Origin Energy Ltd Ord

Good morning everyone and welcome to the Origin Energy results presentation for the 2025 financial year. It's Frank Calabria here and I'm joined by my executive leadership team and we have a brief presentation followed by questions and answers. And you'll also note that we have provided additional information in the appendices for your review. Slide two provides a summary of the financial performance and business highlights for the year and I think underscores the strength of our portfolio. Energy markets, EBITDA of $1.404 billion is ahead of guidance. APLNG production of 682 petajoules at a cost of $4.20 a gigajoule is in line with guidance. LNG trading is at the top end of guidance with trading gains of $441 million. And Octopus EBITDA is at a loss of $88 million. It's within guidance and reflects the investment in its rapid global growth. but also some unseasonably warm weather and one-off adjustments. There are several business highlights for the year. Our customer accounts grew by 104,000, cost to serve reduced by 50 million. We have strong generation performance, and I'll talk to that later. Battery developments are on track, and Yanko Delta Wind Farm has secured access rights. We received $797 million of dividends from APLNG during the year and then a further $335 million on the 3rd of July 2025 and those are all fully franked. Our 2p reserves are up by 298 petajoules before production. The Sinopreg price review is concluded with the final review in 2030 at APLNG's discretion. and Octopus continued its rapid growth. The UK energy customers grew by 13% to 7.6 million. Customers in the non-UK energy markets have doubled to 2.7 million and Kraken Technologies contracted customers have grown by 45% to 74 million. Very pleased to say that we've determined a final fully frank dividend of $0.30 per share, supported by a strong balance sheet and cash flow outlook. Turning to financial highlights, the statutory profit and underlying profit are both up. Our underlying profit at $1.49 billion. is up from $1.18 billion last year. Our underlying EBITDA of $3.41 billion is lower. Our net debt to EBITDA is at 1.9 times, I think highlighting that balance sheet strength. Our rolling 24-month return on capital ploy is 14.6%. And with that final dividend, we have total dividends for the financial year of $0.60 fully franked. Our purpose remains very important to us on slide four, getting energy right for our customers, communities and planet. Some of the highlights are for our customers, a customer happiness index of 69.4%. We spent $38 million supporting customers in hardship in the last year. We increased the breadth of our products. Those include now increasingly connected solutions and we have been rapidly adopting AI with our customer interactions. For communities, it includes spending over $400 million with regional suppliers and $20 million with First Nations suppliers. We've contributed over $4 million through our foundation, and we also contribute to many local communities, and one example here is the Murrumbidgee Council for the Yanko Delta Wind Project. And for the planet, this year we have released our updated Climate Transition Action Plan and have reaffirmed its targets and ambitions. We've increased our ash reuse at Ararang to 61%, which is pleasing to see, and we've also advanced our wind and battery storage developments, and there's more in the operational section. Turning to slide five, Origin is leading through differentiated assets and capabilities that we continue to strengthen. For customer, this includes a trusted brand, world-class platforms and a continuous innovation through tech and data. For energy supply, it includes the largest thermal peaking fleet, a diverse supply portfolio and advanced pipeline of developments in renewables and storage. For energy resource, we have APLNG, which is a world-class LNG asset. And equally importantly, it's backed by very strong reserves and an operating capability to deliver the results that are inherent in that asset and resource. With Octopus, we have a leading customer experience brand and low cost retailer. And for Kraken, we have a best in class enterprise software platform. On slide six, we have our investment proposition for Origin. It constitutes a leading Australian businesses with strong cash flows, fully franked dividends and also investing in the transition. Plus, we have significant growth potential through two globally significant businesses. Those leading Australian businesses are energy markets, integrated gas. With energy markets, we have a leading brand, advanced tech platforms in place, opportunities for growth that extend across customers, products, renewables and storage. And with integrated gas and APL&G, we have a low cost to supply and reserves that 50% of which at least are beyond the current export contracts. And currently, based on our share price on the 11th of August, we're paying a dividend yield of 5.1%, and that's before the franking benefit. The global growth I talked about, those significant businesses are Octopus and Kraken. In Octopus, we have the largest UK energy retailer that continues to grow, and it also grows in the non-UK markets in energy services. And Kraken, as I said before, rapidly growing technology platform business, a significant addressable market. and line of sight to an annual recurring revenue of £500 million by 2027. On that note, I'll hand over to Tony for the financial results and we'll come back and cover off the business performance in a moment.

