To Company Announcements Office Facsimile 1300 135 638 Company ASX Limited Date 27 September 2010 From Helen Hardy Pages 217 Subject ANNUAL REPORT, REVIEW AND NOTICE OF MEETING Attached are the following documents: 1. 2010 Shareholder Review 2. The Annual Report including Financial Statements and Directors’ Report for year ended 30 June 2010 3. Notice of Annual General Meeting and Proxy Appointment Form 4. Proposed Constitution to be approved by Shareholder at the Annual General Meeting These documents are being sent to shareholders in accordance with their elections as to the receipt of printed reports. Regards Helen Hardy Company Secretary 02 8345 5023 – [email protected] 1/1 Origin Energy Limited ABN 30 000 051 696 • Level 45 Australia Square, 264-278 George Street, Sydney NSW 2000 GPO Box 5376, Sydney NSW 2001 • Telephone (02) 8345 5000 • Facsimile (02) 9252 1566 • www.originenergy.com.au acting for Tomorrow. sTraTeGY PerForMaNCe GrowTh shareholder review 2010 origin is australasia’s leading integrated energy company. since listing on the asX in February 2000, origin has been committed to delivering results, while also identifying opportunities to deliver value in the future. It is this focus on strategy and performance that has enabled Origin to deliver 10 years of growth to shareholders. As we look to the next 10 years, Origin will continue Acting for Tomorrow. origin reporting 2010 This shareholder review is part of origin’s suite of reporting documents, which includes the annual report and sustainability report. The 2011 half Year report to shareholders is released in March. discover origin reporting 2010 on our website http://reports.originenergy.com.au acting for tomorrow. StrateGY performance GroWtH Hfoarl ft YHeea Hra rlefp Yoeratr t eon SdHeadr 3e1H doelcdeemrSber 2010 ANNUAL REPORT 2010 acting for Tomorrow. acting for tomorrow. sTraTeGY PerForMaNCe GrowTh strateGy perForManCe GroWtH Acting for Tomorrow. STRATEGY PERFORMANCE GROWTH Cover image: shareholder review 2010 sustainability report 2010 origin employees at Darling Downs power Station, Queensland a decade of Growth origin has delivered significant returns to shareholders since listing on the aSX 23% Underlying profit 17% earnings per Share 24% Dividends per Share 28% total Shareholder return all figures are 10 year Compound annual Growth rates to 30 June 2010. Total shareholder return is since listing. ContentS 2 Performance highlights 8 operational review: 3 a message from your Chairman Generation and Managing director 9 operational review: 5 Business strategy retail 6 operational review: 10 operational review: exploration and Production Contact energy 7 operational review: 11 Board and Management australia Pacific lNG 12 Five year financial history 13 Map of assets and operations 13 Commitments, Principles and values origin energY LimiteD origin landholder liaison officer aBN 30 000 051 696 with a landholder, Queensland 22 PerForMaNCe hiGhliGhTs Performance highlights 8,534 1,346 585 1,655 305 612 98 01 02 03 04 05 06 07 08 09 10 01 02 03 04 05 06 07 08 09 10 01 02 03 04 05 06 07 08 09 10 Statutory NPAT ($m) Revenue ($m) Underlying EBITDA ($m) 66.6 800 50 98 * 01 02 03 04 05 06 07 08 09 10 Underlying Net Profit After Tax ($m) 17.1 170 4 01 02 03 04 05 06 07 08 09 10 01 02 03 04 05 06 07 08 09 10 01 02 03 04 05 06 07 08 09 10 Underlying Earnings Per Share Dividends Per Share (cents) Free Cash Flow ($m) (cents) All figures for the financial year to 30 June. *FY08 dividend includes an additional dividend of 25 cps Key milestones in 2010 1 July 2009 1 January 2010 25 February 2010 Commercial operations commenced Commercial operations commenced Australia Pacific LNG and QGC agreed joint at Cullerin Range Wind Farm. at Kupe Gas Project. development plan and gas sales agreements. 18 august 2009 5 January 2010 Farmed-out a 50 per cent interest Australia Pacific LNG site announced. Awarded two key upstream design, engineering in the Canterbury Basin to Anadarko and construction contracts for Australia Petroleum Corporation. 22 September 2009 Announced new gas field discovery Pacific LNG’s CSG to LNG export project. 16 march 2010 in the northern Perth Basin. 15 January 2010 Completed Otway Gas Project acquisition, Announced the Transform Solar joint venture increasing stake to 67 per cent. 28 September 2009 Entered agreement with Eden Energy to with Micron Technology Inc to develop solar 1 april 2010 farm-in to a geothermal licence in the photovoltaic technology. Completed major maintenance shut-down Cooper Basin adjoining geothermal 21 January 2010 of the BassGas Project. licences held by Geodynamics. Talinga (Stage 2) commissioned 23 may 2010 7 november 2009 by Australia Pacific LNG. Commercial operations commenced Commercial operations commenced at 29 January 2010 at Contact Energy’s Te Huka geothermal the expanded Mt Stuart peaking facility. Australia Pacific LNG draft Environmental power station. 