesale costs flowing through to tariffs with the lag. We had a lower cost of energy, and that lower cost of energy was partially offset by last year's unusually strong wholesale portfolio benefits, which didn't repeat. Gas was $20 million higher as both sale and purchase contracts repriced, partially offset by lower trading volumes. Cost to serve reduced a further $56 million this year. That's against our 10-year 24 baseline. We delivered $126 million of savings before the two retail acquisitions, and that's delivering the $100 to $150 million cost-out target we set two years ago. With the customer base growing, the battery fleet now operating and cost discipline embedded, the business enters thin year 27 well positioned. With the battery ramp up, we expect that to offset lower wholesale prices flowing through customer tariffs. Turning to integrated gas, APL&T delivered operationally well. Availability improved to 96%. 82 wells driven and 2P reserves increased 332 petajoules before production, and that's at 100% APLNG level. Earnings were in line with expectations, reflecting a realised oil price of US$72 per barrel, the full year effect of the Cyanopec price review, and LNG trading gains of $140 million. As Frank indicated, the higher oil prices we've seen since February are expected to be realised in thin year 27. and that supports a continued, strong, fully-ranked distribution from APL&G. And finally, Octopus and Kraken. Our share of EBITDA improved $80 million on Fin Year 25 to a loss of $8 million. UK Retail contributed $134 million. That's the fourth consecutive year of profitability for UK Retail, inclusive of the continued investment in smart tariffs to grow connected customers. Non-UK accounts grew by more than 50%. Energy services improved materially on productivity and is trending towards break-even and Kraken grew revenue 19% while investing in migration capacity or capability and product development. As Frank indicated, legal separation complete and the equity raise finalised in July. Both businesses are well set up for growth and Origin continues to build substantial long-term value through these investments. Just turning to cash flow, which is the standout of this result, cash from operating activities $1.9 billion. That's up almost $1.5 billion on the prior year. We saw energy markets cash conversion above 100% with strong credit and collections activity. The warmer winter weather driving lower working capital also. and we had much lower cash tax paid. You'll remember in year 24 we had a large balancing payment in that year. We received $911 million in fully-ranked dividends from ATL&G. The CAPEX expenditure reduced by $500 million as the Battery Build Program passed its peak. So adjusted free cash flow of $2.1 billion. which is up $867 million. So the underlying story here is two strong businesses converting those earnings to cash. Now to focus on the balance sheet. So strong operating cash flows and dividends from APL&G more than covered the CapEx program and shareholder dividends. Adjusted net debt at 30 June 26 of $4.85 billion increased slightly over the prior year. and that's once the battery tolling increases are included. Adjusted net debt to adjusted underlying EBITDA was 1.6 times. That's below our two to three times target range. Again, driven by strong cash performance. So just as a reminder, the metric now includes the franked credits attached to APL&G distribution. We think this better reflects the pre-tax nature of that metric and better aligns with our Moody's credit ratings. Over thin year 27 we expect to move into the lower end of the target range. This would be reflecting completion of the battery program and the remaining battery leases and the Kraken investment made in July and we will have lower LNG trading gains in thin year 27. The balance sheet settings remain prudent given market conditions. Overall the balance sheet is strong and flexible with capacity to continue to fund the portfolio through the transition. And finally, capital allocation. The board has determined a fully franked dividend of $0.30 per share. As Frank said, that brings Finyear 26 distributions to $0.60 fully franked. That's a yield of 5.6% before the franking benefit, and this represents 50% of adjusted free cash flow. It was an exceptionally strong cash year. If you look at the dividend payout average over thin year 24 to 26, it's more like 70% of adjusted free cash flow. And over this period, we've used 62% of our adjusted free cash flow has been directed to major growth projects, and that's predominantly that battery fleet, which is now generating earnings. The dividend is consistent with our policy of delivering sustainable distributions through the business cycle. So my reflection on the result is our consistency in delivering what we said we would, earnings at the upper end of guidance, battery program on time, on budget, and now earning and converting to cash, and a balance sheet that lets us invest through the transition while sustaining fully franked returns. I'll hand back to Frank to take us through the business.