Thank you, Frank. Tony Lucas here, CFO of Origin. Good morning, everyone, and thanks for joining. It's a pleasure to share such a strong result that demonstrates both operational discipline, portfolio strength and long-term value for shareholders. So just turning to energy markets, EBITDA energy markets first. It was a strong second-half performance from energy markets, particularly within the electricity portfolio, benefiting from higher than normal trading gains and increased volatility, delivering an EBITDA result above the top end of guidance. The retail business grew by 100,000 customer accounts across electricity, gas and the internet, reduced bad and doubtful debts and a $50 million overall reduction in cost to serve, well on our way to meet our target of $100 to $150 by Fin Year 26 compared to Fin Year 24. As expected, EBITDA contribution was lowered this year with lower customer tariffs, following the lag cost recovery of higher energy prices in last year's tariff and also in fin year 24 we benefited from the coal price cap which did not repeat in 25. so a strong underlying performance from energy markets highlighting the portfolio is well placed into the energy transition octopus EBITDA was lower in fin year 25 relative to 24 However, UK retail saw strong organic growth of 13% customer growth, adding a further 1.6 million customer accounts. Octopus experienced unseasonably warm weather in the second half, impacting retail margin by $60 million Aussie dollars origin share, as well as some one-off accounting treatment changes and a settlement of the government energy price guarantee from prior periods, That guarantee was set up to help customers through the energy crisis. Non-UK retail continued to grow, doubling customer accounts to 2.7 million as it continues to invest and scale, looking to replicate the success in the UK. Energy services increased investment to establish a major foothold in consumer demand for behind-the-meter technology and into the drive for electrification in the UK. including the heat pump market, which continues to be subsidised by the UK government. Kraken continues to expand globally, with contracted accounts reaching 74 million, with 45 million of these live. Integrated gas, APLNG's EBITDA was down 3%, reflecting lower production, lower realised LNG prices, also including the impact of the Sinopec price review, which concluded in the period. LNG trading delivered at the top end of guidance at $441 million from trading gains relating to opportunistic hedging undertaken in 2022 during the energy crisis. APLNG continues to be a significant contributor to the East Coast gas market, and as Frank highlighted, has strong reserves, well in excess of its export contracts. Moving through to cash, Finyear 25 saw a major investment in growth capex. Energy markets cash conversion exceeded 100% once we adjust for the Queensland bill relief. APL&G cash flow was strong with $797 million in the year and a further $335 million on the 3rd of July, and that was all 100% franked. Cash tax was slightly higher than last year, but it was lower than what I indicated to you in February as we're able to vary tax instalments throughout the year. CapEx was slightly below expectations, but this is mainly due to timing of payments around year end with material investments in battery storage as part of the energy transition. So moving on to the balance sheet, net debt moved up to $4.6 billion as anticipated on the back of those investments into the battery projects. Earnings from these will start to come on in the second half of Fin Year 26 and further earning contributions expected from Fin Year 27. We expect adjusted net debt to EBITDA to be in our target range over the Fin Year 26-27 period. Our balance sheet is well placed to deliver strong dividends and invest into growth. Capital allocation. The board has determined a dividend of 30 cents per share fully franked. That results in a dividend yield over 5%. The Fin Year 25 declared dividend result is an 86% payout ratio. Dividends paid were up 21% relative to the prior period. This combined with our investment into the energy transition reflects our disciplined approach to capital management. I hope you can see that we remain focused on both driving efficiency, capturing opportunities and evolving landscape, but ultimately delivering sustainable returns. And I'll hand back to Frank to dive into the underlying business drivers.

