Origin Energy Ltd Ord

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.

Thank you. If you would like to ask a question, please press star 1 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 in the energy markets, electricity GP margins at over 40 bucks a megawatt hour, over the half are... clearly a long way ahead if you're through the cycle margin guidance. And looking into FY27, the result calls out new battery earnings and lower coal costs being a tailwind, but partly offset by weaker wholesale prices. Can you please refresh us on an indicative range for the incremental EBITDA and FY27 from batteries and also comment on the extent to which your electricity portfolio is hedged into FY7 just to help us understand how much of a down driver weaker wholesale prices might be as you see them currently.

Yeah, sure. So you've actually peeled away. We're obviously not giving guidance today, but you are picking up correctly and we'll take these in turn. We've got a battery and coal tailwinds. We've certainly been setting ourselves up for 27. The key variable that's playing itself out now is the way wholesale prices will flow through to the default market offer. So you're right, you've got all of those playing out. I might just... I'll give an overall view on the coal. I'll ask Tony then to give a little bit more depth on the battery and we can give you a bit of the drivers around that. But you've got the key drivers there. In terms of coal, we're certainly well on our way to contracting coal and well progressed. And that's looking at prices to be at cost below what we've contracted in 26, and 26 was below 25. We've still got to actually complete the contracting of that coal over time, but that's where we're tracking at the moment. On batteries, you're right, we'll see an uplift in the battery earnings. And Tony, do you want to just add anything further to that in terms of... We do give some information where CODs are occurring, but there will be uplift.

Yeah, so we would expect uplift, obviously, into Fin Year 27 from a full-year contribution from those batteries. We haven't guided specifically on what that... that EBITDA is, but you sort of take that range that we give, that IRR range, and sort of back-solve what that might be. You know, coal costs we are seeing lower than where we've contracted this fin year. And then probably... sort of offsetting that is, or not offsetting it entirely, but sort of a headwind, as you've called out, really, is we would expect that the lower Ford prices to make their way into lower mass market markets DMO tariffs and, you know, potentially CNI rates as we contract that book. In terms of where we sit in that GP range, you know, we originally put that out there as a target range, you know, once we'd got through sort of our three to five gigawatt build-out in renewables over the short-term renewables and storage period. And it was to reflect the retirement of Ararang. So we have called out, we sit above that or near the top end of that when we've got Ararang in and those investments coming online. So without guiding 27, I'd expect it to be near the top of that range.

And Tom, just the last comment, you made a comment about using the term hedging and certainly the wholesale team have been active and proactive early on in terms of what we do in respect of 27. And if that's the reference you're making, certainly we've been pleased to be able to to work actively on that and well in advance. The one thing that is yet to play out, as you know, is just how wholesale prices and the DMO flow in and then what flows from that in terms of the retail book and that's probably the key variable that will play itself out over the coming months.

Great. Thanks, Frank. Thanks, Tony. A follow-up question. The interim dividend at $0.30, To share fully frank, I think it's the first time since half year 22 that Origin hasn't lifted the interim dividend year on year. Just in the context of having upgraded guidance in both energy markets and APL&G, leverage at the bottom end of the target range, can you comment on whether we should interpret this as a hint of the potential for an incremental capital commitment over the coming period of scale, perhaps at Golden Beach given you spent more there or Yanko Delta or potentially within APL&G?

Yeah, thanks, Tom. We've probably gone through a period where we were obviously paying no dividend for a while and so increasing the dividend through the period. When we look forward, we've got oil prices probably potentially a little bit lower. They're holding up in the high 60s at the moment. We've got... you know, the tail end of the capex on the battery program and then, you know, we've got the sort of the impact, albeit not a cash impact, of the change in the accounting methodology for the battery. So we sort of see gearing in that range that we've indicated. We'll get through the rest of the CapEx spend. We'll see what other opportunities are there, see where oil sort of settles. So we feel sort of comfortable at where we're setting the dividend at this time.

And Tom, we'll continue to actively manage capital between the opportunities before us and returns to shareholders and we will continue to review that based on what Tony's just talked about.

