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TOTAL S.A.2023 Annual ReportThe value we create If originality is the ability to do things differently, Origin was created with that in mind. We were the first energy company in Australia to span retail, power generation and upstream gas production. And, we’ve kept our eye on a low-carbon future.Since listing on the ASX in 2000, Origin has grown into a leading Australian energy company. It is a privilege to provide reliable energy to millions of homes and businesses every day and make a strong contribution to communities.We’ve come a long way, but we’ve got a long way to go. Energy generation is changing rapidly as the energy transition accelerates. And with this, the needs and preferences of our customers are changing. Our communities need our support as much as ever. We’re a company that embraces opportunities and leans into challenges. And that’s how we create value. Originality Originality in visionElise Head of Export & Infrastructure for Future Fuels“It’s in our DNA to question, innovate and optimise. It drives our pursuit to reimagine a better and more sustainable future.” Some of the key beliefs that shaped our vision in the early days remain similar today: renewables will meet an increasing share of energy needs; peaking generation is crucial to maintaining reliable supply given the variable output of renewables; and there will be a revolution in how people interact with energy, underpinned by trusted relationships with retailers.Gas has always been an important part of our business, and we believe in its continued role in the energy mix both to firm the grid and as a feedstock for industries where electrification is not a viable alternative.Origin has grown from a market capitalisation of ~$300 million in 2000 to more than $14.5 billion today and in the process established a business that, we believe, is ideally positioned for the energy transition. Originality in investmentMinh Group Manager, Broadband“What we do is less about products, and more about making energy easier and smarter – being endlessly curious, making discoveries and empowering each other to make a meaningful difference.” Key investments have shaped Origin’s business and strategic positioning. Australia Pacific LNG was established alongside ConocoPhillips, and was later joined by Sinopec, with a combined $24.5 billion investment creating a leading east coast gas producer, major LNG exporter and domestic supplier.The acquisition of Country Energy, Integral Energy, Sun Retail, Powerco and CitiPower helped create a market-leading retail business with more than 4.5 million customer accounts.In 2019, we purchased a 20 per cent stake in global energy and technology pioneer, Octopus Energy, and licensed its market-leading Kraken platform propose-built for energy retailing. This has accelerated our ambition to deliver superior customer service at lower cost and differentiate Origin.Contributing to communities and creating a lasting impact has always been important. We established the Origin Energy Foundation in 2010 to support powerful education programs aimed at breaking the cycle of disadvantage and helping young Australians reach their potential. Originality in innovationDaniel Product Development Manager“We take pride in thinking differently about how to turn emerging products into ones that will be in every customer’s home.” The world of energy is changing rapidly.We’re accelerating renewables and storage in our portfolio and have signalled our exit from coal-fired generation. We’ve cultivated a culture of innovation, combining Origin’s strengths and capabilities with great ideas from start-ups around the globe. This has helped shape the products and solutions we need to be successful in this increasingly distributed, decarbonised and digitised energy landscape.We’ve deepened our focus on technology and analytics, building Origin Loop, a virtual power plant using smart data and AI to aggregate and orchestrate thousands of distributed energy sources in homes and businesses to help balance supply and demand, and share benefits with customers. Origin Loop has scaled rapidly to 815 MW of capacity which exceeds the single largest generating unit in the national electricity market. We also continue to explore the potential of future fuels including green hydrogen and ammonia, which could play an important role in the future energy mix.Origin’s ongoing success will depend on our ability to evolve to meet the fast-changing preferences of our customers for cleaner and smarter energy solutions. Contents
1
Contents
A message from Scott and Frank
About Origin
Where We Operate
Board of Directors
Executive Leadership Team
Operating and Financial Review
Directors’ Report
Remuneration Report
Lead Auditor’s Independence Declaration
Financial Statements
Share and Shareholder Information
Exploration and Production Permits and Data
Annual Reserves Report
Five-year Financial History
Glossary and Interpretation
2
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5
6
8
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159
2
Annual Report 2023
A message from
Scott and Frank
“We remain confident that our
customer base, portfolio of assets
and management team position
Origin advantageously as the energy
transition progresses.”
Welcome to the 2023 Annual Report
In what has been a significant year for Origin, on behalf of the
Board, we would like to thank you for your continued support of
our company.
In November last year, Origin announced it had received an
indicative, conditional and non-binding proposal from a consortium
comprising Brookfield Asset Management and MidOcean Energy,
to acquire all the issued shares in Origin by way of a scheme
of arrangement.
That offer was at a premium of almost 55 per cent to Origin’s share
price on the prior trading day. The proposal confirmed that Origin
represents a highly strategic platform and one ideally positioned to
benefit from the energy transition.
In March this year, Origin announced it had entered into a
binding Scheme Implementation Deed with the Consortium, which
implies a total consideration of $8.912 per share prior to dividend
adjustments, based on an assumed AUD/USD exchange rate
of 0.70.1
The proposed acquisition of Origin by the Consortium continues to
progress through the necessary regulatory steps.
The scheme and the Board’s recommendation is subject to an
independent expert concluding the scheme is in the best interests of
shareholders. The independent expert process is underway.
While the timing of the shareholder vote is uncertain as it relates to
the timing of regulatory approvals, Origin and the Consortium are
moving expeditiously towards the target to implement the scheme
by early in the 2024 calendar year.
Financial performance
Origin’s FY2023 financial performance reflected the strength of our
business and the continued strategy. We recorded higher earnings
from Energy Markets, Integrated Gas and from our 20 per cent
interest in the UK-based Octopus Energy.
On a statutory basis, Origin announced a profit of $1,055 million,
compared to a loss of $1,429 million in the prior year.
Underlying profit increased to $747 million, $340 million higher than
the previous year due to improved earnings across all our operations.
These earnings were partly offset by higher income tax expense
associated with unfranked distributions from Australia Pacific LNG.
Origin benefited from record revenues and cash dividends from
Australia Pacific LNG of $1,783 million, as a result of higher
commodity prices. Net of oil hedging, Origin received cash
distributions of $1,489 million. This distribution contributed to a
strong adjusted free cash flow position of $965 million.
The Board has determined a fully franked final dividend of 20 cents
per share. For the FY2023 year, shareholders will have received total
dividends of 36.5 cents per share.
1 To comprise $5.78 per share and US$2.19 per share, to be reduced by any dividends paid by Origin, including the FY2023 Interim and Final Dividends and any subsequent
dividends prior to the implementation of the Scheme. Refer to Origin’s ASX statement on 27 March 2023 for further details regarding the price per Origin share offered by
the Consortium, www.originenergy.com.au.
A message from Scott and Frank
3
Operational performance
Underlying EBITDA for Energy Markets was $1,038 million, up
$637 million on the prior year. Electricity profit rose as higher
wholesale energy costs in previous periods were recovered in
electricity tariffs, and through optimisation of the energy supply
portfolio. Natural gas profit also rose, on higher sales revenue and
trading benefits.
Total customer accounts increased by 66,000 to 4.5 million
primarily driven by growth in electricity, natural gas and broadband.
The migration of customers to Kraken completed in May and
stabilisation activities continue. Origin is expecting to deliver cost
savings of $200 - $250 million from an FY2018 baseline, by 2025.
Origin Zero doubled its share of business customers on solutions
broader than electricity or natural gas, providing rooftop solar,
batteries, electric vehicles and demand management. The team
secured several key account wins, including a leading grocery
retailer, a water utility and a data centre operator. Origin Loop, the
company’s virtual power plant, more than tripled connected assets
to 815 MW and is well on its way to achieve our target of 2 GW.
Origin’s share of Octopus Energy (UK) Underlying EBITDA was
$240 million, up from a loss of $36 million in the prior year. Octopus’
step change in earnings in FY2023 reflects an increase in customer
accounts and the lag in the reset of tariffs. The acquisition of Bulb
Energy added ~2.5 million customer accounts, making Octopus
Energy the UK’s second-largest energy retailer, with continued
growth in the licensing of Kraken to other retailers resulting in
32 million accounts contracted to be on the platform worldwide.
Integrated Gas Underlying EBITDA was $1,919 million, $82 million
higher than the prior year, mainly due to higher commodity prices.
Persistent wet weather restricted access to well sites in the first
half, contributing to a 3 per cent decline in production for the
year. Improved conditions in the second half allowed more well
workover and optimisation activities to occur, enabling a rebound in
production in the second half.
Outlook
The following guidance is provided on the basis that
market conditions and the regulatory environment do not
materially change.
Origin expects higher Energy Markets Underlying EBITDA in
FY2024 of $1,300 - $1,700 million, excluding Octopus Energy.
Electricity gross profit is expected to improve, reflecting higher
tariffs and an increased contribution from Eraring and the peaking
fleet, while natural gas gross profit is expected to moderate due to
higher procurement costs as supply contracts reprice.
Octopus is in a rapid growth phase and continues to invest
in international growth, technology platform developments and
services offerings. Origin's share of Octopus Energy EBITDA is
expected to be lower with a wide range of possible outcomes
reflecting stronger retail competition.
Australia Pacific LNG production is expected to be 680 – 710
PJ (APLNG 100 per cent), with higher capital and operating
expenditure expected, primarily due to higher power costs,
increased well workover and optimisation programs.
Our strategy, people and Board
Over the past year, execution of Origin’s strategy has accelerated
leading to increasing confidence as to our future prospects as
the energy transition gathers momentum. We are rapidly building
our pipeline of renewable and storage projects. We approved the
first phase of a large-scale Eraring battery, acquired the Warrane
prospective wind development site in the New England renewable
energy zone and progressed several renewable and brownfield
battery development options across the portfolio.
We released our first Climate Transition Action Plan (CTAP)
outlining the company’s strategy and ambition to lead the energy
transition through cleaner energy and customer solutions. The
CTAP includes new targets to accelerate emissions reduction across
Origin and create value for shareholders, towards a long-term
ambition to be net zero emissions by 2050. Our CTAP received
overwhelming shareholder support of ~95 per cent at our 2022
Annual General Meeting.
This year’s achievements are in no small part due to the dedication
and commitment of the people who embody the culture and values
of Origin every day. This past year, our safety performance improved
with our Total Recordable Injury Frequency Rate (TRIFR) lowering to
3.8, compared to 4.0 at June 2022. Our employee engagement
score was 7.7, placing us above the industry average, and the
number of females in senior leader positions increased to 46 per
cent, from 40.8 per cent in FY2022.
We would like to acknowledge the service of Bruce Morgan, who
retired from the Origin Board in October, after 10 years of dedicated
service. Bruce has made a lasting contribution to Origin over his time
as a director.
We are pleased with Origin’s strong operational and financial
performance this year. We remain confident that our customer
base, portfolio of assets and management team position Origin
advantageously as the energy transition progresses. This will allow
us to capture value for shareholders and deliver benefits to our
customers and communities.
Thank you, and we look forward to welcoming you to the Annual
General Meeting.
Scott Perkins
Chairman
Frank Calabria
Chief Executive Officer
4
Annual Report 2023
About Origin
Leading integrated
energy company
4.5 million
customer accounts
> 5,500
employees
Listed on the Australian Securities
Exchange in 2000
Electricity, gas, LPG1 and
broadband customers across
Australia and the Pacific
Inclusivity in the workplace;
leading parental support
Powering
Australia
27.5% interest in Australia
Pacific LNG
Transitioning our business to
net zero
7,800 MW generation portfolio,
including 1,515 MW owned
and contracted renewables
and storage
Continue to be a significant
contributor to the east coast
gas market
Growing our portfolio of
renewables and cleaner
energy solutions
Climate ambitions embedded
in our strategy
Driving future
energy innovation
Supporting
Australian communities
Emissions intensity target
consistent with 1.5°C
pathway envelope2
20% interest in Octopus Energy,
investing in new technologies,
start-ups and future fuels
The Origin Energy Foundation has
contributed more than $37 million
since inception
1 On 8 November 2022, Origin entered into an agreement to sell Origin's LPG business in the Pacific
2 Pursuant to the methodology set out in our Climate Transition Action Plan
Where We Operate
5
Where We Operate
Canning Basin1South East QueenslandPacific countries LPG2Bowen/ Surat basinsBrisbaneGladstoneRabaulLaeSantoHoniaraPort VilaSuvaLautokaLabasaApiaPago PagoRarotongaPort MoresbyGasPumped hydroSolar (contracted)Wind (contracted)CoalStorage (under construction)LPG seaboard terminalElectricity customer accountsNatural gas customer accountsOrigin/JV upstream acreageAPLNG upstream acreageProduction facilityAPLNG pipelineExploration & production acreageGenerationAdelaideMelbourneHobartBrisbaneBowen/ Surat Cooper Eromanga BasinbasinsGladstoneLNG ExportBrowse BasinSydney634k501k1,157k386k687k176k264k204k15kCanning Basin1South East QueenslandPacific countries LPG2Bowen/ Surat basinsBrisbaneGladstoneRabaulLaeSantoHoniaraPort VilaSuvaLautokaLabasaApiaPago PagoRarotongaPort MoresbyGasPumped hydroSolar (contracted)Wind (contracted)CoalStorage (under construction)LPG seaboard terminalElectricity customer accountsNatural gas customer accountsOrigin/JV upstream acreageAPLNG upstream acreageProduction facilityAPLNG pipelineExploration & production acreageGenerationAdelaideMelbourneHobartBrisbaneBowen/ Surat Cooper Eromanga BasinbasinsGladstoneLNG ExportBrowse BasinSydney634k501k1,157k386k687k176k264k204k15kCanning Basin1South East QueenslandPacific countries LPG2Bowen/ Surat basinsBrisbaneGladstoneRabaulLaeSantoHoniaraPort VilaSuvaLautokaLabasaApiaPago PagoRarotongaPort MoresbyGasPumped hydroSolar (contracted)Wind (contracted)CoalStorage (under construction)LPG seaboard terminalElectricity customer accountsNatural gas customer accountsOrigin/JV upstream acreageAPLNG upstream acreageProduction facilityAPLNG pipelineExploration & production acreageGenerationAdelaideMelbourneHobartBrisbaneBowen/ Surat Cooper Eromanga BasinbasinsGladstoneLNG ExportBrowse BasinSydney634k501k1,157k386k687k176k264k204k15kCanning Basin1South East QueenslandPacific countries LPG2Bowen/ Surat basinsBrisbaneGladstoneRabaulLaeSantoHoniaraPort VilaSuvaLautokaLabasaApiaPago PagoRarotongaPort MoresbyGasPumped hydroSolar (contracted)Wind (contracted)CoalStorage (under construction)LPG seaboard terminalElectricity customer accountsNatural gas customer accountsOrigin/JV upstream acreageAPLNG upstream acreageProduction facilityAPLNG pipelineExploration & production acreageGenerationAdelaideMelbourneHobartBrisbaneBowen/ Surat Cooper Eromanga BasinbasinsGladstoneLNG ExportBrowse BasinSydney634k501k1,157k386k687k176k264k204k15k1 An agreement has been executed with Buru Energy Limited to exit Origin’s interest in Canning Basin, and with Bridgeport Energy (Qld) Pty Ltd to exit Origin’s joint venture interests in the Cooper Eromanga Basin.2 On 8 November 2022, Origin entered into an agreement to sell Origin’s LPG business in the Pacific. 6
Board of
Directors
Annual Report 2023
Scott Perkins
Ilana Atlas
Maxine Brenner
Frank Calabria
Greg Lalicker
Independent
Non-executive Chair
Independent
Non-executive Director
Independent
Non-executive Director
Managing Director &
Chief Executive Officer
Independent
Non-executive Director
Tenure 7 years 11 months
including 2 years 10 months
as Chair
Scott Perkins joined the
Board in September 2015
and was appointed Chair
in October 2020. He is
Chair of the Nomination
Committee and a member
of the Audit, Remuneration,
People and Culture, Safety
and Sustainability and
Risk committees.
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.
Scott has been a Non-
executive Director of
Woolworths Group Limited
since September 2014 and
was appointed Chair in
October 2022. He is also
a Non-executive Director
of Brambles Limited (since
May 2015). He is Chair
of Sweet Louise (since
2005) and the New
Zealand Initiative (since
2012). Scott was previously
a Director of the Museum
of Contemporary Art in
Sydney (2011 – 2020).
Scott 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.
Tenure 2 years 6 months
Tenure 9 years 9 months
Tenure 6 years 10 months
Tenure 4 years 5 months
Greg Lalicker joined the
Board in March 2019. He is
a member of the Safety and
Sustainability Committee.
Greg is the Chief
Executive Officer of Hilcorp
Energy Company, based
in Houston, USA. Hilcorp
is the largest privately
held independent oil
and gas exploration and
production company in the
United States.
Greg joined Hilcorp’s
leadership team in 2006
as Executive Vice President
where he was responsible
for all exploration and
production activities. He
was appointed President in
2011 and Chief Executive
Officer in 2018. Prior to
working for Hilcorp, Greg
was with BHP Petroleum
based in Midland, Houston,
London and Melbourne
as well as McKinsey &
Company where he worked
in its Houston, Abu Dhabi
and London offices.
Greg graduated as a
petroleum engineer from
the University of Tulsa.
He also has a Master of
Business Administration and
a law degree.
Ilana Atlas joined the
Board in February 2021.
She is a member
of the Remuneration,
People and Culture and
Risk committees.
Ilana is a Non-executive
Director of ANZ Group
Holdings Limited (since
2023) (previously Australian
& New Zealand Banking
Group Limited, since
September 2014) and
Scentre Group Limited
(since May 2021). She is
the Chair of Jawun, on the
Board of the Paul Ramsay
Foundation and a member
of the Council of the
National Gallery of Australia.
Ilana was previously Chair
of Coca-Cola Amatil Limited
(2017 – 2021). Her
last executive role was
Group Executive, People,
at Westpac, where she
was responsible for human
resources, corporate affairs
and sustainability. Prior to
that role, she was Group
Secretary and General
Counsel. Before her 10-
year career at Westpac,
Ilana was a partner in
law firm Mallesons Stephen
Jaques (now known as
King & Wood Mallesons).
In addition to her practice
in corporate law, she held
a number of management
roles in the firm including
Executive Partner, People
and Information, and
Managing Partner.
Ilana holds a Bachelor of
Jurisprudence (Honours)
and Bachelor of Laws
(Honours) from the
University of Western
Australia and Masters of
Laws from the University
of Sydney.
Maxine Brenner joined
the Board in November
2013. She is Chair of the
Safety and Sustainability
Committee and a member
of the Audit, Nomination
and Risk committees.
Maxine was previously
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.
Maxine is a Non-executive
Director of Telstra Group
Limited (since February
2023), Non-executive
Director of Qantas Airways
Ltd (since August 2013) and
Non-executive Director and
Chair of the Risk Committee
of Woolworths Group
Limited (since December
2020). She is also a
member of the University of
NSW Council.
Maxine’s former
directorships include Orica
Limited (2013 – 2022),
Growthpoint Properties
Australia (2012 – 2020),
Treasury Corporation of
NSW, Bulmer Australia
Ltd, Neverfail Springwater
Ltd 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 was
appointed Managing
Director and Chief
Executive Officer in
October 2016. Frank is a
member of the Safety and
Sustainability Committee
and a Director of the Origin
Energy Foundation.
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 a Director of
the Australian Energy
Council (since 2016) and
the Australian Petroleum
Production & Exploration
Association (since 2017).
He is a former Chair
of the Australian Energy
Council and former Director
of the Australian Energy
Market Operator.
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
a Fellow of the Chartered
Accountants Australia and
New Zealand and a Fellow
of the Financial Services
Institute of Australasia.
Board of Directors
7
Mick McCormack
Steven Sargent
Nora Scheinkestel
Joan Withers
Independent
Non-executive Director
Independent
Non-executive Director
Independent
Non-executive Director
Independent
Non-executive Director
Tenure 2 years 8 months
Tenure 8 years 3 months
Tenure 1 year 5 months
Tenure 2 years 10 months
Mick McCormack joined the
Board in December 2020.
He is a member of the Audit,
Remuneration, People and
Culture and Safety and
Sustainability committees.
Mick is Chair of Central
Petroleum Limited (since
November 2020) and
Non-executive Director
of Austal Limited (since
September 2020). He is
also Chair of the Australian
Brandenburg Orchestra
Foundation and a Director of
the Clontarf Foundation.
Mick was previously
Managing Director and CEO
of APA Group (2004-2019)
and has more than 37 years
of experience in the energy
and infrastructure sectors,
including gas-fired and
renewable energy power
generation, gas processing,
LNG and underground
storage. Prior to joining APA
in 2000, Mick held various
senior management roles
with AGL Energy.