Thanks very much Tony. We now turn to business performance and I'm now on slide 13. Energy markets is tracking in line with medium term targets that many of you will be aware of. Electricity earned just above that medium term target in financial year 25. That target is $25 to $40 a megawatt hour. You'll see that gas is in line with the $3 to $4 a gigajoule target for the year. and we have achieved cost-to-serve savings of $50 million in the year and are on track to meet our target of $100 million to $150 million savings in FY26 compared to FY24. Turning to customer on the next slide, we're growing share and value with a relentless focus on customer. As I said earlier, we grew our customer base by 104,000, continuing the growth trend over the last four years. We've been very pleased with the investments we have made in channels that's enabling us to acquire customers at a low cost. We've repositioned the brand to all kinds of useful and have the highest brand consideration and preference in the industry. And we're building scale in our internet offering. Our customer experience has improved. Our churn of 13.4% is over 6% lower than market. And importantly, we are attracting and retaining our key customer segments. Our digital interactions with customers continue to rise. Our customer happiness index improved, and you can see that through the trend of the last six months of this financial year. And product bundling is delivering benefits. Our investment in leading tech and product continues to advance and you can see there the utilization of AI for emails and messages. And we also have a pilot for AI voice agent that's live with 25,000 customers. The investment in tech and product is all about improving the user experience and faster speed to market across many dimensions, all leading to better outcomes for customers. Our virtual power plant grew to 1.5 gigawatts and importantly is delivering value. So as you can see from this slide, we are starting to reap the benefits of Kraken investment and our investments more broadly across a range of capabilities and technologies. Turning to slide 15, I did talk about the strong generation performance and on the left-hand side what we really mean by that is being there when it counts and that enabled high coverage through volatility events and you'll see most notably what happened in June 2025 where many of you will be watching what happened and very pleasingly were available at all of those important times and have done that throughout the year. Our gas peaking and hydro start reliability is very high and we've achieved good availability for our RRing through the year. Our investments in renewables and storage, the batteries are on track and we're confirming our target post-tax returns of 8% to 11% post-tax and continue to see it at the upper end of that range at the front end of the asset life. Bianca Delta Wind Farm, it is progressing. We've been granted full access rights and we've resubmitted environmental approvals as part of that development. Turning to AP LNG, the revenue is steady. The composition has moved underneath in terms of a higher proportion of LNG, which has been offset by lower LNG prices. And you will see there that we have received the full year benefit of QCLNG purchase volumes for a contract we entered into in 2018. Our costs are steady, although the nature of the activity changed throughout the year with higher workovers and optimisation offsetting less cyclical upstream maintenance activity. And you will see on the cash distributions on the right that they are similar to the prior year when you take into account the franking benefit. That's despite the realised oil price being lower at US$83 a barrel before hedging. and we highlight here that 41% of our 26 financial year-old exposure is hedged at a net $73 US a barrel. And APLNG is now paying fully frank dividends and that's expected to continue. The next slide, 17, highlights APLNG's reserves and production and you can see on the left-hand side that the 2p reserves have uplifted by 3% before production. That's really come out of the spring gully and the updated reserves. And we have greater than 50% of reserves and resources beyond the export contracts, as highlighted by that yellow portion of the bar on the left-hand chart. We continued our strong trend of reserves replacement. That's 57% in 2025 and an average of 72% since 2017. and we have the opportunity to increase future reserves with exploration activity underway. On the right-hand side, this really, I think, reaffirms the material that you would have received in the quarterly, but for completeness, you can see in terms of both production and wells drilled in the east, for Talinga, Orana, it's all focused on optimisation activity to manage natural field decline, and for Kondabrai, it's focused on live workovers and solids mitigation. remembering that in the east we're no longer facilities constrained in Tilinga and Orana particularly. In the west it's very strong field performance where we are constrained by processing facilities and in non-operated fields they have been impacted by decline in some fields, unplanned outages and development delays. Turning to the next slide though, just really continuing the strategy that we've been executing on in APONG. The near-term focus is very much about ramping up field optimisation activity, focusing on de-bottlenecking infrastructure, projects that reduce downhole pressure and can accelerate production, and also resuming exploration and appraisal. And in the mid-term, it's an opportunity, there are opportunities for us to invest in infrastructure and drilling, particularly in the west, to accelerate low-cost gas. We did highlight in the quarterly that that is subject to APLNG board approval, but there are opportunities to bring low-cost gas into the portfolio subject to that decision. We are focused on drilling new fields in the east and also growing reserves through exploration and appraisal. Turning now to Octopus and Kraken. The Octopus group, the energy group there, and Kraken continue to build two growing platforms aligned to Origin. And Origin is supportive of the legal separation of these businesses with an appropriate capital structure for growth and regulatory requirements. Octopus Energy has demonstrated to be a leading energy retailer with significant growth potential. It has tremendous capabilities across brand, customer experience, low cost and innovation. And Origin gets the benefit of that customer growth, the increasing customer lifetime value, and really the ability for us and them to share and learn from each other across retail and wholesale energy management. Kraken Technologies is the leading platform, the best in class enterprise platform in energy and utilities. It's got a proven track record transforming and modernising companies across the world. There's an enormous addressable market and its growth is significant in both new geographies and products, and it's achieving well in excess of the global SaaS rule of 40. Obviously, Origin gets the benefit of being a foundation customer of Kraken, but also the insight into the ongoing technology innovation, including AI. A little further detail on the next slide in relation to Octopus Energy, number one energy retailer in the UK, more than 24% market share. The average EBITDA over the last four years is £40 per customer, whilst doubling customers. Its cost to acquire is low these days at £60 a customer, and it's attracting greater than 35% or greater than 40% of switchers and low churn. In the non-UK market, you can just see how rapidly it has grown over the last 12 months, doubling those meters on supply. And they really are focused on replicating that UK success with the same capabilities. Energy services is all about increasing customer lifetime value through integrating those low carbon technologies with its existing large customer base. and the long-term value through the combination of services, supply and flexibility. They very much are focused on business improvement towards profitability, which goes to margins, efficiency and labour utilisation. Kraken Technologies on slide 21 is uniquely placed for growth, clear competitive advantage. You can see their success rate. It's a global enterprise software platform, AI enabled, and it's now got 45 migrations in 17 countries. It's serving the full utility value chain and the product has expanded into water and broadband. That large addressable market I've spoken to you can see is enormous at 2.1 billion households globally and they've signed their major first customer in the U.S., And you can see there's significant contracted customer growth and revenue on the right-hand side of that chart, with revenues growing by 77% in the year, and the EBITDA margin of 43%, which is an average over the last three years. I will now turn to guidance, and we provide a summary here, and there is further information supporting this guidance in the slides, in the appendix. And this guidance is provided on the basis that market conditions and the regulatory environment do not materially change. For energy markets, EBITDA, the FY26 guidance is $1.4 to $1.7 billion. The LNG trading EBITDA is between $100 and $150 million. The share of Octopus Energy EBITDA is between $0 and $150 million. And total CapEx, excluding any acquisitions, is between $800 and $1.1 billion. For APL&G, this is consistent with what you would have received at the time of issuing our quarterly production of between 635 and 680 petajoules production, capex, opex, all-in costs between 2.9 and 3.2 billion, and therefore that converts to a unit range of capex and opex between $4.30 and $5 a gigajoule for the FY26 year. So just finishing up, really just want to summarise the fact that we highlighted, I think, the advantaged assets and capabilities that are well positioned for the transition, the strong cash flows and returns from two diversified businesses and energy markets and integrated gas through APLNG, and also that we've got global growth exposure and value upside via Kraken and Octopus Energy. Importantly, having a balance sheet that's strong enables us to not only increase funding, increase dividends this year, but also is enabling us to continue to invest in the energy transition. So on that note, we will open up for questions and the team will look forward to answering anything that you may have regarding this result.

Thank you. If you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Tom Allen from UBS. Please go ahead.

Good morning, Frank, Tony and the broader team. Just on the guidance for origin share of Octopus Energy EBITDA, it's been a little bumpy the last year or two, so can you just please share a little bit more colour on the drivers of the wide range for fiscal 26 and including a potential draw from the growth being pursued in the UK in the Energy Services Division.

Yeah, thanks, Tom. Tony here. Yeah, so there's been a few ups and downs, I think, this year with the weather, but also with settlement of the energy price guarantee and a few accounting adjustments based on the non-UK entities and really sort of cleaning up those acquisitions and aligning them to Octopus's accounting standards. We've just increased the range probably compared to where we had last year to take into account the increased investment in sort of non-UK retail and also the improvements that they're trying to make in the energy services business. With the non-UK retail, there really is the lever to turn that up and down based on how they're going in market and that drives a lot of the spend into that growth. and the energy services really looking this year to sort of optimise that field force, increase sales and also increase sort of unit margins. So just a bit more of a wider range to account for those variabilities.