Thanks for that. I mean, you've been clear that the capital framework seeks to deliver a sustainable dividend. So is this a sign that recognising the volatility in oil markets that you've called out, you know, becoming to the end of the battery capex, is this a at that sustainable level now or there's still capacity to pay up more?

Well, it's sort of hard to, I don't want to forecast where dividends might go, but the way you should think about it is when gearing was particularly low, you know, sort of sub two times, uh you know you could absorb sort of uh economic cycle uh and commodity cycle impacts a lot easier and increase the dividend i think you know we would be sort of challenged that we're under geared at that level so you know in the two to three times we feel that's the appropriate gearing given the commodities prices that we're exposed to so uh you know we don't sort of we don't Yeah, look at, you know, necessarily a progressive dividend, but as those business cycles started to improve cash flows, that could be a potential opportunity, but we'll balance that against what options we've got in front of us equally.

Thanks, Tony and Frank. If your response is that'll make sense.

Thanks, Tom.

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

Morning, team. Thanks for the update. I might start on APL&G. The Taroom Trust is getting a lot of focus at the moment. I remember years ago we had some oil shows coming up from deeper intervals in Kondabra. But with this exploration program planned, could you share a bit more detail on what potential resource volume you're looking at and what the success criteria might be to inform potential developments, whether it's a flow rate or other metrics?

Okay. Andrew, do you want to pick that up?

Thanks Henry. So as Frank called out earlier, the main purpose of this update was to say firstly we've restarted our exploration program after a number of years of very low activity and secondly we have a very large position, I think the largest position of acreage and tenure across the Taroom Trough which runs pretty much north to south along our tenure from both an operated and non-operated perspective. We drilled a well in the Condor Bride deeps a few years ago and it performed pretty strongly but we didn't get to frack it all the way down deeper than the coals and so what we've done this year is we've gone in and drilled an additional three pilot wells. We've done that now. That's telling us that the reservoir is consistent with what we thought. The well logs are supportable. Everything looks good. But we have to critically go back in and frack it. And that'll tell us ultimately the deliverability and the true potential of the play. So that's going to happen sometime mid-year. And really, we agree with the thinking and the commentary that the Turim troughs are potentially very significant play, but it is still early stage and there's a number of technical and economic uncertainties to be resolved. So I think all that says is post the well test after the frack in the middle of the year, we'll know a lot more and there's a pretty good opportunity for us because as Frank mentioned, The acreage that we have is right near our existing processing facilities and, in particular, in Kondabra there, we have alluge that we could connect into these wells into pretty quickly if it goes well. OK.

Thanks, Andrew. And second one, speaking of integrated gas, you've called out the ongoing investment into Golden Beach here. Could you just share a bit of detail on what agreements are already in place there and the potential timing for the developments? Any costs that Origin would need to support either on balance sheet or off balance sheet through contracting?

Yeah, so to sort of disclose there how much we've put into the project to date and we've committed another $25 million. The project is making good progress. As far as timing, you know, and it'll be likely that we'll participate both as an off-taker and an investor of some kind moving forward. A couple of things will be, you know, timing, FID. We'll take FID when, as you'd expect, once we've de-risked the project from a regulatory procurement and commercial perspective and there's still a fair bit of work to go on that front before we'd sort of want to put out a view on timing of an FID and operations. Ultimately, it'll be a billion dollar plus project if it goes ahead but it's not intended that Origin would be the majority of the equity or anything like that and so we'll need to bring in partners and so we'll have choices ultimately into how much we want to invest at the time when we know when we have a better get our arms around the project and the economics.

That's great. Thanks, Andrew.

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

Thank you very much, and thanks for the result presentation today. Just interested about battery returns and the comment that the front end of asset life is expected towards the upper end of your guided returns and eight to 11% post-tax IRR. What's the expected difference between front and tail end?

I'll get Tony to give his.