4 December 2009 Impact Statement lodged with Queensland 30 June 2010 Farmed-in to a prospective suite of Government. Exploration and Production business achieved exploration and appraisal opportunities 24 February 2010 10 per cent increase in commodity sales in Lao PDR, Thailand and Vietnam. Established ‘shallows’ geothermal joint revenues with production in line with prior Completed the transition of the majority of venture with Geodynamics to explore for year. 2P reserves increased by 38 per cent. Origin’s Retail IT applications support and renewable energy solutions in the Cooper 1 July 2010 development and back office processes and Eromanga basins. Commercial operations commenced at to transformation partner Wipro. Darling Downs Power Station. Assumed operatorship of Otway Gas Project. origin energY SharehoLDer revieW 2010 3 a message from your Chairman and Managing director Fellow shareholder On 21 February 2000, Origin Energy was first listed on the Australian Securities Exchange (ASX), and so began a decade of growth – a decade which has seen market capitalisation increase more than twenty fold; from $600 million to more than $13 billion. During that time, your company has been one of the top performing companies on the ASX with Total Shareholder Returns of 28 per cent (1) per annum. Kevin mcCann grant King Chairman Managing Director As we enter our second decade, Origin’s financial year, a 10 per cent increase on an through increased gross profit in electricity and performance will continue to be driven Underlying Profit of $530 million in the prior year. gas while maintaining cost to serve. There by a clear strategy, that delivers ongoing was also substantial growth in sales of the Underlying earnings per share, calculated opportunities for growth, which is to be: Company’s retail solar systems which provided from Underlying Profit, increased 10 per cent o positioned in the competitive segments to 66.6 cents per share on a weighted average an increased contribution to earnings. of the energy chain; capital base of 878 million shares. Contact energy contributed $346 million to o integrated across key segments, so as to The Board has declared a final fully franked Underlying EBITDA, a 6 per cent reduction on better manage risk, and enhance the range dividend of 25 cents per share, to be paid on the prior year. Higher than normal rainfall of growth opportunities; and 28 September 2010 to shareholders of record during the year resulted in lower wholesale o focused on the pursuit of opportunities on 6 September 2010. This takes the full year electricity prices which made it harder for that leverage the existing business, skills dividend attributable to the 2010 financial year Contact to recover higher gas costs and and knowledge. to 50 cents per share, representing 75 per cent network charges. In the past two years we have deployed of underlying earnings. Changing poLiCY environment approximately $5 billion in balance sheet Origin’s strong financial performance has been UnDerLYing earningS capacity to grow and develop the business. As achieved amid continuing uncertainty in global Origin’s Underlying EBITDA for the 2010 financial a result, a number of projects and acquisitions financial markets and in Australia a high level year increased 10 per cent or $127 million to have made initial or increased contributions of policy uncertainty. During the course of the $1.35 billion. to Origin’s financial performance this year. year, the Federal Government announced Underlying EBITDA for each of Origin’s potential changes to the taxation of resource Strong perFormanCe businesses was as follows. projects and its climate change policy. For the financial year ended 30 June 2010, we are pleased to report that Origin is in a strong exploration and Production Underlying Towards the end of the financial year, the financial position. We have delivered growth EBITDA was $250 million compared with Federal Government sought to introduce its in Underlying Profit. Our Operating Cash flow $264 million in the prior year. The contribution Resources Super Profits Tax, which would have After Tax approached $1 billion per annum. from the recently commissioned Kupe Gas had a material adverse impact on a number This enabled us to fund significant growth Project and Origin’s increased equity interest of Origin’s projects and specifically, the Australia while keeping gearing at a low 20 per cent, in the Otway Gas Project was more than Pacific LNG project. Following significant which provides