Okay, thanks, Tony. Just staying with Octopus, there's been plenty of press. You've commented on it in the past around the potential for a value realisation opportunity relating to Origin's interest in Kraken. Could you comment on how Origin's minded to deploy any proceeds that it might receive if that were to occur? So is an ongoing exposure to a global energy retail opportunity something that the board sees as attractive or is redeploying proceeds to Australian shareholders and or funding growth in Australia more preferred?

That's a fairly forward-looking question, Tom. We're very focused at the moment on the separation of those businesses and that leads to choices and opportunities, but I don't want to get too far ahead of us on that. In terms of assessing those, call it investments, and I do think you should think about the energy and the technology investments as different businesses. We will make an assessment through time based on the best choices of allocating capital. We have choices available here as well. We'd be very pleased obviously with the growth in that investment but we will make decisions and we'll be very clear to the market over time. Clearly if they separate and Kraken does find its way to be a separate entity, which I really can't say more about at the moment given we're just focused on the separation itself, that will present choices to us and we'll keep the market informed as we go forward and that it just feels a little early at the moment to be thinking about how we might realise that through time. But you should see directionally, we're very supportive of the separation and therefore puts these businesses on two separate paths.

That's clear, Frank. Thank you. If I can just sneak one last one, just in the energy markets business, you've achieved an electricity portfolio margin through the top end of that medium term target range. Looking into the outlook, do you still expect that this margin will grow during the period you continue to operate Araring and the additional battery earnings into the business? And what would be the key upside-downside risks that you'd see on a three-year view?

Yeah, so I think we've highlighted before that with Araring continuing to run and as we bring the batteries in, we would be near or above sort of top end of that medium-term target. So we would expect next year to be be the same. And then if I look forward, it's really, it'll be a function of sort of how a raring runs, availability around a raring, if I thought about what are the risks to it. There'll be batteries coming on, which will sort of counteract that and perform a bit better. The retail book's going pretty well and we're seeing competition, you know, we're performing well in market from competition. So I think it's really just the underlying sort of plant availability, you know, in the market that probably drives the largest variance.

That's clear. Thanks, Tony.

Just adding to that, Tom, it's just always difficult to predict the level of volatility that will occur in a market and our availability to it. We're certainly setting our business up to make sure assets are available, the portfolio is there when it counts. But the inherent underlying volatility in the market, you can see, was a little higher this year, and that's the one that's more difficult to predict on an ongoing basis.

Thank you. Your next question comes from Dale Coenders from Baron Joey. Please go ahead.

Morning guys. Maybe just continuing on with Octopus, the comment around the right capital settings for divestment of CRAC and just wondering sort of how you're thinking about further equity contributions net to origin before a possible IPO?

Sorry Dale, just equity contributions you're meaning by origin to the group?

Yeah, so there's been media speculation about an equity raising and we're not sure if there is, if Origin would participate or not.

Yeah, I think... In terms of then setting it up, it's probably a bit early about that. Separating out does need to make sure that both those groups have capital that can enable them to go on their paths for growth. That's probably more a question for the energy business as you think about it, acquiring customers across many markets. We continue to look at each of those. on their merits. And so if we made any investment, you'd hear about that well in advance. But it does come down to if they did an equity raise, what would that be and for what purpose? I know it's been reported in a particular context, but there's been no firm decision to do that at this particular point in time. So we'll just assess it on the merits. But yeah, that's how we think about it at the moment. It's probably a bit early to speculate whether we're doing further in that business or not. Or should you be inferring it one way or the other at this point, to be clear?

Okay, noted. And then maybe a question for Tony, questions around sort of the outlook for your leverage settings increasing to two to three times over the next couple of years. Is there any sort of non-cash items you need to call out or wanted to, or maybe like cash tax payments, how that's playing out? And then the other part of that is probably like dividends, how you're thinking about the outlook for dividend settings increasing given all those movements and given increasing capacity?

Yeah, so we highlighted, I think, last results that as we made the battery investments, our gearing would start to increase into that range, and so that's playing out as expected. We did defer the APL&G dividend into Fin Year 26, which changed that profile a bit, but it'll generally be in that range. I think in terms of cash tax, we expect that to materially decrease into Fin Year 26, which we've called out before. But yeah, I'm not seeing anything else outside of the fact that we'll have battery earnings come, we'll have net debt go up, battery earnings coming in, you know, APLNG is obviously going to have a little bit higher capex in the medium term. Those are all the things that we'll sort of take into account when we think about that ratio.

So is there scope to increase dividends or is the policy of sort of where you've set a 60 cents FY25 more of a sustainable level for now?

Yeah, look, our goal is not to swing the dividend around and look to keep it pretty sort of constant with the potential perhaps to grow it in cents per share. You'll see we paid out above 80% of sort of adjusted free cash flow this year. So the board will make that decision on a sort of year-by-year, half-by-half basis. Okay, thanks.

Thank you. Your next question comes from Nick Burns from Jarden, Australia. Please go ahead.

Thanks, Frank and Tony and team. Just a question again on the FY26 energy markets EBITDA guidance range. Compositionally, you've called out relatively stable electricity growth profits year on year. You talked about the one-offs that assisted in FY25, but then you've got the contributions from batteries coming through in the second half. You've also then directionally talked about potentially higher gas growth profits and then further benefits and costs to serve coming down further. It feels like given you've exited FY25 was at just above $1.4 billion, is it right to think that your range could end up being fairly conservative?