Mick holds a Masters
of Business Administration
from the University of
Queensland, a Graduate
Diploma of Engineering
from Monash University,
and a Bachelor of Applied
Science from the University
of Queensland.
Steven Sargent joined the
Board in May 2015. He is
Chair of the Origin Energy
Foundation, Chair of the
Remuneration, People and
Culture Committee and a
member of the Nomination,
Risk, and Safety and
Sustainability committees.
Steven’s executive career
included 22 years at General
Electric, where he gained
extensive multi-industry,
international experience
leading businesses in
industries including energy,
healthcare and financial
services across the USA,
Europe and Asia Pacific.
Steven has been a
Non-executive Director
of infection prevention
company Nanosonics
Limited since July 2016
and was appointed Chair
in 2022. He is also
a Non-executive Director
of Ramsay Healthcare
Limited (since December
2021). Steven’s unlisted
board activities include
Non-executive Director
of The Great Barrier
Reef Foundation.
Steven was previously
Chair of OFX Group
Limited (2016-2022), and
Non-executive Director of
Veda Group Limited.
Steven holds a Bachelor of
Business from Charles Sturt
University and is a Fellow
with the Australian Institute
of Company Directors.
Nora Scheinkestel joined
the Board in March 2022.
She is Chair of the Audit
Committee and a member
of the Nomination and
Risk committees.
Joan Withers joined the
Board in October 2020.
She is Chair of the
Risk Committee and a
member of the Audit and
Nomination committees.
Joan has spent over
25 years working in the
media industry holding CEO
positions at both Fairfax
NZ Ltd and The Radio
Network and she also
has significant corporate
governance experience.
She is currently Chair of The
Warehouse Group Ltd (since
2016), Director of ANZ Bank
NZ Ltd (since July 2013) and
Sky Network TV Ltd (since
2019). She has previously
held Chair positions
at Auckland International
Airport (1997 – 2013),
Mercury NZ Ltd (2009 –
2019) and TVNZ (2015 –
2017). She has also held
directorships on the boards
of some of New Zealand’s
largest companies including
Meridian Energy Ltd and
Tourism Holdings Ltd. Prior
to her appointment as CEO
of Fairfax NZ Ltd, Joan
was a Director on the
Australian board of John
Fairfax Holdings Ltd.
Joan holds a Masters
Degree in Business
Administration from The
University of Auckland.
Nora is an experienced
company director with
almost 30 years experience
as a non-executive chair
and director of companies
in a wide range of
industries including public,
government and private
sectors. She has a long
track record in highly
regulated sectors such as
infrastructure and financial
services and has served
as chair and director of
numerous regulated utilities
in the electricity, gas and
water sectors.
Nora is currently a Non-
executive Director of
Brambles Limited (since
2020) and Westpac
Banking Corporation
(since 2021). Previous
directorships of publicly
listed companies include
Telstra Corporation Limited
(2010 – 2022), the
Atlas Arteria group (2014
– 2020), which she
chaired, Ausnet Services
Ltd (2016 – 2022), Orica
Limited, Newcrest Limited,
Pacific Brands Limited and
Stockland Group.
Nora holds a Bachelor
of Laws (Honours) First
Class and a Doctor
of Philosophy from the
University of Melbourne.
8
Annual Report 2023
Executive
Leadership Team
Jon Briskin
Greg Jarvis
Kate Jordan
Tony Lucas
James Magill
Executive General
Manager, Energy Supply
and Operations
Greg Jarvis joined Origin in
2002 as Electricity Trading
Manager and was appointed
Executive General Manager,
Energy Supply & Operations
in December 2016.
Greg is responsible
for Wholesale, Trading,
Generation, HSE and LPG.
Greg has over 20 years’
experience in the financial
and energy markets.
Executive General
Manager, Retail
Jon Briskin joined Origin in
2010 and was appointed
Executive General Manager,
Retail in December 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 and
prior to Origin worked as a
management consultant.
General Counsel and
Executive General
Manager, Company
Secretariat, Risk
and Governance
Kate Jordan joined Origin
in March 2020 as
General Counsel and
Executive General Manager,
Company Secretariat, Risk
and Governance.
Kate leads the legal,
company secretariat, risk,
internal audit and energy
markets compliance teams.
Prior to joining Origin,
Kate was Deputy Chief
Executive Partner at Clayton
Utz, with responsibility for
people and development.
Kate has over 20 years’ legal
experience across a range of
corporate transactions.
Executive General
Manager, Future Energy
and Technology
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 Future
Energy, Strategy and
Technology, ensuring that
Origin is well positioned
to lead the transition into
a low-carbon, technology-
enabled world.
Tony began his career
in the banking industry
before moving into the
energy sector.
Executive General
Manager, Origin Zero
James Magill joined Origin
in March 2022 and leads
the newly formed business
unit, Origin Zero. Origin Zero
provides large businesses
with a range of energy and
decarbonisation services as
well as a suite of e-mobility
solutions for work, home
and on the road.
Prior to joining Origin,
James held leadership
roles at Centrica, AGL
and Genesis Energy in
retail, technology, M&A
and strategy.
Executive Leadership Team
9
Sharon Ridgway
Samantha Stevens
Andrew Thornton
Lawrie Tremaine
Executive General
Manager, People
and Culture
Sharon Ridgway joined
Origin in 2009 and
has been responsible for
People and Culture since
December 2016.
Sharon’s team provide
strategic support to the
business in key areas such
as engagement, diversity,
talent management and
culture change.
Prior to Origin, Sharon
developed a wide range
of experience across
operational and human
resources roles whilst
working in Dixons, a large
European electrical retailer.
Executive
General Manager,
Corporate Affairs
Samantha Stevens joined
Origin in March 2018 as
Executive General Manager,
Corporate Affairs. Samantha
is responsible for Origin’s
external affairs, government
and public policy and
employee communication
functions and the Origin
Energy Foundation.
Samantha has more than
25 years’ experience
in corporate affairs,
mainly in the resources,
industrials and financial
services sectors.
Prior to joining Origin,
Samantha headed up
Corporate Affairs for the
global mining services
company, Orica, and
previously led the global
media function and all
Corporate Affairs M&A
activity at global mining
house, BHP, along with
senior external affairs
positions at two of
Australia’s largest banks.
Executive General
Manager, Integrated Gas
Andrew joined Origin in
2012 and was appointed as
Executive General Manager
– Integrated Gas in
November 2021.
Andrew is responsible
for Australia Pacific
LNG’s upstream operations
and gas marketing, and
business development and
investment activity in
renewable fuels and carbon.
Prior to joining Origin,
Andrew held private equity
and investment banking
roles including as an
Executive Director in
the Principal Investment
Area of Goldman Sachs,
JB Were and a
member of the Mergers,
Acquisitions, Restructuring
and Divestitures group of
Morgan Stanley.
Chief Financial Officer
Lawrie Tremaine joined
Origin in June 2017 and
holds the position of Chief
Financial Officer.
Lawrie leads the teams
responsible for all
finance activities, corporate
strategy, corporate
development, procurement
and investor relations.
Lawrie is one of two
Origin nominated Directors
of Australia Pacific LNG.
Lawrie has over 30 years’
experience in financial
and commercial leadership,
predominantly in the
resource, oil and gas
and minerals processing
industries having previously
worked at Woodside
Petroleum and Alcoa.
10
Annual Report 2023
Originality Bill Group Manager - Asset Investment & Emerging Technology“The energy market is very complex, and the energy transition, even more so. Origin understands the underlying fundamentals and is moving, creating and shaping what is required to support an orderly transition.” Operating and Financial Review
11
Operating and Financial Review
For the full year ended 30 June 2023
This report forms part of the Directors’ Report.
1 Market Context and Outlook
Market context
Over the past 18 months, there has been unprecedented disruption and volatility in global and domestic energy markets. The transition to a low
carbon future is bringing significant change and challenges to energy companies and consumers. Russia’s invasion of Ukraine exacerbated
this volatility by restricting global energy supplies and constraining supply chains resulting in a spike in global energy costs.
These global events combined with local factors including coal plant constraints due to outages and flooding which restricted coal supply to
power stations, contributed to severe wholesale price spikes into the early part of FY2023. The structure of the regulated mass market tariff
regime in Australia meant energy retailers were locked into customer tariffs set at prices substantially below wholesale procurement prices.
As regulated tariffs adjust annually to reflect market prices, retailers suffered a period of depressed margins and significant cash flow volatility,
with some smaller retailers going into administration. Regulators responded by intervening in coal and gas markets seeking to lower electricity
prices for consumers.
Origin’s Energy Markets' first half FY2023 earnings were adversely impacted by higher fuel costs and higher levels of energy price volatility.
In the second half of FY2023, Energy Markets earnings began to recover as wholesale prices declined from their peak as coal deliveries
recovered and coal costs declined following the government’s introduction of the coal price cap. During FY2023 mass market tariffs did not
fully recover the wholesale cost of energy. Origin expects tariffs to more closely reflect wholesale prices in the future.
At APLNG, higher global oil prices resulted in record revenue during the period.
Our assets performed well during this period and our focus was to continue to reliably meet the energy needs of our domestic and
offshore customers.
The Australian economy experienced significant inflation during FY2023. Households faced higher interest rates and higher prices, including
energy costs. Origin recognises the financial pressure some of our customers are experiencing and provided around $30 million in bill relief
and pricing support to our most vulnerable customers, including holding prices flat for customers who are on the Power On program. We are
targeting further support for customers in hardship in FY2024.
The energy transition is both a great challenge and opportunity for society. For Australia to successfully transition to a lower carbon energy
system, policy reform is required to both ensure the current emissions-intensive energy system performs reliably for as long as needed, and to
encourage new investment in the cleaner energy infrastructure needed to replace it. As many of the nation’s ageing coal fired power stations
approach the end of their economic and technical lives, significant investment in transmission infrastructure and firming generation is required
to support reliable power supply under all future scenarios. Investors will require both a stable policy environment and adequate financial
returns if they are to invest the significant capital to the build the required infrastructure.
The energy transition presents many opportunities for Origin, and the company is well placed to compete and grow in this environment. Over
the last year we have taken a final investment decision on a major battery as part of our plan to exit coal fired generation, and we have also
expanded and matured our renewable and battery investment opportunities. As more renewable energy enters the Australian energy system
to replace an ageing coal fired fleet, we see more opportunity for our gas peaking generation fleet to supply reliable power to support the
variability in renewable supply. Our early-stage investments in green hydrogen are progressing and being met with strong customer interest
and we believe hydrogen could play a role in the future energy mix, particularly as a substitute for gas in hard to abate sectors.
Consortium proposal update
In March 2023, Origin entered into a binding Scheme Implementation Deed with a consortium of investors to acquire all of the shares of the
company with a consideration mix comprising $5.78 per share and US$2.19 per share (Scheme). Based on an assumed AUD/USD exchange
rate of 0.70, this implies a total consideration of $8.912 per share. The total consideration payable will be reduced by any dividends paid
by Origin prior to implementation of the Scheme, including the interim 16.5 cents per share fully franked dividend paid to shareholders on
24 March 2023 and the 20 cents per share final dividend determined by the Board to be paid 29 September 2023. Any reduction in the
amount payable to shareholders due to the payment of dividends would reduce the Australian dollar component of the total consideration.
A 4.5 cents per share per month ticking fee, accruing on a daily basis, will be added to the total consideration payable per share to shareholders
if implementation of the Scheme is delayed beyond 30 November 2023.
The Scheme is conditional upon the satisfaction of certain conditions, including:
• Origin shareholders approving the Scheme at a meeting of shareholders (Scheme Meeting);
• court and regulatory approvals including the Foreign Investment Review Board (FIRB), the Australian Competition and Consumer
Commission (ACCC), the National Offshore Petroleum Titles Administrator and certain other foreign investment approvals;
•
the issue of an Independent Expert’s Report that concludes that the Scheme is in the best interests of Origin shareholders; and
• customary other conditions, including that no material adverse change occurs prior to implementation.
At this stage, shareholders do not need to take any action and Origin will continue to keep shareholders updated in accordance with its
continuous disclosure obligations.
12
Annual Report 2023
2 Highlights
Our purpose underpins everything we do: Getting energy right for our customers, communities and planet
Getting energy right for our customers
Our customers are at the heart of everything we do. Our focus is on
delivering great customer experiences and striving to provide affordable, more
sustainable and smarter energy solutions. In FY2023, we:
•
successfully completed the migration of all mass-market electricity and gas
customers to our customer service platform, Kraken, licensed through our
partnership with Octopus Energy
• achieved a Customer Happiness Index - new customer interaction
satisfaction metric, measured as the proportion of satisfied customers over
the prior 12 months - score of 65 per cent;
• experienced a decline in our strategic net promoter score reflecting a
general shift in attitudes towards the energy industry in response to cost of
living pressures and higher energy prices;
•
supported residential and small business customers in financial distress due
to flooding and increasing cost-of-living pressures;
• developed new community partnerships to help affected customers and
communities transition out of crisis into recovery;
•
•
supported the domestic east coast gas market through our APLNG business;
launched several new e-mobility solutions, and had more than 400 electric
vehicles under management at June 2023; and
• grew our GreenPower electricity sales volumes by nine per cent to 533
GWh, driven by growth in large business customers.
Customers
Volume of GreenPower sales (GWh)
489489
533533
FY22
FY23
65%
Customer Happiness Index
Getting energy right for our communities
We aim to work responsibly and respectfully with our local communities
and identify opportunities for Origin and our employees to make a
positive difference.
Communities
We spent $421 million directly and indirectly with regional suppliers, or 20 per
cent of our total spend, up from $318 million in FY2022.
Indigenous supplier spend,
direct and indirect spend ($m)
Our new Stretch Reconciliation Action Plan (Stretch RAP) includes a
commitment to increase the participation of Aboriginal and Torres Strait
Islander businesses in Origin’s supply chain. In FY2023, our spend with
Indigenous suppliers was up $7 million to $24 million.
Through grants, 7,000 hours of employee volunteering, and our workplace
giving program, the Origin Energy Foundation contributed over $2.1 million
to the community in FY2023. The Foundation's volunteering program was
awarded gold in the Best Pro Bono/Workplace Volunteering category of the
2022 Australian Workplace Giving Awards.
During FY2023 the first round of applications commenced for the $5 million
Eraring community fund we established in 2022.
2424
1717
FY22
FY23
>$2.1M
Contributed to the community
by the Origin Energy Foundation
Operating and Financial Review
13
Planet
Greenhouse gas emissions
(equity basis, mt CO2-e)
14.214.2
14.814.8
FY22
FY23
Scope 1
Scope 2
9 mt
cumulative reduction
Scope 1 CO2-e equity emissions
between FY2021 and FY2023
Getting energy right for the planet
This year we published our first Climate Transition Action Plan (CTAP) which
outlined our ambition to lead the energy transition through cleaner energy and
customer solutions. The CTAP detailed our updated targets across Scope 1,
2 and 3 emissions to accelerate emissions reduction across our business and
included our long-term ambition to achieve net zero Scope 1, 2 and 3 emissions
by 2050.
Our CTAP was put to a non-binding shareholder advisory vote at our Annual
General Meeting in October 2022. We received strong shareholder support,
with 94.5 per cent of votes cast in favour of the CTAP.
During FY2023,
• we achieved our short-term equity emissions target, with cumulative
reduction of 9 mt CO2-e between FY2021 and FY2023, against our
FY2017 baseline;
•
total Scope 1 and 2 equity emissions increased by four per cent in FY2023,
as improved coal supply enabled increased generation output from Eraring
to support the needs of the market;
• a final investment decision was taken on the 460 MW first stage of a battery
at Eraring;
• we acquired a property in the New England REZ for potential wind
development, and established a joint venture for Gippsland offshore
wind opportunities;
• a Front-End Engineering Design decision was made for the Hunter Valley
Hydrogen Hub, and we participated in a hydrogen-powered bus trial on the
NSW Central Coast; and
• our virtual power plant (VPP) grew to 815 MW across more than 276,000
connected services, up from 258 MW at the end of FY2022.
People
Our people are one of our greatest strengths, and having a diverse and inclusive
workplace is key to the success of our business. During FY2023, we:
Our people
Total Recordable Injury
Frequency Rate (TRIFR)
4.04.0
3.83.8
FY22
FY23
46%
Female Senior Leaders, up from
40.8% in FY2022
•
improved safety performance with TRIFR declining from 4.0 in FY2022
to 3.8;
• experienced an increase in Tier 1 and Tier 2 process safety incidents to 7, up
from 2 in FY2022;
• maintained 40% female representation in the three of our four
leadership cohorts;
•
ranked 73 globally for gender equality in the Equileap Gender Equality
Global Report & Ranking;
• achieved an employee engagement score of 7.7 (out of 10), which is above
the sector average;
•
launched our latest Stretch Reconciliation Action Plan; and
• expanded our inclusion strategy to include three new pillars - life
stages, cultural diversity and accessibility - in addition to gender equity,
reconciliation and our LGBTQ colleagues.
In 2021, Origin became a signatory to 40:40 Vision, an investor-led initiative
targeting gender balance in executive leadership by 2030. This year we
achieved 46% of women in senior leadership roles1.
We continue to focus on supporting the mental health and wellbeing of our
people and to develop a range of resources and programs through our online
Mental Health and Wellbeing Hub.
1 Three reporting levels below the CEO, including roles with base salaries exceeding approximately $200,000 per annum
14
Annual Report 2023
Financial performance
Statutory Profit ($m)
Underlying Profit ($m)
Underlying EBITDA
1,055
1,055
747747
3,107
3,107
407407
2,1142,114
(1,429)
(1,429)
FY22
FY23
FY22
FY23
FY22
FY23
Adjusted Free Cash Flow
(before major growth) ($m)
Adjusted Net Debt ($m)
Final Dividend
2,838
2,838
2,877
2,877
1,062
1,062
965965
FY22
FY23
Jun-22
Jun-23
Lease liabilities
20cps
100% franked
36.5cps total FY2023 dividend
(66% of FY2023 Adjusted Free Cash Flow)
FY2023 Underlying Profit was higher at $747 million with higher earnings from Energy Markets, Octopus Energy and Integrated Gas. Earnings
from Integrated Gas increased despite the sale of 10 per cent of APLNG during the prior period.
Energy Markets’ Underlying EBITDA increased by $637 million to $1,038 million. This reflected the strong performance of our portfolio as
the extreme market conditions of FY2022 eased, and the higher wholesale cost of energy flowing into customer tariffs. Our retail business
performed strongly - we increased customer numbers, and recorded significant growth in our Community Energy Services business. All mass
market electricity and natural gas customers have been successfully migrated to the Kraken platform. We continue to focus on growing our
portfolio of renewables and our cleaner energy projects, commencing early works on the first stage of the Eraring battery and progressing
other renewable and storage projects, and growing our Origin Zero business.
APLNG continued to deliver strong cash flow in challenging operating conditions with the three year La Niña weather cycle restricting access
to well sites during H1 FY2023, affecting production. APLNG benefited from a rebound in production in 2H FY2023 following drier weather
and high global oil and LNG prices.
Origin's share of Octopus Energy EBITDA increased to $240 million, reflecting an increase in customer accounts and the lag in reset of
regulated tariffs in the UK retail business. The result includes a six month contribution from Bulb Energy earnings following the December
2022 acquisition, which added ~2.5 million customer accounts. See to Review of segment operations (see section 6) for further details.
Adjusted Free Cash Flow was down $97 million to $965 million, driven by record cash distributions from APLNG of $1,783 million and lower
cash flow from Energy Markets, with higher earnings more than offset by a higher working capital movement of $771 million reflecting a
moderating working capital position following the extreme wholesale price environment of late FY2022. Origin continues to invest in growth
initiatives, with $253 million spent on topping up our investment in Octopus Energy, implementation of the Kraken platform, and the Eraring
battery project.
The Board has determined to pay a 20.0 cent per share dividend, franked to 100% bringing total distributions for the year to 36.5 cents per
share, fully franked.
Operating and Financial Review
15
Energy Markets performance2
Underlying EBITDA
Operating cash flow
$1,038M
$47M
Up $637M vs FY2022
Down $777M vs FY2022
6.7%
Underlying ROCE3
Up 7.0% vs FY2022
Cost to serve
Customer accounts
Retail X
$576M
4,525k
100%
Up 89M vs FY2022
Up 66k vs June 2022
Customer accounts migrated to
the Kraken platform
Energy Markets Underlying EBITDA up $637 million to $1,038 million on strong improvement in both the electricity and gas businesses'
underlying performance, reflecting the strength of our flexible electricity generation and gas supply portfolios in a less volatile environment.