Yeah, thanks Gordon. Yeah, so in the past we've guided that we think that we'll be at or even potentially above that target in the front end. And then when we took Fed on those projects, Gordon, if you remember, batteries sort of get their revenue from three components. Firstly, there's the cap price. Secondly, the arbitrage spread during the day. And finally, ancillary services. And we, on that latter one, we would forecast that those ancillary service revenues fall through time as more of the kit, I guess, that comes onto the market can offer those services. And equally, when we took Fed on the projects, we wouldn't have banked necessarily that. You shouldn't think that we banked necessarily that cap prices remained at the level they were when we took Fed. So we expect... you know, potentially sort of both of those, the cap return and then also, sorry, the cap premium and also the ancillary to fall through time. In some cases, when we run scenarios, it might be right at the sort of tail end of that range. Equally, we've got scenarios that don't fall as much as that, so... We would say that they're more solid in the first five, seven years than they are in the tail end.

Thanks, Tony. Just one more from me, and this is not for you because it's a technical question. Sorry. On the Turun trough, when you're talking about drilling a horizontal well, can you give us an indication of what the length of those wells would be in the number of frac stages? Yes.

Yeah, thanks Gordon. Andrew here. So no, they're verticals at the moment into Taroom trough. So you might be talking about the, we've got there, we're doing a horizontal frac in Peat. But as far as the Condor Bride deeps, wells, yeah, they're going to be vertical frac wells. I still think it's competitively sensitive on frac stages, et cetera. I will say that we're drilling on the eastern flank, so it's a bit shallower than the rest of the trough, and so we see that as an advantage, obviously, on well costs.

Okay, sorry. Pete, what kind of well are you drilling then on, Pete?

Yeah, so this is a deeper play and it's the first time as we understand it that the industry and the CSG industry in Queensland will have done a horizontal frac well. Clearly we've done lots of horizontals before but this is the first frac well. It's about a one kilometre lateral and in addition, probably the reason for calling it out the way we have is in addition to potentially opening up the peat acreage, to a future development. There's actually a number of other areas that are quite deep and quite tight, and if we can prove that we can do horizontal fracs, it probably opens up some other areas, like in Spring Gully, that we haven't gone after at this point. So it's sort of like a... It's a test to see what we can do in horizontal fracs beyond... in peat and beyond.

Thank you, Andrew.

Thank you. Your next question comes from from Jefferies. Please go ahead.

Morning, Dean. Thank you. Just a question on the energy markets. And if I look at the skew of the business, first half, second half, I think last year it was 53%, 47%. And given you've upgraded the guidance in Feb for full year 26, how do you see that to be evolving for this year, please?

Yeah, sure. Thanks for the question. So in terms of split, we were probably, I would spec, more like more evenly weighted, perhaps sort of slightly, maybe 1% or 2% higher in the first half at a total EBITDA level.

Right. Again, this includes the contribution from the adding. I think, which is a benefit in second half. But more so, I mean, if you can speak to how you see the wholesale, I mean, the hedge book and how the wholesale price volatility, which was very low in the first half, but how do you see that to be evolving as well?

Yeah, there's a couple of things, I guess, that if you remember sort of end of last year, we had quite a lot of volatility in that second half, you know, very late in the second half of of the prior fin year. And so, you know, we're not necessarily forecasting that we get that sort of level of volatility. The book would be positioned particularly well for that if that was to occur with the peaking fleet. So really the electricity book is probably a little bit stronger, first half, second half. In terms of the gas is probably the key call out. We would traditionally normally have a stronger first half in gas in a normal year. What we're seeing this year is just the roll off of some trading contracts and the recontracting and changing nature of the book. you know, we've got a much stronger or sort of a stronger second half than we have first half. So that's probably a different weighting to what you normally would expect out of that gas book.

Right. And maybe just a question on his adding, and you've made a decision to extend this until fiscal 29, and then at the same time you're saying you're not going to do any major maintenance from here. Maybe if you can speak to how do you see all four units to be operational for the next few years and any obligations from the government to keep the asset operational as part of your deal with the New South Wales?

Hello, Amit. This is Greg Jarvis. Look, just with... We're very confident about... maintaining a Raring out to April 29, the Raring power station is in good order. So we're very confident in not doing any major outages. I think the important thing here is that, you know, with the changing market, there'll be opportunities where we can take out units when there's low demand and high capacity and do proactive management. And so by doing that, that will improve the reliability. So, you know, pretty confident about, you know, extending these units out to April 29.

