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HOW ARE
YOU ADAPTING
TO A RAPIDLY
CHANGING
ENERGY
LANDSCAPE?
Trish Kelliher
Shareholder
Everything you
want to know about
how we’re tackling
the big questions.
ORIGIN ENERGY
CONTENTS
02
04
08
12
38
67
68
70
73
82
WELCOME TO THE 2017 ANNUAL REPORT
YEAR AT A GLANCE
DIRECTORS' REPORT
OPERATING AND FINANCIAL REVIEW
RENUMERATION REPORT
LEAD AUDITOR’S INDEPENDENCE DECLARATION
BOARD OF DIRECTORS
EXECUTIVE MANAGEMENT TEAM
CORPORATE GOVERNANCE STATEMENT
FINANCIAL STATEMENTS
145
DIRECTORS’ DECLARATION
146
INDEPENDENT AUDITOR’S REPORT
152
SHARE AND SHAREHOLDER INFORMATION
154
EXPLORATION AND PRODUCTION PERMITS AND DATA
156
ANNUAL RESERVES REPORT
164
FIVE YEAR FINANCIAL HISTORY
166
GLOSSARY AND INTERPRETATION
On the cover of this Annual Report is Trish Kelliher, an Origin
shareholder and also one of our employees. When we recently
spoke to Trish, she asked what Origin is doing to ensure that
energy remains affordable for families; and how are we making
life easier for customers? This information is found in the
Energy Markets section of the Operating and Financial Review,
as well as in our Shareholder Review and Sustainability Report.
ORIGIN ENERGY
1
Origin is focused on
a cleaner, smarter
and customer-centric
energy future.
2
2
WELCOME TO THE 2017 ANNUAL REPORT
WELCOME
TO THE
2017
ANNUAL
REPORT
In compiling this year’s report, we spent
time reflecting on common questions
we've been hearing from our shareholders.
Did you meet your commitments for the year?
Is the business in good shape? What are you
doing for your customers? How are you
planning to grow? Are we getting a dividend?
These are all important questions, and
we’ve taken time to answer them, among
others, in our reporting suite. On that note,
we’d like to thank Trish Kelliher, one of our
shareholders and also one of our employees,
for appearing on the front cover of the
report and sharing her questions.
PROGRESS ON COMMITMENTS
This year, we have made good progress
towards our commitments, delivering a
$1 billion reduction in debt and improving
business performance.
Our operational performance for the year
was solid, driving increases in Underlying
EBITDA and Underlying Profit. However,
the full year statutory result was significantly
impacted by non-cash impairment charges.
Given our primary focus was to reduce debt,
the Board determined not to pay a dividend
for the second half of FY2017. We are
acutely aware of the importance of dividends
to many of our shareholders and this
decision was not taken lightly. The Board’s
view is that suspension of the dividend is
in the best interests of all shareholders at
this time.
IMPROVED BUSINESS PERFORMANCE
Our solid operational performance delivered
an increase in Underlying EBITDA of
$834 million, or 49 per cent, to $2.5 billion.
In Energy Markets, our electricity business is
performing well and our natural gas portfolio
remains a core differentiator.
Australia Pacific LNG has made a strong
start to operations, producing 10 per cent
above nameplate capacity through the
recent 90-day two train Lenders’ Test,
proving its resources and facilities are
world class. In response to the low oil
price environment, Australia Pacific LNG
is focused on improving productivity and
significantly reducing its cost base.
WELCOME TO THE 2017 ANNUAL REPORT
3
49%
increase in underlying
EBITDA to $2.5 billion
WHAT WE’RE DOING
FOR CUSTOMERS
We are aware that rising energy prices
are hurting many Australian households
and businesses. Origin is helping those in
hardship by making sure they will not pay
the recent price increases and ensuring they
are on our best offer with no conditions
attached. We are also behind the push to
simplify energy and help customers more
easily compare offers.
Bringing energy prices down will require
a whole of industry response, including
networks, generators and retailers. Origin is
taking action to put downwards pressure on
prices by increasing our supply of low-cost
renewables to more than 25 per cent of
our generation mix within three years, and
boosting generation from Eraring.
We will continue to advocate for policy
certainty, particularly the adoption of a
Clean Energy Target as the critical action
needed to stimulate further investment in
new supply and deliver a genuine reduction
in prices for Australians.
OUTLOOK FOR GROWTH
Through our two businesses Energy Markets
and Integrated Gas, Origin is focused on
a cleaner, smarter and customer-centric
energy future.
We expect our two businesses to underpin
growth in the year ahead, subject to market
conditions and the regulatory environment.
Energy Markets Underlying EBITDA for
FY2018 is expected to be in the range
of $1.7 billion to $1.8 billion, up 14 to
21 per cent on FY2017.
Integrated Gas is expected to achieve
production in the range of 245 to 265 PJ
in FY2018, up 7 to 16 per cent on FY2017.
Debt reduction remains a key priority and
Origin is targeting adjusted net debt of
below $7 billion by the end of FY2018,
pending the divestment of Lattice Energy,
our conventional gas assets. We remain on
track to execute this by the end of 2017.
NEW LEADERS
This year we were pleased to welcome to
our leadership team, Lawrie Tremaine as
Chief Financial Officer and Mark Schubert
as head of Integrated Gas.
Teresa Engelhard joined the Board as
an independent non-executive director,
bringing valuable expertise in technology
and innovation as we transition to a cleaner
and smarter energy future. We farewelled
Helen Nugent and thank her for her
enormous contribution.
Our employees are the heart and soul of
Origin and central to any success we achieve.
We acknowledge their incredible efforts
and the great pride they take in Origin.
In closing, we are operating in an
environment where stakeholder
expectations are evolving rapidly.
We are committed to meeting those
expectations by being more responsive,
efficient and adaptable.
We’re confident if we do this, we can
continue to build on our core strengths,
grow new businesses and transform our
culture to position Origin for success.
We look forward to speaking with
many of you at our forthcoming AGM
on 18 October.
Thank you for your continued support.
Gordon Cairns
Chairman
Frank Calabria
Managing Director
4
YEAR AT A GLANCE
YEAR AT A GLANCE
5
YEAR AT A GLANCE
SHAREHOLDERS
This year, Origin was focused on reducing debt
and improving returns to shareholders.
UNDERLYING EBITDA UP
$834 MILLION OR 49% TO
$2.5B↑
UNDERLYING PROFIT UP
$185 MILLION OR 51% TO
STATUTORY LOSS INCLUDING
IMPAIRMENTS OF $3.1 BILLION
$550M↑
$2.2B
ADJUSTED NET DEBT DOWN BY
NIL
DIVIDEND
$1B
OUTLOOK FOR GROWTH
MARKETS
↑ ENERGY
$1.7–$1.8 billion. ↑ INTEGRATED
Australia Pacific
LNG production
up 7–16% to
245–265 PJ.
Underlying EBITDA
up 14–21% to
GAS
Lattice Energy
production
76–86 PJe.
Origin will cease
recognising earnings
from Lattice Energy
upon completion
of the expected
divestment.
DEBT TARGET
↓ ADJUSTED NET
Below $7 billion by
June 2018, pending
the divestment of
Lattice Energy.
6
6
YEAR AT A GLANCE
YEAR AT A GLANCE
7
In 2017, Origin was also focused on delivering
better outcomes for customers, our people
and the community.
CUSTOMERS
IMPROVED CUSTOMER
SATISFACTION
- NPS ↑ 4 points to 16.1
- business customer
satisfaction ↑ 11 points to 76
- ombudsman complaints ↓
DIGITAL MAKING LIFE
EASIER FOR CUSTOMERS
INVESTING IN FUTURE
ENERGY SOLUTIONS
Connected home
solution focusing on
home monitoring
– Online sales ↑ 23%
– My Accounts visits ↑ 30%
to 2.5 million customers
– 1.8 million customers on
e-billing, ↑ 15%
HELPING CUSTOMERS
IN HARDSHIP
760 GAS DEALS
with domestic commercial
and industrial customers
Customers in financial
hardship program will not
pay recent price rises
PEOPLE
COMMUNITIES
IMPROVED SAFETY
PERFORMANCE WITH TRIFR OF
3.2
our best ever result
IMPROVING OUR CULTURE
– New leaders
– Creating a more
responsive, efficient and
adaptable company
EMPLOYEE ENGAGEMENT
↑ 5 percentage
points to 58%
OUR PEOPLE VOLUNTEERED
THEIR TIME TO SUPPORT
GOOD CAUSES
5,912 HRS
SINCE 2010 THE ORIGIN
FOUNDATION HAS CONTRIBUTED
+$20M
to support good causes
in education and help
Australians reach
their potential
Technology to itemise energy use in the home 8
DIRECTORS’ REPORT
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
In accordance with the Corporations Act 2001 (Cth), the
Directors of Origin Energy Limited (Company) report on the
Company and the consolidated entity Origin Energy Group
(Origin), being the Company and its controlled entities for the
year ended 30 June 2017.
The Operating and Financial Review and Remuneration Report
form part of this Directors’ Report.
1 PRINCIPAL ACTIVITIES
During the year, the principal activity of Origin was the
operation of energy businesses including:
– exploration and production of oil and gas;
– electricity generation;
– wholesale and retail sale of electricity and gas; and
– sale of liquefied natural gas.
There were no other significant changes in the nature of these
activities during the year.
2
REVIEW OF OPERATIONS
& FUTURE DEVELOPMENTS
A review of the operations and results of operations of Origin
during the year, the financial position of Origin and the business
strategies and prospects for future financial years, is set out in
the Operating and Financial Review, which forms part of this
Directors’ Report.
3
SIGNIFICANT CHANGES
IN THE STATE OF AFFAIRS
The following significant changes in the state of affairs of the
Company occurred during the year:
AUSTRALIA PACIFIC LNG
In October 2016, the second train of Australia Pacific LNG’s
two train CSG to LNG project was commissioned. In July,
Australia Pacific LNG completed the 90-day operational phase
of the two-train project finance lenders’ test, producing more
than 10% above nameplate capacity.
DEVELOPMENT
In the Otway Basin, production commenced from the Halladale
and Speculant wells. In the Bass Basin, the Yolla compressor was
successfully commissioned in June 2017 which is expected to
maximise production over the life of the field.
ACTIONS TAKEN TO REDUCE DEBT
Origin achieved $1 billion of asset sales, above the target of
$800 million.
Origin announced the intention to divest Lattice Energy, the
name given to the upstream conventional gas business, via a
dual track Initial Public Offering (IPO)/trade sale process.
Adjusted net debt reduced by $1 billion to $8.1 billion driven by
proceeds from asset sales and operating cash flows which were
more than sufficient to fund capital expenditure, including net
contributions to Australia Pacific LNG and interest payments.
The events described above and those disclosed in the Financial
Statements represent the significant changes in the state of
affairs of Origin for the year ended 30 June 2017.
4 EVENTS SUBSEQUENT TO BALANCE DATE
No matters or circumstances have arisen since 30 June 2017,
which have significantly affected, or may significantly affect the
Company’s operations, the results of those operations or the
Company’s state of affairs in future financial years.
5 DIVIDENDS
No Dividends were paid during the year by the Company and the
Directors have determined that no final dividend will be payable
for the year ended 30 June 2017.
6 DIRECTORS
The Directors of the Company at any time during or since the
end of the financial year are:
Gordon Cairns (Chairman)
Frank Calabria (Chief Executive Officer & Managing Director)
(appointed 19 October 2016)
Grant King (Managing Director) (retired 19 October 2016)
John Akehurst
Maxine Brenner
Teresa Engelhard (appointed 1 May 2017)
Bruce Morgan
Helen Nugent (retired 3 March 2017)
Scott Perkins
Steve Sargent
7
INFORMATION ON DIRECTORS
AND COMPANY SECRETARIES
Information relating to current Directors’ qualifications,
experience and special responsibilities is set out on pages 68
and 69. The qualifications and experience of the Company
Secretaries are also set out below.
Andrew Clarke
Group General Counsel and Company Secretary
Andrew Clarke joined Origin in May 2009 and is responsible for
the company secretarial and legal functions. He was a partner of
a national law firm for 15 years and was Managing Director of a
global investment bank for more than two years prior to joining
Origin. Andrew has a Bachelor of Laws (Hons) and a Bachelor of
Economics from the University of Sydney, and is a member of the
Australian Institute of Company Directors.
Helen Hardy
Company Secretary
Helen Hardy joined Origin in March 2010. She was previously
General Manager, Company Secretariat of a large ASX listed
company, and has advised on governance, financial reporting
and corporate law at a Big 4 accounting firm and a national law
firm. Helen is a Chartered Accountant and Chartered Secretary
and a Graduate Member of the Australian Institute of Company
Directors. She holds a Bachelor of Laws and a Bachelor of
Commerce from the University of Melbourne, and is admitted to
practice in New South Wales and Victoria.
DIRECTORS’ REPORT
9
8 DIRECTORS’ MEETINGS
The number of Directors’ meetings, including Board committee meetings, and the number of meetings attended by each Director during
the financial year are shown in the table below:
BOARD MEETINGS
COMMITTEE MEETINGS
SCHEDULED
ADDITIONAL
AUDIT
H
10
8
10
10
3
10
2
6
10
10
A
10
8
10
10
3
10
2
6
10
10
H
4
3
4
4
–
4
–
4
4
4
A
4
3
4
4
–
4
–
4
3
4
H
6
–
–
6
1
6
–
5
6
–
HEALTH,
SAFETY AND
ENVIRONMENT
(HSE)
NOMINATION
REMUNERATION
AND PEOPLE
RISK
A
6
–
–
6
1
6
–
5
6
–
H
4
3
4
–
1
4
–
–
–
4
A
4
2
4
–
1
4
–
–
–
4
H
1
–
1
1
–
1
–
–
1
–
A
1
–
1
1
–
1
–
–
1
–
H
7
–
–
–
–
–
1
4
7
7
A
7
–
–
–
–
–
1
4
7
7
H
5
–
5
5
–
5
–
3
1
–
A
5
–
5
5
–
5
–
3
1
–
DIRECTORS
G Cairns
F Calabria1
J Akehurst
M Brenner
G King2
B Morgan
T Engelhard3
H Nugent4
S Perkins
S Sargent
1 From the date of appointment on 19 October 2016.
2 Up to the date of retirement on 19 October 2016.
3 From the date of appointment on 1 May 2017.
4 Up to the date of retirement on 3 March 2017.
H Number of scheduled meetings held during the time that the Director held office or was a member of the committee during the year.
A Number of meetings attended.
The Board held ten scheduled meetings, including a two-day strategic review meeting and four additional meetings to deal with urgent
matters. There were also seven Board or Committee workshops to consider matters of particular relevance. In addition, the Board
conducted visits of Company operations at various sites and met with operational management during the year.
10
DIRECTORS’ REPORT
9 DIRECTORS’ INTERESTS IN SHARES, OPTIONS AND RIGHTS
The relevant interests of each Director as at 30 June 2017 in the shares and Options or Rights over such instruments issued by the
companies within the consolidated entity and other related bodies corporate at the date of this report are as follows:
DIRECTOR
G Cairns
F Calabria
J Akehurst
M Brenner
T Engelhard
B Morgan
S Sargent
S Perkins
ORDINARY SHARES HELD
DIRECTLY AND INDIRECTLY
OPTIONS OVER
ORDINARY SHARES
DEFERRED SHARE
RIGHTS (DSR) OVER
ORDINARY SHARES
PERFORMANCE SHARE
RIGHTS (PSR) OVER
ORDINARY SHARES
163,660
163,530
71,200
22,117
–
47,143
31,429
30,000
–
1,096,0461
–
107,9212
–
145,0292
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Exercise price for Options and Rights:
1 67,124: $13.97; 227,065: $15.65; 570,150: $6.78; 231,707: $5.67.
2 Nil.
No Director other than the Chief Executive Officer & Managing Director participates in the Company’s Equity Incentive Plan.
OPTIONS AND RIGHTS GRANTED BY ORIGIN
Non-executive Directors do not receive Options or Rights as part of their remuneration. The following Options and Rights were granted
to the Chief Executive Officer & Managing Director and the 5 most highly remunerated officers (other than Directors) of the Company
during the year ended 30 June 2017:
J Briskin
G Jarvis
G Mallett
M Schubert
A Clarke
OPTIONS
–
71,708
71,951
70,391
110,365
DSRS
11,548
21,817
19,748
49,776
28,941
PSRS
35,657
20,741
20,811
20,360
77,815
Each of these awards was made in accordance with the Company’s Equity Incentive Plan as part of the relevant executive’s remuneration.
Further details on options and rights granted during the financial year, and unissued shares under Options and Rights, are included in
Section 6 of the Remuneration Report.
No Options or Rights were granted since the end of the financial year.
ORIGIN SHARES ISSUED ON THE EXERCISE OF OPTIONS AND RIGHTS
Options
No Options granted under the Equity Incentive Plan were exercised during or since the year ended 30 June 2017, so no ordinary shares
in Origin were issued as a result.
Rights
1,908,079 ordinary shares of Origin were issued during the year ended 30 June 2017 on the vesting and exercise of DSRs granted
under the Equity Incentive Plan. No amount is payable on the vesting of those DSRs and, accordingly, no amounts remain unpaid in
respect of any of those shares.
Since 30 June 2017, 57,729 ordinary shares were issued on the vesting of DSRs granted under the Equity Incentive Plan. No amount
is payable on the vesting of those DSRs and, accordingly, no amounts remain unpaid in respect of any of those shares.
DIRECTORS’ REPORT
11
13 NON-AUDIT SERVICES
The amounts paid or payable to KPMG for non-audit services
provided during the year was $971,000 (shown to nearest
thousand dollar). Amounts paid to KPMG are included in
F7 to the full financial statements.
Based on written advice received from the Audit Committee
Chairman pursuant to a resolution passed by the Audit
Committee, the Board has formed the view that the provision of
those non-audit services by KPMG is compatible with, and did not
compromise, the general standards of independence for auditors
imposed by the Corporations Act 2001 (Cth). The Board’s reasons
for concluding that the non-audit services provided by KPMG did
not compromise its independence are:
– all non-audit services provided were subjected to the Company’s
corporate governance procedures and were either below
the pre-approved limits imposed by the Audit Committee or
separately approved by the Audit Committee;
– all non-audit services provided did not, and do not, undermine
the general principles relating to auditor independence as they
did not involve reviewing or auditing the auditor’s own work,
acting in a management or decision making capacity for the
Company, acting as an advocate for the Company or jointly
sharing risks and rewards; and
– there were no known conflict of interest situations nor any
other circumstance arising out of a relationship between Origin
(including its Directors and officers) and KPMG which may impact
on auditor independence.
14 PROCEEDINGS ON BEHALF OF THE COMPANY
No proceedings have been brought on behalf of the Company,
nor have any applications been made in respect of the Company
under section 237 of the Corporations Act 2001 (Cth).
15 ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016/191
dated 24 March 2016 and in accordance with that class order,
amounts in the financial report and Directors’ Report have been
rounded off to the nearest million dollars unless otherwise stated.
16 REMUNERATION
The Remuneration Report forms part of this Directors’ Report.
10 ENVIRONMENTAL REGULATION
AND PERFORMANCE
The Company’s operations are subject to environmental
regulation under Commonwealth, State, and Territory legislation.
For the year ended 30 June 2017, the Company’s Australian
operations recorded some environmental incidents arising from
Origin’s activities including those where Origin was the operator
of a joint venture. These incidents resulted in environmental
impacts mostly with a moderate and temporary nature.
Regulators were notified of reportable environmental incidents.
The Company received 12 notices that included requests for
further information, and official warnings. These included four
penalty infringement notices totalling $46,964. Appropriate
remedial actions have been taken or are being undertaken in
response to each notice and reportable environmental incident.
11
INDEMNITIES AND INSURANCE
FOR DIRECTORS AND OFFICERS
Under its Constitution, the Company may indemnify current
and past Directors and Officers for losses or liabilities incurred
by them as a Director or Officer of the Company or its
related bodies corporate to the extent allowed under law.
The Constitution also permits the Company to purchase and
maintain a Directors’ and Officers’ insurance policy. No indemnity
has been granted to an auditor of the Company in their capacity
as auditor of the Company.
The Company has entered into agreements with current
Directors and certain former Directors whereby it will indemnify
those Directors from all losses or liabilities in accordance with
the terms of, and subject to the limits set by, the Constitution.
The agreements stipulate that the Company will meet the full
amount of any such liability, including costs and expenses to
the extent allowed under law. The Company is not aware of any
liability having arisen, and no claim has been made against the
Company during or since the year ended 30 June 2017 under
these agreements.
During the year, the Company has paid insurance premiums in
respect of Directors’ and Officers’ liability, and legal expense
insurance contracts for the year ended 30 June 2017.
The insurance contracts insure against certain liability (subject
to exclusions) of persons who are or have been Directors or
Officers of the Company and its controlled entities. A condition
of the contracts is that the nature of the liability indemnified
and the premium payable not be disclosed.
12 AUDITOR INDEPENDENCE
There is no former partner or director of KPMG, the
Company’s auditors, who is or was at any time during the year
ended 30 June 2017 an officer of the Origin Energy Group.
The auditor’s independence declaration for the financial year
(made under section 307C of the Corporations Act (Cth)) is
attached to and forms part of this Report.
1212
OPERATING AND FINANCIAL REVIEW FOR THE YEAR ENDED 30 JUNE 2017
A dual track Initial Public Offering (IPO)/trade sale process
is currently underway for Lattice Energy, the name given to
Origin’s upstream conventional business. On 10 August 2015,
Origin divested its entire 53.09 per cent interest in Contact
Energy. Origin has also undertaken the sales program of a
number of infrastructure assets in recent periods. Lattice Energy,
Contact Energy and other selected assets are treated as ‘held for
sale’ and ‘discontinued operations’ in Origin’s statutory financial
statements. Financial information in this report, unless otherwise
stated, references total operations including those classified
as discontinued, consistent with the way Origin management
assesses performance. Note E4 of Origin’s accounts contains
earnings, cash flow and statement of financial position for
Discontinued Operations.
Disclosures of Origin and Australia Pacific LNG’s reserves
and resources are as at 30 June 2017. These reserves and
resources were announced on the same date as the release of
this Operating and Financial Review in Origin’s Annual Reserves
Report for the year ended 30 June 2017. Petroleum reserves
and contingent resources are typically prepared by deterministic
methods with support from probabilistic methods. Petroleum
reserves and contingent resources are aggregated by arithmetic
summation by category and as a result, proved reserves (1P
reserves) may be a conservative estimate due to the portfolio
effects of the arithmetic summation. Proved plus probable plus
possible (3P reserves) may be an optimistic estimate due to the
same aforementioned reasons.
Some of Australia Pacific LNG’s CSG interests are subject to
reversionary rights to transfer back to Tri-Star a 45 per cent
interest in Australia Pacific LNG’s share of those CSG interests
that were acquired from Tri-Star in 2002 if certain conditions
are met. Please refer to section 5 for further information.
IMPORTANT INFORMATION
This Operating and Financial Review (OFR) contains forward
looking statements, including statements of current intention,
statements of opinion and predictions as to possible future
events and future financial prospects. Such statements are not
statements of fact and there can be no certainty of outcome
in relation to the matters to which the statements relate.
Forward looking statements involve known and unknown
risks, uncertainties, assumptions and other important factors
that could cause the actual outcomes to be materially
different from the events or results expressed or implied by
such statements, and the outcomes are not all within the
control of Origin. Statements about past performance are
not necessarily indicative of future performance.
Neither the Company nor any of its subsidiaries, affiliates
and associated companies (or any of their respective officers,
employees or agents) (the ‘Relevant Persons’) makes any
representation, assurance or guarantee as to the accuracy or
likelihood of fulfilment of any forward looking statement or
any outcomes expressed or implied in any forward looking
statement. The forward looking statements in this OFR reflect
views held only at the date of this report and except as required
by applicable law or the ASX Listing Rules, the Relevant
Persons disclaim any obligation or undertaking to publicly
update any forward looking statements, or discussion of future
financial prospects, whether as a result of new information or
future events.
This OFR and Directors’ Report refer to Origin’s financial results,
including Origin’s Statutory Profit and Underlying Profit. Origin’s
Statutory Profit contains a number of items that when excluded
provide a different perspective on the financial and operational
performance of the business. Income Statement amounts,
presented on an underlying basis such as Underlying Profit, are
non-International Financial Reporting Standards (IFRS) financial
measures, and exclude the impact of these items consistent with
the manner in which senior management reviews the financial
and operating performance of the business. Each underlying
measure disclosed has been adjusted to remove the impact of
these items on a consistent basis. A reconciliation and description
of the items that contribute to the difference between Statutory
Profit and Underlying Profit is provided in Section 2.2 of
this OFR.
Certain other non-IFRS financial measures are also included
in this OFR. These non-IFRS financial measures are used
internally by management to assess the performance of
Origin’s business and make decisions on allocation of resources.
Further information regarding the non-IFRS financial
measures is included in the Glossary on pages 166 to 168.
Non-IFRS measures have not been subject to audit or review.
Certain comparative amounts from the prior corresponding
period have been re-presented to conform to the current
period’s presentation.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 1313
ORIGIN IS A LEADING AUSTRALIAN
INTEGRATED ENERGY COMPANY
Through its two businesses, Energy Markets and
Integrated Gas, Origin is focused on a cleaner, smarter,
customer-centric energy future.
ENERGY MARKETS
– Retail sales of electricity, gas and other customer solutions
– Electricity generation
– Wholesale trading of electricity and gas
LEADING ENERGY
RETAILER
SIGNIFICANT
GENERATION PORTFOLIO
4.2 million gas,
electricity and
LPG customer
accounts
LARGE AND FLEXIBLE
GAS SUPPLY
~ 6,000MW with
fuel and geographic
diversity
GROWING RENEWABLE SUPPLY
Contracted
gas supply
beyond 2022
From approximately
10% of our generation
mix to more than
25% by 2020
ENERGY MARKETS IS FOCUSED ON:
– Transforming customer experience through digital, innovative products and future energy solutions;
– Building on the strength of its gas and electricity supply portfolio; and
– Accelerating the growth of renewable energy.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 1414
INTEGRATED GAS
– Upstream exploration, development and production
UPSTREAM OPERATOR AND 37.5%
SHAREHOLDER IN AUSTRALIA
PACIFIC LNG
CONVENTIONAL
UPSTREAM EXPLORER
AND PRODUCER
OTHER EXPLORATION
AND DEVELOPMENT
INTERESTS
AUSTRALIA’S LARGEST
CSG RESERVES BASE
2P reserves of 12,545 PJ
(APLNG 100%)1
LARGEST LNG FACILITY ON
THE EAST COAST OF AUSTRALIA
9mtpa nameplate capacity
SUPPLIER TO DOMESTIC
AND EXPORT MARKETS
Supplies ~ 20% of domestic
east coast gas demand
~ 8.6mtpa LNG export
contracts for ~ 20 years
Surat Basin
Beetaloo Basin
Browse Basin
Geographically
diversified
upstream
exploration
and production
company
Progressing
divestment
via IPO or
trade sale
INTEGRATED GAS IS FOCUSED ON:
– Optimising APLNG's development activities and directing surplus gas to the highest value markets;
– Improving productivity and reducing costs in APLNG; and
– Pursuing other unconventional growth prospects for potential future development.
1
At 30 June 2017. For further information refer to Origin's Annual Reserves Report for the year ended 30 June 2017 on page 156.
Also refer to the Important Information on reserves and resources disclosures prior to Section 1.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 1515
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UPSTREAM
ACREAGE
Origin Energy
Australia Pacific LNG
Lattice Energy
GENERATION
Power station
(gas-fired)
Power station
(coal-fired)
Contracted
wind generation
Pumped hydro
generation
Contracted
solar generation
Production facility
Development proposal
Under construction
Office
LPG seaboard terminal
Customer accounts.
In addition to the seven LPG seaboard
terminals on the east coast of Australia,
Origin also operates 37 inland terminals,
servicing every state/territory of
Australia; and in eight countries
across the Pacific and Vietnam with
25 seaboard and inland terminals.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 1616
FINANCIAL HIGHLIGHTS
STATUTORY LOSS ($M)
UNDERLYING EBITDA ($M)
UNDERLYING PROFIT ($M)
$2,226M
$2,530M
$550M
$1.6 billion on FY2016
$834 million on FY2016
$185 million on FY2016
– Includes the impact of impairments
of $3.1 billion after tax
– In line with guidance of
$2,450-2,615 million
– In line with guidance of
$480-590 million
DELIVERING ON OUR PRIORITIES IN FY2017
REDUCING DEBT
AND IMPROVING RETURNS
LEADERSHIP IN
ENERGY MARKETS
LEADERSHIP IN
INTEGRATED GAS
$1 billion reduction in adjusted net
Improved customer satisfaction
40% increase in production volumes
debt to $8.1 billion
(Interaction NPS up 4 points to +16)
Underlying ROCE improved to 6%
Improvement in electricity
$1.2 billion reduction in
capital spend
and natural gas
Gas sales volumes up 12%
$1 billion in asset sales completed
1,200 MW increase in committed
Australia Pacific LNG Train 2 online
Completed 90 day operational
phase of Australia Pacific
LNG two train test (operating
>10% above nameplate)
NCOIA increased by $163 million
Progressing divestment of
Lattice Energy
renewable energy supply
Halladale/Speculant online
Accelerating digital transformation
and future energy solutions
Booked contingent resource and
increased interest in prospective
Beetaloo JV to 70%
TRANSFORMING CULTURE
New executive leadership team
Employee engagement score increased to 58% from 53% in FY2016
Improved safety performance (TRIFR reduced to 3.2 from 4.2 in FY2016)
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 1717
FY2018 GUIDANCE
Subject to market conditions and regulatory environment
ENERGY MARKETS
INTEGRATED GAS
ADJUSTED NET DEBT TARGET
$1.7-1.8B
EBITDA driven by
– Improving electricity earnings; and
– Stable natural gas earnings
245-265PJ
Below $7B
production from
APLNG (Origin
share) driven by
– First full year contribution from both
LNG trains
76–86 PJe estimated production
from Lattice Energy
– Earnings will cease to be recognised
on divestment
by 30 June 2018
driven by
– Proceeds from divestment
of Lattice Energy; and
– Improved operating cash flow
from Energy Markets
FY2018 PRIORITIES AND FUTURE PROSPECTS
REDUCING DEBT
AND IMPROVING RETURNS
LEADERSHIP IN
ENERGY MARKETS
o Execute divestment of Lattice Energy
o Increase gas volumes supported by
strength of supply portfolio
LEADERSHIP IN
INTEGRATED GAS
o Increase production at
Australia Pacific LNG
o Target adjusted net debt below
$7 billion by 30 June 2018
o Transformation and cost out program
o Disciplined capital management
o Increase generation output in
response to high wholesale prices
o Improve productivity and reduce
costs in Australia Pacific LNG
o Leading transition to renewables
o Target FEED on Ironbark
o Transforming customer experience
through digital, innovative products
and future energy solutions
TRANSFORMING CULTURE
o Customer oriented, outcome focused culture
o Proactively adapt to changing energy markets
o Clear expectations for leaders and people, including refreshing Purpose, Values and Behaviours
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW LEADERSHIP IN INTEGRATED GAS
In July 2017 Australia Pacific LNG successfully concluded
the 90-day operational phase of the two train project finance
lenders’ test, with the plant performing at more than 10 per cent
above design nameplate capacity during the 90 day period. All
other elements of the project finance completion tests are on
track and Australia Pacific LNG expects that formal certification
that they have been satisfied will be provided during the first
quarter of FY2018. When formal certifications are received,
the remaining US$3.4 billion of shareholder guarantees relating
to Australia Pacific LNG’s US$8.5 billion project finance facility
will be formally released. Australia Pacific LNG now has the
opportunity to take advantage of potential opportunities to
sell additional gas into the domestic market.
As upstream operator of Australia Pacific LNG, Origin is focused
on improving productivity and reducing its cost base. This includes
optimising well designs, well placement and well maintenance
to maximise output and minimise unit rate development
and operating costs. As well as focusing on leaner operating
processes; and integrated planning to drive strategic long term
decisions and optimise medium term capital deployment.
Origin is also continuing to pursue other unconventional growth
prospects for future development, including at its 100 per cent
owned Ironbark resource, where it aims to enter FEED on a
Phase 1 Development concept during FY2018. In the Beetaloo
Basin, Origin continues to support the Northern Territory
Government’s Scientific Inquiry into Hydraulic Fracturing of
Onshore Unconventional reservoirs, having announced in
February 2017 the discovery of a gross 2C contingent resource
of 6.6 Tcf, based on early exploration results (refer to Origin’s
announcement to the ASX on 15 February 2017 for further
information regarding this discovery).
1818
REDUCING DEBT AND IMPROVING RETURNS
Over the last 6 months, Adjusted Net Debt has been reduced
from $9.1 billion to $8.1 billion. With the expected proceeds
from the sale of Lattice Energy and continued focus on improving
returns and cash flow, Adjusted Net Debt is expected to reduce to
below $7 billion by 30 June 2018.
LEADERSHIP IN ENERGY MARKETS
Origin aspires to take a leading role in the transition to a cleaner
and smarter energy future by accelerating the development of
large scale renewables and focusing on developing new products
to improve customer experience and lifetime value.
In the near term, the Australian energy market is expected to
continue to be characterised by tight gas and electricity markets
with high wholesale prices. Origin’s large and flexible gas supply
portfolio will continue to meet the needs of major industrial and
residential customers as well as support energy security through
gas-fired generation. With strong gas supply beyond and flexible
transport, Origin’s gas portfolio is expected to support volume
growth and sustainable earnings in FY2018. The electricity
supply portfolio is also well positioned to deliver a competitive
cost of energy and support continued improvement in returns
in FY2018.
Renewables represent the lowest cost investment in new
electricity generation today and will support a competitive cost
of energy over the medium to long term. Origin has an ambition
to add up to 1,500 MW of new renewable supply to its portfolio
by 2020 which is expected to increase the proportion of
renewables in its generation mix from approximately 10 per cent
today to more than 25 per cent by 2020. Since March 2016,
Origin has already committed to approximately 1,200 MW of
new renewables which will progressively come into its portfolio
from 2H FY2018. As Origin generates less energy than it sells,
it is well placed to bring renewables into its portfolio without
stranding existing generation assets. Origin also operates
Australia’s largest fleet of peaking gas-fired generators which
are expected to play an increasingly important role in supporting
the growth of intermittent non-dispatchable renewable energy,
along with batteries in the longer term.
Customers are increasingly attracted to technologies and
services that enhance their energy experience and give them
greater transparency, control and efficiency. These include solar
generation and battery storage, connected homes, energy
efficiency technology and energy usage management. In response
to these changing customer needs, Origin is proactively engaging
with cutting edge start-up companies in order to conduct trials
of new energy technologies, and explore new ways of interacting
with customers. Origin has established a small presence in Silicon
Valley in the US via an office sharing arrangement with innogy, a
large German new energy company. Origin and innogy are also
co-founders of the Free Electrons initiative – a global accelerator
that brings together eight forward-thinking utilities and 12
leading start-ups in the areas of renewables, smart grids, electric
vehicles and home energy management.
Origin is equally committed to supporting, working with, and
investing in, Australian innovation. This includes recently
becoming principal sponsor of EnergyLab, the new home for
clean energy innovation in Australia, hosted by the University
of Technology, Sydney.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 2. REVIEW OF OPERATIONS
2.1 FINANCIAL PERFORMANCE
YEAR ENDED 30 JUNE
STATUTORY FINANCIAL PERFORMANCE1:
Statutory profit/(loss)2
Statutory earnings per share
Items excluded from underlying profit (post-tax)3
UNDERLYING FINANCIAL PERFORMANCE:
Energy Markets underlying EBITDA
Integrated Gas underlying EBITDA
Corporate underlying EBITDA
Contact Energy underlying EBITDA
Underlying EBITDA
Underlying depreciation and amortisation
Underlying share of ITDA
Underlying EBIT
Underlying net financing costs4
Underlying profit before income tax and non-controlling interests
Underlying income tax expense
Non-controlling interests’ share of underlying profit
Underlying profit
Underlying earnings per share
Final dividend per share
1919
2017
($MILLION)
2016
($MILLION)
CHANGE
($MILLION)
(2,226)
(126.9¢)
(2,776)
1,492
1,104
(66)
–
2,530
(477)
(925)
1,128
(296)
832
(279)
(3)
550
31.3¢
Nil
(628)
(39.8¢)
(993)
1,330
386
(81)
61
1,696
(624)
(296)
776
(109)
667
(286)
(16)
365
23.2¢
Nil
(1,598)
(87.1¢)
(1,783)
162
718
15
(61)
834
147
(629)
352
(187)
165
7
13
185
8.1¢
–
Statutory Loss of $2,226 million includes an impairment charge of $3,064 million. Excluding this charge and other adjustments to
statutory profit results in an underlying profit of $550 million. See below for a reconciliation from statutory to underlying profit.
Underlying EBITDA of $2,530 million increased by $834 million driven by volume growth and improving returns in Electricity, the ramp
up of LNG earnings5 and the commencement of production from the Halladale/Speculant field.
Underlying Profit of $550 million increased by $185 million reflecting higher EBITDA and lower underlying depreciation and amortisation
relating to Contact Energy and Lattice Energy6. This was partially offset by an increase in the amount of Australia Pacific LNG interest,
tax, depreciation and amortisation (ITDA) and net financing costs associated with the funding of Origin’s interest in Australia Pacific LNG
that was recognised in underlying earnings. Refer to Appendix 1 for additional detail on underlying net financing costs.
The Board has decided to not pay a final dividend in respect of earnings for the second half of the financial year.
1 Refer to Glossary on pages 166 to 168 for definitions of terms set out in the table.
2 FY2016 statutory profit/(loss) has been restated to reflect adjustments in accounting for power purchase arrangements, as noted in Note F12 of the 30 June 2017
Origin Consolidated Financial Statements.
3 Refer to Section 2.2 for additional detail.
4 Refer to Appendix 1 for additional detail.
5 FY2017 reflects revenue and costs from a full year of Train 1 and 8 months of Train 2 compared to 4 months of Train 1 in FY2016.
6
In line with accounting standard requirements, depreciation and amortisation of Lattice Energy assets ceased from 7 December 2016.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 2020
2.2 RECONCILIATION FROM STATUTORY TO UNDERLYING PROFIT
YEAR ENDED 30 JUNE
Statutory Profit/(Loss)1
Items Excluded from Underlying Profit
Fair value and foreign exchange movements
LNG items pre revenue recognition
Disposals, impairments and business restructuring
Total Items Excluded from Underlying Profit
Underlying Profit
2017
($MILLION)
2016
($MILLION)
MOVEMENT
($MILLION)
(2,226)
(628)
(1,598)
96
(36)
(2,836)
(2,776)
550
(234)
(222)
(537)
(993)
365
330
186
(2,299)
(1,783)
185
Fair value and foreign exchange movements primarily reflected non-cash fair value gains associated with oil hedging2 and the Oil Forward
Sale (following the announced intention to terminate post the proposed divestment of Lattice Energy), as well as fair value gains related to
interest rate swaps and other financial instruments impacting Energy Markets, partially offset by foreign exchange movements relating to
LNG funding.
LNG related items pre revenue recognition relate to net financing costs associated with Australia Pacific LNG that would otherwise have
been capitalised if the development project was held directly by Origin, rather than via an equity accounted investment.
The disposals, impairments and business restructuring category include gains associated with the asset sales programme of $303 million,
more than offset by restructuring costs of $75 million and non-cash impairments of $3,064 million.
Restructuring costs comprised transaction costs and tax loss write-off arising from the asset sales programme and the Lattice Energy
divestment process and costs associated with restructuring and cost reductions programs.
Non-cash impairment charges of $3,064 million included:
– $1,893 million recognised in H1 FY2017 relating to Origin’s share of Australia Pacific LNG’s impairment ($1,031 million), Browse
Basin ($578 million), upstream exploration assets held for sale ($170 million), and Origin’s interest in Energia Austral SpA in Chile
($114 million); and
– $1,172 million recognised in H2 FY2017 relating to Origin’s share of further impairments by Australia Pacific LNG ($815 million) and
a review of the carrying value of Lattice Energy (which reflects the cessation of depreciation and amortisation from 7 December 2016)
against the expected proceeds from divestment net of estimated cost of disposal ($357 million).
In determining the carrying value of its assets, Australia Pacific LNG considers a range of project and macro assumptions – including
oil price, AUD/USD exchange rates, discount rates and costs. Since the last assessment at 31 December 2016, a number of relevant
assumptions have changed but the principal change is a reduction in the long term oil price assumptions to US$67/bbl (real) from 2022.
1 FY2016 statutory profit/(loss) has been restated to reflect adjustments in accounting for power purchase arrangements, as noted in Note F12 of the 30 June 2017
Origin Consolidated Financial Statements.
2 On 22 December, 2015 Origin announced the purchase of put options over 15 million barrels of oil for the 2017 financial year. Origin has purchased put options over a further
20 million barrels for the 2018 financial year.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 2.3 CASH FLOWS
YEAR ENDED 30 JUNE
Movements excluding Contact Energy
Underlying EBITDA
Non-cash items in Underlying EBITDA1
Change in working capital
Oil Puts premium paid
Insurance relating to completion of APLNG
Re-structuring costs
Other
Tax paid/refund received
Total cash flow from operating activities (ex- Contact Energy)
Contact Energy – cash flow from operating activities
Total cash flow from operating activities
Capital expenditure
APLNG net contribution
APLNG – reserve accounts2
Net disposals
Total cash flow from investing activities
Net cash flow from operating and investing activities (NCOIA)
Net proceeds/(repayment) of debt
APLNG – loan proceeds2
Interest paid
Dividends paid
Proceeds from share issue
2121
2017
($MILLION)
2016
($MILLION)
CHANGE
($MILLION)
CHANGE
(%)
2,530
(821)
(319)
(64)
(7)
(13)
(70)
53
1,289
–
1,289
(501)
(170)
(127)
887
89
1,378
(956)
127
(540)
(2)
–
1,635
(187)
161
(117)
(37)
(102)
(54)
34
1,333
71
1,404
(701)
(1,206)
–
1,718
(189)
1,215
(2,690)
–
(611)
(418)
2,496
895
(634)
(480)
53
30
89
(16)
19
(44)
(71)
(115)
200
1,036
(127)
(830)
278
163
1,734
127
71
416
(2,496)
(148)
55
339
N/A
(45)
(81)
(87)
30
56
(3)
N/A
(8)
(29)
(86)
N/A
(48)
N/A
13
(64)
N/A
(12)
(99)
N/A
12
Total cash flow from financing activities
(1,371)
(1,223)
Operating cash flow decreased by $115 million to $1,289 million, of which $71 million related to Contact Energy which was sold in
August 2015. The remaining $44 million reflected unfavourable working capital movements ($480 million), partially offset by higher
cash EBITDA1 ($261 million) and reductions in other costs ($175 million).
Working capital decreased by $161 million in FY2016 (excluding Contact Energy), primarily in Energy Markets driven by favourable
collections ($87 million) and tariff reductions from lower network charges ($48 million). In FY2017, working capital increased
$319 million primarily in Energy Markets driven by revenue growth ($187 million) as well as a delayed AEMO settlement ($43 million,
fully recovered in July 2017) and a delay relating to a new Business customer billing platform ($94 million, expected to be recovered
in Q1 FY2018).
Investing cash flow improved $278 million driven by reductions in capital expenditure and contributions to Australia Pacific LNG, partially
offset by lower disposal proceeds due to the sale of Contact Energy in the prior period.
Net cash from operating and investing activities (NCOIA) of $1,378 million together with proceeds returned from Australia Pacific LNG
in relation to the funding of reserve accounts was used to meet interest payments and repay debt.
1 Non-cash items in EBITDA include the contribution from equity accounted Australia Pacific LNG operations ($859 million: FY2016 $111 million), exploration expense
($62 million: FY2016 $63 million), amortisation of oil hedge premiums ($117 million: FY2016 Nil) and the impact of the Oil Forward Sale ($141 million; FY2016 $139 million).
2 Australia Pacific LNG – reserve accounts represents cash provided to Australia Pacific LNG to satisfy project finance debt service reserve account requirements. Upon issue of a
bank guarantee to Australia Pacific LNG by Origin, this amount was returned to Origin as a loan (denominated in US Dollars and classified as a financing cash flow, ‘Australia Pacific
LNG – loan proceeds’).
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 2222
2.4 FINANCIAL POSITION AND RETURN ON CAPITAL
AS AT
Net Assets1
including:
Investment in APLNG
MRCPS2 issued by APLNG
Non-cash fair value uplift4
Adjusted net assets
Origin Adjusted Net Debt
Net derivative liabilities
Origin’s share of APLNG project finance
Capital employed
Underlying EBIT
Origin’s equity share of APLNG interest and tax
Dilution depreciation adjustment (relating to APLNG Non-cash fair value uplift4)
Adjusted EBIT4
Average capital employed
Underlying ROCE3
30 JUNE 2017
($MILLION)
30 JUNE 2016
($MILLION)
11,418
14,060
5,463
3,609
(30)
11,388
8,111
565
3,642
23,706
1,128
324
47
1,500
24,914
6.0%
5,945
4,848
(1,923)
12,137
9,131
692
4,163
26,123
776
31
22
829
28,106
2.9%
As at 30 June 2017, capital employed of $23,706 million included $12,684 million capital related to Australia Pacific LNG, comprising the
carrying value of its equity accounted investment, the balance of MRCPS and Origin’s share of Australia Pacific LNG project finance less
the non-cash fair value uplift recorded on the creation of Australia Pacific LNG and subsequent share issues by Australia Pacific LNG to
Sinopec. Capital employed reduced by $2,417 million primarily reflecting asset impairments for assets held for sale, upstream investment
in the Browse Basin and International Development assets in Chile.
Adjusted EBIT increased by $671 million to $1,500 million reflecting increased earnings across all segments.
Average capital employed decreased by $3,192 million to $24,914 million primarily reflecting the impact of the divestment of Contact
Energy in August 2015, impairments of assets held for sale, upstream investment in the Browse Basin and International Development
assets in Chile.
Underlying ROCE increased from 2.9 per cent in the prior period to 6.0 per cent for the 2017 financial year. Australia Pacific LNG is
ramping up to full operations in a low oil price environment, and as a result, the impact of this business is not yet fully reflected in the
2017 results.
1 30 June 2016 net assets has been restated to reflect adjustments in accounting for power purchase arrangements, as noted in Note F12 of the 30 June 2017
Origin Consolidated Financial Statements.
2 Mandatorily redeemable cumulative preference shares (MRCPS).
3 Underlying ROCE is calculated as Adjusted EBIT/Average Capital Employed. Refer to definition in the Glossary on page 167.
4 Refer to definition in the Glossary.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 2.5 FUNDING AND CAPITAL MANAGEMENT
AS AT
Total interest bearing liabilities
Less: cash and cash equivalents
Net Debt
Fair value adjustments on FX hedging transactions
Adjusted Net Debt1
Statutory average interest rate
Underlying average interest rate
2323
30 JUNE 2017
($MILLION)
30 JUNE 2016
($MILLION)
8,515
(151)
8,364
(253)
8,111
6.3%
6.3%
9,616
(146)
9,470
(339)
9,131
6.5%
5.9%
Adjusted net debt decreased by $1 billion to $8.1 billion driven by $0.9 billion net proceeds from asset sales and $1.3 billion of operating
cash flows, which were more than sufficient to fund $0.5 billion of capital expenditure, $0.2 billion of net contributions to Australia Pacific
LNG and $0.5 billion of interest payments.
Liquidity remains sufficient for all foreseeable funding requirements with $6.6 billion of committed undrawn debt facilities and cash
(excluding bank guarantees). During the period, the maturity of $4.5 billion of syndicated bank loans was extended by 34 months to
October 2021 and the A$900 million of Subordinated Notes were redeemed.
The increase in underlying average interest rate reflects an increase in financing costs associated with funding the investment in
Australia Pacific LNG being recognised within underlying profit following commencement of revenue recognition for both trains.
The funding of this investment included hybrid debt incurring a higher interest rate relative to the portfolio average.
AUSTRALIA PACIFIC LNG DEBT
During the period, Australia Pacific LNG drew down the remaining US$38 million from its US$8,500 million project finance facility and
also made its first principal repayment of US$267 million. Interest on the project finance facility of US$38 million was capitalised during
the current period and US$300 million has been recorded in the Income Statement. As at 30 June 2017, the total outstanding balance
of the project finance facility was US$8,233 million.
SHARE CAPITAL
During the period, Origin issued an additional two million shares under employee incentive plans resulting in a total number of 1,755
million shares on issue as at 30 June 2017. The weighted average number of shares used to calculate basic EPS at 30 June 2017
increased by 176 million to 1,754 million from 1,578 million at 30 June 2016.
2.6 FINAL DIVIDEND
As a result of the primary focus on reducing debt, the Board has decided not to pay a dividend in respect of earnings for the second half
of the financial year. While the Board will review each dividend decision in light of the prevailing circumstances, the Board’s view is that
suspension of the dividend is in the best overall interest of shareholders.
1 Adjusted net debt represents interest bearing liabilities adjusted to reflect associated cross currency interest rate swaps used to hedge some foreign currency denominated
debt into either AUD or USD, less cash and cash equivalents. Refer to Glossary for details of Adjusted Net Debt.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 2424
3.
FY2018 OUTLOOK
FY2018 earnings is expected to be underpinned by growth
in Energy Markets and in Integrated Gas, subject to market
conditions and the regulatory environment.
ENERGY MARKETS
Energy Markets FY2018 EBITDA is expected to be in the range
of $1.7–$1.8 billion, representing 14–21 per cent growth on
FY2017. This growth is expected to be driven by:
– Continued improvement in Electricity returns from higher
wholesale market prices partially offset by higher hedging costs,
higher gas and coal supply costs for generation and the benefit
from the sale of RECs in FY2017 not repeating. Eraring Power
station output is expected to be up 5–10 per cent on full year
FY2017 levels (to 14.6–15.3 TWh); and
– Relatively stable gross profit in Natural Gas in FY2018. Gas
procurement costs are expected to increase reflecting repricing
of gas contracts and higher wholesale gas prices. Offsetting the
higher gas procurement costs are increased volumes and higher
revenue rates.
Growth in Electricity is expected to be weighted towards the
second half of FY2018 with supply from renewable PPAs
increasing and assuming the extreme weather event in the
second half of FY2017 does not repeat. The generation fleet will
be utilised evenly in both halves with planned outages at Darling
Downs Power Station (6 weeks) in the first half and one unit
at the Eraring Power Station (10 weeks) in the second half to
reduce risk to the portfolio.
INTEGRATED GAS
Growth in Integrated Gas in FY2018 is expected to be
underpinned by a first full year of production from both
Australia Pacific LNG trains. Origin’s share of Australia Pacific
LNG production is expected to increase 7–16 per cent to
245–265 PJ. This includes the impact of planned maintenance
shutdowns1 of the LNG trains in FY2018.
In FY2018, Australia Pacific LNG is expected to be cash flow
break-even at US$45/boe (assuming AUD:USD exchange rate
of 0.70) or at US$48/boe (assuming AUD:USD exchange rate
of 0.75). Origin has hedged approximately 95 per cent of its
FY2018 and approximately 25 per cent of its FY2019 Australia
Pacific LNG related JCC oil price exposure2.
Origin has also purchased $194.5 million FY2018 AUD/
USD currency call options with a strike of 82 cents at a hedge
premium cost of A$1 million (pre-tax). This currency hedge
combined with Origin’s share of Australia Pacific LNG’s USD
project finance principal and interest payments and interest
payments on Origin’s USD denominated debt mitigates an
estimated 55 per cent of Origin’s share of Australia Pacific
LNG’s USD denominated cash flow exposure in FY2018.
Earnings contribution from Lattice Energy is expected to be
driven by full year production in the range of 76–86 PJe.
Origin will cease to recognise earnings from Lattice Energy
upon completion of the expected divestment of the business.
CAPITAL EXPENDITURE
Capital expenditure (excluding Lattice Energy) is expected
to be $360–$420 million, including investment in future
energy solutions.
ADJUSTED NET DEBT
Adjusted Net Debt is expected to be below $7 billion, driven by
expected proceeds from the sale of Lattice Energy and improved
operating cash flow from Energy Markets.
1
In the first quarter of FY2018, Australia Pacific LNG expects to complete maintenance shutdowns for both trains, involving one train shutdown for approximately two weeks,
and one train running at half rates for approximately one week.
2 FY2018 oil hedges premiums of A$64 million (pre-tax) include a combination of puts and collars (40 per cent in puts with a floor of US$45/bbl and 60 per cent in collars with
strikes of US$45-71/bbl). FY2019 hedges to 11 August 2017 include 4.6 million barrels hedged through collars with strikes of US$44-62bbl and 1 million barrels hedged through
a three way option with strikes of U$40-50-60/bbl at a cost of A$7 million (pre-tax) to be settled in FY2019 (hedge rates are in Brent crude oil equivalent). The three way oil
option comprises a long U$50/bbl strike put, a short U$40/bbl strike put and a short U$60/bbl strike call.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 2525
4. REVIEW OF SEGMENT OPERATIONS
4.1 ENERGY MARKETS
Energy Markets is an integrated provider of energy solutions to retail and wholesale markets. As Australia’s leading retailer, it continues
to develop product offerings to improve customer experience and value. It has a diverse portfolio of gas and coal supply contracts,
operates one of Australia’s largest and most diverse generation portfolios, and is increasing its investment in renewables. Earnings are
reported across Natural Gas, Electricity, LPG, Solar & Energy Services and Future Energy. Natural Gas and Electricity customers comprise
Retail (residential and SMEs) and Business (commercial and industrial, and LNG producers for Natural Gas).