considerable financial offset by the dilution of Origin’s CSG interests public debate and industry consultation, the flexibility and enables investment in the in Australia Pacific LNG, production constraints Government’s decision was to apply the continued growth of the Company. in the Bass and Cooper basins, production existing Petroleum Resource Rent Tax decline in the Perth Basin and expenses to onshore oil and gas projects. While this Origin reported Statutory Net Profit After Tax relating to the expanded offshore and represents an additional impost on industry, of $612 million for the 2010 financial year, international exploration program if passed, it provides greater certainty than compared with $6.9 billion for the prior year. undertaken during the year. the proposed Resources Super Profits Tax The Statutory Profit for both years contains Generation Underlying EBITDA increased and better balances the risks and rewards a number of items that do not reflect the 70 per cent to $182 million. Origin increased of investing in resource projects. underlying performance of the business. For instance, in the prior year it included a benefit its generation fleet from 704 MW to 1,620 MW Until early 2010, the Federal Government’s from the gain on the dilution of Origin’s over the course of the 2009 calendar year policy response to climate change had been interest in Australia Pacific LNG of $6.7 billion. through the addition of four new or expanded following a dual pathway of an expanded Some of the benefits of the Australia Pacific generation plants. The increased EBITDA Renewable Energy Target (RET), combined LNG transaction have been used to fund the reflected higher capacity payments from the with an emissions trading scheme known as development of operating assets. Retail segment to Generation for this the Carbon Pollution Reduction Scheme (CPRS). increased capacity. The expanded RET has been implemented, Excluding the impact of this and similar items, retail Underlying EBITDA increased 19 per cent providing industry with a more certain the Underlying Profit was $585 million for the or $89 million to $568 million, achieved environment with respect to investment in (1) Compound Annual Growth Rate since listing to 30 June 2010. 4 a MessaGe FroM Your ChairMaN aNd MaNaGiNG direCTor wind, solar and geothermal. However, the Total expenditure on gas and oil exploration Frequency Rate to 5.6 at 30 June 2010. Despite CPRS has been delayed until at least 2013 and activities is expected to be around $170 million, this progress, we recognise we have much more its future remains unclear. Without a price on with the majority of expenditure in the first to do. During the year, several employees carbon it is difficult to determine which half of the 2011 financial year. Embedded in and contractors were injured and we were generation technology we should invest in. the profit guidance is an assumption that some deeply saddened by the death of one of our In particular, investment in combined cycle elements of our exploration program may be Queensland-based contractors. These facts gas generation is likely to be delayed until the unsuccessful and will therefore be expensed are a sobering reminder of the risks we face, future of the CPRS is determined, or the as part of the underlying performance of the and of the importance of continuous Government announces other broad based business in the 2011 financial year. improvement in safety. reduction policies. Taking all these factors into account and based As we pursue a number of opportunities to Origin will continue to work with the on current market conditions, we expect that further grow and develop the business, we Government on this major policy issue. Underlying EBITDA will increase by look to strengthen the skills and capabilities approximately 35 per cent in the 2011 financial of our people. This year, our total employee WeLL poSitioneD For FUtUre groWth year when compared with the prior year. numbers increased to 4,392 (2), primarily Origin has funded a number of projects and through the growth of our Exploration and As a consequence, Underlying Profit for the acquisitions during the past two years which Production business. 