This resulted in a ROCE3 of 6.7 per cent in the period, up from negative 0.3 per cent in the prior year
Electricity Gross Profit increased by $366 million to $574 million, driven by higher wholesale prices flowing into business and retail customer
tariffs, reflecting the recovery of higher costs associated with the current and prior periods. Fuel costs increased primarily due to higher coal
procurement costs with greater volumes purchased at higher market prices during the first half of FY2023. Across the year the coal price
impact was lessened by the introduction of the coal price cap implemented in December 2022.
Natural Gas Gross Profit increased by $379 million to $943 million, driven by repricing of business and retail customer tariffs reflecting higher
wholesale costs, partly offset by higher net JKM and oil supply costs and higher procurement costs. Portfolio strength is underpinned by fixed
price4 supply contracts and transport flexibility. The JKM supply position is largely hedged through to the end of FY2024, and there is one
gas supply counterparty that is subject to contract price review commencing July 2023.
Electricity and Natural Gas cost to serve up $89 million, primarily driven by an increase in bad and doubtful debt expense due to higher bill
sizes, cost of living pressures and slower aged debt collection.
Under the current challenging market conditions with high inflation and cost of living pressure, we are committed to relieving the pricing
impacts on customers where possible. We provided around $30 million in bill relief and pricing support to our most vulnerable customers,
including holding prices flat for customers who are on the Power On program.
Customer accounts increased by 66,000 of which our Broadband business grew by 35,000 to 96,000 customer accounts and won the
2023 Canstar Blue Best-Rated Bundled Energy and Telecommunications Provider award. Origin Loop (our in house VPP) more than tripled
connected assets to 815 MW during the period.
Our Origin Zero business is gaining momentum with new products, services and commercial models aimed at accelerating the
decarbonisation journey for large business customers. There is now more than 200 MW of flexible large business demand enrolled in
our VPP, more than 400 EVs under management through a range of E-mobility solutions and the number of large customers engaging in
non-commodity products doubled to around 4 per cent during the year.
Our generation fleet delivered exceptional performance, with over 98 per cent start reliability across our peaking fleet, and a forced outage
at Eraring of less than 5 per cent.
We made a final investment decision on the first phase of the Eraring battery, and we also acquired the 60 MW Yanco Solar Farm development
in NSW and a 5 per cent equity interest in Newcastle based clean-tech company Allegro Energy, and entered an agreement to acquire around
7,500 hectare Warrane farm in the New England Renewable Energy Zone (REZ) as a prospective greenfield wind development opportunity.
2 Energy Markets segment now excludes Octopus Energy.
3
12-month average. Return on Capital Employed (ROCE) has been adjusted to exclude the impact of FY2022 $2.2 billion impairment of goodwill.
4 Subject to CPI adjustments.
16
Annual Report 2023
Integrated Gas performance
Underlying EBITDA
Cash distributions
from APLNG
$1,919M
$1,783M
Up $82m or 4% vs FY2022
Underlying EBIT up $110m
Up $188m or 12% vs FY2022
20.2%
Underlying ROCE
Up from 15.2%
in FY2022
APLNG
production (100%)
674PJ
Average realised LNG price
Capex and opex5/GJ
US$14.2/
MMBtu
$3.9/GJ
Down 3% vs FY2022
Up 14% vs FY2022
23% increase vs FY2022
Up 22% in A$ terms at $20.0/GJ
Integrated Gas underlying EBITDA was up $82 million to $1,919 million in comparison to FY20226, primarily due to higher global
commodity prices.
APLNG’s cash distributions to Origin amounted to $1,783 million. Origin's share of APLNG underlying EBITDA increased by $355 million,
excluding the impact of the 10 per cent ownership change in December 2021. This was partly offset by Origin's hedging losses associated
with the higher commodity prices, increasing from $189 million in FY2022 to $235 million in FY2023.
APLNG production volumes decreased three per cent compared to the FY2022 reflecting the cumulative impact of the three consecutive
years of La Niña weather into the first half of FY2023. Production rebounded strongly in the second half of FY2023, with drier weather allowing
an increase in well workover activity and wells online. The Talinga Condabri North Pipeline ramped to full capacity in December 2022 and the
Orana South Loop Line completed in April 2023, enabling field production uplift and greater operational flexibility.
APLNG maintained a significant role as a key contributor to the east coast market. The average realised domestic gas price increased by 37
per cent to $8.54/GJ, primarily reflecting higher market linked short term contract prices. Average prices offered to domestic customers
remained below those paid by international customers.
Capital and operating expenditure5 increased by $0.7/GJ to $3.90/GJ reflecting both higher expenditure and lower production. Drier
weather saw an increase in workover activity focused on reducing La Niña weather inventory backlog. Additionally, the commencement of
planned multi-year upstream gas processing maintenance program and increased operated and non-operated well development activity led
to higher costs.
APLNG 2P (proven plus probable) reserves increased 175 PJ before production, representing a reserves replacement ratio of 26 per cent,
primarily driven by non-operated 2P reserve replacement during FY2023. After production, 2P reserves decreased by 499 PJ.7
Other highlights across Integrated Gas during the period included:
• Beetaloo Basin – In November 2022 Origin completed the sale of its interest in the Northern Territory’s Beetaloo Basin and received upfront
consideration of $60 million and a royalty agreement covering future production.
• Canning Basin – An agreement has been executed with Buru Energy Limited to exit Origin’s interest in the Canning Basin and the
transaction is now expected to complete in the first half of FY2024, awaiting regulatory approval.
• Cooper-Eromanga Basin – Origin executed an agreement to transfer its 75 per cent interest and operatorship of five permits back to
Bridgeport, and has surrendered the remaining twelve permits in the Cooper-Eromanga Basin.
• Hunter Valley Hydrogen Hub - Origin executed a $70 million grant Funding Agreement with the Commonwealth Government for the
implementation of the Hunter Valley Hydrogen Hub project.
5 Opex excludes purchases, one-off write off and reflects royalties at the breakeven oil price.
6 Origin's interest is 27.5 per cent. Prior to 8 December 2021 it was 37.5 per cent.
7 Refer to Section 8 for disclosure relating to Tri-Star litigation associated with these CSG interests.
Operating and Financial Review
17
3 Our strategy
Our strategy
During the year we made significant progress towards executing our strategy:
• Progressed the transformation of our retail business with the migration of all of our mass market electricity and natural gas customer
accounts to the Kraken platform
• Took a final investment decision on the first stage of our Eraring battery project, committing to around $600 million of investment over the
next two years. This first stage involves the construction of a 460 MW battery storage system with a dispatch duration of two hours
• Grew our virtual power plant to 815 MW across 276,000 connected assets
• Entered into joint venture arrangements with leading UK based renewable developer RES which applied for offshore wind feasibility
licenses representing 3 GW of offshore development projects off the coast of Gippsland, Victoria
• Progressed FEED for a Hunter Valley Hydrogen Hub, a green hydrogen project with a final investment decision targeted for FY2024
• Announced intention to exit our upstream exploration portfolio. We completed the sale of Beetaloo and plans to exit from the Canning and
Cooper-Eromanga Basin are well advanced
• Grew our broadband business by 35,000 accounts
• Grew our Electric Vehicle business to more than 400 vehicles under management
Our business drivers
As a leading integrated energy company, Origin’s earnings drivers are spread across the energy value chain.
Our electricity margin is driven by outperforming the market cost of energy through our supply portfolio (including our power stations and
supply contracts). Our portfolio of coal and gas generation plants, renewable energy Power Purchase Agreements (PPAs) and market supply
and hedge contracts gives us with the flexibility to manage energy procurement costs. As we sell more energy than we generate, we have the
ability to build or contract renewable energy and storage.
In natural gas, Origin’s wholesale margin is driven by a strong gas supply portfolio, with pipeline and storage flexibility enabling us to direct
gas to where it is most needed. A large portion of supply is under long-term contracts that are either fixed-price8 or linked to oil and LNG spot
prices. Some of our contracts reprice to market over time.
Profitability in energy retailing is driven by managing retail margins through matching retail tariffs with energy procurement costs combined
with an efficient, low cost operation, innovative products, and the ability to attract and retain customers through providing a superior customer
experience. We implemented the Kraken retail system to further lower our cost base and enhance our customer experiences.
We own 20 per cent of Octopus Energy9, a UK-based fast-growing energy technology company. Octopus owns the Kraken technology
platform which has significant global licensing potential. Octopus is the second largest energy retailer by customer accounts in the UK.
Origin is the upstream operator and has a 27.5 per cent interest in APLNG, which is Australia’s largest CSG to LNG project. It is a significant
supplier to both domestic gas and international LNG markets, with the majority of volume contracted until around 2035. Profitability is
underpinned by maintaining a low capital and operating cost base relative to revenues, much of which are linked to oil prices. In FY2023,
around 77 per cent of APLNG gas volume was sold as LNG (of which 95 per cent was under long-term oil-linked contracts).
8 Subject to CPI adjustments.
9 Following CPPIB' investment in Octopus Energy during December 2021, Origin accounted for its interest in Octopus Energy at 18.7 per cent from 1 December 2021 (previously
20 per cent), with subsequent investment of $173 million during FY2023 to maintain its 20 per cent interest from August 2022.
19 March 20222022 Strategy PresentationOur strategic pillarsOur ambitionENABLEcustomers to decarboniseGROWour portfolio of renewables and cleaner energy REDUCE emissions of our existing operationsUnrivalled customer solutionsAccelerate renewable and cleaner energyDeliver reliable energy through the transitionOur decarbonisation prioritiesTo lead the energy transition through cleaner energy and customer solutionsOur purposeGetting energy right for our customers communities and planet 18
Annual Report 2023
Our strategic pillars
We have three strategic pillars:
Unrivalled customer solutions
We have a leading retail business with 4.5 million customer accounts, delivering a superior customer
experience at low cost and with churn lower than our Tier 1 competitors.
Our strategy to increase the value of our retail business and enhance customer experience involves:
• adopting a new operating model and migrating customers to the world class Kraken platform,
delivering a superior customer experience, lower costs, a leaner operation and lower churn. We are
targeting a $200 - 250 million cost reduction from FY2018 baseline by FY2025. As at FY2023 we
have realised ~$150 million in cost savings, excluding the impact of rising bad and doubtful expenses
•
increasing the breadth of products offered including broadband, solar, batteries, connected solutions
and E-mobility
• using our strong data analytics capability to enable personalised and segmented offers and
experiences for customers
For our larger business customers, we are working to simplify the energy transition, providing tailored
energy and decarbonisation solutions through Origin Zero. These solutions can include elements such as
renewable energy, demand response, solar, batteries, energy management and EV fleet management.
Through our Octopus Energy investment, we have access to an industry-leading retail platform to deliver
the lowest cost and market-leading customer happiness, as well as exposure to Octopus’s global growth.
Accelerate renewables and cleaner energy
We will invest in cleaner energy positions to support our customers’ demand for energy and
decarbonisation solutions. We will increase our renewable energy supply through new investments,
partnerships, and projects, targeting multi-GW renewable growth opportunities through a staged and
disciplined investment and/or contracting approach.
In addition to our significant thermal peaking generation portfolio, we will invest in growing our 'firming
capacity' such as batteries and our VPP to support the growth of renewables during periods of peak
demand and lower renewable generation.
We have developed a proprietary VPP platform to connect and use artificial intelligence to orchestrate
distributed assets. We are growing our battery storage portfolio and took a final investment decision on
the first stage of our battery project at Eraring.
We are investigating opportunities to invest in cleaner fuels for harder-to-abate sectors, including
domestic and export green hydrogen projects, targeting domestic hydrogen supply from the mid 2020s
and export supply from the late 2020s.
Deliver reliable energy through the transition
We have a valuable portfolio of assets that play a critical role in providing customers with reliable and
affordable energy as we transition to a low-carbon future. We believe gas will remain a key part of the
energy mix during the transition.
Through our 27.5 per cent interest in APLNG, we continue to be a low cost supplier of gas, for domestic
and export customers.
Our Eraring coal fired power station continues to support the reliability and security of the electricity
market. We have announced the potential early retirement of Eraring as our portfolio and the market
transitions to cleaner sources of energy and new sources of supply enter the market.
Our existing thermal peaking generation will continue to play a critical role in providing capacity and
firming as coal generators such as Eraring retire and are replaced by intermittent renewables.
We have a leading domestic wholesale gas position with the ability to transport gas across the east coast
to support our gas fired generation fleet as well as residential, business and wholesale customers.
LPG Operating and Financial Review
19
4 Guidance
The following guidance is based on current market conditions and the regulatory environment. Ongoing volatility in market conditions is likely
and may adversely impact operations.
Energy Markets
FY2024 EBITDA is expected to be $1,300 - $1,700 million, excluding Octopus Energy. Electricity gross profit is expected to increase due
to tariffs repricing reflecting higher energy procurement costs and capacity prices in recent periods, improving the contribution from Eraring
and our thermal peaking fleet. Coal price caps are also expected to continue to 30 June 2024, reducing fuel costs to Eraring. Gas gross profit
is expected to moderate as energy procurement costs increase from supply contracts repricing and higher JKM linked supply costs.
Energy Markets’ cash flow is expected to improve compared to FY2023, driven by higher earnings and the first refund of LGC shortfall charge,
partially offset by higher working capital requirements driven by higher customer tariffs.
We anticipate a reduction in electricity gross profit in FY2025 as customer tariffs decline in line with wholesale costs following government
intervention in late 2022. We expect to deliver on our commitment of $200 - $250 million cost reduction by FY2025, from an
FY2018 baseline.
Octopus Energy
Octopus is in a rapid growth phase and continues to invest in international growth, technology platform developments and services
offerings. Origin's share of Octopus Energy EBITDA is expected to be lower with a wide range of possible outcomes reflecting stronger retail
competition. FY2024 will include a full year contribution from Bulb.
Integrated Gas
We estimate higher production in FY2024 of 680 - 710 PJ (APLNG 100 per cent), reflecting La Niña weather production recovery and
continued cyclical upstream gas processing maintenance program.
We estimate higher total APLNG capex and opex of $3.9 - $4.4/GJ, reflecting:
• higher power costs;
•
increased workover and base production optimisation programs; and
• higher non-operated development activity; partly offset by
•
lower cyclical maintenance.
Unit capex and opex over FY2025 and FY2026 is expected to be lower at $3.6 - $4.1/GJ following delivery of production optimisation and
cost of supply initiatives, completion of upstream cyclical maintenance program and expected lower power costs10.
At 7 August 2023, Origin estimates that approximately 41 per cent of APLNG’s FY2024 JCC oil price exposure has been priced at US$84/bbl
before hedging, based on the long-term LNG contract lags, and 23 per cent of APLNG's FY2024 JKM exposure has been priced at
US$11/MMBtu.
Based on forward market prices, we estimate losses in FY2024 on oil, gas and fx hedging of $27 million. We estimate a gain on LNG trading
in FY2024 of $40 - $60 million, and across both FY2025 and FY2026, a gain of $450 - $650 million. This outlook remains subject to market
prices on unhedged volumes, operational performance and delivery risk of physical cargoes, and shipping and regasification costs. See
Section 6.3.2 for details of Integrated Gas oil hedging and LNG trading.
10 Based on wholesale electricity forward curves as at 7 August 2023
20
Annual Report 2023
5 Financial update
5.1 Reconciliation from Statutory to Underlying Profit
Statutory Profit/(Loss) - total operations
Items Excluded from Underlying Profit (post-tax)
Increase/(decrease) in fair value and foreign exchange movements
Oil and gas
Electricity
FX and interest rate
Other financial instruments
FX gain/(loss) on foreign-denominated financing
Impairment, disposals, business restructuring and other
Total Items Excluded from Underlying Profit (post-tax)
Underlying Profit
FY23
($m)
1,055
74
261
(79)
-
(80)
(28)
234
308
747
FY22
($m)
(1,429)
791
92
713
3
59
(76)
(2,627)
(1,836)
407
Change
($m)
2,484
(717)
169
(792)
(3)
(139)
48
2,861
2,144
340
Change
(%)
n/a
n/a
(91)
184
n/a
(100)
n/a
(63)
n/a
n/a
84
Fair value and foreign exchange movements reflect non-cash or non-recurring fair value gains/(losses) associated with commodity hedging,
interest rate swaps and other financial instruments. These amounts are excluded from Underlying Profit to remove the volatility caused by
timing mismatches in valuing financial instruments and the underlying transactions they relate to.
• Oil and gas derivatives manage exposure to fluctuations in the underlying commodity price to which Origin is exposed through its gas
portfolio and indirectly through Origin’s investment in APLNG. See Section 6.3.2 for details of Origin’s APLNG-related oil hedging.
• Electricity derivatives, including swaps, options and forward purchase contracts, are used to manage fluctuations in wholesale electricity
and environmental certificate prices in respect of electricity purchased to meet customer demand.
• Foreign exchange and interest rate derivatives manage exposures associated with the debt portfolio. A portion of debt is euro-
denominated and cross-currency interest rate swaps hedge that debt to AUD.
• Other financial assets/liabilities reflects investments held by Origin.
• Foreign exchange on foreign-denominated financing reflects currency fluctuations on unhedged USD debt. Debt is maintained in USD to
offset the USD-denominated investment in APLNG, which delivers USD cash distributions.
Impairment, disposals, business restructuring and other are either non-cash or non-recurring items and are excluded from Underlying Profit
to better reflect the underlying performance of the business. They include the following:
Business restructuring
Disposals
Other
Deferred tax liability utilisation - APLNG
LGC net shortfall charge
Provision for legal matters
Onerous contracts - LNG
Impairment, disposals, business restructuring and other
FY23
($m)
(88)
(13)
335
180
(77)
(13)
245
234
• $88 million business restructuring and transformation costs including the Kraken implementation project ($55 million) and costs relating
to the proposed acquisition of all the issued shares in Origin ($17 million) by the Consortium;
• $13 million disposals, reflecting the post-tax disposal of Origin's interests in the Beetaloo Basin ($75 million), partly offset by the release of
the foreign currency translation reserve on wind-up of legacy international development entities ($62 million);
• $180 million non-cash utilisation of deferred tax liability for dividends paid out of APLNG's retained earnings. Refer to Appendix 1 for
further details;
• $77 million net cost relating to a decision to defer the surrender of a portion of Origin’s calendar year 2022 large-scale generation
certificates. The costs associated with this deferral are expected to be recovered in future periods. Refer to Appendix 2 for further
details; and
• $245 million non-cash benefit relating to revaluation of the LNG onerous contract provisions, reflecting a reduction in the provision as the
contract unwinds. This was partly offset by unfavourable movements in near term JKM relative to Henry Hub pricing. The realised position
for the period associated with these contracts is recognised in Underlying Profit.
The nature of Items Excluded from Underlying Profit set out in the above table have been reviewed by our auditor for consistency with the
description in Note A1 of the Financial Statements.
Operating and Financial Review
5.2 Underlying Profit
Energy Markets
Share of Octopus Energy
Integrated Gas - Share of APLNG
Integrated Gas - Other
Corporate
Underlying EBITDA
Underlying depreciation and amortisation (D&A)
Underlying share of ITDA of equity accounted investees
Underlying EBIT
Underlying interest income - MRCPS
Underlying interest income - Other
Underlying interest expense
Underlying profit before income tax and non-controlling interests
Underlying income tax expense
Non-controlling interests’ share of Underlying Profit
Underlying Profit
Underlying EPS
Underlying ROCE - rolling 12 month
21
Change
(%)
159
n/a
5
10
2
47
17
2
169
(100)
292
(1)
220
n/a
(25)
84
87
7.1%
FY23
($m)
1,038
240
2,246
(327)
(90)
3,107
(527)
(1,163)
1,417
-
51
(185)
1,283
(533)
(3)
747
FY22
($m)
401
(36)
2,134
(297)
(88)
2,114
(449)
(1,138)
527
48
13
(187)
401
10
(4)
407
Change
($m)
637
276
112
(30)
(2)
993
(78)
(25)
890
(48)
38
2
882
(543)
1
340
43.4cps
14.2%
23.2cps
7.1%
20.2cps
Reflecting the growing size of the Octopus Energy business, the reporting has been split from the Energy Markets segment into a new
Octopus Energy segment. See Sections 6.1 , 6.2 and 6.3 respectively for Energy Markets, Share of Octopus Energy and Integrated
Gas analysis.