YEAR ENDED 30 JUNE
Total Segment Revenue2
Electricity gross profit
Natural Gas gross profit
Electricity & Natural Gas cost to serve
LPG EBITDA
Solar & Energy Services EBITDA
Future Energy costs
Underlying EBITDA
Underlying EBIT margin
Cash flow from operating activities
Capital expenditure
Net cash flow from operating and investing activities
2017
($MILLION)
20161
($MILLION)
CHANGE
(%)
13,558
1,426
528
(541)
88
5
(14)
1,492
10.6%
1,134
278
1,292
11,423
1,282
518
(542)
76
(3)
–
1,330
10.1%
1,388
236
1,262
19
11
2
(0)
16
N/A
N/A
12
5
(18)
18
2
EBITDA increased by $162 million to $1,492 million primarily driven by growth in Electricity.
– Increased Electricity gross profit was driven by volume growth and improving returns underpinned by a generation portfolio that
maintained a competitive cost of energy in a rising wholesale price environment.
– Increased Natural Gas gross profit reflects higher sales volumes offset by lower realised oil price on sales to GLNG and higher
procurement costs due to benefits of low-cost ramp gas in FY2016 not repeating.
– Electricity and Natural Gas cost to serve improved reflecting the benefit of cost reduction initiatives, partially offset by increased
acquisition activity in a competitive market.
– Growth in LPG EBITDA reflects ongoing cost reduction initiatives, and profitability in Solar & Energy Services was driven by increased
solar installations and margins and serviced hot water customer growth.
– Future Energy relates to activities focused on technology innovation and related strategy development.
Cash flow from operating activities decreased as EBITDA growth was more than offset by unfavourable working capital movements.
FY2016, working capital decreased $154 million, largely driven by favourable collections ($87 million) and tariff reductions from lower
network charges ($48 million). Conversely, FY2017 working capital increased $298 million driven by revenue growth ($187 million),
timing of AEMO settlements associated with extreme weather in early 2017 ($43 million, fully recovered in July), and a one-off delay
relating to roll out of a new Business customer billing platform in May 2017 ($94 million, expected to be recovered in Q1 FY2018).
Capital expenditure increased due to the 1 in 20 year planned maintenance outage at Eraring ($45 million).
Growth in net cash flow from operating and investing activities reflected lower operating cash flow and higher capital expenditure,
offset by higher proceeds from asset sales ($436 million compared to $110 million in FY2016).
1 FY2016 has been restated to reflect changes in the treatment of certain items previously included Electricity and Natural Gas gross profit and cost to serve. See Glossary
on pages 166 to 168 for details of the Electricity and Natural Gas cost to serve restatement.
2 Refer to Glossary on pages 166 to 168.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW
2626
4.1.1 ELECTRICITY
VOLUME SUMMARY
YEAR ENDED 30 JUNE
VOLUMES SOLD (TWH)
NSW
Victoria
Queensland
South Australia
Total volumes sold
FINANCIAL SUMMARY
2017
2016
CHANGE
CHANGE
RETAIL
BUSINESS
TOTAL
RETAIL
BUSINESS
TOTAL
TWH
9.0
3.4
5.2
1.1
18.6
9.1
4.8
5.4
1.7
21.1
18.1
8.2
10.6
2.8
39.7
8.9
3.4
5.2
1.0
18.4
8.5
4.5
5.5
1.2
19.6
17.4
7.9
10.7
2.2
38.1
0.7
0.3
(0.1)
0.6
1.6
%
4
4
(1)
27
4
YEAR ENDED 30 JUNE
2017
$/MWH
2016
$/MWH
CHANGE %
Revenue ($m)1
Retail (consumer & SME)1
Business
Externally contracted generation
Cost of goods sold ($m)
Network costs
Wholesale energy costs
Generation operating costs1
Energy procurement costs
Gross profit ($m)1
Gross margin %
Period-end customer accounts (‘000)
Average customer accounts (‘000)
$ Gross profit per customer
8,085
5,065
3,017
3
(6,660)
(3,829)
(2,629)
(202)
(2,831)
1,426
17.6%
2,716
2,736
521
203.8
272.4
143.1
(167.9)
(96.5)
(66.3)
(5.1)
(71.4)
35.9
7,293
4,783
2,463
47
(6,012)
(3,674)
(2,093)
(244)
(2,337)
1,282
17.6%
2,741
2,758
465
191.5
259.4
125.4
(157.9)
(96.5)
(55.0)
(6.4)
(61.4)
33.7
11
6
22
(93)
11
4
26
(17)
21
11
0.2%
(1)
(1)
56
CHANGE
($/MWH)
12.3
13.0
17.7
(10.0)
0.0
(11.3)
1.3
(10.0)
2.3
Retail revenue rates increased $13/MWh and Business revenue rate increased $17.7/MWh reflecting pass through of higher market
wholesale prices for energy and LRET certificates and higher network costs for Business customers. Electricity total revenue rate
increased by $12.3/MWh or 11 per cent reflecting a higher proportion of lower priced Business sales and reduced revenues from
externally contracted generation due to the end of the Worsley joint venture.
Wholesale energy costs increased $11.3/MWh reflecting the impact of higher pool prices including the extreme weather event in
February, higher coal and gas costs used in generation and contract costs for assets sold, offset by trading gains on sale of RECs.
Wholesale energy costs increased less than market wholesale prices due to the benefit of Origin’s wholesale and REC portfolio and
resulted in recovering returns.
Generation operating costs decreased $42 million reflecting the end of the Worsley joint venture and underlying cost reductions through
operational efficiencies.
Electricity gross profit increased by 11 per cent or $144 million to $1,426 million reflecting volume growth and recovering returns in
both customer segments.
1 FY2016 has been restated to reflect changes in the treatment of certain items previously included in Electricity and Natural Gas gross profit and cost to serve. See Glossary on
pages 166 to 168 for details of the Electricity and Natural Gas cost to serve restatement.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 2727
ELECTRICITY SUPPLY
Performance of the generation portfolio, including contracted plant is summarised below:
YEAR ENDED 30 JUNE 2017
NAMEPLATE
CAPACITY
(MW)
EQUIVALENT
RELIABILITY
FACTOR2
CAPACITY
FACTOR
ELECTRICITY
OUTPUT
(GWH)
POOL
REVENUE
($MILLION)
POOL
REVENUE
($/MWH)
TYPE1
Eraring
Darling Downs
Osborne3
Uranquinty
Mortlake
Mount Stuart
Quarantine
Ladbroke Grove
Roma
Shoalhaven
Cullerin Range4
2,880
644
180
664
566
423
224
80
80
Black Coal
CCGT
CCGT
OCGT
OCGT
OCGT
OCGT
OCGT
OCGT
240 Pump/Hydro
Wind
30
Internal Generation
Renewable PPAs
6,011
732
Solar/Wind
Owned and Contracted Generation
6,743
89.6%
99.0%
100.0%
99.7%
98.9%
84.6%
98.7%
98.2%
97.5%
90.5%
93.0%
91.9%
n.a.
55%
55%
59%
10%
22%
2%
13%
26%
6%
6%
48%
32%
13,882
3,129
937
588
1,086
71
257
185
39
117
4
20,295
2,105
22,400
1,197
342
124
108
122
53
58
35
13
22
0
2,073
86
109
132
183
112
741
226
188
332
192
91
102
Owned and contracted electricity generation for the period was 22.4 TWh (22.7 TWh in the prior period) representing 56 per cent
(59 per cent in the prior period) of the 39.7 TWh of electricity volumes sold.
Output from Eraring increased to 13.9 TWh in FY2017 (13.5 TWh in FY2016) despite the planned 1 in 20 year maintenance outage
in the first half. In the second half, Eraring operated at an average capacity factor of 64 per cent and generated 73 per cent of its annual
revenue as coal inventory build-up was utilised in the second half at higher average pool prices.
Output from the gas-fired generation fleet was relatively stable in FY2017 despite decreased availability of low-cost ramp gas.
During the period contracted renewable capacity of 732 MW contributed 2.1 TWh of energy. Since March 2016, Origin has
committed to increase its renewable energy supply by approximately 1,200 MW, some of which is already operating and the remainder
(approximately 1,150 MW) is expected to come into production over the coming years, with 496 MW expected to come during the
second half of FY2018.
4.1.2 NATURAL GAS
VOLUME SUMMARY
YEAR ENDED 30 JUNE
VOLUMES SOLD (TWH)
NSW
Victoria
Queensland
South Australia
External volumes sold
Internal sales (generation)
Total volumes sold
2017
2016
CHANGE
CHANGE
RETAIL
BUSINESS
TOTAL
RETAIL
BUSINESS
TOTAL
9.4
25.6
2.9
5.1
43.1
23.4
40.9
69.1
11.3
144.7
32.8
66.5
72.0
16.4
187.9
61.5
249.4
8.2
25.6
3.0
5.3
42.1
16.7
39.3
57.5
11.4
124.9
24.9
64.9
60.5
16.7
167.1
61.1
228.2
PJ
7.9
1.6
11.5
(0.3)
20.8
0.3
21.2
%
32
2
19
(2)
12
(3)
9
1 OCGT = Open cycle gas turbine; CCGT = Combined cycle gas turbine.
2 Availability for Eraring = Equivalent Availability Factor (which takes into account de-ratings).
3 Origin has a 50 per cent interest in the 180 MW plant and contracts 100 per cent of the output.
4 The sale of the Cullerin Range wind farm completed in July 2016.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 2828
FINANCIAL SUMMARY
YEAR ENDED 30 JUNE
Revenue ($m)2
Retail (consumer & SME)2
Business
Cost of goods sold ($m)
Network costs
Energy procurement costs
Gross profit ($m)2
Gross margin %
Period-end customer accounts (‘000)
Average customer accounts (‘000)
$ Gross profit per customer
2017
2,154
1,030
1,124
(1,627)
(709)
(918)
528
24.5%
1,112
1,105
478
$/GJ
11.5
23.9
7.8
(8.7)
(3.8)
(4.9)
2.8
20161
1,942
991
951
(1,425)
(696)
(729)
518
26.7%
1,089
1,080
480
$/GJ
11.6
23.5
7.6
(8.5)
(4.2)
(4.4)
3.1
CHANGE %
CHANGE
($/GJ)
(0.1)
0.4
0.2
0.1
0.4
(0.5)
(0.3)
11
4
18
14
2
26
2
(8)
2
2
(0)
Revenue rates for both Retail and Business increased reflecting pass through of higher market wholesale gas prices. Higher Business
revenue rates were achieved despite an increase in sales to GLNG at a lower average price (including the impact of lower realised oil
prices). Natural Gas total revenue rate declined by $0.1/GJ to $11.5/GJ despite higher rates in each customer segment due to a higher
proportion of lower priced Business revenue.
Energy procurement costs increased $0.50/GJ to $4.90/GJ as low-cost ramp gas in FY2016 was replaced with higher priced gas
purchases in FY2017.
Natural Gas gross profit increased by 2 per cent or $10 million to $528 million reflecting increased volume, partially offset by lower unit
margin driven by the absence of low-cost ramp gas and a lower realised oil price on sales to GLNG.
4.1.3 ELECTRICITY AND NATURAL GAS OPERATING COSTS
YEAR ENDED 30 JUNE
Cost to maintain ($ per average customer4)
Cost to acquire/retain ($ per average customer4)
Elec & Natural Gas Cost to Serve ($ per average customer4)
Maintenance Costs ($m)
Acquisition & Retention Costs5 ($m)
Elec & Natural Gas cost to serve ($m)
2017
(115)
(31)
(146)
(427)
(114)
(541)
20163
(117)
(29)
(145)
(435)
(107)
(542)
CHANGE
CHANGE
(%)
2
(2)
(1)
8
(7)
1
(2)
6
1
(2)
6
0
Maintenance Costs decreased by $8 million driven by ongoing cost reduction initiatives including offshore resourcing, lower Ombudsmen
costs, cost recovery fees and continued digitisation of customer experience. Online sales increased by 23 per cent and ‘My Account’ visits
increased by 30 per cent to 2.5 million customers. Paperless billing increased, with around 1.8 million customer accounts now taking up
e-billing (15 per cent increase) and 1.0 million customers accounts are now paying by direct debit (17 per cent increase).
Acquisition and Retention Costs increased by $7 million or 6 per cent driven by an increase in wins and new connections (including the
use of third party sales channels in a competitive market).
Improvements in customer experience have led to an increase in the Interaction Net Promoter Score (NPS)6 of 4 points to +16.1 and
a reduction in Ombudsman complaints from 3.4 to 2.5 (per 1,000 customers).
1 Osborne gas sales reclassified as internal due to new operational agreement. As a result prior period external sales volumes, revenues and costs have been revised with no
impact on gross profit.
2 FY2016 has been restated to reflect changes in the treatment of certain items previously included Electricity and Natural Gas gross profit and cost to serve. See Glossary
on pages 166 to 168 for details of the Electricity and Natural Gas cost to serve restatement.
3 FY2016 has been restated to reflect changes in the treatment of certain items previously included Electricity and Natural Gas gross profit and cost to serve. See Glossary
on pages 166 to 168 for details of the Electricity and Natural Gas cost to serve restatement.
4 Represents Cost to Serve per average customer account, excluding serviced hot water accounts.
5 Customer wins (FY17:552,000; FY16: 509,000) and retains (FY17: 1,509,000; FY16: 1,493,000). Note prior year has been restated to be net of cancellations.
6 Refer to Glossary on pages 166 to 168.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 4.1.4 LPG
YEAR ENDED 30 JUNE
Volumes (kt)
Revenue ($m)
Cost of Goods Sold ($m)
Gross Profit ($m)
Operating Costs ($m)1
Underlying EBITDA ($m)
2929
2017
448
628
(418)
211
(122)
88
2016
457
593
(385)
208
(133)
76
CHANGE
(%)
(2)
6
8
1
(8)
16
LPG volumes decreased due to declines in the Autogas segment, partially offset by increases in the stationary LPG market. LPG
gross profit remained stable and operating costs decreased $11 million driven by ongoing cost reduction initiatives and improved
logistics efficiency.
4.1.5 SOLAR & ENERGY SERVICES
YEAR ENDED 30 JUNE
Revenue ($m)
Cost of Goods Sold ($m)
Gross Profit ($m)
Operating Costs ($m)2
Underlying EBITDA ($m)
2017
148
(74)
74
(69)
5
2016
138
(83)
55
(59)
(3)
CHANGE
(%)
7
(12)
35
18
N/A
Solar & Energy Services gross profit increased $19 million driven by an increased contribution from the solar business with higher
installations and margins (lower cost contractor model and reduced panel costs), as well as growth in serviced hot water.
4.1.6 FUTURE ENERGY
YEAR ENDED 30 JUNE
Operating Costs ($m)
Investments ($m)
2017
(14)
2
2016
–
4
CHANGE
(%)
N/A
N/A
Future Energy relates to activities focused on technological innovation and customer related strategy development.
Origin has established a shared office in Silicon Valley with German energy company innogy and is a foundation member of the
‘Free Electrons’ global accelerator program. During the period, Origin made a small investment in People Power (a US start up focused
on connected home solutions) and has undertaken a number of technology trials in home energy management, peer to peer trading,
metering communications and internet of things (IOT) home security and monitoring.
4.1.7 NATURAL GAS, ELECTRICITY AND LPG CUSTOMER ACCOUNTS
AS AT CUSTOMER ACCOUNTS (‘000)
ELECTRICITY
30JUNE 2017
NATURAL
GAS
TOTAL ELECTRICITY
30JUNE 2016
NATURAL
GAS
TOTAL
CHANGE
NSW3
Victoria
Queensland
South Australia4
Total
1,213
553
752
198
2,716
262
478
168
203
1,112
1,475
1,031
920
401
3,828
1,240
566
761
174
2,741
252
478
160
199
1,089
1,492
1,044
921
372
3,830
(17)
(13)
(1)
29
(2)
Customer accounts were relatively stable overall during the period reflecting the loss of 25,000 Electricity customers and the addition
of 23,000 Natural Gas customers.
As at 30 June 2017, penetration of dual fuel (Electricity and Natural Gas) customer accounts was 35.8 per cent, increasing from 34.9 per
cent at 30 June 2016. As at 30 June 2017, Origin had 382,000 LPG customer accounts, a decrease of 2,000 accounts from 30 June 2016.
1 FY2016 has been restated to reflect changes in the treatment of certain items previously included Electricity and Natural Gas gross profit and cost to serve. See Glossary
on pages 166 to 168 for details of the Electricity and Natural Gas cost to serve restatement.
2 The period ending 30 June 2016 has been restated to reflect changes in the treatment of certain items previously included Electricity and Natural Gas gross profit and cost
to serve. See Glossary on pages 166 to 168 for details of the Electricity and Natural Gas cost to serve restatement.
3 Australian Capital Territory (ACT) customer accounts are included in New South Wales.
4 Northern Territory customers are included in South Australia.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 3030
4.2 INTEGRATED GAS
Integrated Gas comprises LNG which includes a 37.5 per cent equity accounted share of Australia Pacific LNG and other activities and
transactions arising from the upstream operatorship of Australia Pacific LNG1 and management of exposure to LNG pricing risk; and
E&P which represents the conventional upstream business now known as Lattice Energy (held for sale) as well as other exploration
and development interests in the Surat, Beetaloo and Browse basins.
2017
2016
YEAR ENDED 30 JUNE
E&P ($M)
LNG ($M)
INTEGRATED
GAS ($M)
E&P ($M)
LNG ($M)
INTEGRATED
GAS ($M)
CHANGE (%)
Production (PJe)
Underlying EBITDA
Cash flow from operating activities
Capital expenditure
Contribution to APLNG
Net cash flow from operating
and investing activities2
95
355
280
200
–
483
229
749
(77)
11
170
323
1,104
203
211
170
75
269
142
412
–
157
117
(116)
20
231
386
26
432
1,206
1,206
(385)
98
(262)
(1,343)
(1,605)
40
186
681
(51)
(86)
N/A
Production increased 92 PJe or 40 per cent due to the ramp up in LNG production at Australia Pacific LNG and the commencement
of production at Halladale/Speculant in E&P.
Underlying EBITDA increased $718 million or 186 per cent to $1,104 million reflecting:
– $632 million increase in LNG EBITDA to $749 million driven by an increase in Origin’s share of Australia Pacific LNG EBITDA from
the ramp up of LNG sales and higher prices ($748 million), partially offset by the cost of oil hedges entered into by Origin net of hedge
payout ($103 million); and
– $86 million increase in E&P to $355 million driven primarily by the commencement of production from Halladale/Speculant in August 2016.
Cash flow from operating activities increased by $177 million to $203 million comprising:
– $138 million increase in E&P to $280 million due to higher EBITDA and lower working capital requirements primarily relating to
purchases and lower inventory in the Cooper Basin; and
– $39 million improvement in LNG to an outflow of $77 million driven primarily by lower oil hedging cash costs.
Net cash flow from operating and investing activities increased by $1,703 million reflecting:
– $958 million improvement in LNG due to a lower contribution to Australia Pacific LNG and lower oil hedging cash costs.
– $745 million improvement in E&P driven by higher operating cash flows, lower capital expenditure, and proceeds from the sale of the
Darling Downs Pipelines.
4.2.1 LNG
AUSTRALIA PACIFIC LNG PRODUCTION AND SALES
YEAR ENDED 30 JUNE
VOLUMES (PJ)
Production volumes
Natural Gas (domestic)
Natural Gas (LNG feed gas)
Gross sales volumes3
Natural Gas
LNG
Gross realised price (A$/GJ)3
Natural Gas
LNG
2017
2016
100% APLNG
ORIGIN SHARE
100% APLNG
ORIGIN SHARE
610
195
415
608
214
394
3.04
8.16
229
73
156
228
80
148
418
296
122
388
291
98
2.03
7.24
157
111
46
146
109
37
Total Australia Pacific LNG production increased by 192 PJe or 46 per cent to 610 PJ as Train 2 came online during the year with the
LNG plant operating well above design nameplate capacity during the 90 day two train operational test in May and June. Domestic
volumes decreased reflecting a reduction in sales to QGC and other short term domestic sales, with volumes directed to LNG feed gas
to maximise LNG production.
Net Realised Price for Natural Gas increased due to lower volumes sold to QGC under oil-linked contracts, and higher prices achieved
on incremental domestic sales. LNG price increased in line with higher realised oil prices.
1 Origin’s share of Australia Pacific LNG’s Underlying EBITDA is included in the Underlying EBITDA of the Integrated Gas segment. Origin’s share of Australia Pacific LNG’s
Underlying interest, tax, depreciation and amortisation expense is accounted for between Underlying EBITDA and Underlying EBIT in the line item ‘Share of interest, tax,
depreciation and amortisation of equity accounted investees’.
Includes cash (classified as investing activity) provided to Australia Pacific LNG to satisfy Project Finance reserve requirements ($127 million) via bank guarantee returned
to Origin as a loan (classified as financing activity).
2
3 Gross sales volumes and realised prices are inclusive of 20 PJ (FY2016: 93 PJ) that were capitalised for accounting purposes.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 3131
AUSTRALIA PACIFIC LNG UNDERLYING FINANCIAL PERFORMANCE
YEAR ENDED 30 JUNE
$ MILLION
Operating revenue
Operating expenses
Underlying EBITDA
D&A expense
Net financing expense
Income tax benefit
Underlying ITDA1
Underlying profit
2017
2016
100% APLNG
ORIGIN SHARE
100% APLNG
ORIGIN SHARE
3,754
(1,465)
2,289
(1,614)
(952)
87
(2,479)
(190)
1,408
(549)
859
(605)
(357)
32
(930)
(71)
880
(585)
295
(700)
(291)
209
(782)
(487)
330
(219)
111
(263)
(109)
78
(293)
(182)
Australia Pacific LNG’s financial performance during the period reflected earnings associated with domestic gas sales and the ramp up
of LNG sales with a full year contribution from Train 1 and an eight month contribution from Train 2. Earnings relating to Train 2 were
recognised in the income statement from November 2016.
AUSTRALIA PACIFIC LNG SUSTAINING CAPITAL EXPENDITURE AND FUNDING
Australia Pacific LNG FY2017 sustaining capital expenditure of $1.0 billion was $0.4 billion lower than guidance primarily due to savings
achieved from reduced drilling and connection costs, lower owner’s costs and the timing of non-operated activity deferred from FY2017
into FY2018. This contributed to lower than expected net contributions by Origin to Australia Pacific LNG ($170 million in FY2017).
Guidance for FY2018 sustaining capital expenditure is unchanged at $1.4 billion as recurring savings achieved in FY2017 are expected
to be offset by deferred non-operated spend from FY2017 into FY2018 and acceleration of other non-operated activity previously
assumed in FY2019. Compared to FY2017, the FY2018 operated sustaining capital program is expected to include increased rate of
fracture stimulation wells, and non-operated activity is expected to increase.
AUSTRALIA PACIFIC LNG OPERATIONS
In July 2017 Australia Pacific LNG successfully concluded the 90-day operational phase of the two-train project finance lenders’ test,
with the plant performing at more than 10 per cent above design nameplate capacity during the 90 day period. Australia Pacific LNG is
expected to satisfy all other requirements of the project finance tests during Q1 FY2018 which will result in the release of the remaining
US$3.4 billion of shareholder guarantees relating to Australia Pacific LNG’s US$8.5 billion project finance facility. Australia Pacific LNG
now has the flexibility to take advantage of potential opportunities to sell additional gas into the domestic market.
A total of 413 development wells were commissioned in FY2017 including 41 horizontal/vertical pairs and multi-laterals in Spring Gully
(represented as 80 wells). On average, these wells have provided higher production rates and faster ramp up than standard vertical wells
in the same area. Australia Pacific LNG will continue to utilise these new well technologies to target improved productivity.
Ongoing development and operations at Australia Pacific LNG are focused on improving productivity and debottlenecking its existing
facilities. In FY2018, Australia Pacific LNG expects to deliver increased annual production and has the flexibility to direct excess volumes
(above contractual requirements) to either the domestic or export LNG market.
1 Origin’s share of the Australia Pacific LNG underlying ITDA differs slightly to the share of ITDA recognised by Origin due to a MRCPS elimination adjustment
(see Glossary for details).
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 3232
AUSTRALIA PACIFIC LNG RESERVES AND RESOURCES1
Origin’s share of Australia Pacific LNG’s 2P reserves decreased 369 PJ, including 229 PJe of production. Excluding production,
Australia Pacific LNG’s 2P reserves decreased by 3 per cent primarily due to reduced recovery estimates in low permeability areas.
Origin share of reserves and resources (37.5 per cent share in Australia Pacific LNG)
RESERVES (PJe)
30/06/16
RESERVES
ACQUISITION/
DIVESTMENT
NEW BOOKING/
DISCOVERIES
REVISIONS/
EXTENSIONS
PRODUCTION
30/06/17
RESERVES
1P
2P
3P
2,659
5,073
5,601
RESOURCES (PJe)
RESOURCES
2C
1,135
–
–
–
0
–
–
–
0
389
(141)
(354)
349
(229)
(229)
(229)
2,819
4,704
5,018
0
1,483
Development activity during FY2017 focused on drilling for near term production ahead of the two train lenders’ test which is reflected
in an increase in 1P reserves of 160 PJe (Origin share) after production. Australia Pacific LNG is now focused on exploration and appraisal
activities to identify and mature resources to reserves.
4.2.2 EXPLORATION & PRODUCTION
YEAR ENDED 30 JUNE
Total Production (PJe)
Total Sales (PJe)
Commodity Sales Revenue ($m)>
Other income
Cost of goods sold and stock movements
Exploration expense
Other expenses
Underlying EBITDA
Cash flow from operating activities
Proved plus Probable (2P) reserves ex-APLNG (PJe)
2017
94.6
105.6
747
79
(110)
(62)
(299)
355
280
1,084
2016
74.6
82.6
592
63
(80)
(63)
(243)
269
142
1,204
CHANGE
(%)
27
28
26
25
38
(2)
23
32
97
(10)
>
Includes gain/(loss) – forward sale and hedging of $28 million in current period ($43 million prior period).
Origin’s share of total production increased 20 PJe to 94.6 PJe due to higher Otway Basin production (23 PJe) following the
commencement of production from Halladale/Speculant, partly offset by lower Bass Basin production (2 PJe) due to a planned statutory
maintenance shutdown.
Sales volumes increased 23 PJe to 105.6 PJe due to increased production and the use of inventory to meet higher gas nominations in
the Cooper Basin. Commodity Sales Revenue increased by $155 million or 26 per cent to $747 million, in line with higher sales volumes.
Other income relates primarily to tolling revenue. This increased 25 per cent primarily driven by the impact of Halladale/Speculant
volumes (100 per cent owned) tolled through the Otway joint venture (67.23 per cent interest). This is offset by higher tolling costs
included in other expenses.
Higher stock movement reflected a reduction in gas inventory due to higher customer nominations within the Cooper Basin.
Exploration expense included the write-off of T/34P, an exploration permit in the Otway Basin following an application for consent to
surrender ($26 million), Enterprise 2 3D transition zone seismic survey acquisition ($14 million) and Crowes Foot 3D offshore seismic
survey acquisition ($11 million).
Other expenses increased 23 per cent primarily due to tolling charges associated with the commencement of production at
Halladale/Speculant.
E&P EBITDA increased $86 million to $355 million primarily due to commencement of production from Halladale/Speculant.
Further information regarding production, sales volumes and revenues is provided in Origin’s June 2017 Quarterly Production Report,
available at www.originenergy.com.au.
1 Refer to the Important Information on reserves and resources disclosures prior to Section 1.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 3333
CAPITAL EXPENDITURE
Capital expenditure decreased $212 million from the prior year following the completion of development projects across the Otway,
Bass and Cooper basins. Capital expenditure for the year of $200 million included:
– Otway Basin including Halladale/Speculant - $47 million;
– Cooper Basin - $39 million;
– Beetaloo and Cooper Basin farm-ins - $37 million;
– Bass Basin - $16 million;
– Perth Basin - $11 million; and
– Other assets - $48 million.
EXPLORATION & PRODUCTION RESERVES
Proved plus probable (2P) reserves decreased by 119 PJe (after production of 94.6 PJe) to a total of 1,084 PJe excluding Origin’s share
of Australia Pacific LNG reserves, compared with 30 June 2016.
Origin undertakes a full assessment of its reserves resources on an annual basis at the end of the financial year. A full statement
of reserves and resources attributable to Origin at 30 June 2017 is included in the Annual Reserves Report on pages 156 to 163.
5. RISKS RELATED TO FUTURE FINANCIAL PROSPECTS
The scope of operations and activities means that Origin is exposed to risks that can have a material impact on its future financial
prospects. Material risks, and the company’s approach to managing them, are summarised below.
RISK MANAGEMENT FRAMEWORK
Origin’s risk management framework supports the identification, management and reporting of material risks and uncertainties that can
impact the delivery of key priorities. Overseen by the Board and the Board Risk Committee, the framework incorporates a ‘three lines of
defence’ model for managing risks and controls. All employees are responsible for making risk-based decisions and managing risk within
understood limits.
If a risk, such as a natural disaster, cannot be fully managed to reflect the risk appetite of the company using internal controls, it is
transferred to third parties via insurance where commercially appropriate. Origin’s business resilience processes also help minimise the
impact of risk events.
THREE LINES OF DEFENCE
LINE OF DEFENCE
RESPONSIBILITY
PRIMARY ACCOUNTABILITY
First line
Lines of business
Second line
Oversight functions
Third line
Internal audit
– Identifies, assesses, records, prioritises, manages and
Management
monitors risks.
– Provides the risk management framework, tools and
Management
systems to support effective risk management.
– Provides assurance on the effectiveness of
Board, Board Committees and management
governance, risk management and internal controls.
MATERIAL RISKS
The risks identified in this section have the potential to materially affect Origin’s ability to meet its key priorities and impact on the
company’s future financial performance, either separately or in combination.
These risks are not exhaustive and are not arranged in order of significance.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 3434
STRATEGIC RISKS
Strategic risks arise from uncertainties that may emerge in the medium to longer term and, while they may not necessarily impact on
short-term profits, can have an immediate impact on the value of the company. These risks are managed through continuous monitoring
and reviewing of emerging and escalating risks, ongoing planning and the allocation of resources and evaluation from management
and the Board.
RISK
CONSEQUENCES
MANAGEMENT
Competition
Origin operates in a highly competitive retail environment
which can result in downward pressure on margins and
customer losses.
Competition also impacts Origin’s wholesale business,
with generators competing for capacity and fuel and
the potential for gas markets to be impacted by new
domestic gas resources and the volume of gas exports.
Technological
developments/
disruption
Distributed generation is empowering consumers to own,
generate and store electricity, consuming less energy from
the centralised grid network. Technology is allowing
consumers to understand and manage their power usage
through smart appliances, having the potential to disrupt
the existing utility relationship with consumers. Advances
in technology have the potential to create new business
models and introduce new competitors.
– Origin’s strategy to mitigate the impact of this risk on its
retail business is to build customer loyalty and trust by
delivering simple, seamless and personalised customer
experiences and offering innovative and differentiated
products and services.
– Origin endeavours to mitigate the impact of this risk on its
wholesale business by sourcing competitively priced fuel to
operate its generation fleet, leveraging the flexibility in its
fuel, transportation and generation portfolio and
increasing the supply of low-cost renewables.
– Through our Future Energy business, Origin actively
monitors new technology innovation through participation
in local and global startup accelerator programs, trialing
new energy technology and exploring investments in new
products or business models.
– In parallel, Origin is growing its distributed generation and
home energy services businesses and also endeavours to
mitigate the impact of this risk on its core energy
businesses by offering superior service and innovative
products and reducing cost to serve.
Changes in demand
for energy
Changes in energy demand driven by price, consumer
behaviour, mandatory energy efficiency schemes,
Government policy, weather and other factors can reduce
Origin’s revenues and adversely affect Origin’s future
financial performance.
– Origin is partially mitigating the impact of this risk
by applying advanced data and analytics capability to smart
meter data in order to better predict customer demand,
also enabling Origin to develop data based customer
propositions and customer value segmentation.
Regulatory policy
Climate change
Origin has broad exposure to regulatory policy change
including domestic energy pricing, generation and gas
supply portfolios, carbon, retail operations, upstream
development, royalties and taxation policy. Changes to
policy may impact financial outcomes and, in some cases,
change the commercial viability of existing or proposed
projects or operations.
Origin has broad exposures to energy market
decarbonisation, which includes decreased demand for
fossil fuels in some markets, reduced lifespans of higher
carbon-intensive assets, increased regulation of
greenhouse gas emissions from operations and
consumer shifts to lower-carbon sources of energy.
– Origin manages its exposure to industry wide regulatory
risk by actively leading policy debate, proactively engaging
with policy makers across all levels of government and
participating in public forums, industry associations, think
tanks and research.
– Origin’s strategy for transitioning to a carbon constrained
future is to prepare for a range of decarbonisation
scenarios.
– Origin produces less electricity than it sells to customers,
which provides flexibility to adapt to changing market
dynamics, including climate change, and positions the
company well to bring low-cost renewables into its
portfolio without stranding existing assets. The generation
portfolio has no exposure to high-emissions brown coal,
and has only one black coal-fired generation asset.
– Origin has signed up to We Mean Business and is
progressing a science based target
.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 3535
FINANCIAL RISKS
Financial risks are the risks that directly impact the financial performance and resilience of Origin.
RISK
CONSEQUENCES
MANAGEMENT
Commodity
Foreign exchange
and interest rates
Liquidity and access
to capital markets
Origin has a long term exposure to the international oil
prices through the sale of gas, oil, LPG, and its investment
in Australia Pacific LNG. Pricing can be volatile and downward
price movements can impact cash flow, financial
performance, recoverable reserves and asset carrying values.
Prices and volumes for electricity that Origin sources to
on-sell to customers are volatile and are influenced by many
factors that are difficult to predict. Long term fluctuations in
coal and gas prices also impact the margins of Origin’s
generation portfolio.
Origin has exposures through principal debt and interest
payments in foreign currency long-term borrowings,
through the sale and purchase of oil and gas, and through
its investments in Australia Pacific LNG and the company’s
foreign operations. Interest rate movements and foreign
exchange fluctuations could lead to a decrease in Australian
dollar revenues or increased payments in Australian
dollar terms.
Origin’s business, prospects, and financial flexibility could be
adversely affected by a failure to appropriately manage its
liquidity position, or if markets are not available at the time
of any financing or refinancing required.
Credit and
counterparty
Some counterparties may fail to fulfil their obligations
(in whole or part) under major contracts.
Australia Pacific
LNG’s project
finance facility
Failure to meet the two train completion tests by Q1
FY2018 could require Australia Pacific LNG to repay
the amount of project finance facility relating to Train 2
(maximum US$3.4 billion).
– Commodity limits are set by the Board to manage the
overall financial exposure that Origin is prepared to take.
– Origin’s commodity risk management process monitors
and reports performance against defined limits.
– Commodity price risk is managed through a combination
of physical positions and derivatives contracts.
– Risk limits are set by the Board to manage the overall
exposure.
– Origin’s treasury risk management process monitors
and reports performance against defined limits.
– Foreign exchange and interest rate risks are
managed through a combination of physical positions
and derivatives.
– Origin actively manages its liquidity position through cash
flow forecasting and maintenance of minimum levels of
liquidity as determined under Board approval limits.
– Counterparty risk assessments are regularly undertaken
and where appropriate, credit support is obtained to
manage counterparty risk.
– Australia Pacific LNG has concluded the 90-day
operational phase of the two-train project finance lenders’
test and all other elements of the project finance
completion tests are on track and Australia Pacific LNG
expects that formal certification that they have been
satisfied will be provided during the first quarter
of FY2018.
OPERATIONAL RISKS
Operational risks arise from inadequate or failed internal processes, people or systems or from external events.
RISK
CONSEQUENCES
MANAGEMENT
Safe and reliable
operations
Environmental
and social
Malfunctioning plant, incorrect application of procedures,
unsafe practices, a physical security breach, or a cyber-attack
may lead to the loss of lives, asset damage, environmental
damage, and other impacts to third parties.
A production, network, or IT systems outage may affect
Origin’s ability to deliver electricity and gas to its customers.
A prolonged outage may affect Origin’s brand and reputation.
– Core operations are subject to comprehensive operational,
safety and maintenance procedures.
– Origin personnel are adequately trained and licensed to
perform their operational activities.
– Origin maintains an extensive insurance program to
mitigate consequences by transferring financial risk
exposure to third parties where commercially appropriate.
An environmental incident or Origin’s failure to consider
and adequately mitigate the environmental, social and
socio-economic impacts on communities and the
environment has the potential to cause community action,
environmental impact, regulatory intervention, legal action,
reduced access to resources and markets, impacts to
Origin’s reputation, and increased operating costs.
– All activities manage environmental and social factors
using documented policies, directives and procedures.
Outcomes are monitored and reported internally
and externally.
– At a minimum, the management of environmental and
social risks meets regulatory requirements. Where
practical, their management extends to the improvement
of environmental values and the creation of socio-
economic benefits.
– Origin engages with communities on the company’s
projects and operations to understand, mitigate and report
on environmental and social aspects of concern.
Cyber security
A cyber security incident could lead to a breach of privacy,
loss of and/or corruption of commercially sensitive data, or a
disruption of critical business processes. This may adversely
impact customers and the company’s business activities.
– Cyber security is managed through best practice
configuration of Origin’s network, hardware, and software
environments as well as awareness training for all
employees and contractors.
– IT systems are subject to regular audits and monitoring
to confirm Origin’s cyber security and IT Operations
resilience.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 3636
RISK
CONSEQUENCES
MANAGEMENT
Oil and gas reserves
and resources
There is uncertainty about the productivity, and therefore
economic viability, of resources and undeveloped reserves.
As a result, there is a risk that actual production may vary
from that estimated, and in the longer term, that there will
be insufficient reserves to supply the full duration and
volumes to meet contractual requirements.
– Origin employs established industry procedures to identify
and consider areas for exploration to mature contingent
and prospective resources.
– Origin monitors reservoir performance and adjusts
development plans accordingly and/or acquires reserves
from alternate sources.
Conduct
Joint venture
Australia Pacific LNG
reversion
Lack of ethical business practices and integrity, and failure
to comply with Origin’s Compass may affect Origin’s risk
profile, business operations and financial prospects.
– Origin’s Purpose, Values and Behaviours guide
conduct and decision making in a way that is
common across Origin.
– Enterprise-wide joint venture governance and
management standards are being revised to provide
a more consistent approach to managing Origin’s
joint ventures.
– Origin actively monitors and participates in its joint
ventures through participation in their respective boards
and committees.
– Australia Pacific LNG denies the claim and is defending it.
Third party joint venture operators may have economic or
other business interests that are inconsistent with Origin’s
own and may take actions contrary to the company’s
objectives, interests or standards. This may lead to potential
financial, reputational and environmental damage in the
event of a serious incident.
The CSG interests that Australia Pacific LNG acquired
from Tri-Star in 2002 are subject to reversionary rights.
If triggered, these rights will require Australia Pacific LNG
to transfer back to Tri-Star a 45 per cent interest in those
CSG interests for no additional consideration. The reversion
trigger will occur when the revenue from the sale of
petroleum from those CSG interests, plus any other revenue
derived from or in connection with those CSG interests,
exceeds the aggregate of all expenditure relating to those
CSG interests plus interest on that expenditure, royalty
payments and the original acquisition price. Approximately
21 per cent of Australia Pacific LNG’s 3P CSG reserves as of
30 June 2017 are subject to these reversionary rights.
Tri-Star has commenced proceedings against Australia Pacific
LNG claiming that reversion has occurred. If Tri-Star’s claim
is not successfully defended, Tri-Star may be entitled to an
order that reversion occurred as early as 1 November 2008
and the reserves and resources that are subject to reversion
may not be available for Australia Pacific LNG to sell or use.
These events may have a material adverse impact on the
financial performance of Australia Pacific LNG and, if
unmitigated, may significantly affect the amount and timing
of cash flows from Australia Pacific LNG to its shareholders,
including Origin.
PROJECT RISKS
Origin undertakes investments in a variety of major projects including gas and oil projects, electricity generation, major transactions,
and operational systems. These major projects are exposed to the effectiveness of Origin’s project management and to events outside
of Origin’s control, such as weather events or natural disasters, which may result in adverse cost and schedule implications, and, in turn,
Origin’s financial prospects.
RISK
CONSEQUENCES
MANAGEMENT
Divestment
of Origin’s
conventional
upstream business
A dual track IPO/trade sale process is currently underway
for Lattice Energy. A failure to complete the divestment
or lower than expected divestment proceeds will adversely
impact Origin’s debt reduction program.
Material adverse changes in the state of equity capital
markets and the interest of potential acquirers may impact
the ability to successfully divest this business.
– A dedicated project team, supported by independent
advice, has been established to coordinate the divestment
of identified assets at the maximum market value.
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW APPENDIX 1 – NET FINANCING COSTS
YEAR ENDED 30 JUNE
STATUTORY NET FINANCING COST – TOTAL OPERATION
Total interest charged by other parties
Impact of discounting on long term provisions
Capitalised interest
Total interest expense
MRCPS interest income
Other interest income
Statutory Net financing costs
Average interest rate1
ITEMS EXCLUDED FROM UNDERLYING NET FINANCING COSTS
RELATING TO FUNDING OF APLNG
Total interest expense
MRCPS interest income
Net financing costs relating to funding of APLNG
Average interest rate1
UNDERLYING NET FINANCING COST – TOTAL OPERATIONS
Total interest charged by other parties (excluding costs associated with funding of APLNG)
Total interest charged by other parties (costs associated with funding of APLNG)
Impact of discounting on long term provisions
Capitalised interest
Total interest expense
MRCPS interest income (in Underlying)
Other interest income
Underlying Net financing costs
Average interest rate1
3737
2017
$MILLION
2016
$MILLION
CHANGE
$MILLION
(560)
(15)
10
(565)
222
2
(341)
6.3%
(68)
23
(45)
6.5%
(96)
(396)
(15)
10
(497)
199
2
(296)
6.3%
(643)
(16)
90
(569)
220
2
(347)
6.5%
(400)
162
(238)
6.9%
(155)
(88)
(16)
90
(169)
58
2
(109)
5.9%
83
1
(80)
4
2
–
6
(0.2%)
332
(139)
193
(0.5%)
59
(308)
1
(80)
(328)
141
–
(187)
0.4%
APPENDIX 2 – RECONCILIATION OF ADJUSTED NET DEBT
Between 2011 and 2015, Origin raised foreign currency denominated debt in the US and Euro markets. This foreign currency debt was
hedged into either AUD or USD using cross currency interest rate swap (CCIRS) derivatives. Accounting standards require the foreign
currency debt and the linked CCIRS derivatives to be disclosed in different lines on the Statement of Financial Position (Balance Sheet).
Foreign currency debt is translated at the current market spot rate and classified as interest-bearing liabilities, whilst the associated CCIRS
derivatives are measured at current market rates (fair value) and are classified as either derivative assets or derivative liabilities on the
Statement of Financial Position. It is the combination of the interest-bearing liabilities and the derivative assets or derivative liabilities that
reflect the Company’s adjusted net debt position or the quantum of funds the Company is required to repay upon maturity of the debt.
As at 30 June 2017, Origin’s interest bearing liabilities on the Statement of Financial Position were $8,515 million. The associated CCIRS
was a net derivative asset of $253 million on the Statement of Financial Position. Adjusted Net Debt of $8,111 million decreased $1,020
million compared to the prior period.
ISSUE
CURRENCY
ISSUE
NOTIONAL
HEDGED
CURRENCY
HEDGED
NOTIONAL
AUD $M
JUNE 2017
AUD $M
JUNE 2017
AUD $M
JUNE 2017
AUD debt
USD Debt left in USD
USD debt swapped to AUD
EUR debt swapped to AUD
EUR debt swapped to USD
NZD debt swapped to AUD
Total
Cash and cash equivalents
Adjusted net debt
AUD
USD
USD
EUR
EUR
NZD
517
850
895
2,700
1,000
141
AUD
USD
AUD
AUD
USD
AUD
517
850
1,004
3,727
1,372
125
1 Average interest rate calculated using total interest charged by other parties.
Interest-
bearing
liabilities
Fair value
adjustments on
FX hedging
transactions
517
1,105
1,166
4,106
1,487
134
8,515
0
0
(162)
(378)
298
(10)
(253)
Adjusted
net debt
517
1,105
1,004
3,727
1,784
124
8,262
(151)
(8,111)
ORIGIN ENERGY PAGE TITLE OPERATING AND FINANCIAL REVIEW 3838
REMUNERATION REPORT
ORIGIN ENERGY
ANNUAL REPORT 2017
PAGE TITLE
REMUNERATION REPORT FOR THE YEAR ENDED 30 JUNE 2017
CONTENTS
The Remuneration Report for the 12 months ended 30 June
2017 (FY2017, the Period) forms part of the Directors’ Report.
Except as otherwise noted it has been prepared in accordance
with the Corporations Act 2001 (Cth) (the Act) and in compliance
with AASB 124 Related Party Disclosures, and audited as required
by section 308(3C) of the Act. The report is divided into the
following sections:
1 People covered by the report
2 Remuneration outcomes for FY2017
3 Executive remuneration policy and structure
4 Changes for FY2018
5 Remuneration governance
6 Statutory disclosures
7 Loans and other transactions with Key Management Personnel
LETTER FROM THE CHAIRMAN OF THE
REMUNERATION AND PEOPLE COMMITTEE
On behalf of the Remuneration and People Committee (RPC)
and the Board, I am pleased to present the Remuneration Report
for the year ended 30 June 2017.
During the year there were significant changes to both the
management structure of the company and to the composition
and scope of the RPC. A new Chief Executive Officer (CEO),
Frank Calabria, was appointed following the retirement of Grant
King from the role which he held since 2000. The RPC expanded
its mandate to cover general people accountabilities for the
company. I succeeded Dr Helen Nugent as Chairman, and more
recently Teresa Engelhard joined the RPC.
The expanded scope of the RPC enables a more direct linkage
between the policies governing people and their performance
and the company’s overall strategic objectives.
The objectives of the executive remuneration framework
are to enable the company to attract and retain high-calibre
individuals from diverse backgrounds in a competitive market,
and to structure rewards such that they align the interests
of the executives with our shareholders. The RPC and the
Board review the operation and outcomes of the framework
to assure its fitness for this purpose in a dynamic business and
commercial context.
In FY2017, Origin recorded a solid operational performance.
While financial returns remain unsatisfactory, the company
recorded meaningful progress against its three key priorities
of reducing debt, improving returns, and maintaining our
leadership in Energy Markets and Integrated Gas. The company’s
share price rose by 19.3 per cent over the period, a marked
improvement on recent years.
In terms of executive performance in FY2017, annual short term
incentive (STI) outcomes were generally close to their targets,
reflecting the levels of achievement against financial and non-
financial targets (as detailed in tables 3 and 9). The fifth successive
year of nil vesting and forfeiture of all long-term incentive (LTI)
awards demonstrates the direct link between long term company
performance and executive remuneration outcomes.
To further simplify the current structure and emphasise the
importance of share ownership, the Board intends to modify
the remuneration structure, beginning in FY2018. Directors
have carefully considered the modifications and have taken
external advice.
The proposed changes are summarised in section 4 of the
Remuneration Report. We are confident these changes
will strengthen the framework to meet the objectives
described above.
We have re-ordered and streamlined the content of this report
in order to make it clearer, more concise and more informative.
Scott Perkins
Chairman, Remuneration and People Committee
3939
1 PEOPLE COVERED BY THE REMUNERATION REPORT
The Remuneration Report discloses the remuneration arrangements and outcomes for people listed in table 1, who are those individuals
who have been determined as Key Management Personnel (KMP) as defined by AASB 124 Related Party Disclosures.
Table 1: KMP
NAME
POSITION AND BOARD COMMITTEES
TERM AS KMP IN FY2017
NON-EXECUTIVE
DIRECTORS (NEDS)
J Akehurst
M Brenner
G Cairns
T Engelhard
B Morgan
S Perkins
S Sargent
EXECUTIVE DIRECTOR
F Calabria
OTHER KMP
G Jarvis
J Briskin
M Schubert
G Mallett
FORMER KMP
H Nugent
G King
D Baldwin
Independent Director
Health, Safety and Environment (Chair); Risk; Nomination
Independent Director
Risk (Chair); Audit; Nomination
Full year
Full year
Independent Chairman
Nomination (Chair); Audit; Risk; Remuneration and People; Health, Safety and Environment
Full year
Independent Director
Remuneration and People; Nomination
Independent Director
Audit (Chair); Risk; Health, Safety & Environment; Nomination
Independent Director
Remuneration and People (Chair since 3 March 2017); Audit; Risk
Independent Director
Origin Foundation (Chair); Remuneration and People; Health, Safety and Environment
Chief Executive Officer (CEO)
Previously CEO Energy Markets (KMP role); appointed CEO 19 October 2016
Executive General Manager, Energy Supply and Operations
Appointed KMP 5 December 2016
Executive General Manager, Retail
Appointed KMP 5 December 2016
Executive General Manager, Integrated Gas
Appointed KMP 1 May 2017
Acting Chief Financial Officer
Acting in KMP role
Previously Independent Director
Resigned 3 March 2017. Remuneration and People (Chair until 3 March 2017)
Previously Managing Director
Ceased as KMP 19 October 2016
Previously Chief Executive Officer, Integrated Gas
Ceased as KMP on 28 April 2017
From 1 May 2017
Full year
Full year
Full year
Full year
From 5 December 2016
From 5 December 2016
From 1 May 2017
Full year
To 3 March 2017
To 19 October 2016
To 28 April 2017
The term Executive KMP is a reference to the Executive Director plus Other KMP.
As announced to the ASX on 14 February 2017, Origin has appointed Lawrie Tremaine as Chief Financial Officer. Mr Tremaine took
up his KMP duties with Origin on 10 July 2017 and is not included in this Remuneration Report.
Although focused on the remuneration arrangements and outcomes for the KMP listed in table 1, the report also provides a perspective
across the broader Executive Leadership Team (ELT). The term ‘senior executives’ in this report is a collective reference to Other KMP
plus non-KMP members of the ELT.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 4040
2.
REMUNERATION OUTCOMES FOR FY2017
This section summarises remuneration outcomes for FY2017 and provides commentary on their alignment with company outcomes.
2.1 FIVE-YEAR COMPANY PERFORMANCE AND REMUNERATION OUTCOMES
Table 2 summarises key financial and non-financial performance for the company from FY2013 to FY2017, grouped and compared
with short-term and long-term remuneration outcomes.
Table 2: Five-year performance history
EARNINGS AND CASH FLOW
Revenue $m
Revenue $m (without Contact Energy)
Statutory profit $m1
Statutory EPS cents1,2
Underlying profit $m
Underlying profit $m (without Contact Energy)
Underlying EPS cents2
Underlying EPS cents2 (without Contact Energy)
Net cash from/(used in) operating and investing
activities (NCOIA)
STI SCORECARD RESULTS (TABLE 3)
STI business scorecard (% of target)
STI AWARD OUTCOMES (TABLE 4)
CEO3 outcome (% of target)
Other KMP4 outcome (% of target)
RETURNS
Share price2 (closing at 30 June, $)
Dividends (cents)
Annual TSR (%)
5-year rolling TSR5 (CAGR % pa)
Underlying ROCE6 (% pa)
LTI OUTCOMES (CEO AND OTHER KMP)
LTI vesting % in the year
LTI forfeit % in the year
2013
2014
2015
2016
2017
14,747
12,728
378
30.3
760
674
60.8
53.9
127
9.3
33.3
86.0
11.00
50.0
7.4
2.1
na
0
100
14,518
12,363
530
42.1
713
604
56.7
48.0
14,147
11,893
(658)
(52.1)
682
603
54.0
47.7
12,174
11,923
(628)
(39.8)
365
354
23.2
22.4
14,107
14,107
(2,226)
(126.9)
550
550
31.3
31.3
(1,087)
(2,081)
1,215
1,378
115.8
119.1
103.7
130.1
93.3
120.8
12.79
50.0
20.6
3.4
na
0
100
59.3
93.0
10.47
50.0
(15.0)
0.1
na
0
100
0.0
79.8
5.75
10.0
(42.0)
(14.2)
na
0
100
107.7
112.3
6.86
0.0
19.3
(5.0)
6.0
0
100
1 FY2016 statutory profit and statutory EPS have been restated to reflect adjustments relating to note F12 to the financial statements.
2 EPS and share price have been restated for the bonus element of the rights issue completed in October 2015.
3 FY2017 results for F Calabria only, excluding pro-rata zero outcome for the outgoing Managing Director (G King).
4 Excludes CEO and, for FY2017, the outgoing Managing Director (G King).
5
Measured using a three-month volume weighted average price (VWAP) to the commencement and end of period (e.g. for FY2017, to 1 July 2012 and to 30 June 2017)
to reflect the methodology for testing for LTI.
6 Reporting for ROCE commenced FY2017.
Table 2 shows that overall awarded STI outcomes for the CEO were below target for the four years from FY2013 to FY2016, and were
107.7 per cent of target for FY2017.
LTI vesting outcomes were zero (for the CEO and Other KMP) in the five year period ended FY2016, due to sustained stock price
underperformance. More recently, the company’s share price performance has been strong, rising 26 per cent since the October 2015
Rights issue and 19.3 per cent for the year ended 30 June 2017.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 4141
2.2 STI AWARDS AND SCORECARD DETAILS FOR FY2017
The framework for the scorecard to assess STI performance is detailed in section 3.9. The CEO’s FY2017 scorecard is made up of
80 per cent business KPIs (of which 60 per cent are financial), and 20 per cent personal KPIs. It is shown in table 3 with weights and
outcomes, for both business and personal KPIs.