Well, I think it's, as Frank highlighted just before, the ability to predict the level of volatility in the market and the potential trading gains it will make as that plays out and plant availability. You know, we came off a pretty good fin year 25 in that nature, but if you remember fin year 24, we didn't quite have the plant availability. So I think you can think about us setting our range as being You know, taking a view on that, it would be probably more of an aggressive view if you were forecasting fin year 25 to repeat. You know, so we sort of set the range in that way. We do have, if you have a look in the OFR, you'll see that our underlying dollars a megawatt hour unit cost on swaps is particularly low. It's in the low 40s, which represents that trading gain. And so, you know, as time, as we roll through to 26, we expect that to increase a bit. So there's a few things that came out of 25 that mean that that's probably sort of slightly elevated and we've set the 26 range on that basis.

That's great. Thanks for that, Tony. Look, just a question around your FY26 CapEx guidance. It really, I think, highlights that you're over the main hump of battery investment and Just wondering how we should think about your growth plans from generation and firming capacity beyond the existing battery investment commitments. What are your drivers here as you consider your options in the shape of the supply and capacity portfolio post-Ararian closure? Thank you.

Yeah, so you see capex drops in 20, we forecast capex to drop in 26, and when we look at committed capex into 27, drops further. As we bring those batteries on, we'll assess the performance of those. We'll look at You know, the market requirements as regard to RARing, we've always said we'll be engaging with the government and being cognizant of prices for customers as well as security supply. So we need to take all of that into account. We continue to assess greenfield options in both batteries and OCGT peaking plant, but we'll be quite clear if we decide to move further on those.

There's no near-term plans. Any FIDs upcoming in FY26 for additional growth investment?

We've got nothing committed or nothing planned at this stage, but it's not to say that we may not do small things around perhaps batteries. If there was modifications or extensions we could do to those if we thought they were particularly attractive investments. We're seeing the returns in batteries. Obviously, we've got a prove that in Fin Year 26, but our forecast returns look quite good, so we find those quite attractive. And so we'll just take all of that into account and be clear when we're willing to make those commitments.

The only add I'd give to that, Nick, is that we do advance a lot of initiatives behind the scenes, but when you say timing on That's where we won't be more precise at this point in time because we advanced and we have to assess the market. There's a lot of policy work that's going on right at the moment. We'd like to understand that. But we certainly are advancing, for example, OCGT developments, both Greenfield and Brownfield across our fleet. So we'll continue to work on those, but I wouldn't have an FY26 FID at this point in time. as a firm timing, but we will be advancing on the basis that we would want to bring decisions, the right decisions at the right time, and therefore doing the lead-in work that takes some time.

That's very clear. Thank you both.

Thank you. Your next question comes from Gordon Ramsey from RBC. Please go ahead.

Oh, thank you very much and great result. Slide 15, you captured some really good pricing in the June quarter. How did you do that? Was it a combination of a rare gas fire? Just kind of interested in terms of how you delivered, you know, good availability and capture of electricity pricing June quarter.

Yeah, Gordon, it's great to have us here. Thanks for the question. There's a couple of things. One, just calling out the trading team, firstly, we construct a robust portfolio. So, you know, that's very important. But equally in that quarter, you know, the generation performance is very good. So there's one thing which we always concentrate on is availability at the right time. And that means you've just got to make sure you keep your maintenance up to these machines and just perform at the right time. So that's what played out. So it was just good portfolio performance right across that period.

Thanks, Greg. And maybe this is a question for you, Frank, just following on from Nick's question on the CapEx outlook. How much is your CapEx decision being affected by your view on a rearing? Clearly, you're going to have to consider whether or not a two-year extension happens with respect to that plan, and is that affecting your CapEx expenditure over the next year or two?

Certainly the decision around Araring, and as you know, we've got our notice for closure in pursuant to the agreement with the government by sort of August 27. But clearly we continue to assess the market and the needs of the market. And so we will, certainly that feeds into our timing and decisions around it. But equally also it does, it's whether we build or contract, and you've seen what we've done with batteries. And we felt that it was appropriate when you're making a bet on a technology all at once to do a combination of build and contracting in terms of the duration of those and the capital commitment. So those feed into it and that would be an ongoing discussion that Greg and Tony and I and the teams would be focused on in terms of the contracting options versus build. But you're right, ARARing and its timing and any considerations that would feed into that thinking Our job really here is to navigate this transition effectively for customers and shareholders and what we're really looking at is how do you continue to allocate capital wisely in a market that has uncertainty and we have done that I think to date and we would continue to make assessments around it which is why To Nick's question and yours, we are preparing for a variety of scenarios to be ready to execute on those, but the final decisions of both timing and choice will be determined by a range of factors that you've talked about and we're looking forward to seeing that in the direction also of the Nelson view to make sure we're confident about that as well. Nothing to suggest it's not at the moment. They're focusing in the right areas. There's just a bit of detail to be worked through. That's important. But we'll continue to make decisions based on that premise.

And Gordon, one other addition is that we haven't missed on maintaining our units. So we're even having an outage this September. So we're keeping the plant up to scratch, which is important in this market.

Lastly, if I may, just on the gas supply, We heard yesterday that another company is getting their margins squeezed in higher costs for gas supply. You're going to lose your fixed-price contracts in the next couple of years. Are you kind of seeing any pressure there at all, or are you pretty happy with your position from APL&G and the benefits that you have in the domestic gas market?

Yeah, so, Gordon, our gas portfolio remains well-placed, so we have long-term contracts. There's a couple of moving parts this year. There's a couple of contracts roll off, both a sale and a purchase, but you should expect consistent earnings from the gas portfolio going forward.

Thank you very much.

Thank you. Your next question comes from Amif Khan-Watia from Jefferies. Please go ahead.

Morning, Tim. If I can start with the strategy on Craton and Octopus. And you said you're supportive of the separation that gives you choices. Maybe if you can speak to how do you see is the best approach to unlock value for your shareholders from that separation, please?