Corporate costs increased by $2 million, primarily reflecting higher employee costs, and IT and People and Culture projects. These were partly
offset by non-repeat of ERP implementation costs and lower foreign exchange loss.
Underlying D&A increased by $78 million, driven primarily by accelerated depreciation following the reassessment of Eraring's useful life.
Underlying share of ITDA increased $25 million, driven by increased ITDA from Origin’s equity share of Octopus Energy ($50 million), offset
by lower ITDA from APLNG ($28 million), comprising lower net interest expense ($53 million) and depreciation and amortisation ($39 million),
partly offset by higher tax expense ($64 million).
Underlying MRCPS interest income decreased $48 million with the principal balance fully repaid during the prior year following buy-backs
by APLNG.
Underlying net interest expense decreased $40 million, reflecting higher interest income due to a higher cash balance and interest income
on futures collateral positions.
Underlying income tax expense increased $543 million, reflecting increased earnings from Energy Markets and unfranked dividends
from APLNG.
22
Annual Report 2023
5.3 Cash flows
Operating cash flow
Underlying EBITDA
Underlying equity accounted share of EBITDA (non-cash)
Other non-cash items in Underlying EBITDA
Underlying EBITDA adjusted for non cash items
Change in working capital
Futures exchange collateral
Energy Markets
Integrated Gas - excluding APLNG
Corporate
Other
Tax paid
Cash flow from operating activities
FY23
($m)
3,107
(2,487)
183
803
(1,061)
(290)
(671)
(113)
13
(182)
(193)
(633)
FY22
($m)
2,114
(2,097)
118
135
590
471
68
48
3
(167)
(27)
531
Change
($m)
Change
(%)
993
(390)
65
668
(1,651)
(761)
(739)
(161)
10
(15)
(166)
(1,164)
47
19
55
n/a
n/a
n/a
n/a
n/a
333
9
n/a
n/a
Operating cash flow includes outflows from Integrated Gas hedging activities and the tax associated with increased unfranked dividends
from APLNG, however excludes those dividends received from APLNG. Distributions from APLNG are included in investing activities, and
increased $188 million from FY2022.
Operating cash flow decreased $1,164 million, reflecting:
• Unfavourable change in working capital cash flows ($1,651 million) reflecting an outflow of ($1,061 million) in FY2023, compared with an
inflow of $590 million in the prior period. Current year cash outflow driven by:
– Energy Markets working capital balances increased by $671 million driven by the unwind of higher priced net creditors for wholesale
energy, following the extreme wholesale price environment in FY2022. A build up of the Eraring coal stockpile occurred during H1
FY2023, however the value of inventory has moderated in H2 FY2023 due to lower coal prices, following the implementation of the
coal cap in December 2022
– Integrated Gas working capital balances increased by $113 million during the period primarily reflecting the cash settlement timing of
LNG trading activities;
– Futures collateral outflow of $290 million reflecting cash collateral paid associated with the mark to market valuation of gas and
electricity hedge contracts
• Other ($182 million), which primarily reflects the cash impact of items excluded from Underlying Profit, primarily restructuring costs
excluded from Underlying Profit and the 2022 LGC shortfall charge (see Appendix 2 for further details)
•
Increased income tax paid ($166 million) reflecting the commencement of unfranked dividends received from APLNG
• Lower earnings from Integrated Gas - Other ($30 million)
• Partially offset by higher earnings from Energy Markets ($637 million)
Underlying equity accounted share of EBITDA (non-cash) reflects share of APLNG ($2,246 million) and share of Octopus Energy
($240 million). Other non-cash expenses include provisions for bad and doubtful debts ($148 million), share-based remuneration ($25 million)
exploration expense write-off ($23 million), partly offset by change in value of derivatives ($21 million).
Operating and Financial Review
23
Investing cash flow
Capital expenditure
Distribution from APLNG
Interest received from other parties
Investments/acquisitions
Disposals
Cash flow from investing activities
FY23
($m)
(475)
1,783
43
(205)
72
1,218
FY22
($m)
(336)
1,595
2
(392)
1,963
2,832
Change
($m)
(139)
188
41
187
(1,891)
(1,614)
Change
(%)
41
12
n/a
(48)
(96)
(57)
FY2023 capital expenditure was $475 million, an increase of $139 million, and was driven by spend at Eraring, continued progress on the
Kraken implementation, the Eraring battery, and other pre-FID renewable and storage projects. Capital expenditure comprises:
• generation maintenance and sustaining capital ($219 million), primarily at Eraring ($147 million) due to costs associated with the Ash Dam
($69 million) and maintenance activities, as well as Darling Downs Power Station capital spares and major outage ($32 million)
• other sustaining capital ($66 million) including LPG ($33 million), and CES ($12 million);
• productivity/growth ($180 million) including deferred and contingent licensing payment to Octopus Energy ($20 million), other Kraken
implementation costs ($33 million), Eraring battery ($27 million) for which Origin reached FID on 460MW stage 1 during the year, early
stage renewable and storage development projects ($29 million), and growth in CES ($17 million) and Origin Zero ($13 million); and
• exploration and appraisal spend ($11 million) primarily related to the appraisal programs in the Beetaloo and Canning Basins.
Cash distributions from APLNG amounted to $1,783 million comprising unfranked dividends, up from $1,595 million in FY2022, which
comprised $433 million in unfranked dividends, $1,112 million of MRCPS buy backs and $50 million in MRCPS interest.
Investments include deferred and contingent consideration for the equity interest in Octopus Energy ($173 million), Climate Asset
Management Nature Based Carbon fund investment ($13 million) and the acquisition of Yanco Solar Farm ($6 million).
Disposals relate primarily to the divestment of Origin's interest in Beetaloo.
Financing cash flow
Net proceeds/(repayment) of debt
Operator cash call movements
AEMO cash deposits
On-market purchase of shares
Settlement of foreign currency contracts
APLNG loan (repayment)/proceeds1
Interest paid
Payment of lease liabilities
Dividends paid
Total cash flow from financing activities
Effect of exchange rate changes on cash
FY23
($m)
(215)
66
290
(4)
(48)
-
(163)
(71)
(576)
(721)
(1)
FY22
($m)
(1,856)
(70)
(290)
(325)
(46)
(51)
(191)
(73)
(314)
(3,216)
1
Change
($m)
Change
(%)
1,641
136
580
321
(2)
51
28
2
(262)
2,495
(2)
(88)
n/a
n/a
(99)
4
(100)
(15)
(3)
83
(78)
n/a
1 APLNG - loan (repayment)/proceeds represents cash generated by APLNG as part of its normal business operations deposited to a project finance debt service reserve
accounts. Upon issuance of a bank guarantee to APLNG by Origin the cash was distributed to Origin by way of a loan.
Operator cash call movements represent the movement in funds held and other balances relating to Origin's role as the upstream operator
of APLNG.
Australian Energy Market Operator (AEMO) cash deposits relate to cash security deposits placed with AEMO to support Origin's energy
purchases from national electricity and gas markets. The obligation is typically satisfied by bank guarantees; however the obligation was
partially met with cash in FY2022, and subsequently refunded to Origin in FY2023
On-market purchase of shares represents the purchase of shares connected with employee share remuneration schemes as well as a share
buy back in FY2022. The employee share plan terminated in March 2023 due to the proposed acquisition of Origin by the Consortium.
Settlement of foreign currency contracts represents the partial closure of contracts executed in prior periods to monetise the value in certain
cross-currency interest rate swap contracts. These foreign currency contracts have now been settled in full.
24
Annual Report 2023
Free Cash Flow
Free Cash Flow represents cash flow available to pay dividends, repay debt, invest in major growth projects or return surplus cash to
shareholders. This is prepared on the basis of equity accounting of APLNG. Specific items may be excluded from Free Cash Flow, to better
represent cashflows from the underlying business.
In FY2023, consistent with previous years, cash payments associated with the Octopus Energy equity investment and Kraken licence
implementation costs ($226 million) , as well as initial spend on the first stage of a large-scale battery at the Eraring Power Station ($27 million)
were considered to be Major Growth and were excluded from FY2023 Free Cash Flow.
Energy Markets
Share of
Octopus Energy
Integrated Gas
- Share
of APLNG
Integrated
Gas - Other
FY23
FY22
2023
2022
FY23
FY22
240
(240)
(36)
2,246
2,134
36
(2,246)
(2,134)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
($m)
Underlying EBITDA
Non-cash items
Change in working capital
Futures exchange collateral
Other
Tax paid
Operating cash flow
1,038
133
(671)
(290)
401
76
68
471
(162)
(192)
-
48
-
824
Capital expenditure
(454)
(261)
Cash distribution from APLNG
-
-
(Acquisitions)/disposals
(29)
(118)
(173)
(268)
Interest received
-
-
-
-
Investing cash flow
(483)
(379)
(173)
(268)
Interest paid
Free Cash Flow
Major growth spend
APLNG proceeds
Futures exchange collateral
Adjusted Free Cash Flow
-
-
-
-
(435)
445
(173)
(268)
80
-
290
(65)
50
-
(471)
24
173
268
-
-
-
-
-
-
FY23
(327)
49
(113)
-
-
-
FY22
(297)
31
48
-
25
-
-
13
-
(20)
(193)
Corporate
Total
FY23
FY22
FY23
FY22
(90)
(88)
3,107
2,114
12
(2,304)
(1,979)
3
-
-
(27)
(771)
(290)
(182)
(193)
119
471
(167)
(27)
531
(391)
(193)
(290)
(100)
(633)
(19)
(69)
(2)
(6)
(475)
(336)
1,783
69
-
1,595
1,957
-
1,833
3,483
-
-
43
41
-
-
2
1,783
1,595
(133)
1,571
43
2
(4)
1,218
2,832
-
-
(163)
(191)
(163)
(191)
1,442
3,290
(412)
(295)
-
-
-
-
(1,957)
-
-
-
-
-
-
-
1,442
1,333
(412)
(295)
422
253
3,172
318
-
(1,957)
290
965
(471)
1,062
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Operating and Financial Review
25
5.4 Capital management
During FY2023, the following capital management initiatives were completed:
• Repaid debt facilities:
– Repaid US$20 million (A$29) Asian Term Loan at a 1.9 per cent effective interest rate; and
– Repaid €150 million ten-year note issued under the Euro Medium Term Note (EMTN) program. The notes had been swapped to
A$186 million at a 6.6 per cent effective interest rate.
Adjusted Net Debt
Movements in Adjusted Net Debt ($m)
633633
(1,783)
(1,783)
576576
(290)
(290)
175175
133133
120120
475475
2,838
2,838
2,877
2,877
30 June 2022 Operating cash
flow
Net cash from
APLNG
Capex
Net acquisitions
/ disposals
Net interest
payments
Dividend
AEMO cash
deposits
FX/Other
30 June 2023
Adjusted Net Debt increased $39 million, reflecting cash inflows from cash distributions from APLNG and the return of cash collateral deposits
from AEMO, and cash outflows including:
• Operating cash flow, a net outflow of $633 million primarily reflecting improved earnings from Energy Markets, which was more than offset
by higher working capital movement associated with the Energy Markets business and $290 million of cash collateral associated with
unfavourable movement in the value of open energy futures hedging contracts
• expenditure associated with the investment in Octopus Energy and Kraken implementation ($226 million), and capital expenditure
associated with the Eraring Ash Dam and Eraring battery
• payment of 33 cps in dividends to shareholders
Origin aims to maintain an Adjusted Net Debt/Adjusted Underlying EBITDA ratio of 2.0 - 3.0x and a gearing11 target of 20 per cent to 30 per
cent. At 30 June 2023, these ratios were 1.2x and 24 per cent respectively.
Our long-term credit profile is Baa2 (stable) from Moody’s.
11 Gearing is Adjusted Net Debt divided by Adjusted Net Debt plus Equity.
26
Annual Report 2023
Debt maturity profile
- excluding lease liabilities (A$bn)
Debt portfolio management
Average term to maturity decreased from 4.4 years at 30 June 2022
to 3.6 years at 30 June 2023. The average interest rate on drawn
debt increased from 4.3 per cent in FY2022 to 5.0 per cent in
FY2023.
As at 30 June 2023, Origin held $0.4 billion12in cash and $2.8 billion
in committed undrawn debt facilities. This liquidity position of
$3.2 billion is held to meet near-term debt and lease liability payment
obligations of $0.2 billion and to maintain a sufficient liquidity buffer.
2.5
2.0
1.5
1.0
0.5
0
FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33+
Capital Markets
Debt & Term Loan
Loans and Bank
Guarantees - Drawn
Loans and Bank
Guarantees -
Undrawn
APLNG funding
During construction of APLNG, shareholders contributed capital via ordinary equity and the investment in preference shares (termed MRCPS)
issued by APLNG, with the MRCPS fully redeemed prior to the end of FY2022. Subsequent distributions from APLNG have been received
via unfranked dividends.
APLNG also funded construction via US$8.5 billion (APLNG 100 per cent) in project finance facilities. These facilities were partially refinanced
in FY2019. The outstanding balance at 30 June 2023 was US$4,888 million (A$7,374 million), net of unamortised debt fees of US$39 million
(A$59 million). APLNG’s average interest rate associated with its project finance debt portfolio for FY2023 was 4.1 per cent.
Gearing13 in APLNG was 20 per cent as at 30 June 2023, down from 21 per cent at 30 June 2022.
APLNG project finance debt amortisation profile
Closing balance as at
30 June
(US$m)
Bank loan (variable)
US Exim
USPP
Total
5.5 Shareholder returns
2023
1,407
1,519
2,000
4,927
2024
1,153
1,247
1,940
4,340
2025
871
965
1,887
3,722
2026
587
679
1,787
3,052
2027
265
382
1,690
2,337
2028
2029
2030
-
162
1,437
1,599
-
-
930
930
-
-
297
297
The Board has determined a fully franked final dividend of 20 cents per share. This brings Origin’s total distributions to shareholders for
FY2023 to 36.5 cents per share, representing 66 per cent of Adjusted Free Cash Flow. The final dividend will be paid on 29 September to
shareholders registered as at 6 September 2023.
Origin will seek to deliver sustainable shareholder returns through the business cycle and will typically target a payout range of 30 per cent
to 50 per cent of Adjusted Free Cash Flow per annum in the form of ordinary dividends. Adjusted Free Cash Flow is defined as cash from
operating activities and investing activities (excluding major growth projects), less interest paid. Remaining cash flow will be applied to further
debt reduction, value accretive organic growth and acquisition opportunities, and/or additional capital management initiatives.
The dividend payout ratio of 66 percent is above the target range, reflecting the improved earnings outlook, the company's strong balance
sheet and the one-off increase in working capital.
The Board maintains discretion to adjust shareholder distributions for economic and business conditions. Further capital management
initiatives will be considered by the Board during FY2024 and beyond, taking into account franking balances, business conditions, growth
opportunities, and the status of the Brookfield/EIG transaction.
12 Excludes $93 million cash held on behalf of APLNG as upstream operator.
13 Gearing is defined as project finance debt less cash, divided by project finance debt less cash plus equity.
Operating and Financial Review
27
6 Review of segment operations
6.1 Energy Markets
Origin’s Energy Markets business comprises one of Australia’s largest energy retail businesses by customer accounts, Australia’s largest fleet
of gas-fired peaking power stations supported by a substantial contracted fuel position, a growing supply of contracted renewable energy
and Australia’s largest power station, the black coal fired Eraring Power Station.
The business reports on an integrated portfolio basis. Electricity and Natural Gas Gross Profit and cost to serve are reported separately, as are
the EBITDA of the Solar and Energy Services, Future Energy and LPG divisions. Origin's share of Octopus Energy EBITDA is now a separate
segment - refer to section 6.2.
6.1.1 Financial summary
Electricity Gross Profit
Natural Gas Gross Profit
Electricity and Natural Gas cost to serve
LPG EBITDA
Solar and Energy Services EBITDA
Future Energy EBITDA
Underlying EBITDA
Underlying EBIT
FY23
($m)
574
943
(576)
96
55
(54)
1,038
534
FY22
($m)
207
564
(487)
92
52
(28)
401
(24)
Change
($m)
Change
(%)
366
379
(89)
4
3
(26)
637
558
177
67
18
5
6
91
159
n/a
Fuel Supply•••GasCoalLPGTransportation •Flexible contracted gas transport arrangements Generation •••1 black coal generatorAustralia’s largestgas-fired fleetGrowing contracted renewables•••Retail (consumer and SME)Business (commercial and industrial)Wholesale Networks •RegulatedCustomers Energy Markets operationsMovements in Underlying EBITDA ($m)4011,038(303)(91)(63)(32)(3)(89)(18)761477FY2022Fuel costsProcurement costsOil and JKM pricemovementsProcurement costsCost to serveS&ES, LPG, FutureEnergyFY2023Gas +$379 millionElectricity +$366 millionVolumes 28
Annual Report 2023
6.1.2 Electricity
Volume summary
Volumes sold
(TWh)
New South Wales1
Queensland
Victoria
South Australia
Total volumes sold
FY23
Retail
Business
7.2
4.0
3.0
1.3
15.6
7.9
4.3
5.2
2.8
20.2
Total
15.2
8.4
8.2
4.2
35.8
FY22
Retail
Business
7.6
4.1
2.9
1.3
15.9
8.1
4.2
5.0
2.3
19.6
Total
15.7
8.3
7.9
3.7
35.5
Change
(TWh)
(0.5)
0.1
0.3
0.5
0.4
Change
(%)
(3.2)
0.9
3.6
13.7
1.0
1 Australian Capital Territory customers are included in New South Wales.
Gross Profit summary
Revenue
Retail (residential/SME)
Business
Cost of goods sold
Network costs
Energy procurement costs
Gross Profit
Gross margin %
FY23
$m
7,755
4,391
3,365
(7,181)
(3,158)
(4,024)
574
7.4%
$/MWh
216.3
281.4
166.2
(200.3)
(88.1)
(112.2)
16.0
Electricity Gross Profit increased by $366 million to $574 million
driven by:
• +$761 million due to higher wholesale prices flowing into
business (+$395 million) and retail (+$366 million) customer
tariffs, reflecting the recovery of higher costs associated with
the current and prior periods;
•
•
-$303 million due to higher fuel costs, primarily due to coal
generation. Unit fuel costs increased from $68.2/MWh to $87.8/
MWh. Eraring generation was higher (+1.2 TWh) with improved
coal deliveries from our key coal supplier via conveyor and from
suppliers via rail, as Origin seeks to diversify its coal supply
chain. Coal price was higher driven by greater volumes of
coal purchased at higher market prices during the first half of
FY2023 as long term contractual supply contracts approach
their expiration date. Across the year the coal price impact was
softened by the introduction of the coal price cap implemented
in December 2022;
-$91 million due to higher other electricity procurement costs,
largely reflecting higher net pool costs due to higher pool prices
on short positions and higher generation operating costs on
increased maintenance activities as well as ash dam related costs.
Bundled renewable PPA costs increased due to higher Stockyard
Hill volumes, partly offset by lower Solar FiT costs driven by
improved value management of Solar customers, as well as lower
market contract volumes purchased due to improved Eraring
output; and
• Volumes increased 0.4 TWh, reflecting a 0.7 TWh increase in
business volumes on net customer wins, partly offset by a 0.3
TWh decrease in retail volumes due to lower household usage.
With the volume increase primarily related to customers on pool
price pass-through arrangements, there was no material impact
to Gross Profit.
40
30
20
10
0
FY22
$m
7,125
4,148
2,977
(6,918)
(3,271)
(3,647)
207
2.9%
$/MWh
200.8
260.6
152.1
(194.9)
(92.2)
(102.8)
5.8
Change
(%)
Change
($/MWh)
8.8
5.8
13.0
(3.8)
3.5
(10.3)
176.6
154.1
15.6
20.7
14.1
(5.4)
4.1
(9.5)
10.2
Sources and uses of electricity (TWh)
FY22
Sources
FY23
Sources
FY22
Uses
FY23
Uses
Solar FiT
Renewables
Coal (Eraring)
Gas
Other
Swap contracts
Short position
Business
Retail
Losses
Owned and contracted generation output of 19.0 TWh, was higher
by 0.3 TWh on FY2022, primarily driven by higher Eraring generation output. Generation from renewable PPAs (+0.2 TWh) increased due to
Stockyard Hill volumes received while ramping up production. Refer to the Electricity Supply table below.