Table 3: CEO scorecard for FY2017
KEY
TARGET
ACTUAL
BUSINESS KPIS (80%)
Underlying EPS
Net cash from operating and
investing activities (NCOIA)
Total Recordable Injury Frequency Rate
(TRIFR)
Serious Actual Consequence Incidence
Frequency Rate (SACIFR)
Group Engagement Score
PERSONAL KPIS (20%)
Customer
Transformation
Stakeholder engagement
People and Culture
THRESHOLD
33%
TARGET
100%
STRETCH
167%
WEIGHT
%
SCORE
% TARGET
RESULT
%
29.3c
31.5c
33.7c
37.5
94
35.2
31.3c
$994m
$1,135m
$1,276m
37.5
167
62.5
3.6
1.5
54
3.2
3.2
1.2
57
58
$1,398m
0.4
2.8
0.9
60
8.3
8.3
8.3
100
8.3
167
13.9
122
10.2
Business scorecard result (% target)
130.1
THRESHOLD
33%
TARGET
100%
STRETCH
167%
WEIGHT
%
SCORE
% TARGET
RESULT
%
25.0
25.0
25.0
25.0
80.0
20.0
117
133
133
100
130.1
120.8
29.2
33.3
33.3
25.0
120.8
104.1
24.1
128.2
Personal Scorecard result (% target)
80% business weights
20% personal weights
Scorecard outcome (% of target)
Combining the corporate scorecard result with the current CEO’s personal scorecard result yields a final outcome of 128.2 per cent
of target (based on his weighting of 80 per cent to business results and 20 per cent to personal results).
The CEO’s target and maximum STI opportunities are 110 per cent and 130 per cent of Fixed Remuneration respectively (table 4).
Applying the scorecard outcome (128.2 per cent) to this range yields an STI award of 118.5 per cent of Fixed Remuneration2 for the
current CEO. For the outgoing Managing Director the STI pro-rata STI award (to October 2016) was zero.
For all KMP, 63.3 per cent of the maximum potential STI was awarded (with 36.7 per cent forfeited) for FY2017.
1
2
Results are referenced to target, where the threshold is 33.3 per cent of target, and stretch (maximum) is 166.7 per cent of target. Previously the reference was to
the maximum, where the threshold was 20 per cent of maximum, and target was 60 per cent of maximum. The relationships between threshold, target and maximum
remain the same.
CEO’s outcome as percentage of his FR = 110 + { (130-110) * (128.2-100)/(166.7-100) } = 118.5 per cent. This is equivalent to 107.7 per cent of his STI target
opportunity. See also note 6 to table 4.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT
4242
2.3 LTI ALLOCATIONS FOR FY2017
LTI awards for FY2017 are listed in table 4. These have generally been at target level, noting that their vesting depends on future
achievements against the long-term company performance hurdles (see table 13).
From time to time the Board exercises its discretion to adjust the award allocation (as it did in FY2016). It did not find reason to vary
from the target level allocations for FY2017. This was especially appropriate given that the ELT was substantially restructured during
the period.
2.4 VARIABLE PAY OUTCOMES
Table 4 summarises variable pay outcomes (STI and LTI) for Executive KMP for FY2017 and FY2016, segmented into cash and
deferred payments.
Almost two-thirds (62 per cent) of the award amounts are equity-based and subject to the risk of forfeiture, and they are deferred
for periods of up to five years after the end of FY2017.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 4343
2.5 ACTUAL PAY RECEIVED
In line with general market practice a (non-AIFRS) presentation of actual pay received is provided in table 5 in addition to the statutory
requirements (table 17). This gives shareholders a more informative picture of actual remuneration outcomes.
In addition to Fixed Remuneration (FR) and the cash component of STI, actual pay received includes equity that has vested from equity
grants made in prior periods, whether from Deferred STI allocations or from LTI allocations.
The value of Deferred STI that vests, even though it is not subject to further performance conditions, depends on the company’s share
price at the time of vesting. This ensures that the original award is moderated in value by such increases or decreases in share price over
the deferral period.
With respect to LTI awards table 5 shows no value crystallised in FY2017 (or FY2016) from prior year LTI allocations. This reflects
that the company’s performance in recent years has not reached levels at which executives derive any value from the LTI part of their
remuneration package.
Further, LTI awards which have been previously reported and disclosed as statutory remuneration attributed to the executives, have
been forfeited. The amount shown in table 5 in the forfeiture column is the value of the remuneration that was previously attributed to
the executive but which was ultimately of no value. Over the past two years, KMP have forfeited just short of $20 million of previously
reported statutory remuneration.
These observations demonstrate the strong alignment that exists between executive remuneration and long-term company performance.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 44
44
45
45
Table 4: Variable pay (STI and LTI) awarded for the period ($, except where otherwise indicated)
NAME
FR BASE1
TARGET STI MAXIMUM STI
STI AWARD STI AWARD ($)
AWARD
(% OF
TARGET)
AWARD2
(% OF
MAXIMUM
TARGET LTI
LTI AWARD
LTI AWARD ($)3
AWARD
(% OF
TARGET)
STI + LTI
AWARDS
STI CASH4
STI DEFERRED5
% OF AWARDS
DEFERRED
STI
% OF FR
LTI
STI + LTI
% OF FR
EXECUTIVE DIRECTOR
F Calabria6
OTHER EXECUTIVE KMP
J Briskin
G Jarvis
G Mallett
M Schubert7
FORMER EXECUTIVE KMP
G King
K Moses
D Baldwin
Total
2017
2016
1,700,000
1,086,000
110
78
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
384,750
–
412,680
–
590,000
74,153
108,650
–
760,000
2,500,000
–
1,202,434
951,740
1,150,000
4,907,820
6,012,587
66
–
66
–
45
45
56
–
90
90
–
81
78
78
130
130
110
–
110
–
75
75
92.5
–
150
150
–
135
130
130
118.5
89.7
2,014,500
974,142
76.5
–
79.4
–
60.5
52.5
64.4
–
0
0
–
29.7
78.0
71.3
294,142
–
327,580
–
357,098
38,991
69,949
–
0
0
–
357,103
742,357
820,000
3,805,626
2,190,236
107.7
115.0
115.8
–
120.3
–
134.5
116.8
115.0
–
0.0
0.0
–
36.7
100.0
91.4
91.7
43.8
91.1
69.0
69.5
–
72.2
–
80.7
70.1
69.6
–
0.0
0.0
–
22.0
60.0
54.8
63.3
26.3
110
70
60
–
60
–
40
40
60
–
120
120
–
85
80
80
110
70
1,870,000
760,000
60
–
60
–
40
40
60
–
0
53
–
0
0
83
230,850
–
247,608
–
236,000
29,665
65,190
–
0
–
0
0
760,000
2,649,648
2,899,665
100.0
100.0
100.0
–
100.0
–
100.0
100.0
100.0
–
0
3,884,500
1,734,142
1,007,250
649,428
1,007,250
324,714
524,992
196,095
98,047
–
–
–
575,188
218,387
109,193
–
593,098
68,656
135,139
–
0
–
238,065
25,994
46,633
–
0
0
–
238,069
742,357
546,667
–
119,033
12,997
23,316
–
0
0
–
119,034
0
273,333
61.4
50.6
6,455,274
5,089,901
2,448,787
1,460,158
1,356,840
730,078
74.1
62.6
62.6
–
62.0
–
59.9
62.1
65.5
–
–
100.0
–
33.3
0.0
65.4
62.1
71.3
1,350,000
45.0
1,350,000
–
0
0
–
357,103
742,357
103.7
1,580,000
1 The FR base is the reference Fixed Remuneration (FR) applicable for STI and LTI calculations, generally it represents the FR at 30 June or else a representative value
averaged over the relevant year. The FR base excludes acting and temporary allowances that are included in FR more generally.
2 Where the STI award is less than 100 per cent of the maximum, the difference is forfeited. If the Board exercises discretion to award more than the nominal maximum,
the amount forfeited is zero.
3 The LTI award allocation is conditional pay that is subject to performance hurdles over four years for PSRs, and five years for Options. These awards may vest (partially
or fully) or they may lapse without value in a future period.
4 STI cash represents half of the STI award for the CEO in FY2017, otherwise it represents two-thirds of the STI awarded. The FY2017 STI award for D Baldwin was not subject
to deferral. The STI cash is physically paid after the end of the financial year to which it relates, but is allocated to the earning year. The balance of the STI award is STI Deferred.
5 STI Deferred is the difference between the STI award and STI cash (note 4 above). This is the award quantum that is allocated in the form of DSRs.
6 F Calabria’s FY2017 maximum STI is 130 per cent of FR, which is 1.18 times his target of 110 per cent of FR. Prior year, and all other KMP current and prior, have maxima set
at 1.67 times target. A consequence of the lower ceiling for the CEO in FY2017 is that the percentage of maximum (91.1 per cent) appears higher relative to other KMP.
7 M Schubert’s FY2017 STI target and maximum opportunity levels at year end were 66 and 110 per cent respectively. The opportunities in the table represent averages for
two roles during FY2017.
ORIGIN ENERGY PAGE TITLE ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT REMUNERATION REPORT 4646
Table 5: Actual pay received in the period ($) – non-AIFRS
NAME
EXECUTIVE DIRECTOR
F Calabria
OTHER EXECUTIVE KMP
J Briskin
G Jarvis
G Mallett
M Schubert
FORMER EXECUTIVE KMP
G King
K Moses
D Baldwin
Total
VARIABLE PAY (STI + LTI) RECEIVED
FIXED
REMUNERATION1
STI CASH2
DEFERRED
STI
VESTED3
LTI VESTED4
TOTAL
REMUNERATION
RECEIVED5
EQUITY
FORFEITED6
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
1,498,461
1,086,000
1,007,250
649,428
158,714
46,354
339,225
196,095
–
–
373,209
218,387
–
849,078
86,733
100,479
–
680,319
2,500,000
–
1,202,434
942,484
1,150,000
–
238,065
25,994
46,633
–
0
0
–
238,069
742,357
546,667
4,783,255
2,448,787
6,025,167
1,460,158
0
–
0
–
48,968
0
0
–
174,793
94,673
–
57,933
162,567
56,394
545,042
255,354
0
0
0
–
0
–
0
0
0
–
0
0
–
0
0
0
0
0
2,664,425
1,781,782
(1,755,705)
(1,346,788)
535,320
–
591,596
–
0
–
0
–
1,136,111
(411,555)
112,727
147,112
–
0
0
–
855,112
(6,245,275)
2,594,673
(4,889,809)
–
–
1,498,436
(1,940,395)
1,847,408
(2,000,352)
1,753,061
(1,403,286)
7,777,084 (10,412,887)
7,740,679
(9,580,278)
1 Fixed Remuneration (FR) represents cash plus superannuation plus salary sacrificed benefits received during the period as KMP. It does not include Contact Energy Board fees
that were earned in FY2016 by Former Executive KMP (detailed in table 17). F Calabria’s FR for FY2017 was for the role of CEO Energy Markets for the period 1 July 2016
to 18 October 2016, and for the role of CEO thereafter. G Mallet’s FR includes allowances for acting in the role of CFO.
2 STI cash represents half of the STI award for the CEO in FY2017, otherwise it represents two-thirds of the STI awarded. The FY2017 STI award for D Baldwin was not subject
to deferral. The STI cash is physically paid after the end of the financial year to which it relates, but is allocated to the earning year.
3 Deferred STI vested for FY2017 relates to the vesting in October 2016 of the 2 year FY2014 DSR tranche plus the 1 year FY2015 tranche. For FY2016 it relates to the
October 2015 vesting of 1 year FY2014 DSR tranches. The vested value is calculated as the number of vested securities multiplied by the closing price of Origin ordinary
shares on the day of vesting.
4 LTI vested represents the value of LTI awards from prior years that vested wholly or partially during the year. No LTI awards vested in FY2017 or FY2016.
5 Total remuneration received is the sum of FR plus STI cash, plus the value of Deferred STI and LTI that vested during the Period.
6 The value of equity forfeited relates to previously awarded equity that forfeited during the year (i.e. the relevant grants realised no benefit). The forfeited value represents
original value that was attributed to remuneration in the year of the grant.
3
EXECUTIVE REMUNERATION POLICY AND STRUCTURE
3.1 OBJECTIVES
There are two principal objectives of the executive remuneration framework.
The first is to attract, motivate and retain high-calibre individuals from diverse backgrounds and industries. It achieves this by configuring
the remuneration package to be competitive in the broad market, and, contingent on company and personal performance, offers
attractive levels of reward in the event of out-performance.
The second objective is to align the interests of executives with those of shareholders through executive share ownership that exposes
them to company performance in the same way as experienced by shareholders generally. It achieves this by integrating performance
benchmarks and equity elements into the structure such that reward levels are modulated to reflect actual performance over time.
The most senior executives (those who have the greatest influence on company outcomes) are exposed to proportionately higher
levels of at-risk remuneration and higher proportions of equity.
The details of the current framework and its structural elements are set out in the following sections. Please refer to section 4 for
discussion of changes proposed for FY2018.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 4747
3.2 REMUNERATION COMPONENTS AND BENCHMARKS
The company’s executive remuneration falls into two broad categories. The first is Fixed Remuneration (FR) which is the minimum
(or base) received for providing the know-how, skills and experience that are required for the role being undertaken. The second is
at-risk or variable remuneration received on a contingent basis depending on annual outcomes against defined targets. It is divided
into two elements, a short-term incentive (STI) and a long-term incentive (LTI), which depend respectively on annual and long term
performance measures.
Table 6: Remuneration elements and benchmarks
ELEMENT
DETAILS
Fixed Remuneration (FR)
Short term incentive (STI)
Long term incentive (LTI)
Total Remuneration (TR)
(FR+STI+LTI)
.
FR includes cash salary, employer contributions to superannuation and salary sacrifice benefits.
Positions are benchmarked annually with reference to the median of comparable jobs across relevant peer
groups (including the Reference Group listed under Performance Conditions in table 11). Benchmarking
takes into account the size and complexity of the role, market practice and the know-how, skills and
experience that an incumbent requires to be successful in the role. When recruiting externally, the company
has regard to wider industry comparisons to secure the best people from a diverse talent pool, rather than
one that is limited by industry sector.
STI plays a key role in aligning superior outcomes for shareholders with remuneration outcomes for
management. The STI award is forfeited if the executive resigns before the end of the financial year to which
it relates. Part of the STI award is deferred for up to four years and is forfeited on resignation before vesting.
STI therefore plays a role in retention.
The STI opportunity level varies according to the executive’s role, the amount of remuneration at-risk
increasing with job size and the capacity to influence the overall performance of the business. As at
30 June 2017 the levels were:
CEO
Other KMP (average)
110 per cent of FR (target)
130 per cent of FR (maximum)
61 per cent of FR (target)
101 per cent of FR (maximum)
In each case the minimum is zero. Further details are in sections 3.3 to 3.10.
LTI is awarded as conditional equity which vests over four and five years subject to the company achieving
performance targets over the vesting period.
An executive’s LTI opportunity is determined by the position held and its influence on the long-term
performance of the company, calibrated with reference to the market percentile positions relative to the
peer group. Subject to satisfactory performance, LTI awards are generally made at the target level to
recognise their forward-looking nature and future performance conditions, but the Board may award
below target (including to a minimum of zero) or, in exceptional circumstances, above the target level.
As at 30 June the target opportunities were:
CEO
Other KMP (average)
LTI creates alignment between executive and shareholder interests. If shareholders do well, the executive
does well. Conversely, if shareholders do not do well, neither does the executive.
If the executive resigns before the end of the deferral period the award is forfeited. LTI therefore plays a role
in retention.
Further details are in sections 3.3-3.8 and 3.11.
110 per cent of FR
55 per cent of FR
TR is benchmarked against the same reference groups as for FR. It is intended that when STI and LTI are at
target outcomes, the TR will reflect the TR at target for the benchmark populations. Additionally, in the event
of outperformance an executive has the potential to earn at or above the 75th percentile of the benchmark
populations (i.e. into the top quartile)
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT
4848
3.3 REMUNERATION RANGE, MIX AND DEFERRAL
The possible range of remuneration outcomes and their mix is shown in table 7. It demonstrates that the proportion of packages
at risk and delivered as deferred equity increases with seniority of the role.
For ‘at target’ or expected outcomes the CEO’s remuneration package is 62 per cent at risk, with 58 per cent delivered as cash and
42 per cent as deferred equity (deferred for up to five years). At maximum outcomes it is 72 per cent at risk and is mostly deferred.
For Other KMP, on average, the package ‘at target’ or expected outcomes is 47 per cent at risk with approximately one-quarter
delivered in deferred pay, and at maximum outcomes is 61 per cent at risk with more than one-third deferred.
Table 7: Remuneration range and mix
Fixed
Cash STI
Deferred STI
LTI
CEO
Other KMP (average)
2,000
1,500
1,000
500
0
8,000
7,000
6,000
5,000
4,000
3,000
2,000
0
0
0
$
935
935
935
2,210
1,105
1,105
407
231
463
203
139
278
1,000
1,700
1,700
1,700
0
Minimum
Expected/Target
Maximum
Minimum
Expected/Target
Maximum
703
703
703
COMPONENT
100% Fixed
38% Fixed
28% Fixed
100% Fixed
53% Fixed
39% Fixed
41% STI
21% LTI
36% STI
36% LTI
32% STI
15% LTI
38% STI
23% LTI
RISK
100% Fixed
38% Fixed
62% At Risk
28% Fixed
72% At Risk
100% Fixed
53% Fixed
39% Fixed
47% At Risk
61% At Risk
DEFERRAL
100% Cash
58% Cash
42% Deferred
46% Cash
54% Deferred
100% Cash
74% Cash
65% Cash
26% Deferred
35% Deferred
To enable consistent comparisons the remuneration in table 7 is annualised at the rates applicable on 30 June 2017
(i.e. the data is not pro-rated). LTI is assumed to be wholly allocated in performance rights1, and the following definitions apply:
Minimum
Expected
Maximum
Zero STI awarded and zero LTI awarded (or zero LTI vested outcome)
‘At target’ STI awarded and target LTI allocated with a 50% vested outcome
Maximum STI awarded and maximum LTI allocated with a 100% vested outcome
1 A maximum value cannot be calculated for Options, because their face value is zero (they are granted with an exercise price equal to the market value).
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 4949
3.4 FRAMEWORK AND TIMELINES
The framework and timelines are illustrated in table 8 (see table 14 for changes for FY2018).
Table 8: FY2017 framework and timelines
GRANT
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
Fixed remuneration
Prime comparator
group ASX similar
market cap plus AGL,
Oil Search, Santos,
Woodside
STI earning year
60% financials
(EPS, NCOIA)
20% non-financials
(safety, engagement)
20% personal
LTI
Pre-grant service
contribution
cash award (50% of STI for CEO, 67% for Other KMP)
3 equity awards (50% of STI for CEO, 33% for Other KMP)
STI deferral
(1/3rd for 2 years)
STI deferral (1/3rd for 3 years)
STI deferral (1/3rd for 4 years)
Performance Share Rights = 50% of LTI award
Return on capital employed (ROCE) 4-year performance period
Share Options = 50% of LTI award
Relative TSR over 5-year performance period
equity grant
vest
conditional vest
3.5 MALUS AND CLAWBACK
The STI and LTI arrangements include malus and clawback provisions to enable the company to reduce or clawback awards where
it is appropriate to do so.
The Board retains discretion to adjust award outcomes, upwards or downwards, where it considers it appropriate to do so, and it may
make such adjustments to the STI or LTI element, or to both. Downward variations (malus) can include reducing awards to zero.
In previous years the Board exercised discretion to ensure that overall outcomes were aligned to both benchmarks and to the overall
circumstances of the company. This included zero STI and LTI allocations for some executives in FY2015 and FY2016.
Clawback provisions allow the Board to cancel unvested equity awards or to demand the return of shares or the realised cash value
of those shares where the Board determines that the benefit obtained was inappropriate as a result of fraud, dishonesty or breach of
employment obligations by the recipient or any employee of the Group. No circumstances during the current or prior reporting periods
required the application of clawback provisions.
3.6 NO HEDGING
The company’s policy requires that employees cannot trade instruments or other financial products that limit the economic risk of
any securities held under any equity-based incentive schemes so long as those holdings are unvested. Non-compliance may result
in summary dismissal.
3.7 CHANGE OF CONTROL
If a change of control1 occurs prior to the vesting of share rights that are not subject to performance hurdles the Board has discretion
to bring forward vesting dates where it considers it appropriate to do so.
If a change of control occurs prior to the vesting of Options or share rights that are subject to performance hurdles, provided that the
executive has held the relevant instruments for at least 12 months as at the change of control, the Board has discretion to bring forward
testing against the performance conditions as at the date of the change of control, and vesting may occur to the extent that the relevant
performance conditions have been met.
1 Change of control is defined as a person/entity acquiring more than 50 per cent of the relevant interest in the company pursuant to a takeover bid that has become
unconditional, or when a person/entity otherwise acquires more than 50 per cent of a relevant interest in the issued capital of the company.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 5050
3.8 CAPITAL REORGANISATION
On a capital reorganisation, the number of unvested share rights and/or Options held by participants may be adjusted in a manner
determined by the Board to minimise or eliminate any material advantage or disadvantage to the participant. If new awards are granted,
they will, unless the Board determines otherwise, be subject to the same terms and conditions as the original awards.
3.9 STI SCORECARD STRUCTURE
The STI program operates on an annual financial year scorecard basis consisting of business and personal key performance indicators
(KPIs). The KPIs applicable for FY2017 were as set out in table 9.1
Table 9 – FY2017 scorecard structure (see section 4 for changes for FY2018)
BUSINESS SCORECARD
WEIGHT
Financial
Safety
People
Net cash from operating and
investing activities (NCOIA);
37.5%
Underlying earnings per share (EPS)
37.5%
Total recordable injury frequency
rate (TRIFR)
Serious actual consequence incidence
frequency rate (SACIFR)
Engagement score
8.3%
8.3%
8.4%
100%
Business KPIs are weighted 80% for
the CEO, and 75% for Other KMP
All division heads are exposed to the
company’s financial metrics. Heads of
operating divisions are also exposed to
their division metrics.
PERSONAL SCORECARD
Personal KPIs are individually structured to cover the key value-adding priorities for the role in
the current year. They may include customer measures, profitability, production metrics, project
delivery milestones, safety performance and risk containment, and measures that reflect strategic
and people priorities.
Personal KPIs are weighted 20% for the CEO
and 25% for Other KMP
100%
The two financials (NCOIA and EPS) represent 75 per cent of the business scorecard reflecting the importance of earnings per share and
cash generation after investment as key drivers of returns to shareholders; while safety and engagement measures represent 25 per cent
of the business scorecard and reflect the importance of sustainability and productivity.
The scorecard method of assessment facilitates objective evaluation against target performance levels. Each KPI is assessed on a
threshold, target and stretch basis. Unless the threshold level is achieved, the award for the KPI is zero. Threshold level performance
results in a pay outcome of one-third of the target outcome. Performance at the target level results in an ‘at target’ pay outcome for the
KPI. The stretch performance level is set on the basis of significantly exceeding budget and operational targets. Achieving stretch-level
KPIs results in a pay outcome equivalent to 1.67 times the target level (i.e. the target represents 60 per cent of the stretch). Between
target and threshold, and between threshold and stretch, outcomes are calculated on a proportionate basis.
The KPIs and outcomes for Executive KMP are approved by the Board on advice from the RPC.
1 Where the executive changed roles during the year, the scorecard weights will vary on a pro-rata basis.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT
5151
3.10 STI DEFERRAL
All senior executives have a proportion of their STI award deferred on the terms and conditions set out in table 10. The portion of the
STI award that is not deferred is paid in cash (less applicable tax and superannuation) approximately three months after the end of the
financial year in which it was earned.
Table 10: FY2017 details of STI deferral (see section 4 for changes for FY2018)
PARAMETER
STI DEFERRAL DETAILS
Deferred STI award quantum
Instrument
Service conditions and cessation
of employment
Deferral periods
Allocation
Vesting and exercise
50 per cent of the STI award
33.3 per cent of the STI award
The proportion of the STI award that is subject to deferral is:
CEO
Other KMP
Deferred STI is awarded in the form of deferred share rights (DSRs).1 A DSR is the right to a fully paid share in
the company. There is no cost for the right as it represents the earned benefit from the proportion of STI that
has been deferred. DSRs carry no entitlement to dividends or voting rights (future allocations of DSRs at simple
face value may have a dividend-adjusted vesting conversion).
DSRs will be forfeited if the holder does not remain in ongoing employment with satisfactory service through to
the end of the relevant deferral period (see below).
Where the executive is unable to meet the service obligation by virtue of death, disability, redundancy, genuine
retirement or other exceptional circumstances as approved by the Board, unvested DSRs will vest at cessation of
employment, unless the Board determines otherwise. In these circumstances pro-rata awards or grants of DSRs
not yet made will be made in cash (deferral proportion set to zero).
The DSRs vest in three equal tranches (by number), one-third each after two years, three years and four
years respectively.
The number of DSRs to be allocated is the Deferred STI amount divided by the face value of a share determined
as the volume weighted average price (VWAP) over 30 days to the 30 June preceding grant. This was $7.37
to 30 June 2017, which will be the allocation value for DSRs to be granted in respect of FY2017 STI awards.
The Board’s recommendation for the CEO’s Deferred STI equity award is submitted for approval at the first
Annual General Meeting (AGM) following the end of the financial year. Once approved, the DSRs are granted
shortly thereafter.
DSRs vest on meeting the service and personal performance conditions. Exercise of DSRs is automatic
on vesting and the exercise price is nil.
1 The Board has discretion to award in alternative forms including cash and deferred cash. Where the deferral amount calculates below a threshold (currently $2,000 as defined
in the equity incentive plan rules), the deferral proportion is set to zero.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 5252
3.11 LTI PLAN DESCRIPTION
Long term incentives are provided in the form of conditional equity that may vest in the future subject to the executive meeting service
and performance obligations and the company meeting or exceeding long-term performance targets.
The principles, terms and arrangements are summarised in table 11.
Table 11: Summary of the FY2017 LTI plan (see section 4 for changes for FY2018)
PARAMETER
LTI PLAN DETAILS
LTI award quantum
The LTI award quantum allocated at the end of the year is conditional on satisfactory performance during that year. Subject
to that condition the award will generally be at the target levels shown below. However, the Board may determine that the
award quantum should be varied from the target value, up or down (including to zero).
Target opportunities
CEO
Other KMP (average FY2017)
110 per cent of FR
53 per cent of FR
Instruments
Executive KMP have LTIs awarded in two instruments:
– Options (half of the LTI award value): Rights to fully paid ordinary shares on payment of an exercise price (outlined below);
and
Service conditions
and cessation of
employment
Performance
conditions (hurdles)
– PSRs (half of the LTI award value): Rights to fully paid ordinary shares.
There is no cost for the Options or PSRs as they represent allocations to executives as part of their remuneration packages.
Options and PSRs carry no voting rights or dividend entitlements.
Options and PSRs will ordinarily be forfeited if the holder does not remain in ongoing employment with satisfactory service
through to the end of the relevant deferral period (see below). These service conditions are in addition to the company
performance hurdles.
Where the executive is unable to meet the service obligation by virtue of death, disability, redundancy, genuine retirement
or other exceptional circumstances as approved by the Board, unvested Options or PSRs may be held ‘on foot’ subject to
specified performance hurdles and other plan conditions being met, or dealt with in an appropriate manner determined by
the Board.
An executive who holds vested but unexercised instruments at the date of cessation of employment must exercise within
60 days of cessation, otherwise the instruments lapse and are forfeited.
Return on capital employed (ROCE)
The ROCE hurdle reflects the importance of the level of return and the capital employed to generate that return.
It is referenced to statutory EBIT divided by average capital employed (ACE).1
The hurdle has two gates, both of which must be achieved to trigger vesting. The first gate is to achieve or exceed the
average ROCE target over four financial years. Each annual target is set by the Board in advance, based on the approved
budget for that year and the current strategic plan. The four-year target (and the actual outcome) are measured on the
basis of a simple arithmetic average of the four numbers.
The second gate is to reach a ROCE level at least equivalent to the company’s pre-tax weighted average cost of capital
(WACC) in either of the last two years of the four year performance period.
Total shareholder return (TSR)
Relative TSR is a measure that represents an assessment of the company’s ability to invest and achieve a return on capital
relative to a Reference Group other companies which represent comparable investment choices that investors in the
company will have.
As with the prior year, the Reference Group for FY2017 was selected on the basis of a ‘ten-up/ten-down’ market
capitalisation reference plus AGL, Oil Search, Santos and Woodside (if not already in that group).
The Reference Group for an equity grant is determined at the beginning of the performance period. For LTI awards due to
be granted in 2017 the Reference Group was set on 1 July 2017 as AGL Energy, AMP, APA Group, Aristocrat Leisure, ASX
Limited, Aurizon, Brambles, Cimic Group, Goodman Group, Lendlease, Newcrest Mining, Oil Search, Qantas, Ramsay Health,
ResMed, Santos, Sonic Healthcare, South32, Stockland, Sydney Airport, Treasury Wine Estates, Vicinity Centres and
Woodside Petroleum.
The TSR for Origin and for each company in the Reference Group is measured on the basis of a three-month weighted
average prior to the first and last dates of the performance period.
Each of the two performance conditions is transparent, robust and capable of being tested objectively. TSR testing for both
Origin and the comparator companies is carried out independently.
1 The ROCE numerator is Origin’s earnings before interest and tax (EBIT) and Origin’s share of Australia Pacific LNG (APLNG) EBIT plus the dilution adjustment, with adjustment
to remove:
– Origin’s share of APLNG interest and tax (which is included in Origin’s reported EBIT); and
– Items excluded from underlying earnings in the (decrease)/increase in fair value of financial instruments and LNG items category (the LNG items category ceased once
Train 2 commenced operations on 5 November 2016).
Gains or losses on disposals and impairments are included unless specifically excluded by the Board.
The denominator average capital employed (ACE) is shareholders equity plus Origin debt plus Origin’s share of APLNG project finance less the non-cash fair value uplift
in Origin’s investment in APLNG plus net derivative liabilities. The adjustment to ACE reflects the impact of the accounting uplift in the asset base of APLNG of $1.9 billion
which was recorded on the creation of the APLNG Joint Venture. This balance was reduced by $1,846 million during FY2017 reflecting Origin’s share of the impairment
recorded by APLNG of its non-current assets. The remaining non-cash fair value uplift balance of $30 million will be depreciated in APLNG’s income statement on an ongoing
basis and, therefore, a dilution adjustment is made to remove this depreciation. From Origin’s perspective, cash was received for this amount up-front at the time of the creation
of the Joint Venture. The non-cash fair value adjustments are disclosed and explained in Note E1.2 in the financial statements. ACE is a simple average of opening and closing
capital employed in any one year.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT
5353
PARAMETER
LTI PLAN DETAILS
Performance period
and testing
The performance period and testing arrangements for Executive KMP are shown below:
GRANT DATE
End August 2017
(except CEO,
grant is subject
to shareholder
approval, October
2017)
Options
(relative
TSR)
PSRs
(ROCE)
BASE DATE
(START OF
PERFORMANCE
PERIOD)
END
PERFORMANCE
PERIOD
(TEST DATE)
VEST (SUBJECT
TO CONTINUING
EMPLOYMENT)
EXERCISE
1 July 2017
(3 month VWAP)
30 June 2022
(5 years)
(3-month VWAP)
After release
of full year
results 2022
1 July 2017
30 June 2021
(4 years)
After release
of full year
results 2021
Up to 10 years after grant
date, or 60 days after
cessation, whichever
occurs first, on payment
of exercise price
Automatic on vest
The part of the prior performance year during which service was rendered to be considered for an award at the end of that
year does not count towards the performance period.
Options and PSRs that do not vest are forfeited immediately and there is no retesting. Options that vest but are not
exercised within the time frames shown above are forfeited.
Value
The range of values for the LTI instruments is summarised below.
INSTRUMENT
MINIMUM VALUE
EXPECTED VALUE
MAXIMUM VALUE
Allocation
Options
Zero
The accounting value.
The Black Scholes-Monte Carlo
process determines an Option value
that takes into account the likelihood of
meeting the hurdle and the amount by
which the future share price may
exceed the exercise price.
It is not possible to determine the
maximum value because the exercise
price for the Options is the current
market value of the underlying Origin
shares. Therefore, the present day value
of an Option (market value less the
exercise price to pay) is zero.
PSRs
Zero
The probability of vesting is
approximately half the maximum value1.
The maximum value is the present-day
face value based on full vesting.
The minimum value will be realised, for example, when service conditions are not met or performance conditions are not
met; or, for Options, all conditions are met but the share price is less than exercise price.
– The number of PSRs to be allocated is half of the LTI award divided by the face value of a share determined as the VWAP
over 30 days to the 30 June preceding grant. This was $7.37 to 30 June 2017, which will be the allocation value for
PSRs to be granted in respect of FY2017 LTI awards.
– The value of Options to be allocated is also half the value of the LTI award. However, a face value denominator cannot be
used to determine the number because the face value is zero (this is because the exercise price for Options is the current
market value of the underlying share). Accordingly, the denominator is the long-term expected value of an Option, which
is its accounting value. This is calculated independently using a Black-Scholes pricing model with a Monte Carlo simulation.
Mercer Consulting has determined this value as at 30 June 2017 to be $2.33 which will be the allocation value for
Options to be granted in respect of FY2017 LTI awards.
– The exercise price for Options is determined as the VWAP over 30 days to the 30 June preceding grant. This was $7.37
to 30 June 2017, which will be the exercise price for Options to be granted in respect of FY2017 LTI awards.
Equity grants to the CEO are subject to shareholder approval. Options to be granted in respect of FY2017 will be
the last offered.
Vesting
Subject to meeting the service conditions, Options and PSRs vest as follows:
PERFORMANCE
CONDITION
(HURDLE)
Relative TSR
ROCE
50% AWARDS VEST
Exceeding 50th percentile
ranking among the
Reference Group.
Achieve two gates; first gate is to
meet average ROCE target over
4 years. Second gate to achieve
pre-tax WACC in year 3 or
year 4.
BETWEEN 50–100%
OF AWARDS VEST
Proportionate vesting on
a straight-line basis for ranking
outcomes between the 50th and
75th percentiles.
Proportionate vesting on
a straight-line basis between
50% and 100% vest levels where
first gate is met and WACC is
exceeded by between zero and
two percentage points in year
3 or year 4.
100% OF AWARDS VEST
Achieving 75th percentile
ranking amongst the
Reference Group.
First gate met, plus exceed
pre-tax WACC by two
percentage points or more
in year 3 or year 4.
Vesting against the two performance conditions is independent, the result of one does not affect the other. Instruments that
do not vest on test are forfeited.
1 Where PSRs vest against a market condition (such as TSR) a proxy for the probability of vesting can be determined by dividing the fair value at grant date by the share price
at the same date. The historical average over five years for this ratio is 51.4 per cent. The same approach cannot be used where PSRs vest against an internal (non-market)
hurdle such as return on capital employed (ROCE). The Board has set the ROCE targets in such a way that, in its judgment, over the long term, executives will realise half of the
potential maximum value. In other words the Board has set targets with the intention that over the long-term approximately 50 per cent of awards are likely to vest (and that
100 per cent vesting occurs only when meeting challenging and difficult, but achievable, stretch targets). In both cases therefore the probability of PSRs vesting is estimated to
be approximately 50 per cent.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 5454
3.12 OTHER EQUITY/SHARE PLANS
The company operates a general employee share plan in which all full-time and part-time employees can be awarded up to $1,000
worth of company shares on an annual basis. For FY2017 the award was subject to meeting a safety target, and eligibility required service
throughout the year on which the safety target applied. The target was for employees to record and close 40,000 safety observations.
The target was surpassed with 56,444 closed observations. Accordingly a $1,000 award was approved by the Board. Shares are purchased
on-market during late August for allocation to employees on a restricted basis (the shares cannot be traded until the earlier of cessation
of employment or three years). Section 4 highlights that improvements to the Employee Share Plan will be implemented during FY2018.
To help preserve shareholder value, retention plans may be used selectively to retain key people. The RPC regularly assesses the risk of
the Group losing key people in areas of intense market activity. Typically, they are critical senior executives who manage core activities
or have skills that are being actively solicited in the market.
The RPC may consider putting in place deferred payment arrangements to reduce the risk of critical loss. Key people may be offered DSRs
or deferred cash payments subject to the condition of remaining in ongoing employment with the company through to a nominated date
and achieving personal performance targets over that period. Where DSRs are used for this purpose they represent the same equity
vehicle described in section 3.10 for deferred STI, but their purpose is for retention and the vesting period will vary according to the
specific circumstances.
No deferred cash or retention DSRs were provided to KMP during the current or prior period.
From time to time it may be necessary to offer DSRs, PSRs or Options, or a combination of those, to replace similar or equivalent equity
that an executive forfeits when leaving another employer to take up employment with the company. ‘Sign-on’ equity of this sort, where
required, is targeted to the particular circumstances and will have vesting periods matching those circumstances. No sign-on equity was
granted to KMP during the current or prior period. Such equity is expected to be granted in 2018, as noted in table 19.
3.13 MINIMUM SHAREHOLDING REQUIREMENT (MSR) FOR SENIOR EXECUTIVES
As noted in section 4, the Board is introducing a new Executive Share Ownership Policy that requires the CEO and all senior executives
to build and maintain a minimum shareholding in the company. The policy requirement is to meet, within a period of four years, a holding
equivalent to two times annual FR for the CEO, and one times annual FR for senior executives.
3.14 REMUNERATION AND CONTRACTUAL DETAILS FOR EXECUTIVE KMP
Table 12 sets out the main employment terms and conditions for Executive KMP as at 30 June 2017.
Table 12: Executive service agreements and remuneration terms
Basis of contract
Ongoing (no fixed term)
CEO
OTHER KMP
Ongoing (no fixed term)
Notice period
12 months by either party, or shorter notice
by agreement. No notice for misconduct or breach
of contract
Up to six months by either party or shorter notice
by agreement. No notice for misconduct or breach
of contract
Termination benefits
for cause
Termination benefits
for resignation
Termination benefits for
other than resignation
or cause
Statutory entitlements only
Statutory entitlements only
Notice as above or payment in lieu of notice that is not
worked; current-year STI forfeited; all unvested equity
lapses; statutory entitlements
Notice as above or payment in lieu of notice that is not
worked; current-year STI forfeited; all unvested equity
lapses; statutory entitlements
Notice worked (or payment in lieu of any portion not
worked); pro rata STI for the period worked (no deferral
applicable); all unvested equity lapses unless held ‘on foot’
in accordance with Equity Incentive Plan Rules (in cases of
death, disability, genuine retirement or extraordinary
circumstance); and statutory entitlements
Notice worked (or payment in lieu of any portion not
worked); pro rata STI for the period worked (no deferral
applicable); all unvested equity lapses unless held ‘on foot’
in accordance with Equity Incentive Plan Rules (in cases of
death, disability, bona fide redundancy, genuine retirement
or extraordinary circumstance); and statutory
entitlements.
Payment in accordance with the company’s general
redundancy policy of three weeks FR per year of
service with a minimum of 18 weeks and a maximum
of 74 weeks)
Fixed Remuneration (FR)
$1,700,000 per annum
Up to $724,000 per annum
STI opportunity
LTI opportunity
0 per cent of FR (minimum)
110 per cent of FR (target)
130 per cent of FR (maximum)
Half deferred over two, three and four years
0 per cent of FR (minimum)
110 per cent of FR (target)
130 per cent of FR (maximum)
Deferred over four and five years
0 per cent of FR (minimum)
66 per cent of FR (target)
110 per cent of FR (maximum)
One-third deferred over two, three and four years
0 per cent of FR (minimum)
60 per cent of FR (target and maximum)
Deferred over four and five years
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 5555
4. CHANGES FOR FY2018
The Board has tested the effectiveness of the current remuneration framework and identified opportunities to simplify the structure
and improve shareholding levels. An integrated package of changes will be implemented for the FY2018 year. These changes and the
rationale behind them are summarised in table 13.
Table 13 – FY2018 remuneration framework changes
FY2018 CHANGE
RATIONALE FOR CHANGE
1
2
3
4
5
6
7
8
9
Increase the deferral of STI from one-third
to one-half of the STI award, for all senior
executives
Rebalance STI performance metrics
Simplify the STI and LTI vesting schedules
Increase executive equity accretion; one standard for all senior executives
Part of a new standardised structure for scorecards that broadens operating and financial
measures (preserving the 60% weighting and key role for eps and NCOIA), elevates
customer measures, and reduces personal bespoke measures
Current structure (table 8) is excessively complex and outside market norms. New structure
(table 14) reflects the strategic context and the timing of key initiatives for both Energy
Markets and for Integrated Gas and achieves deferral objectives by integrating the vesting
profile with a holding lock mechanism and new minimum shareholding requirement
Discontinue the use of Options in LTI awards
Simplify LTI arrangements by using one vehicle (PSRs) that is well understood in the
domestic market
Allocate all equity awards on the basis of
simple face value
Adopt one simple standard – face value (a mix of allocation methodologies has applied to
recent awards). The discontinuation of Options eliminates the allocation problem of zero
face value (market price less exercise price equals zero)
Add a share price growth condition to the
relative TSR hurdle and adopt ASX-50 as
the Reference Group
Imposing a share price growth condition prevents vesting where Origin outperforms on
returns but its share price falls (e.g. in a falling market). Use of the ASX-50 improves the
efficacy of the Reference Group by broadening it. ROCE will continue to be used as a
second performance hurdle
Introduce a new Minimum Shareholding
Requirement (MSR) for executives
Increased executive share ownership strengthens shareholder and employee alignment.
The new requirement is to build and then hold a minimum equity level1 equivalent to two
times FR for the CEO, and one times FR for senior executives, within four years
Strengthen the Minimum Shareholding
Requirement for NEDs
Upgrade the general employee share plan
Modify the MSR for NEDs by re-expressing the policy in terms of holding a minimum value
of shares equivalent to one times the NED Base Fee, and introduce a new level for the
Chairman at twice the NED Base Fee
Widen the plan to reduce service eligibility from one year to six months, incorporate salary
sacrifice, and introduce matching facilities to encourage greater share ownership across
the company
1 For the purposes of the Executive MSR, only fully paid shares and unvested equity that is not subject to performance hurdles may be counted against the requirement.
It is assessed at the end of the year against the FR at the beginning of the year.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 5656
The new framework is shown schematically in table 14. It illustrates a simpler and more integrated structure when compared with
the current framework (table 8).
Table 14: FY2018 framework and timelines
GRANT
YEAR 1
YEAR 2
YEAR 3
YEAR 4
Fixed remuneration
ASX-50 and other
relevant benchmarks
STI earning year
60% financials
(including
EPS, NCOIA,
EBITDA, opex)
20% customer
(strategic NPS etc)
20% people (safety,
engagement,
gender etc)
LTI
Pre-grant service
contribution
cash award (50% of STI)
equity award (50% of STI)
STI deferral (2 years)
Performance share rights
Half with 3-year ROCE hurdle
Half with 3-year relative TSR
hurdle plus a share price
growth condition
Ongoing minimum
shareholding requirement
1-year post-vest
holding lock
No changes to Fixed Remuneration have been made for Executive KMP for FY2018.
equity grant
vest
conditional vest
5. REMUNERATION GOVERNANCE
5.1 ROLE OF THE BOARD AND ITS REMUNERATION AND PEOPLE COMMITTEE
The full Board has oversight of Origin’s remuneration arrangements. It is accountable for the remuneration of executives and of NEDs,
and the policies and processes governing both.
The Remuneration and People Committee (RPC) operates under a Charter published on the company’s website at originenergy.com.au.
The RPC, through its chairman, provides advice and makes recommendations to the full Board on remuneration for NEDs and for ELT
members, and also for all equity arrangements and grants regardless of level. The RPC has delegated authority to approve remuneration
arrangements for Origin people outside these groups.
As identified in table 1, the RPC has four members (including its chairman) who are all independent NEDs. The RPC’s Charter requires
a minimum of three NEDs. In addition, there is a standing invitation to all Board members to attend the RPC’s meetings. The RPC met
formally four times during the Period.
5.2 EXTERNAL ADVISORS
The RPC has established protocols for engaging and dealing with external advisors, including those defined as remuneration consultants
for the purpose of the Act. The protocols are to ensure independence and the avoidance of conflicts of interest.
The protocols require that remuneration advisors are directly engaged by the RPC and act on instruction from its chairman. Reports
must be delivered directly to the RPC Chairman. The advisor is prohibited from communication with company management except as
authorised by the Chairman, and limited to the provision or validation of factual and policy data. The advisor must furnish a statement
confirming the absence of any undue influence from management.
During the Period the RPC engaged external advisors to conduct a general policy and framework review, and also received general
benchmarking and market trend information from a variety of commercial and industry sources. It did not seek or receive any
remuneration recommendations within the definition of the Act.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 5757
5.3 REMUNERATION POLICY AND STRUCTURE FOR NEDS
NED remuneration is designed to ensure independence by setting fees that are fixed and not dependent on company results. There are
no bonus or incentive-based payments. This ensures that NEDs are able to independently and objectively assess both executive and
company performance.
Shareholders approve the aggregate cap for overall NED remuneration. The current cap of $2,700,000 was approved at the 2010 AGM.
Shareholder approval will be sought at the 2017 AGM for an increase in the aggregate cap to $3,200,000 to provide sufficient flexibility
for the appointment of additional directors. In addition to the timespan since the last increase, a decrease in the number of executive
directors and an increase in the number of non-executive directors is a relevant factor for this proposed increase.
Board and committee fees take into account market rates for similar positions at relevant Australian organisations (those of comparable
size and complexity) that fairly reflect the time commitments and responsibilities involved. Per diem fees may also be paid on occasions
where approved special work is undertaken outside of the expected commitments. No per diem fees were paid during the Period.
The Origin Chairman receives a single fee that is inclusive of committee activities, while other NEDs receive a NED Base Fee and separate
fees for their role on specific committees, other than the Nomination Committee, which is considered within the NED Base Fee. All fees
include superannuation contributions.
Tables 15 and 16 set out the structure and level of NED fees that applied during FY2017. The same fee levels will apply during FY2018.
Fees were last increased in FY2013 (fees for the Risk Committee were introduced in FY2016).
Table 15: NED fees ($)
ROLE
Board chairman (including all committee work)
NED Base Fee (excluding committee work, table 16)
Table 16: Committee fees ($)
COMMITTEE
Audit
Remuneration and People
Heath, Safety and Environment
Risk
Nomination
FY2017 AND FY2018
677,000
196,000
FY2017 AND FY2018
CHAIR
MEMBER
57,000
29,000
47,000
21,000
42,000
21,000
42,000
21,000
Nil
Nil
5.4 MINIMUM SHAREHOLDING REQUIREMENT FOR NEDS
To align the interests of the Board and shareholders, NEDs are required to build and then maintain a minimum shareholding in
the company.
Commencing 1 July 2017 the MSR for NEDs has been increased from 20,000 shares to the equivalent of one times the NED Base Fee
(table 15). At the share price on 30 June 2017 this represents an increase to approximately 28,600 shares. A new policy will apply to the
Chairman of the Board whose MSR will be twice the NED Base Fee.
NEDs are required to reach the requirement within three years of their appointment, or where the requirement has been increased,
to meet the increased level within two years of that increase.
At the date of this Remuneration Report, all NEDs either met the minimum requirement or were on track to meet it within the required
time period. Details on NED shareholdings are included in table 20.
A Non-executive Director Share Plan (NEDSP) is in suspension and closed to new entrants. The NEDSP provided for NEDs to sacrifice
annual fees toward the acquisition of shares, which were then acquired on market by the Trustee of the plan. The Trustee could transfer
shares acquired on behalf of the relevant NED after a period of five years, or on retirement from office, or in case of death. The plan was
closed in August 2013 to new entrants or new acquisitions by existing participants. One participant remains in it.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT
58
58
59
59
6. STATUTORY DISCLOSURES
Table 17: Executive KMP statutory remuneration (A-IFRS) ($, except where otherwise indicated)
SHORT-TERM BENEFITS
POST-EMPLOYMENT
BENEFITS
ACCOUNTING VALUE OF LONG-TERM BENEFITS
TOTALS
EXECUTIVE DIRECTOR
F Calabria
OTHER EXECUTIVE KMP
J Briskin
G Jarvis
G Mallett7
M Schubert
FORMER EXECUTIVE KMP
G King4,5,6
K Moses5,7
D Baldwin4,5,6
D Barnes7
TOTAL
BASE SALARY
1,471,005
1,046,655
328,035
–
357,798
–
824,046
84,327
97,200
–
673,026
2,478,168
–
1,169,595
926,237
1,118,480
–
89,094
4,677,347
5,986,319
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
CONTACT
ENERGY
FEES1
–
–
–
–
–
–
–
–
–
–
–
22,389
–
14,650
–
14,602
–
–
0
51,641
CASH STI2
NON-MONETARY
BENEFITS3
SUPERANNUATION
DEFERRED STI4
LTI (OPTIONS &
PSRs)5
ACCRUED LEAVE
CHANGE
TERMINATION
BENEFITS6
TOTAL
REMUNERATION
AT RISK (%)
SHARE
BASED (%)
1,007,250
649,428
196,095
–
218,387
–
238,065
25,994
46,633
–
0
0
–
238,069
742,357
546,667
–
–
32,312
33,284
4,375
–
15,236
–
26,282
2,722
1,672
–
21,000
53,597
–
34,367
27,649
32,867
–
29
27,456
27,144
11,190
–
15,411
–
25,032
3,184
3,279
–
7,293
21,832
–
30,030
16,247
19,320
–
4,697
2,448,787
1,460,158
128,526
156,866
105,908
106,207
433,397
254,243
61,343
–
81,009
–
112,805
12,248
30,180
–
20,796
(71,677)
–
113,763
142,087
249,188
–
43,000
881,617
600,765
458,546
491,259
35,477
–
73,845
–
131,850
18,390
10,123
–
272,492
1,304,780
–
565,359
507,254
705,161
–
172,697
1,489,587
3,257,646
265,312
27,178
13,903
–
37,868
–
15,000
1,814
1,881
–
15,738
62,515
–
34,320
23,945
160,438
–
1,537
373,647
287,802
–
–
–
–
–
–
–
–
–
–
2,173,077
–
–
–
746,019
–
–
–
3,695,278
2,529,191
650,418
–
799,554
–
1,373,080
148,679
190,968
–
3,183,422
3,871,604
–
2,200,153
3,131,795
2,846,723
–
311,054
2,919,096
0
13,024,515
11,907,404
51
55
45
–
47
–
35
38
46
–
9
32
–
42
44
53
–
69
37
45
24
29
15
–
19
–
18
21
21
–
9
32
–
31
21
34
–
69
18
32
1 G King, D Baldwin, and K Moses were the company’s nominees on the Board of Contact Energy, from 1 July to 10 August 2015 on completion of the sale of the company’s
interest in Contact Energy. FY2016 fees converted to Australian dollars using an exchange rate of $1.1166 for the period 1 July 2015 to 10 August 2015.
2 STI cash represents one half of the STI award for the CEO in FY2017, otherwise it represents two-thirds of the STI awarded. For Former Executive KMP the STI award may
not be subject to deferral. The STI cash is physically paid after the end of the financial year to which it relates, but is allocated to the earning year. The balance of the STI award
is STI deferred.
3 Non-monetary benefits include insurance premiums and fringe benefits such as car parking and expenses associated with travel.
4 Deferred STI is that portion of the accounting value of equity granted or to be granted (DSRs) for the current and prior periods attributable to the reporting period. In following
reporting periods the accumulated expense is adjusted for the number of instruments then expected to vest. A ‘bring-forward’ of future-period accounting expense may occur
where a cessation of employment occurs before the normal vesting date. Such ‘bring-forward’ is an accounting adjustment that does not represent actual remuneration. The
table does not include a ‘bring-forward’ accounting expense of $62,807 in relation to the cessation of employment of G King on 28 October 2016.
5 LTI is that portion of the accounting value of LTI equity granted or to be granted (Options and/or PSRs) for the current and prior periods attributable to the reporting period.
Where instruments vest against a market condition (such as TSR) the application of accounting rule AASB-2 determines a fair value that takes into account that market
condition. This involves assumptions for the volatility of Origin shares and the shares of all other companies in the comparator group, dividend yields, and the risk-free rate (see
note F3(a)(i) to the financial statements). In the case of Options it also includes assumptions on the timing of exercise. This fair value, amortised over the service/vesting period
is used for expensing purposes. The value is not adjusted for the actual outcome against the market condition. Where instruments vest against a non-market condition (such
as ROCE), AASB-2 does not take into account the hurdle. The initial grant date expense is represented by face value less dividends foregone over the vesting period. True-ups
then occur each reporting period for the expected vesting outcome, based on reasonable and successive forecasts of the final vesting outcome, lastly with a final true-up when
the outcome is known. A ‘bring-forward’ of future-period accounting expense may occur where a cessation of employment occurs before the normal vesting date where prior
years’ awards remain on foot at cessation. At cessation, if unvested Options or PSRs remain on foot then any unvested expense is brought forward, but if forfeited, previously
booked expense is reversed. Neither treatment has any bearing on what the executive may ultimately forfeit or receive. The applicable treatment may not be known at the end
of the reporting period even if a cessation is expected in the near future.