Yes. So if you think about those two, Those two businesses' separation, they are becoming different businesses pursuing global strategies. In particular, you're seeing now Kraken really going into multiple markets across not just the energy or the full utility chain, but also into water and broadband. And it's clearly set itself up with a leadership team. A lot of what you're seeing even this year is the build of a global growth capability. So it's going to set itself up. It's too early to talk about it. There's been lots of speculation in the press and IPO. It's a bit early for us to talk about that because shareholders would need to decide upon that at the right time. What we are very focused on separation, but you could see that putting it into a situation which it provides a realisable event, I think is important for Origin Overtime. but we are cognizant that we are a shareholder amongst many and that everyone's working and aligned around, you know, focusing on that separation now. In relation to the energy transition business, it's a business that Tony talked about earlier that it's actually very much cemented itself to be a profitable business in the UK and now has two growth vectors, both in the non-UK markets and energy services sectors. That is really all about earlier, you know, talking about setting it up to go on that growth. Importantly, it's worth recognising that they never pulled the heavy growth lever in those two other vectors until they had a very profitable UK retail business. And so we're just going through the strategy for that over time in a separated world. But really the focus I think you'll find is that if we get them separated, it sets up Kraken on a path which enables it to be valued separately, potentially leading to liquidity but too early, and then we can choose what's the best way to realise value for our shareholders there.

Sure. Just staying on crack and you commented on the EBITDA margin, which is an average 23, 25 at 43%. Maybe if you can speak to, is there any margin kind of expectations into the future for that business?

Yes, there are margin expectations in the business. What you'll find when you do that average to be very transparent, you'll see that the current year's margin is lower than But we didn't think that was reflective because what's actually happening right now, this business has now got a CEO that has run global software business. They've just recruited a CFO. They've got a leadership team. They're now building our product that's really an geographic sales expansion. So it is really reflective of a heavier investment this year to build those capabilities. And as you can see, it's pulling through revenue growth that's coming through. And so I think it's a better read to look at those overall margins over the last several years. That would be a better read in our view. And I'm saying that without giving you a very precise, but it's a better guide than I think what you're looking at in the current based on the amount of revenue that's pulling through and live revenue that's going to emerge over time. So that's how I would focus on it and clearly you're looking at the growth and they've got to continue to sign customers in markets around the world and that's where we're focused. We're focused the organisation. We really wanted to run hard at that. It is a very significant opportunity. that's a convergence of few things. We've got disaggregated energy, technology, not only that, but we've also got cloud enablement and AI that are actually going to be increasingly important to our sector. So, yeah, I think it's best to read that three-year average as a guide.

And maybe if I can move to the energy markets. And, I mean, if I think about your customer strategy, which is around crack and migration, you've migrated your customers on crack. I mean, Octopus in the UK has been a great success story. I mean, you've talked to a lower cost benefit coming through the next into 26. But maybe if you can speak to your strategy in terms of customer growth in this market. and the lifetime customer value and basically what the benefits you get from better improved access to the VPPs?

Yeah, it's John Briskin here. You know, in a lot of ways, I think... Yeah, the results speak a little bit for themselves there that we're seeing that growth come through now post the migration of Kraken. We certainly feel that we're in an advantageous position. We've got some great channels. We've obviously got the technology, the product propositions and we're lowering the costs. So you see that like pulling through in that churn differential to market, you see that pulling through in terms of the customer wins. We offer customers, we like to think we offer them very fair and reasonable pricing. We're not always the price leader. We manage the value of our customer base. We think about multi-product. when we look at value. And you're right, the orchestration of different assets over time presents a real opportunity for us. The one and a half gig on the VPP is part of that. Frank mentioned that's now starting to deliver value. But we certainly think that the sort of collection of capabilities, including access to more customers taking up batteries through our acquisition of solar quotes, puts us in a really good position at to look at this retail market and see that growth come through.

Okay. Thank you.

Thank you. Your next question comes from Rob Coe from Morgan Stanley. Please go ahead.

Good morning. Thank you and congratulations on the result. My first question is I guess in relation to battery returns. You've given us an indication there of the kind of 8% to 11% return range. I take it that that's for the projects you've already committed to. Is that a similar kind of return profile that you would be looking at a new battery project today? And then second part of that question, if you could provide any update on, bottom up, how you derive those types of returns through, I guess, caps and arbitrage and ancillary services, please?

Thanks. Good question. Rob, Tony here. Yeah, so when we've looked at the projects in the past, we've given a range of 8% to 11%, and we've probably said that in the front end, it's towards the upper end of that as we sort of expect the market to build out batteries over time. I think what would drive the rate being higher would be if you had lower capex coming from lower construction costs or lithium. I mean, we've seen from when we started building batteries to the most recent ones we built, we've seen the prices decrease mainly in lithium. So, yeah, when we look at new projects, we sort of put them in that range as well. There may be some brownfield benefits as well. In terms of the spread of income, we would sort of say it gets income from those three things, which is, if you like, the cap value, which we would put it somewhere between sort of 40% and 45%, maybe as high as 50%, and then maybe there's 5% in FCAS, and then the balance would be the energy arbitrage. I think that what you've got to look at when people are quoting those percentages, Rob, is the duration of their batteries. So if you've got a shorter duration batteries, you'll get more from the cap value than you would from the energy spread. So ours are quiet in terms of what other people are putting in. Ours will have a bit more duration, so they'll get a bit more revenue from the spread. Okay. Thanks, Mr Lucas.

That's really helpful. Also, I have seen a few transactions reported in the market I think CLP reported a gain of 77 mil by selling down a battery development that's under construction. I wonder if you guys would like to comment on your pipeline of developments, if capital recycling is a possibility on that front?