Operating and Financial Review
29
Wholesale energy costs
Fuel cost1
Generation operating costs
Owned generation1
Net pool costs2
Bundled renewable PPA costs3
Market contracts3
Solar feed-in tariff
Capacity hedge contracts
Green schemes (excl. PPAs)
Other
$m
1,368
292
1,660
542
293
630
135
217
501
46
FY23
FY22
TWh
15.6
15.6
15.6
5.1
3.4
10.0
2.3
$/MWh
87.8
18.7
106.5
106.2
85.3
62.8
60.0
$m
1,057
235
1,293
363
271
727
207
226
535
24
TWh
$/MWh
15.5
15.5
15.5
3.7
3.2
11.9
2.3
68.2
15.2
83.4
99.2
84.8
60.9
90.9
Energy procurement costs
4,024
36.44
110.5
3,647
36.64
99.7
1
Includes volume from internal generation and contracted from Pelican Point.
2 Net pool costs includes gross pool purchase costs net of pool revenue from generation, gross and net settled PPAs, and other contracts.
3 Bundled PPAs includes cost of electricity and renewable certificates. Market contracts include swap and energy hedge contracts.
4 Volume differs from sales volume due to energy losses of 0.6 TWh (FY2022: 1.1 TWh).
Electricity supply
Eraring
Units 1 - 4
Gas Turbine
Darling Downs
Osborne2
Uranquinty
Mortlake
Mount Stuart
Quarantine
Ladbroke Grove
Roma
FY23
FY22
Change
Type1
Output
Pool revenue
Output
Pool revenue
Output
Pool revenue
(GWh)
($m)
($/MWh)
(GWh)
($m)
($/MWh)
(GWh)
($m)
($/MWh)
Nameplate
capacity
(MW)
2,922
2,880 Black Coal
12,150
2,024
167
10,966
1,668
42 OCGT
644 CCGT
180 CCGT
692 OCGT
584 OCGT
423 OCGT
235 OCGT
80 OCGT
80 OCGT
0
1,162
431
132
432
15
196
61
21
211
0
305
115
57
123
12
53
19
11
54
0
263
267
429
284
758
268
314
492
0
1,871
606
301
458
70
95
42
55
256
153
0
475
105
94
90
49
27
9
19
35
14,811
2,772
187
14,617
2,571
Shoalhaven
Internal generation
240
6,080
Pumped
Hydro
Pelican Point
240 CCGT
770
Renewable PPAs
1,5153 Solar / Wind
3,439
Owned and
contracted
generation
7,835
19,019
885
3,196
18,697
1 OCGT stands for open cycle gas turbine; CCGT stands for combined cycle gas turbine.
2 Origin has a 50 per cent interest in the 180 MW plant and contracts 100 per cent of the output.
15
-
9
94
118
88
51
(12)
95
135
26
11
356
0
(170)
10
(37)
33
(37)
26
10
(9)
19
201
152
0
254
173
312
196
708
280
219
357
230
176
1,184
0
(710)
(175)
(168)
(26)
(54)
101
18
(33)
58
194
(115)
243
322
3 Nameplate capacity includes Stockyard Hill. Origin received 50 per cent of its production output during HY2023, then 100 per cent from 1 January 2023.
30
Annual Report 2023
6.1.3 Natural Gas
Volume summary
Volume sold (PJ)
New South Wales1
Queensland
Victoria
South Australia2
External volumes sold
Internal sales (generation)
Total volumes sold
FY23
Retail
Business
12.3
3.1
24.1
5.7
45.2
24.5
66.9
39.5
10.3
141.3
Total
36.9
70.1
63.6
16.0
186.5
30.6
217.1
FY22
Retail
Business
12.2
3.1
23.6
5.4
44.2
19.5
71.9
40.3
12.1
143.9
Total
31.7
75.0
63.8
17.5
188.1
41.4
229.4
Change
(PJ)
Change
(%)
5.2
(5.0)
(0.2)
(1.5)
(1.5)
(10.8)
(12.3)
16
(7)
(0)
(9)
(1)
(26)
(5)
1 Australian Capital Territory customers are included in New South Wales.
2 Northern Territory and Western Australia customers are included in South Australia.
Gross Profit summary
Revenue
Retail (residential/SME)
Business
Cost of goods sold
Network costs
Energy procurement costs
Gross Profit
Gross margin %
FY23
$m
3,510
1,397
2,114
(2,567)
(783)
(1,784)
943
26.9%
$/GJ
18.8
30.9
15.0
(13.8)
(4.2)
(9.6)
5.1
FY22
$m
2,769
1,185
1,584
(2,205)
(749)
(1,456)
564
20.4%
$/GJ
14.7
26.8
11.0
(11.7)
(4.0)
(7.7)
3.0
Change
(%)
Change
($/GJ)
27
18
33
(16)
(5)
(23)
67
32
4.1
4.1
3.9
(2.0)
(0.2)
(1.8)
2.1
Natural Gas Gross Profit increased by $379 million to $943 million
driven by:
• +$477 million due to business (+$297 million) and retail (+
$180 million) customer tariffs repricing (excluding oil and JKM
linked sales), reflecting the recovery of higher costs associated
with the current and prior period;
•
•
•
-$63 million primarily due to higher net JKM and oil supply
costs. Revenue increased by $149 million due to higher price
movements on JKM and oil linked sales, while procurement
costs linked to JKM and oil increased by $212 million. To the
extent that JKM and oil linked sales and purchases do not fully
offset, hedging of any residual exposure to price movements is
undertaken on an ongoing basis;
-$32 million reflecting higher procurement costs (excluding oil
and JKM linked purchases), driven by both higher priced short
term market purchases and inflationary increases on longer-term
supply contracts; and
1.5 PJ decrease in external sales volume (-$3 million)
due to a reduction in business volumes on expiration of
customer contracts.
250
200
150
100
50
0
Sources and uses of gas (PJ)1
FY22
Sources
FY23
Sources
FY22
Uses
FY23
Uses
APLNG - fixed price
Other fixed price
Oil/JKM linked
Retail
Business - C&I
Business - Wholesale
Generation
1 Fixed price contracts are subject to CPI adjustments.
Operating and Financial Review
31
6.1.4 Electricity and Natural Gas cost to serve
Cost to maintain ($ per average customer)1
Cost to acquire/retain ($ per average customer)1
Electricity and Natural Gas cost to serve ($ per average customer)1
Maintenance costs ($m)
Acquisition and retention costs ($m)2
Electricity and Natural Gas cost to serve ($m)
FY23
(122)
(38)
(161)
(439)
(137)
(576)
1 Represents cost to serve per average customer account, excluding CES accounts.
2 Customer wins (FY2023: 465,000; FY2022: 480,000) and retains (FY2023: 907,000; FY2022: 1,224,000).
Labour
Bad and doubtful debts
Other variable costs
Retail and Business
Wholesale
Corporate services and IT
Electricity and Natural Gas cost to serve
FY23
($m)
(158)
(132)
(119)
(410)
(64)
(103)
(576)
FY22
(97)
(39)
(135)
(348)
(139)
(487)
FY22
($m)
(150)
(58)
(128)
(337)
(52)
(99)
(487)
Change
($)
Change
(%)
(26)
0
(26)
(91)
2
(89)
27
(1)
19
26
(1)
18
Change
($)
Change
(%)
(8)
(74)
9
(73)
(12)
(4)
(89)
6
127
(7)
22
23
4
18
Electricity and Natural Gas cost to serve up $89 million, primarily driven by an increase in bad and doubtful debt expense ($74 million) due to
higher bill sizes, rising cost of living pressures, slower aged debt collection, and the non-repeat of a $26 million release/utilisation of COVID-19
bad and doubtful debt provisions in FY2022. Higher labour costs have been incurred in our Retail business driven by compliance, regulatory
and growth activities.
The migration of mass market electricity and natural gas customers to the Kraken platform was successfully completed in early May 2023. We
remain committed to target a $200 - $250 million reduction in operating and capital costs from a FY2018 baseline but with delayed realisation
of remaining benefits into FY2025. The business is focussed on stabilisation post migration and supporting customers through a period of
cost of living pressures. Around $150 million cost savings has been achieved as at the end of FY2023 from the FY2018 baseline, excluding
the impact of rising bad and doubtful expenses.
Bad debt expense as a percentage of total Electricity and Natural Gas revenue increased to 1.17 from 0.59 in FY2022.
Customer accounts
Customer accounts ('000) as at
Electricity
New South Wales1
Queensland
Victoria
South Australia2
Natural Gas
New South Wales1
Queensland
Victoria
South Australia2
Total electricity and natural gas
Rolling average customer accounts
Broadband
LPG
Other4
30 June 2023
30 June 2022
Change
2,742
1,157
687
634
264
1,282
386
176
501
220
4,0243
4,011
96
368
37
2,733
1,193
674
608
257
1,277
379
178
495
226
4,010
3,922
61
368
20
9
(36)
13
25
7
4
7
(2)
5
(6)
13
89
35
1
17
66
Total customer accounts
4,525
4,458
1 Australian Capital Territory customer accounts are included in New South Wales.
2 Northern Territory and Western Australia customer accounts are included in South Australia.
3 Includes 442,000 CES customer accounts (FY2022: 403,000).
4 Relates to Origin Home Assist customers.
32
Annual Report 2023
Origin churn decreased by 0.7 per cent to 12.7 per cent compared
to market churn of 18.3 per cent which is down from 19.0 per cent
in the prior period. Market churn rates spiked across July and August
2022 as customers sought new retailers following a period of smaller
energy retailers exiting the market or offering uncompetitive prices
to their customers, and then largely remained at consistent levels
with FY2022.
Period end customer accounts increased by 66,000 overall.
Electricity customer accounts increased by 9,000 with gains in
Victoria, Queensland and South Australia, offset by losses in New
South Wales. Natural Gas customer accounts increased by 4,000,
driven primarily by gains in New South Wales and Victoria.
Broadband customer accounts increased by 35,000 to a total of
96,000 and Home Assist customer accounts increased by 17,000
to a total of 37,000. LPG customer accounts remained flat. Around
7,000 customer accounts14 were added from Retailer of Last Resort
(ROLR) events15 that occurred during the year.
30
25
20
15
10
6.1.5 LPG
Volumes (kT)
Revenue and Other Income ($m)
Cost of goods sold ($m)
Gross Profit ($m)
Operating costs ($m)
Underlying EBITDA ($m)
Monthly Churn (%)
1
2
0
2
-
l
u
J
1
2
0
2
-
p
e
S
1
2
0
2
-
v
o
N
2
2
0
2
-
n
a
J
2
2
0
2
-
r
a
M
2
2
0
2
-
y
a
M
2
2
0
2
-
l
u
J
2
2
0
2
-
p
e
S
2
2
0
2
-
v
o
N
3
2
0
2
-
n
a
J
3
2
0
2
-
r
a
M
3
2
0
2
-
y
a
M
3
2
0
2
-
n
u
J
Origin
Market
FY23
374
749
(535)
214
(117)
96
FY22
357
710
(513)
196
(104)
92
Change
Change (%)
16
39
(22)
18
(13)
4
5
6
4
9
13
5
Origin is one of Australia’s largest LPG and propane suppliers, procuring and distributing LPG to residential and business locations across
Australia. On 8 November 2022, Origin entered into an agreement to sell Origin's LPG business in the Pacific. This includes our wholly-owned
operations in Vanuatu, American Samoa, Samoa and Cook Islands, and joint-venture operations in Fiji, Papua New Guinea and the Solomon
Islands. The sale remains subject to fulfilment of conditions precedent and regulatory approvals. The LPG business in the Pacific contributed
$27 million of EBITDA in FY2023.
Gross Profit was higher in FY2023 largely driven by higher retail sales across both Australian and Pacific businesses. Volumes were up
5 per cent as a result of continued growth in large commercial segment and recovery in pacific economies post COVID-19 downturn.
Operating costs increased $13 million with inflationary impacts and supply challenges partly mitigated through cost optimisation initiatives
and price increases.
6.1.6 Solar and Energy Services
Revenue and Other Income
CES Gross Profit
Solar Gross Profit
Other Gross Profit
Gross Profit
Operating costs
Underlying EBITDA
FY23
($m)
564
148
23
(1)
170
(115)
55
FY22
($m)
405
98
33
2
133
(81)
52
Change
($m)
159
50
(9)
(3)
37
(35)
3
Change
(%)
39
51
(29)
n/a
28
43
5
Origin provides installation of solar photovoltaic (PV) systems and batteries to residential and business customers, and ongoing support and
maintenance services. The Community Energy Services (CES) business provides serviced hot water, natural gas and electricity via embedded
networks and other related services such as communal solar and battery systems to apartment blocks.
Underlying EBITDA increased $3 million. CES Gross Profit increased $50 million driven by continued growth in customer accounts including
the full year benefit of the WINconnect acquisition which was completed in April 2022, adding around 100,000 customer accounts. This is
offset by a $9 million reduction in Solar Gross Profit largely due to higher panel costs associated with manufacturing and supply constraints,
a $35 million increase in operating costs supporting the growth in the CES business and continued investment in Broadband growth.
14 Gross customer accounts net with those customers who subsequently churn post event.
15 Pooled Energy, PowerClub, Mojo, Social Energy, Elysian Energy, Mojo Power East and QEnergy.
Operating and Financial Review
33
6.1.7 Future Energy
Operating costs - Origin 360 EV
Operating costs - Other
Total operating costs1
Other income
EBITDA
Net (investments) / disposals2
FY23
($m)
(12)
(44)
(56)
2
(54)
(2)
FY22
($m)
-
(29)
(29)
2
(28)
1
Change
($m)
Change
(%)
(12)
(15)
(27)
(1)
(26)
(3)
n/a
51
91
(29)
91
n/a
1 Origin 360 EV is reported within Future Energy from HY2023. In the prior period, it was reported in Corporate, and costs were $3 million.
2 Relates to investments in future energy technology focused private equity funds.
Future Energy activities and associated expenditure reflects the transition from the incubation phase to scaling of various initiatives.
Operating costs increased, primarily due the inclusion of Origin 360 EV, previously reported under Corporate, as well as continued scaling of
Origin Loop, batteries and demand response offerings.
Origin Loop
Origin Loop, our in-house Virtual Power Plant, provides connected solutions to customers across multiple products and services. An
increasing variety of distributed assets are aggregated, controlled and dispatched in response to market and portfolio positions, improving
customer engagement while reducing energy costs for both customers and Origin.
Assets connected to Loop have grown by approximately 216 per cent, from 258 MW to 815 MW over FY2023. Spike, our behavioural
demand response program that rewards customers for reducing energy usage during periods of peak market demand, continues to grow with
137,000 customers now signed up as at 30 June 2023 utilising a new platform that provides more advanced and engaging digital experiences
and insights.
Origin continues to grow our connected home footprint with Loop-connected products including bundled solar and battery offers, a BYO
(bring your own) battery offer to integrate with customers' existing assets, and trial of EV charging tariffs.
Origin 360 EV
Origin 360 EV, our E-mobility business, provides full suite of end-to-end EV solutions to both commercial and residential customers. We
continue to accelerate our growth by scaling our Fleet, Car Share and Charging solutions as well as launching new products including the
EV Energy Plan, salary packaging EV subscription for employees and charging solutions for body corporates and residents of apartment
buildings. We continue to offer smart charging solutions to customers by enrolling EV chargers onto Loop.
34
Annual Report 2023
6.2 Octopus Energy
20 per cent Origin share
Revenue - energy
Revenue - licensing1
Cost of sales
Gross Profit
Operating costs1
EBITDA
ITDA
NPAT
FY23
($m)
4,828
37
(4,481)
384
(144)
240
(101)
139
FY22
($m)
1,603
40
(1,607)
36
(72)
(36)
(51)
(87)
Change
($m)
3,225
(3)
(2,874)
348
(72)
276
(50)
226
Change
(%)
201
(8)
179
964
100
n/a
97
n/a
1 Licensing revenue and operating costs disclosed here includes fees for Octopus Energy customers using the platform. These are eliminated on consolidation in Octopus
Energy’s statutory financial reporting.
100 per cent Octopus customer accounts ('000) as at
30 June 2023
30 June 2022
Change
Energy customer accounts
Contracted Kraken platform customer accounts
9,657
32,158
6,013
25,683
3,644
6,475
Origin’s share of Octopus Energy EBITDA16 for the period was $240 million, an increase of $276 million from FY2022. The result primarily
reflects an increase in customer accounts and the lag in reset of regulated tariffs in the UK retail business.
Tariffs are capped by the regulator Ofgem and reflect an allowance for wholesale, network, operating and other costs. The loss in the prior year
resulted from incurring higher cost of energy, with an inability to pass this onto customers due to the lag in the reset of regulated tariffs. The
current year saw these costs recouped. During FY2023 there was also a change in the reset frequency from six months to quarterly, enabling
more rapid response to changing wholesale market prices. This allowed higher wholesale costs in HY2023 to be recouped in the second half.
The majority of Octopus' customers are priced at a discount to the Ofgem price cap.
FY2023 saw a six-month contribution from the customers acquired from Bulb Energy, which added 2.5 million customer accounts in
December 2022. The contribution includes accounting fair value considerations as a result of the acquisition agreement and will continue to
do so for the duration of the agreement. Following the Bulb acquisition, Octopus Energy is the second largest UK energy retailer by customer
accounts and is continuing to grow organically. Customer accounts in the UK retail business have grown to around 9.7 million at the end of
June 2023, a 61 per cent increase in the year.
Octopus' software licensing business, Kraken, has achieved a 25 per cent growth in accounts contracted to the platform.
Kraken earns recurring revenue from licencing the platform to utilities as well as one-off fees earned through the period of customer account
migration. Recurring revenue will grow as accounts are migrated onto the platform. Total licensing revenue is down as FY2022 included higher
one-off migration and performance payments.
The Kraken platform is now contracted to serve over half of all UK households, with a strong global sales pipeline, driving towards a 100 million
licensed customer account ambition by 2027. All of EON’s UK customers and Origin's mass-market electricity and natural gas customer
accounts have been successfully migrated to the Kraken platform. Migration has begun for EDF’s UK customers. Kraken licensing has
expanded into new utilities, with the first water and broadband deals signed in July 2023.
Octopus' operating costs increased, driven by investment in people to scale up growth in licensing delivery, energy installation services and
international retail businesses.
16 Following CPPIB' investment in Octopus Energy during December 2021, Origin accounted for its interest in Octopus Energy at 18.7 per cent from December 2021 (previously
20 per cent), with subsequent investment of $173 million during FY2023 to maintain its 20 per cent interest from August 2022.
Operating and Financial Review
35
6.3 Integrated Gas
Share of APLNG EBITDA (see Section 6.3.1)1
Integrated Gas - Other (see Section 6.3.2)
Underlying EBITDA
Underlying depreciation and amortisation
Underlying share of ITDA from APLNG
Underlying EBIT
1 Origin's interest is 27.5 per cent. Prior to 8 December 2021 it was 37.5 per cent.
6.3.1 Share of APLNG
FY23
($m)
2,246
(327)
1,919
(22)
(1,060)
837
FY22
($m)
2,134
(297)
1,837
(24)
(1,086)
727
Change
($m)
Change
(%)
112
(30)
82
2
26
110
5
10
4
(8)
(2)
15
Origin holds a 27.517 per cent shareholding in APLNG, an equity accounted incorporated joint venture. APLNG operates Australia’s largest
CSG to LNG export project (by nameplate capacity) with the country’s largest 2P CSG reserves.18 Origin is the operator of the upstream CSG
exploration and appraisal, development and production activities. ConocoPhillips is the operator of the 9 mtpa two-train LNG liquefaction
facility at Gladstone in Queensland.
As APLNG is an equity accounted incorporated joint venture, Integrated Gas reports its share of APLNG EBITDA. The share of APLNG ITDA
is recorded as a line item between EBITDA and EBIT.
APLNG acquired various CSG interests from Tri-Star in 2002 that are subject to reversionary rights and an ongoing royalty interest in favour of
Tri-Star. These interests represent approximately 19 per cent of APLNG’s 2P CSG reserves and approximately 18 per cent of 3P (proved plus
probable plus possible) CSG reserves (as at 30 June 2023). Refer to Section 8 for disclosure relating to Tri-Star litigation associated with these
CSG interests.