At the time of FY2016 reporting, the ‘on-foot/lapse’ position for K Moses cessation was unknown and no accounting adjustments were made or reported. Subsequently,
following cessation of employment (which occurred in FY2017 and was not from a KMP role), the actual bring-forward of accounting expense was determined as $716,975
(and was wholly in relation to LTI). At the time of FY2017 reporting, the ‘on-foot/lapse’ position for D Baldwin was unknown and no accounting adjustments have been made.
When known, it will be disclosed in the relevant Remuneration Report. In relation to G King (whose cessation was on 28 October 2016), the bring-forward of accounting
expense was $2,207,624 in relation to LTI awards (see note 4 for deferred STI awards). These disclosures are made, when known, on the basis of transparency and irrespective
of whether the executive remains in a KMP role at the time of cessation of employment.
6 For G King, the termination benefit represents contractual notice payment. As a result of the restructure announced on 18 April 2017, D Baldwin stepped down from his KMP
role and is expected to leave the company during FY2018. Although he has not ceased employment at the date of this report, and will not be in a KMP role at the time of
cessation, the expected termination payment has been included in the table on the basis that it ultimately relates to his KMP tenure. In both cases payments are pursuant to and
within shareholder authorisation obtained by AGM resolution in October 2015.
7 For FY2016 comparatives, pro-rata periods for KMP office are: G Mallett 16 May 2016 to 30 June 2016; K Moses 1 July 2015 to 16 May 2016; and D Barnes 1 July 2015
to 10 August 2015.
ORIGIN ENERGY PAGE TITLE ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT REMUNERATION REPORT
6060
Table 18: NED statutory remuneration table ($) (A-IFRS)
NON-EXECUTIVE DIRECTORS
CASH FEES
NON-MONETARY
BENEFITS1
SUPERANNUATION
TOTAL
REMUNERATION
J Akehurst
M Brenner
G Cairns
T Engelhard
B Morgan
S Perkins2
S Sargent
FORMER NON-EXECUTIVE DIRECTORS
H Nugent
R Norris2
Total NED
remuneration
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
239,368
239,679
247,368
247,680
657,368
657,680
32,894
–
275,368
275,679
241,694
188,900
218,368
218,679
185,216
273,680
–
56,670
200
180
200
180
12,400
33,406
33
–
200
10,983
18,209
180
200
180
134
180
–
38
19,632
19,320
19,632
19,320
19,632
19,320
3,272
–
19,632
19,320
19,632
16,100
19,632
19,320
13,301
19,320
–
4,830
259,200
259,179
267,200
267,180
689,400
710,406
36,199
–
295,200
305,982
279,535
205,180
238,200
238,179
198,651
293,180
–
61,538
2,097,644
2,158,647
31,576
45,327
134,365
136,850
2,263,585
2,340,824
1 Non-monetary benefits include insurance premiums and fringe benefits. Changes between current and prior year primarily reflect expenses associated with varying
travel commitments.
2 For FY2016 comparatives, pro-rata periods for KMP office are: R Norris 1 July 2015 to 16 September 2015; S Perkins 1 September 2015 to 30 June 2016.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 6161
Table 19: Details of, and movements in, rights to equity
Rights to equity in the company (Options, PSRs and DSRs) are granted to Executive KMP only, no NEDs hold rights to equity. This table
covers holdings and movements for rights held by Executive KMP (directly, indirectly or beneficially including related parties) over the
Period (or KMP portion of the Period), including grants, transactions and forfeits, by value and by number. Details of the terms and
vesting and exercise conditions attaching to the rights are set out in tables 19 and 21. The company expects to make equity awards
to its new CFO (L Tremaine) in late August or early September 2017 as an offset to equity forfeited from his prior employment and
as a direct consequence of accepting employment with the company. As at the date of this Report the arrangements were not finalised.
The allocation will be disclosed in the 2018 Remuneration Report.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 62
62
63
63
Table 19: Details of, and movements in, rights to equity
TYPE
HELD AT
START1
GRANT DATE
NUMBER
GRANTED
EXECUTIVE DIRECTOR
RIGHTS GRANTED
FAIR
VALUE2,3
($)
VALUE ($)
EXERCISE
PRICE ($)
VEST DATE4
EXPIRY DATE5
F Calabria
Options
PSRs
DSRs
1,409,891
148,552
77,295
30 Aug 2016
30 Aug 2016
30 Aug 2016
231,707
67,019
59,001
1.37
4.95
5.10
317,439
331,744
300,905
5.67
–
–
23 Aug 2021
24 Aug 2020
2018 to 2020
28 Aug 2026
Vest date
Vest date
OTHER EXECUTIVE KMP
J Briskin
G Jarvis
G Mallett
M Schubert
FORMER KMP
G King
D Baldwin
Options
PSRs
DSRs
Options
PSRs
DSRs
Options
PSRs
DSRs
Options
PSRs
DSRs
Options
PSRs
DSRs
Options
PSRs
DSRs
17,769
60,733
25,163
229,982
54,319
42,679
263,663
56,820
28,585
153,641
45,652
52,578
–
–
–
–
–
–
0
0
0
0
0
0
30 Aug 2016
30 Aug 2016
30 Aug 2016
71,951
20,811
19,748
–
–
–
0
0
0
3,018,530
307,838
31,984
1,632,647
202,324
77,714
19 Oct 2016
19 Oct 2016
–
30 Aug 2016
30 Aug 2016
30 Aug 2016
450,000
129,558
–
231,707
67,019
49,665
–
–
–
–
–
–
1.37
4.95
5.23
–
–
–
1.76
5.32
–
1.37
4.95
5.10
0
0
0
0
0
0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
98,573
103,014
103,296
5.67
–
–
23 Aug 2021
24 Aug 2020
2018 to 2020
28 Aug 2026
Vest date
Vest date
0
0
0
–
–
–
–
–
–
–
–
–
792,000
689,249
–
317,439
331,744
253,292
5.21
–
–
5.67
–
–
23 Aug 2021
24 Aug 2020
–
23 Aug 2021
24 Aug 2020
2018 to 2020
28 Aug 2026
Vest date
–
28 Aug 2026
Vest date
Vest date
1 The number of instruments that are held at the start/end of the Period, or, where the holder is KMP for part-year only, on the relevant start/end dates of holding KMP office.
2 Accounting expense value at grant date (Black-Scholes Monte Carlo for Relative TSR performance conditions; discounted cash flow for DSRs) or as estimated at first reporting
period (ROCE non-market hurdle).
3 For DSRs this is the weighted average fair value for the three tranches vesting respectively in 2018, 2019 and 2020.
4 Vest dates are the scheduled test dates. Where identified as 2018 to 2020, the vesting is tranched into three parcels (equal in number) vesting on 20 August 2018, 26 August
2019 and 24 August 2020.
5 The expiry date is the same as the vesting date where the terms of the grant apply automatic exercise on vesting. Where there is no automatic exercise on vesting, the expiry
date is the last possible expiry. Rights may expire earlier, for example if the rights fail to vest on test, they will lapse and expire on the vesting date.
RIGHTS
VESTED
RIGHTS
EXERCISED
0
0
28,375
0
0
28,375
0
0
0
0
0
0
0
0
8,823
0
0
0
0
0
31,984
0
0
29,080
0
0
0
0
0
0
0
0
8,823
0
0
0
0
0
31,984
0
0
29,080
VALUE AT
EXERCISE6
($)
0
0
158,714
0
0
0
0
0
0
0
0
48,968
0
0
0
0
0
174,793
0
0
162,567
RIGHTS
FORFEITED7
VALUE8
($)
VESTED
EXERCISABLE
AT END
HELD AT END1
545,552
70,542
0
1,068,822
686,883
0
0
0
0
0
0
0
103,344
23,196
0
0
0
0
2,021,610
234,128
0
493,495
111,102
0
0
0
0
0
0
0
200,266
211,289
0
0
0
0
3,934,487
2,310,788
0
981,327
1,019,025
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,096,046
145,029
107,921
17,769
60,733
25,163
229,982
54,319
42,679
232,270
54,435
39,510
153,641
45,652
52,578
1,446,920
203,268
0
1,370,859
158,241
98,299
6 The value of rights exercised is calculated as the closing market price of the company’s shares on the Australian Securities Exchange (ASX) on the date of exercise, after
deducting any exercise price. The exercise price for PSRs and DSRs is nil.
7 Forfeited Options were granted in October 2011 and October 2012. Forfeited PSRs were granted in October 2011 and October 2013.
8 The value of equity or rights forfeited represents prior year Origin equity allocations that were forfeited during the year (i.e. the relevant grants realised no benefit and
lapsed without value). The forfeited value represents the grant date value that was disclosed and attributed to remuneration at the time of the grant.
ORIGIN ENERGY PAGE TITLE ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT REMUNERATION REPORT 6464
Table 20: Details of, and movements in, ordinary shares of the company
Holdings and movements for ordinary shares held by KMP (directly, indirectly or beneficially including related parties) over the Period.
HELD
AT START1
ACQUIRED2
RECEIVED ON
EXERCISE OF
OPTIONS/PSRS3
RECEIVED ON
EXERCISE
OF DSRS3
DISPOSED4
POSITION
RELATIVE TO
SHAREHOLDING
REQUIREMENT6
HELD
AT END1,5
NON-EXECUTIVE DIRECTORS7
J Akehurst
M Brenner
G Cairns
T Engelhard
B Morgan
S Perkins
S Sargent
71,200
22,117
163,660
0
47,143
30,000
31,429
EXECUTIVE DIRECTOR
F Calabria
134,974
OTHER EXECUTIVE KMP
J Briskin
G Jarvis
G Mallett
M Schubert
FORMER KMP
H Nugent
G King
D Baldwin
15,302
14,319
34,278
28,138
61,026
1,601,657
12,161
0
0
0
0
0
0
0
181
–
–
181
–
0
0
181
Met
On track
Met
On track
Met
Met
Met
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
28,375
–
–
8,823
–
–
31,984
29,080
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
71,200
22,117
163,660
0
47,143
30,000
31,429
163,530
15,302
14,319
43,282
28,138
61,026
1,633,641
41,422
1 The number of instruments that are held at the start/end of the Period, or, where the holder is KMP for part-year only, on the relevant start/end dates of holding KMP office.
2 Purchases and transfers in. For Other Executive KMP this includes allotments of fully-paid ordinary shares granted under the general Employee Share Plan (ESP). In the case
of F Calabria, the ESP shares were allotted to him on 26 August 2016 prior to his appointment as an Executive Director.
3 After vesting and after payment of the exercise price (the exercise price for PSRs and for DSRs is nil).
4 Sales and transfers out.
5 Other than options and rights disclosed elsewhere in this Report, no other equity instruments including shares in the company were granted to KMP during the period.
6 For NEDs the minimum shareholding requirement is set out in section 5.4. Although the new policy is applicable from 1 July 2017, for informative purposes the test applied
here is against the new policy using the closing share price of $6.86 on 30 June 2017.
7 NEDs are not issued shares under any incentive or equity plans. Their purchases of shares on-market, or pursuant to the company’s dividend reinvestment plan or the
August 2015 Entitlement Offer.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 6565
Table 21: Details of equity granted
The table below lists all unissued shares potentially arising from equity-based incentive grants current at 30 June 2017 held by current
or former employees (including Executive Directors and Executive KMP). Equity-based incentives are not granted to NEDs. No terms
of equity-settled share-based transactions have been altered or modified subsequent to grant. Equity grants that failed to meet their
performance hurdles on their final test dates prior to 30 June 2017 have all been lapsed.
GRANTED
OPTIONS
14 October 2013
22 October 2014
22 October 2015
30 August 2016
19 October 2016
PERFORMANCE SHARE RIGHTS
22 October 2014
22 October 2015
30 August 2016
19 October 2016
DEFERRED SHARE RIGHTS
14 October 2013
22 October 2014
22 October 2015
22 October 2015
22 October 2015
7 December 2015
7 December 2015
7 December 2015
7 December 2015
30 August 2016
30 August 2016
30 August 2016
30 August 2016
NUMBER OUTSTANDING
EXERCISE PRICE
LAST POSSIBLE EXPIRY1
2,625,749
2,148,904
2,945,660
1,715,801
450,000
473,828
1,398,651
1,484,320
129,558
4,240
27,702
603
2,289,152
57,300
24,288
13,830
19,152
10,068
12,346
2,864,366
55,805
55,805
$13.97
$15.65
$6.78
$5.67
$5.21
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14 October 2020
22 October 2021
21 October 2025
28 August 2026
28 August 2026
22 October 2018
21 October 2019
24 August 2020
24 August 2020
14 October 2017
23 October 2017
14 October 2017
23 October 2017
22 October 2018
23 October 2017
22 October 2018
15 January 2018
15 January 2019
21 August 2017
20 August 2018
26 August 2019
24 August 2020
1 The expiry date is the same as the vesting date where the terms of the grant apply automatic exercise on vesting. Where there is no automatic exercise on vesting, the expiry
date is the last possible expiry. Rights may expire earlier, for example if the rights fail to vest on test, they will lapse and expire on the vesting date.
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT 6666
7.
LOANS AND OTHER TRANSACTIONS WITH KMP
There were no loans with KMP during the year.
7.1 OTHER TRANSACTIONS WITH THE CONSOLIDATED ENTITY
OR ITS CONTROLLED ENTITIES
Transactions entered into during the year with KMP which are within normal employee, customer or supplier relationships on terms
and conditions no more favourable than dealings in the same circumstances on an arm’s length basis include:
– the receipt of dividends from Origin Energy Limited;
– participation in the Employee Share Plan, Equity Incentive Plan and NED Share Plan;
– participation in the August 2016 rights issue as a shareholder;
– terms and conditions of employment or directorship appointment;
– reimbursement of expenses incurred in the normal course of employment;
– purchases of goods and services; and
– receipt of interest on Retail Notes
Certain directors of Origin Energy Limited are also directors of other companies which supply Origin Energy Limited with goods and
services or acquire goods or services from Origin Energy Limited. Those transactions are approved by management within delegated
limits of authority and the directors do not participate in the decisions to enter into such transactions. If the decision to enter into
those transactions should require approval of the Board, the director concerned will not vote upon that decision nor take part in
its consideration.
Signed in accordance with a resolution of Directors
Gordon Cairns, Chairman
Sydney, 16 August 2017
ORIGIN ENERGY PAGE TITLE REMUNERATION REPORT LEAD AUDITOR’S INDEPENDENCE DECLARATION
6767
LEAD AUDITOR’S INDEPENDENCE DECLARATION
ORIGIN ENERGY PAGE TITLE 6868
BOARD OF DIRECTORS
BOARD OF DIRECTORS
GORDON CAIRNS
INDEPENDENT
NON-EXECUTIVE
CHAIRMAN
MAXINE BRENNER
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
Gordon Cairns joined the Board in June 2007 and became
Chairman in October 2013. He is Chairman of the Nomination
Committee and a member of the Risk, Remuneration and People,
Audit and Health, Safety and Environment committees.
He has extensive Australian and international experience as
a senior executive, as Chief Executive Officer of Lion Nathan
Ltd, and has held senior management positions in marketing,
operations and finance with PepsiCo, Cadbury Ltd and Nestlé.
Gordon is Chairman of Woolworths Ltd (since September 2015),
a Director of Macquarie Group Limited (since November 2014),
Macquarie Bank Limited (since November 2014) and Non-
executive Director of World Education Australia (since November
2007). He was previously Chairman of the Origin Foundation,
David Jones Ltd (March 2014 – August 2014), Rebel Group
(2010-2012), Director of The Centre for Independent
Studies (May 2006 – August 2011), Director of Quick Service
Restaurant Group (October 2011 – May 2017) and Director of
Westpac Banking Corporation (July 2004 – December 2013).
He also was a senior advisor to McKinsey & Company.
Gordon holds a Master of Arts (Honours) from the University
of Edinburgh.
JOHN AKEHURST
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
John Akehurst joined the Board in April 2009. He is Chairman
of the Health, Safety and Environment Committee and a member
of the Nomination and Risk committees.
His executive career was in the upstream oil and gas and
LNG industries, initially with Royal Dutch Shell and then
as Chief Executive of Woodside Petroleum Ltd. John is
currently a member of the Board of the Reserve Bank of
Australia (since September 2007) and Chairman of Transform
Exploration Pty Ltd.
He is Chairman of the National Centre for Asbestos Related
Diseases and of the Fortitude Foundation, a former Chairman
of Alinta Limited (January 2007–September 2007), and
Coogee Resources Ltd (2008–2012), and a former Director
of CSL Limited (April 2004–October 2016), Oil Search
Limited (1998-2003), Securency Ltd (2008–2012), Murdoch
Film Studios Pty Ltd and the University of Western Australia
Business School.
John holds a Masters in Engineering Science from
Oxford University and is a Fellow of the Institution
of Mechanical Engineers.
Maxine Brenner joined the Board in November 2013. She is
Chairman of the Risk Committee and a member of the Audit
and Nomination committees.
Maxine is a Non-executive Director of Orica Ltd (since April
2013) and Qantas Airways Ltd (since August 2013). She is also
an Independent Director and Chairman of the Audit and Risk
Committee for Growthpoint Properties Australia and a member
of the University of NSW Council.
Maxine was formerly a Managing Director of Investment Banking
at Investec Bank (Australia) Ltd. Prior to Investec, Maxine was
a Lecturer in Law at the University of NSW and a lawyer at
Freehills, specialising in corporate law. Her former directorships
include Treasury Corporation of NSW, Bulmer Australia Ltd,
Neverfail Springwater Ltd (1993–2003) and Federal Airports
Corporation, where she was Deputy Chair. In addition, Maxine has
served as a Council Member of the State Library of NSW and as
a member of the Takeovers Panel.
Maxine holds a Bachelor of Arts and a Bachelor of Laws.
FRANK CALABRIA
CHIEF EXECUTIVE
OFFICER & MANAGING
DIRECTOR
Frank Calabria was appointed Chief Executive Officer and
Managing Director in October 2016. Frank is a member of
the Health, Safety and Environment Committee.
Frank first joined Origin as Chief Financial Officer in November
2001 and was appointed Chief Executive Officer, Energy Markets
in March 2009. In that latter role, Frank was responsible for the
integrated business within Australia including retailing and trading
of natural gas, electricity and LPG, power generation and solar
and energy services.
Frank is Chairman of the Australian Energy Council (AEC) and
a director of the Australian Petroleum Production & Exploration
Association (APPEA). He is a former director of the Australian
Energy Market Operator (AEMO).
Frank has a Bachelor of Economics from Macquarie University
and a Master of Business Administration (Executive) from the
Australian Graduate School of Management.
Frank is also a Fellow of Chartered Accountants Australia and
New Zealand and a Fellow of the Financial Services Institute
of Australasia.
ORIGIN ENERGY PAGE TITLE BOARD OF DIRECTORS
6969
TERESA ENGELHARD
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
SCOTT PERKINS
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
Teresa Engelhard joined the Board of the Company in May 2017.
She is a member of the Remuneration and People Committee.
Teresa has more than 20 years’ experience in the information,
communication, technology and energy sectors as a senior
executive and venture capitalist. Teresa is a Non-executive
Director of RedBubble Limited (since July 2011), Planet
Innovation Ltd (since April 2016), StartupAUS (since March
2016), Redkite (since February 2017) and a member of
Innovation and Science Australia’s Entrepreneurs’ Programme
Committee (since May 2015). Teresa started her career at
McKinsey & Company in California, and spent a decade in Silicon
Valley as a venture capitalist and executive before moving to
Australia in 2006. More recently, she has focused on energy
sector innovation as a venture investor and board member.
Teresa’s past directorships include Daintree Networks, Redfern
Integrated Optics and Zen Ecosystems.
Teresa holds a Bachelor of Science (Hons) degree from the
California Institute of Technology (Caltech), an MBA from
Stanford University and is a graduate of the Australian Institute
of Company Directors.
Scott Perkins joined the Board in September 2015. He is
Chairman of the Remuneration and People Committee and
a member of the Audit, Risk and Nomination committees.
Scott is a Non-executive Director of Woolworths Limited
(since September 2014) and Brambles Limited (since May 2015).
He is Chairman of Sweet Louise (since 2005), a Director of the
Museum of Contemporary Art in Sydney (since 2011) and the
New Zealand Initiative (since 2012). Scott was previously a Non-
executive Director of Meridian Energy (1999–2002).
Scott has extensive Australian and international experience as
a leading corporate adviser. He was formerly Head of Corporate
Finance for Deutsche Bank Australia and New Zealand and a
member of the Executive Committee with overall responsibility
for the Bank’s activities in this region. Prior to that he was Chief
Executive Officer of Deutsche Bank New Zealand and Deputy
CEO of Bankers Trust New Zealand.
He has a longstanding commitment to breast cancer causes,
the visual arts and public policy development.
Scott holds a Bachelor of Commerce and a Bachelor of Laws
(Hons) from Auckland University.
BRUCE MORGAN
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
STEVE SARGENT
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
Bruce Morgan joined the Board in November 2012. He is
Chairman of the Audit Committee and a member of the Health,
Safety and Environment, Nomination and Risk committees.
He is Chairman of Sydney Water Corporation (since October
2013), a Director of Caltex Australia Ltd (since June 2013),
Chairman of Redkite (since April 2015), a Director of the
University of NSW Foundation and the European Australian
Business Council. Bruce has a Bachelor of Commerce
(Accounting and Finance) from the University of NSW.
Bruce served as Chairman of the Board of
PricewaterhouseCoopers (PwC) Australia between 2005
and 2012. In 2009, he was elected as a member of the PwC
International Board, serving a four year term. He was previously
Managing Partner of PwC’s Sydney and Brisbane offices. An audit
partner of the firm for over 25 years, he was focused on the
financial services and energy and mining sectors leading some of
the firm’s most significant clients in Australia and internationally.
He is a Fellow of Chartered Accountants Australia and New
Zealand and of the Australian Institute of Company Directors.
Steve Sargent joined the Board in May 2015. He is Chairman
of the Origin Foundation and a member of the Health, Safety
and Environment and Remuneration and People committees.
Steve is Chairman of OFX Group Ltd (since November 2016).
He is a Non-executive Director of Nanosonics Ltd (since July
2016) and the Great Barrier Reef Foundation (since March
2015). Over recent years Steven has been a Non-executive
Director of Veda Group Limited (2015–2016) and Bond
University Ltd (2010–2016). Steve was also a member of
the Australian Treasurer’s Financial Sector Advisory Council,
President of the American Chamber of Commerce and a Director
on the Board of the Business Council of Australia.
Steve’s most recent executive role was President and Chief
Executive Officer of GE Mining, GE’s global mining technology
and services business. He joined GE Capital in 1993 and held
a number of global leadership positions with the company,
spanning the US, Europe and Asia. He was a member of the
Australian B20 Leadership Group and Coordinating Chair of
the B20 Human Capital Taskforce.
Steve holds a Bachelor of Business from Charles Sturt University
in New South Wales and is a Fellow with the Australian Institute
of Company Directors and Fellow with the Australian Academy
of Technological Sciences and Engineering.
ORIGIN ENERGY PAGE TITLE
7070
EXECUTIVE MANAGEMENT TEAM
EXECUTIVE MANAGEMENT TEAM
JON BRISKIN
EXECUTIVE GENERAL
MANAGER, RETAIL
TONY LUCAS
EXECUTIVE GENERAL MANAGER,
FUTURE ENERGY AND
BUSINESS DEVELOPMENT
Jon Briskin joined Origin in 2010 and was appointed General
Manager, Retail in May 2016.
Jon leads the teams responsible for energy sales, marketing,
product development and service experience for Origin’s
residential and SME customers.
Jon has held various roles at Origin, leading customer operations,
service transformation and customer experience.
Prior to Origin Jon worked as a management consultant across
financial services, energy, technology and government sectors.
Jon holds a Bachelor of Commerce (Accounting and Finance)
from Monash University.
Tony Lucas joined Origin as Risk Analysis Manager in 2002 and
was appointed as General Manager, Energy Risk Management in
February 2011.
Tony leads the team responsible for Strategy and Risk for
Energy Markets. He will also ensure that Origin is uniquely
positioned to lead the transition into a low carbon, technology-
enabled world where customers are empowered with greater
choice by investing in, incubating and deploying the best future
energy solutions.
Originally from New Zealand, Tony began his career in the
banking industry before moving to London where he worked for
Lehman Brothers. He moved to Australia in 1997 and worked
with Bankers Trust and Integral Energy. Tony has an NZ Diploma
in Business Studies and Master of Applied Finance.
ANDREW CLARKE
GROUP GENERAL COUNSEL
AND COMPANY SECRETARY
Andrew Clarke joined Origin in May 2009 and is responsible for
the company secretarial and legal functions. He was a partner of
a national law firm for 15 years and was Managing Director of a
global investment bank for more than two years prior to joining
Origin. Andrew has a Bachelor of Laws (Hons) and a Bachelor
of Economics from Sydney University and is a member of the
Australian Institute of Company Directors.
GREG JARVIS
EXECUTIVE GENERAL MANAGER,
ENERGY SUPPLY AND OPERATIONS.
Greg Jarvis joined Origin in 2002 as Electricity Trading Manager
and was appointed General Manager, Wholesale, Trading and
Business Sales in February 2011.
Greg is responsible for Wholesale, Trading, Business Energy,
Solar, Generation and LPG.
Holding 19 years' experience in the financial market industry, with
14 years' experience in energy markets, Greg began his career in
the banking industry in Australia before moving overseas to work.
He has a Masters in Applied Finance and a Bachelor of Business.
CARL McCAMISH
EXECUTIVE GENERAL MANAGER,
TECHNOLOGY, RISK, HSE,
AND TRANSFORMATION
Carl McCamish joined Origin in March 2008 and is responsible
for Information Technology, Company transformation and risk.
Carl was previously Executive General Manager Corporate
Development and subsequently Executive General Manager
Corporate Affairs, and more recently Executive General Manager,
People & Culture.
Before joining Origin, Carl was head of strategic development
at the private equity firm, Terra Firma. He was previously
Senior Energy Advisor in the United Kingdom Prime Minister's
Strategy Unit. Before that he worked at McKinsey & Company
management consultants.
Carl has a Bachelor of Arts and Laws from the University
of Melbourne and a Masters in Industrial Relations and
Labour Economics from Oxford University where he was a
Rhodes Scholar.
ORIGIN ENERGY PAGE TITLE EXECUTIVE MANAGEMENT TEAM
7171
SHARON RIDGWAY
EXECUTIVE GENERAL MANAGER,
PEOPLE AND CULTURE
LAWRIE TREMAINE
CHIEF FINANCIAL OFFICER
Sharon Ridgway joined Origin in 2009 and is responsible for
People and Culture, internal communications and The Origin
Foundation. Sharon was appointed in 2012 as the Head of P&C
for the LNG business unit before being appointed as the General
Manager P&C for Energy Markets in 2015.
Sharon's team provides strategic support to the business in
key areas such as engagement, diversity, talent management,
communications and culture change.
Originally from the UK, Sharon spent most of her early career
with the Dixons Group, a large European electrical retailer. There
she held a number of operational roles before being appointed
as the Head of HR and subsequently the Head of European
Recruitment. Sharon holds a Bachelor of Business Administration
and a Postgraduate Diploma in HR Management.
MARK SCHUBERT
EXECUTIVE GENERAL MANAGER,
INTEGRATED GAS
Lawrie Tremaine joined Origin in July 2017 and holds the
position of Chief Financial Officer.
Lawrie leads the teams responsible for all finance
activities, corporate strategy, corporate development, and
investor relations.
Lawrie has over 30 years’ experience in financial leadership,
predominantly in the resource, oil and gas and minerals
processing industries.
Prior to joining Origin, Lawrie spent 10 years at Woodside
Petroleum, where he held a number of senior positions, including
Chief Financial Officer for more than 6 years. Before joining
Woodside Lawrie worked at Alcoa for 17 years culminating in
5 years in Tokyo and Beijing as Vice President Finance, Alcoa
Asia Pacific.
Lawrie has extensive experience in capital markets, managing
corporate finances and leading change.
Lawrie has a Bachelor of Business from Chisholm Institute (now
Monash University) and is a Fellow of CPA Australia.
Mark Schubert joined Origin in April 2015 and was appointed
Executive General Manager, IG, in April, 2017. He is responsible
for Origin’s Integrated Gas business, which manages the
Company’s portfolio of natural gas and LNG interests across
Australia, New Zealand and internationally. Integrated Gas
includes Origin's interests in Australia Pacific LNG, as operator
of the upstream and pipeline components of the joint venture
and as gas marketing agent. Mark’s prior Origin role was General
Manager, Commercial where he was responsible for strategy,
business performance, exploration and new resources, gas
marketing, LNG portfolio management, joint ventures and our
non-operated interests.
Mark also held a number of senior positions during his 18 year
career with Shell. Most recently Mark served as General Manager
Production where he had direct accountability for developing
Prelude FLNG - the world's first floating LNG facility. Mark’s
other roles in Shell included General Manager Geelong Refinery
and General Manager Oceania Supply & Marine. Mark holds a
Masters of Finance and Financial Law from the University of
London and a Bachelor of Engineering (Chemical) from the
University of Sydney.
ORIGIN ENERGY PAGE TITLE
7272
CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2017
7373
Origin is committed to the creation of shareholder value and
meeting the expectations of stakeholders to practice sound
corporate governance.
Origin aspires to the highest standards of integrity, personal
safety and environmental performance. To achieve this, every
employee and contractor is required to act in accordance with
Origin’s governance and business conduct standards across its
operations in Australia and internationally.
COMPLIANCE WITH THE ASX CORPORATE
GOVERNANCE PRINCIPLES AND
RECOMMENDATIONS (ASX PRINCIPLES)
This statement has been approved by the Board and summarises
the Company’s governance practices which were in place
throughout the financial year ended 30 June 2017. During the
financial year and to the date of this Report, Origin has complied
with all of the ASX Principles.
PRINCIPLE 1: LAY SOLID FOUNDATIONS
FOR MANAGEMENT AND OVERSIGHT
The Board’s roles and responsibilities are formalised in
a Board Charter, which is available on the Company’s website.
The Charter sets out those functions that are delegated to
management and those that are reserved for the Board.
The Company Secretary is accountable directly to the Board,
through the Chairman, on all matters to do with the proper
functioning of the Board.
Before a Director is appointed, Origin undertakes appropriate
evaluations. These include independent checks of a candidate’s
character, experience, education, criminal record, bankruptcy
history, and any other factors which would affect the Company’s
or the individual’s reputation.
Where a candidate is standing for election or re-election as
Director, the notice of meeting will set out information on
the candidate including biographical details, qualifications and
experience, independence status, outside interests and the
recommendation of the rest of the Board on the resolution.
At the time of joining Origin, Directors and senior executives
are provided with letters of appointment, together with key
Company documents and information, setting out their term
of office, duties, rights and responsibilities, and entitlements
on termination.
The performance of all key executives, including the
Chief Executive Officer (CEO), is reviewed annually against:
– a set of personal financial and non-financial goals;
– Company and Business-Unit specific goals; and
– adherence to the Company’s Compass, which reflects the role
that Origin’s Purpose, Principles, Values and Commitments play
in everyday decision making.
The Remuneration and People Committee and the Board
consider the performance of the Chief Executive Officer and all
members of the Executive Leadership Team (ELT) when deciding
whether to award performance-related remuneration through
short-term and long-term incentives for the year completed and
when assessing fixed remuneration for future periods. Further
information on the outcomes of the FY2017 assessment of
executive remuneration is set out in the Remuneration Report.
Each year, the Directors review the performance of the whole
Board, Board committees and individual Directors. This year, a
full review was undertaken with assistance from an independent
external consultant, covering individual Director performance,
the Board and Committees’ activities and work program, time
commitments, meeting efficiency and Board contribution to
Company strategy, monitoring, compliance and governance.
The results of the review were discussed by the whole Board,
and initiatives to improve or enhance Board performance and
effectiveness were considered and recommended.
ORIGIN ENERGY PAGE TITLE CORPORATE GOVERNANCE STATEMENT 7474
DIVERSITY
Origin’s Diversity and Inclusion Policy applies to all aspects
of employment including recruitment, selection, promotion,
training, remuneration benefits and performance management.
There are also procedures in place to prevent and eliminate
unlawful discrimination and harassment.
Origin promotes a culture where managers and employees
proactively apply the diversity policies and programs through
effective leadership and communication. The Company offers
flexible working arrangements to support diversity in the
workforce and a more inclusive culture.
In FY2017 Origin launched the ‘All Roles Flex’ initiative.
This challenges the organisation, both employees and
managers, to find flexibility in any role. The aim is to improve
productivity by further removing barriers to workplace diversity.
This program also targets greater flexibility for employees
working in roles that are traditionally less flexible due to shift
rosters or remote locations, such as an operational role at a
power station.
During FY2017, as part of the parental leave program, the
entitlement of paid partner leave doubled from five days to
10 days. This leave can also be taken on a flexible basis.
Gender diversity
The Board oversees Origin’s strategies on gender diversity,
including monitoring achievement against gender targets set
by the Board.
Improving gender diversity at Origin continues to be a priority.
During FY2017, Origin was again recognised as a Workplace
Gender Equality Agency Employer of Choice for Gender Equality.
Origin’s three gender diversity targets, and FY2017 performance
against those targets, are outlined below.
Definition of seniority
For the purpose of gender diversity targets, ‘senior roles’ includes
all people in Hay Pay Scale job grades that pay approximately
$150,000 per annum in fixed remuneration1.
We define seniority by reference to standard Hay Pay Scale
job grades, rather than reporting relationship to the CEO,
for two reasons:
– to make genuine comparisons of seniority. In recent years
executives leading four support functions have reported to the
CEO. A large number of people in corporate support areas such
as legal, company secretary, human resources, strategy and
communications are therefore only two or three levels below
the CEO, while in the operating businesses there are many roles
with significant line management responsibility that are more
than three levels below; and
– to make analysis comparable over time. Any restructure that
changes Executive Leadership Team (ELT) roles also changes the
reporting relationships for hundreds of people at lower levels,
making it less valid to accurately compare progress on gender
pay equality at those levels before and after the restructure.
While Origin does not use reporting relationship to the CEO
to define Origin’s gender diversity targets, the gender profile
of these cohorts is of interest to some external stakeholders
and is presented in the cohorts by gender in the table below.
1 The dollar number is approximate because the boundary is defined by Korn Ferry Hay Group position grading methodology. The corresponding market rate varies with time.
ORIGIN ENERGY PAGE TITLE CORPORATE GOVERNANCE STATEMENT 7575
Cohorts by gender
COHORT1
Board
CEO-1 (ELT)
CEO-2
CEO-3
Senior roles
FY2015
FY2016
FY2017
# PEOPLE IN
COHORT
PERCENTAGE
FEMALE
# PEOPLE IN
COHORT
PERCENTAGE
FEMALE
# PEOPLE IN
COHORT
PERCENTAGE
FEMALE
9
9
51
158
1,861
33
11
29
34
28.1
8
6
36
143
1,574
25
17
25
34
27.4
7
9
65
178
1,636
29
11
26
38
28.8
1 Definitions for CEO-1, CEO-2 and CEO-3 are as per Workplace Gender Equality Agency guidelines. That is, they do not include clerical and administrative staff or other staff
that do not themselves manage other people. With all staff included, CEO-3 at Origin was 34 per cent female out of a total cohort of 158 as at 30 June 2017.
PERFORMANCE AGAINST TARGETS
3. Reduce the gap between male and female
1. Deliver equal average pay for men and women at
turnover to zero
Turnover for both men and women was lower than in the
prior year. Achieving the same turnover for men and women
across the Company overall continues to be a stretch target.
During the year, 17 per cent of women and 11.1 per cent of
men in senior roles left the Company, resulting in a gap of
5.9 per cent.
FY2018 TARGETS
Origin’s diversity targets for FY2018 will be to:
– continue to deliver equal average pay for men and women
at each job grade;
– improve the rate of appointment of women to senior roles
by 15 per cent compared to FY2017; and
– improve our retention of women in senior roles with a goal
to reduce the gap between male and female turnover to zero.
The Board has set itself a target of females being at least
40 per cent of the Board by 2020.
each job grade
At the end of FY2017, the average difference between male
and female pay across all job grades was just below one per cent.
While the average female pay is higher at some grades than
average male pay; it is reversed at other grades.
Gender pay gap (graded population weighted average)
to 30 Jun 2017
6
5
4
3
2
1
0
-1
2. Improve the rate of appointment of women to senior
roles to 36 per cent
The percentage of women recruited into senior roles was
38.7 per cent. This was much higher than in the prior year, and
significantly better than Origin’s previous best of approximately
36 per cent in FY2015.
At the end of FY2017, there were 1,636 people in senior roles,
of which 28.9 per cent were women.
Rate of appointment of women to senior roles
(among new hires)
%
7
8
3
.
%
9
5
3
.
%
5
2
3
.
%
6
8
2
.
40
35
30
25
20
%
5
4
2
.
FY13
FY14
FY15
FY16
FY17
1 Definitions for CEO-1, CEO-2 and CEO-3 are as per Workplace Gender Equality Agency guidelines. That is, they do not include clerical and administrative staff or other
staff that do not themselves manage other people. With all staff included, CEO-3 at Origin was 34 per cent female out of a total cohort of 158 as at 30 June 2017.
ORIGIN ENERGY PAGE TITLE CORPORATE GOVERNANCE STATEMENT 7676
PRINCIPLE 2: STRUCTURE THE BOARD
TO ADD VALUE
The Board is structured to facilitate the effective discharge of
its duties and to add value through its deliberations.
In FY2017, the Board had 10 scheduled meetings, including a
two-day strategic planning meeting. The Board and Committees
also had seven separate scheduled workshops to consider matters
of particular relevance. Outside of scheduled meetings, the
full Board met on four other occasions to consider significant
matters. In addition, the Board conducted visits of Company
operations and met with operational management during
the year.
From time to time, the Board delegates its authority to non-
standing committees of Directors to consider transactional
or other matters. In the 12 months to 30 June 2017, five
such additional Board Committee meetings were held. In addition,
the Board established a Due Diligence Committee as part of
the proposed divestment of Origin’s conventional Upstream
assets via a proposed IPO. This Committee met three times
to 30 June 2017.
At Board meetings, Directors receive reports from executive
management on financial and operational performance, risk,
strategy, people, HSE, and major projects or initiatives in which
Origin is involved. In addition, the Directors receive reports
from Board Committees and, as appropriate, presentations on
opportunities and risks for the Company.
Non-executive Directors also meet without the presence of
management (including the Chief Executive Officer) to address
such matters as succession planning, key strategic issues, and
Board operation and effectiveness. All Directors have access
to Company employees, advisers and records. In carrying out
their duties and responsibilities, Directors have access to advice
and counsel from the Chairman, the Company Secretary and
the Group General Counsel, and are able to seek independent
professional advice at the Company’s expense, after consultation
with the Chairman.
New Directors undergo an induction program which includes
sessions with members of management, Chairman of the Board,
and Chairs of each relevant Board Committee, and visits to
key operations to familiarise them with Origin’s business and
administration. Directors also receive continuing education
through ongoing briefings and workshops on industry,
regulatory or other relevant topics and attendance at industry
or governance conferences.
The Board’s size and composition is determined by the Directors,
within limits set by Origin’s Constitution, which requires a Board
of between five and 12 Directors. As at 30 June 2017, the
Board comprised eight Directors, including seven Non-executive
Directors, all of whom are considered independent by the Board,
and the Chief Executive Officer & Managing Director. Of the
eight Directors, two are women. Directors’ profiles, duration of
office and details of their skills, experience and special expertise
are set out in the Directors’ Report.
The Board seeks to have an appropriate mix of skills, experience,
expertise and diversity to enable it to discharge its responsibilities
and add value to the Company. The Board values diversity in all
respects, including gender and differences in background and life
experience, communication styles, interpersonal skills, education,
functional expertise and problem solving skills.
Together, the Directors contribute the following key skills
and experience:
Score:
1: weak
5: average
10: strong
SKILLS AND EXPERIENCE
Governance
A commitment to and experience in setting best
practice corporate governance policies, practices
and standards. Ability to assess the effectiveness
of senior management.
Industry
Experience in the energy or oil and gas industry, or
upstream or integrated exploration and production
company including in-depth knowledge of the
Company’s strategy, markets, competitors, operational
issues, technology and regulatory concerns. This
includes advisory roles for these industries.
Diversity
Diversity in gender, background, geographic
origin, experience (industry and public, private
and non-profit sectors).
International
Exposure to international regions either through
experience working in an organisation with global
operations or through management of international
stakeholder relationships. Understanding of different
cultural, political, regulatory and business requirements.
Strategy
Senior executive and directorship experience, dealing
with complex business models and projects. Experience
in developing, setting and executing strategic direction
and driving growth.
Financial and risk management
Senior executive experience in financial accounting
and reporting, corporate finance, risk and internal
controls. Experience in anticipating and evaluating risks
that could impact the business, recognising and
managing these risks through sound risk governance
policies and frameworks.
Sustainability
Experience in programs implementing health, safety
and environment, including mental health and physical
wellbeing. Ability to identify economically, socially and
environmentally sustainable developments and to set
and monitor sustainability aspirations.
Regulatory and public policy
Experience in the identification and resolution of legal
and regulatory issues. Experience in public and
regulatory policy, including how it affects corporations.
People
Experience in building workforce capability, setting
a remuneration framework which attracts and retains
a high calibre of executives, promotion of diversity
and inclusion.
Customer
Experience in a customer first industry.
Disruption
Background in an industry that has faced
disruptive change.
BOARD
SCORE
(OUT OF 10)
9
7
7
9
8
8
8
7
8
7
6
ORIGIN ENERGY PAGE TITLE CORPORATE GOVERNANCE STATEMENT 7777
The Company’s policy on the Independence of Directors requires
that the Board is comprised of a majority of independent
Directors. In defining the characteristics of an independent
Director, the Board uses the ASX Principles, together with its
own considerations of the Company’s operations and businesses
and appropriate materiality thresholds. Further details of the
matters considered by the Board in assessing independence are
contained in the Independence of Directors Policy which is part
of the Board Charter and is available on the Company’s website.
The Board reviews each Director’s independence annually. At its
review for the FY2017 reporting period, the Board formed the
view that all Non-executive Directors were independent.
The Board selects and appoints the Chairman from the
independent Directors. The Chairman, Mr Cairns, is independent
and his role and responsibilities are separate from those of the
Chief Executive Officer.
Five Committees assist the Board in executing its duties
relating to audit, remuneration and people, health, safety and
environment (HSE), nomination and risk. Each Committee has its
own Charter which sets out its role, responsibilities, composition,
structure, membership requirements and operation. These are
available on the Company’s website. Each Committee’s Chairman
reports to the Board on the Committee’s deliberations at the
following Board meeting where the Committee meeting minutes
are also tabled. Additional and specific reporting requirements to
the Board by each Committee are addressed in the respective
Committee Charters.
Additional information about the Audit Committee, Risk
Committee, HSE Committee and Remuneration and People
Committee is provided in response to Principles 4, 7 and
8 respectively.
A list of the members of each Board Committee as at 30 June
2017 is set out below and their attendance at Committee
meetings during FY2017 is set out in the Directors’ Report.
Board committee membership as at 30 June 2017
AUDIT
REMUNERATION
& PEOPLE
HEALTH,
SAFETY AND
ENVIRONMENT
NOMINATION
RISK
TENURE
INDEPENDENT NON-EXECUTIVE DIRECTORS
John Akehurst
Maxine Brenner
Gordon Cairns
Teresa Engelhard
Bruce Morgan
Scott Perkins
Steve Sargent1
Member
Member
Chairman
Member
Member
Member
Chairman
Member
CHIEF EXECUTIVE OFFICER & MANAGING DIRECTOR
Frank Calabria
1 Mr Sargent also chairs the Origin Foundation.
Chairman
Member
Member
Member
Member
Member
Member
Chairman
Member
Member
Member
Chairman
Member
Member
Member
8 years 4 months
3 years 9 months
10 years 2 months
2 months
4 years and 9 months
1 year 11 months
2 years 3 months
8 months
ORIGIN ENERGY PAGE TITLE CORPORATE GOVERNANCE STATEMENT 7878
The Nomination Committee is comprised of the Chairman of the
Board and the Chairman of each other Board Committee, and
is chaired by Mr Cairns. The Nomination Committee met once
during FY2017, and provides support and advice to the Board by:
– assessing the range of skills and experience required on the
Board and of Directors as part of the Company’s continued
consideration of Board renewal and succession planning;
– reviewing the performance of Directors and the Board;
– establishing processes to identify suitable Directors, including
the use of professional intermediaries;
Ms Teresa Engelhard joined the Board in May 2017 and will
be standing for election at the AGM in accordance with the
ASX Listing Rules. Appropriate background checks in relation
to character, experience, education, criminal record and
bankruptcy history were conducted prior to the appointment
of Ms Engelhard. The Board considers Mr Engelhard’s extensive
experience in disruption, technology, innovation and growth,
together with her global corporate perspectives, will further
strengthen the Board and complement the skills of the existing
Directors. The Board (with Ms Engelhard absent) recommends
Ms Engelhard for election.
– recommending Directors’ appointments and re-elections; and
PRINCIPLE 3: ACT ETHICALLY AND RESPONSIBLY
– considering the appropriate induction and continuing education
provided for Directors.
When identifying potential candidates, the Nomination
Committee considers the current and future needs of Origin
and desired attributes and skill sets for a new Director. Where
a candidate is recommended by the Nomination Committee,
the Board will assess that candidate against a range of criteria
including background, experience, professional qualifications and
the potential for the candidate’s skills to augment the existing
Board and his/her availability to commit to the Board’s activities.
If these criteria are met and the Board appoints the candidate as
a Director, that Director will stand for election by shareholders
at the following Annual General Meeting.
Each year the performance of the Directors retiring by rotation
and seeking re-election under the Constitution is reviewed
by the Nomination Committee (other than the relevant
Director), the results of which form the basis of the Board’s
recommendation to shareholders. The review considers a
Director’s expertise, skill and experience, along with his/her
understanding of the Company’s business, preparation for
meetings, relationships with other Directors and management,
awareness of ethical and governance issues, independence of
thought and overall contribution.
The Board reviewed the performance of Ms Maxine Brenner,
who is standing for re-election at the Annual General Meeting
(AGM) in October 2017. Ms Brenner was not present for her
own review. The Board (with Ms Brenner absent) found that
Ms Brenner had been a high performing Director and concluded
that she should be proposed for re-election.
All Directors and employees are expected to comply with the
law and act with a high level of integrity. Origin has a Code of
Conduct and a number of policies governing conduct in pursuit
of Company objectives in dealing with shareholders, employees,
customers, communities, business partners, suppliers, contractors
and other stakeholders. The Code of Conduct is based on the
Company’s Purpose, Principles, Values and Commitments, which
serves as a guide to Origin’s decision making, behaviours and
actions for its employees.
Origin’s Purpose, Principles, Values and Commitments and a
summary of the Code of Conduct is available on Origin’s website.
Origin prohibits the offer, payment, solicitation or acceptance
of bribes and facilitation payments in any form. It also prohibits
the provision of gifts and gratuities, both directly and indirectly,
to public officials or relatives or associates of public officials.
The giving or receiving of gifts or hospitality is prohibited in all
circumstances that influence, create obligations or conflicts of
interest, indicate favouritism or do not align with Origin’s Code
of Conduct.
Origin encourages individuals to report known or suspected
instances of inappropriate conduct, including breaches of
the Code of Conduct and other policies and directives.
There are policies in place designed to protect employees
and contractors from any reprisal, discrimination or being
personally disadvantaged as a result of their reporting a concern.
ORIGIN ENERGY PAGE TITLE CORPORATE GOVERNANCE STATEMENT PRINCIPLE 4: SAFEGUARD INTEGRITY
IN CORPORATE REPORTING
PRINCIPLE 5: MAKE TIMELY AND
BALANCED DISCLOSURE
7979
The Board has an Audit Committee which comprises four Non-
executive Directors, all of whom are independent. The Chairman
of the Board cannot chair the Audit Committee. The Chairman
of the Audit Committee, Mr Bruce Morgan, is an independent
Director with significant financial expertise. All members of the
Committee are financially literate and the Committee possesses
sufficient accounting and financial expertise and knowledge of
the industry in which Origin operates.
Prior to approval of the Company’s financial statements for
each financial period, the Chief Executive Officer and the
Chief Financial Officer give the Board a declaration that, in their
opinion, the financial records have been properly maintained, that
the financial statements complied with the accounting standards
and gave a true and fair view, and that their opinion had been
formed on the basis of a sound system of risk management and
internal compliance and control which was operating effectively.
The Audit Committee oversees the structure and management
systems that are designed to protect the integrity of the
Company’s corporate reporting. The Audit Committee reviews
the Company’s half and full year financial reports and makes
recommendations to the Board on adopting the financial
statements. The Committee provides additional assurance to
the Board with regard to the quality and reliability of financial
information. The Committee has the authority to seek
information from any employee or external party.
The internal and external auditors have direct access to the Audit
Committee Chairman and, following each scheduled Committee
meeting, meet separately with the Committee without
management present.
The Committee reviews the independence of the external
auditor, including the nature and level of non-audit services
provided, and reports its findings to the Board every six months.
The names of the members of the Audit Committee are set out
in the table under Principle 2 and their attendance at meetings
of the Committee is set out in the Directors’ Report.
The external auditor attends the Company’s AGM and is available
to answer questions from shareholders relevant to the audit.
Origin has adopted policies and procedures designed to ensure
compliance with its continuous disclosure obligations and make
senior management accountable for that compliance.
Origin provides timely, full and accurate disclosure and
keeps the market informed with quarterly releases detailing
exploration, development and production, and half and full
year reports to shareholders including in digital format on
the Company’s website.
All material matters are disclosed immediately to the stock
exchanges on which Origin’s securities are listed (and
subsequently to the media, where relevant), as required by
the relevant listing rules. All material investor presentations
are released to the stock exchanges and are posted on the
Company’s website. Other reports or media statements that
do not contain price sensitive information are included on the
Company’s website. Shareholders can subscribe to an email
notification service and receive notice of any announcements
released by the Company.
Both the Continuous Disclosure Policy and the Communications
with Shareholders Policy are available on the Company’s website.
PRINCIPLE 6: RESPECT THE RIGHTS
OF SHAREHOLDERS
Origin respects the rights of its shareholders and has adopted
policies to facilitate the effective exercise of those rights through
participation at general meetings and with the provision of
information about Origin and its operations.
Origin provides a high standard of communication to
shareholders and other stakeholders so that they have all
available information reasonably required to make informed
assessments of the Company’s business value and prospects.
Shareholders can review the financial and non-financial
performance of Origin via a half year report, shareholder review,
Annual Report, Sustainability Report and annual general meeting
materials. These reports are also available on the ASX on Origin’s
website. Shareholders may also request hardcopies.
Sustainability reporting is guided by the Global Reporting
Initiative and includes disclosures of material environmental,
social and governance (ESG) aspects of the Company’s
business activities.
Origin also discloses other ESG information via regulated
National Greenhouse Emissions Reporting, as well as voluntary
disclosure platforms such as the Carbon Disclosure Project.
Origin regularly engages with and provides requested information
to research firms. Origin was again included in the FSTE4Good
Index and the Dow Jones Sustainability Australia Index during
the period.
All communications from, and most communications to, the
Company’s share registry are available electronically, including
company reports, and shareholders are encouraged to take up
the option of e-communications.
ORIGIN ENERGY PAGE TITLE CORPORATE GOVERNANCE STATEMENT 8080
Origin’s website contains a list of key dates and all recent
announcements, presentations, past and current company
reports and notices of meetings. Shareholder meetings and
results announcements are webcast and an archive of these
meetings is published on the Company’s website.
Origin welcomes and encourages shareholders to attend
and participate in its AGM, either in person, by proxy or
attorney, or by other means adopted by the Board. At each
AGM, the Chairman allows a reasonable opportunity for
shareholders to ask questions of the Board and the external
auditors. Shareholders who are unable to attend the AGM
can view a webcast of the meeting (and certain past general
meetings) on the Company’s website.
Origin has a wide stakeholder engagement program and
a dedicated investor relations function to facilitate effective
two-way communication with investors.
The Communications with Shareholders Policy is available
on the Company’s website.
In addition to shareholders, the Company’s projects and
operations necessitate interaction with a range of stakeholders
including local communities, business partners, government,
industry, media, suppliers and NGOs. Origin has a program to
support these stakeholder interactions and facilitate constructive
relationships. These include:
– dedicated community advisors to help facilitate and implement
the Company’s engagement with local communities and regular
dialogue with the communities in which Origin operates;
– a government relations team which regularly interacts with
policy makers within the jurisdictions of Origin’s operations,
particularly to help develop sound and stable policy to ensure
business certainty;
– dedicated external affairs team with regular interaction with
media and NGOs to create a better understanding of Origin’s
business; and
– making a contribution to the formulation of public policy through
submissions to various enquiries.
Further information on the Company’s stakeholder engagement
program can be found in the Sustainability Report under
Stakeholder Engagement.
Customers are a central part of Origin’s engagement, innovation
and value creation. Origin continues to adapt processes, introduce
new products and invest in technology to provide customers
with greater choice and an improved customer experience. The
Sustainability Report provides further information on Origin’s
interaction with its customers.
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
Origin’s approach to risk management aims to embed a risk-
aware culture in all decision-making and to manage risk in a
proactive and effective manner. The Board has an overarching
policy governing the Company’s approach to risk oversight and
management and internal control systems. This policy and further
information on Origin’s approach to managing its material risks is
available on the Company’s website.