Yeah, so I think we do assess this all the time, Rob. We're obviously with Yanko Delta. That's our sort of plan A is to sell down at least a very large proportion of that. You've seen us do some battery tolling deals where we haven't been the developer. But, yeah, we continue to assess whether, you know, when we think about capital allocation, we continue to assess what are the capital recycling opportunities and that is a potential opportunity that we could take up.

Yeah. Okay, cool. Thank you. Maybe just moving over to the gas, side or the upstream side. One of the things that you've mentioned is that the Ironbark reserves are still trying to achieve EPBC approvals. I wonder if you could provide any kind of colour or update on that and maybe in particular if you have any comment on what the groundwater approval process is there. Is it going through OGEA or IESC or if you're able to share that.

Yeah. Hi, Rob. Andrew Thornton here. So maybe just to recap where Ironbark's part of a broader set of approvals, we've been progressing through EPBC for quite a while. So the first time that got submitted to EPBC was in 2020. And so as many people will be familiar with, that's quite a long process, which is subject to third party interventions along the way. Most of those approvals So Ironbark is embedded in that approval. There are approvals outside of Ironbark that reflect our existing tenure. We're hopeful of an approval through EPBC this calendar year. So we need to continue to work that, and obviously there's some regulatory reform going on in that area, so certainly it's not for certain. After you go beyond that, we'd be looking at... starting phase one of ironbark drilling. We've talked about, you've seen disclosed in the reserves report, it's 300 PJs for 2P and quite a bit more than that for 3P. And, you know, it'd be a two to three year process before you'd see gas coming through from ironbark. I have to take the specific question on groundwater and which regulatory agency is taking that. I'd have to take that one away. I'm sorry.

Yeah, no worries at all. Thank you very much, Mr. Thornton. Final question, if you'll indulge me. I haven't had a chance to read fully through your CTAP document, but I just wanted to double-check if your scope 1, 2 and 3 targets include APLNG or not, and if there's a cumulative target in addition to the 2030 interim target.

So the scope 1, 2 and 3 do include APL&G. In terms of absolute target we had, is that what you're referring to, Rob?

Yeah, so you've got a nice 20 million tonnes reduction by 2030. And then is there also like a cumulative between now and then? Oh, right. Okay.

Yeah, we did have a shorter term target in our prior CTAP that was an absolute, which I thought you were referring to. No, there's no cumulative that's a reduction in year in 2030. Okay, cool. Versus the 2019 baseline. Yes, understood.

Thank you. Once again, if you would like to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from Ian Miles from Macquarie. Please go ahead.

Hi, guys. Just a couple of questions. If we go back to Arari, can you maybe give us a colour on the timelines you need to make if you want to extend it? Because obviously planning capex and maintenance cycles are long lead items. Just say when you need to make those sort of decisions.

Yeah, OK.

Hi, Ian. It's Frank. So we have always worked on the premise that having reliable and available assets has been absolutely of the utmost importance in a market that's as dynamic as it is and I think you've seen it play out in the last year and so having them that way has meant that we've not compromised any decision to date on those units. Every year we make a decision about the next unit. So think about four units and they're on a four year cycle. So we make a decision every year regarding that. So the next decision for the unit will be probably made first half of next calendar year for execution around this equivalent time. That will be our next decision point on the next large component of capital. And Greg, I think we spend about $100 million a year, but three quarters of that would be a big outage now, is that right?

That's right. And we're proceeding with a major outage this year.

So we certainly... So the decision is not till next year. You've got to make the call next year on whether you let a unit die.

That's right. That's correct, Ian.

That's right. And also the scope of that work too, Ian, so it's not always digital. It can be what would you decide the scope based on the call it the life of what you would expect to then make the next investment. And so maybe what... we could indicate to you next year is if we were reducing scope or doing anything like that, you could get an indication for us regarding that. That's probably the key. And the second thing is really that we do have to assess the market. We're very respectful also of the relationship with government and we're also, you know, I think have been a very responsible operator and will continue to make the best decisions in the context of customers as well as our shareholders, as well as government. So If you really thought about the next lead time on that, it's really around that next capital investment decision. And also, whatever we do, we need to think about our people, and we've done that, I think, successfully to date, but we don't want to take that for granted. But, you know, we've got a bit of time if that's what you were getting at.

Okay. In terms of there was a bit of speculation, I think Gentrack came out and said they were getting a renewal from Snowy. And there was speculation in the market around Snowy looking at Kraken. I'm just interested what Origin's attitude towards the exclusivity they have and what they might be able to extract in terms of value from releasing that exclusivity.

I don't have anything to say today, Ian, on that except that the exclusivity is valuable and therefore it would need to be recognised in the context of anything that was done to release it and that's how you should think that we would treat that. But yeah, nothing to say further than that at the moment. We think they're the leader and having that exclusivity is valuable and we also think them growing globally is also very valuable for the Kraken stock. So we are very cognizant of both of those and you would expect us to get value for exclusivity if we were to release it.

Okay.

And in terms of Octopus Energy, you talk about separation. You also imply that maybe Octopus Energy has a capital shortage given regulatory requirements and the likes. I'm just trying to understand, you know, the need and the quantum of capital that Octopus Energy might need and also the timing of it. Is separation come first before a raise or does a capital requirement or is it the other way around?

Yeah, all good questions, Ian. And in fact, that's what the group is working through right now. And that's also then, it's not just that, it's also the growth ambition that it sits with that. And so really what's going through right now is what do we think those capital requirements will be? I know it's been speculated about a particular capital requirement because in the UK market associated with being a retailer, that's not something they have today. It's something they have in several years. But they do need to think about all of their regulatory requirements and all of that capital base. So just to let you know that that is actually what's being worked through right now because there's a range of solutions and it's one that's really the subject of discussion by the shareholders and the board right now. So that's why I can't really add more to it at the moment except you're on the right thing.