And last question, if I can move to Kraken and formal separation, it may be useful to provide an update on the process from you and the potential pathways to unlock value for shareholders, particularly given the recent volatility in the equity markets in the tech space.

Okay, thanks Amit. Clearly what you can see has happened since we last reported to the market is that a series of transactions have been set up so that this business can separate and it's now set up to be able to pursue independent paths for both businesses. That might include an IPO of Kraken but we're not in a position to confirm anything on that today. That's certainly a choice available to the investors. We obviously continue to be supportive of both of them, but clearly you can see that it's now on a path for both of those and that's an act of consideration. So you can see those steps are demonstrating action, but as to timing and final decision, I haven't got anything further to add today. And the main focus is that it's ready to pursue whatever path we choose. And I think investors It was very clear about the investor base we wanted to bring in on this transaction. I mean D1's led that out but there's a number of others and so we feel we're well placed to have now a cap table that enables us to take several paths and that's what the focus is right now. Everyone is aware of what's happening in markets but at the same time it wasn't that long ago that A bunch of knowledgeable investors came in and invested at 8.65 US. And so he's still very, very focused on quite an exciting future for Kraken. Might be worth me just adding a couple of things about that because there's a lot happening in the tech space and it's difficult for us to comment on sentiment at a very granular level. But that look through valuation is one. The pipeline that we can see for Kraken is another strong point. And the nature of what happens in utilities is we should never forget the fact that these are big decisions for utilities and therefore the sort of proprietary nature, the non-public data, the domain logic, the integration, the regulatory compliance and also the brand trust and delivery record are really quite important factors to be successful in this market. And the proven platform, the fact that it was cloud native, the fact that you can actually have that unified data set and you can therefore code and add more AI capability to it, and you get an opportunity here directly from EMEA. We see opportunities, but clearly you've got sentiment in market and other things, but we do feel it is very well placed to continue to be successful. And certainly I think they're a good organisation in the sense of the way they leverage those capabilities, build those capabilities and continue to advance, and that's certainly been active.

All right. Very useful. Thanks, Tim. Thanks.

Thank you.

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

Good morning, Frank and team. I was hoping you could provide a little bit more colour around, I guess, the rest of Octopus outside of Kraken, just understanding how much in the negative EBITDA was seasonal, because when we look at that seasonal swing historically from the limited data we have, it looks like the second half, up 80 million, is the best we've seen in UK retail. So... How much of this is structural versus seasonal in terms of the first half result?

Oh, yeah, okay. Look, when we gave the quarterly, we were guiding to the fact that the first half has always been, you know, very little earnings come out of the UK retail business in itself. So that's another feature this half. But you're right, the one thing that happened in addition to that was that the warm home discount came in, which has actually cost the UK retailers this half part of which or a reasonable chunk of which gets recovered the following year. So there's an element of timing associated with that. Otherwise, if I looked at UK retail, they would be the two key features associated with that. Then turning to international retail, that's a growth and a conscious choice to grow those businesses. Actually before I come to that, just the last thing really on UK retail is a decision to invest in the smart tariffs. By that, what we mean by that, it's really owning the flexibility customers that come onto that platform over time and grow value in that respect. So there's an investment that's been made by them in that. That's a choice they'll make each year as to how much they want to invest in it, but it certainly has been heavier this half than prior. When it comes to the international, it's a very conscious decision. They're growing customers. It'd be like the early stages of the UK, so the cost to acquire would be close to £100 rather than the £50 or £60 they're paying in the UK now. So that's very much a growth story. Services is all about scaling, improving efficiency, so you would expect that to continue to get better and that's the aim of the businesses. I wouldn't say structural. The only thing on the accounting for Kraken and other things like that is that that's why we're trying to give an average of that margin over time, simply because if you then think about, you know, you go into IFRS or other accounting, there will always be some element about what goes to development, what goes to capitalisation versus expense. So that's the one thing that's probably just playing it through right now. I don't – we just continue to expect that these businesses, the UK business in particular, Dale, will achieve its sort of 40 to 50 pounds a customer in EBITDA. Like, I mean, I think there's no change to our view around that. But you can – I fully appreciate there's quite a bit moving around and noise in that in the six-month period, but that hasn't changed our fundamental view of the business.