Financial summary – APLNG
($m)
Commodity revenue and other income1
Operating expenses
Underlying EBITDA
Depreciation and amortisation
MRCPS interest expense
Project finance interest expense
Other financing expense
Interest income
Income tax expense
Underlying ITDA2
Underlying Profit
FY23
FY22
APLNG
100%
11,259
(3,091)
8,168
(1,659)
-
(339)
(101)
87
(1,850)
(3,862)
4,306
Origin
share
3,096
(850)
2,246
(456)
-
(93)
(28)
24
(509)
(1,062)
1,184
APLNG
100%
9,362
(2,486)
6,876
(1,563)
(141)
(261)
(67)
9
(1,456)
(3,479)
3,397
Origin
share
2,903
(768)
2,134
(495)
(48)
(82)
(23)
3
(445)
(1,090)
1,044
1
Includes commodity revenue plus other income of $20 million (Origin share) primarily related to tolling revenue and FX (FY2022: $29 million Origin share).
2 See Note B2.1 of the Financial Statements for details relating to a $2 million difference between APLNG ITDA and Origin's reported share. (FY2022 $4m)
17 Origin's interest is 27.5 per cent. Prior to 8 December 2021 it was 37.5 per cent.
18 As per EnergyQuest EnergyQuarterly, June 2023.
Exploration and appraisal Drilling and gatheringProcessing andtransportation Domestic customersLiquefaction and export customers 36
Annual Report 2023
Origin’s share of APLNG Underlying EBITDA increased by $355 million excluding the impact from 10 per cent ownership change in December
2021, primarily due to higher realised oil prices.
• Commodity revenue and other income increased by $516 million19, primarily reflecting a higher realised oil price of US$103/bbl (A$154/
bbl) compared to US$74/bbl (A$103/bbl) in FY2022, together with higher domestic revenue attributed to market linked short term
contract prices. Seven spot cargoes were delivered in FY2023 down from fifteen cargoes in FY2022 reflecting the impact of La Niña
weather on production and the prioritisation of domestic market sales.
• Operating expenses increased by $16119 million, driven by increased gas purchases to manage the portfolio (primarily through operational
time swaps with other major producers), increased workover activity focused on reducing La Niña weather inventory backlog,
commencement of a planned multi-year upstream gas processing maintenance program, inflationary impacts, higher royalties as a
consequence of higher revenue and exploration asset write off.
Origin’s share of depreciation and amortisation decreased by of $39 million, mainly reflecting the impact from 10 per cent ownership change
in December 2021 and reduced well amortisation as a result of lower production.
MRCPS interest expense decreased by $48 million to nil as MRCPS were fully repaid in FY2022. See Section 5.4 for details relating to the
APLNG funding.
19 Origin's interest is 27.5 per cent. Prior to 8 December 2021 it was 37.5 per cent.
Movements in Underlying EBITDA ($m)(161)(15)(243)(234)FY2022FY2023(+$355 million)Commodity revenue and other income (+$516 million)LNG volumeLNG priceDomestic revenueOther incomeOpex10% Sell down Operating and Financial Review
APLNG volume summary
Volumes (PJ)
Operated
Non-operated
Total production
Purchases/swaps
Changes in upstream gas inventory/other
Liquefaction/downstream inventory/other
Total sales
Commodity revenue ($m)
Domestic gas
LNG
Sales mix (PJ)
Domestic gas
LNG contract
LNG spot
Realised price
Domestic gas (A$/GJ)
LNG (A$/GJ)
LNG (US$/MMbtu)
37
Origin
share1
170
50
220
5
(1)
(13)
211
327
2,546
52
143
16
Origin
share
147
38
185
6
(2)
(12)
177
353
2,723
41
129
7
FY23
APLNG
100%
534
140
674
21
(6)
(44)
645
1,283
9,903
150
468
27
8.54
20.01
14.20
FY22
APLNG
100%
535
157
693
15
(4)
(40)
664
990
8,267
159
450
55
6.23
16.36
12.50
1 Origin's interest is 27.5 per cent. Prior to 8 December 2021 it was 37.5 per cent.
APLNG production volumes decreased 3 per cent compared to FY2022 reflecting the cumulative impact of the three consecutive years
of La Niña weather, which restricted access to fields for workovers, drilling and optimisation activities during the first half of FY2023. The
commencement of a planned multi-year upstream gas processing maintenance program in addition to unplanned non-operated outages also
contributing to the decline in production.
Production rebounded strongly in the second half of FY2023 with favourable drier weather. This allowed an increase in well workover activity
and increasing the rates of online wells, which, coupled with production optimisation projects, increased overall production. Talinga Condabri
North Pipeline ramped to full capacity and Orana South Loop Line also completed, enabling additional field production uplift and greater
operational flexibility. This led to multiple daily operated production records, peaking at 1,618 TJ/day in May 2023.
APLNG sales volumes decreased 3 per cent, reflecting lower production volumes during FY2023.
The average realised LNG price increased 22 per cent to A$20.01/GJ driven by higher realised oil prices. The average realised domestic gas
price increased 37 per cent to $8.54/GJ, primarily driven by market-linked short-term contract prices.
38
Annual Report 2023
Cash flow – APLNG 100%
Underlying EBITDA
Non-cash items in underlying EBITDA
Change in working capital
Operating cash flow1
Capital expenditure1
Interest income1
Acquisitions/disposals1
Loans (advanced to)/paid by shareholders
Investing cash flow
Project finance interest and transaction costs1
Repayment of project finance1
Other financing activities1
Repayment of lease liabilities1
Interest on lease liabilities1
MRCPS interest
MRCPS buy-back
Ordinary dividends paid
Financing cash flow
Net increase/(decrease) in cash and cash equivalents
Effect of exchange rate changes on cash1
Net increase/(decrease) in cash and cash equivalents including
FX movement
Distributable cash flow1
FY23
($m)
8,168
(40)
56
8,184
(481)
82
1
-
(398)
(311)
(813)
-
(64)
(27)
-
-
(6,483)
(7,698)
88
88
176
6,659
FY22
($m)
6,876
(89)
283
7,070
(415)
7
68
51
(289)
(233)
(694)
(22)
(55)
(15)
(145)
(3,544)
(1,573)
(6,281)
500
139
639
5,850
Change
($m)
Change
(%)
1,292
49
(227)
1,114
(66)
75
(67)
(51)
(109)
(78)
(119)
22
(9)
(12)
145
3,544
(4,910)
(1,417)
(412)
(51)
(463)
809
19
(55)
(80)
16
16
1,071
(99)
(100)
38
33
17
(100)
16
80
(100)
(100)
312
23
(82)
(37)
(72)
14
1
Included in distributable cash flow. Distributable cash flow represents the net increase in cash, including foreign exchange movements before MRCPS interest and buy-backs,
and transactions with shareholders.
APLNG generated distributable cash flow of $6,659 million in FY2023 at an effective oil price of US$103/bbl, up from $5,850 million at an
effective oil price of US$74/bbl in the prior year. Cash distributions to Origin were $1,783 million in FY2023, in the form of unfranked ordinary
dividends, up from $1,595 million in the prior year.
APLNG accumulated tax loss position was US$1,760 million (US$528 million tax effected) at 30 June 2023, down from US$5,600 million at
30 June 2022. Once the accumulated tax losses have been utilised, APLNG will move towards paying tax, and franking dividends.
The project finance facility requires APLNG to hold an amount of cash to service near-term operational and project finance obligations. As
at 30 June 2023, APLNG held $1,720 million of cash, up from $1,544 million at 30 June 2022 primarily reflecting FX revaluation of US
dollar balances.
Non-cash items reflects the reversal of a prior period provision net of write-off of an exploration asset.
Operating and Financial Review
39
Operating expenditure – APLNG 100%
Purchases/swaps
Royalties and tariffs1
Upstream operated opex
Upstream non-operated opex
Downstream opex
APLNG Corporate/other
Total operating expenses per Profit and Loss
Other cash items
Total operating cash costs
FY23
($m)
(280)
(933)
(1,112)
(294)
(334)
(138)
(3,091)
(3)
(3,094)
FY22
($m)
(144)
(784)
(935)
(295)
(309)
(19)
(2,486)
(32)
(2,518)
Change
($m)
Change
(%)
(136)
(149)
(177)
1
(25)
(119)
(605)
29
(576)
94
19
19
(0)
8
626
24
(90)
23
1 Reflects actual royalties paid. At breakeven price, royalties and tariffs would have amounted to $211 million (FY2022: $175 million).
Operating expenses increased $605 million. Purchases costs associated with portfolio management through operational time swaps with
other major producers increased $136 million. Royalties and tariffs were higher by $149 million, reflecting stronger commodity revenue.
Upstream operated opex increased $177 million, mainly due to increased workover activity focused on reducing La Niña weather inventory
backlog, commencement of a planned multi-year upstream gas processing maintenance program and broad inflationary impacts.
Downstream opex increased $25 million reflecting additional maintenance work conducted during Train 2 shutdown period. APLNG
Corporate/other increased by $119 million, which includes $77 million of exploration write off.
Capital expenditure – APLNG 100%
Operated upstream - Sustain
Operated upstream - Infrastructure
Exploration and appraisal
Downstream
Non-operated
Total capital expenditure
FY23
($m)
(280)
(29)
(38)
(24)
(149)
(521)
FY22
($m)
(202)
(29)
(35)
(23)
(131)
(421)
Change
Change
($m)
(78)
(0)
(3)
(1)
(18)
(100)
(%)
38
0
9
6
13
24
Operated upstream - Sustain includes expenditure for drilling, completions, fracture stimulation, gathering network, surface connection,
capital improvements and land access which occurs over multiple years. In FY2023, 64 operated wells were drilled (versus 63 in FY2022),
42 wells were fracture stimulated (versus 23 in FY2022) and 71 operated wells were commissioned (versus 65 in FY2022).
Capital expenditure increased $100 million, primarily driven by a change to well scope and more complex completion activities and
non-operated well development programs.
Operated upstream - Sustain costs increased $78 million reflecting higher fracture stimulation activities, and La Niña weather impacts on
surface scope requiring additional rig support, along with La Niña weather risk mitigations.
Non-operated expenditure increased $18 million due to increased activities in Fairview well development programs, partially offset by a
decrease in the Arcadia Phase 2 development program and material completion of Bellevue drilling program in the prior year.
40
Annual Report 2023
6.3.2 Integrated Gas – Other
This segment comprises Origin Integrated Gas activities that are separate from APLNG, and includes exploration interests in Beetaloo,
Cooper-Eromanga, Canning and Browse Basin, interest in Hunter Valley Hydrogen Hub Project on Kooragang Island.
This segment also includes overhead costs (net of recoveries) incurred as upstream operator and corporate service provider to APLNG, costs
associated with growth initiatives such as hydrogen, and costs incurred in managing Origin’s exposure to LNG pricing risk and impacts of its
LNG trading positions.
In September 2022, Origin announced it will undertake a strategic review of all remaining exploration permits (excluding its interests in
Australia Pacific LNG) with a view to exiting those permits over time, as the company focuses on its strategy and ambition to lead the
energy transition.
Beetaloo Basin (Northern Territory)
In November 2022 Origin completed the sale of its interest in the Northern Territory’s Beetaloo Basin and received upfront consideration of
$60 million. Origin will also receive a 5.5 per cent royalty based on wellhead revenues produced from the three Beetaloo permits. A non-cash
post tax loss of $75 million in relation to the transaction was recorded. Origin has also executed a gas sale agreement conditional on a final
investment decision being made and future development occurring.
Cooper-Eromanga Basin (Queensland)
Origin executed an agreement to transfer its 75 per cent interest and operatorship of five permits back to Bridgeport, and has surrendered the
twelve permits in the Cooper-Eromanga Basin. The transaction is expected to complete in the first half FY2024.
Canning Basin (Western Australia)
An agreement has been executed with Buru Energy Limited to exit Origin’s interest in the Canning Basin and the transaction is now expected
to complete in the first half FY2024. The terms of the sale provide for Origin to provide Buru with up to $4 million to fund a seismic survey
and for Buru to provide Origin with future reimbursement payments of up to $34 million, conditional on the achievement of key development
and production milestones.
Hunter Valley Hydrogen Hub
Origin executed a $70 million grant Funding Agreement with the Commonwealth Government for the implementation of the Hunter Valley
Hydrogen Hub project.
Financial summary
Origin only commodity hedging and trading
Other Origin only costs
Underlying EBITDA
Underlying depreciation and amortisation/ITDA
Interest income - MRCPS
Underlying Profit/(Loss)
FY23
($m)
(235)
(91)
(327)
(20)
-
(347)
FY22
($m)
(189)
(109)
(297)
(20)
48
(268)
Change
($m)
Change
(%)
(47)
18
(30)
-
(48)
(79)
25
(16)
10
-
(100)
29
Refer to the following table for a breakdown of Origin only commodity hedging and trading costs.
Other Origin only costs decreased $18 million reflecting lower exploration cost and higher APLNG cost recovery.
Operating and Financial Review
41
Commodity hedging and trading summary
FY2023 hedge positions realised a $235 million net loss, compared to a $189 million loss in FY2022. The FY2023 net loss included a hedge
loss of $271 million associated with 5.4 MMbbl of oil swaps and 1.6MMbbl of oil producer collars which realised a hedge price of US$99/bbl.
These hedge contracts were established over October 2020 to August 2021 during the height of the COVID pandemic to protect the
company’s investment grade credit rating.
Based on current forward market prices20, we estimate a net loss on oil, gas and FX hedging in FY2024 of $27 million.
($m)
Oil hedging premium expense
Gain/(loss) on oil, gas and FX hedging
Gain/(loss) on LNG trading
Total
1 Based on forward prices as at 7 August 2023.
Oil, gas and fx hedging
FY23
actual
(22)
(271)
58
(235)
FY22
actual
(28)
(137)
(23)
(189)
FY24
estimate1
(2)
(25)
Origin has entered into oil and gas hedging instruments for the FY2024 and FY2025 periods to manage its share of APLNG oil and gas price
risk based on the primary principle of protecting the Company’s investment grade credit rating and cash flows during volatile market periods
and to satisfy conditions outlined in the Consortium's proposal.
For FY2024, Origin’s share of APLNG related Japan Customs-cleared Crude (JCC) oil and Japan Korea Marker (JKM) gas price exposure is
estimated to be approximately 17 MMboe and 18 tBtu respectively. As at 7 August 2023, we estimate that 41 per cent of JCC and 23 per cent
of JKM have been priced (based on LNG contract lags) at approximately US$84/bbl and US$11/MMBtu respectively, before any hedging.
As at 7 August 2023, Origin has separately hedged to provide downside protection for FY2024 using the following instruments:
• 2.0 MMbbl of Brent USD swaps hedged at a fixed price of A$137/bbl;
• 0.8 MMbbl of Brent producer collars struck between US$35/bbl and US$90/bbl;
• 6.2 MMbbl of JCC USD swaps hedged at a fixed price of US$81/bbl
• 4.2 tBtu of JKM futures hedged at a fixed price of US$16/MMBtu; and
• US$205 million FX forwards hedged at a fixed rate of 0.70.
As at 7 August 2023, 3.7 MMbbl of oil hedging and 0.4 tBtu JKM hedging have been priced at US$86/bbl and US$15/MMBtu respectively.
Based on a forward oil price of US$87/bbl and forward JKM price of US$15/MMBtu, the effective prices of the remaining 4.5 MMbbl of oil
hedging and 3.8 tBtu JKM hedging are US$82/bbl and US$16/MMBtu respectively. This would result in an effective oil price on the company's
FY2024 approximate 17 MMboe oil exposure and 18 tBtu JKM exposure of US$85/bbl and US$15/MMBtu including hedges.
Premium spend for this hedge position is A$2 million.
The FY2025 hedge position consists of:
• 6.2 MMbbl oil swaps hedged at a fixed price of US$76/bbl;
• 3.5 tBtu JKM futures hedged at a fixed price of US$14/MMBtu; and
• US$162m FX forwards hedged at a fixed price of 0.69.
LNG hedging and trading
In 2013, Origin established a Henry Hub linked contract to purchase 0.25 mtpa from Cameron LNG for a period of 20 years, with the first cargo
delivered to Origin in June 2020.
In 2016, Origin established a medium term contract with ENN LNG Trading Company Limited to sell ~0.28 mtpa commencing in FY2019. As
at 30 June 2022, a non-cash onerous provision of $397 million was held in relation to this contract, reflecting stronger LNG prices relative
to Brent oil prices. In FY2023, a reduction in the non-cash onerous provision of $335 million was recognised, with the provision revalued to
$62 million as at 30 June 2023, reflecting a decline in near-term LNG price assumptions relative to Brent oil prices.
These contracts and derivative hedge contracts that manage the price risk associated with the physical LNG contracts form part of an LNG
trading portfolio.
Based on market forward prices as at 7 August 2023, the FY2024 LNG trading EBITDA is expected to be between $40 - 60 million. Across
both FY2025 and FY2026, the total LNG trading EBITDA is expected to be between $450 - 650 million. This outlook remains subject to
market prices on unhedged volumes, operational performance and delivery risk of physical cargoes, and shipping and regasification costs.
20 As at 7 August 2023.
42
Annual Report 2023
7 Risks related to Origin’s future financial prospects
The scope of operations and activities means that Origin is exposed to risks that can have a material impact on our future financial prospects.
Material risks, and the Company’s approach to managing them, are summarised below.
Risk management framework
Overseen by the Board and the Board Risk Committee, Origin’s risk management framework supports the identification, management and
reporting of material risks. Risks are identified that have the potential to impact the delivery of business plans and objectives. Risks are
assessed using a risk toolkit that considers the level of consequence and likelihood of occurrence using consistent risk assessment criteria.
The risk framework incorporates a "three lines of defence" model for managing risks and controls in areas such as health and safety,
environment, climate change, financial, reputation and brand, legal and compliance and social impacts. All employees are responsible for
making risk-based decisions and managing risk within approved risk appetite and specific limits.
The Board reviews Origin’s material risks each quarter and assesses the effectiveness of the Company’s risk management framework annually
in accordance with the ASX Corporate Governance Principles and Recommendations.
Three lines of defence
Line of defence
First line
Lines of business
Second line
Oversight functions
Third line
Internal audit
Responsibility
Primary accountability
Identifies, assesses, records, prioritises, manages and monitors risks.
Management
Provides the risk management framework, tools and systems to
support effective risk management.
Management
Provides assurance on the effectiveness of governance, risk
management and internal controls.
Board, Board Committees
and Management
Origin's risk framework supports the identification and management of emerging risks and escalating threats. During FY2023, the
accelerating energy transition, as well as ongoing geopolitical risks, inflationary pressures, and supply chain disruptions were key threats to
operational and financial performance. These threats required ongoing response and management across many of our existing material risks
to minimise impacts. Our priorities remain ensuring the continuity of operations and supporting activities to provide essential services to our
customers, and maintaining our financial resilience to respond to changes in global markets.
Material risks
The risks identified in this section have the potential to materially affect Origin’s ability to meet our business objectives and impact its future
financial prospects. These risks are not exhaustive and are not arranged in order of significance.
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 strategic risks are managed through continuous
monitoring and reviewing of emerging and escalating risks, ongoing planning and the allocation of resources, and evaluation by Management
and the Board.
Risk
Consequences
Management
Competition
Origin operates in a highly competitive retail environment which
can result in 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,
LNG imports and the volume of gas exports.
Origin is well placed to respond to prevailing headwinds
due to the diversified nature of our business, however we
are exposed to coal supply challenges relative to vertically
integrated organisations with coal businesses or those with long
term legacy coal contracts.
• Our strategy to mitigate the impact of this risk on our retail
business is to provide customers with value for money
and exceptional service, while continuously focusing
on maintaining our cost leadership and innovation. The
migration of our business to Octopus Energy’s Kraken
platform should see us maintain our churn advantage
over competitors through extending leadership in cost,
products and service.
• We endeavour to mitigate the impact of this risk on
our wholesale business by sourcing competitively priced
fuel to operate our generation fleet and through efficient
operations to optimise flexibility in our fuel, transportation
and generation portfolio.
Operating and Financial Review
43
Risk
Consequences
Management
Technological
developments /
disruption
Changes in
demand for energy
Origin is exposed to risks and opportunities relating to new digital
and low-carbon technologies.
Distributed generation is empowering consumers to own,
generate and store electricity, which results in less energy
consumption from the grid. Technology is allowing consumers
to understand and manage their power usage through smart
appliances, which could potentially disrupt the existing utility
relationship with consumers.