2011 financial year is expected to be around will contribute to the Company’s financial 15 per cent higher than the prior year. We appreciate the contribution all of our performance in 2011. These include: employees have made to the growth and o full year contributions from the Kupe and CapitaLiSing on the groWing development of the business throughout Otway Gas projects and the continued DemanD For energY the year. expansion of Australia Pacific LNG’s domestic Looking forward, Origin is well-placed to Over the past 12 months, your Board has been CSG production which is expected to reach benefit from the growing demand for energy active. It met 11 times and in addition, held more than 100 PJ per annum; both domestically and overseas. several planning and review workshops. o a full year contribution from the Darling Over the next year, Origin will address a number Downs Power Station and a contribution It inspected first-hand the progress at some of opportunities with the potential to create from the Mortlake Power Station for of Origin’s major development projects, significant additional value for shareholders. approximately three months; and including the official opening of the Kupe Gas These include: o increased contribution by Contact Energy Project in New Zealand. Members of the Board from new investments in the Stratford o a final investment decision by Australia also visited the Otway Gas Project and peaking plant and the Ahuroa gas storage Pacific LNG on its LNG project; Mortlake Power Station in Victoria. In addition, facility which will reduce Contact’s o the NSW Government’s energy asset sales several meetings were held with operational exposure to periods of high rainfall. process; management throughout the year. We expect these major capital projects will o pursuit of a substantial portfolio of Gender diversity on Boards and in the provide substantial additional cash flows and renewable energy opportunities including: executive ranks has received focus from the contribution to EBITDA, and will result in a – a n extensive pipeline of wind community during the year. Origin has two commensurate increase in depreciation and development options, women on its Board, or 22 per cent of its amortisation expense. – geothermal opportunities in Australia composition. Director Karen Moses is a member and overseas, of the Executive Committee of Management Origin also continues to invest in projects – f urther development of solar and we are developing programs to improve which will contribute to the growth of the photovoltaic technology through participation rates of women in the executive Company over the long term. This will include Transform Solar, in joint venture with group. We will be an early adopter of the ASX a continuation of the high level of total Micron Technology Inc; Governance Recommendations on Diversity exploration and appraisal expenditure o gas and oil exploration opportunities on Boards and the workplace. incurred in 2010. including prospects in Australia, We would like to express our appreciation to New Zealand, South East Asia and Kenya; our fellow directors for the commitment and o implementation of the Retail Transformation dedication they bring to the Origin Board. FinanCiaL CaLenDar 2010/11 program; and Finally, we would like to take this opportunity 28 September 2010 o expansion of Contact’s geothermal and to thank all those associated with our business Final dividend payment peaking generation. – our investors, customers, communities and 29 october 2010 BoarD anD empLoYeeS employees – for their continued support. The annual General Meeting 2010 The health and safety of our people and strength of these relationships has been a 31 December 2010 contractors continues to be our first priority. major contributor to the growth of Origin half year end Encouragingly, we achieved a 38 per cent over the past decade, and positions us well to 24 February 2011 improvement in our Total Recordable Incident continue delivering strong results in the future. half year profit announcement march 2011 interim dividend payment 30 June 2011 Full year end Kevin mcCann grant King Chairman Managing Director (2) Excluding Contact Energy. origin energY SharehoLDer revieW 2010 5 Business strategy: strength through integration – fuel integrated generator and retailer Origin’s strategic focus remains on the competitive segments of the Australian and New Zealand energy markets, with some opportunities in the fast growing energy markets of Asia. The Company seeks to deepen the integration within the business across the energy supply chain, to more effectively manage risk and create opportunities for growth. FUEL GENERATION RETAIL origin’s integrated strategy provides a natural hedge against market risks and enhances the range of growth opportunities available to the business. FUeL generation retaiL ContaCt energY Origin’s Exploration and Origin is the largest owner and Origin is a leading wholesaler and Origin owns a 51.8 per cent Production business targets gas developer of gas-fired electricity retailer of energy, servicing interest in Contact Energy, one of resources close to markets so the generation in Australia. When the approximately 3 million New Zealand’s largest integrated