I think that the hard thing, frankly, is just the guidance. So, say, FY26 is zero to 150 mil. Yeah, yeah. Like when we think about the loss that was made in the first half and a seasonal swing in UK retail with potentially plus 80 back the other way, it's looking like the second half might be maybe break-even and still not enough to get over the first half loss to hit the bottom end of your range. So what scenarios do we need to actually see to hit the bottom end and the top end of that guidance range?

Yeah, well, we give a range so you can form a view in that. You know, there's... But... We do expect the second half to be much stronger. We've gone through January. It is much stronger for the UK retail business, to be clear, Dale. There's a lot always moving around. January was a decent month for them. They go through those shoulder periods. There's a reason for the ranges around those aspects, but we do expect... We're not giving a range with the objective of hitting the bottom end. We're giving a range because we would be wanting to hit... hit in the middle of it. That's the objective. I don't know, Tony, if you've got anything more specific on UK retail?

No, it's really the shape of the UK retail cash flow. So it is a much stronger second half in the UK retail. It predominantly comes about because of the way that they pay capacity charges in the gas market and then recover that across the customer base. You know, the revenue is... really recovered across that second half period with the winter. So predominantly that'll be where we see a stronger second half out of those. There'll be some slight improvements in energy services run rate. We're seeing good progress in that. Non-UK retailers, Frank called out, will be a function really of investment and they've swung into market and swung out of market as they've seen opportunities. But, yeah, predominantly UK retail.

Okay. Thanks, Christ.

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

Yeah, hi Frank, Tony and everyone. First question on energy markets. The final Nelson review was released late last year. Can you talk through your thinking and your thoughts on the review and a potential impact on Origin? Frank, you've said before you feel pretty comfortable where your generation portfolio sits but with a recent commitment to a rathering life extension and the review now released, has your view shifted at all on the opportunity set for further investment? You've still got Yanko Delta out there and is there an increasing need for more gas peakers and even more investment in battery storage as well. Thank you.

Yeah, sure. Well, the market, we're early stages into a very large transition, Nick, so I think the need for everything is going to grow over time. Specifically, back to your link to the Nelson review, though, obviously they handed down their report at the end of last year. Probably the key thing, though, now that the industry and policymakers and government will will actually work on is in specifically the ESEM, which is the contract mechanism being recommended by the panel that will drive future investment. That mechanism has quite a lot of work acknowledged by everyone in the detail of how those, let's call it contract structures, and that's really addressing this tenor gap. And so that becomes a very important piece of detail to be landed and landed soon so that it is attracting the right investment enduring over time beyond structures like the CIS and that's why the government has initiated that review. So I think there's still more work to be done on that. Linking it back to what do you think the market will need, we still remain of the view that You can see there'll be a lot of batteries being built and that's going on underway. There'll need to be a replacement of energy over time and that diversification points to the fact that that energy is also going to need to come from sources like wind, which is why we remain very positive by having a very large scale attractive wind project. So that's going to be needed in the system. And we do think there'll need to be more gas fired generation introduced. And if you had Daniel Westerman, for example, at AEMO, he would give you a very consistent message to this. Why the mechanism becomes important for that asset class is you can see that there will be a lot that plays out on an average day being produced initially by coal, then more by renewables and by batteries moving it around. But we will need to have sufficient capacity for periods of time which we've seen over the last period of time where you're going to need more than six, eight hours of storage, but they're likely over time to be less frequent and so therefore they'll need to be supported by a well-constructed mechanism that rewards capacity appropriately. And that's probably the one thing we would see critical. You can see it's not getting in the way of people bringing storage on like us and others, but that becomes, I think, a key ingredient. And one that I think is understood, as I say, even if you talk to AMO and others, I don't think that's controversial, but it will need to be brought in.