Okay. And one final question. You talk about your $25 to $40 per megawatt hour and you're outperforming that quite well, which is impressive. You sit on the demand side and the actual selling of electricity and where you see that growth coming through and the rapid surge of batteries, does that actually become a negative to the retail side of the business? What's that sort of growth rate you see in actual megawatts sold?

I might get John to talk from a consumer point of view if you're happy and then James McGill could talk about from a business point of view. So we'll give you a sense for what's happening in market and then we can, if you need further, we can then add to that.

I mean the forecast we would have at the residential would be broadly flat, as you said, the offset of EVs coming in and energy efficiency and batteries, you know, decline that demand. I think the way – so that sort of – perhaps at a demand level, I think the way we sort of think about it is around the opportunity for the – to use that demand for our VPP and use that flexibility at the right times to be able to generate both better returns for us, but also to deliver that value back to customers as well. And I think that's sort of where the key product propositions and focus is now going.

So from a CNI enterprise point of view, there are some things driving demand like electrification and then energy efficiency. Of course, most sectors are broadly flat, but the biggest tailwind in CNI is data centers. And so there's varying forecasts there. We obviously have a good market share of data centers. And from our own customer forecasts, some forecasts up to 25% annual growth are reasonable, and we're seeing some of that.

Okay, and is the profitability out of a data center as good as out of a regular corporate customer, or given their low profile, it's pretty low profitability?

Certainly, it's a flat low profile. I would say with data centers and many other customers, there's many opportunities to work with them on a fuller energy services package, so behind the meter. some advisory services, depending on the carbon composition they're looking for. So with a bigger, more complex load, there's a great opportunity to provide a wider set of services that would complement the electricity volume.

Yeah, and Tony here, probably the other thing at a macro level is we are starting to see electrification coming through in the market, so sort of a rotation out of domestic gas. into electricity that's lifting usage in domestic customers, certainly on the electricity side. And then we'll have, you know, obviously EV growth coming through on that side as well. I think the key thing to highlight in the $40 a megawatt hour, which I think you've Highlighting is, you know, the incremental loads on all learning, $40 a megawatt hour, that margins across the book, which includes, you know, return on, you know, assets that were invested in in the past. But certainly we're seeing, you know, opportunities across CNI and residential in terms of increased electricity consumption.

Okay. Look, that's great. Thanks a lot.

Thank you. Your next question comes from Henry Meyer from Goldman Sachs. Please go ahead.

Good morning all. Just to expand on the portfolio electricity margins, which remain strong, could you share your latest thoughts on how those margins could change over the next few years when Eraring closes, and whether the earnings from your current battery pipeline and VPP benefits could offset the closure?

Yeah, thanks, Henry. Good question. We originally put the $25 to $40 a megawatt hour in to highlight the fact that, you know, we thought we could stay in that range once Araring retired. And then the investments that we made in trying to get to our four to five gigawatt renewable and storage target, you know, were going to get us into that range. I think the key thing is that Arari, you know, is probably making a stronger contribution than we would have forecast three or four years ago as the prices are sort of holding up and really the renewable transition has slowed a bit. And so I think that gives us the opportunity really to bring those batteries into the portfolio. They'll make a pretty material contribution by the time you get through Fin Year 26 and We'll assess what other options are available to us, contracting and also potentially other investments. Ultimately, I think coal will become, as more renewables come in and the middle of the day starts to get more and more hollowed out, then you start to see coal earnings start to fall, regardless of whether you retire them or not. We're pretty confident we can hold in the middle of that range with the opportunities that are in front of us. When I say middle of the range, I'm saying within the range. I'm not pinpointing a range.

Okay, that's clear. Thank you. And on gas markets, there's a little uncertainty on the best way to resolve the risk of peak gas shortfalls on the horizon through a frequency pipeline and storage capacity improvements, LNG imports, which will be tied to the closure of a raring as well. In that context, could you share perspectives on how you think that risk of shortfall would be best resolved? How Origin might be able to play a pass and again, I think we touched on earlier, but how that's factoring into the likelihood and requirements of extending a raring beyond FY27?

Yeah, that's a very good question, Henry. Firstly, in the gas market we are talking to all the counterparties about all those options of bringing more gas into especially in the southern markets you know really the requirement with sort of decreasing Gippsland production is certainly winter peaking gas so the markets sort of managed that pretty well certainly this year and but looking forward you know we certainly think that an NLG import terminal would certainly assist this market But in saying that, we are also seeing producers sort of, you know, they're looking to develop some of their reserves, and that's coming on stream as well. So we do think it's being pushed out a little bit, and that's certainly what AEMO is saying as well. But longer term, we still think an import, an LNG import option is certainly, you know, something we're interested in going forward.

Probably the other thing to add, Henry, on the Araring sort of theme on that question is, yeah, there's no doubt Araring coming out forces gas fired peaking to run harder and it has a flow-on impact into MDQ and gas. So that's one of the other considerations, I think, if the government and the market is looking at security across both fuels, that we'll need to assess the impacts on both electricity and gas.

Great. Makes sense. Thank you.

Thank you. There are no further questions at this time. I'll now hand back to Mr Calabria for any closing remarks.

Okay, thanks very much for joining the call this morning and thank you all for those questions. We look forward to meeting with many of our shareholders over the next several days and you'll get an opportunity to meet with a number of the team as we get around to see you. So thanks very much everyone.