Company can quickly and Mortlake Power Station customers with natural gas, energy companies. Contact also effectively develop and monetise development is completed in electricity and LPG across has an integrated energy any discovery. Origin is the largest 2011, Origin’s total generation Australia. Origin is Australia’s position, including an extensive holder of gas reserves in eastern capacity will be 2,800 MW. clear leader in green energy sales portfolio of gas supply Australia and a leading gas Among Origin’s assets is Darling with over half a million green arrangements, gas storage under producer. Together with its Downs Power Station, which is energy customers and a 46 per development, a diverse and domestic operations, Origin is powered by gas from Australia cent share of the national flexible generation portfolio, working with ConocoPhillips in a Pacific LNG’s CSG fields. It is the GreenPower market. and a strong retail position with joint venture to deliver one of largest combined cycle power approximately 600,000 Australia’s largest CSG to LNG station in Australia and generates customers across the North export projects. To Origin, fuel baseload electricity which emits and South islands. also may take the form of wind less than half of the greenhouse resources, geothermal and hydro gas and requires less than three consents, or access to technology per cent of the water used by a to harness solar energy. typical water-cooled coal-fired power station of the same capacity. Origin has also developed a substantial portfolio of renewable energy opportunities including wind, geothermal and solar photovoltaic energy. 6 oPeraTioNal review exploration and Production Deployment of substantial capital and resources in recent years continues to deliver increased production capacity, while future growth opportunities are being pursued through Origin’s exploration program. inCreaSe in reServeS anD SigniFiCant eXpLoration In the coming year, Origin will continue proDUCtion CapaCitY aCtivitY UnDertaKen with a high level of exploration and In 2010, the Exploration and Production During the year, Origin undertook an appraisal activity. This will include business delivered significant reserves expanded exploration program over drilling two wells in the offshore upgrades, increased production and above its usual level of activity. Northland Basin in New Zealand, capacity and achieved significant The Company embarked on a major another well in the Bass Basin, three exploration success. Origin also offshore drilling program in Australian wells in South East Asia and an active significantly increased its capabilities; waters, drilling four wells across the Australian onshore program across the now operating three major offshore Bass and Otway basins. In addition, Company’s conventional and CSG developments with more than three Origin increased its international assets. Origin will also be preparing quarters of production now coming exploration program by farming-in to for activity in the Canterbury Basin in from areas the Company operates. a prospective suite of exploration and New Zealand where farm-out partner appraisal opportunities in Lao PDR, Anadarko will undertake drilling in 2011. Notwithstanding these achievements, Thailand and Vietnam. Two wells were Underlying EBITDA for Exploration and Strong Start For KUpe gaS drilled in these areas during the Production decreased to $250 million proJeCt financial year. from $264 million in the prior year. The The Kupe Gas Project was officially contributions from the recently As at 30 June 2010, four out of opened on 18 March 2010 after a short commissioned Kupe Gas Project and six wells completed as part of this and highly successful commissioning Origin’s increased equity interest in expanded exploration program had period. It provided six months of the Otway Gas Project were more than encountered hydrocarbons. Costs commercial production through to offset by the dilution of Origin’s CSG associated with the two wells that did 30 June 2010 and produced its one interests in Australia Pacific LNG, not encounter hydrocarbons have millionth barrel of light crude oil or production constraints in the Bass and been included as exploration expenses condensate. Reserves in the field have Cooper basins, production decline in in the financial results for this year. also been increased following a review the Perth Basin and expenses relating In addition to the expanded of well data, early field production to the expanded offshore and exploration program, Origin performance and field reservoir international exploration program participated in drilling campaigns in modelling. Initial 2P reserves increased undertaken during the year. the Cooper and