But from your perspective there still needs to be more work done before you feel confident moving ahead with any further investment decision there?

Well certainly at the moment we would be either investing in current mechanisms and therefore there are both states and federal governments with their own mechanisms and we continue to engage with all of those. If you're asking about a long-dated asset when people are envisaging that there would be a new market mechanism coming in over the coming years, then we would need to see more of the detail associated with the ESCM. We certainly are not stopping the advancing of opportunities to be clear, Nick, and we're assessing that and working on that and being ready for that. So we will make judgments, but at the moment, making a large gas-fired peaking, it would need a form of support that rewarded capacity over time.

I might stick with the theme on government reviews on my other question, just around the gas market review and APL&G. There's obviously been talk around a reservation scheme being introduced there and there's been a range of percentages that may be applied. to the Queensland LNG producers. Can you just confirm first of all that under the ranges being proposed there wouldn't be any incremental gas supply that APLNG will need to supply to the domestic market and then just looking through, you flagged the medium term investment needs at APLNG just to maintain gas supply. Post the release of the gas market review, does the joint venture there have sufficient confidence on the impact of the review to reprove that new investment that you're currently looking at?

Well I think there's further work to be done on the gas market review. A lot of work done but acknowledged I think also by the policy makers. They've got to actually work through how some of the specific mechanisms work and so my starting position, we haven't talked, you know, the joint venture is that there needs to be some further clarity around some of those mechanisms for investment but Andrew, do you want to add anything further, given the detailed work that APLNG has been doing?

Yeah, so, you know, we obviously support the holistic review of all of the mechanisms that are in place in the gas market at the moment. And I think you asked the question of between 15% and 25%, would APLNG have to contribute more? I think maybe it was the question. And, you know, we don't think so in the short term, but, you know, at some point contracts roll off. And so if you look out, five-plus years, for example, and depending on what that reservation percentage is, depending on the term of the reservation, depending on how often it's reviewed, et cetera, there are a number of variables which would impact, ultimately, APL&G's obligation, but certainly in the short term. As we talked about, we're a very significant contributor to the East Coast gas market and so wouldn't see there being any near-term impact. I think then in terms of like the link to future investment, you know, there are a number of factors which obviously we take into account, the view of the market, the outcome of this review, they're all inputs. Certainly we want to continue to support our supply and production irrespective of the outcome of the gas market review from the perspective of we've got to make contracts. We've just reduced or eliminated one of the constraints we had to additional drilling in the west in Spring Gully through the completion of a water pipeline between Spring Gully and Reedy Creek. So we've got the opportunity to commence drilling again in Spring Gully next year. some of the probably the larger investment opportunities. We've talked about an expansion in Reedy Creek Processing Facility. We talked about exploration as well. Some of those items I think where you're really making a choice to have additional length above contracts. That's where I think you've really got to have a good look at market inputs and policy inputs as well. That's great. Thank you very much.

Thank you. Your next question comes from Ian Miles from Macquarie Equities. Please go ahead.

Good morning, guys. If we just go back to energy markets for a second, you upgraded guidance. In the referencing, you talked about batteries and the gas position. How have they changed from your previous guidance? Because you would have known about both of those prior. So I'm just interested in what has lifted that sort of guidance expectation.

So, hi, Ian. Tony here. Really, in terms of where we thought going into the year where we've benefited really is, again, remember last year we were able to change the mix a bit on the portfolio trading in the Ford market. We were able to repeat components of that in the first half. We had... The lower LRED and VEEP prices that materialised through the first half, which is, and we predict into the second half, which has contributed to that. We've also had sort of higher volumes out of, you know, CNI, and we've also been able to run ARARing. than what we'd probably forecast and at a lower coal cost. So it's just two or three sort of contributing factors that gave us a little bit more in the tank than what we would have thought going into the year. You know, on the gas, we've done a little bit of what we call sort of value management in terms of tariffs in the gas book. And then we've also got some lower supply costs coming through there. So they were just a few things we've been able to do throughout the year that's enabled us to increase the outlook.