Technology also allows customers to have increased awareness
of the impact of when they consume energy and the source of
that energy.
Advances in technology and the abundance of low-cost data
acquisition, communication and control has the potential to
create new business models and introduce new competitors.
The volume or source of energy demanded by customers
could change due to price, consumer behaviour, community
expectations, mandatory energy efficiency schemes,
Government policy, weather and other factors.
Demand for the energy is also expected to grow due to increased
electrification; for example, hydrogen, e-mobility and distributed
infrastructure as a service, providing new market opportunities.
The current global energy market environment may impact the
supply and cost of energy to our customers, and this could
have an adverse impact on our reputation with customers and
the community.
Any change in demand for energy could impact Origin’s
revenues and future financial performance.
Regulatory policy Origin has broad exposure to regulatory policy change and
other government interventions. Changes to policy and other
government interventions can impact financial outcomes and,
in some cases, change the commercial viability of existing or
proposed projects or operations. Specific areas subject to review
and development include government subsidies for building
new generation or transmission capacity, direct government
investment in generation, energy market design, domestic and
international climate change policies, domestic gas market
interventions, wholesale and retail price, consumer protection
regulation, and royalties and taxation policy.
• Origin actively participates and invests in technological
developments through local and global start-up
accelerator programs, trialling new energy technology and
new products and business models.
•
In parallel, we are growing our distributed generation
and home energy services businesses and endeavouring
to mitigate the impact of this risk on our core energy
businesses by offering superior service and innovative
products and reducing cost to serve.
• Origin is pursuing opportunities in low-carbon
technologies such as hydrogen, e-mobility and
carbon management.
• Our strategy of increasing renewable energy in our
portfolio and investing in new technology and products,
such as storage, the virtual power plant (VPP) and lower
carbon customer solutions, supports Origin’s ability to
meet future increases in energy demand.
• We use the flexibility in our gas supply and peaking
generation capacity, as well as the flexibility of Eraring
Power Station, to manage the intermittency of renewables
and maintain reliable supply for customers.
• Origin is partially mitigating the impact of this risk
by developing data-based customer propositions and
better predicting customer demand through our artificial
intelligence orchestration platform, or VPP, which
connects and controls distributed assets and Internet of
Things (IoT) devices, and by applying advanced data
analytics capability.
• Origin contributes to the policy process with federal,
state and territory governments by actively participating
in public policy debate, proactively engaging with policy
makers and participating in public forums, industry
associations, think tanks and research.
• We advocate directly with key members of governments,
opposition parties and bureaucrats to achieve sound
policy outcomes that align with our strategy, purpose
and commercial objectives. Origin also makes formal
submissions to relevant government policy inquiries.
• Origin actively and publicly promotes the customer
and economic benefits that flow from our activities in
deregulated energy markets.
44
Annual Report 2023
Climate risks
Climate change risk is considered a strategic risk for Origin. Under the Task Force on Climate-related Financial Disclosures (TCFD) framework,
Origin’s climate-related risks can be classified as transitional or physical. Many of our climate-related risks are managed within our existing
risks and the table below provides a summary of our climate-related risks under the TCFD's categories.
TCFD Risk Type
Consequences
Management
Transition Risks
Policy and Legal
Risk time horizon:
Short – Medium
Changes to government policy and regulation in relation to,
and resulting from, climate change may present risks and
opportunities for Origin, including:
•
regulatory intervention in the national electricity and
gas markets;
• carbon pricing (including carbon markets, border adjustment
and taxes);
•
the emergence of new climate-related legislation or
reporting requirements;
• government investment in energy infrastructure and
generation including partnerships;
• government grants and subsidies to innovate and incentivise
market development; and
• development approvals and planning and zoning laws.
These changes may impact Origin's asset values, operating
costs, or investment decisions.
There is an increased risk of climate change-related litigation
globally and in Australia. Any litigation would incur legal
costs and potential penalties, compensation payments or
settlement costs and may directly or indirectly influence future
operational strategy.
• Origin continues to advocate for coordinated and long-
term energy policy at the national level to give industry
the confidence to invest in new electricity generation and
gas supply.
• We engage proactively with all levels of government
and regulatory bodies on energy and climate policy,
including through policy submissions, participating in
think tanks, research and various industry associations.
This consultation helps to support government responses
in a rapidly evolving landscape.
• Climate-related commitments and disclosures are
regularly reviewed and updated to take into consideration
up to date science, regulatory requirements and
stakeholder expectations.
• Origin carries out scenario based planning and
portfolio assessment that consider potential changes to
government policy and regulation.
Technology
Risk time horizon:
Short – Long
The development of new technologies may be required to assist
Origin to meet its medium to long-term emissions reduction
targets and ambitions, however there is uncertainty regarding
the efficacy, timing, cost and availability of those technologies.
The growth of low emissions technologies, distributed
generation, and demand management enabled by technologies
could result in lower demand (and revenue) for existing products,
however these also present new market opportunities and
potential revenue streams.
Market
Risk time horizon:
Short - Medium
The energy transition represents a period of significant change
and volatility which presents both risks and opportunities for
Origin. The ongoing decarbonisation of energy markets and
lower demand for fossil fuels in some markets could result in:
•
•
the reduced lifespan of existing carbon-intensive assets and
potential for stranded assets;
the continued electrification of some sectors that currently
depend on fossil fuels, with potential to increase overall
demand for electricity;
• a change in the competitive landscape and the development
of new markets and business models that Origin can
participate in, as cleaner fuels, renewables, storage, and
distributed generation markets evolve; and
• energy market price volatility, as both the volume and source
of energy supply and demand shift.
Origin's response to these market changes may have a positive or
negative influence on our future financial prospects including our
earnings, asset values, and investments.
Origin's financial performance during the energy transition will
also be influenced by the timely and affordable access to:
• capital to support our strategy and growth aspirations;
•
land and infrastructure, including the necessary network
transmission capacity to enable investment in renewables and
other third-party infrastructure; and
• Origin participates in local and global start-up accelerator
programs, trialling new energy technology and exploring
investments in new products or business models.
• We are growing our offerings in emerging technologies
and markets.
• More details can be found in the ‘Technological
developments / disruption’ strategic risk above.
• Our ambition is to lead the energy transition
through cleaner energy and customer solutions, and
we are strategically positioned to benefit from the
energy transition.
• We are focused on growing our offering of lower
carbon solutions, including solar and batteries, electric
vehicles and demand management, to help our customers
decarbonise. We are also accelerating growth in
renewables and cleaner energy. We have an ambition to
grow our portfolio of renewables and storage to 4 GW
by 2030, and in April 2023 we took a final investment
decision on the first stage of a large-scale battery at
the Eraring Power Station. We are also exploring both
domestic and export market opportunities for hydrogen
and ammonia.
• We believe there will continue to be a long-term role for
natural gas to maintain energy security and support the
energy transition. Our portfolio of gas-fired peaking plants
will continue to have an important role to play in Australia’s
energy transition to support intermittent renewable output
and maintain reliable electricity supply.
• We intend to ensure that our capital expenditure portfolio
is consistent with our emissions reduction targets.
Relevant investments in growth projects will be evaluated
against our emissions reduction targets and our ambition
to be net zero emissions by 2050. Climate change
scenario analysis plays a role in our assessment of the
assets we should hold, invest in, dispose of and acquire.
Operating and Financial Review
45
TCFD Risk Type
Consequences
Transition Risks
Management
•
the necessary inputs (including skills, commodities, and other
supplies) to develop renewable and cleaner energy assets in
an ethical manner.
• Origin aims to deploy capital in areas that deliver value to
shareholders and are consistent with our strategy, targets
and ambitions.
• Origin is investing in new technology to support our ability
to manage the supply / demand balance in the electricity
market. This includes scaling an artificial intelligence
orchestration platform, or VPP, which connects, and
controls distributed assets and IoT devices, and applies
advanced data analytics capability to smart meter data to
better predict customer demand and develop data-based
customer propositions. The VPP provides Origin with an
important tool to manage the supply/demand balance in
the electricity market.
• We released our Climate Transition Action Plan in 2022,
outlining our ambition to lead the energy transition
through cleaner energy and customer solutions. Included
in the plan are short and medium-term targets for
increased emissions reduction across Origin, towards our
long-term ambition to be net zero in Scope 1, 2 and 3
emissions by 2050. We believe our updated medium-term
emissions intensity target and our long-term net zero
emissions ambition are consistent with the goals of the
Paris Agreement to limit the increase in the average global
temperature to 1.5°C above pre-industrial levels.1
• Origin has been using the TCFD as the framework for our
external climate disclosures since 2018.
• Origin proactively engages with our capital providers
and other financial stakeholders to ensure they are
well informed of our climate change strategy, targets
and ambitions.
• We engage with communities to understand, mitigate and
report on environmental risks associated with our projects
and operations, including those relating to climate change.
• We have put in place principles for a just energy transition
which guide our approach and are underpinned by open,
inclusive and transparent engagement.
• Origin is applying advanced data analytics capability
to better predict customer demand and to increase
our supply of renewables and flexible capacity to meet
changes in demand.
• More details are in the ‘Changes in demand for energy’
strategic risk above.
Reputation
Risk time
horizon: Short
Our strategy, emissions reduction targets and ambitions may fail
to meet stakeholder expectations. This includes the timing and
alignment of our portfolio decisions, and how we set, measure
and report on climate change targets. This could result in:
•
increased cost of, or restricted access to, debt and equity
capital and insurance;
• adverse impacts to our social licence to operate and our
reputation among our communities, customers, suppliers and
other stakeholders; and
• challenges attracting and retaining talent.
Our path through the energy transition will have an impact on our
people, communities and customers as our business changes,
including the planned closure of the Eraring coal-fired power
station as early as August 2025. There is a risk we fail to meet
stakeholder expectations in relation to a 'just energy transition'.
Changing weather patterns may influence the demand for
energy, which could impact Origin’s revenues and future
financial performance.
Physical Risks
Chronic
Risk time horizon:
Short – Long
Acute
Risk time horizon:
Short – Long
Changing and more frequent and severe weather conditions,
including floods, droughts, bushfires, and extreme temperature
events could disrupt our operations or impact the efficacy
of our assets, and supporting distribution and transmission
infrastructure. This could lead to increased operating costs,
increased maintenance and capital expenditure, the risk
of environmental incidents and higher insurance costs or
restrictions on accessing insurance.
• Origin has extreme weather event preparation processes
including comprehensive seasonal readiness activities and
emergency response plans.
• Our operational planning and design processes
incorporate extreme weather events, while investment
decisions for major growth projects. incorporate potential
financial losses from natural disasters.
1 Pursuant to the methodology outlined in the Climate Transition Action Plan.
Time horizons: Short-term: up to three years; Medium-term: three to 10 years; Long-term: beyond 10 years
46
Annual Report 2023
Financial risks
Financial risks are the risks that directly impact the financial performance and resilience of Origin.
Consequences
Management
Risk
Commodity
Foreign exchange
and interest rates
We have a long-term exposure to international oil, LNG and gas
prices through the sale and purchase of domestic gas, LNG and
LPG, and our investment in Australia Pacific LNG. Pricing can be
volatile and driven by global macroeconomic events. Downward
price movements can impact cash flow, financial performance,
reserves and asset carrying values. Some of Origin’s long-term
domestic gas purchase agreements and Australia Pacific LNG's
LNG sale agreements contain periodic price reviews. Following
each review, pricing may be adjusted upwards or downwards, or
remain unchanged.
The prices and volumes for wholesale electricity that Origin
sources to on-sell to customers are volatile and influenced by
many factors, including generation availability, the pricing of
generation fuels (coal and gas), and weather. Fluctuations in
coal and gas prices also impact the margins of Origin's own
generation portfolio. Energy Markets also has exposures to
contracted volumes of coal not being delivered which could
result in lower output or higher costs to meet customer demand.
Different commodity prices that have historically moved in a
correlated fashion may see that correlation break down. It would
be disadvantageous for Origin if the domestic wholesale energy
costs incurred by Energy Markets were high, but the international
oil and LNG prices obtained by Australia Pacific LNG were low.
Origin has exposures through principal debt and interest
payments associated with foreign currency and Australian dollar
borrowings, through the sale and purchase of gas, LNG and LPG,
and through its investments in Australia Pacific LNG and Octopus
Energy. Interest rate and foreign exchange movements could
lead to a decrease in revenues or an increase in payments in
Australian dollar terms.
Liquidity and
access to
capital markets
Our business, prospects and financial flexibility could be
adversely affected by a failure to appropriately manage our
liquidity position, or if markets are not available at the time of any
financing or refinancing requirement.
Credit
and counterparty
Some counterparties may fail to fulfil their obligations (in whole
or part) under major contracts.
• Commodity exposure 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 in accordance with our ‘Commodity Risk
Management System’.
• Commodity price risk is managed using various
controls, most notably financial hedging contracts
(derivatives), which are widely available for Origin’s
international commodity exposures and wholesale
electricity exposures.
• For each periodic price and supply review, a negotiation
strategy is developed that considers external market
advice and utilises both external and in-house expertise.
• 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.
• We actively manage our liquidity position through cash
flow forecasting and maintenance of minimum levels of
liquidity as determined under Board approved limits.
• Counterparty risk assessments are regularly undertaken
and where appropriate, credit support is obtained to
manage counterparty risk.
• AEMO credit is managed daily to ensure compliance
with the market rules, ensuring management forecasts
the collateral required to continue to meet spot market
obligations for all AEMO markets.
Operating and Financial Review
47
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
We are exposure to reliability or major accident events that may
impact our assets, our licence to operate or financial prospects.
This includes loss of containment, cyber-attack and security
incidents, unsafe operations, and natural hazards and events
that may result in harm to our people, environmental damage,
additional costs, production loss, property damage, third party
impacts, and reputational impacts.
A production outage or constraint, network or IT systems
outage, would affect Origin's ability to deliver electricity and
gas to customers.
A serious incident or a prolonged outage may also damage
Origin’s financial prospects and reputation.
• Core operations are subject to a comprehensive
framework of controls, management systems and
operational performance monitoring to manage the
design, operational and technical integrity of our assets
and associated operational activities. Origin’s standards
and controls are designed to meet regulatory and industry
standards in all operations.
• Origin personnel are appropriately trained and licensed to
perform their operational activities.
• We maintain an extensive insurance program to mitigate
consequences by partially transferring financial risk
exposure to third parties where commercially appropriate.
An environmental incident or failing to consider and adequately
mitigate environmental, social and socio-economic impacts
on communities and the environment has the potential to
cause environmental impact, community action, regulatory
intervention, legal action, reduced access to resources and
markets, impacts to our licence to operate and reputation and
increased operating costs.
Community concerns regarding environmental and social
impacts associated with our activities may also give rise to unrest
amongst community stakeholder groups and activism which
may impact the company's reputation. A third party’s actions
may also result in delay in Origin carrying out its approved
development and operational activities. NGOs, landholders,
community members and other affected parties can seek to
prevent or delay Origin’s activities through court litigation,
preventing access to land and extending approval pathway
time frames.
• Core operations are subject to a comprehensive
framework of environmental controls, management
systems and operational performance monitoring to
manage operational exposure to the environment. Origin’s
standards and controls are designed to meet regulatory
and industry standards in all operations.
• Origin personnel are appropriately trained and licensed to
perform their operational activities.
• We engage with communities to understand, mitigate and
report on environmental and social risks associated with
our projects and operations.
• At a minimum, the management of environmental
and social risks meets regulatory requirements. Where
practical, our management extends to the improvement
of environmental values and the creation of socio-
economic benefits.
• Origin has a cultural awareness learning framework to
build awareness of Aboriginal and Torres Strait Islander
cultures, histories and achievements. Origin maintains
and implements Native Title Agreements and Cultural
Heritage Management Plans with Traditional Owners
where appropriate. We engage with impacted groups and
consider cultural heritage protection as part of ongoing
operations and at project stage gates.
• A dedicated Board committee oversees safety and
sustainability. The committee receives regular reporting
on the highest rated environmental risks and mitigants,
and reviews significant incidents and near misses. The
committee also receives updates on our engagement with
Traditional Owners.
• We engage with stakeholders before seeking relevant
approvals for our development and operational activities.
This engagement continues through the life of the project
and during operations.
• A cyber security strategy is in place and is regularly
updated to cater for emerging threats, security regulation
and stakeholder expectations.
• A robust security monitoring and incident response
process exists and is tested on a regular basis. In the event
of an incident, Origin is supported by an external incident
response and forensics firm.
• We undertake regular independent security assurance to
assess the resilience of our digital channels and internal
security controls.
• Employees undertake compulsory cyber awareness
training, including how to identify phishing emails and hoe
to keep data safe, and are subject to a regular program of
random testing.
Cyber security
A cyber security incident could lead to a breach of privacy,
loss of and/or corruption of commercially sensitive data,
and/or a disruption of critical business processes. This may
adversely impact customers, the Company’s business activities
and reputation and brand.
48
Annual Report 2023
Risk
Consequences
Management
APLNG gas
reserves, resources
and deliverability
There is uncertainty about the productivity, and therefore
economic viability, of resources and developed 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 commitments.
As at 30 June 2023 Australia Pacific LNG’s identified reserves
and resources are estimated to be greater than its contractual
supply commitments on a volume basis. However, given the
inherent uncertainty in forecasting future production rates, there
is a risk that the rate of gas delivery required to meet Australia
Pacific LNG’s committed gas supply agreements may not be able
to be met for the later years in the life of existing contracts.
Conduct
and compliance
Unlawful, unethical or inappropriate conduct that falls short of
community expectations could result in penalties, reputational/
brand damage, loss of customers and adverse financial impacts.
Origin’s financial prospects and operations are underpinned
by our licence to operate which requires compliance with
stakeholder commitments, regulations, and laws. For example,
requirements for dealing with vulnerable customers, privacy, and
insider trading.
Joint venture
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.
• Australia Pacific LNG integrates all available subsurface
data to develop insights into regional prospectivity
allowing identification and prioritisation of plays and
prospects for exploration to mature contingent and
prospective resources.
• Australia Pacific LNG monitors reservoir performance
and adjusts development plans accordingly. Australia
Pacific LNG continually takes steps to further strengthen
the supply base such as lowering costs and identifying
new plays.
• Australia Pacific LNG is progressing an exploration
campaign that if successful, could increase long
term supply.
• Australia Pacific LNG continues to review business
development opportunities for long term gas supply, and
has the ability to substitute gas or LNG to meet contractual
requirements if required.
• Origin’s people are trained on the key laws and regulations
that apply to their activities and operations or on
the processes that underpin compliance with laws
and regulations.
• Origin’s Purpose, Values, Behaviours and Code of
Conduct guide conduct and decision making across
the Company.
• All our people are trained in our Code of Conduct,
and we conduct training for insider trading, privacy and
competition and consumer law every year.
• Conduct risk and Compliance are identified as material
risks within Origin’s risk management framework and are
a continuing area of focus for regulators. These risks are
regularly reported to the Board Risk Committee. Controls
specific to the different parts of Origin’s business are
the accountability of Business Units and are subject to
assurance activities, including internal audits.
• We apply a number of governance and management
standards across our various joint venture interests to
provide a consistent approach to managing them.
• Origin actively monitors and participates in its joint
ventures through participation in their respective boards
and governance committees.
Operating and Financial Review
49
8 APLNG reversion
In 2002, APLNG acquired various CSG interests from Tri-Star that
are subject to reversionary rights and an ongoing royalty in favour
of Tri-Star. If triggered, the reversionary rights require APLNG 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
a calculation of 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.
The affected CSG interests represent approximately 18 per cent of
APLNG’s 3P CSG reserves (as at 30 June 2023), and approximately
19 per cent of APLNG’s 2P CSG reserves (as at 30 June 2023).
Tri-Star served proceedings on APLNG in 2015 (‘2015 proceeding’)
claiming that reversion occurred as early as 1 November 2008
following ConocoPhillips’ investment in APLNG, on the assertion
that the equity subscription monies paid by ConocoPhillips, or
a portion of them, were revenue for purposes of the reversion
trigger (the ConocoPhillips reversion claim). Tri-Star has also
claimed in the alternative that reversion occurred in 2011 or 2012
following Sinopec’s investment in APLNG (the Sinopec reversion
claim). These claims are referred to in this document as Tri-Star’s
"past reversion" claims.