Thanks very much Tony. Now turning to business performance and we're on slide 16 and in energy markets we have delivered on our short and medium term targets in 2026. On the left hand side the electricity gross profit continues to sit above the medium term target of $25 to $40 a megawatt hour. In 2027 it's expected to remain above the target range with the batteries coming online and that will be partially offset by lower wholesale prices flowing into tariffs. In 2028 we do expect a moderation of gross profit as lower forward prices flow through to tariffs. For gas earnings they're also above the medium term target of $3 to $4 a gigajoule. There were lower trading volumes in the 2026 financial year with the 35 petajoule GLNG contract ending just prior to it in May 2025 and in 2027 we do expect our oil JKM link supply costs to be lower with our current contract positions. And just a reminder, the Beach Otway contract is subject to price review, which hasn't yet concluded, but on conclusion is effective from July 2026. And then just lastly, the cost to serve target, as we said, in 2024 has been achieved between 100 to 150 million. And that also is achieved even including the two new acquisitions that were made this year. And we also were able to lower our bad and doubtful debt with improved collections through our automated credit decision engine. Turning to customer on the next slide, the growth momentum continues. We've added 243,000 customer accounts this year. That's both in organic and inorganic. The acquisitions of First Energy and Energy Locals added 135,000 of those accounts. We have a community energy services business which may otherwise known as Abetted Networks in the residential space and businesses at 484,000 customers and we've achieved a 46% compound annual growth in internet customers over the last three years. Our churn continues to be lowest in the market and we continued improvement in customer experience as measured by the Customer Happiness Index. We've introduced new propositions as distributed assets increase. We have increased the number of interactions that are now being fully digital and we continue to scale AI across our business and our virtual power plant once again grew to 1.6 gigawatts. Now just turning to what's happening in the market over the last 12 months, in particular what's happened with batteries, you'll see that grid scale batteries in the NEM have more than doubled in the last 12 months. and they're now able to meet about 25% of peak demand. At the same time, you can see there's greater than four times growth in behind-the-meter batteries in the last 12 months, and that's having an impact on the shape of residential grid demand. The role of batteries and gas work well together, with batteries being suited to managing those evening peaks and the short, sharp spikes. That means that we start our gas fleet less, that defers maintenance costs, and gas peakers continue to play an important role managing extreme and long duration volatility events. We build on that further on the next slide, which shows that batteries will survive most days, while gas peakers and hydro will firm the seasons. In the context of a market with the growing renewable energy, there'll be more variability, meaning there'll be both daily and seasonal periods of both over and under supply. so batteries will solve most days in summer and spring where we have an abundance of renewable energy however they cannot shift energy between seasons and then if you turn to winter and autumn the renewable output is less meaning batteries are more often depleted before the demand is met the long duration firming of gas peakers and hydro will be required to solve those seasonal swings and I just note that in winter we're going through now it's been very mild conditions and we've also had very high coal availability, the highest in the last five years. So Origin holds the battery and gas peaking portfolio that positions it well to manage both daily and seasonal variability in a changing energy market. Turning to APLNG, and some of this information was provided in the quarterly, but APLNG revenue has declined in line with expectations. We've had lower sales volumes and realised prices. As I stated earlier, the recent high oil prices will be realised in the 2027 financial year and costs have increased by 5% to $3 billion as we continue to drive increased investment in our well optimisation projects, development infrastructure and exploration program and they were partially upset by some lower power costs. We've stated before that the cash distribution was $911 million. Just worth noting that $335 million of those dividends related to the cash generated in the 2025 financial year. And based on about a week or so ago, 40% of APL&G's JCC all exposure for the next financial year, or the 27th financial year I should say, has been priced at $100 US a barrel and that's before any origin hedging. Turning to slide 21, APL&G has 2P reserves of 9,619 petajoules, 61% operated 2P reserves replaced in the financial year 26 and as you can see on the left-hand chart, greater than 50% of our reserves and resources extend beyond the existing export contracts and we also have further reserves growth potential through exploration success. On the right-hand side, you can see production of 668 petajoules for the year. The team have done a very good job delivering their program through the year and you can see that base optimisation, which we set out to achieve, has now improved well availability to 96%. We now have our work over industry to optimal levels and we've completed a number of infrastructure projects that have had benefits to de-bottleneck to enable that production. We drilled 82 operated wells during the year. We commissioned 92 wells and really to note that in 2027 financial year we'll be ramping up our drilling. Slide 22 just highlights the way we think about our production levers and the first three of those blocks really just do talk about more of that optimisation activity as we focus for the 2027 financial year. Probably just want to make note of the ramp-up of new well development. Our increased drilling that I just noted before will include new asset east fields, and just to note that it takes approximately two years for new wells to reach peak production. In relation to mid-term investment, we do continue to evaluate opportunities to unlock reserves in the asset west. Joint venture