The Board has an established Risk Committee to oversee
Origin's policies and procedures in relation to risk management
and internal control systems. The Risk Committee is comprised
of the Chairman of the Board and the Chairman of each other
Board Committee, and is chaired by independent Non-executive
Director Ms Maxine Brenner. The Risk Committee Charter is
available on the Company’s website. The names of the members
of the Risk Committee are set out in the table under Principle 2
and a record of their attendance at meetings of the Committee
is set out in the Directors’ Report.
The Company’s risk policies are designed to identify, assess,
manage and monitor strategic, operational, financial and project
risks and mitigate the impact in the event that they materialise.
The Board has also approved policies for hedging interest rates,
foreign exchange rates and commodities. Certain specific risks
are covered by insurance.
Management is responsible for the design and implementation
of the risk management and internal control systems to manage
the Company’s risks. Management reports to the Risk Committee
on how material risks are being managed and the effectiveness
of controls in place to mitigate those risks. The Risk Committee
has an annual calendar that includes regular detailed risk
profile reviews.
The Risk Committee reviews the Company’s risk management
framework annually to satisfy itself that it continues to be sound.
An independent review of the risk management framework was
completed during the financial year and it found the framework to
be sound. Management has reported to the Risk Committee and
the Board that, as at 30 June 2017, the framework is sound.
Origin also has an internal audit function which utilises both
internal and external resources to provide an independent
appraisal of the adequacy and effectiveness of the Company’s
risk management and internal control systems. The internal
audit function has direct access to the Chairmen of the Audit,
Risk and HSE Committees and management, and has the right
to seek information. A risk-based approach is used to develop
the annual internal audit plan, aligning planned internal audit
activities to the Company’s material risks. The internal audit plan
is approved by the Audit, Risk and HSE Committees annually and
reviewed quarterly.
In addition to internal audit activities, second line assurance
activity is undertaken across the business in the management
of risk. The findings of this activity are reported through to the
relevant executive and, where appropriate, Board Committee.
ORIGIN ENERGY PAGE TITLE CORPORATE GOVERNANCE STATEMENT 8181
PRINCIPLE 8: REMUNERATE FAIRLY
AND RESPONSIBLY
The Remuneration Report sets out details of the Company’s
policies and practices for remunerating Directors, key
management personnel and employees.
The Board has a Remuneration and People Committee which
comprises four Non-executive Directors, all of whom are
independent. The Chairman, Mr Scott Perkins, is an independent
Director. The names of the members of the Remuneration and
People Committee are set out under Principle 2 and a record of
their attendance at meetings of the Committee is set out in the
Directors’ Report.
Further information about the Remuneration and People
Committee’s activities is provided in the Remuneration Report.
The remuneration of Non-executive Directors is structured
separately from that of the Executive Directors and senior
executives. Information on remuneration for Non-executive
Directors is in the Remuneration Report.
Origin has established a policy which governs dealings in its
securities. This precludes any Origin personnel from engaging
in short-term dealings in the Company’s securities and margin
loans should not be entered into if they could cause a dealing
that is in breach of the general insider trading provisions of the
Corporations Act or the Policy. Origin personnel are prohibited
from entering into hedging transactions which operate to
limit the economic risk of any of their unvested equity-based
incentives. The Dealing in Securities Policy is available on the
Company’s website.
The Code of Conduct, Dealings in Securities Policy and other
relevant policies are supported by appropriate training programs
and regular updates.
Information referred to in this Corporate Governance
Statement as being on the Company’s website may be found at
the web address: www.originenergy.com.au under the section
‘About – Investors & Media – Governance’.
Origin’s approach to the management of risks and controls
reflects the ‘three lines of defence’ model. The first line of
defence comprises operational business managers that own and
manage risks. The second line of defence comprises the corporate
functions that oversee/monitor/challenge risks. The third line of
defence comprises the Origin group internal audit function that
assures compliance with policies and standards.
The Board’s HSE Committee supports and advises the Board on
HSE matters and HSE related risks arising out of the activities
and operations of Origin and its related companies. The HSE
Committee comprises the Chief Executive Officer and four
independent Non-executive Directors. The Chairman, Mr John
Akehurst, is an independent Director. The Board considers
that the direct impact the deliberations of the HSE Committee
can have on the day-to-day operations of Origin makes it
appropriate for the Chief Executive Officer to be a member
of that Committee.
The names of the members of the HSE Committee are set out
under Principle 2 and a record of their attendance at meetings
of the Committee is set out in the Directors’ Report.
Beyond the financial results, Origin is witnessing changes in
community attitudes and increased focus on local and global
environmental challenges. Origin recognises the need for
disclosure and transparency of decision making to help investors
assess both short term and long term risks and prospects.
Origin assesses the environmental and social risks associated
with projects and operations. Projects are developed with
precautionary engineering and management measures in
place to mitigate or manage key environmental and social risks,
and operations are managed using policies and procedures to
control remaining environmental and social risks. Environmental
and social risk management is subject to periodic audits
and assurance.
As one of Australia’s largest power generators, Origin closely
measures, manages and reports on the greenhouse gas emissions
associated with its operations. These emissions are governed
by laws and regulations. Management of emissions extends to
the development of a low carbon power generation portfolio
including natural gas, wind and solar.
Further information on Origin’s management and performance
in the social, environmental and economic aspects in operating its
business is contained in the Sustainability Report.
Origin measures its reputation, that is, how Origin is perceived by
Australians (including shareholders) using RepTrak® methodology.
Origin’s reputation performance and reputation risk issues are
periodically reported to the Board.
In addition to stakeholder measurement through RepTrak, Origin
also engages external advisors to provide real-time monitoring of
mainstream and social media to evaluate the external operating
environment and ensure emerging risks, issues and shifting public
and policy debates are identified and addressed accordingly.
Quarterly quantitative and qualitative mainstream media
analysis is undertaken to better understand external trends,
and sentiment and key public influencers.
These insights influence and inform Origin’s external affairs and
stakeholder engagement strategies, as well as customer facing
positioning and community engagement programs.
ORIGIN ENERGY PAGE TITLE CORPORATE GOVERNANCE STATEMENT 8282
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Income
Intangible assets
Interest-bearing liabilities
RESULTS FOR THE YEAR
PRIMARY STATEMENTS
Income statement
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
OVERVIEW
A
A1 Segments
A2
A3 Expenses
A4 Results of equity accounted investees
A5 Earnings per share
A6 Dividends
B OPERATING ASSETS AND LIABILITIES
B1 Trade and other receivables
B2 Exploration, evaluation and development assets
B3 Property, plant and equipment
B4
B5 Provisions
B6 Other financial assets and liabilities
C CAPITAL, FUNDING AND RISK MANAGEMENT
C1
C2 Risk management
C3 Capital management
C4 Fair value of financial assets and liabilities
C5 Hedging and derivatives
C6 Share capital and reserves
C7 Other comprehensive income
D TAXATION
D1
D2 Deferred tax
E GROUP STRUCTURE
E1 Joint arrangements
E2 Business combinations
E3 Controlled entities
E4 Discontinued operations, assets held for sale and disposals
F OTHER INFORMATION
F1 Contingent liabilities
F2 Commitments
F3 Share-based payments
F4 Related party disclosures
F5 Key management personnel
F6 Notes to the statement of cash flows
F7 Auditors' remuneration
F8 Master netting or similar agreements
F9 Deed of Cross Guarantee
F10 Parent entity disclosures
F11 New standards and interpretations not yet adopted
F12 Power Purchase Arrangements adjustment
F13 Subsequent events
DIRECTORS' DECLARATION
INDEPENDENT AUDITOR'S REPORT
Income tax expense
83
84
85
86
87
88
90
90
96
96
97
98
98
99
99
100
101
103
104
105
106
106
107
110
111
114
117
118
119
119
121
123
123
127
128
132
134
134
135
135
137
138
138
139
139
140
142
142
144
144
145
146
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS INCOME STATEMENT
8383
INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE
CONTINUING OPERATIONS
Revenue
Other income
Expenses
Results of equity accounted investees
Interest income
Interest expense
LOSS BEFORE INCOME TAX
Income tax benefit/(expense)
LOSS FOR THE PERIOD FROM CONTINUING OPERATIONS
DISCONTINUED OPERATIONS
Loss from discontinued operations
LOSS FOR THE PERIOD
(LOSS)/PROFIT FOR THE PERIOD ATTRIBUTABLE TO:
Members of the parent entity
Non-controlling interests
LOSS FOR THE PERIOD
EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
(LOSS)/PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS ATTRIBUTABLE TO:
Members of the parent entity
Non-controlling interests
LOSS FOR THE PERIOD
EARNINGS PER SHARE FROM CONTINUING OPERATIONS
Basic earnings per share
Diluted earnings per share
NOTE
2017
$MILLION
2016
$MILLION1
A2
A2
A3
A4
A2
A3
D1
E4
13,646
187
(13,667)
(1,912)
224
(553)
(2,075)
26
(2,049)
(174)
(2,223)
(2,226)
3
(2,223)
11,456
41
(11,222)
(228)
222
(548)
(279)
(17)
(296)
(319)
(615)
(628)
13
(615)
A5
A5
(126.9) cents
(126.9) cents
(39.8) cents
(39.8) cents
(2,052)
3
(2,049)
(302)
6
(296)
A5
A5
(117.0) cents
(117.0) cents
(19.1) cents
(19.1) cents
1 Certain amounts have been re-presented to separately show those operations classified as discontinued operations and also to reflect adjustments relating to note F12.
The income statement should be read in conjunction with the accompanying notes set out on pages 88 to 144.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 8484
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE
Loss for the period
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified to the income statement
Actuarial gain on defined benefit superannuation plan
Items that may be reclassified to the income statement
Foreign currency translation differences for foreign operations
AVAILABLE-FOR-SALE FINANCIAL ASSETS
Valuation (loss)/gain taken to equity
CASH FLOW HEDGES
Changes in fair value of cash flow hedges
Net loss on hedge of net investment in foreign operations
Total items that may be reclassified to the income statement
TOTAL OTHER COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX
C7
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Items that will not be reclassified to the income statement
Members of the parent entity
Non-controlling interests
Items that may be reclassified to the income statement
Members of the parent entity
Non-controlling interests
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE
TO MEMBERS OF THE PARENT ENTITY ARISING FROM:
Continuing operations
Discontinued operations
NOTE
2017
$MILLION
2016
$MILLION1
(2,223)
(615)
1
(200)
(41)
(202)
–
(443)
(442)
(2,665)
1
–
1
(2,669)
3
(2,666)
(2,665)
(2,332)
(336)
–
80
6
247
(18)
315
315
(300)
–
–
–
(311)
11
(300)
(300)
(64)
(247)
1 Certain amounts have been re-presented to separately show those operations classified as discontinued operations and also to reflect adjustments relating to note F12.
The statement of comprehensive income should be read in conjunction with the accompanying notes set out on pages 88 to 144.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION
8585
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Derivatives
Other financial assets
Income tax receivable
Assets classified as held for sale
Other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Derivatives
Other financial assets
Investments accounted for using the equity method
Property, plant and equipment (PPE)
Exploration and evaluation assets
Development assets
Intangible assets
Deferred tax assets
Other assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Payables to joint ventures
Interest-bearing liabilities
Derivatives
Other financial liabilities
Provision for income tax
Employee benefits
Provisions
Liabilities classified as held for sale
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Trade and other payables
Interest-bearing liabilities
Derivatives
Employee benefits
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Reserves
Retained earnings
TOTAL PARENT ENTITY INTEREST
Non-controlling interests - Contact Energy
Non-controlling interests - other
TOTAL EQUITY
NOTE
2017
$MILLION
2016
$MILLION1
AS AT
1 JULY 2015
$MILLION1
B1
C5
B6
E4
B1
C5
B6
A4
B3
B2
B2
B4
C1
C5
B6
B5
E4
C1
C5
B5
C6
117
2,278
138
241
86
–
2,050
101
5,011
4
1,055
3,700
5,463
3,714
858
–
5,325
35
34
146
1,945
248
237
312
59
471
137
3,555
3
1,065
4,943
5,945
5,685
1,932
292
5,366
92
27
151
2,085
239
15
207
79
5,441
104
8,321
5
861
3,553
6,467
6,505
1,894
239
5,481
38
43
20,188
25,199
25,350
28,905
25,086
33,407
1,892
130
133
300
387
52
184
56
720
3,854
10
8,382
1,309
35
191
9,927
13,781
11,418
7,150
439
3,807
11,396
–
22
11,418
2,048
–
110
18
375
6
215
71
46
2,889
68
9,506
1,637
35
710
11,956
14,845
14,060
7,150
857
6,032
14,039
–
21
14,060
2,037
–
38
31
156
4
260
74
2,575
5,175
89
11,839
1,927
35
614
14,504
19,679
13,728
4,599
576
7,117
12,292
1,244
192
13,728
1 Certain amounts have been restated to reflect adjustments relating to note F12.
The statement of financial position should be read in conjunction with the accompanying notes set out on pages 88 to 144.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 8686
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE
$MILLION
SHARE
CAPITAL
SHARE-
BASED
PAYMENTS
RESERVE
FOREIGN
CURRENCY
TRANSLATION
RESERVE
HEDGING
RESERVE
AVAILABLE-
FOR-SALE
RESERVE
RETAINED
EARNINGS
NON-
CONTROLLING
INTERESTS
TOTAL
EQUITY
7,150
197
314
321
(200)
–
(202)
–
25
(41)
–
6,032
1
(2,226)
(200)
(202)
(41)
(2,225)
–
–
–
–
–
–
–
–
–
119
(16)
3,807
21
14,060
–
3
3
(2)
–
(2)
22
(442)
(2,223)
(2,665)
(2)
25
23
11,418
BALANCE AS AT 30 JUNE 2017
7,150
BALANCE AS AT 1 JULY 2016
Other comprehensive income
(refer to note C7)
(Loss)/profit
TOTAL COMPREHENSIVE
INCOME
FOR THE PERIOD
Dividends paid (refer to
note A6)
Share-based payments
TOTAL TRANSACTIONS
WITH OWNERS RECORDED
DIRECTLY IN EQUITY
BALANCE AS AT 1 JULY 2015
Power Purchase Arrangements
adjustment, net of tax
(refer to note F12)
BALANCE AS AT
1 JULY 2015 (RESTATED)1
(Loss)/profit as reported in
2016 financial statements
Power Purchase Arrangements
adjustment, net of tax
(refer to note F12)
Restated (loss)/profit for
the period
Other comprehensive income
(refer to note C7)
TOTAL COMPREHENSIVE
INCOME
FOR THE PERIOD
Dividends paid (refer to
note A6)
Movement in share capital
(refer to note C6)
Share-based payments
Sale of Contact Energy
Transfer within reserves
TOTAL TRANSACTIONS
WITH OWNERS RECORDED
DIRECTLY IN EQUITY
BALANCE AS AT
30 JUNE 2016 RESTATED1
–
–
–
–
–
–
–
–
–
–
25
25
222
171
4,599
–
–
4,599
171
–
–
–
–
–
–
2,551
–
–
–
–
–
–
–
–
–
–
32
(6)
–
–
–
–
114
315
–
315
–
–
–
64
64
–
–
–
(65)
–
71
–
71
–
–
–
247
247
–
–
–
3
–
3
19
7,548
1,436
14,159
–
19
–
–
6
6
–
–
–
–
–
–
(431)
–
(431)
7,117
1,436
13,728
(589)
(39)
(628)
–
(628)
(452)
–
–
–
(5)
13
–
13
(2)
11
(8)
(576)
(39)
(615)
315
(300)
(460)
–
–
(1,423)
5
2,551
32
(1,491)
–
(457)
(1,426)
632
2,551
26
(65)
7,150
197
314
321
25
6,032
21
14,060
1 Certain amounts have been restated to reflect adjustments relating to note F12.
The statement of changes in equity should be read in conjunction with the accompanying notes set out on pages 88 to 144.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS STATEMENT OF CASH FLOWS
8787
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
Cash paid to suppliers
Cash generated from operations
Income taxes paid, net of refunds received
NET CASH FROM OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of PPE
Acquisition of exploration and development assets
Acquisition of other assets
Investment in equity accounted investees
Loans to equity accounted investees
Interest received from equity accounted investees
Investment in equity accounted investees
(funding of APLNG debt service reserve account)1
Interest received from other parties
Net proceeds from sale of investment in Contact Energy
Net proceeds from sale of non-current assets
NET CASH FROM/(USED IN) INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayment of borrowings
Proceeds from share rights issue
Interest paid
Dividends paid by the parent entity
Loan from equity accounted investees1
Dividends paid to non-controlling interests
NET CASH USED IN FINANCING ACTIVITIES
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD
Effect of exchange rate changes on cash
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD2
NOTE
2017
$MILLION
2016
$MILLION
F6
15,263
(14,027)
1,236
53
1,289
(354)
(65)
(82)
(389)
–
218
(127)
1
–
887
89
4,017
(4,973)
–
(540)
–
127
(2)
14,040
(12,688)
1,352
52
1,404
(460)
(112)
(119)
(10)
(1,544)
338
–
1
1,599
118
(189)
9,102
(11,792)
2,496
(611)
(410)
–
(8)
(1,371)
(1,223)
7
146
(2)
151
(8)
155
(1)
146
1 Relates to cash calls paid by the Group to Australia Pacific LNG, to allow it to meet its project finance Debt Service Reserve Account requirements. These amounts were
subsequently loaned back to the Group by Australia Pacific LNG after the provision of a guarantee by the Group. The loan is disclosed as a payable to joint ventures in the
statement of financial position.
2 Cash and cash equivalents at the end of the period of $151 million includes $34 million of cash and cash equivalents which are classified as held for sale.
The statement of cash flows should be read in conjunction with the accompanying notes set out on pages 88 to 144.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 8888
NOTES TO THE FINANCIAL STATEMENTS
OVERVIEW
Origin Energy Limited (the Company) is a for-profit company domiciled in Australia. The address of the Company’s registered office is
Level 45, Australia Square, 264–278 George Street, Sydney NSW 2000. The nature of the operations and principal activities of the
Company and its controlled entities (the Group) are described in the Segment information.
The consolidated general purpose financial statements of the Group for the year ended 30 June 2017 were authorised for issue in
accordance with a resolution of the directors on 16 August 2017.
The financial statements:
– have been prepared in accordance with the requirements of the Corporations Act 2001 (Cth), Australian Accounting Standards and other
authoritative pronouncements of the Australian Accounting Standards Board (AASB) and International Financial Reporting Standards as
issued by the International Accounting Standards Board;
– have been prepared on a historical cost basis, except for derivative financial instruments, environmental scheme certificates, surrender
obligations, available-for-sale financial assets and assets and liabilities classified as held for sale that are carried at their fair value; and
trade and other receivables that are initially recognised at fair value, and subsequently measured at amortised cost less accumulated
impairment losses;
– are presented in Australian dollars;
– are rounded to the nearest million dollars, unless otherwise stated, in accordance with Australian Securities and Investments Commission
(ASIC) Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191;
– present reclassified comparative information where required for consistency with the current year’s presentation;
– adopt all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the operations of the
Group and effective for reporting periods beginning on or after 1 July 2016; and
– do not early adopt any Accounting Standards and Interpretations that have been issued or amended but are not yet effective.
Refer to note F11 for further details.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS KEY JUDGEMENTS AND ESTIMATES
In the process of applying the Group’s accounting policies, a number of judgements and estimates have been made. Judgements and
estimates which are material to the financial statements are found in the following notes:
8989
– Income (note A2)
– Trade and other receivables (note B1)
– Exploration, evaluation and development assets (note B2)
– Property, plant and equipment (note B3)
– Intangible assets (note B4)
– Provisions (note B5)
– Fair value of financial assets and liabilities (note C4)
– Income tax expense (note D1)
Estimates of recoverable amounts are based on an asset’s value in use or fair value less costs to sell, using a discounted cash flow method.
This requires estimates and assumptions to be made about highly uncertain external factors such as future commodity prices, foreign
exchange rates, discount rates, the effects of inflation, climate change policies, supply-and-demand conditions, reserves, future operating
profiles and production costs.
The recoverable amounts of non-current assets have been assessed at 30 June 2017 based on the types of judgements and estimates
described above. Where required, any impairment has been recognised in the income statement.
Errors can arise in respect of recognition, measurement, presentation or disclosure of elements of financial statements. In the case
where the Group identifies a material error during the year relating to prior period, the error is corrected retrospectively by restating
the comparative amounts for the prior period(s) presented in which the error occurred.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS
90
90
A RESULTS FOR THE YEAR
This section highlights the performance of the Group for the year, including results by operating segment, income and expenses,
results of equity accounted investments, earnings per share and dividends.
A1 SEGMENTS
The Group’s Managing Director monitors the operating results of the business using operating segments organised according to the
nature and/or geography of the activities undertaken. This section includes the results by operating segment (A1.1), segment assets
and liabilities (A1.2) and geographical information for revenue and non-current assets (A1.3).
A1.1 Segment result for the year ended 30 June
91
91
$MILLION
REVENUE
Segment revenue
Eliminations
EXTERNAL REVENUE
UNDERLYING EBITDA
Depreciation and amortisation
Share of ITDA of equity accounted investees
UNDERLYING EBIT
Net financing costs5
Income tax expense6
Non-controlling interests (NCI)
SEGMENT RESULT AND UNDERLYING PROFIT7
ITEMS EXCLUDED FROM UNDERLYING PROFIT
Fair value and foreign exchange movements8
LNG-related items pre revenue recognition
Disposals, impairments and business restructuring
Tax and NCI on items excluded from underlying profit8
ITEMS EXCLUDED FROM UNDERLYING PROFIT
STATUTORY LOSS ATTRIBUTABLE TO MEMBERS
OF THE PARENT ENTITY8
ENERGY
MARKETS1
INTEGRATED GAS2
CORPORATE3
TOTAL CONTINUING
OPERATIONS
CONTACT ENERGY4
OTHER
DISCONTINUED
OPERATIONS
TOTAL
DISCONTINUED
OPERATIONS7
CONSOLIDATED
REF.
2017
20168
2017
2016
2017
2016
2017
20168
2017
2016
2017
2016
2017
2016
2017
20168
(a)
(b)
(c)
(d)
(e)
(f)
13,558
11,423
–
–
13,558
11,423
1,492
(325)
–
1,167
–
–
–
1,330
(326)
–
1,004
–
–
–
88
–
88
747
(19)
(925)
(197)
(197)
–
–
33
–
33
49
(17)
(293)
(261)
(30)
–
–
1,167
1,004
(394)
(291)
20
–
157
–
177
(111)
–
(4)
–
19
(52)
(2,669)
–
(143)
(304)
(5)
–
(115)
(2,702)
(452)
–
–
–
(66)
–
–
(66)
(87)
(217)
(3)
(373)
13
–
(183)
243
73
–
–
–
(81)
–
(3)
(84)
(58)
(279)
(6)
(427)
(53)
–
(286)
264
(75)
13,646
11,456
–
–
13,646
11,456
2,173
(344)
(925)
904
(284)
(217)
(3)
400
52
(52)
(2,695)
243
(2,452)
1,298
(343)
(296)
659
(88)
(279)
(6)
286
(307)
(304)
(295)
264
(642)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
251
–
251
61
(20)
–
41
(9)
(11)
(10)
11
(10)
–
14
6
10
824
(363)
461
357
(133)
–
224
(12)
(62)
–
150
82
–
(519)
113
(324)
641
(174)
467
337
(261)
–
76
(12)
4
–
68
(24)
–
(500)
163
(361)
824
(363)
461
357
(133)
–
224
(12)
(62)
–
150
82
–
(519)
113
(324)
892
(174)
718
398
(281)
–
117
(21)
(7)
(10)
79
(34)
–
(486)
169
14,470
12,348
(363)
(174)
14,107
12,174
2,530
(477)
(925)
1,128
(296)
(279)
(3)
550
134
(52)
(3,214)
356
1,696
(624)
(296)
776
(109)
(286)
(16)
365
(341)
(304)
(781)
433
(993)
(351)
(2,776)
(2,226)
(628)
1 Energy retailing, power generation and LPG operations predominantly in Australia.
2 Unconventional Gas business including the Group’s investment in Australia Pacific LNG; the results of the Group’s activities as Australia Pacific LNG upstream operator and
management of the Group’s exposure to LNG pricing risk. The results of the Group’s upstream conventional business which are part of the proposed divestment, have been
classified as other discontinued operations.
3 Various business development and support activities that are not allocated to operating segments. The June 2016 results include $6 million of net financing costs and
4
$5 million of income tax benefit and NCI relating to the Group’s funding of its investment in Contact Energy.
Includes the Group’s 53.09 per cent controlling interest in Contact Energy Limited (Contact Energy), which is involved in energy retailing and power generation in New Zealand,
up to the date of sale of the Group’s interest in Contact Energy on 10 August 2015. The results of Contact Energy were classified as a discontinued operation at 30 June 2016
(refer to note E4).
5 Net financing costs have been allocated to the Integrated Gas segment relating to the LNG business, the Contact Energy segment (until disposal on 10 August 2015) and to
other discontinued operations segment.
Income tax expense for entities in the Origin tax consolidated group is allocated to the Corporate segment with the exception of amounts related to other discontinued operations.
6
7 Further details of discontinued operations are included in note E4.
8 Certain amounts have been restated to reflect adjustments relating to note F12.
ORIGIN ENERGY PAGE TITLE ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS 9292
A1 SEGMENTS (CONTINUED)
EXPLANATORY NOTES TO SEGMENT RESULTS FOR THE YEAR ENDED 30 JUNE
(a) Segment revenue eliminations
Sales between segments occur on an arm’s length basis. The Upstream conventional business (of which assets relating to the proposed
divestment have been classified as other discontinued operations) sells gas and LPG to the Energy Markets segment, and previously sold
LPG to Contact Energy.
(b) Underlying EBITDA
Represents underlying earnings before interest, tax, depreciation and amortisation (EBITDA). Includes the Group’s share of underlying
EBITDA from equity accounted investees of $859 million (2016: $111 million). Refer to note E1.2 for details
(c) Net financing costs
Net financing costs is the aggregation of interest income of $224 million (2016: $222 million), interest expense of $553
million (2016: $548 million) from continuing operations, net interest expense of $12 million relating to discontinued operations
(2016: $21 million), less net interest expense relating to Australia Pacific LNG funding of $45 million (2016: $238 million).
(d) Fair value and foreign exchange movements
$MILLION
GROSS
TAX AND NCI
GROSS
TAX AND NCI
2017
20161
Increase/(decrease) in fair value of financial instruments
LNG foreign currency loss
LNG translation of foreign denominated long-term tax balances
Tax benefit on translation of foreign denominated
long-term tax balances
(e) LNG-related items pre revenue recognition
207
(73)
–
–
134
(63)
22
–
3
(38)
(290)
(42)
(9)
–
(341)
90
12
–
5
107
2017
20161
$MILLION
GROSS
TAX AND NCI
GROSS
TAX AND NCI
Net financing costs incurred in funding the Australia Pacific LNG project
LNG pre-production costs not able to be capitalised
(45)
(7)
(52)
14
2
16
(238)
(66)
(304)
71
11
82
(f) Disposals, impairments and business restructuring
$MILLION
GROSS
TAX AND NCI
GROSS
TAX AND NCI
2017
20161
Gain on sale of Rimu, Kauri and Manutahi (RKM)
Gain on sale of Mortlake Pipeline
Gain on sale of Surat Basin
Gain on sale of Cullerin Range Wind Farm
Loss on sale of OTP Geothermal Pte Ltd
Gain on sale of Javiera solar project
Gain on sale of Darling Downs Solar Farm
Gain on sale of Darling Downs Pipeline
Gain on sale of Stockyard Hill Wind Farm
Gain on sale of Contact Energy
Gain on sale of Mortlake Terminal Station
Capital loss recognition
Tax expense reflecting difference between carrying amount
and tax base of entities sold
DISPOSALS
1 Certain amounts have been restated to reflect adjustments relating to note F12.
1
88
2
12
(1)
2
3
234
60
–
–
–
–
401
–
(26)
(1)
(4)
–
–
(1)
(71)
(18)
–
–
40
(17)
(98)
–
–
–
–
–
–
–
–
–
14
24
–
–
38
–
–
–
–
–
–
–
–
–
–
(7)
28
–
21
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 9393
A1 SEGMENTS (CONTINUED)
EXPLANATORY NOTES TO SEGMENT RESULTS FOR THE YEAR ENDED 30 JUNE (CONTINUED)
(f) Disposals, impairments and business restructuring (continued)
$MILLION
GROSS
TAX AND NCI
GROSS
TAX AND NCI
2017
2016
Integrated Gas
Share of Australia Pacific LNG impairment of non-current assets1
Browse Basin
Assets held for sale
New Zealand onshore assets
Cooper Basin
BassGas
Otway Basin
Surat Basin
Corporate
Investment in Energia Austral SpA
IT transformation
Investment in Energia Andina S.A.
Investment in OTP Geothermal Pte Ltd
IMPAIRMENTS
Transaction costs in respect of the Lattice Energy divestment
Restructure costs
Corporate transaction costs
Integration and transformation costs
De-recognition of New Zealand tax losses forecast
to be no longer available post divestment
Uplift in tax cost base
BUSINESS RESTRUCTURING
(1,846)
(825)
(753)
–
–
–
–
–
(114)
–
–
–
(3,538)
(40)
(17)
(20)
–
–
–
(77)
TOTAL DISPOSALS, IMPAIRMENTS AND BUSINESS RESTRUCTURING
(3,214)
–
248
226
–
–
–
–
–
–
–
–
–
474
12
5
6
–
(21)
–
2
378
–
–
–
30
(111)
(204)
(236)
30
–
(94)
(86)
(20)
(691)
–
(111)
(12)
(5)
–
–
(128)
(781)
–
–
–
(9)
34
61
70
(9)
–
29
–
–
176
–
33
3
2
–
9
47
244
1 As the Group equity accounts for its share of net profit after tax of Australia Pacific LNG the above amount is presented post-tax.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 94
94
95
95
A1 SEGMENTS (CONTINUED)
A1.2 SEGMENT ASSETS AND LIABILITIES AS AT 30 JUNE
$MILLION
ASSETS
Segment assets
Investments accounted for using the equity method (refer
to note A4)
Cash, funding related derivatives and tax assets
TOTAL ASSETS
LIABILITIES
Segment liabilities
Financial liabilities, interest-bearing liabilities, funding
related derivatives and tax liabilities
TOTAL LIABILITIES
Acquisitions of non-current assets
(includes capital expenditure)1
ENERGY MARKETS
INTEGRATED GAS
CORPORATE
TOTAL CONTINUING
OPERATIONS
CONTACT ENERGY
ASSETS AND
LIABILITIES HELD
FOR SALE
OTHER ASSETS AND
LIABILITIES HELD FOR
SALE
TOTAL ASSETS AND
LIABILITIES HELD
FOR SALE2
CONSOLIDATED
2017
20163
2017
2016
2017
2016
2017
20163
2017
2016
2017
2016
2017
2016
2017
20163
12,188
12,048
973
4,431
–
–
–
–
5,463
3,609
5,945
4,848
12,188
12,048
10,045
15,224
126
–
790
916
118
–
1,044
1,162
(2,852)
(2,834)
(565)
(1,293)
(467)
(380)
–
–
(7,633)
(6,905)
(1,544)
(3,387)
(2,852)
(2,834)
(8,198)
(8,198)
(2,011)
(3,767)
13,287
16,597
5,463
4,399
5,945
5,892
23,149
28,434
(3,884)
(4,507)
(9,177)
(10,292)
(13,061)
(14,799)
276
223
396
383
11
15
683
621
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7
1,696
–
354
2,050
(720)
–
(720)
113
318
152
1
471
(46)
–
(46)
25
1,696
318
14,983
16,915
–
354
2,050
(720)
–
(720)
113
152
1
471
(46)
5,463
4,753
6,097
5,893
25,199
28,905
(4,604)
(4,553)
–
(9,177)
(10,292)
(46)
(13,781)
(14,845)
32
796
653
1 The Integrated Gas segment includes $388 million of cash contributions to Australia Pacific LNG. June 2016 cash contributions of
$1,544 million to Australia Pacific LNG are not treated as acquisitions as they are accounted for as loans rather than an increase in
the Group’s investment.
2 Further details of held for sale amounts are included in note E4.
3 Certain amounts have been restated to reflect adjustments relating to note F12.
A1.3 GEOGRAPHICAL INFORMATION
Detailed below is revenue based on the location of the customer and non-current assets (excluding derivatives and other financial assets)
based on the location of the assets.
REVENUE FOR THE YEAR ENDED 30 JUNE
Australia
Other
REVENUE FROM CONTINUING OPERATIONS
Australia
New Zealand
REVENUE FROM DISCONTINUED OPERATIONS
TOTAL EXTERNAL REVENUE
NON-CURRENT ASSETS AS AT 30 JUNE
Australia
New Zealand
Other
TOTAL NON-CURRENT ASSETS1
1 Excludes amounts which are classified as held for sale at 30 June 2016 and 30 June 2017. Refer to note E4.
2017
$MILLION
2016
$MILLION
13,515
131
13,646
318
143
461
11,300
156
11,456
335
383
718
14,107
12,174
15,359
–
39
15,398
18,712
495
43
19,250
ORIGIN ENERGY PAGE TITLE ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS
9696
A2 INCOME
INCOME FROM CONTINUING OPERATIONS
Revenue2
Net gain on sale of assets
Other
OTHER INCOME
Interest earned from other parties
Interest earned on Australia Pacific LNG MRCPS (refer to note E1)
INTEREST INCOME3
2017
$MILLION1
2016
$MILLION1
13,646
11,456
167
20
187
2
222
224
25
16
41
2
220
222
1 Excludes amounts classified as discontinued operations at 30 June 2016 and 30 June 2017. Refer to note E4.
2 Revenue from the sale of oil and gas by the Integrated Gas segment is recognised when title to the commodity passes to the customer. Revenue from the sale of electricity
and gas by the Energy Markets segment is recognised on delivery of the product. Amount excludes revenue from discontinued operations of $461 million (2016: $718 million
restated). Note A1 provides segment revenue.
Interest income is recognised as it accrues.
3
KEY ESTIMATE: UNBILLED REVENUE
At the end of each period, the volume of energy supplied since a customer’s last bill is estimated in determining the unbilled revenue
included in income. This estimation requires judgement and is based on historical customer consumption and payment patterns.
Related to this are unbilled network expenses for unread gas and electricity meters, which are estimated based on historical customer
consumption patterns and accrued at the end of the reporting period. This is recorded within trade and other payables in the statement
of financial position.
A3 EXPENSES
EXPENSES FROM CONTINUING OPERATIONS
Raw materials and consumables used
Labour2
Exploration
Depreciation and amortisation
Impairment of assets
(Increase)/decrease in fair value of financial instruments5
Net foreign exchange loss
Other3
EXPENSES5
Interest charged by other parties
Impact of discounting on long-term provisions
Interest expense related to Australia Pacific LNG funding
INTEREST EXPENSE
Financing costs capitalised4
2017
$MILLION1
2016
$MILLION1
11,099
618
–
344
939
(125)
75
717
13,667
86
3
464
553
2
8,952
691
53
343
141
256
43
743
11,222
56
4
488
548
64
Includes contributions to defined contribution superannuation funds from continuing operations of $61 million (2016: $66 million).
Includes operating lease rental expense of $67 million (2016: $79 million) from continuing operations.
1 Excludes amounts classified as discontinued operations at 30 June 2016 and 30 June 2017. Refer to note E4.
2
3
4 Financing costs incurred for the construction of a qualifying asset are capitalised while the asset is being constructed or prepared for use at the rate applicable to the
relevant borrowings. Where borrowings are not specific to an asset, financing costs are calculated at an average rate based on the general borrowings of the Group
(2017: 4.10 per cent; 2016: 4.40 per cent).
5 Certain comparative amounts have been restated to reflect adjustments relating to note F12.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS A4 RESULTS OF EQUITY ACCOUNTED INVESTEES
$MILLION
FOR THE YEAR ENDED 30 JUNE 2017
Australia Pacific LNG1
TOTAL
Group’s share of Australia Pacific LNG’s items excluded
from underlying consolidated profit2
TOTAL EXCLUDING GROUP’S SHARE OF AUSTRALIA PACIFIC LNG’S
ITEMS EXCLUDED FROM UNDERLYING CONSOLIDATED PROFIT3
$MILLION
FOR THE YEAR ENDED 30 JUNE 2016
Australia Pacific LNG1
Other joint venture entities
TOTAL
Group’s share of Australia Pacific LNG’s items excluded
from underlying consolidated profit2
TOTAL EXCLUDING GROUP’S SHARE OF AUSTRALIA PACIFIC LNG’S
ITEMS EXCLUDED FROM UNDERLYING CONSOLIDATED PROFIT3
$MILLION
AS AT
Australia Pacific LNG1
Other joint venture entities
9797
SHARE OF
INTEREST, TAX,
DEPRECIATION AND
AMORTISATION
(ITDA)
SHARE OF NET
(LOSS)/PROFIT
(134)
(134)
(791)
(925)
(287)
(3)
(290)
(6)
(1,912)
(1,912)
1,846
(66)
(225)
(3)
(228)
43
SHARE OF
EBITDA
(1,778)
(1,778)
2,637
859
62
–
62
49
111
(296)
(185)
EQUITY ACCOUNTED INVESTMENT
CARRYING AMOUNT
2017
5,463
–
5,463
2016
5,945
–
5,945
1 Australia Pacific LNG’s summary financial information is separately disclosed in note E1.
2 Detailed further in note E1.
3 Disclosure is provided to enable the reconciliation to share of ITDA of equity accounted investees included in the segment analysis in note A1.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 9898
A5 EARNINGS PER SHARE
EARNINGS PER SHARE BASED ON STATUTORY CONSOLIDATED LOSS
Basic earnings per share
Diluted earnings per share
Basic earnings per share from continuing operations
Diluted earnings per share from continuing operations
Basic earnings per share from discontinued operations
Diluted earnings per share from discontinued operations
EARNINGS PER SHARE BASED ON UNDERLYING CONSOLIDATED PROFIT1
Underlying basic earnings per share
Underlying diluted earnings per share
2017
20162
(126.9) cents
(126.9) cents
(117.0) cents
(117.0) cents
(9.9) cents
(9.9) cents
(39.8) cents
(39.8) cents
(19.1) cents
(19.1) cents
(20.7) cents
(20.7) cents
31.3 cents
31.2 cents
23.2 cents
23.2 cents
1 Refer to note A1 for a reconciliation of underlying consolidated profit to statutory loss.
2 Certain amounts have been re-presented to separately show those operations classified as discontinued operations and also to reflect adjustments relating to note F12.
CALCULATION OF EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share (EPS) is calculated as loss for the period attributable to the parent entity (2017: $2,226 million loss;
2016: $628 million loss) divided by the average weighted number of shares on issue during the year.
Basic earnings per share from continuing operations
Basic EPS from continuing operations is calculated as loss for the period from continuing operations attributable to the parent entity
(2017: $2,052 million loss; 2016: $302 million loss) divided by the average weighted number of shares (2017: 1,754,489,221; 2016:
1,578,213,157).
Diluted underlying earnings per share
Diluted underlying EPS represents loss for the period attributable to the parent entity divided by an average weighted number of shares
(2017: 1,759,929,408; 2016: 1,580,493,399) which has been adjusted to reflect the number of shares which would be issued if all
outstanding options, performance share rights and deferred shares rights were to be exercised (2017: 5,440,187; 2016: 2,280,242).
Due to the statutory loss attributable to the parent entity for the years ended 30 June 2016 and 2017, the effect of these instruments
and the impact of the share rights issue on these instruments has been excluded in the calculation of diluted EPS and diluted EPS from
continuing operations as they would reduce the loss per share.
A6 DIVIDENDS
The Directors have determined not to pay a final dividend for the year ended 30 June 2017. The following dividends were paid during
the year ended 30 June.
Nil final dividend (2016: Final dividend of 25 cents per share, unfranked, paid 28 September 2015)
Nil interim dividend (2016: Interim dividend of 10 cents per share, unfranked, paid 31 March 2016)
DIVIDEND FRANKING ACCOUNT
Franking credits available to shareholders of Origin Energy Limited for subsequent financial years are shown below.
Australian franking credits available at 30 per cent
New Zealand franking credits available at 28 per cent (in NZD)
2017
$MILLION
2016
$MILLION
–
–
–
–
304
277
175
452
–
304
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS
9999
B OPERATING ASSETS AND LIABILITIES
This section provides information on the assets used to generate the Group’s trading performance and the liabilities incurred as a result.
B1 TRADE AND OTHER RECEIVABLES
The following balances are amounts which are due from the Group’s customers.
CURRENT
Trade receivables net of allowance for impairment
Unbilled revenue net of allowance for impairment
Other receivables
NON-CURRENT
Trade receivables
2017
$MILLION
2016
$MILLION
728
1,193
357
2,278
4
4
632
992
321
1,945
3
3
Trade and other receivables are initially recorded at the amount billed to customers. Unbilled receivables represent estimated gas and
electricity services supplied to customers since their previous bill was issued. Trade and other receivables (including unbilled revenue)
reflect the amount anticipated to be collected. The collectability of these balances is assessed on an ongoing basis. When there is
evidence that an amount will not be collected, it is provided for, and then if recovery is not possible it is written off. If receivables are
subsequently recovered, the amounts are credited against other expenses in the income statement when collected.
The Group’s customers are required to pay in accordance with agreed payment terms. Depending on the customer segment, settlement
terms are generally 14 to 30 days from the date of the invoice. Credit approval processes are in place for large customers. All credit and
recovery risk associated with trade receivables has been provided for in the statement of financial position.
KEY JUDGEMENTS AND ESTIMATES
Recoverability of trade receivables: Judgement is required in determining the level of provisioning for customer debts. Impairment
allowances take into account the age of the debt, prevailing economic conditions and historic collection trends.
Unbilled revenue: Unbilled gas and electricity revenue is not collectable until customers’ meters are read and invoices issued.
Refer to note A2 for judgement applied in determining the amount of unbilled gas and electricity revenue to recognise.
The average age of trade receivables is 19 days (2016: 18 days). The ageing of trade receivables that were not impaired at 30 June
are shown below.
Not yet due
1–30 days past due
31–60 days past due
61–90 days past due
91 days past due
The movement in the allowance for impairment in respect of trade receivables and unbilled revenue
during the year is shown below.
Balance as at 1 July
Impairment losses recognised
Transfers to held for sale
Amounts written off
BALANCE AS AT 30 JUNE
2017
$MILLION
2016
$MILLION
500
111
46
23
48
728
87
75
–
(52)
110
419
99
32
21
61
632
97
67
(2)
(75)
87
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 100100
B2 EXPLORATION, EVALUATION AND DEVELOPMENT ASSETS
Balance as at 1 July
Additions
Exploration expense – continuing operations
Exploration expense – discontinued operations
Net impairment loss1
Transfers to held for sale2
Transfers to PPE
Effect of movements in foreign exchange rates
BALANCE AS AT 30 JUNE
EXPLORATION AND
EVALUATION ASSETS
DEVELOPMENT ASSETS
2017
$MILLION
2016
$MILLION
2017
$MILLION
2016
$MILLION
1,932
58
–
(64)
(1,068)
–
–
–
858
1,894
107
(53)
(10)
–
(9)
–
3
1,932
292
–
–
–
–
–
(292)
–
–
239
53
–
–
–
–
–
–
292
1 Reflects impairment of $243 million (tax benefit $73 million) relating to assets subsequently transferred to held for sale and the Browse Basin exploration asset of $825 million
(tax benefit $248 million).
2 Relates to amounts classified as held for sale. Refer to note E4.
The Group holds a number of exploration permits that are grouped into areas of interest according to geographical and geological
attributes. Expenditure incurred in each area of interest is accounted for using the successful efforts method. Under this method all
general exploration and evaluation costs are expensed as incurred except the direct costs of acquiring the rights to explore, drilling
exploratory wells and evaluating the results of drilling. These direct costs are capitalised as exploration and evaluation assets pending
the determination of the success of the well. If a well does not result in a successful discovery, the previously capitalised costs are
immediately expensed.
The carrying amounts of exploration and evaluation assets are reviewed at each reporting date to determine whether any of the
following indicators of impairment are present:
– the right to explore has expired, or will expire in the near future, and is not expected to be renewed;
– further exploration for and evaluation of resources in the specific area is not budgeted or planned;
– the Group has decided to discontinue activities in the area; or
– there is sufficient data to indicate the carrying value is unlikely to be recovered in full from successful development or by sale.
Where an indicator of impairment exists, the asset’s recoverable amount is estimated and an impairment is recognised in the income
statement if required.
KEY JUDGEMENT: RECOVERABILITY OF EXPLORATION AND EVALUATION ASSETS
Assessment of the recoverability of capitalised exploration and evaluation expenditure requires certain estimates and assumptions to be
made as to future events and circumstances, particularly in relation to whether economic quantities of reserves have been discovered.
Such estimates and assumptions may change as new information becomes available. If it is concluded that the carrying value of an
exploration and evaluation asset is unlikely to be recovered by future exploitation or sale, the relevant amount will be written off to the
income statement.
Upon approval of the commercial development of a project, the exploration and evaluation asset is classified as a development asset.
Once production commences, development assets are transferred to PPE.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS B3 PROPERTY, PLANT AND EQUIPMENT
$MILLION
2017
Cost
Accumulated depreciation
BALANCE AS AT 1 JULY 2016
Additions
Disposals
Depreciation/amortisation
– continuing operations
Depreciation/amortisation
– discontinued operations
Net impairment loss1
Transfers within PP&E
Transfers from Development assets
Transfers to held for sale2
Effect of movements in
foreign exchange rates
BALANCE AS AT 30 JUNE 2017
2016
Cost
Accumulated depreciation
BALANCE AS AT 1 JULY 2015
Additions
Disposals
Depreciation/amortisation
– continuing operations
Depreciation/amortisation
– discontinued operations
Net impairment loss1
Transfers within PP&E
Transfers to held for sale2
Effect of movements in
foreign exchange rates
BALANCE AS AT 30 JUNE 2016
GENERATION
PROPERTY,
PLANT AND
EQUIPMENT
OTHER LAND
AND BUILDINGS
OTHER
PLANT AND
EQUIPMENT
PRODUCING
AREAS OF
INTEREST
CAPITAL WORK
IN PROGRESS
4,392
(1,151)
3,241
3,327
94
–
(187)
–
–
7
–
–
–
3,241
4,327
(1,000)
3,327
3,715
92
(85)
(184)
–
–
–
(211)
–
3,327
79
(37)
42
78
–
(9)
(3)
–
(6)
–
–
(17)
(1)
42
118
(40)
78
69
15
–
(7)
–
–
1
–
–
78
814
(588)
226
1,274
139
(150)
(46)
(51)
(282)
176
–
(822)
(12)
226
2,944
(1,670)
1,274
1,659
37
–
(29)
(128)
(354)
86
(7)
10
1,274
–
–
–
559
39
–
–
(81)
(207)
–
292
(598)
(4)
–
1,850
(1,291)
559
738
155
(1)
–
(133)
(137)
–
(67)
4
559
205
–
205
447
66
(68)
–
–
(15)
(183)
–
(42)
–
205
447
–
447
324
219
–
–
–
–
(87)
(9)
–
447
101101
TOTAL
5,490
(1,776)
3,714
5,685
338
(227)
(236)
(132)
(510)
–
292
(1,479)
(17)
3,714
9,686
(4,001)
5,685
6,505
518
(86)
(220)
(261)
(491)
–
(294)
14
5,685
1 Reflects impairments of $510 million (tax benefit $153 million) relating to assets held for sale at 30 June 2017.
Reflects impairments of $204 million (tax benefit $61 million) relating to BassGas assets, impairment of $111 million (tax benefit $34 million) relating to the Cooper Basin
and impairment of $236 million (tax benefit $70 million) relating to the Otway Basin offset by a reversal of prior impairment on the sale of Surat Basin assets of $30 million
(tax expense $9 million); and a reversal of prior impairment on New Zealand onshore assets of $30 million (tax expense $9 million) at 30 June 2016.
2 Relates to amounts classified as held for sale. Refer to note E4.
PPE is recorded at cost less accumulated depreciation, depletion, amortisation and impairment charges. Cost includes the estimated
future cost of required closure and rehabilitation.
The carrying amounts of assets are reviewed to determine if there is any indication of impairment. If any such indication exists, the asset’s
recoverable amount is estimated and if required, an impairment is recognised in the income statement.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS
102102
B3 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Several different depreciation methodologies are used by the Group. Sub-surface assets relating to producing areas of interest are
amortised on a units of production basis. This method applies an average unit depletion cost to current period production. The proved
and probable reserves (2P), expenditure to date and an estimate of future development expenditure required to develop those reserves
are used to derive the unit depletion cost. Land and capital work in progress are not depreciated. All other assets are depreciated on a
straight-line basis over their useful lives.
The range of depreciation rates for the current and comparative period for each class of asset are set out below.
Generation PPE
Other land and buildings
Other plant and equipment
Producing areas of interest
%
1 – 35
0 – 10
1 – 50
1 – 28
At 30 June 2017, the Group reassessed the carrying amounts of its non-current assets for indicators of impairment.
Estimates of recoverable amounts are based on an asset’s value in use or fair value less costs to sell (level 3 fair value hierarchy).
The recoverable amount of these assets is most sensitive to those assumptions highlighted in the key judgements and estimates below.
KEY JUDGEMENTS AND ESTIMATES
Recoverability of carrying values: Assets are grouped together into the smallest group of assets that generate largely independent cash
inflows (cash generating unit). A Cash Generating Unit’s (CGU) recoverable amount comprises the present value of the future cash flows
which will arise from use of the assets. Assessment of a CGU’s recoverable amount requires estimates and assumptions to be made about
highly uncertain external factors such as future commodity prices, foreign exchange rates, discount rates, the effects of inflation, climate
change policies and the outlook for global or regional market supply-and-demand conditions. In addition, the Group makes estimates
and assumptions about reserves, future operating profiles and production costs. Such estimates and assumptions may change as new
information becomes available. If it is concluded that the carrying value of a CGU is not likely to be recovered by use or sale, the relevant
amount will be written off to the income statement.
Estimation of reserves: Conventional reserves are estimates of the amount of product that can be extracted from an area of interest.
A range of assumptions are used to estimate economically recoverable 2P reserves. As the economic assumptions change from period
to period, and because additional geological information becomes available during the course of operations, estimates of 2P reserves
may change from period to period. These changes could impact the asset carrying values, unit of production depletion calculations,
restoration provisions and deferred tax balances. Refer note E1.2 for information regarding Australia Pacific LNG’s unconventional
reserve estimation policy.
Estimation of commodity prices: The Group’s best estimate of future commodity prices is made with reference to internally derived
forecast data, current spot prices, external market analysts’ forecasts and forward curves. Where volumes are contracted, future prices
reflect the contracted price. Future commodity price assumptions impact the recoverability of carrying values and are reviewed at
least annually.
Estimation of useful economic lives: A technical assessment of the operating life of an asset requires significant judgement. Useful lives
are amended prospectively when a change in those assessments occurs.
Restoration provisions: An asset’s carrying value includes the estimated future cost of required closure and rehabilitation activities.
Refer to note B5 for key judgement related to restoration provisions.
Future downhole costs: The depletion and amortisation calculation for producing areas of interest depends in part on the estimated
future downhole expenditure required to develop and extract 2P undeveloped reserves. Changes in future downhole expenditure can
therefore impact amortisation recognised. Future expenditure estimates have been based on the proposed development profiles for
the fields.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS B4 INTANGIBLE ASSETS
Goodwill at cost – Energy Markets
Software and other intangible assets at cost less impairment losses
Less: Accumulated amortisation
Reconciliations of the carrying amounts of each class of intangible asset are set out below.
$MILLION
Balance as at 1 July 2016
Additions
Disposals
Amortisation expense – continuing operations
Amortisation expense – discontinued operations
Transfers to held for sale2
BALANCE AS AT 30 JUNE 2017
BALANCE AS AT 1 JULY 2015
Additions
Impairment loss1
Amortisation expense – continuing operations
Transfers to held for sale2
BALANCE AS AT 30 JUNE 2016
103103
2017
$MILLION
2016
$MILLION
4,827
1,169
(671)
5,325
GOODWILL
SOFTWARE
AND OTHER
INTANGIBLES
4,827
–
–
–
–
–
4,827
4,815
12
–
–
–
4,827
539
72
(1)
(108)
(1)
(3)
498
666
95
(94)
(122)
(6)
539
4,827
1,123
(584)
5,366
TOTAL
5,366
72
(1)
(108)
(1)
(3)
5,325
5,481
107
(94)
(122)
(6)
5,366
1 During the prior period a decision was made to write-off an organisation-wide IT implementation. As a consequence, an impairment charge of $94 million was recognised in the
financial statements which reflects the write-off of the intangible asset relating to this project. The intangible assets relating to this project are allocated across the reportable
segments, however the impairment is recorded in the Corporate segment.
2 Relates to amounts classified as held for sale. Refer to note E4.
Goodwill is stated at cost less any accumulated impairment losses and is not amortised. Software and other intangible assets are stated
at cost less accumulated amortisation and impairment losses. Amortisation is recognised as an expense on a straight-line basis over the
estimated useful lives of the intangible assets.
The average amortisation rate for software and other intangibles (excluding capital work in progress) was 12% (2016: 12%).
KEY JUDGEMENT
Carrying values of assets: Refer to note B3 for key judgement relating to carrying values of assets.
IMPAIRMENT TESTING
The recoverable amount of the Energy Markets goodwill has been determined using a value in use model which includes an appropriate
terminal value. The key inputs and assumptions in the calculation of value in use are set out below.