Perth basins, both of by 11 per cent and included a 27 per cent The 2P (Proved plus Probable) reserves which yielded success. The Company increase in light oil. attributable to Origin across its areas also commenced a program of During the period, Origin also of interest at 30 June 2010 totalled exploration drilling and pilot production increased its interest in the Otway Gas 6,207 PJe, which is an increase of testing for the Ironbark CSG project Project from 31 per cent to 67 per cent. 38 per cent on the prior year. A in ATP 788P, which it acquired early in Effective 1 July 2010, Origin became significant increase in reserves held by 2009. Two core holes had been drilled Operator of the joint venture. Australia Pacific LNG (see facing page), by the end of the year with further as well as reserves increases for the Kupe drilling to be undertaken during the and Otway gas projects contributed to course of 2011. this result. Key indicators 522 587 Dilution of Australia Pacific LNG 6,207 516 375 250 264 975 01 02 03 04 05 06 07 08 09 10 09 10 09 10 09 10 Origin 2P Reserves (PJe) Revenue EBITDA Capital ($m) ($m) Expenditure* ($m) * Does not include acquisitions. origin energY SharehoLDer revieW 2010 7 australia Pacific lNG Australia Pacific LNG is the leading producer of CSG in Australia and holds the country’s largest CSG reserves, and continues to meet major milestones in the development of its CSG to LNG export project. BooSt in proDUCtion CapaCitY anD 2p reServeS Australia Pacific LNG is the largest producer of CSG in Australia and has increased production capacity this year to supply contracts with Darling Downs and Rio Tinto, demonstrating a capability to deliver and operate large scale CSG developments. During the year, Australia Pacific LNG produced 71 PJe. Production capacity increased to over 300 terajoules (TJ) per day, and is expected to increase to 350 TJ per day – or the equivalent of 128 PJ per annum – by late 2010. This equates to approximately half the production capacity required to service a 4.5 million tonnes per annum LNG train. The Spring Gully gas production facility continued to be developed during the year, while the Talinga Stage 2 gas production facility was commissioned in early 2010. Australia Pacific LNG also has interests in producing projects operated by others in the Bowen and Surat basins. Australia Pacific LNG holds the largest CSG reserves in Australia and has established sufficient reserves and SigniFiCant progreSS on Good progress has been made on all origin site manager at resources to more than cover a two train aUStraLia paCiFiC Lng proJeCt major project areas and as a talinga gas production LNG development. Australia Pacific LNG made substantial consequence, Australia Pacific LNG facility, Queensland At 30 June 2010, 2P reserves increased progress during the year and continues expects to have all technical and by 40 per cent to 10,143 PJe. 3P (Proved, to move towards a final investment regulatory approvals by the end of the Probable plus Possible) reserves decision. calendar year. increased by 16 per cent to 14,598 PJe, During the year, Australia Pacific LNG Australia Pacific LNG is engaged with while the combined reserves and completed a comprehensive a number of customers with the resources attributable to Australia Environmental Impact Statement potential to secure sufficient off-take Pacific LNG increased to over 26,000 PJe. incorporating the cumulative impact agreements to enable a final Origin has a 50 per cent interest in of the three major currently proposed investment decision to be made. these resources. CSG to LNG projects in Queensland. Responses to public submissions are DeveLopment agreement SigneD currently being prepared and reviewed In February 2010, Australia Pacific LNG with Government agencies. and QGC agreed a framework for the development of two jointly owned Four significant front end engineering CSG tenements and entered into and design (FEED) and early works conditional gas sales agreements that contracts have been awarded. This will support the development of both included a $220 million drilling and Australia Pacific LNG and QGC’s work-over rig contract to Savanna proposed LNG projects. The agreements Energy Services, major contracts for cover up to 640 PJ over a period of the 450km main pipeline and 20 years, including approximately upstream facilities with McConnell 190 PJ over the first two years. This will Dowell Constructors and Baulderstone assist Australia Pacific LNG manage Bilfinger Berger Services Joint Venture the ramp up gas for its CSG to LNG and work is continuing on FEED for the project and provides an export liquefaction facility at Curtis Island channel to market for this gas. with Bechtel.