approval would be required for those, and that will be informed by both market and regulatory outlook. In terms of mid-term investment, we do also remain very focused on growing reserves and resources through exploration and appraisal opportunities, including the Troom trough. We're very excited by the Troom trough and APL&G holds a large tenure footprint across both operated and not operated holdings. And just to note that most of that is near existing gas infrastructure. Turning to Octopus Energy and you can really see that the Octopus brand and service just underpins impressive growth. The brand in the UK is a standout market leader as you can see in that top left and that's driving their continued growth in the UK market on the top right where it really is leading the market and has grown another 800,000 customers to have 26% market share. You can see that replicating now through to the non-UK markets where they now have 4.1 million customer accounts. And when we think about energy services, what they're doing there is building an ecosystem of assets and platform that enables them to meet all those customer needs and that really extends across scaling installations. It's an electric vehicle leasing fleet and they've grown their VPP to 3.2 gigawatts. The development of that business then links back into continuing to grow value and customers in the UK retail business and other markets, in the markets that are rapidly transitioning. On the next slide for UK Retail, I'll really just highlight how we and they think about the business. With the UK retail strength, and as Tony said earlier, they've reported their fourth consecutive year of profitability, and this year, They earn £39 per customer on that 7.8 million average customers and that's enabling them to invest in growth. It's funding customer growth that you can see on the dark colour on the right-hand bar chart in the non-UK markets. They've invested in smart retail tariffs in the UK and they've also then invested in their energy services business. Each of these businesses have a strong growth outlook. The brand and service drives customer growth in the UK. And when you think about the large addressable market they're now going for across non-UK markets, that represents another significant growth opportunity. And what we're seeing now is it's only firmed, in fact, over the last six months, is strong government and customer support for electrification and increased adoption of distributed assets. And in the UK, that's in particular electric vehicles. They are catalysts for ongoing growth growth in the energy services business. Now turning to the Kraken business on slide 25. I said earlier they've got 95 million contracted to customer accounts. That growth of 21 million includes the entry into the Saudi market through Saudi Energy Partnership that's added 10 million accounts and of that 95 million accounts, 52 million are live and what that means is that they're what's generating revenue. and that translates into the revenue growth you can see on the right-hand chart that's grown by 19% to £300 million. Clearly, they continue to get contract annual revenue growth and the pull-throughs of the P&L is really driven by that live revenue. And they're expanding products now. They're really working across now CNI markets, water, telecoms, flexibility and field services. So that continues to widen their aggressible markets. In terms of financial results for the Kraken in FY26, they certainly invested more heavily to accelerate customer migrations. That particularly plays out when you are going into new markets but also when you're accelerating migration of large accounts that they're bringing on live for a live revenue and so those costs around £64 million have been incurred ahead of the revenue and what we've done is highlight the EBITDA with and without those accelerated migration investment costs that you can see on the left-hand chart. There are a number of achievements in FY26. I'll just draw out a couple. They grew the contracted annual recurring revenue by 44%. and the average EBITDA margin since 23, even including all of that delivery investment, has been 35%. You can see then we've also highlighted what the underlying subscription gross margin is for that business, which is very strong as well. So I'll now go to guidance. So I'm now on slide 28. Energy markets EBITDA for the 2027 financial year is between $1.55 billion and $1.85 billion. The total CapEx you'll see is reduced since this financial year as we complete more of the batteries and that's between 450 and 650 million. We provided the APL&G guidance in our quarterly results but for completeness you can see the guidance on production is between 625 and 670 petajoules and the CapEx and OpEx guidance excluding purchases is between 3 and 3.3 billion. We've provided guidance here for both Octopus and Kraken. On Octopus, we've guided the UK retail EBITDA per customer, and that's a guidance of between £25 and £50 a customer. And I'll just make a couple of comments as to why we've chosen that. You would have seen on the earlier side that really Octopus Energy comprises a number of businesses. One, the ongoing operations and growth of the UK retail business. but then it's making choices as to how fast it invests in non-UK retail and energy services. And because they do drive a lot of that growth, through organic means that goes through the P&L. So we think it's more meaningful for you to understand the ongoing profitability for Yucca Retail EBITDA and they will continue to make decisions based on the way they want to grow those other businesses and as more of that information unfolds, we're happy to share that but we think this is a more meaningful way of understanding the profitability of the core business. And secondly, we've now provided guidance on CRAC and revenue which is growing. at greater than 20% is the guidance for FY27. And just to wrap up, continue to believe we have advantaged assets and capabilities for the energy transition. We've got strong cash flows and returns from energy markets and integrated gas. We've got global growth potential from two now independent businesses. Pleased with the balance sheet strength. We've declared stable dividends at a good yield and that continues to position us well to allocate capital to the right opportunities for shareholders over the coming years. So on that note, I will now open up the discussion for questions.