KEY INPUT/ASSUMPTIONS
ENERGY MARKETS
Period of cash flow projections
Customer numbers and customer churn
Either 40 years, or the life of each Generation asset, based on the Group’s five-year business plan.
The Energy Markets business is considered a long-term business and as such projection of long-term
cash flows is appropriate for a more accurate forecast. The growth rate used to extrapolate cash flow
projections beyond the five year plan is 2.5%.
Based on review of actual customer numbers and historical data regarding movements in customer
numbers and levels of customer churn. The historical analysis is considered against current and expected
market trends and competition for customers.
Gross margin and other operating
costs per customer
Based on review of actual gross margins and cost per customer, and consideration of current and
expected market movements and impacts.
Discount rate
Pre-tax discount rate of 10.3 per cent (2016: 8.5 per cent).
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 104104
B5 PROVISIONS
$MILLION
BALANCE AS AT 1 JULY 2016
Provisions recognised
Provisions released
Payments/utilisation
Transfers to held for sale1
BALANCE AS AT 30 JUNE 2017
Current
Non-current
RESTORATION
OTHER
TOTAL
693
67
(84)
(3)
(496)
177
18
159
177
88
19
(1)
(35)
(1)
70
38
32
70
781
86
(85)
(38)
(497)
247
56
191
247
1 Relates to amounts classified as held for sale at 30 June 2017. Refer to note E4.
Restoration provisions are initially recognised at the best estimate of the costs to be incurred in settling the obligation. Where restoration
activities are expected to occur more than 12 months from the reporting period the provision is discounted using a pre-tax rate that
reflects current market assessments of the time value of money.
At each reporting date, the restoration provision is remeasured in line with changes in discount rates, and changes to the timing or
amount of the costs to be incurred based on current legal requirements and technology. Any changes in the estimated liability in future
periods are added to or deducted from the related asset. The unwinding of the discount is recognised in each period as interest expense.
KEY ESTIMATE: RESTORATION, REHABILITATION AND DISMANTLING COSTS
The Group estimates the cost of future site restoration activities at the time of installation or construction of an asset, or when an
obligation arises. Restoration often does not occur for many years and thus significant judgement is required as to the extent of work,
cost and timing of future activities.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 105105
2017
$MILLION
2016
$MILLION
58
28
86
91
3,609
3,700
261
51
312
95
4,848
4,943
270
105
375
B6 OTHER FINANCIAL ASSETS AND LIABILITIES
OTHER FINANCIAL ASSETS
CURRENT
Environmental scheme certificates
Available-for-sale financial assets
NON-CURRENT
Available-for-sale financial assets
Mandatorily Redeemable Cumulative Preference Shares issued by Australia Pacific LNG
(refer to note E1)1
1 The Mandatorily Redeemable Cumulative Preference Shares (MRCPS) were cancelled on 1 July 2016 and replaced with US$2.8 billion of MRCPS and US$0.8 billion
capital contribution.
OTHER FINANCIAL LIABILITIES
CURRENT
Environmental scheme surrender obligations
Other financial liabilities
276
111
387
Financial assets are recognised (or derecognised) on the date on which the Group commits to purchase (or sell) the asset.
The environmental scheme certificates and surrender obligations are initially recorded at cost. Subsequently, they are recorded at their
market price (i.e. fair value) where there is an active market. If there is no active market, certificates continue to be recorded at cost.
Other financial assets are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and
are intended to be held for the medium to long term.
The Group’s available-for-sale assets are primarily Settlement Residual Agreements.
The Group’s other financial liabilities primarily represent the net amount owed for exchange-traded derivative contracts which have not
settled as at 30 June 2017.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 106106
C CAPITAL, FUNDING AND RISK MANAGEMENT
This section focuses on the Group’s capital structure, and related financing costs. Information is also presented about how the Group
manages capital and the various financial risks to which the Group is exposed through its operating and financing activities.
C1 INTEREST-BEARING LIABILITIES
CURRENT
Bank loans – unsecured
Capital market borrowings – unsecured
Total current borrowings
Lease liabilities – secured
TOTAL CURRENT INTEREST-BEARING LIABILITIES
NON-CURRENT
Bank loans – unsecured
Capital market borrowings – unsecured
TOTAL NON-CURRENT BORROWINGS
Lease liabilities – secured
TOTAL NON-CURRENT INTEREST-BEARING LIABILITIES
2017
$MILLION
2016
$MILLION
6
126
132
1
133
787
7,588
8,375
7
8,382
8
101
109
1
110
726
8,772
9,498
8
9,506
Interest-bearing liabilities are initially recorded at the amount of proceeds received (fair value) less transaction costs. After that date
the liability is amortised to face value at maturity using an effective interest rate method with any gains or losses recognised in the
income statement.
The contractual maturities of non-current borrowings are as set out below.
One to two years
Two to five years
Over five years
TOTAL NON-CURRENT BORROWINGS
Lease liabilities
Total non-current interest-bearing liabilities
2017
$MILLION
2016
$MILLION
1,044
4,773
2,558
8,375
7
8,382
137
3,935
5,426
9,498
8
9,506
Some of the Group’s borrowings are subject to terms that allow the lender to call on the debt. As at 30 June 2017, these terms had not
been triggered.
SIGNIFICANT FUNDING TRANSACTIONS
In October 2016, the Group amended $4.5 billion of syndicated loan facilities to extend the existing maturity by 34 months to October
2021. The interest cost of the bank loan facilities was increased by 0.2 per cent per annum and flexibility was added with increased USD,
bank guarantee and letter of credit drawdown capacity.
In October 2015, the Group completed a rights issue of 636,086,881 shares at $4.00 per share. The rights issue was fully underwritten
and was completed on 2 October 2015 (Institutional rights offer) and 28 October 2015 (Retail rights offer). The net proceeds from the
rights issue of $2.5 billion were used to pay down Group borrowings.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 107107
C2 RISK MANAGEMENT
The Group holds or issues financial instruments for the following purposes:
– Funding: used to finance the Group’s operating activities. The principal types of instruments include syndicated bank loans, bank
guarantee facilities, senior notes, hybrid securities, cash and short-term deposits;
– Operating: the Group’s day-to-day business activities generate financial instruments such as cash, trade receivables and trade
payables; and
– Risk management: to reduce risks arising from the financial instruments described above, the Group holds derivatives such as forward
exchange contracts and interest rate swaps (including cross currency). In addition, a range of standard and bespoke financial instruments
are held to manage the Group’s exposure to fluctuations in commodity prices.
– A number of these financial instruments are recorded at the value that reflects current market conditions, i.e. at fair value. The Group’s
methodology for calculating fair value can be found in note C4.
– These risks are managed under policies approved by the Board of Directors. The key financial risks to which the Group is exposed are
explained further in the following sections. They include:
– Credit risk;
– Liquidity risk;
– Market risk (including foreign exchange and price risk); and
– Interest rate risk.
C2.1 CREDIT RISK
Credit risk is the risk that a counterparty will not fulfil its financial obligations under a contract or other arrangement. In order to manage
credit risk the Group has credit limits which determine the level of exposure that it is prepared to accept with respect to counterparties.
The Group is exposed to credit risk through its normal operating activities primarily through customer contracts, financing activities
(including Mandatorily Redeemable Cumulative Preference Shares), deposits and the collection risk from arrangements entered into
to manage financial risk.
The Group has Board approved credit risk management policies which allocate credit limits to counterparties based on publicly available
credit information from recognised providers where available. Credit policies cover exposures generated from the sale of products and
the use of derivative instruments. The Group also utilises International Swaps and Derivative Association (ISDA) agreements with all
derivative counterparties in order to limit exposure to credit risk through the netting of amounts receivable from and amounts payable
to individual counterparties when a counterparty defaults under the terms of the ISDA. Refer note F8.
The carrying amounts of financial assets, which are disclosed in more detail in notes B1, B6 and C5, best represents the Group’s
maximum exposure to credit risk at the reporting date. The Group holds no significant collateral as security and there are no other
significant credit enhancements in respect of these assets. All financial assets are monitored in order to identify any potential changes
in the credit quality.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 108108
C2 RISK MANAGEMENT (CONTINUED)
C2.2 LIQUIDITY RISK
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group is exposed to liquidity
risk through its ongoing business obligations and its strategy to take advantage of new investment opportunities as they arise and to
mitigate against further risks such as lower oil prices. The Group has a capital structure which allows it to support these activities. A key
element of this structure is the use of committed undrawn debt facilities.
The tables below set out the contractual timing of undiscounted cash flows for derivative and non-derivative financial assets and liabilities
at reporting date and include borrowings drawn at reporting date, including interest, and all financial instruments and drawn guarantees.
DERIVATIVE FINANCIAL INSTRUMENTS
$MILLION
Less than one month
One to three months
Three to 12 months
One to five years
Over five years
NON-DERIVATIVE FINANCIAL INSTRUMENTS2
$MILLION
Less than one month
One to three months
Three to 12 months
One to five years
Over five years
2017
20161
DERIVATIVE
FINANCIAL
LIABILITIES
DERIVATIVE
FINANCIAL
ASSETS
NET
DERIVATIVE
FINANCIAL
(LIABILITIES)/
ASSETS
DERIVATIVE
FINANCIAL
LIABILITIES
DERIVATIVE
FINANCIAL
ASSETS
NET
DERIVATIVE
FINANCIAL
(LIABILITIES)/
ASSETS
(8)
(18)
(492)
(584)
(514)
30
83
188
1,422
652
22
65
(304)
838
138
(14)
(41)
(178)
(1,119)
(406)
22
19
96
1,020
386
8
(22)
(82)
(99)
(20)
2017
2016
OTHER
FINANCIAL
LIABILITIES
OTHER
FINANCIAL
ASSETS
NET OTHER
FINANCIAL
(LIABILITIES)/
ASSETS
OTHER
FINANCIAL
LIABILITIES
OTHER
FINANCIAL
ASSETS
NET OTHER
FINANCIAL
(LIABILITIES)/
ASSETS
(1,485)
(691)
(2,556)
(6,717)
(311)
615
1,262
716
2,337
2,312
(870)
571
(1,840)
(4,380)
2,001
(1,028)
(853)
(2,231)
(6,765)
(2,178)
532
1,044
1,018
3,767
2,521
(496)
191
(1,213)
(2,998)
343
The Group manages liquidity risk centrally by monitoring operating cash flow forecasts and the degree of access to debt and equity capital
markets. The Group holds a number of debt instruments with varying maturities. The debt portfolio is periodically reviewed to ensure
there is funding flexibility and an appropriate repayment profile.
The Group has the following committed undrawn floating rate borrowing facilities:
Expiring beyond one year
1 Certain amounts have been restated to reflect adjustments relating to note F12.
2 All facilities are deemed to be repaid at the earlier of their contractual maturity date or first call/intended repayment date.
2017
$MILLION
2016
$MILLION
6,407
6,581
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 109109
C2 RISK MANAGEMENT (CONTINUED)
C2.3 FOREIGN EXCHANGE (FX) RISK
FX risk is the risk that fluctuations in exchange rates will impact the Group’s result. FX risk arises from future commercial transactions
(including interest payments and principal debt repayments on foreign currency long-term borrowings, the sale and purchase of oil
and gas, LPG, LNG and the purchase of capital equipment), the recognition of assets and liabilities (including foreign receivables and
borrowings) and net investments in foreign operations. The Group is mainly exposed to fluctuations in the US dollar and the Euro
through its operations (both overseas and in Australia), its financing facilities and through arrangements put in place to manage risk.
As at 30 June 2017, after hedging, the Group is exposed to FX risk on receivables of US$553 million (A$719 million). As at 30 June
2016, after hedging, the Group was exposed to FX risk on borrowings of US$2,247 million (A$3,021 million).
To manage FX risk the Group uses forward foreign exchange contracts and cross-currency interest rate swaps (both fixed-to-fixed and
fixed-to-floating). In certain circumstances borrowings are left in the foreign currency, or hedged from one currency to another, to match
payments of interest and principal against expected future business cash flows in that currency.
The Group has certain investments in foreign operations whose net assets are exposed to FX translation risk. This currency exposure
is managed primarily by borrowing in the currency to which the foreign operation is exposed.
Significant transactions undertaken in the normal course of operations which are denominated in a foreign currency are managed on
a case-by-case basis.
The table below shows the impact of a 10 per cent change in FX rates (holding all other things constant) on profit and equity based
solely on the Group’s borrowings and related financial instruments (excluding debt designated as a net investment hedge) existing at
the reporting date but does not take into account any mitigating actions that management might take if the rate change occurred.
$MILLION
2017
US dollar
Euro1
2016
US dollar
Euro1
IMPACT ON POST-TAX PROFIT
IMPACT ON EQUITY
INCREASE
DECREASE
INCREASE
DECREASE
(65)
9
189
(5)
69
(9)
(184)
5
(74)
17
156
(12)
79
(17)
(151)
12
1 Exposure to Euro is a result of ineffectiveness of some fair value hedges that are swapped in AUD.
C2.4 COMMODITY PRICE RISK
Commodity price risk is the risk that fluctuations in commodity prices will impact the Group’s result. The Group is exposed to fluctuations
in prices of electricity, oil, gas and environmental scheme certificates.
To manage its price risks the Group utilises a range of financial and derivative instruments including fixed-price swaps, options, futures
and fixed price forward purchase contracts. Refer to note C5. The policy for managing price risk permits the active hedging of price and
volume exposures within prescribed limits. The full hedge portfolio is tested on an ongoing basis against these limits.
The table below shows the impact of a 10 per cent change in commodity prices (holding all other things constant) on profit and equity
based solely on the Group’s hedged and unhedged price exposures existing at the reporting date but does not take into account any
mitigating actions that management might take if the price change occurred.
$MILLION
INCREASE
DECREASE
INCREASE
DECREASE
IMPACT ON POST-TAX PROFIT
IMPACT ON EQUITY
2017
Electricity forward price
Oil forward prices
Environmental scheme certificate prices
2016
Electricity forward price1
Oil forward prices
Environmental scheme certificate prices
1 Certain amounts have been restated to reflect adjustments relating to note F12.
202
9
25
95
–
32
(202)
(2)
(25)
(95)
–
(32)
238
28
25
113
28
32
(238)
(21)
(25)
(113)
(28)
(32)
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 110110
C2 RISK MANAGEMENT (CONTINUED)
C2.5 INTEREST RATE RISK
Interest rate risk is the risk that fluctuations in interest rates affect the Group’s results. Borrowings issued at variable interest rates expose
the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.
The exposure of the Group’s borrowings (excluding lease liabilities), after hedging, to interest rate changes and the contractual repricing
periods at the reporting date are set out below.
Variable rate borrowings
Fixed interest rate – repricing dates
Six months or less
Six to twelve months
One to five years
Over five years
2017
$MILLION
2016
$MILLION
2,838
1,900
742
2,695
332
8,507
3,403
900
–
4,298
1,006
9,607
The Group’s risk management policy is to manage interest rate exposures using Profit at Risk and Value at Risk methodologies.
Exposure limits are set to ensure that the Group is not exposed to excess risk from interest rate volatility.
The Group manages its cash flow interest rate risk by entering into fixed-rate interest rate swap contracts and fixed-rate debt securities,
with rates ranging between 2.25 per cent to 7.91 per cent per annum, at a weighted average rate of 5.29 per cent per annum
(2016: 2.25 per cent to 7.91 per cent per annum, at a weighted average rate of 5.14 per cent per annum). Such interest rate swaps
have the economic effect of converting borrowings from floating to fixed rates.
The Group manages its fair value interest rate risk by using fixed-to-floating interest rate swaps. Where possible these are designated
to hedge the interest rate costs associated with underlying debt obligations.
The table below shows the effect on profit and equity if interest rates had been 100 basis points higher or lower based on the relevant
interest rate yield curve applicable to the underlying currency of the Group’s interest-bearing assets and liabilities. All other variables
have been held constant and the impact of any mitigating actions that management might take if the rate change occurred have not
been taken into account.
$MILLION
2017
Interest rates
2016
Interest rates
IMPACT ON POST-TAX PROFIT
IMPACT ON EQUITY
INCREASE
DECREASE
INCREASE
DECREASE
8
15
(13)
(20)
5
14
(10)
(19)
C3 CAPITAL MANAGEMENT
The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern, so that it can continue to
provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost
of capital.
To maintain or adjust the capital structure, the Group monitors its current and future funding requirements for at least the next five years
and regularly assesses a range of funding alternatives to meet these requirements in advance of when the funds are required.
Key factors considered in determining the Group’s capital structure and funding strategy at any point in time include expected operating
cash flows, capital expenditure plans, maturity profile of existing debt facilities, dividend policy and the ability to access funding from banks,
capital markets, and other sources.
The Group monitors its capital requirements through a number of metrics including the gearing ratio. This ratio is calculated as adjusted
net debt divided by total capital. Net debt is adjusted to take into account the effect of FX hedging transactions on the Group’s foreign
currency debt obligations. The Group maintains a gearing ratio designed to optimise the cost of capital while providing flexibility to fund
growth opportunities.
The Group also monitors various other credit metrics including funds from operations to net adjusted debt and EBITDA to
interest expense.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS C3 CAPITAL MANAGEMENT (CONTINUED)
Total interest-bearing liabilities
Less: Cash and cash equivalents
Net debt
Fair value adjustments on FX hedging transactions
Adjusted net debt
Total equity1
Total capital1
Gearing ratio
111111
2017
$MILLION
2016
$MILLION
8,515
(151)
8,364
(253)
8,111
11,418
19,529
42%
9,616
(146)
9,470
(339)
9,131
14,060
23,191
39%
1 Certain amounts have been restated to reflect adjustments relating to note F12.
C4 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The following table summarises the methods that are used to estimate the fair value of the Group’s financial instruments.
INSTRUMENT
FAIR VALUE METHODOLOGY
Financial instruments traded
in active markets
Forward foreign
exchange contracts
Commodity option contracts
which are regularly traded
Long-term debt and other
financial assets
Commodity swaps and non-
exchange traded futures
Interest rate swaps and cross
currency interest rate swaps
Quoted market prices at reporting date.
Present value of expected future cash flows using quoted forward exchange rates.
Most recent available transaction prices for same or similar instruments.
Quoted market prices, dealer quotes for similar instruments, or present value of estimated future cash flows.
Present value of expected future cash flows using market forward prices.
Present value of expected future cash flows of these instruments. Key variables include market pricing data,
discount rates and credit risk of the Group or counterparty where relevant. Variables reflect those which would
be used by market participants to execute and value the instruments.
Structured electricity derivatives
which are not regularly traded
and with no observable
market price
The valuation models for long-term electricity derivatives reflect the fair value of the avoided costs of
construction of the physical assets which would be required to achieve an equivalent risk management outcome
for the Group. The methodology takes into account all relevant variables including forward commodity prices,
physical generation plant variables, the risk-free discount rate and related credit adjustments, and asset lives. The
valuation models for short-term electricity derivatives include premiums for lack of volume in the market relative
to the size of the instruments being valued.
Power purchase arrangement
electricity derivatives
The discounted cash flow methodology reflects the difference in the contract price and long term forecast
electricity pool prices which are not observable in the market. The valuation also requires estimation of forecast
electricity volumes, the risk-free discount rate and related credit adjustments.
Oil forward structured
derivative instrument
Valued with reference to the observable market oil forward prices, foreign exchange rates and discount rates.
As a result of the structured nature of the instrument, certain risk premium and credit variables utilised in the
valuation model are unobservable.
Commodity option contracts
which are not regularly traded
Valued using an established pricing model (such as Monte Carlo or Black-Scholes) to generate potential future
cash flow outcomes over the period covered by the option contract. Variables reflect those which would be used
by market participants to value the option including commodity price and foreign exchange data, the risk-free
discount rate and related credit adjustments.
Valuation methodologies are determined based on the nature of the underlying instrument. To the maximum extent possible, valuations
are based on assumptions which are supported by independent and observable market data. Where valuation models are used,
instruments are discounted at the market interest rate applicable to the instrument.
KEY ESTIMATE: FAIR VALUE
To estimate the fair value of financial assets and financial liabilities, the Group uses a variety of methods (outlined in the table above) and
makes assumptions based on market conditions which exist at each reporting date.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 112112
C4 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
The following table provides information about the reliability of the inputs used in determining the fair value of financial assets and
liabilities carried at fair value. The three levels in the hierarchy reflect the level of independent observable market data used in determining
the fair values and are defined as follows:
– Level 1: quoted prices (unadjusted) in active markets for identical instruments.
– Level 2: other valuation methods for which all inputs that have a significant impact on fair value are observable, either directly (as prices)
or indirectly (derived from prices).
– Level 3: one or more key inputs for the instrument are not based on observable market data (unobservable inputs).
$MILLION
NOTE
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
2017
Derivative financial assets
Environmental scheme certificates
Available-for-sale financial assets
FINANCIAL ASSETS CARRIED AT FAIR VALUE
Derivative financial liabilities
Environmental scheme surrender obligations
FINANCIAL LIABILITIES CARRIED AT FAIR VALUE
$MILLION
20161
Derivative financial assets
Environmental scheme certificates
Available-for-sale financial assets
FINANCIAL ASSETS CARRIED AT FAIR VALUE
Derivative financial liabilities
Environmental scheme surrender obligations
FINANCIAL LIABILITIES CARRIED AT FAIR VALUE
C5
B6
B6
C5
B6
116
58
119
293
(16)
(276)
(292)
882
–
–
882
(842)
–
(842)
298
–
–
298
(751)
–
(751)
1,296
58
119
1,473
(1,609)
(276)
(1,885)
NOTE
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
C5
B6
B6
C5
B6
115
261
146
522
(3)
(270)
(273)
937
–
–
937
(717)
–
(717)
250
–
–
250
(935)
–
(935)
1,302
261
146
1,709
(1,655)
(270)
(1,925)
The following table shows a reconciliation of movements in the value of instruments included in Level 3 of the fair value hierarchy.
BALANCE AS AT 1 JULY 20161
Net gain recognised in other comprehensive income
Net loss realised in revenue line
Net loss realised in cost of sales
Net gain from financial instruments at fair value
Cash settlements on existing instruments
New instruments in the period
BALANCE AS AT 30 JUNE 2017
1 Certain amounts have been restated to reflect adjustments relating to note F12.
$MILLION
(685)
13
(26)
(229)
145
327
2
(453)
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 113113
C4 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
The following is a summary of the main inputs and assumptions used by the Group in measuring the fair value of level 3
financial instruments.
Discount rates: Based on observable market rates for risk-free instruments of the appropriate term.
Credit adjustments: Applied to the discount rate depending on the asset/liability position of a financial instrument to reflect the risk of
default by either the Group or a specific counterparty. Where a counterparty specific credit curve is not observable, an estimated curve is
applied which takes into consideration the credit rating of the counterparty and its industry.
Forward commodity prices: Including both observable external market data and internally derived forecast data. For oil derivatives,
internally derived data principally relates to the forward price path for Japanese Customs-cleared Crude (JCC) which is not readily
observable in the market. The forward curve for JCC is inferred from the observable Brent oil forward curve. For certain long term
electricity derivatives, internally derived forecast spot pool prices and renewable energy certificate prices are applied as market prices are
not readily observable for the corresponding term.
Physical generation plant variables: Variables which would be used in the valuation of physical generation assets with equivalent risk
management outcomes including new build capital costs, operating costs and plant efficiency factors. For derivatives related to renewable
generation, further assumptions are applied to forecast generation volumes over the life of the instrument.
Liquidity premiums: Applied to allow for the lack of volume in the market relative to the size of the instruments being valued.
Strike premiums: Applied to allow for instances where instruments have different strike prices to those associated with instruments which
have observable market prices.
The use of different methodologies or assumptions could lead to different measurements of fair value. For fair value measurements in
Level 3, a 10 per cent increase or decrease in the unobservable assumptions would have the following effects:
$MILLION
Electricity derivative assets
Electricity derivative liabilities
Oil derivative assets
2017
20161
IMPACT ON POST-TAX PROFIT
IMPACT ON POST-TAX PROFIT
INCREASE
DECREASE
INCREASE
DECREASE
130
138
(1)
(130)
(138)
1
55
112
(5)
(55)
(112)
14
1 Certain amounts have been restated to reflect adjustments relating to note F12.
GAINS/(LOSSES) ON INITIAL RECOGNITION OF FINANCIAL INSTRUMENTS
Any differences between the fair value at initial recognition (transaction price) and the amount that would be determined at that date
using the relevant valuation technique are deferred in the statement of financial position and recognised in the income statement over
the life of the instrument. The following has been recognised during the year.
DERIVATIVE ASSETS
Opening balance – gain
Change in classification
Recognised in the income statement
New instruments in the period
Closing balance – gain
DERIVATIVE LIABILITIES
Opening balance – gain
Change in classification
Recognised in the income statement
New instruments in the period
Closing balance – gain
2017
$MILLION
72
83
(38)
416
533
282
(83)
(7)
182
374
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 114114
C4 FAIR VALUE AND FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
Except as noted below, the carrying amounts of financial assets and liabilities are reasonable approximations of their fair values.
The Group has the following non-current financial instruments which are not measured at fair value in the statement of financial position.
FAIR VALUE
HIERARCHY LEVEL
CARRYING VALUE
FAIR VALUE
2017
$MILLION
2016
$MILLION
2017
$MILLION
2016
$MILLION
ASSETS
Other financial assets
LIABILITIES
Bank loans – unsecured
Capital markets borrowings
– unsecured
2
2
2
3,609
787
7,588
8,375
4,848
726
8,772
9,498
3,115
744
7,959
8,703
5,128
764
8,642
9,406
The fair value of these financial instruments reflect the present value of estimated future cash flows of the instrument. Key variables used
to determine the present value include:
– market pricing data (for the relevant underlying interest rates, foreign exchange rates or commodity prices);
– discount rates; and
– the credit risk of the Group or counterparty where appropriate.
For these instruments, each of these variables is taken from observed market pricing data at the valuation date and therefore these
variables represent those which would be used by market participants to execute and value the instruments.
C5 HEDGING AND DERIVATIVES
The Group is exposed to risk from movements in foreign exchange and interest rates, and electricity and oil prices. As part of the risk
management strategy set out in note C2, the Group holds the following types of derivative instruments:
CURRENT
Interest rate swaps
Cross-currency interest rate swaps
Forward foreign exchange contracts
Electricity derivatives
Oil derivatives
Other commodity derivatives
NON-CURRENT
Interest rate swaps
Cross-currency interest rate swaps
Forward foreign exchange contracts
Electricity derivatives
Oil derivatives
Other commodity derivatives
TOTAL
1 Certain amounts have been restated to reflect adjustments relating to note F12.
ASSETS
LIABILITIES
2017
$MILLION
2016
$MILLION1
2017
$MILLION
2016
$MILLION1
–
–
–
184
55
2
241
–
597
–
451
5
2
–
7
–
185
45
–
237
–
738
–
317
9
1
–
(229)
(1)
(58)
(12)
–
(300)
(8)
(74)
(300)
(621)
(303)
(3)
(2)
–
(1)
(10)
(5)
–
(18)
(35)
(347)
(286)
(688)
(281)
–
1,055
1,296
1,065
1,302
(1,309)
(1,609)
(1,637)
(1,655)
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 115115
C5 HEDGING AND DERIVATIVES (CONTINUED)
Derivatives are initially recognised at fair value on the date they are entered into and are subsequently remeasured at their fair value.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if
so, the nature of the item being hedged. Gains or losses on derivatives which are not designated as hedging instruments are recognised
in the income statement and resulted in a $109 million gain in the year ended 30 June 2017 (20161: $254 million loss). This includes
an $82 million gain relating to discontinued operations (2016: $10 million loss).
The Group designates certain derivatives as either:
– hedges of the fair value of recognised assets, liabilities or firm commitments (fair value hedge);
– hedges of a particular cash flow risk associated with a recognised asset, liability or highly probable forecast transaction
(cash flow hedge); or
– hedges of a net investment in a foreign operation (net investment hedge).
The Group documents at the inception of these transactions the relationship between hedging instruments and hedged items, as well
as the risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment,
both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective
in offsetting changes in fair values or cash flows of hedged items.
The following table shows the fair value of instruments which have been designated as hedging instruments.
Fair value hedges
Cash flow hedges
Net investment hedges
ASSETS
LIABILITIES
2017
$MILLION
2016
$MILLION
2017
$MILLION
2016
$MILLION
(a)
(b)
(c)
484
351
–
620
358
–
34
65
–
25
298
1,264
ANALYSIS OF FINANCIAL INSTRUMENTS WHICH HAVE BEEN DESIGNATED AS HEDGING INSTRUMENTS
(a) Fair value hedges
The Group designates certain cross currency interest rate swaps in fair value hedge relationships. Changes in the fair value of these
interest swaps are recorded in the income statement, together with any changes in the fair value of the hedged item. If the hedge no
longer meets the criteria for hedge accounting, the adjustment to the carrying amount of the hedged item for which the effective interest
method is used is amortised to profit and loss over the remaining life using a recalculated effective interest rate.
The changes in the fair values of the hedged items and hedging instruments recognised in the income statement for the year are
disclosed in the following table.
(Loss)/gain on the hedging instruments
Gain/(loss) on the hedged item attributable to the hedge risk
2017
$MILLION
2016
$MILLION
(145)
121
(24)
189
(172)
17
1 Certain amounts have been restated to reflect adjustments relating to note F12.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 116116
C5 HEDGING AND DERIVATIVES (CONTINUED)
ANALYSIS OF FINANCIAL INSTRUMENTS WHICH HAVE BEEN DESIGNATED AS HEDGING INSTRUMENTS (CONTINUED)
(b) Cash flow hedges
The Group designates certain foreign exchange contracts, electricity derivatives, interest rate swaps, cross-currency interest rate swaps
and oil derivatives in cash flow hedge relationships. The effective portion of changes in the fair value of these derivatives are recognised
in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within expenses.
Amounts accumulated in equity are transferred to the income statement in the periods when the hedged item affects profit or loss
(for instance when the forecast sale that is hedged takes place). When a hedging instrument expires or is sold, or when a hedge no longer
meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised
when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to
occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.
Following the announcement to divest the conventional upstream assets (refer note E4), a cash flow hedge was de-designated as the
underlying forecast transaction no longer met the highly probable criteria for hedge accounting.
The following sets out the amounts recognised in the income statement and equity arising from the Group’s cash flow hedges:
Effective portion of the gains on cash flow hedges recognised in the cash flow hedge reserve (pre-tax)
Losses transferred from the cash flow hedge reserve to sales
Losses transferred from the cash flow hedge reserve to cost of sales
(Losses)/gains transferred from the cash flow hedge reserve to decrease in fair value of financial instruments
Gains transferred from the cash flow hedge reserve to finance cost
Ineffectiveness gains recognised in the income statement from cash flow hedges
246
(77)
(319)
(198)
60
(534)
6
550
(151)
(136)
30
60
(197)
4
(c) Net investment and hedge of net investment in foreign operations
The Group designates certain foreign denominated borrowings in net investment hedge relationships. Exchange differences arising
from the translation of the net investment in foreign operations, and of related hedges that are deemed effective, are recognised in
other comprehensive income and presented in the foreign currency translation reserve within equity (2017: $nil; 2016: $36 million
loss). They are released to the income statement upon disposal of the foreign operation. The ineffectiveness recognised in the income
statement from net investment hedges for the year to 30 June 2017 totalled $nil (2016: $nil).
The different types of derivatives used by the Group are set out below along with details of their key attributes.
(d) Types of derivatives
Interest rate swaps
At 30 June 2017, the fixed interest rates varied from 2.25 per cent to 2.84 per cent (2016: 2.25 per cent to 3.33 per cent) and the main
floating rate was the Bank Bill Swap Benchmark (BBSW).
The hedged interest payment transactions are expected to impact profit at various dates between one month and six years from the
reporting date.
Cross-currency interest rate swaps
At 30 June 2017, the fixed interest rates varied from 3.30 per cent to 7.91 per cent (2016: 2.50 per cent to 7.91 per cent) and the main
floating rates were BBSW and US LIBOR.
The hedged interest payment transactions are expected to impact profit at various dates between one month and six years from the
reporting date.
Forward foreign exchange contracts
The hedged foreign currency denominated transactions are expected to impact profit at various dates between one month and six years
from the reporting date.
Electricity derivatives
The hedged electricity purchase and sale transactions are expected to impact profit continuously for each half hour period throughout
the next 14 years from the reporting date.
Oil derivatives
The hedged oil sale and purchase transactions are expected to impact profit continuously throughout the next three years from the
reporting date.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS
C6 SHARE CAPITAL AND RESERVES
ISSUED AND PAID-UP CAPITAL
1,755,333,517 (2016: 1,753,335,764) ordinary shares, fully paid
ORDINARY SHARE CAPITAL AT THE BEGINNING OF THE PERIOD
Shares issued:
– Nil (2016: 636,086,881) shares under a rights issue
– Nil (2016: 6,483,666) shares in accordance with the Dividend Reinvestment Plan
– 1,997,753 (2016: 1,136,313) shares in accordance with the Long Term Incentive Plans1
TOTAL MOVEMENTS IN ORDINARY SHARE CAPITAL
ORDINARY SHARE CAPITAL AT THE END OF THE PERIOD
1 Relates to shares that have not yet vested.
117117
2017
$MILLION
2016
$MILLION
7,150
7,150
–
–
–
–
7,150
7,150
4,599
2,509
42
–
2,551
7,150
TERMS AND CONDITIONS
Holders of ordinary shares are entitled to receive dividends as determined from time to time and are entitled to one vote per share at
shareholders’ meetings. In the event of the winding up of the Group, ordinary shareholders rank after creditors, and are fully entitled to
any proceeds of liquidation.
The Group does not have authorised capital or par value in respect of its issued shares.
NATURE AND PURPOSE OF RESERVES
Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of options, performance share rights and deferred share rights over
their vesting period. Refer to note F3.
Foreign currency translation reserve
The foreign currency translation reserve records the foreign currency differences arising from the translation of foreign operations, and
the translation of transactions that hedge the Group’s net investments in foreign operations.
Hedging reserve
The hedging reserve is used to record the effective portion of the gains or losses on cash flow hedging instruments that have not yet
settled. Amounts are recognised in profit or loss when the associated hedged transactions affect profit or loss or as part of the cost of an
asset if non-monetary.
Available-for-sale reserve
Changes in fair value and exchange differences arising on translation of investments are taken to the available-for-sale reserve. Amounts
are recognised in profit or loss when the associated investments are sold/settled or impaired.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 118118
C7 OTHER COMPREHENSIVE INCOME
$ MILLION
2017
Items that will not be reclassified
to the income statement
Actuarial loss on defined benefit
superannuation plan, net of tax
Items that may be reclassified to
the income statement
Foreign currency translation
differences for foreign operations
Net loss on cash flow hedges
(refer note C5(b))
Available-for-sale financial assets
– valuation loss taken to equity,
net of tax
TOTAL OTHER
COMPREHENSIVE INCOME
$MILLION
2016
Items that will not be reclassified
to the income statement
Actuarial gain on defined benefit
superannuation plan, net of tax
Items that may be reclassified to
the income statement
Foreign currency translation
differences for foreign operations
Net loss on hedge of net
investment in foreign operations
Net gain on cashflow hedges
Available-for-sale financial assets
– valuation gain taken to equity,
net of tax
TOTAL OTHER
COMPREHENSIVE INCOME
FOREIGN
CURRENCY
TRANSLATION
RESERVE
HEDGING
RESERVE
AVAILABLE-
FOR-SALE
RESERVE
RETAINED
EARNINGS
NON-
CONTROLLING
INTERESTS
TOTAL OTHER
COMPREHENSIVE
INCOME
–
–
(200)
–
–
(200)
(200)
–
–
82
(18)
–
–
64
64
–
–
–
(202)
–
(202)
(202)
–
–
–
–
247
–
247
247
–
–
–
–
(41)
(41)
(41)
–
–
–
–
–
6
6
6
1
1
–
–
–
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2)
–
–
–
(2)
(2)
1
1
(200)
(202)
(41)
(443)
(442)
–
–
80
(18)
247
6
315
315
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS D TAXATION
This section provides details of the Group’s income tax expense, current tax provision and deferred tax balances and the Group’s tax
accounting policies.
119119
D1 INCOME TAX EXPENSE
INCOME TAX
Current tax expense/(benefit)
Deferred tax benefit
Under provided in prior years
Tax effect of PPAs adjustment (refer to note F12)
TOTAL INCOME TAX BENEFIT
INCOME TAX BENEFIT ATTRIBUTABLE TO:
(Loss)/profit from continuing operations
Loss from discontinued operations
RECONCILIATION BETWEEN TAX EXPENSE AND PRE-TAX NET PROFIT
Loss from continuing operations before income tax
Loss from discontinued operations before income tax
Income tax using the domestic corporation tax rate of 30 per cent (2016: 30 per cent)
Prima facie income tax expense on pre-tax accounting profit:
– at Australian tax rate of 30 per cent
– adjustment for difference between Australian and overseas tax rates
INCOME TAX BENEFIT ON PRE-TAX ACCOUNTING PROFIT AT STANDARD RATES
INCREASE/(DECREASE) IN INCOME TAX EXPENSE DUE TO:
Impairment expense not recoverable
Write-off exploration expense
Sale of Contact Energy
Capital loss recognition
Recognition of change in net tax loss position
Recognition of cost base on disposal of entities
Reset of tax bases on consolidation of Uranquinty into tax group
Share of results of equity accounted investees
Tax benefit on translation of foreign denominated tax balances
Other
Under provided in prior years
TOTAL INCOME TAX BENEFIT
DEFERRED TAX MOVEMENTS RECOGNISED DIRECTLY IN OTHER COMPREHENSIVE INCOME
(INCLUDING FOREIGN CURRENCY TRANSLATION)
Financial instruments at fair value
Property, plant and equipment
Provisions
Other items
1 Certain amounts have been restated to reflect adjustments relating to note F12.
2017
$MILLION
2016
$MILLION1
77
(158)
5
–
(76)
(26)
(50)
(76)
(2,075)
(224)
(2,299)
(690)
5
(685)
28
–
–
(40)
21
17
–
574
(3)
7
604
5
(76)
(103)
(4)
2
–
(105)
(13)
(116)
3
(17)
(143)
17
(160)
(143)
(279)
(479)
(758)
(228)
15
(213)
23
13
(3)
(30)
–
–
(9)
65
(3)
11
67
3
(143)
98
(28)
–
8
78
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 120120
D1 INCOME TAX EXPENSE (CONTINUED)
The Company and its wholly-owned Australian resident entities, which met the membership requirements, formed a tax-consolidated
group with effect from 1 July 2003. The head entity within the tax-consolidated group is Origin Energy Limited. Tax funding arrangement
amounts are recognised as inter-entity amounts.
Income tax expense is made up of current tax expense and deferred tax expense. Current tax expense represents the expected tax
payable on the taxable income for the year, using current tax rates and any adjustment to tax payable in respect of previous years.
Deferred tax expense reflects the temporary differences between the accounting carrying amount of an asset or liability in the statement
of financial position and its tax base.
KEY JUDGEMENTS
Tax balances: Tax balances reflect a current understanding and interpretation of existing tax laws. Uncertainty arises due to the possibility
that changes in tax law or other future circumstances can impact the tax balances recognised in the financial statements. Ultimate
outcomes may vary.
Deferred taxes: The recognition of deferred tax balances requires judgement as to whether it is probable such balances will be utilised
and/or reversed in the foreseeable future.
Petroleum Resource Rent Tax (PRRT): The PRRT applies to all Australian onshore oil and gas projects, including coal seam gas
projects. The application of PRRT legislation involves significant judgement around the taxing point of projects, the transfer price used
for determining PRRT income, and the measurement of the Starting Base on transition of existing permits, production licences and
retention leases into the PRRT regime. In assessing the recoverability of deferred tax assets, estimates are required in respect of future
augmentation (escalation) of expenditure, the sequence in which current and future deductible amounts are expected to be utilised, and
the probable cash flows used in determining the recoverability of deferred tax assets.
Income tax expense recognised in other comprehensive income
$MILLION
Available for sale assets:
Valuation (loss)/gain taken to equity
Cash flow hedges:
Reclassified to income statement
Effective portion of change in fair value
Net loss on hedge of net investment in foreign operations
Foreign currency translation differences
for foreign operations
Actuarial gain on defined benefit superannuation plan
OTHER COMPREHENSIVE INCOME FOR THE PERIOD
GROSS
2017
TAX
NET
GROSS
2016
TAX
NET
(58)
17
(41)
9
(3)
6
(534)
246
–
(200)
2
(544)
160
(74)
–
–
(1)
102
(374)
172
–
(200)
1
(442)
(197)
550
(29)
80
–
413
59
(165)
11
–
–
(98)
(138)
385
(18)
80
–
315
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 121121
D2 DEFERRED TAX
Deferred tax balances arise when there are temporary differences between accounting carrying amounts and the tax bases of assets
and liabilities, other than for the following:
– where the difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and
affects neither the accounting profit nor taxable profit or loss;
– where temporary differences relate to investments in subsidiaries, associates and interests in joint arrangements to the extent the
Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the
foreseeable future; and
– where temporary differences arise on initial recognition of goodwill.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or
the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the
asset can be utilised. Deferred tax assets are reduced if it is no longer probable that the related tax benefit will be realised.
Movement in temporary differences during the year
ASSET/(LIABILITY)
$MILLION
1 JULY
20152
RECOGNISED
IN INCOME2
RECOGNISED
IN EQUITY
TRANSFERS
TO HELD
FOR SALE1
30
JUNE
20162
RECOGNISED
IN INCOME
RECOGNISED
IN EQUITY
TRANSFERS
TO HELD
FOR SALE1
30
JUNE
2017
Accrued expenses
not incurred for tax
Employee benefits
Acquired
environmental
scheme certificate
purchase obligations
Acquired energy
purchase obligations
Provisions
Tax value of
carry-forward tax
losses recognised
Property, plant and
equipment
Exploration and
evaluation assets
Financial instruments
at fair value
APLNG MRCPS
elimination (refer
note E1.2)
Business related
costs (deductible
under s.40-880
ITAA97)
Other items
NET DEFERRED
TAX ASSETS
5
79
8
17
239
138
(467)
(356)
347
22
1
5
38
2
(9)
(2)
(8)
30
25
89
(102)
21
28
20
39
–
–
–
–
–
1
28
–
(98)
–
–
(9)
–
–
–
–
(5)
7
70
6
9
264
(4)
(1)
(2)
(7)
(12)
–
164
(154)
(11)
(361)
15
(443)
186
273
–
–
–
–
(2)
(1)
4
–
–
(7)
3
62
–
4
–
(149)
2
101
–
9
(249)
(420)
85
(85)
270
(125)
103
–
–
–
–
50
21
35
92
3
2
(1)
–
–
1
–
–
–
–
248
53
23
35
35
1 Relates to amounts classified as held for sale at 30 June 2016 and 30 June 2017. Refer to note E4.
2 Certain amounts have been re-presented to reflect adjustments relating to note F12.
133
(78)
(1)
158
105
(320)
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 122122
D2 DEFERRED TAX (CONTINUED)
UNRECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets have not been recognised in respect of the following items:
Revenue losses
Capital losses
Petroleum resource rent tax, net of income tax1
Acquisition transaction costs
Investment in joint ventures
Intangible assets
Deferred tax liabilities have not been recognised in respect of the following items:
Investment in Australia Pacific LNG2
2017
$MILLION
2016
$MILLION
53
2
2,459
57
67
8
2,646
33
33
2,083
57
39
24
2,269
(1,190)
(1,190)
(1,817)
(1,817)
1 PRRT is considered, for accounting purposes, to be a tax based on income under AASB 112 Income Taxes. Accordingly, any current and deferred PRRT expense is measured
and disclosed on the same basis as income tax. The application of PRRT legislation relies on a forecast of future years expenditure in order to determine whether the
utilisation of the PRRT base will be required. As the forecast indicates that no utilisation is required, no deferred tax asset has been recognised with respect to PRRT in these
financial statements.
2 A deferred tax liability has not been recorded in respect of the investment in Australia Pacific LNG as the Group is able to control the timing of the reversal of the temporary
difference through its voting rights and it is not expected that the temporary difference will reverse in the foreseeable future.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 123123
E GROUP STRUCTURE
The following section provides information on the Group’s structure and how this impacts the results of the Group as a whole, including
details of joint arrangements, controlled entities, transactions with non-controlling interests and changes made to the Group structure
during the year.
E1 JOINT ARRANGEMENTS
Joint arrangements are those entities over whose activities the Group has joint control, established by contractual agreement and require
consent of two or more parties for strategic, financial and operating decisions. The Group classifies its interests in joint arrangements as
either joint operations or joint ventures depending on its rights to the assets and obligations for the liabilities of the arrangements.
E1.1 INTERESTS IN JOINT VENTURES
Interests in joint ventures are initially recognised at cost and are subsequently adjusted for changes in the Group’s share of the joint
venture’s net assets.
JOINT VENTURE ENTITY
REPORTING DATE
COUNTRY OF INCORPORATION
Australia Pacific LNG Pty Ltd1
Energia Andina S.A.2
Energia Austral SpA3
KUBU Energy Resources (Pty) Limited
OTP Geothermal Pte Ltd4
PNG Energy Developments Limited
Venn Energy Trading Pte Limited
30 June
31 December
31 December
30 June
31 December
31 December
31 March
Australia
Chile
Chile
Botswana
Singapore
PNG
Singapore
OWNERSHIP INTEREST (%)
2017
37.5
49.9
34.0
50.0
–
50.0
50.0
2016
37.5
49.9
34.0
50.0
50.0
50.0
50.0
1 Australia Pacific LNG is a separate legal entity. Operating, management and funding decisions require the unanimous support of the Foundation Shareholders, which includes
the Group and ConocoPhillips. Accordingly, joint control exists and the Group has classified the investment in Australia Pacific LNG as a joint venture.
2 Energia Andina S.A. is a separate legal entity. Key decisions require super majority (four directors) approval, with the Group entitled to appoint two of the five directors. As a
consequence joint control exists and the Group has classified the investment as a joint venture.
3 Energia Austral SpA is a separate legal entity. Key decisions require super majority (four directors) approval, with the Group entitled to appoint two of the five directors. As a
consequence joint control exists and the Group has classified the investment as a joint venture. The Group’s ownership interest can change between reporting periods when
equity contributions are made to the joint venture.
4 OTP Geothermal Pte Ltd is a separate legal entity. On 16 August 2016, the Group sold its interest in OTP Geothermal Pte Ltd.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 124124
E1 JOINT ARRANGEMENTS (CONTINUED)
E1.2 INVESTMENT IN AUSTRALIA PACIFIC LNG PTY LTD
Australia Pacific LNG’s second LNG train commenced production during the period, with revenue recognition for the second train
commencing in November 2016. A summary of Australia Pacific LNG’s financial performance and its financial position for the periods
ended 30 June 2017 and 30 June 2016 follows.
2017
2016
ORIGIN
INTEREST
TOTAL
APLNG
ORIGIN
INTEREST
$MILLION
Operating revenue
Operating expenses
EBITDA
Depreciation and amortisation expense
Interest income
Interest expense
Income tax benefit
UNDERLYING RESULT FOR THE PERIOD
Elimination of MRCPS depreciation1
TOTAL UNDERLYING RESULT FOR THE PERIOD
ITEMS EXCLUDED FROM SEGMENT RESULT:
Impairment of non-current assets
Net foreign exchange loss
Tax expense on translation of foreign denominated tax balances
Pre-production costs not able to be capitalised
Restructure costs
TOTAL ITEMS EXCLUDED FROM SEGMENT RESULT
TOTAL
APLNG
3,754
(1,465)
2,289
(1,614)
3
(955)
87
(190)
–
(190)
(4,922)
–
–
–
–
(4,922)
859
(71)
5
(66)
(1,846)
–
–
–
–
(1,846)
NET LOSS FOR THE PERIOD
Other comprehensive income
TOTAL COMPREHENSIVE INCOME
(5,112)
(1,912)
–
–
(5,112)
(1,912)
880
(585)
295
(700)
5
(296)
209
(487)
–
(487)
–
(7)
(23)
(75)
(9)
(114)
(601)
95
(506)
111
(182)
–
(182)
–
(3)
(9)
(28)
(3)
(43)
(225)
36
(189)
1 During project construction, interest paid by Australia Pacific LNG (APLNG) to the Group on Mandatorily Redeemable Cumulative Preference Shares (MRCPS) was capitalised
by APLNG. These capitalised interest amounts in APLNG now form part of the cost of APLNG’s assets and these assets have been depreciated since commencement of
operations. During the project construction period, when the Group received interest on the MRCPS from APLNG, it recorded the interest as income after eliminating a
proportion of this interest which related to its ownership interest in APLNG. When the Group now takes up its share of APLNG’s net profit after tax (NPAT) the result contains
an element of depreciation relating to this capitalised interest. As these amounts were previously eliminated by the Group against its investment at the time the interest was
received, an adjustment is made to reverse the impact of this depreciation on APLNG NPAT.
Impairment of investment for the year ended 30 June
$MILLION
Share of Australia Pacific LNG impairment of non-current assets
2017
1,846
2016
–
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 125125
E1 JOINT ARRANGEMENTS (CONTINUED)
E1.2 INVESTMENT IN AUSTRALIA PACIFIC LNG PTY LTD (CONTINUED)
Impairment of investment (continued)
The carrying amount of the Group’s equity accounted investment in Australia Pacific LNG (APLNG) is reviewed at each reporting date to
determine whether there is any indication of impairment. Where an indicator of impairment exists, a formal estimate of the recoverable
amount is made.
APLNG has performed its own impairment assessment and determined that an impairment of US$5,238 million (A$7,031 million) pre-
tax for the period should be recognised (US$2,888 million or A$3,927 million pre-tax having already been recorded at 31 December
2016). As a result, the Group has taken up its 37.5% share (A$1,846 million post-tax) of the impairment recognised by APLNG. This is
recorded within the results from equity accounted investees in the income statement.
The Group’s own assessment of the carrying value of its equity accounted investment in APLNG identified no additional impairment.
The Group’s share of the impairment recognised by APLNG is due to a change in a number of assumptions but principally reduced oil
prices and a significant increase in USD interest rates impacting APLNG’s underlying risk free and base rates.
The APLNG valuation is determined based on an assessment of fair value less costs of disposal (based on level 3 fair value hierarchy).
Key assumptions in APLNG’s valuation are reserves, future production profiles, commodity prices, operating costs and any future
development costs necessary to produce the reserves.
Estimated unconventional reserve quantities in APLNG are based upon interpretations of geological and geophysical models and
assessment of the technical feasibility and commercial viability of producing the reserves. Reserve estimates are prepared which
conform to guidelines prepared by the Society of Petroleum Engineers. These assessments require assumptions to be made regarding
future development and production cost, commodity prices, exchange rates and fiscal regimes. The estimates of reserves may
change from period to period as the economic assumptions used to estimate the reserves can change from period to period, and as
additional geological data is generated during the course of operations. Estimated reserve quantities include a Probabilistic Resource
Assessment approach.
Estimates of future commodity prices are based on APLNG’s best estimate of future market prices with reference to external industry
and market analysts’ forecasts, current spot prices and forward curves. Future commodity prices for impairment testing are reviewed
6 monthly. Where volumes are contracted, future prices are based on the contracted price.
Oil prices (Brent oil Nominal, US$/bbl) used by APLNG in its impairment assessment are set out below.
30 June 2017
1 Escalated at 2.1% from 2022.
2017
49
2018
51
2019
59
2020
67
2021
71
20221
74
Forecasts of the foreign exchange rate for foreign currencies, where relevant, are estimated with reference to observable external market
data and forward values, including analysis of broker and consensus estimates.
The future estimated AUD/USD rates applied by APLNG are represented below:
30 June 2017
2017
0.77
2018
0.77
2019
0.76
2020
0.76
2021
0.75
2022
0.74
The pre-tax discount rate, determined as APLNG’s weighted average cost of capital, adjusted for risks where appropriate, that has been
applied is 10.1% (30 June 2016: 9.0%).
In the event that future circumstances vary from these assumptions, the recoverable amount of the investment could change materially
and result in further impairment losses or the reversal of previous impairment losses.
Impairment sensitivity
The calculation of fair value less costs of disposal for APLNG is most sensitive to changes in oil price, discount rates and the AUD/USD
foreign exchange rate. Key accounting judgements and estimates used in forming the valuation are disclosed on the previous page.
Reasonably possible changes in circumstances will affect assumptions and the estimated fair value of Origin’s investment in APLNG.
As the recoverable amount of APLNG equals its carrying value, any adverse movements in key assumptions, in isolation, will lead to
further impairment. These reasonably possible changes include:
– A decrease in oil prices of USD$1/bbl, which in isolation would lead to a decrease of US$380 million in the valuation; and
– An increase in the discount rate of 0.25% in isolation or an increase in the AUD/USD FX rate of 2.5 cents in isolation from the rates
assumed in the valuation would lead to a similar decrease as noted for oil above.