Okay, that's great. And on the – this may be asked the question a different way – You've got lower coal contracts. You put in your slide deck the VWAP price for New South Wales, base for 27, is down the better part of circa $7. You have a pretty good view of where the DMO pricing and VDO pricing would be coming out at this point in time. Does the coal drop offset the drop in baseload prices?

Ian, is that a 27?

For 27, yeah.

Yeah, well, ultimately, we won't have contracted all of our coal for 27, so it's kind of hard to make a full statement there. I think that you would sort of indicate that the Ford prices, the way that they have, if you look at Ford fin year 27 prices and how they relate to fin year 26, which is kind of the important thing to look at, not how 27s evolve through time. you'll see that that has a reduction in the tariff, you know, of a certain amount per megawatt hour, which I think is probably ultimately more than the coal. The coal will go some way to offsetting it, but ultimately it'll depend on where we contract the remainder of that.

And then competitive dynamics in the retail market as well that flow from that.

But, yeah. OK. And then... OK, that's fine. On... Octopus Energy, do you want to clarify, OE obviously raised implicit money through the Kraken transaction. Is that business now capably sufficient? And I'm curious to understand, did Origin have a look at the convertible note which Octopus Co. acquired and why you didn't seek to have that own part of that CBT?

Yeah, look, just in terms of the octopus, it is capitally efficient to go forward on its independent path. And the focus for us firstly was around the Kraken. If there's a further convertible node opportunity that might arise and there's other funding opportunities, we'll continue to assess those. But it was one that was really done by Octopus Capital. this particular one and we were happy for them to do that. But it doesn't stop us assessing opportunities like that going forward. And so we certainly were active in a lot of the conversations around that and relationship is good.

You didn't say no to that opportunity?

No, no. You weren't given the opportunity? Octopus Capital agreed and we were aware. They did tell us they were going to do that note. And like a lot of these relationships over time, we were aware that they were going to put that in there. It's not a question of saying no, it's a question of us then thinking about future opportunities with them. That was the way it was set up.

Okay.

Yep.

And you make a comment to CRAC and EBITDA guidance of 40% over the last three years. Yet, you know, year one was really high, year two and year three were incrementally lower. Why is 40% the right number?

What we're really trying to guide over time is there's been movements around in that margin and that business over time and we're just giving a look through over a three-plus year view and you can look at those averages over time as to where it's going. And also, as you go into the future, you know, I've been asked a question about whether it goes to IPO and I don't know what market it goes to IPO and what accounting might flow from that as well. So I think the fundamentals are though that they're growing that revenue base at good unit economics and there's certainly been some movement around investing in capability that's growing it to the business it is today and secondly there's been some accounting change to that. So, yes, that was all it was intended to do, Ian.

Okay, that's fine. But on that, has the business now got that baseline capability of being an independent company operating so the cost base has actually done the step up so that the incremental wins that you get and the incremental conversions are actually got really high conversion rates that we're going to get a return in the margin?

Yes is the answer and the objective of having, so there has been a heavy capability build over the last I would say 18 months or so. You had a leadership team that's now scaling a global enterprise platform business. The objective of having AMIR come out at the end of April is for people to hear that directly and they are set up today to deliver across multi geographies and products. and winning those accounts and the last one was obviously significant and it's continuing on that growth path and that is definitely the case.

One final question. We've seen volatility in the Australian energy market slipping. Is this changing your timelines of investment cycles for the gas plants and additional batteries in the system? I think for the first time I've heard you guys talk, the actual cap prices are falling in a reasonable way.

There are probably different durations to that answer Ian, and by the way, we foreshadowed that cap prices would fall over time. Cap prices are, as you know, can be a function of volatility and we've gone through a six month period where through a combination of base load availability, good renewable output and batteries coming into the system, we saw low volatility. Then you come into the new year and you're seeing more. And then we've just talked about previously, I'm going to raise it again, that winter's becoming one of the riskier periods, so we've still got to play that out. So we continue to see volatility, but cap prices will be informed by that volatility. There's a lot of batteries coming into the system. We feel very confident about the investments we've made. That's why we've given the commentary we have to date. Continue to assess those. They've lowered in cost and we've been able to increase pretty cheaply incremental capacity and duration on that. I think when you think about assets like gas-fired peakers, you're essentially introducing a 20 plus year asset into your portfolio. I think it's really around the latter half of those periods versus the front half in terms of understanding how the market would play out over the longer term. There's still a lot that's still got to come into the market. there's still a substantial amount of all of these assets that are going to come in. But certainly as it relates to gas-fired peaking, I think because the nature of those assets may not run high capacity factors but play a very valuable role, I think that's the one where you'd want to make sure you understand that, particularly in the outer years.