Changes in any of the aforementioned assumptions may be accompanied by changes in other assumptions which may have an
offsetting impact.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 126126
E1 JOINT ARRANGEMENTS (CONTINUED)
E1.2 INVESTMENT IN AUSTRALIA PACIFIC LNG PTY LTD (CONTINUED)
Summary statement of financial position of Australia Pacific LNG
$MILLION
Cash and cash equivalents
Other current assets
CURRENT ASSETS
Receivables from shareholders
Property, plant and equipment
Exploration, evaluation and development assets
Other non-current assets
NON-CURRENT ASSETS
TOTAL ASSETS
Bank loans – secured
Other current liabilities
CURRENT LIABILITIES
Bank loans – secured
Payable to shareholders
Other non-current liabilities
NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
Group’s interest of 37.5 per cent of APLNG net assets
Group’s own costs
Mandatorily Redeemable Cumulative Preference Shares elimination1
INVESTMENT IN AUSTRALIA PACIFIC LNG PTY LTD
2017
747
677
1,424
333
33,853
351
2,425
36,962
38,386
927
915
1,842
9,532
9,624
2,413
21,569
23,411
14,975
2016
286
584
870
–
40,011
1,354
379
41,744
42,614
360
890
1,250
10,742
12,927
1,463
25,132
26,382
16,232
2017
$MILLION
2016
$MILLION
5,615
25
(177)
5,463
6,087
25
(167)
5,945
1 The Mandatorily Redeemable Cumulative Preference Shares (MRCPS) are recognised as a financial asset by the Group and the MRCPS dividend is recognised as interest
revenue in the Group’s income statement. The proportion attributable to the Group’s own interest (37.5 per cent) is eliminated through the equity accounted investment
balance as Australia Pacific LNG has capitalised a portion of interest expense associated with the MRCPS.
In calculating Origin’s return on capital employed, an adjustment is made to the carrying value of the Australia Pacific LNG equity
accounted investment as noted below.
Investment in Australia Pacific LNG Pty Ltd
Less: Non-cash fair value uplift1
ADJUSTED INVESTMENT IN AUSTRALIA PACIFIC LNG PTY LTD
2017
$MILLION
2016
$MILLION
5,463
(30)
5,433
5,945
(1,923)
4,022
1 Non-cash fair value uplift represents the increase in Origin's equity accounted investment in Australia Pacific LNG arising from the partly paid shares issued by Australia
Pacific LNG Pty Ltd to ConocoPhillips (CoP) in October 2009 and the dilution impact of subsequent share issues by Australia Pacific LNG Pty Ltd to Sinopec (August 2011
and July 2012).
In the initial years, Origin was not required to make an equivalent contribution and instead recorded a non-cash fair value uplift to its investment in Australia Pacific LNG. The
amount has been reduced by the $1,846 million impairment during the period. The equity contributions made by CoP and Sinopec to Australia Pacific LNG were used to fund
construction of the LNG project assets, which will be depreciated over their useful lives (approximately 30 years).
In each period Origin’s equity accounted share of Australia Pacific LNG’s earnings will include a depreciation charge referrable to the non-cash fair value uplift. When these
earnings are reflected in Origin’s investment balance this depreciation amount will reduce the remaining balance of the non-cash fair value uplift.
The 30 June 2017 balance includes an estimated depreciation charge of $47 million (30 June 2016: $22 million) associated with the non-cash fair value uplift described above.
Australia Pacific LNG is subject to the Petroleum Resource Rent Tax legislation and has an unrecognised deferred tax asset balance of
$5,377 million (100 per cent Australia Pacific LNG) at 30 June 2017 (30 June 2016: $3,747 million). Any future recognition of this
balance by Australia Pacific LNG will result in an increase in the Group’s equity accounted investment in Australia Pacific LNG, rather
than a deferred tax asset, as the Group equity accounts its 37.5 per cent interest.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS
127127
E1 JOINT ARRANGEMENTS (CONTINUED)
E1.3 TRANSACTIONS BETWEEN THE GROUP AND AUSTRALIA PACIFIC LNG PTY LTD
The Group provides services to Australia Pacific LNG including corporate services, upstream operating services related to the
development and operation of Australia Pacific LNG’s natural gas assets, and marketing services relating to coal seam gas (CSG).
The Group incurs costs in providing these services and charges Australia Pacific LNG for them in accordance with the terms of the
contract governing those services.
Separately, the Group has entered agreements with Australia Pacific LNG to purchase gas (2017: $255 million; 2016: $296 million)
and the Group sells gas to Australia Pacific LNG (2017: $66 million; 2016: $41 million). At 30 June 2017, the Group’s outstanding
payable balance for purchases from Australia Pacific LNG was $nil (2016: $27 million) and outstanding receivable balance for sales to
Australia Pacific LNG was $3 million (2016: $1 million).
The Group has invested in Mandatorily Redeemable Cumulative Preference Shares (MRCPS) issued by Australia Pacific LNG. The MRCPS
existing at 1 July 2016 were cancelled and replaced with US$2.8 billion of MRCPS and US$0.8 billion capital contribution. The MRCPS
are the mechanism by which the funding for the CSG to LNG Project has been provided by the shareholders of Australia Pacific LNG in
proportion to their ordinary equity interests. The MRCPS have a fixed rate dividend obligation based on the relevant observable market
interest rates and estimated credit margin at the date of issue. The dividend is paid twice per annum. The mandatory redemption date for
the MRCPS is 30 June 2026. The financial asset (loan) reflecting these MRCPS was $3,609 million as at 30 June 2017 (2016: $4,848
million). Dividends received are recognised as interest. Refer to note A2.
The carrying value of the financial asset at 30 June 2017, as disclosed in note B6, reflects the Group’s view that Australia Pacific LNG will
utilise cash flows generated from export operations to redeem the MRCPS for their full issue price prior to their mandatory redemption
date. There are no conditions existing at the reporting date which indicate that Australia Pacific LNG will be unable to repay the full
carrying value. Accordingly the financial asset/(loan) is valued at amortised cost and reflects the cash provided to Australia Pacific LNG.
E1.4 INTERESTS IN UNINCORPORATED JOINT OPERATIONS
The Group’s interests in unincorporated joint operations are brought to account on a line-by-line basis in the income statement and
statement of financial position. These interests are held on the following assets whose principal activities are oil and/or gas exploration,
development and production, power generation and geothermal power technology:
– Cooper Basin
– Otway Basin
– Bass Basin
– Perth Basin
– Bonaparte Basin
– Surat Basin
– Browse Basin
– Taranaki Basin
– Canterbury Basin
– Worsley Power Plant
– Beetaloo Basin
– Geodynamics
E2 BUSINESS COMBINATIONS
There were no significant business combinations during the years ended 30 June 2017 and 30 June 2016.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 128128
E3 CONTROLLED ENTITIES
The financial statements of the Group include the consolidation of Origin Energy Limited and controlled entities. Controlled entities are
the following entities controlled by the parent entity (Origin Energy Limited):
INCORPORATED IN
2017
OWNERSHIP
INTEREST
PER CENT
2016
OWNERSHIP
INTEREST
PER CENT
Origin Energy Limited
Origin Energy Finance Limited
Huddart Parker Pty Limited <
Origin Energy NZ Share Plan Limited
FRL Pty Ltd <
B.T.S. Pty Ltd <
Origin Energy Power Limited <
Origin Energy SWC Limited <
BESP Pty Ltd
Origin Energy Walloons Transmissions Pty Limited
Origin Energy Eraring Pty Limited <
Origin Energy Eraring Services Pty Limited <
Darling Downs Solar Farm Pty Ltd
Darling Downs Solar Farm Operating Holding Pty Ltd
Darling Downs Solar Farm Asset Holding Pty Ltd
Darling Downs Solar Farm Asset Pty Ltd
Darling Downs Solar Farm Operating Pty Ltd
Origin Energy Upstream Holdings Pty Ltd
Origin Energy B2 Pty Ltd
Origin Energy Upstream Operator Pty Ltd
Origin Energy Upstream Operator 2 Pty Ltd
Origin Energy Holdings Pty Limited <
Origin Energy Retail Limited <
Origin Energy (Vic) Pty Limited <
Gasmart (Vic) Pty Ltd <
Origin Energy (TM) Pty Limited <
Cogent Energy Pty Ltd
Origin Energy Retail No. 1 Pty Limited
Origin Energy Retail No. 2 Pty Limited
Horan & Bird Energy Pty Ltd
Origin Energy Electricity Limited <
Eraring Gentrader Depositor Pty Limited
Sun Retail Pty Ltd <
OE Power Pty Limited <
Origin Energy Uranquinty Power Pty Ltd <
Origin Energy Mortlake Terminal Station No. 1 Pty Limited
Origin Energy Mortlake Terminal Station No. 2 Pty Limited
Origin Energy PNG Ltd #
Origin Energy PNG Holdings Limited #
Origin Energy Tasmania Pty Limited <
The Fiji Gas Co Ltd
Origin Energy Contracting Limited <
Origin Energy LPG Limited <
Origin (LGC) (Aust) Pty Limited <
Origin Energy SA Pty Limited <
Hylemit Pty Limited
Origin Energy LPG Retail (NSW) Pty Limited
Origin Energy WA Pty Limited <
Origin Energy Services Limited <
OEL US Inc.
Origin Energy NSW Pty Limited <
NSW
Vic
Vic
NZ
WA
WA
SA
WA
Vic
Vic
NSW
NSW
NSW
NSW
NSW
NSW
NSW
Vic
Vic
Vic
Vic
Vic
SA
Vic
Vic
Vic
Vic
Vic
Vic
Qld
Vic
Vic
Qld
Vic
Vic
Vic
Vic
PNG
PNG
Tas
Fiji
Qld
NSW
NSW
SA
Vic
NSW
WA
SA
USA
NSW
100
100
100
100
100
100
100
100
–
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
66.7
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
66.7
100
100
51
100
100
100
100
100
100
100
100
100
100
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS E3 CONTROLLED ENTITIES (CONTINUED)
Origin Energy Asset Management Limited <
Origin Energy Pipelines Pty Limited <
Origin Energy Pipelines (SESA) Pty Limited
Origin Energy Pipelines (Vic) Holdings Pty Limited <
Origin Energy Pipelines (Vic) Pty Limited <
Origin LPG (Vietnam) LLC
Origin Energy Solomons Ltd
Origin Energy Cook Islands Ltd
Origin Energy Vanuatu Ltd
Origin Energy Samoa Ltd
Origin Energy American Samoa Inc
Origin Energy Insurance Singapore Pte Ltd
Acumen Metering Pty Ltd **
Angari Pty Limited <*
Oil Investments Pty Limited <*
Origin Energy Southern Africa Holdings Pty Limited*
Origin Energy Kenya Pty Limited*
Origin Energy Zoca 91-08 Pty Limited <*
Sagasco NT Pty Ltd <*
Sagasco Amadeus Pty Ltd <*
Origin Energy Amadeus Pty Limited <*
Amadeus United States Pty Limited <*
Origin Energy Vietnam Pty Limited*
Origin Energy Singapore Holdings Pte Limited*
Origin Energy (Song Hong) Pte Limited*
Lattice Energy Limited < ##
Origin Energy CSG 2 Pty Limited
Origin Energy ATP 788P Pty Limited
Origin Energy Wallumbilla Transmissions Pty Limited
Oil Company of Australia (Moura) Transmissions Pty Limited <
Lattice Energy Resources (Bonaparte) Pty Limited <
Lattice Energy Resources (Perth Basin) Pty Limited <
Origin Energy Petroleum Pty Limited <
Origin Energy Browse Pty Ltd
Lattice Energy Resources (Bass Gas) Limited
Sagasco South East Inc
Lattice Energy Resources NZ (Holdings) Limited
Kupe Development Limited
Kupe Mining (No.1) Limited
Lattice Energy Resources NZ (Kupe) Limited
Origin Energy Resources NZ (Rimu) Limited
Lattice Energy Resources NZ (TAWN) Limited
OE Resources Limited Partnership
Lattice Energy Services Pty Limited
Lattice Energy Finance Limited
129129
INCORPORATED IN
2017
OWNERSHIP
INTEREST
PER CENT
2016
OWNERSHIP
INTEREST
PER CENT
SA
NT
Vic
Vic
Vic
Vietnam
Solomon Islands
Cook Islands
Vanuatu
Western Samoa
American Samoa
Singapore
Vic
SA
SA
Qld
Vic
SA
SA
SA
Qld
Qld
Vic
Singapore
Singapore
SA
Vic
Qld
Vic
WA
SA
ACT
Qld
Vic
UK
Panama
NZ
NZ
NZ
NZ
NZ
NZ
NSW
Vic
Vic
100
100
100
100
100
51
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 130130
E3 CONTROLLED ENTITIES (CONTINUED)
Origin Energy VIC Holdings Pty Limited <
Origin Energy New Zealand Limited
Origin Energy Universal Holdings Limited
Origin Energy Five Star Holdings Limited
Origin Energy Contact Finance Limited
Origin Energy Contact Finance No.2 Limited
Origin Energy Pacific Holdings Limited
Origin Energy Capital Ltd<
Origin Energy Finance Company Pty Limited <
OE JV Co Pty Limited <
OE JV Holdings Pty Limited
Origin Energy LNG Holdings Pte Limited
Origin Energy LNG Portfolio Pty Ltd
Origin Energy Australia Holding BV #
Origin Energy Mt Stuart BV #
OE Mt Stuart General Partnership #
Parbond Pty Limited
Origin Foundation Pty Limited
Origin Renewable Energy Investments No 1 Pty Ltd
Origin Renewable Energy Investments No 2 Pty Ltd
Origin Renewable Energy Pty Ltd
Origin Energy Geothermal Holdings Pty Ltd
Origin Energy Geothermal Pty Ltd
Origin Energy Chile Holdings Pty Limited
Origin Energy Chile S.A. #
Origin Energy Geothermal Chile Limitada #
Nido Energy SpA #
Pleiades S.A
Origin Energy Geothermal Singapore Pte Limited
Origin Energy Wind Holdings Pty Ltd
Cullerin Range Wind Farm Pty Ltd
Crystal Brook Wind Farm Pty Limited
Wind Power Pty Ltd
Wind Power Management Pty Ltd
Lexton Wind Farm Pty Ltd
Stockyard Hill Wind Farm Pty Ltd
Tuki Wind Farm Pty Ltd
Dundas Tablelands Wind Farm Pty Limited
Origin Energy Hydro Bermuda Limited
Origin Energy Hydro Chile SpA #
INCORPORATED IN
2017
OWNERSHIP
INTEREST
PER CENT
2016
OWNERSHIP
INTEREST
PER CENT
Vic
NZ
NZ
NZ
NZ
NZ
NZ
Vic
Vic
Vic
Vic
Singapore
Victoria
Netherlands
Netherlands
Netherlands
NSW
Vic
Vic
Vic
Vic
Vic
Vic
Vic
Chile
Chile
Chile
Chile
Singapore
Vic
NSW
NSW
Vic
Vic
Vic
Vic
Vic
Vic
Bermuda
Chile
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
< Entered into ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 and related deed of cross guarantee with Origin Energy Limited.
# Controlled entity has a financial reporting period ending 31 December.
## Origin Energy Resources Limited has changed its name to Lattice Energy Limited on 29 June 2017.
* Origin Energy Resources Limited (subsequently renamed Lattice Energy Limited) transferred its shares in certain entities to Origin Energy Holdings Pty Limited on 28
June 2017.
** Origin Energy Power Limited transferred its shares in Acumen Metering Pty Ltd (previously named Origin Energy Pinjar Security Pty Ltd) to Origin Energy Holdings Pty Limited
on 6 April 2017.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 131131
E3 CONTROLLED ENTITIES (CONTINUED)
CHANGES IN CONTROLLED ENTITIES
2017
Sagasco South East Inc was deregistered on 10 October 2016.
Cullerin Range Wind Farm Pty Ltd and Stockyard Hill Wind Farm Pty Ltd were sold during the year ended 30 June 2017.
Darling Downs Solar Farm Operating Holding Pty Ltd, Darling Downs Solar Farm Asset Holding Pty Ltd, Darling Downs Solar Farm
Asset Pty Ltd and Darling Downs Solar Farm Operating Pty Ltd were incorporated during the year ended 30 June 2017.
The following name changes occurred on 1 February 2017:
Origin Energy Pinjar Holdings No. 1 Pty Limited changed its name to Origin Energy Upstream Holdings Pty Ltd
Origin Energy Pinjar Holdings No. 2 Pty Limited changed its name to Origin Energy Upstream Operator Pty Ltd
Origin Energy Pinjar No. 1 Pty Limited changed its name to Origin Energy B2 Pty Ltd
Origin Energy Pinjar No. 2 Pty Limited changed its name to Origin Energy Upstream Operator 2 Pty Ltd
Origin Energy Darling Downs Solar Farm Pty Ltd changed its name to Darling Downs Solar Farm Pty Ltd on 26 April 2017.
Darling Downs Solar Farm Pty Ltd was sold on 6 April 2017.
On 28 April 2017 Origin Energy Fairview Transmissions Pty Limited changed its name to Lattice Energy Services Pty Limited.
Origin Energy Walloons Transmissions Pty Limited, Origin Energy Wallumbilla Transmissions Pty Limited and Oil Company
of Australia (Moura) Transmissions Pty Ltd were sold on 6 June 2017.
Lattice Energy Finance Limited was incorporated on 26 June 2017.
Origin Energy Pinjar Security Pty Ltd changed its name to Acumen Metering Pty Ltd effective from 27 June 2017.
Origin Energy Resources Limited changed its name to Lattice Energy Limited on 29 June 2017.
The following name changes occurred on 28 June 2017:
Origin Energy Developments Pty Limited changed its name to Lattice Energy Resources (Perth Basin) Pty Limited
Origin Energy Bonaparte Pty Limited changed its name to Lattice Energy Resources (Bonaparte) Pty Limited
Origin Energy Northwest Limited changed its name to Lattice Energy Resources (Bass Gas) Limited
Origin Energy Resources (Kupe) Limited changed its name to Lattice Energy Resources NZ (Kupe) Limited
Origin Energy Resources NZ Limited changed its name to Lattice Energy Resources NZ (Holdings) Limited
Origin Energy Resources NZ (TAWN) Limited changed its name to Lattice Energy Resources NZ (TAWN) Limited
2016
On 10 August 2015 Contact Energy Limited ceased to be controlled by the Group (refer note E4).
On 2 November 2015 the Group acquired 100 per cent of Horan & Bird Energy Pty Ltd.
On 18 February 2016 the Group registered Origin Energy LNG Portfolio Pty Ltd.
On 15 March 2016 the Group registered Origin Energy Darling Downs Solar Farm Pty Ltd.
Origin Energy Generacion Chile SpA changed its name to Nido Energy SpA on 23 February 2016.
Origin Energy (Block 31) Pte Limited, Origin Energy (Block 01) Pte Limited, Origin Energy (L15/50) Pte Limited,
Origin Energy (L26/50) Pte Limited and Origin Energy (Savannahket) Pte Limited were struck off.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 132132
E4 DISCONTINUED OPERATIONS, ASSETS HELD FOR SALE AND DISPOSALS
E4.1 DISCONTINUED OPERATIONS
On 6 December 2016 the Group announced its intention to divest the conventional upstream assets. The associated earnings, along
with those from the Darling Downs Pipeline which was sold in the current period, have been classified as discontinued operations in the
income statement and all related note disclosures for the current and comparative period. The earnings of Contact Energy, prior to the
Group’s sale of its investment on 10 August 2015, were classified as discontinued operations in the comparative period.
FOR THE YEAR ENDED 30 JUNE
RESULTS OF DISCONTINUED OPERATIONS
Revenue
Net gain on sale of assets
Expenses
Impairment
Net financing costs
LOSS BEFORE INCOME TAX
Income tax benefit
LOSS AFTER TAX FROM DISCONTINUED OPERATIONS
Attributable to:
Members of the parent entity
Non-controlling interests
Financing costs capitalised
CASH FLOWS OF DISCONTINUED OPERATIONS
Cash flows from operating activities
Cash flows used in investing activities
Cash flows used in financing activities1
NET DECREASE IN CASH AND CASH EQUIVALENTS
2017
$MILLION
2016
$MILLION
461
234
(154)
(753)
(12)
(224)
50
(174)
(174)
–
(174)
8
284
(178)
–
106
718
21
(647)
(550)
(21)
(479)
160
(319)
(326)
7
(319)
26
226
(389)
(63)
(226)
1 Cash flows used in financing activities in the Origin Group are managed by Origin Treasury on a consolidated basis and are not classified as cash flows from discontinued
operations. Prior period cash flows used in financing activities relate to Contact Energy.
E4.2 ASSETS HELD FOR SALE
The assets and liabilities relating to the divestment of the conventional upstream business, Acumen metering business and Jingemia
assets have been classified as held for sale at 30 June 2017 (2016: Mortlake Pipeline, Cullerin Range Wind Farm, New Zealand on-shore
assets, Waitsia, Senecio, Beharra, Energia Austral SpA, OTP Geothermal Pte Ltd and Javiera solar project).
Impairment losses of $753 million for write-downs of the disposal group to the lower of its carrying amount and its fair value less costs to
sell have been included in ‘results of discontinued operations’. The impairment losses have been applied to reduce the carrying amount of
property, plant and equipment and exploration assets within the disposal group.
ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
Investments accounted for using the equity method
Property, plant and equipment
Exploration and evaluation assets
Intangible assets
Tax assets
Other assets
ASSETS CLASSIFIED AS HELD FOR SALE
Trade and other payables
Employee benefits
Provisions
LIABILITIES CLASSIFIED AS HELD FOR SALE
2017
$MILLION
2016
$MILLION
34
91
58
–
8
–
1,479
–
3
320
57
2,050
198
25
497
720
–
2
2
5
–
152
294
9
6
1
–
471
9
–
37
46
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS E4.3 DISPOSALS
During the year, the Group completed the following divestments as listed below.
– Mortlake Pipeline;
– Cullerin Range Wind Farm;
– New Zealand on-shore assets;
– OTP Geothermal Pte Ltd;
– Javiera solar project;
– Darling Downs Solar Farm;
– Darling Downs Pipeline;
– Stockyard Hill Wind Farm; and
– Surat basin assets.
RECONCILIATION OF GAIN ON SALE
Consideration received
Transaction related costs
Net assets disposed
Gain on sale before income tax expense
CARRYING VALUE OF NET ASSETS DISPOSED
Trade and other receivables
Inventories
Property, plant and equipment
Intangible assets
Investments accounted for using the equity method
Deferred tax assets
Trade and other payables
Income tax liabilities
Provisions and employee benefits
Deferred tax liabilities
NET ASSETS DISPOSED
133133
2017
$MILLION
887
(30)
(456)
401
1
2
459
6
49
3
(5)
(1)
(33)
(25)
456
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 134134
F OTHER INFORMATION
This section includes other information to assist in understanding the financial performance and position of the Group, or items required
to be disclosed to comply with accounting standards and other pronouncements.
F1 CONTINGENT LIABILITIES
Discussed below are items for which it is not probable that the Group will have to make future payments or the amount of the future
payments cannot be reliably measured.
GUARANTEES
Bank guarantees and letters of credit have been provided mainly to Australian Energy Market Operator Limited to support the Group’s
obligations to purchase electricity from the National Electricity Market.
Bank guarantees – unsecured
Letters of credit – unsecured
1
2
Includes unsecured bank guarantees of $13 million related to discontinued operations.
Includes unsecured bank guarantees of $3 million related to discontinued operations.
2017
$MILLION1
2016
$MILLION2
368
2
398
2
The Group’s share of guarantees for certain contractual commitments of its joint ventures is shown at note F2. The Group has also given
letters of comfort to its bankers in respect of financial arrangements provided by the banks to certain partly-owned controlled entities.
JOINT ARRANGEMENTS
As a participant in certain joint arrangements, the Group is liable for its share of liabilities incurred by these arrangements. In some
circumstances the Group may incur more than its proportionate share of such liabilities, but will have the right to recover the excess
liability from the other joint arrangement participants.
Australia Pacific LNG has secured US$8.5 billion in funding through a project finance facility. As of 30 June 2017, Australia Pacific LNG
has drawn down US$8.5 billion under the facility for capital expenditure, fees and interest. The Group guarantees its share of amounts
drawn under the facility during the construction phase of the project (37.5 per cent share at 30 June 2017 being US$3.2 billion). On
31 October 2016 US$5.1 billion (37.5 per cent share being US$1.9 billion) of shareholder guarantees were released after the project’s
first production train successfully satisfied lender’s completion tests. The remaining US$3.4 billion remains guaranteed at 30 June 2017
(37.5 per cent share being US$1.3 billion). Principal repayments of US$267 million were made during the year (30 June 2016: $nil).
In September 2016, APLNG made a loan to the Group of $US96 million and receipt of this $US96 million from APLNG is shown as a
current payable to joint ventures in the statement of financial position. The loan was made by APLNG to the Group in accordance with
the terms of the APLNG project financing facility, which allows APLNG to make a loan to a shareholder if the shareholder provides the
project financiers with a letter of credit for the amount of the loan.
The Group continues to provide parent company guarantees in excess of its 37.5 per cent shareholding in Australia Pacific LNG in
respect of certain historical domestic contracts.
LEGAL AND REGULATORY
Certain entities within the Group (and joint venture entities, such as Australia Pacific LNG) are subject to various lawsuits and claims as
well as audits and reviews by government or regulatory bodies. In most instances it is not possible to reasonably predict the outcome of
these matters or their impact on the Group. Where outcomes can be reasonably predicted, provisions are recorded.
A number of sites owned/operated (or previously owned/operated) by the Group have been identified as contaminated. These properties
are subject to ongoing environmental management programs. For sites where the requirements can be assessed and remediation costs
can be estimated, such costs have been expensed or provided for.
Warranties and indemnities have also been given and/or received by entities in the Group in relation to environmental liabilities for certain
properties divested and/or acquired.
CAPITAL EXPENDITURE
As part of the acquisition of Browse Basin exploration permits, the Group agreed to pay cash consideration of US$75 million
contingent upon a project Final Investment Decision (FID) and US$75 million contingent upon first production. The Group will pay
further contingent consideration of up to US$50 million upon first production if 2P reserves, at the time of FID, reach certain thresholds.
These obligations have not been provided for at the reporting date as they are dependent upon uncertain future events not wholly within
the Group’s control.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS
135135
F2 COMMITMENTS
Detailed below are the Group’s contractual commitments that are not recognised as liabilities as the relevant assets have not yet
been received.
Capital expenditure commitments
Joint venture commitments1
Operating lease commitments
2017
$MILLION
2016
$MILLION
72
740
398
81
993
296
1
Includes $623 million (2016: $822 million) in relation to the Group’s share of Australia Pacific LNG’s capital, joint venture and operating lease commitments.
The Group leases property, plant and equipment under operating leases with terms of one to ten years. The future minimum lease
payments under non-cancellable operating leases are shown below.
Less than one year
Between one and five years
More than five years
F3 SHARE-BASED PAYMENTS
2017
$MILLION
2016
$MILLION
58
159
181
398
67
161
68
296
This section sets out details of the Group’s share-based remuneration arrangements including details of the Company’s Equity Incentive
Plan and Employee Share Plan.
The table below shows share-based remuneration expense that was recognised during the year.
Origin Equity Incentive Plan
Origin Employee Share Plan
REF.
(a)
(b)
2017
$MILLION
2016
$MILLION
25
5
30
32
5
37
EXPLANATORY NOTES TO SHARE-BASED PAYMENTS FOR THE YEAR ENDED 30 JUNE
(a) Equity Incentive Plan
Eligible employees are granted share-based remuneration under the Origin Energy Limited Equity Incentive Plan. Participation in the plan
is at the Board’s discretion and no individual has a contractual right to participate or to receive any guaranteed benefits. Equity incentives
are offered in the form of Options and/or share rights.
(i) Short Term Incentive (STI)
STI includes the award of Deferred Share Rights (DSRs) which vest where the employee remains employed with satisfactory performance
for a set period (generally between two and four years). DSRs do not carry voting or dividend entitlements. Once vested, a DSR entitles
the holder to one fully paid ordinary share of the Company. As there is no exercise price for DSRs, they are exercised automatically
upon vesting. The fair value of DSRs is recognised as an employee expense over the related service period. DSRs are forfeited if the
service and performance conditions are not met. In exceptional circumstances1 the DSRs, which represent a portion of ‘earned’ STI, will
vest at cessation unless the Board determines otherwise. Fair value is measured at grant date as the market value of an Origin share
less the discounted value of dividends foregone (two year vesting period: $5.25, three year vesting period: $5.10 and four year vesting
period: $4.95).
1 The Equity Incentive Plan Rules set out the circumstances as death, disability, redundancy, genuine retirement, or other exceptional circumstances approved by the Board.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 136136
F3 SHARE-BASED PAYMENTS (CONTINUED)
EXPLANATORY NOTES TO SHARE-BASED PAYMENTS FOR THE YEAR ENDED 30 JUNE (CONTINUED)
(ii) Long Term Incentive (LTI)
LTI includes the award of Performance Share Rights (PSRs) and/or Options which do not carry dividend or voting entitlements and will
only vest if certain performance standards are met. PSRs have a performance period of four years, and Options have a performance
period of five years. Half of each LTI award is subject to a market hurdle, namely Origin’s Total Shareholder Return (TSR) relative to a
Reference Group of ASX-listed companies identified in the Remuneration Report. Half of each LTI award is subject to an internal hurdle,
namely Return on Capital Employed (ROCE) as set out in the Remuneration Report. The number of awards that may vest depends
on performance against each hurdle, considered separately. For awards subject to the relative TSR hurdle, no vesting occurs unless
Origin’s TSR over the performance period (4 years if the award is in PSRs, 5 years if the award is in Options) is ranked above the 50th
percentile of the Reference Group. 50 per cent vesting occurs if the 50th percentile is exceeded. Full vesting occurs if Origin is ranked
at or above the 75th percentile of the Reference Group, with pro-rata vesting between these two vesting points. The relative TSR hurdle
may apply to either PSRs or Options. For KMP the relative TSR hurdle applies only to Options. For awards subject to the ROCE hurdle,
no vesting occurs unless Origin achieves two conditions, the first to meet the average of the four annual target ROCEs, and the second
to achieve Origin’s weighted average cost of capital in the third or fourth year. 50 per cent vesting occurs if those two conditions are met.
Full vesting occurs if Origin exceeds the weighted average cost of capital by two percentage points in the third or fourth year. Pro rata
vesting occurs between those two vesting points. The ROCE hurdle applies only to PSRs, including for key management personnel.
Vested Options may be exercised up to a maximum of 10 years after grant date. The exercise price of Options is based on the weighted
average price of the Company’s shares over a period of 30 trading days referenced to 30 June, or in the case of awards to the Chief
Executive Officer subject to shareholder approval, as announced in the relevant shareholder resolution. As there is no exercise price for
PSRs, once vested they are exercised automatically. When exercised, either automatically or upon payment of the exercise price, a vested
award is converted into one fully paid ordinary share that carries voting and dividend entitlements.
The fair value of the awards granted is recognised as an employee expense, with a corresponding increase in equity, over the vesting
period. In exceptional circumstances1 unvested PSRs or Options may be held ‘on foot’ subject to the specified performance hurdles and
other plan conditions being met, or dealt with in an appropriate manner determined by the Board. For PSRs or Options subject to the
relative TSR condition fair value is measured at grant date using a Monte Carlo simulation model that takes into account the exercise
price, share price at grant date, price volatility, dividend yield, risk-free interest rate for the term of the security and the likelihood of
meeting the TSR market condition. The expected volatility reflects the assumption that the historical volatility over a period similar to the
life of the options is indicative of future trends, which may not necessarily be the actual outcome. The amount recognised as an expense
is adjusted to reflect the actual number of awards that vest except where due to non-achievement of the TSR market condition. Set out
below are the inputs used to determine the fair value of the PSRs and Options granted during the year. For PSRs subject to the ROCE
condition, the initial fair value at grant date is the market value of an Origin share less the discounted value of dividends foregone, and
the expensing value is trued-up at each reporting period to the expected outcome as assessed at that time.
Grant date
Grant date share price
Exercise price
Volatility (per cent)
Dividend yield (per cent)2
Risk-free rate (per cent)
Grant date fair value (per award)
30-Aug-16
$5.25
$5.67
38%
1.8%
1.69%
OPTIONS
19-Oct-16
$5.62
$5.21
39%
1.8%
2.05%
PSRS
19-Oct-16
$5.62
Nil
39%
1.5%
1.78%
30-Aug-16
$5.25
Nil
38%
1.5%
1.47%
$2.79 (TSR)
$1.37
$1.76
$4.95 (ROCE)
$5.32 (ROCE)
1 The Equity Incentive Plan Rules set out the circumstances as death, disability, redundancy, genuine retirement, or other exceptional circumstances approved by the Board.
2 Dividend assumptions are the compound average per annum rate over the vesting period (4 years PSRs, and 5 years Options).
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS
137137
F3 SHARE-BASED PAYMENTS (CONTINUED)
EXPLANATORY NOTES TO SHARE-BASED PAYMENTS FOR THE YEAR ENDED 30 JUNE (CONTINUED)
Equity Incentive Plan awards outstanding
Set out below is a summary of awards outstanding at the beginning and end of the financial year.
Outstanding at 1 July 2016
Granted
Exercised
Forfeited
OUTSTANDING AT 30 JUNE 2017
Exercisable at 30 June 2017
Outstanding at 1 July 2015
Granted1
Exercised
Forfeited
OUTSTANDING AT 30 JUNE 2016
Exercisable at 30 June 2016
WEIGHTED
AVERAGE
EXERCISE
PRICE
$11.99
$5.58
–
$12.13
$10.35
–
$13.30
$6.92
–
$13.27
$11.99
–
OPTIONS
18,022,234
2,302,631
–
10,438,751
9,886,114
–
19,322,406
3,709,418
–
5,009,590
18,022,234
–
PSRS
DSRS
5,479,633
1,725,214
–
3,718,490
4,199,028
3,497,212
1,986,376
275,207
3,486,357
5,434,657
–
–
8,725,038
1,831,456
–
5,076,861
1,518,469
3,999,436
1,147,690
171,187
5,479,633
4,199,028
–
–
1 The number of DSRs issued in 2014 was adjusted for the October 2015 rights issue for all participants except Executive Directors to eliminate any material advantage
or disadvantage to participants.
The weighted average share price during 2017 was $6.39 (2016: $5.67). The options outstanding at 30 June 2017 have an exercise
price in the range of $5.21 to $15.65 and a weighted average contractual life of 6.3 years (2016: 4.3 years).
For more information on these share plans and performance rights issued to KMPs, refer to the Remuneration Report.
(b) Employee Share Plan (ESP)
Under the ESP all full-time and permanent part-time employees of the Company who are based in Australia or New Zealand with at least
one year of continuous service at 30 June of the performance year are granted up to AUD $1,000 of fully paid Origin shares conditional
upon the Company meeting certain safety targets. The shares are granted for no consideration. Shares awarded under the ESP are
purchased on-market, registered in the name of the employee, and are restricted for three years, or until cessation of employment,
whichever occurs first. New Zealand employees may elect to have shares held in trust for three years.
Details of the shares awarded under the ESP during the year are set out below.
2017
2016
GRANT DATE
SHARES
GRANTED
COST PER
SHARE1
TOTAL COST
$’000
26-Aug-16
25-Sep-15
870,302
870,302
708,647
708,647
$5.51
$7.18
4,795
4,795
5,088
5,088
1 The cost per share represents the weighted average market price of the Company’s shares on the grant date.
F4 RELATED PARTY DISCLOSURES
The Group’s interests in equity accounted entities and details of transactions with these entities are set out in note E1.
Certain directors of Origin Energy Limited are also directors of other companies that supply Origin Energy Limited with goods and
services or acquire goods or services from Origin Energy Limited. Those transactions are approved by management within delegated
limits of authority and the Directors do not participate in the decisions to enter into such transactions. If the decision to enter into
those transactions should require approval of the Board, the Director concerned will not vote upon that decision nor take part in the
consideration of it.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 138138
F5 KEY MANAGEMENT PERSONNEL
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
2017
$
9,383,880
240,273
373,647
2,919,096
2,371,204
2016
$
9,858,958
243,057
287,802
–
3,858,411
15,288,100
14,248,228
LOANS AND OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
There were no loans with key management personnel during the year.
Transactions entered into during the year with key management personnel are normal employee, customer or supplier relationships
and have terms and conditions which are no more favourable than dealings in the same circumstances on an arm’s length basis.
These transactions include:
– the receipt of dividends from Origin Energy Limited or participation in the Dividend Reinvestment Plan;
– participation in the Employee Share Plan, Equity Incentive Plan and Non-Executive Director Share Plan;
– participation in the October 2015 rights issue as a shareholder;
– terms and conditions of employment or directorship appointment;
– reimbursement of expenses incurred in the normal course of employment;
– purchases of goods and services; and
– receipt of interest on Retail Notes.
F6 NOTES TO THE STATEMENT OF CASH FLOWS
Cash includes cash on hand, at bank and short-term deposits, net of outstanding bank overdrafts.
The following table reconciles profit to net cash provided by operating activities.
LOSS FOR THE PERIOD
Adjustments to reconcile profit to net cash provided by operating activities:
Depreciation and amortisation
Executive share-based payment expense
Impairment losses recognised – trade and other receivables
Exploration expense
Impairment of assets
(Increase)/decrease in fair value of financial instruments
Net financing costs
Increase in tax balances
Gain on sale of assets
Non-cash share of net profits of equity accounted investees
Unrealised foreign exchange loss
Oil forward sale
Oil option premium
Changes in assets and liabilities, net of effects from acquisitions/disposals:
– Receivables
– Inventories
– Payables
– Provisions
– Other
TOTAL ADJUSTMENTS1
NET CASH FROM OPERATING ACTIVITIES
NOTE
2017
$MILLION
2016
$MILLION2
(2,223)
(615)
481
25
75
62
1,692
(207)
341
(23)
(401)
1,912
76
(141)
53
(487)
52
58
(24)
(32)
3,512
1,289
623
32
67
63
691
290
347
(92)
(39)
228
40
(139)
(117)
8
(11)
96
(39)
(29)
2,019
1,404
The following non-cash financing and investing activities have not been included
in the statement of cash flows:
Issue of shares in respect of the Dividend Reinvestment Plan
C6
–
42
1 Adjustments include amounts that are classified as discontinued operations and held for sale at 30 June 2017 and 30 June 2016. Refer to note E4 for details of cash flows
relating to discontinued operations.
2 Certain amounts have been restated to reflect adjustments relating to note F12.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS F7 AUDITORS’ REMUNERATION
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and
non-related audit firms:
139139
AUDIT AND REVIEW SERVICES OF THE FINANCIAL REPORTS BY:
Auditors of the Group (KPMG)1
Other auditors
OTHER SERVICES BY:
Auditors of the Group (KPMG)
Accounting advice
Taxation services
Legal services
Assurance services:
– equity and debt transactions2
– contract compliance
– other
2017
$'000
3,042
82
3,124
45
65
211
632
–
18
971
2016
$'000
2,431
76
2,507
20
17
–
159
140
45
381
4,095
2,888
1
2
Included in this amount is $534,000 relating to the audit and review of financial reports for Lattice Energy in 2017.
Includes IPO transaction services and US 144A advisory services for Lattice Energy in 2017 (2016: equity raising fees).
F8 MASTER NETTING OR SIMILAR AGREEMENTS
The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting agreements.
In general, under such agreements the amounts owed by each counterparty on a single day in respect of all transactions outstanding in
the same currency are aggregated into a net amount payable by one party to the other.
Financial assets and liabilities are offset, and the net amount reported in the statement of financial position, where the Group has a legally
enforceable right to offset recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability
simultaneously. The Group has also entered into arrangements that do not meet the criteria for offsetting, but still allow for the related
amounts to be offset in certain circumstances, such as a loan default or the termination of a contract.
The following table presents the recognised financial instruments that are offset, or subject to master netting arrangements but not
offset, as at reporting date. The column ‘net amount’ shows the impact on the Group’s statement of financial position if all set-off
rights were exercised.
30 JUNE 2017
Derivative financial assets
Derivative financial liabilities
30 JUNE 20161
Derivative financial assets
Derivative financial liabilities
AMOUNT
OFFSET IN THE
STATEMENT
OF FINANCIAL
POSITION
$MILLION
AMOUNT
IN THE
STATEMENT
OF FINANCIAL
POSITION
$MILLION
GROSS
AMOUNT
$MILLION
RELATED
AMOUNT
NOT OFFSET
$MILLION
NET AMOUNT
$MILLION
1,708
(2,021)
1,674
(2,027)
(412)
412
(372)
372
1,296
(1,609)
1,302
(1,655)
(414)
414
(437)
437
882
(1,195)
865
(1,218)
1 Certain amounts have been restated to reflect adjustments relating to note F12.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 140140
F9 DEED OF CROSS GUARANTEE
The parent entity has entered into a Deed of Cross Guarantee through which the Group guarantees the debts of certain controlled
entities. The controlled entities that are party to the Deed, are shown in note E3.
The following consolidated statement of comprehensive income and retained profits, and statement of financial position comprises
the Company and its controlled entities which are party to the Deed of Cross Guarantee after eliminating all transactions between
parties to the Deed.
FOR THE YEAR ENDED 30 JUNE
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND RETAINED PROFITS
Revenue
Other income
Expenses
Share of results of equity accounted investees
Impairment
Interest income
Interest expense
LOSS BEFORE INCOME TAX
Income tax (expense)/benefit
LOSS FOR THE PERIOD
Other comprehensive income
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
RETAINED EARNINGS AT THE BEGINNING OF THE PERIOD
Adjustments for entities entering the Deed of Cross Guarantee
RETAINED EARNINGS AT THE BEGINNING OF THE PERIOD
Dividends paid
RETAINED EARNINGS AT THE END OF THE PERIOD
1 Certain amounts have been restated to reflect adjustments relating to note F12.
2017
$MILLION
2016
$MILLION1
13,646
393
(12,509)
(1,912)
(753)
224
(590)
(1,501)
(102)
(1,603)
1
(1,602)
5,834
–
5,834
–
4,232
11,526
105
(11,698)
(225)
–
222
(629)
(699)
180
(519)
–
(519)
6,748
57
6,805
(452)
5,834
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS F9 DEED OF CROSS GUARANTEE (CONTINUED)
AS AT 30 JUNE
STATEMENT OF FINANCIAL POSITION
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Derivatives
Other financial assets
Income tax receivable
Assets classified as held for sale
Other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Derivatives
Other financial assets
Investments accounted for using the equity method
Property, plant and equipment
Exploration and evaluation assets
Development assets
Intangible assets
Deferred tax assets
Other assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Payables to joint ventures
Interest-bearing liabilities
Derivatives
Other financial liabilities
Provision for income tax
Employee benefits
Provisions
Liabilities classified as held for sale
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Trade and other payables
Interest-bearing liabilities
Derivatives
Employee benefits
PROVISIONS
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Reserves
Retained earnings
TOTAL EQUITY
1 Certain amounts have been restated to reflect adjustments relating to note F12.
141141
2017
$MILLION
2016
$MILLION1
44
3,321
123
240
86
–
2,050
99
5,963
1,831
1,055
4,614
5,451
2,934
63
–
5,131
187
34
49
4,403
231
237
312
56
220
135
5,643
845
1,065
6,041
5,933
4,700
310
292
5,172
457
27
21,300
27,263
24,842
30,485
2,544
130
127
300
387
51
179
33
720
4,471
8,625
1,016
1,309
34
64
11,048
15,519
11,744
7,150
362
4,232
2,938
–
102
18
375
–
209
49
19
3,710
8,703
2,055
1,637
35
577
13,007
16,717
13,768
7,150
784
5,834
11,744
13,768
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 142142
F10 PARENT ENTITY DISCLOSURES
The following table sets out the results and financial position of the parent entity, Origin Energy Limited.
ORIGIN ENERGY LIMITED
Loss for the period
Other comprehensive income, net of income tax
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
FINANCIAL POSITION OF THE PARENT ENTITY AT PERIOD END
Current assets
Non-current assets
TOTAL ASSETS
Current liabilities
Non-current liabilities
TOTAL LIABILITIES
Share capital
Share-based payments reserve
Hedging reserve
Retained earnings
TOTAL EQUITY
2017
$MILLION
2016
$MILLION
(17)
1
(16)
1,517
17,813
19,330
2,344
9,173
11,517
7,150
221
(25)
467
7,813
(30)
3
(27)
1,418
17,949
19,367
994
10,568
11,562
7,150
197
(26)
484
7,805
CONTINGENT LIABILITIES OF THE PARENT ENTITY
Bank guarantees – unsecured
1
11
The parent entity has entered into a deed of indemnity for the cross-guarantee of liabilities of a number of controlled entities.
Refer to note E3.
The parent entity has also provided guarantees for certain contractual commitments of its joint ventures associated with capital projects.
F11 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after 1 July
2017 and have not been applied in preparing these financial statements. The Group has reviewed these standards and interpretations,
and, with the exception of AASB 9 Financial Instruments, AASB 15 Revenue from Contracts with Customers and AASB 16 Leases,
determined that none of these standards and interpretations materially impact the Group.
The Group has commenced a project to implement the changes resulting from AASB 9, AASB 15 and AASB 16. The first phase of
this project, a qualitative impact assessment, was completed in the period. The Group’s initial assessment of impacts arising from each
standard is disclosed below. These are not necessarily exhaustive and will evolve as work progresses.
AASB 9 Financial Instruments and AASB 2014-7 Amendments to Australian Accounting Standards arising from AASB 9
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement. The standard will become effective for the Group for
the reporting period beginning 1 July 2018. Retrospective application is required with some exceptions. The Group does not intend to
early adopt the standard.
Whilst further work is required to quantify any changes, the Group currently expects the following impacts upon initial adoption of AASB 9:
– Classification of available-for-sale financial assets – The Group has available-for-sale financial assets which are likely to be reclassified
to either amortised cost or to fair value. The Group does not hold any financial liabilities at fair value through profit and loss and as such
there is no impact of the new standard on financial liabilities.
– Hedge relationships – The standard introduces a new hedge accounting model which more closely aligns hedge accounting with risk
management objectives. As a general rule more hedge relationships are eligible for hedge accounting and the Group is actively reviewing
options to expand its hedging relationships. Existing hedge relationships should continue to qualify as effective hedge relationships upon
adoption of the new standard.
– Bad debt provisioning – The standard introduces a new impairment model for financial assets. Bad debt provisioning will need to move
from the existing incurred model (based on the historical experience of bad debts) to an expected loss model (based on expected level of
bad debts with reference to current and forecast credit conditions). The model will need to be applied to the Group’s trade receivables and
unbilled revenue and, for some categories of debt, may result in the earlier recognition of bad debt provisions. Currently, allowances for
doubtful receivables are recognised by assessing each receivable balance for collectability based on analysis of various historical factors.
AASB 7 Financial Instruments: Disclosures has been amended to reflect the requirements of AASB 9 and also introduces a number of new
disclosure requirements. The Group is currently assessing the extent of these new disclosure requirements but expects that there will be
an impact on future statutory reporting.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 143143
F11 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED (CONTINUED)
AASB 15 Revenue from Contracts with Customers
AASB 15 replaces AASB 111 Construction Contracts, AASB 118 Revenue and related Interpretations. Retrospective application is
required, however the Group will have the option to either restate comparative period balances or record a cumulative adjustment at the
beginning of the period in which the standard is first adopted. The Group will adopt the new standard when it becomes effective in the
financial year beginning 1 July 2018.
AASB 15 applies to the recognition of revenue for the Group’s contracts with customers. Where a bundle of goods and/or services is
sold under one contract the standard requires consideration for each component of the sale be recognised as revenue when an entity
transfers control of each individual promised good or service to its customer. The Group’s work to date has focused on identifying the
areas of the business that have the highest potential impact.
Significant work is required to understand the financial statement impact and any changes to systems, processes and policies in order
to implement the new standard due to the following factors:
– The new requirements are far more comprehensive than existing revenue standards;
– AASB 15 requires the identification and assessment of individual rights and obligations in each customer contract;
– The highly contracted nature of revenues earned by the Group; and
– The pervasiveness and importance of revenue recognition.
To date, the Group has identified certain areas of the business where work effort will be prioritised to understand and assess individual
components of each contract and the potential differences between current revenue recognition and the requirements of AASB 15.
Initially, this will focus on electricity retailing to Mass Market customers and the estimates and judgements involved in the unbilled revenue
recognition process; long-term gas sales arrangements and the associated complexities with take-or-pay terms and specific quantitative
and qualitative disclosures required under AASB 15.
The Group is currently in the process of determining the potential impact of adopting AASB 15 and management cannot at this stage
reasonably quantify the estimated impact in the period of initial application.
AASB 16 Leases
AASB 16 replaces AASB 117 Leases and related Interpretations. It is effective for the Group for the reporting period beginning 1 July
2019. The new standard must be implemented retrospectively, either by restating comparatives or by recognising the cumulative impact
at the date of initial application. The Group is currently assessing the most appropriate transition option, however adoption of AASB 16
will have an impact on the Group’s balance sheet and retained earnings.
AASB 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance leases under
the current standard. The standard further introduces a new definition of a lease, which focuses on the right to control the use of an
identified asset.
At commencement of a lease arrangement, a lessee will recognise a liability to make lease payments (“the lease liability”) and an asset
representing the right to use the underlying asset during the lease term (“the right-of-use asset”). Lessees will be required to separately
recognise interest expense on the lease liability and depreciation expense on the right-of-use asset. For lease arrangements which
would have been treated as operating leases under the current accounting standard there would be a corresponding reduction in “other
operating expenses” where operating lease expenses are currently recognised.
The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term
leases (leases with a duration of 12 months or less) however the total value of leases which have not been recognised is required to be
disclosed in the financial statements.
At 30 June 2017, the Group has $398 million of non-cancellable operating lease commitments. Related information is disclosed in note
F2 of the financial statements. Upon implementation of the new standard all lease arrangements will be recognised on the balance sheet.
The Group has identified certain areas of the business where further work is required to understand and assess arrangements that may
contain a lease under the new definition which are not leases under the current definition and therefore are not included in the non-
cancellable operating lease commitment disclosures. In addition, the Group will be required to assess option or renewal periods identified
in lease agreements. Where such options are reasonably certain of exercise, further lease payments will be included in the calculation of
the lease liability and right-of-use asset, in addition to those currently disclosed in operating lease commitments.
The Group cannot reasonably estimate the impact in the period of initial application at this stage and will continue to work through the
implications of the new standard across the business. To date, work has focused on identifying the provisions of the standard that will
most impact the Group. In the remainder of 2017, work on these issues and their resolution will continue. This will include a detailed
review of contracts, consideration of financial reporting impacts and an assessment of required changes to systems.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS 144144
F12 POWER PURCHASE ARRANGEMENTS ADJUSTMENT
Power Purchase Arrangements (PPAs) are entered into with third parties (power generator entities) by the Group in order to ensure it
can continue to purchase electricity at predetermined prices and to meet its commitments under the Renewable Energy Target Scheme.
The Group has historically concluded that all PPAs were supply contracts for the delivery of electricity and Renewable Energy Certificates
(RECs) as the contracts required physical delivery of the products and the view that the Australian Electricity Market Operator (AEMO)
was a market clearing house that is used to settle such arrangements. As the Group has a short generation position (i.e. it needs to
purchase energy from the market to meet electricity demand of its customers) the accounting outcome reflected the economic rationale
for entering into the arrangements.
Whilst the accounting standards that outline the measurement and presentation requirements to be applied to PPAs have not changed,
there has been a review of the accounting treatment for these contracts since the half year ended 31 December 2016. As a number of
the PPAs require net settlement due to the structure of the electricity market, it has been concluded that the net payment made to or
received from the third party should be accounted for as a derivative financial instrument. As a result, the Group has determined the fair
value of these arrangements and recognised a derivative asset or liability at each reporting date. This change in accounting treatment has
been reflected in both the current and comparative periods.
The Group has restated each of the affected financial statement line items for the prior year, as detailed below.
Impact on equity (increase/(decrease))
30 JUNE 2016
Derivative assets – current
Derivative assets – non-current
Deferred tax assets
TOTAL ASSETS
Derivative liabilities – non-current
Deferred tax liabilities
TOTAL LIABILITIES
NET IMPACT ON EQUITY
1 JULY 2015
Derivative assets – non-current
Deferred tax assets
TOTAL ASSETS
Derivative liabilities – non-current
Deferred tax liabilities
TOTAL LIABILITIES
Retained earnings
NET IMPACT ON EQUITY
IMPACT ON INCOME STATEMENT (INCREASE/(DECREASE))
30 JUNE 2016
Expenses
NET IMPACT ON PROFIT FOR THE YEAR
1 Excludes impact of discontinued operations re-presentation.
PREVIOUSLY
REPORTED
$MILLION
ADJUSTMENT
$MILLION
RESTATED
$MILLION
253
1,134
–
28,898
1,050
110
14,368
14,530
(16)
(69)
92
7
587
(110)
477
(470)
237
1,065
92
28,905
1,637
–
14,845
14,060
$MILLION
$MILLION
$MILLION
859
–
33,367
1,309
147
19,208
7,548
14,159
2
38
40
618
(147)
471
(431)
(431)
861
38
33,407
1,927
–
19,679
7,117
13,728
$MILLION
$MILLION
$MILLION1
(12,127)
(576)
(56)
(39)
(12,183)
(615)
IMPACT ON BASIC AND DILUTED EARNINGS PER SHARE (EPS) (INCREASE/(DECREASE) IN EPS)
EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
(2.5)
(2.5)
The change did not have an impact on OCI for the period or the Group’s operating, investing and financing cash flows.
F13 SUBSEQUENT EVENTS
No item, transaction or event of a material nature has arisen since 30 June 2017 that would significantly affect the operations of the
Group, the results of those operations, or the state of affairs of the Group, in future financial periods.
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS' DECLARATION
DIRECTORS' DECLARATION
145145
1 In the opinion of the Directors of Origin Energy Limited (the Company):
(a) the consolidated financial statements and notes are in accordance with the Corporations Act 2001 (Cth), including:
(i) giving a true and fair view of the financial position of the Group as at 30 June 2017 and of its performance,
for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001 (Cth).
(b) the consolidated financial statements also comply with International Financial Reporting Standards as disclosed in the
Overview of the consolidated financial statements.
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2 There are reasonable grounds to believe that the Company and the controlled entities identified in note E3 will be able to meet
any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the
Company and those controlled entities pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
3 The Directors have been given the declarations required by section 295A of the Corporations Act 2001 (Cth) from the
Chief Executive Officer and the Chief Financial Officer for the financial year ended 30 June 2017.
Signed in accordance with a resolution of the Directors:
Gordon M Cairns, Chairman
Director
Sydney, 16 August 2017
ORIGIN ENERGY PAGE TITLE NOTES TO THE FINANCIAL STATEMENTS
146146
INDEPENDENT AUDITOR'S REPORT
INDEPENDENT AUDITOR'S REPORT
ORIGIN ENERGY PAGE TITLE INDEPENDENT AUDITOR'S REPORT
147147
ORIGIN ENERGY PAGE TITLE 148148
INDEPENDENT AUDITOR'S REPORT
ORIGIN ENERGY PAGE TITLE INDEPENDENT AUDITOR'S REPORT
149149
ORIGIN ENERGY PAGE TITLE 150150
INDEPENDENT AUDITOR'S REPORT
ORIGIN ENERGY PAGE TITLE INDEPENDENT AUDITOR'S REPORT
151151
ORIGIN ENERGY PAGE TITLE 152152
SHARE AND SHAREHOLDER INFORMATION
SHARE AND SHAREHOLDER INFORMATION
Information set out below was applicable as at 16 August 2017.
As at 16 August 2017, there were:
– 152,397 holders of ordinary shares in the Company; and
– 105 holders of 9,874,379 Options, 88 holders of 3,486,357 Performance Share Rights, and 480 holders of 6,242,583
Deferred Share Rights granted under the Origin Energy Equity Incentive Plan.
There is not a current on-market buy-back of Origin shares.
During the reporting period, 870,302 Origin shares were purchased on-market for the purpose of the Employee Share Plan.
The average price per share purchased was $5.51.
ANALYSIS OF SHARES
HOLDINGS RANGES
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001–99,999,999,999
TOTALS
HOLDERS
TOTAL UNITS
PERCENTAGE OF
TOTAL UNITS
61,458
66,218
15,216
27,536,629
159,847,961
106,641,495
9,270
188,313,375
235
1,273,098,715
152,397
1,755,438,175
1.6
9.1
6.1
10.7
72.5
100.0
At 16 August 2017, 6,659 shareholders held less than a marketable parcel.
SUBSTANTIAL SHAREHOLDERS
There were no substantial shareholders as disclosed by notices received by the Company as at 16 August 2017.
TOP 20 HOLDINGS
SHAREHOLDER
HSBC Custody Nominees
JP Morgan Nominees Australia
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
Argo Investments Limited
AMP Life Limited
HSBC Custody Nominees (Australia) Limited
Australian Foundation Investment Company Limited
CS Third Nominees Pty Limited
The Senior Master of The Supreme Court
RBC Investor Services Australia Nominees Pty Limited
Forsyth Barr Custodians Ltd
HSBC Custody Nominees (Australia) Limited-GSCO Eca
Navigator Australia Ltd
RBC Investor Services Australia Nominees Pty Ltd
National Nominees Limited
IOOF Investment Management Limited
Total Securities of Top 20 Holdings
Total of securities
NUMBER OF
SHARES
PERCENTAGE OF
ISSUED SHARES
502,103,622
303,035,562
146,794,466
104,739,007
48,242,864
26,135,095
18,893,675
10,959,203
10,516,444
8,363,915
6,000,000
3,896,466
3,580,943
3,418,150
2,848,215
2,715,523
1,954,151
1,822,597
1,800,555
1,687,239
1,209,507,692
1,755,438,175
28.6
17.3
8.4
6.0
2.8
1.5
1.1
0.6
0.6
0.5
0.3
0.2
0.2
0.2
0.2
0.2
0.1
0.1
0.1
0.1
68.9
ORIGIN ENERGY PAGE TITLE
SHARE AND SHAREHOLDER INFORMATION
153153
SHAREHOLDER ENQUIRIES
For information about your shareholding, to notify a change of address, to make changes to your dividend payment instructions or for
any other shareholder enquiries, contact Origin Energy’s share registry, Boardroom Pty Ltd on 1300 664 446. Please note that broker
sponsored holders are required to contact their broker to amend their address.
When contacting the share registry, shareholders should quote their security holder reference number, which can be found on the
holding or dividend statements.
Shareholders with internet access can update and obtain information regarding their shareholding at https://www.originenergy.com.au/
about/investors-media.html
TAX FILE NUMBER
For resident shareholders who have not provided the share registry with their Tax File Number (TFN) or exemption category details,
tax at the top marginal tax rate (plus Medicare levy) will be deducted from dividends to the extent they are not fully franked. For those
shareholders who have not as yet provided their TFN or exemption category details, forms are available from the share registry.
Shareholders are not obliged to provide this information if they do not wish to do so.
INFORMATION ON ORIGIN
The main source of information for shareholders is the Annual Report and the Shareholder Review. Both the Annual Report
and Shareholder Review will be provided to shareholders on request and free of charge. Shareholders not wishing to receive the
Annual Report should advise the share registry in writing so that their names can be removed from the mailing list. Origin’s website
www.originenergy.com.au is another source of information for shareholders.
SECURITIES EXCHANGE LISTING
Origin shares are traded on the Australian Securities Exchange Limited (ASX). The symbol under which Origin shares are traded is ‘ORG’.
VOTING RIGHTS OF MEMBERS
At a meeting of members, each member who is entitled to attend and vote may attend and vote in person or by proxy, attorney or
representative. On a show of hands, every person present who is a member, proxy, attorney or representative, shall have one vote and on
a poll, every member who is present in person or by proxy, attorney or representative shall have one vote for each fully paid share held.
ORIGIN ENERGY PAGE TITLE 154154
EXPLORATION AND PRODUCTION PERMITS AND DATA
1 COOPER/EROMANGA BASIN
8
7
9
2 SURAT/BOWEN BASIN
6
3
2
1
4
5
10
11
3 GALILEE BASIN
BASS BASIN
6 PERTH BASIN
9 BEETALOO BASIN
4 OTWAY BASIN
7
BROWSE BASIN
10 TARANAKI BASIN
5 BASS BASIN
8
BONAPARTE BASIN
11 CANTERBURY BASIN
ORIGIN ENERGY PAGE TITLE EXPLORATION AND PRODUCTION PERMITS AND DATA
155
1. ORIGIN’S INTERESTS
Origin held interests in the following permits at 30 June 2017.
BASIN/PROJECT AREA
AUSTRALIA
Tasmania
T/L2 and T/L3
T/30P
Bass Basin (Tasmania)
T/L1
T/RL 2, 3, 4 and 5
INTEREST
67.23%
70.77%
42.50%
39.00%
PERTH BASIN (Western Australia)
EP320 and L11
L 14
L1/L2 (Excluding
Dongara, Mondarra
and Yardarino)
67.00%
49.19%
50.00%
BROWSE BASIN (Western Australia)
WA-315-P, WA-398-P
and TP/28
40.00%
BONAPARTE BASIN
(Western Australia & Northern Territory)
WA-454-P
NT/RL1 and WA-6-R
5.00%
NT/P84
NT/P85
100.00
* 3
50.00%
50.00%
BEETALOO BASIN (NORTHERN
TERRITORY)
*
*
*
*
*
*
*
EP 76, EP 98 and EP117
NEW ZEALAND
TARANAKI BASIN
PML 38146
CANTERBURY BASIN
PEP 38264
35.00%
*4
50.00%
*
45.00%
Notes:
* Operatorship
1
Interest held through 37.5 per cent ownership
of Australia Pacific LNG Joint Venture.
** Replacement tenure for parts of ATP 526.
~ Replacement tenure for PL 203.
2 Percentage increase due to Toyota Tsucho
Gas E&P Otway Ltd withdrawal.
3 Percentage increase due to Drysdale Offshore
4
Exploration Pty Ltd withdrawal.
Origin has entered into an agreement to, subject
to completion, acquire an additional 35 per cent
interest in these permits.
PPL 90, PPL 133, PPL 134 sold on 6 June 2017.
INTEREST
BASIN/PROJECT AREA
AUSTRALIA
COOPER BASIN (South Australia)
Patchawarra East
Block PPLs
SA Unit PPLs
Reg Sprigg West Unit
(PPL 194/PPL 211 )
PEL 637 and PRL 106
PELs 638
10.54%
13.19%
7.90%
40.00%
33.75%
COOPER BASIN (Queensland)
SWQ Unit Subleases
Aquitaine A & B Blocks
of ATP 1189P and
associated PLs
Aquitaine C Block
of ATP 1189P and
associated PLs
Wareena Block of
ATP 1189P and
associated PLs
16.74%
25.00%
27.00%
10.00%
GALILEE BASIN (Queensland)
ATP’s 666P, 667P
and 668P
37.50%
SURAT BASIN (Queensland)
ATP 788P (Shallows)
ATP 788P (Deeps)
100.0%
25.00%
18.75%
DENISON TROUGH (Queensland)
PL’s 41, 42, 43, 44,
45, 54, 67, 173, 183
and 218
ATP 1191 Farm-out
(Production)
ATP 337P (Exploration)
and PL’s 450(A), 451(A),
457(A) and 1012(A)
ATP 1191
ATP 1177P
PPL’s 10 and 11
18.75%
18.75%
18.75%
18.75%
11.25%
37.50%
37.50%
LNG (Gladstone)
PPL’s 162 and 163
PFL 20
CSG (Queensland)
Fairview
ATP 526P, ATP 2012P**
and PL’s 90, 91, 92, 99,
100, 232, 233, 234, 235
and 236, PL(A) 1017
Spring Gully
ATP 592P and PL’s 195,
203, 414, 415, 416, 417,
418, 268(A)~ and 419(A)
PL 204
PL 200
PPL 180
BASIN/PROJECT AREA
AUSTRALIA
Talinga/Orana
ATP 692P and PL’s 209,
215, 226, 272, 216(A),
225(A), 445(A))
PPL’s 171 and 181
PFL 26
INTEREST
37.50%
37.50%
37.50%
*1
*1
*1
Kenya/Argyle/Lauren/Bellevue
PL’s 179, 180, 228,
229 and 263
PL 247
ATP 648 and PL’s 257,
273, 274, 275, 278, 279,
442, 466, 474 and 503
PL 1025
PFL 19
PPL’s 107, 176 and 2014
15.23%
11.02%
11.72%
11.72%
11.72%
15.23%
1
1
1
1
1
1
Peat
PL 101
Other Bowen Basin
ATP 804P
ATP 745P and PL’s 420,
421 and 440
PL’s 219 and 220
Other Surat Basin
ATP 606P and PL’s 297,
403, 404, 407, 408,
405(A), 406(A), 412(A),
413(A) and 444(A)
ATP 631P and PL’s
281(A) and 282(A)
ATP 663P and PL’s
434(A), 435(A),
436(A), 437(A),
438(A) and 439(A)
ATP 973P and PL’s 265,
266 and 267
ATP 972P and PL’s
469(A), 470(A) and
471(A)
PL 1011
PL 1018
PPL’s 143, 177, 178,
185, 186, and 2000
*1
*
*
*1
*1
1
1
1
*1
*1
*1
37.50%
*1
10.99%
8.94%
37.50%
1
1
*1
34.77%
*1
6.79%
1
37.50%
37.50%
34.77%
37.50%
37.50%
37.50%
*1
*1
*1
*1
*1
*1
*
*
*
*
*
* 2
*
*
*
8.97%
1
35.44%
37.40%
35.89%
37.50%
*1
*1
*1
*1
ONSHORE OTWAY BASIN
Victoria
PPL’s 6,9 and PRL1
PPL’s 4, 5, 7, 10 and 12
PPL 2 Ex (Iona Exclusion)
PPL 8
90.00%
100.00%
100.00%
100.00%
OFFSHORE OTWAY BASIN
Victoria
Vic/P42 (V)
Vic/P43
Vic/L23
Vic/P69
Vic/L1(V)
100.00%
70.77%
67.23%
100.00%
100.00%
156
ANNUAL RESERVES REPORT
ANNUAL RESERVES REPORT
This Annual Reserves Report provides an update on the reserves and resources of Origin Energy Limited (Origin) and its share of Australia
Pacific LNG (APLNG), as at 30 June 2017. It also identifies the reserves and resources for Lattice Energy (the conventional upstream business
that Origin intends to divest via a dual track IPO/trade sale process). The data is compared with and reconciled to the position at 30 June 2016.
HIGHLIGHTS
AUSTRALIA PACIFIC LNG
– Activity during the 2017 Financial Year (FY 2017) focused on increasing near term production ahead of the two-train lenders’
test contributing to:
– a strong production result with Origin’s share of Australia Pacific LNG production increasing by 72 PJe to 229 PJe; and
– an increase in Origin’s share of proven reserves (1P) of 389 PJe before production as a result of development drilling.
After production 1P increased by 160 PJe to 2,819 PJe.
– Following completion of the operational phase of the two-train lenders’ test, Australia Pacific LNG is now focused on exploration
and appraisal activities to identify and mature resources to reserves.
LATTICE ENERGY
– The completion of the Halladale/Speculant project during August 2016 contributed to a 20 PJe increase in annual production to
95 PJe relative to FY2016.
– Proved plus probable (2P) reserves decreased by 113 PJe to 835 PJe primarily reflecting production.
– Stage 2 of the Waitsia Gas Project continues to progress with FID on the 100 TJ/day project anticipated by the end of FY2018.
Table 1: Origin 2P reserves (by area)
RESERVES (2P) BY AREA (PJE)
Australia Pacific LNG
Surat/Bowen (Unconventional)
Other
Ironbark (Unconventional)
Lattice Energy
Otway Basin (Thylacine, Geographe)
Otway Basin (HBWS)1
Bass Basin
SA Cooper Basin
SWQ Cooper Basin
Perth Basin (Operated)2
Perth Basin (Non Operated)3
NZ Onshore Taranaki
NZ Offshore Taranaki (Kupe)
Sub Total (Lattice Energy)
Total
Notes to table 1
1 HBWS: Halladale, Black Watch, Speculant.
2 Operated: Beharra Spring Terrace, Redback Terrace.
3 Non Operated: Waitsia.
2P
30/06/16
ACQUISITION/
DIVESTMENT
NEW
BOOKING/
DISCOVERY
REVISIONS/
EXTENSIONS
PRODUCTION
2P
30/06/17
5,073
256
177
78
50
149
35
23
232
-
204
948
6,277
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(141)
(229)
4,704
(7)
4
(14)
7
(18)
2
3
2
0
(3)
(18)
–
(26)
(22)
(8)
(10)
(6)
(3)
(1)
(0)
(18)
(95)
249
156
42
48
120
31
23
233
–
184
836
(166)
(323)
5,788
ANNUAL RESERVES REPORT
157
SUMMARY OF 2P RESERVES MOVEMENT
Proved plus probable (2P) reserves decreased by 489 PJe to a total of 5,788 PJe, when compared to 30 June 2016.
The key changes in 2P reserves included:
– 323 PJe decrease due to production.
– 166 PJe net decreases resulting from revisions/extensions mostly associated with Australia Pacific LNG.
– The revisions/extensions of 166 PJe of 2P reserves included movements in the following areas:
– Australia Pacific LNG decreased by 141 PJe primarily due to reduced recovery estimates in low permeability areas.
– Cooper decreased 17 PJe due to field development revisions.
– Ironbark (unconventional) decreased by 7 PJe due to updated regional permeability mapping.
– Otway Basin decreased by 10 PJe due to lower than expected performance at Halladale Field partly offset by the successful
Thylacine TA-1 well intervention which extended production.
– Bass Basin increased 7 PJe reflecting an updated reservoir model.
ADDITIONAL NOTES
– At 30/06/2017, 86 per cent of Origin 2P reserves are unconventional.
– The current Waitsia appraisal drilling results are being evaluated and are not included in this update.
Table 2: Origin 2P reserves (by product and development type)
RESERVES (2P) BY PRODUCT/
DEVELOPMENT
GAS
(PJ)
LPG
(KT)
CONDENSATE
(kbbl)
OIL
(kbbl)
DEVELOPED UNDEVELOPED
TOTAL
(PJe)
TOTAL (PJe)
Australia Pacific LNG
Surat/Bowen (Unconventional)
4,704
Other
Ironbark (Unconventional)
Lattice Energy
Otway Basin (Thylacine, Geographe)
Otway Basin (HBWS)1
Bass Basin
SA Cooper Basin
SWQ Cooper Basin
Perth Basin (Operated)2
Perth Basin (Non Operated)3
NZ Onshore Taranaki
NZ Offshore Taranaki (Kupe)
Sub Total (Lattice Energy)
249
132
37
36
93
25
23
232
–
133
712
–
–
262
49
101
196
49
–
–
–
571
1,230
Total
5,664
1,230
Notes to table 2
1 HBWS: Halladale, Black Watch, Speculant.
2 Operated: Beharra Spring Terrace, Redback Terrace.
3 Non Operated: Waitsia
Table 3: Origin 2P reserves changes (by product)
RESERVES (2P) BY PRODUCT
2P 30/06/16
Acquisition/divestment
New bookings/discoveries
Revisions/extensions
Production
2P 30/06/17
Change
Change (percentage)
–
–
1,935
414
1,197
1,448
359
16
94
–
4,194
9,658
9,658
–
–
–
–
–
1,527
385
–
–
–
–
1,912
1,912
2,387
2,317
4,704
–
80
31
48
86
21
18
45
–
95
425
249
75
10
–
34
10
5
188
–
88
411
249
–
156
42
48
120
31
23
233
–
184
836
2,812
2,976
5,788
GAS
(PJ)
6,133
–
–
(163)
(306)
5,664
(469)
(8)
LPG
(KT)
CONDENSATE
(kbbl)
1,394
–
–
(21)
(143)
1,230
(164)
(12)
11,411
–
–
(272)
(1,482)
9,658
(1,754)
(15)
OIL
(kbbl)
2,287
–
–
(64)
(311)
1,912
(375)
(16)
TOTAL
(PJe)
6,277
–
–
(166)
(323)
5,788
(489)
(8)
158
ANNUAL RESERVES REPORT
SUMMARY OF 1P RESERVES
Proved (1P) reserves increased by 110 PJe (after production) to a total of 3,271 PJe, when compared to previous reporting period.
Approximately 86per cent of 1P reserves are unconventional.
Table 4: Origin 1P reserves (by area)
RESERVES (1P) BY AREA (PJE)
Australia Pacific LNG
Surat/Bowen (Unconventional)
Other
Ironbark (Unconventional)
Lattice Energy
Otway Basin (Thylacine, Geographe)
Otway Basin (HBWS)1
Bass Basin
SA Cooper Basin
SWQ Cooper Basin
Perth Basin (Operated)2
Perth Basin (Non Operated)3
NZ Onshore Taranaki
NZ Offshore Taranaki (Kupe)
Sub Total (Lattice Energy)
Total
1P
30/06/16
ACQUISITION/
DIVESTMENT
NEW
BOOKING/
DISCOVERY
REVISIONS/
EXTENSIONS
PRODUCTION
1P
30/06/17
2,659
–
127
47
39
64
16
9
57
–
143
502
3,160
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
389
(229)
2,819
–
(11)
(6)
(0)
(2)
4
2
64
0
(8)
45
–
(26)
(22)
(8)
(10)
(6)
(3)
(1)
(0)
(18)
(95)
–
91
19
31
51
14
8
120
–
117
452
434
(323)
3,271
Notes to table 4
1 HBWS: Halladale, Black Watch, Speculant.
2 Operated: Beharra Spring Terrace, Redback Terrace.
3 Non Operated: Waitsia.
Table 5: Origin 1P reserves (by product and development)
RESERVES (1P) BY PRODUCT
Australia Pacific LNG
Surat/Bowen (Unconventional)
Other
Ironbark (Unconventional)
Lattice Energy
Otway Basin (Thylacine, Geographe)
Otway Basin (HBWS)1
Bass Basin
SA Cooper Basin
SWQ Cooper Basin
Perth Basin (Operated)2
Perth Basin (Non Operated)
NZ Onshore Taranaki
NZ Offshore Taranaki (Kupe)
Sub Total (Lattice Energy)
GAS
(PJ)
2,819
–
76
17
23
40
11
8
120
–
83
379
Total
3,198
Notes to table 5
1 HBWS: Halladale, Black Watch, Speculant.
2 Operated: Beharra Spring Terrace, Redback Terrace.
3 Non Operated: Waitsia.
LPG
(KT)
CONDENSATE
(kbbl)
OIL
(kbbl) DEVELOPED UNDEVELOPED
TOTAL
(PJe)
TOTAL (PJe)
–
–
157
24
66
83
25
–
–
–
355
709
709
–
–
1,163
198
750
572
158
8
48
–
3,195
6,093
6,093
–
–
–
–
–
776
124
–
–
–
–
899
899
2,387
432
2,819
–
53
19
31
37
10
8
34
–
78
271
2,658
–
38
–
–
14
4
–
86
–
40
181
613
–
–
91
19
31
52
14
8
120
–
117
452
3,271
ANNUAL RESERVES REPORT
Table 6: Origin 1P reserve changes (by product)
RESERVES (1P) BY PRODUCT
1P 30/06/16
Acquisition/divestment
New bookings/discoveries
Revisions/extensions
Production
1P 30/06/17
Change
Change (percentage)
GAS
(PJ)
3,067
–
–
437
(306)
3,198
131
4
LPG
(KT)
899
–
–
(47)
(143)
709
(190)
(21)
CONDENSATE
(kbbl)
8,083
–
–
(508)
(1,482)
6,093
(1,990)
(25)
OIL
(kbbl)
877
–
–
333
(311)
899
23
3
SUMMARY OF 3P RESERVES AND 2C CONTINGENT RESOURCES FOR LATTICE ENERGY
The following tables summarise the 3P reserve estimate and the 2C contingent resource estimate for the Lattice Energy assets
as at 30 June 2017.
Table 7: Lattice energy 3P reserves (by area & product)
RESERVES/RESOURCE
CLASSIFICATION (PJe)
Otway Basin (Thylacine, Geographe)
Otway Basin (HBWS)1
Bass Basin
Bonaparte Basin
SA Cooper Basin
SWQ Cooper Basin
Perth Basin (Operated)2
Perth Basin (Non Operated)3
NZ Onshore Taranaki
NZ Offshore Taranaki (Kupe)
GAS
(PJ)
180
52
45
–
154
45
31
353
–
165
LPG
(KT)
347
69
123
–
375
92
–
–
–
709
CONDENSATE
(kbbl)
2,565
586
1,481
–
2,844
726
25
143
–
5,036
Total
1,026
1,715
13,406
Notes table 7
1 HBWS: Halladale, Black Watch, Speculant.
2 Operated: Beharra Spring Terrace, Redback Terrace.
3 Non Operated: Waitsia, Senecio, Synaphea, Irwin.
Table 8: Lattice energy 2C contingent resources (by area & product)
RESERVES/RESOURCE
CLASSIFICATION (PJe)
Otway Basin (Thylacine, Geographe)
Otway Basin (HBWS)1
Bass Basin
Bonaparte Basin
SA Cooper Basin
SWQ Cooper Basin
Perth Basin (Operated)2
Perth Basin (Non Operated)3
NZ Onshore Taranaki
NZ Offshore Taranaki (Kupe)
GAS
(PJ)
94
29
67
54
316
38
–
474
–
12
LPG
(KT)
157
50
214
16
467
60
–
–
–
52
CONDENSATE
(kbbl)
1,201
375
3,262
216
3,348
476
–
1,735
–
1,165
Total
1,084
1,015
11,777
Notes to table 8
1 HBWS: Halladale, Black Watch, Speculant.
2 Operated: Beharra Spring Terrace, Redback Terrace.
3 Non Operated: Waitsia, Senecio, Synaphea, Irwin.
ADDITIONAL COMMENTS
OIL
(kbbl)
–
–
–
–
3,070
505
–
–
–
–
3,575
OIL
(kbbl)
–
–
560
–
4,039
255
111
–
–
305
5,270
159
TOTAL
(PJe)
3,160
–
–
434
(323)
3,271
111
4
3P
(PJe)
211
59
59
–
206
57
31
354
–
227
1,204
2C
(PJe)
108
34
99
56
381
45
1
483
–
23
1,229
Beetaloo
A material contingent resource announcement of 6.6 Tscf (gross) or 2.3 Tscf (net) for the Beetaloo Basin was provided on 15 February 2017
to the ASX
Ironbark
Ironbark (unconventional) 3P reserves decreased by 77 PJe to 635 PJe and 2C increased by 3 PJe to 332 PJe. These changes are due to
updated regional permeability mapping
160
ANNUAL RESERVES REPORT
AUSTRALIA PACIFIC LNG RESERVES AND RESOURCES
Netherland, Sewell & Associates, Inc. (NSAI) has audited and prepared a consolidated report of the reserves and resources held by Australia
Pacific LNG. The reserves and resources estimates for each property in this report have either been independently prepared by NSAI or
prepared by Origin and audited by NSAI. The reserves and resources data are based on technical, commercial and operational information
provided by Origin on behalf of Australia Pacific LNG.
Table 9 provides 1P, 2P and 3P reserves and 2C resources for Australia Pacific LNG (100 per cent) and Table 10 shows Origin’s 37.5 per cent
interest in these Australia Pacific LNG reserves and resources.
Table 9: Reserves/resources held by APLNG (100% share)
RESERVES/RESOURCE
CLASSIFICATION (PJE)
30/06/16
ACQUISITION/
DIVESTMENT
NEW
BOOKING/
DISCOVERY PRODUCTION
REVISIONS/
EXTENSIONS
1P (proven)
2P (proven plus probable)
3P (proven plus probable plus possible)
2C (best estimate contingent resources)
7,089
13,529
14,935
3,026
–
–
–
–
–
–
–
–
(610)
(610)
(610)
–
1,037
(375)
(944)
930
30/06/17
7,518
12,545
13,382
3,956
Table 10: Reserves/resources held by Origin (37.5% in Apling)
RESERVES/RESOURCE
CLASSIFICATION (PJE)
1P (proven)
2P (proven plus probable)
3P (proven plus probable plus possible)
2C (best estimate contingent resources)
30/06/16
ACQUISITION/
DIVESTMENT
NEW
BOOKING/
DISCOVERY PRODUCTION
REVISIONS/
EXTENSIONS
30/06/17
2,659
5,073
5,601
1,135
–
–
–
–
–
–
–
–
(229)
(229)
(229)
–
389
(141)
(354)
349
2,819
4,704
5,018
1,483
The 1,037 PJe increase in Australia Pacific LNG (100 per cent share) 1P excluding production is due to development drilling.
The 375 PJe decrease in Australia Pacific LNG (100 per cent share) 2P excluding production is due to downward revision of recovery
in low permeability areas.
The 944 PJe decrease in Australia Pacific LNG (100 per cent share) 3P excluding production is due to reclassification of 3P to 2C contingent
resources and downward revision in recovery in low permeability areas.
The 930 PJe increase in Australia Pacific LNG (100 per cent share) 2C is due to reclassification from reserves. There are a number of appraisal
activities presently ongoing that if successful will convert some of the resources to reserves.
Australia Pacific LNG is now focused on exploration and appraisal activities to identify and mature resources to reserves with active exploration
and appraisal drilling, technology trials and cost saving initiatives.
ANNUAL RESERVES REPORT
161
NOTES RELATING TO THE RESERVES REPORT
a. Methodology regarding Reserves and Resources
The Reserves Report has been prepared to be consistent with the Petroleum Resources Management System (PRMS) 2007 published by
Society of Petroleum Engineers (SPE). This document may be found at the SPE website: spe.org/industry/docs/Petroleum_Resources_
Management_System_2007.pdf. Additionally, this Reserves Report has been prepared to be consistent with the ASX reporting guidelines.
For all assets Origin reports reserves and resources consistent with SPE guidelines as follows: proved reserves (1P); proved plus probable
reserves (2P); proved plus probable plus possible reserves (3P); best estimate contingent resource (2C). Reserves must be discovered,
recoverable, commercial and remaining.
The conventional (non-CSG) reserves estimates are prepared by employees who are qualified petroleum reserves and resource evaluators
working in each of our assets utilising an Origin approved Reserves and Resources Process. RISC Operations Pty Ltd (RISC) has performed
an independent audit of Origin Energy’s estimates of reserves and contingent resources for the Lattice Energy assets as listed in this report
and believe these reserves and resources estimates to be reasonable and have been prepared in accordance with the standards, definitions
and guidelines contained within the Petroleum Resources Management System (PRMS) and generally accepted petroleum engineering and
evaluation principles as set out in the SPE Reserves Auditing Standards. RISC consents to being named in this report.
The CSG reserves and resources held within Australia Pacific LNG’s properties have either been independently prepared by NSAI or prepared
by Origin and audited by NSAI. An independent assessment of our CSG reserves and resources within ATP 788 (Ironbark) permit has been
undertaken by NSAI.
Origin does not intend to report Prospective or Undiscovered Resources as defined by the SPE in any of its areas of interest on an
ongoing basis.
b. Economic test for reserves
The assessment of reserves requires a commercial test to establish that reserves can be economically recovered. Within the commercial test,
operating cost and capital cost estimates are combined with fiscal regimes and product pricing to confirm the economic viability of producing
the reserves.
In the case of oil, condensate and LPG, forward estimates of prices are used in line with the forward curves available through various
international benchmarking agencies, appropriately adjusted for local market conditions.
Gas reserves are assessed against existing contractual arrangements, local market conditions, as appropriate. In the case of gas reserves where
contracts are not in place, a forward price scenario based on monetisation of the reserves through domestic markets has been used, including
power generation opportunities, direct sales to LNG and other end users and utilisation of Origin’s wholesale and retail channels to market.
For CSG reserves that are intended to supply the Australia Pacific LNG CSG to LNG project, the economic test is based on internal transfer
prices based on the Residual Pricing Mechanism (RPM). The RPM mechanism is used within the Petroleum Resource Rent Tax (PRRT) regime
to determine an appropriate transfer price for integrated gas to liquids projects.
RPM applies the same rate of return to the upstream and downstream businesses of the Australia Pacific LNG project, and divides residual profit
equally between the businesses. The residual profit is a function of the upstream “cost plus” and the downstream “net back” prices. The residual
price is exposed to changes in the supply/demand balance in the market through the oil price-linked LNG contract, as well as other market
forces through the long term bond rate.
c. Reversionary Rights
The CSG interests that Australia Pacific LNG acquired from Tri-Star in 2002 are subject to reversionary rights. If triggered, these rights will
require Australia Pacific LNG to transfer back to Tri-Star a 45 per cent interest in those CSG interests for no additional consideration. Origin
has assessed the potential impact of these reversionary rights based on economic tests consistent with the reserves and resources referable
to the CSG interests and based on that assessment does not consider that the existence of these reversionary rights impacts the reserves
and resources quoted in this report. Tri-Star has commenced proceedings against Australia Pacific LNG claiming that reversion has occurred.
Australia Pacific LNG denies that reversion has occurred and is defending the claim.
162
ANNUAL RESERVES REPORT
d. Information regarding the preparation of this Reserves Report
The internationally recognised petroleum consultant NSAI has prepared assessments of the reserves and resources for the Ironbark asset.
The CSG reserves and resources held within Australia Pacific LNG’s properties have either been independently prepared by NSAI or prepared
by Origin and audited by NSAI. All assessments are based on technical, commercial and operational data provided by Origin on behalf of
Australia Pacific LNG.
The statements in this Reserves Report relating to reserves and resources as of 30 June 2017 for Australia Pacific LNG and the Ironbark
asset are based on information in the NSAI reports dated 26 July 2017 and 5 July 2017, respectively. The data has been compiled by Mr. Dan
Paul Smith, a full-time employee of NSAI. Mr. Dan Paul Smith has consented to the statements based on this information, and to the form and
context in which these statements appear.
The statements in this Reserves Report relating to reserves and resources for other assets have been compiled by Andrew Mayers, a full-time
employee of Origin. Andrew Mayers is a qualified reserves and resources evaluator and has consented to the form and context in which these
statements appear.
e. Rounding
Information on reserves is quoted in this Reserves Report rounded to the nearest whole number. Some totals in tables in this Reserves Report
may not add due to rounding. Items that round to zero are represented by the number 0, while items that are actually zero are represented with
a dash “-”.
f. Abbreviations
bbl
Bscf
CSG
kbbls
ktonnes
mmboe
PJ
PJe
Tscf
Barrel
Billion standard cubic feet
Coal seam gas
Kilo barrels = 1,000 barrels
Kilo tonnes = 1,000 tonnes
Million barrels of oil equivalent
Petajoule = 1 x 1015 joules
Petajoule equivalent
Trillions of standard cubic feet of gas
g. Conversion Factors for PJe
Crude oil
Condensate
LPG
CSG
0.00583 PJ/kbbls = 5.83 PJ/mmboe
0.00541 PJ/kbbls
0.0493 PJ/ktonnes
1.038 PJ/Bscf
h. Reference Point
Reference points for Origin’s petroleum reserves and contingent resources are defined points within Origin’s operations where normal
exploration and production business ceases, and quantities of the produced product are measured under defined conditions prior to custody
transfer. Fuel, flare and vent consumed to the reference points are excluded.
i. Preparing and Aggregating Petroleum Resources
Petroleum reserves and contingent resources are typically prepared by deterministic methods with the support from probabilistic methods.
Petroleum reserves and contingent resources are aggregated by arithmetic summation by category and as a result, proved reserves may be a
conservative estimate due to the portfolio effects of the arithmetic summation. Proved plus probable plus possible may be an optimistic estimate
due to the same aforementioned reasons.
j. Methodology and Internal Controls
The reserves estimates undergo an assurance process to ensure that they are technically reasonable given the available data and have been
prepared according to our reserves and resources process, which includes adherence to the PRMS Guidelines. The assurance process includes
peer reviews of the technical and commercial assumptions. The annual reserves report is reviewed by management with the appropriate
technical expertise, including Chief Petroleum Engineer and Integrated Gas General Managers.
ANNUAL RESERVES REPORT
163
k. Qualified Petroleum Reserves and Resources Evaluators
The material presented in this report is based on, and fairly represents, information and supporting documentation prepared by, or under
the supervision of the listed qualified reserves and resources evaluators. These individuals have consented to the statements based on this
information, and to the form and context in which these statements appear.
NAME
Andrew Mayers
Chung Chen
Samantha Phillips
Ian Meynink
Rod Trubshaw
Graham Sutherland
Simon Smith
Alistair Jones
Reneke van Soest
Julie Moriarty
Alexander Cote
Sarah Bishop
Alan Mourgues
Petrina Weatherstone
Arvo Nagel
Pedro Paris
Jocelyn Young
David MacDougal
Nick Allen
Rowan Wilson
EMPLOYER
PROFESSIONAL ORGANISATION*
Origin Energy (Chief Petroleum Engineer)
SPE, APEGA, RPEQ
Origin Energy
Origin Energy
Origin Energy
Origin Energy
Origin Energy
Origin Energy
Origin Energy
Origin Energy
Origin Energy
Origin Energy
Origin Energy (Lattice Energy)
Origin Energy (Lattice Energy)
Origin Energy (Lattice Energy)
Origin Energy (Lattice Energy)
Origin Energy (Lattice Energy)
Origin Energy (Lattice Energy)
Origin Energy (Lattice Energy)
Origin Energy (Lattice Energy)
Origin Energy (Lattice Energy)
SPE, EA, RPEQ
SPE, EA, APEGA, RPEQ
SPE, EA, RPEQ
SPE, RPEQ
SPE, EA, RPEQ
SPE, EA, RPEQ
SPE, EA
SPE
SPE
SPE, APEGA, EA
SPE, EA, RPEQ
SPE, EA, RPEQ
SPE
SPE
SPE
SPE
SPE
SPE
SPE
Notes to table
* SPE: Society of Petroleum Engineers; AAPG: American Association of Petroleum Geologists; APEGA: The Association of Professional Engineers and Geoscientists
of Alberta; EA: Engineers of Australia; RPEQ: Board of Professional Engineers Queensland; RPEQ: Registered Professional Engineer of Queensland.
164
FIVE YEAR FINANCIAL HISTORY
FIVE YEAR FINANCIAL HISTORY
A reconcilation between statutory and underlying profit measures can be found in note A1 of the Origin Consolidated Financial Statements
INCOME STATEMENT ($M)
Total external revenue
UNDERLYING:
EBITDA
Depreciation and amortisation expense
Share of interest, tax, depreciation and amortisation of
equity accounted investees3
EBIT
Net financing costs
Income tax expense
Non-controlling interests
Segment result and underlying consolidated profit
Impact of items excluded from segment result and
underlying consolidated profit net of tax
STATUTORY:
Profit attributable to members of the parent entity
STATEMENT OF FINANCIAL POSITION ($M)
Total assets
Net debt/(cash)
Shareholders’ equity – members/parent entity interest
Adjusted net debt/(cash)4
Shareholders’ equity – total
CASH FLOW
Net cash from operating and investing activities – total
operations ($m)
Key ratios
Statutory basic earnings per share (cents)5
Underlying basic earnings per share (cents)5
Total dividend per share (cents)
Net debt to net debt plus equity (adjusted) (%)4
UNDERLYING EBITDA BY SEGMENT ($M)
Energy Markets
Integrated Gas6
Contact Energy
Corporate
GENERAL INFORMATION
Number of employees (Excluding Contact Energy)
Weighted average number of shares5
INTEGRATED GAS
2P reserves (PJe)7
Product sales volumes (PJe)
Natural gas and ethane (PJ)
Crude oil (kbbls)
Condensate/naphtha (kbbls)
LPG (kt)
Production volumes (PJe)
ENERGY MARKETS
Generation (MW) – owned
Generation dispatched (TWh)
Number of customers (‘000)
Electricity
Natural gas
LPG
Electricity (TWh)8
Natural gas (PJ)9
LPG (Kt)
20171
14,107
2,530
(477)
(925)
1,128
(296)
(279)
(3)
550
(2,776)
20161,2
12,174
1,696
(624)
(296)
776
(109)
(286)
(16)
365
(993)
20151
14,147
2014
14,518
2013
14,747
2,149
(807)
(62)
1,280
(169)
(349)
(80)
682
(1,340)
2,139
(732)
(54)
1,353
(192)
(342)
(106)
713
(183)
2,181
(695)
(48)
1,438
(255)
(339)
(84)
760
(382)
(2,226)
(628)
(658)
530
378
25,199
8,398
11,396
8,111
11,418
28,905
9,470
14,039
9,131
14,060
33,367
13,273
12,723
13,102
14,159
30,941
9,134
13,444
9,146
15,129
1,378
1,215
(2,081)
(1,087)
(126.9)
31.3
0
42
1,492
1,104
–
(66)
(39.8)
23.2
10
39
1,330
386
61
(81)
(52.1)
54.0
50
48
1,260
498
487
(96)
42.1
56.7
50
38
1,053
570
533
(17)
29,589
6,808
13,283
7,037
14,794
127
30.3
60.8
50
32
1,333
455
435
(42)
5,894
5,658
1,754,489,221 1,578,213,157 1,263,960,708 1,255,157,889 1,246,975,013
6,922
6,701
5,811
5,788
334
163
1,209
1,615
144
323
6,011
20.295
4,210
2,716
1,112
382
39.7
187.9
448
6,277
228
168
1,629
1,403
127
232
6,011
20.10
4,217
2,741
1,089
387
38.1
167.1
457
6,260
154
128
1,754
1,581
147
148
5,994
19.94
4,266
2,801
1,083
382
37.3
134.7
415
6,473
153
123
2,036
1,843
160
142
6,010
17.20
4,295
2,876
1,036
383
39.1
96
386
6,201
133
110
1,462
1,548
113
123
5,930
15.70
4,293
2,917
998
378
–
–
437
FIVE YEAR FINANCIAL HISTORY
165
Includes discontinued operations and assets held for sale unless stated otherwise.
1
2 Certain amounts above have been restated to reflect adjustments as noted in Note F12 of the consolidated financial statements.
3 Origin discloses its equity accounted results in two lines: ‘share of EBITDA of equity accounted investees,’ included in EBITDA; and ‘share of interest, tax, depreciation and
amortisation of equity accounted investees,’ included between EBITDA and EBIT.
4 Total current and non-current interest-bearing liabilities only, less cash and cash equivalents, less fair value adjustments on foreign exchange hedging transactions.
5 Prior period adjusted for the bonus element (discount to market price) of the September 2015 rights issue.
6 The Integrated Gas segment combines the former Exploration & Production and Australia Pacific LNG segments, as announced in August 2015.
7
8 FY2015 and FY2014 were restated to better reflect the recognition of volumes, revenues and costs associated with feed-in volumes from solar customers with no impact on
Includes Origin’s share of Australia Pacific LNG reserves. Shareholding was 42.5 per cent at 30 June 2012 and post-Sinopec completion on 12 July 2012 was 37.5 per cent.
9
gross profit. Comparable figures for FY2013 are not available.
Includes external volumes sold. Osborne gas sales were reclassified as internal due to new operational agreement. As a result, FY2015 and FY2014 external sales volumes,
revenues and costs were revised with no impact on gross profit. Comparable figures for FY2013 are not available.
166
GLOSSARY AND INTERPRETATION
GLOSSARY AND INTERPRETATION
FINANCIAL MEASURES
STATUTORY FINANCIAL MEASURES
Statutory Financial Measures are measures included in the Financial Statements for the Origin Consolidated Group, which are measured
and disclosed in accordance with applicable Australian Accounting Standards. Statutory Financial Measures also include measures that
have been directly calculated from, or disaggregated directly from financial information included in the Financial Statements for the
Origin Consolidated Group.
TERM
MEANING
Statutory Profit/Loss
Net profit/loss after tax and non-controlling interests as disclosed in the Income Statement of the Origin
Consolidated Financial Statements.
Statutory earnings per share
Statutory profit divided by weighted average number of shares.
Cash flows from operating activities
Statutory cash flows from operating activities as disclosed in the Cash Flow Statement of the Origin
Consolidated Financial Statements.
Cash flows used in investing
activities
Statutory cash flows used in investing activities as disclosed in the Cash Flow Statement of the Origin
Consolidated Financial Statements.
Cash flows from financing activities
Statutory cash flows from financing activities as disclosed in the Cash Flow Statement of the Origin
Consolidated Financial Statements
External revenue
Net Debt
Non-controlling interest
Revenue after elimination of intersegment sales on consolidation as disclosed in the Income Statement
of the Origin Consolidated Financial Statements
Total current and non-current interest bearing liabilities only, less cash and cash equivalents.
Economic interest in a controlled entity of the consolidated entity that is not held by the Parent entity
or a controlled entity of the consolidated entity.
Statutory net financing costs
Interest expense net of interest income as disclosed in the Origin Consolidated Financial Statements.
NON-IFRS FINANCIAL MEASURES
This document includes certain Non-IFRS Financial Measures. Non-IFRS Financial Measures are defined as financial measures that
are presented other than in accordance with all relevant Accounting Standards. Non-IFRS Financial Measures are used internally by
management to assess the performance of Origin’s business, and to make decisions on allocation of resources. The Non-IFRS Financial
Measures have been derived from Statutory Financial Measures included in the Origin Consolidated Financial Statements, and are
provided in this report, along with the Statutory Financial Measures to enable further insight and a different perspective into the financial
performance, including profit and loss and cash flow outcomes, of the Origin business.
The principle non-IFRS profit and loss measure of Underlying Profit has been reconciled to Statutory Profit in Section 2.2. The key
Non-IFRS Financial Measures included in this report are defined below.
TERM
Current period
Electricity& Natural Gas cost
to serve restatement
Items excluded from
Underlying Profit
MRCPS elimination adjustment
Prior period
Total Segment Revenue
MEANING
Year ended 30 June 2017.
The period ending 30 June 2016 has been restated to reflect the following changes to Electricity and
Natural Gas cost to serve:
– Other income (relating to late payment fees) included as an offset, previously recognised in Electricity and
Natural Gas gross profit; and
– HSE, procurement, solar marketing costs and corporate recharges reallocated to Electricity gross profit,
LPG and Solar & Energy Services.
Items that do not align with the manner in which the Managing Director reviews the financial and operating
performance of the business which are excluded from Underlying Profit. Items excluded from Underlying
Profit are categorised as:
Fair value and foreign exchange movements – reflecting the impact of mark to market movements on
financial assets and liabilities from period to period.
LNG related items before revenue recognition – primarily comprising net financing costs incurred (but
unable to be capitalised) in funding Origin’s investment in Australia Pacific LNG which relate to the period
prior to revenue recognition for each of the two LNG Trains.
Disposals, impairments and business restructuring – reflecting the impact of actions and decisions to
dispose, acquire, revalue or restructure the company’s assets and business operations.
The interest on MRCPS was capitalised by Australia Pacific LNG prior to commencement of revenue
recognition. As the project is now operational, previously capitalised interest is being unwound through
depreciation. The proportion of the unwind attributable to Origin’s share is eliminated as Origin had
previously eliminated the impact of the capitalised interest through the equity investment balance.
Year ended 30 June 2016.
Total revenue for the Energy Markets, Integrated Gas, Contact Energy and Corporate segments, including
inter-segment sales, as disclosed in note A1 of the Origin Consolidated Financial Statements.
GLOSSARY AND INTERPRETATION
167
TERM
Underlying Profit
MEANING
Underlying net profit after tax and non-controlling interests as disclosed in note A1 of the Origin
Consolidated Financial Statements.
Underlying earnings per share
Underlying profit/loss divided by weighted average number of shares.
Underlying average interest rate
Underlying interest expense for the current period divided by Origin’s average drawn debt during the
current period (excluding funding related to Australia Pacific LNG).
Underlying EBITDA
Underlying depreciation
and amortisation
Underlying EBIT
Underlying earnings before underlying interest, underlying tax, underlying depreciation and amortisation
(EBITDA) as disclosed in note A1 of the Origin Consolidated Financial Statements.
Underlying depreciation and amortisation as disclosed in note A1 of the Origin Consolidated
Financial Statements.
Underlying earnings before underlying interest and underlying tax (EBIT) as disclosed in note A1 of the
Origin Consolidated Financial Statements.
Underlying income tax expense
Underlying income tax expense as disclosed in note A1 of the Origin Consolidated Financial Statements.
Underlying net financing costs
Underlying interest expense net of interest income as disclosed in note A1 of the Origin Consolidated
Financial Statements.
Underlying profit before tax
Underlying profit before tax as disclosed in note A1 of the Origin Consolidated Financial Statements.
Underlying share of ITDA
Underlying ROCE
Gross Profit
Adjusted Net Debt
Non-cash fair value uplift
The Group’s share of underlying interest, underlying tax, underlying depreciation and underlying
amortisation (ITDA) of equity accounted investees as disclosed in note A1 of the Origin Consolidated
Financial Statements.
Underlying ROCE is calculated as Adjusted EBIT / Average Capital Employed.
– Average Capital Employed = Shareholders Equity + Origin Debt + Origin’s Share of Australia Pacific
LNG project finance - Non-cash fair value uplift + net derivative liabilities. The average is a simple
average of opening and closing in any year.
– Adjusted EBIT = Origin Underlying EBIT and Origin’s share of Australia Pacific LNG Underlying EBIT +
Dilution Adjustment = Statutory Origin EBIT adjusted to remove the following items: a) Items excluded
from underlying earnings; b) Origin’s share of Australlia Pacific LNG underlying interest and tax; and c)
the depreciation of the Non-cash fair value uplift adjustment.
– In contrast, for remuneration purposes Origin’s statutory EBIT is adjusted to remove Origin’s share of
Australia Pacific LNG statutory interest and tax (which is included in Origin’s reported EBIT) and certain
items excluded from underlying earnings. Gains and losses on disposals and impairments will only be
excluded subject to Board discretion. The Remuneration Report provides specific details.
Revenue less cost of goods sold.
Net Debt adjusted to remove fair value adjustments on hedged borrowings.
Reflects the impact of the accounting uplift in the asset base of Australia Pacific LNG of $1.9 billion which
was recorded on the creation of Australia Pacific LNG and subsequent share issues to Sinopec. This balance
will be depreciated in Australia Pacific LNG’s income statement on an ongoing basis and, therefore, a dilution
adjustment is made to remove this depreciation. The non-cash fair value uplift adjustments are disclosed
and explained in Note E1.2 of the financial statements.
TRIFR
Total Recordable Incident Frequency Rate.
NON-FINANCIAL TERMS
TERM
1P reserves
2P reserves
3P reserves
2C resources
Boe
Capacity factor
MEANING
Proved Reserves are those reserves which analysis of geological and engineering data can be estimated with
reasonable certainty to be commercially recoverable. There should be at least a 90 per cent probability that
the quantities actually recovered will equal or exceed the estimate.
The sum of Proved plus Probable Reserves. Probable Reserves are those additional reserves which analysis
of geological and engineering data indicate are less likely to be recovered than Proved Reserves but more
certain than Possible Reserves. There should be at least a 50 per cent possibility that the quantities actually
recovered will equal or exceed the best estimate of Proved plus Probable Reserves (2P).
Proved plus Probable plus Possible Reserves. Possible Reserves are those additional Reserves which analysis
of geological and engineering data suggest are less likely to be recoverable than Probable Reserves. The
total quantities ultimately recovered from the project have at least a 10 per cent probability of exceeding
the sum of Proved plus Probable plus Possible (3P), which is equivalent to the high estimate scenario.
The best estimate quantity of petroleum estimated to be potentially recoverable from known accumulations
by application of development oil and gas projects, but which are not currently considered to be
commercially recoverable due to one or more contingencies. The total quantities ultimately recovered
from the project have at least a 50 per cent probability to equal or exceed the best estimate for 2C
contingent resources.
Barrel of oil equivalent
A generation plant’s output over a period compared with the expected maximum output from the plant in
the period based on 100 per cent availability at the manufacturer’s operating specifications.
168
GLOSSARY AND INTERPRETATION
TERM
Discounting
MEANING
For Energy Markets, discounting refers to offers made to customers at a reduced price to the published
tariffs. While a customer bill comprises a fixed and a variable portion, Origin’s discounts only apply to the
variable portion. In some cases, these discounts are conditional, such as requiring direct debit payment or
on-time payments.
Equivalent reliability factor
Equivalent reliability factor is the availability of the plant after scheduled outages.
FEED
GJ
GJe
Joule
kT
kW
kWh
Mtpa
MW
MWh
NPS
Oil Forward Sale Agreements
PJ
PJe
Ramp gas
Tscf
TW
TWh
Watt
Front End Engineering Design
Gigajoule = 109 joules
Gigajoules equivalent = 10-6 PJe
Primary measure of energy in the metric system.
Kilo tonnes = 1,000 tonnes
Kilowatt = 103 watts
Kilowatt hour = standard unit of electrical energy representing consumption of one kilowatt over one hour.
Million tonnes per annum
Megawatt = 106 watts
Megawatt hour = 103 kilowatt hours
Net Promoter Score (NPS) is a measure of customers’ propensity to recommend Origin to friends
and family
Agreements to sell a portion of future oil and condensate production from July 2015 for 72 months at
prices linked to the oil forward pricing curve at the agreement date. The cash proceeds were received
upfront in the 2013 financial year at a locked-in price of $62.40/bbl.
Petajoule = 1015 joules
Petajoules equivalent = an energy measurement Origin uses to represent the equivalent energy in different
products so the amount of energy contained in these products can be compared. The factors used by Origin
to convert to PJe are: 1 million barrels crude oil = 5.8 PJe; 1 million barrels condensate = 5.4 PJe; 1 million
tonnes LPG = 49.3 PJe; 1 TWh of electricity = 3.6 PJe.
Short term Queensland gas supply as upstream assets associated with CSG-to-LNG projects gradually
increase production in advance of first LNG
Trillions of standard cubic feet of gas
Terawatt = 1012 watts
Terawatt hour = 109 kilowatt hours
A measure of power when a one ampere of current flows under one volt of pressure.
INTERPRETATION
All comparable results reflect a comparison between the current period and the prior period ended 30 June 2016, unless specifically
stated otherwise.
A reference to APLNG or Australia Pacific LNG is a reference to Australia Pacific LNG Pacific LNG Pty Limited in which Origin holds
a 37.5 per cent shareholding. Origin’s shareholding in Australia Pacific LNG is equity accounted.
A reference to $ is a reference to Australian dollars unless specifically marked otherwise.
All references to debt are a reference to interest bearing debt only.
Individual items and totals are rounded to the nearest appropriate number or decimal. Some totals may not add down the page due
to rounding of individual components.
When calculating a percentage change, a positive or negative percentage change denotes the mathematical movement in the underlying
metric, rather than a positive or a detrimental impact.
Percentage changes on measures for which the numbers change from negative to positive, or vice versa, are labelled as not applicable.
DIRECTORY
ORIGIN ENERGY
LIMITED
REGISTERED OFFICE
Level 45, Australia Square
264–278 George Street
Sydney NSW 2000
GPO Box 5376
Sydney NSW 2001
T (02) 8345 5000
F (02) 9252 9244
SECRETARIES
Andrew Clarke
Helen Hardy
SHARE REGISTRY
Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
GPO Box 3993
Sydney NSW 2001
T Australia 1300 664 446
T
F (02) 9279 0664
International (+61 2) 8016 2896
www.boardroomlimited.com.au
origin@boardroomlimited.com.au
AUDITOR
KPMG
Further information about Origin’s
performance can be found at:
www.originenergy.com.au
Shareholders can contact Origin at:
shareholder.enquiries@originenergy.com.au
Shareholders wishing to receive their shareholder communications electronically,
including annual reports, notices of meetings and dividend statements and other
company related information should contact the share registry.