Okay, well, that's great. Thank you very much.

Thanks, Sam.

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

Good morning. Congratulations on the result. I thought I'd ask an electricity question and give Mr Jarvis an opportunity to talk, seeing as I think he's got plans for the rest of this year, or I hope he does. Just again, in terms of... Not just yet, Rob.

Not just yet. OK. Not just yet.

Get every cent you can. But... Just in terms of battery revenues and I guess following on from Miles's question about caps and avoided cap cost revenue, can you give us any sense of how your thoughts are evolving? Are the new morning and evening peak products also maybe providing a battery opportunity?

Yeah. Rob, look, the battery's working really well in the portfolio. There's a few things. The intraday volatility still plays out. You know, right now in summer, it probably lends itself to really manage some of the evening peaks. So we're probably doing all one cycles. But you can see, you know, going forward, you can see how we can, you know, double cycle these batteries as well. So, you know, they're playing really well in the portfolio. I've got to say, the other benefit we get from these batteries is, you know, we don't have to turn on gas peakers just for a one or two hour period, which is, you know, that leads to high maintenance costs. So, you know, We're also seeing some benefit just with the existing fleet. So we can use our sort of gas peak as more for duration events, if that makes sense. So really, these batteries, and we're having a battery in every state, so that just gives flexibility right across the portfolio, which is playing very well for us.

Okay, sounds good. I was trying to say something nice about your announcement there and do wish you all the best in your next opportunity.

Rob, I appreciate it. And let me tell you, can I just say that I leave a good team in place and it's going to be a very smooth transition to Andrew. So it's playing out very nicely.

Ah, to Andrew. Ah, congratulations to Mr Thornton. Very good. Okay, my next question is I guess around a balance sheet for Octopus and Kraken. I guess as of June there was some sizeable current liabilities and then there's prudential requirements and things like that. I take it that everybody's pretty comfortable with that. There was also a small investment by the British Business Bank. So I'm just wondering if you can provide any colour on the balance sheet strength of the two entities please.

Oh yes, so certainly, look, there are facilities in place today across the group and they're all very well capitalised and remember that you need to make sure that you are protected for weather events and a whole range of things and they've always been very prudently managing that capital through both facilities, cash and a number of things in terms of the strength of the balance sheet. The recent set of transactions sets it up for the future. because we need to make sure that that energy business has enough available for working capital as well as the ongoing growth of the other businesses, and we feel confident around that. You are correct in stating that there's a variety of arrangements in the UK market that go, and there's even been recent announcements that are changing some of those obligations. For example, the renewable obligation and the region budget announcement is changing. I mean, changing to actually have some of that being managed by government rather than the industry as well. So we feel very comfortable around the balance sheet. It'll be around... the ability for it to continue to grow and it's got runway today for that over a period of time and that'll be where we're really making choices around capital going forward but yeah we feel confident about the facilities they have today and the cash that's been raised uh for the benefit of when these entities separate yeah great thank you maybe if i can ask a slightly more direct question should we be thinking uh that there's a permanent amount of debt or um

non-equity capital in the structure at this point or is it all just still in flux?

I think there are debt markets available as part of that as well. They've certainly, they will have some debt but it would be a lot less debt once they separate Kraken and so therefore it would be a combination. But they're making choices between what's the most efficient form of capital put into the business and it is a combination of debt and equity but the debt would be lower than what it is today across the group. Okay, cool. That's great. Thank you so much. 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 everyone for joining us this morning. We look forward to meeting with many of our investors over the coming days and look forward to having further discussions. So thanks very much for your time today.