Tri-Star has made other claims in the 2015 proceeding against
APLNG relating to other aspects of the reversion trigger calculation
(including as to the calculation of interest, calculation of revenue
and the nature and quantum of APLNG’s expenditures that can
be included), the calculation of the royalty payable by APLNG to
Tri-Star, rights in respect of infrastructure, and claims relating to gas
sold by APLNG following the alleged reversion dates. APLNG denies
these claims and is defending the proceedings.
If Tri-Star’s past reversion claims are successful, then Tri-Star may be
entitled to an order that reversion occurred as early as 1 November
2008. If the court determines that reversion has occurred, then
APLNG may no longer have access to the reserves and resources
that are subject to Tri-Star’s reversionary interests and may need
to source alternative supplies of gas (including from third parties)
to meet its contracted commitments. There are also likely to be a
number of further complex issues that would need to be resolved
as a consequence of any such finding in favour of Tri-Star. These
matters will need to be determined by the court (either in the current
or in separate proceedings) or by agreement between the parties,
and they include:
•
•
•
the terms under which some of the affected CSG interests will be
operated where currently there are no joint operating agreements
in place;
the amount of Tri-Star’s contribution to the costs incurred by
APLNG in exploring and developing the affected CSG interests
between the date of reversion and the date of judgment, which
APLNG has stated in its defence and counter-claim are in the
order of $4.56 billion (as at 31 December 2019) if reversion
occurred on 1 November 2008; and
the consequences of APLNG having dealt with Tri-Star’s
reversionary interests between the date of past reversion and
the date of judgment, including the gas produced from them.
Tri-Star has:
– estimated the value of such gas which it has been unable
to take since the alleged reversion, calculated by reference
to the sale of gas as LNG and gas to domestic customers,
to be approximately $3.37 billion (as at 31 March 2019)
and approximately $1.3 billion per annum thereafter. Tri-
Star claims that the value of gas sold as LNG should be
assessed by reference to the revenue derived by APLNG or
its affiliates from LNG sales since the alleged reversion, being
approximately $2.5 billion (as at March 2019), or $2.4 billion
(as at March 2019) if the proceeds from the sale of LNG is
determined to be calculated net of liquefaction costs;
– conceded in its claim that certain costs for processing and
transportation of that gas would need to be deducted from the
value of gas to calculate the quantum of its claim, but has not
quantified those costs; and
– alleged that it should be paid the value of such gas after
deduction of those costs or is otherwise entitled to set-off the
value of such gas from any amount owing to APLNG arising
from APLNG’s counter-claim for contribution to the costs
incurred by APLNG in exploring and developing the affected
CSG interests between the date of reversion and the date of
judgement; and
•
if reversion occurred:
– the extent of the reversionary interests principally with respect
to Tri-Star’s ownership and/or rights to use or access certain
project infrastructure; and
– the repayment by Tri-Star of the ongoing royalty which
has been paid by APLNG since reversion, resulting from its
mistake as to the occurrence of the reversion trigger.
If APLNG is successful in defending Tri-Star’s past reversion claims in
the 2015 proceeding, the potential for reversion to otherwise occur
in the future in accordance with the reversion trigger will remain.
In 2017, Tri-Star commenced separate proceedings against APLNG
(‘2017 proceeding’) which allege that APLNG breached three CSG
joint operating agreements by failing to offer Tri-Star (and the
other minority participants in those agreements) an opportunity
to participate in the “markets” alleged to be constituted by certain
of APLNG’s LNG and domestic gas sales agreements, including
the Sinopec and Kansai LNG sale agreements entered into by
APLNG in 2011 and 2012. Tri-Star has alleged that it should have
been offered participation in those sales agreements for its share
of production from those three CSG joint ventures referable to
both its small participating interests and its reversionary interests
in those joint ventures (the markets claim). In that regard, Tri-Star
is claiming, amongst other things, damages and/or an order that
APLNG offer Tri-Star (and the other minority participants in those
CSG joint operating agreements) the opportunity to participate in
those sales agreements for their proportionate share of production
from those three CSG joint ventures. APLNG denies these claims
and is defending these proceedings.
In September 2019, Tri-Star made further claims in the 2017
proceeding relating to:
•
the nature and scope of the obligations of APLNG as operator
pursuant to the CSG joint operating agreements;
• Tri-Star’s ownership and/or rights to use or access certain project
infrastructure; and
• APLNG’s entitlement as operator to charge (both historically and
in the future) certain categories of costs under the relevant CSG
joint operating agreements.
APLNG filed defences and counterclaims in both proceedings in
April and May 2020. In December 2020, Tri-Star filed replies and
answers in both proceedings. APLNG filed its rejoinders in the
2015 proceeding and the 2017 proceeding in February and April
2021 respectively. APLNG filed a further amended defence and
counterclaim in the 2015 proceeding in December 2021.
In September 2021, Tri-Star filed and served an application in both
proceedings for questions to be determined separately (or further
or alternatively referred to a referee to conduct an inquiry into and
prepare a report to the court on those questions). The questions
proposed for separate determination in those applications included
50
Annual Report 2023
the issue of whether the 2008 ConocoPhillips subscription monies
are revenue for the purposes of the calculation of the reversion
trigger. APLNG opposed those applications. The applications were
heard in April 2022 and both were ultimately dismissed by the Court.
Tri-Star recently notified APLNG that it intends to seek to amend its
claims in both proceedings. In relation to the 2017 proceedings,
Tri-Star’s proposed amendments include it not continuing with
the markets claim. In relation to the 2015 proceedings, Tri-Star’s
proposed amendments include:
• not continuing with the Sinopec reversion claim (that is, the
claim that reversion occurred in 2011 or 2012, following Sinopec’s
investment in APLNG);
•
•
the addition of an alternative claim that if the ConocoPhillips
reversion claim is not successful, the reversion trigger
nevertheless occurred by no later than 1 August 2022;
the addition of alternative bases for Tri-Star’s claims for
compensation or damages relevant to the consequences of the
alleged past reversion, including as:
– compensation calculated on the basis of loss of opportunity to
sell the affected CSG interests in 2008 or 2009;
– equitable compensation calculated on the basis of the ‘market
value’ of the gas produced from the affected CSG interests
since the alleged reversion on 1 November 2008); or
– an account of the profits earned by APLNG or its affiliates
from the affected CSG interests since 1 November 2008 with
Tri-Star asserting that the revenue received by APLNG for that
gas is to be calculated in a similar manner to the existing claim.
As to the proposed claim for equitable compensation, Tri-Star
asserts that the “market value” of the gas should be determined
by reference to the wholesale spot price for domestic gas on the East
coast of Australia as at the date of trial or, alternatively, by reference
to the wholesale gas market prices for the East coast of Australia as
at the relevant date the gas was sold plus compound interest. Tri-Star
concedes that certain processing and transportation costs (which
have not been quantified by Tri-Star) will also need to be deducted to
determine the quantum of this claim. There are presently a number
of uncertainties as to the quantum of this claim, if it were able to be
established by Tri-Star, including details of Tri-Star’s calculations as
to the market value of the gas, the amount of costs to be deducted,
changes to the amount claimed to account for sales of gas up to
the date of trial and the prevailing relevant prices at, and ahead, of
that date.
Tri-Star has not yet served a final version of its proposed amended
pleadings and will need the leave of the Court to file any such
amendments. If leave is granted, once Tri-Star files its amended
claims and statements of claim, APLNG will prepare and file
amended defences and counterclaims in response to defend the
amended claims. The parties may also need to prepare replies and
rejoinders. Once that process is finalised, the Court will make further
orders for the conduct of the two proceedings.
Before the proceedings are set down for trial, the Court would
ordinarily order a number of procedural steps to be completed by
the parties, including document disclosure, evidence preparation
and exchange and pre-trial mediation. The process that will be
followed in the 2015 and 2017 proceedings (and the procedural
timetable) will depend on the decisions of the Court and is difficult
to predict at this stage.
If APLNG is not successful in defending all or some of the claims
being made in the proceedings by Tri-Star, APLNG’s financial
performance may be materially adversely impacted and the amount
and timing of cash flows from APLNG to its shareholders, including
Origin, may be significantly affected.
Operating and Financial Review
51
Statutory Profit and Underlying Profit is provided in Section 5.1 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 of this OFR. Non-IFRS financial 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.
Emissions data
Origin reports its Scope 1 and Scope 2 emissions under the
National Greenhouse and Energy Reporting Act, 2007 (NGER)21.
Origin calculates Scope 3 emissions based on the Greenhouse
Gas Protocol’s Corporate Value Chain (Scope 3) Accounting and
Reporting Standard22 and Scope 3 guidance documents23.
Due to the inherent uncertainty and limitations in measuring
emissions under the calculation methodologies used in the
preparation of such data, all emissions data or references to
emissions volumes (including ratios or percentages) in this
presentation are estimates. Where data is not available due to
timing, Origin applies a reasonable estimation methodology. Where
applicable, Origin revises prior year data to update prior estimates
and align with external reporting requirements such as NGER.
Enforceable Undertaking with SafeWork NSW
In March 2020 an explosion and fire occurred at Origin Energy’s
Minto LPG Terminal, New South Wales while a worker was filling
LPG cylinders. No injuries were sustained. On 10 August 2023,
SafeWork NSW accepted an Enforceable Undertaking (EU) from
Origin Energy LPG Limited (ACN 000 508 369) (Origin Energy LPG)
in accordance with Part 11 of the Work Health and Safety Act 2011.
The EU requires Origin Energy LPG to carry out the following
key actions to deliver benefits to the workplace, industry and
the community:
• hosting a series of workplace and community events which will
seek to prevent and reduce psychosocial risks in the workplace
and the community, promoting awareness of mental health and
early preventative measures;
• developing guidance materials for industry and community
regarding safely working with or in the vicinity of gas cylinders,
tanks, gas systems and gas appliances that may be affected by
major flood or storm events; and
• engaging subject matter experts to develop updated industry
guidance on hazards, risks and control measures in relation to
electrostatic discharge as a potential ignition source for LPG or
LPG vapour.
This disclosure has been made under the terms of the EU and
acknowledges acceptance of the EU by Origin Energy LPG .
9 Important information
Forward looking statements
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.
This OFR also contains forward looking statements in the form
of scenario analysis. These are based on management’s current
expectations and reflect judgments, assumptions, estimates and
other information available as at the date of this OFR and/or the
date of Origin’s planning processes or scenarios analysis processes.
There are inherent limitations with scenario analysis and it is difficult
to predict which, if any, of the scenarios might eventuate. Scenarios
do not constitute definitive outcomes or probabilities, and scenario
analysis relies on assumptions that may or may not be, or prove to
be, correct and may or may not eventuate. Scenarios may also be
impacted by additional factors to the assumptions disclosed.
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, completeness or
likelihood of fulfilment of any forward looking statement any
assumption on which a forward looking statement is based. The
forward looking statements in this OFR reflect views held only at
the date of this report and except as required by applicable law, the
Relevant Persons disclaim any obligation or undertaking to publicly
update any forward looking statements whether as a result of new
information or future events.
Information on likely developments in the Company’s business
strategies, prospects and operations for future financial years
and the expected results that could result in unreasonable
prejudice to the Company (for example, information that is
commercially sensitive, confidential or could give a third party a
commercial advantage) has not been included in this OFR. The
categories of information omitted include forward-looking estimates
and projections prepared for internal management purposes,
information regarding the Company’s operations and projects,
which are developing and susceptible to change, and information
relating to commercial contracts.
Non-IFRS financial measures
This OFR and Directors’ Report refers 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-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
21 National Greenhouse and Energy Reporting NGER (cleanenergyregulator.gov.au)
22 Corporate Value Chain (Scope 3) Standard | Greenhouse Gas Protocol (ghgprotocol.org)
23 Scope 3 Calculation Guidance | Greenhouse Gas Protocol (ghgprotocol.org)
52
Annual Report 2023
Appendix
1 Deferred Tax Liability - investment in APLNG
There is an unrecognised deferred tax liability in respect of our investment in APLNG because the accounting cost base of the investment
is higher than the tax cost base. The accounting carrying value has been augmented, primarily as a result of our equity accounted share of
retained profits to date, while the tax cost base reflects only the cash outlaid.
Consistent with accounting standards, the deferred tax liability has not been recognised historically because
1. Origin is able to control the timing of distributions from APLNG which would reverse the temporary difference; and
2. It has not been probable that the temporary difference will reverse in the foreseeable future via dividends paid from current retained
earnings, capital returns or a disposal.
As it had become probable in FY2021 that APLNG would begin to distribute cash to shareholders via dividends in the coming years, Origin
recognised a deferred tax liability. Recognition of the deferred tax liability only impacts the timing of accounting for the tax expense and has
no impact on the underlying economics or cash flows.
During the year, the unfranked ordinary dividends of $1,783 million were received from APLNG.
The unfranked dividends received during the year were higher than our share of equity accounted income of $1,184 million, which means the
excess has been paid out of prior year profits.
The proportion paid from current year earnings gave rise to a tax expense of $355 million and the balance paid out of prior year profits resulted
in the partial utilisation of previously recognised deferred tax liability of $180 million.
As at 30 June 2023, we have a deferred tax liability on the balance sheet of $528 million, representing 30 per cent of the dividends expected
to be paid by APLNG in the foreseeable future from the carried forward equity accounted earnings based on current market assumptions,
including future oil prices, in respect of our interest of 27.5 per cent.
There is a remaining unrecognised deferred tax liability at 30 June 2023 of $759 million which may be partly or fully recognised in the future.
2 Accounting for large-scale generation certificate trading strategy
Supply and demand for large-scale generation certificates (LGCs) is driven by the rate of new renewable projects coming online, voluntary
demand for carbon offsets as well as the compliance obligations under the Large-scale Renewable Energy Target (LRET). Renewable project
delays and generation curtailments have led to a near-term tightening of the LGC market. However, it is expected that the 33 TWh legislated
target will be exceeded and longer term the market will be oversupplied. The Clean Energy Regulator has acknowledged this and provides
the option for parties to shift demand from periods of tight supply by deferring the surrender of certificates to later years. Under the scheme,
parties can defer up to 10 per cent of their obligation at no additional cost and can defer more than 10 per cent by incurring a shortfall charge of
$65 per certificate that is refundable provided the LGCs are surrendered within three years. Refunds are now non-assessable for tax following
legislative change and aligns with the non-deductible treatment of the shortfall charge.
This presents an economic opportunity with the LGC forward curve in backwardation and Origin has elected to defer surrender of
2.5 million CY2020 certificates in February 2021, 3.6 million CY2021 certificates in February 2022, and 3.2 million CY2022 certificates in
February 2023.
During FY2023, a shortfall charge of $206 million was paid in relation to CY2022 certificates of which $92 million was accrued in FY2022.
Included in the FY2023 Underlying Profit is a cost of $38 million, reflecting the estimated future surrender cost, based on a weighted average
of the current forward price and purchases to date, comprising:
•
•
1.4 million CY2022 certificates recorded in FY2022 repriced from $14 to $18;
1.8 million CY2022 certificates at $18 per certificate.
The balance of $76 million is excluded from Underlying Profit.
Over FY2024 to FY2026 we will receive a net cash refund of $425 million, representing the shortfall charge paid less the actual cost of
the certificates:
• $114 million in FY2024;
• $163 million in FY2025;
• $148 million in FY2026.
Operating and Financial Review
53
Statutory
Profit
($m)
Adjustment
($m)
Underlying
Profit
($m)
CY2020 and CY2021 certificates shortfall
Shortfall charge (~4.1 million certificates x $65; $160 million paid and $102 million accrued)
(262)
Expected surrender cost (~2.5 million CY2020 certificates x $19)
Expected surrender cost (~1.6 million CY2021 certificates x $12)
FY2021 impact
Reassessment of FY2021 impact, remaining CY2021 certificates shortfall and CY2022
certificates shortfall
Shortfall charge accrued (~3.5 million certificates x $65; $236 million paid and
$92 million accrued)
Reassessment of CY2021 shortfall recorded in FY2021 (~1.6 million certificates x $8)
Expected surrender cost (~2 million CY2021 certificates x $20)
Expected surrender cost (~1.4 million CY2022 certificates x $14)
FY2022 impact
Reassessment of FY2022 impact and remaining CY2022 certificates shortfall
Shortfall charge accrued (~1.8 million certificates x $65; $206 million paid)
Reassessment of CY2022 shortfall recorded in FY2022 (~1.4 million certificates x $4)
Expected surrender cost (~1.8 million CY2022 certificates x $18)
FY2023 impact
CY2020 certificates surrender
Surrender (~2.5 million certificates x $19)
Shortfall refund (~2.5 million certificates x $65)
FY2024 impact
CY2021 certificates surrender
Surrender (~3.6 million certificates x $20)
Shortfall refund (~3.6 million certificates x $65)
FY2025 impact
CY2022 certificates surrender
Surrender (~3.2 million certificates x $14)
Shortfall refund (~3.2 million certificates x $65)
FY2026 impact
Total cost of ~9.3 million certificates
-
-
(262)
(225)
-
-
-
(225)
(114)
-
-
(114)
(46)
160
114
(72)
235
163
(58)
206
148
(177)
262
(46)
(18)
198
225
(13)
(41)
(20)
151
114
(6)
(32)
76
46
(160)
(114)
72
(235)
(163)
58
(206)
(148)
-
(46)
(18)
(64)
-
(13)
(41)
(20)
(74)
-
(6)
(32)
(38)
-
-
-
-
-
-
-
-
-
-
(177)
54
Annual Report 2023
Directors’ Report
For the year ended 30 June 2023
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 2023.
The Operating and Financial Review and Remuneration Report form
part of this Directors’ Report.
1 Principal activities, review of
operations and significant change in
state of affairs
During the year, the principal activity of Origin was the operation of
energy businesses including exploration and production of natural
gas, electricity generation, wholesale and retail sale of electricity and
gas, and sale of liquefied natural gas. There have been no significant
changes in the nature of those activities during the year and no
significant changes in the state of affairs of the Company during
the year.
The Operating and Financial Review, which forms part of this
Directors’ Report, contains a review of operations during the
year and the results of those operations, the financial position of
Origin, its business strategies, and prospects for future financial
years, including likely developments in Origin’s operations in future
financial years and the expected results of those operations.
2 Events subsequent to balance date
Other than the matters described below, no matters or
circumstances have arisen since 30 June 2023, 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.
On 17 August 2023, the Directors determined a final dividend of 20
cents per share, fully franked, on ordinary shares. The dividend will
be paid on 29 September 2023.
On 18 July 2023 the directors of APLNG determined unfranked
dividends to be paid to shareholders. Origin received unfranked
dividends from APLNG of US$65 million (A$98 million) on
26 July 2023.
b. In respect of the current financial year, the Directors have
determined a final dividend as follows:
20 cents per ordinary share,
fully franked, for the full year
ended 30 June 2023 payable
29 September 2023
$ million
345
The Dividend Reinvestment Plan (DRP) will not operate for the
FY2023 final dividend.
4 Directors and Company Secretary
The Directors of the Company at any time during or since the end
of the financial year, their qualifications, experience and special
responsibilities are set out on pages 6 and 7. The qualifications and
experience of the Company Secretary is also set out below:
Scott Perkins
Independent Non-executive Chair
Frank Calabria
Managing Director and Chief Executive Officer
Ilana Atlas
Independent Non-executive Director
Maxine Brenner
Independent Non-executive Director
Greg Lalicker
Independent Non-executive Director
Mick McCormack
Independent Non-executive Director
Bruce Morgan
(retired 19 October 2022)
Independent Non-executive Director
Steven Sargent
Independent Non-executive Director
Nora Scheinkestel
Independent Non-executive Director
Joan Withers
Independent Non-executive Director
On 15 August 2023 the directors of APLNG determined further
unfranked dividends to be paid to shareholders. Origin expects to
receive US$115 million on 29 August 2023.
Helen Hardy
Company Secretary
3 Dividends
a. Dividends paid during the year by the Company were as follows:
$ million
284
284
16.5 cents per ordinary share,
partially franked to 75 per cent, for
the full year ended 30 June 2022,
paid on 30 September 2022
16.5 cents per ordinary share,
fully franked, for the half year
ended 31 December 2022, paid on
24 March 2023
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 PwC and Freehills. Helen is a Chartered
Accountant, Chartered Secretary and a Graduate Member of the
Australian Institute of Company Directors. Helen is a Director of the
Governance Institute of Australia and a member of its Legislative
Review Committee. She holds a Bachelor of Laws and a Bachelor of
Commerce from the University of Melbourne, a Graduate Diploma in
Applied Corporate Governance and is admitted to legal practice in
New South Wales and Victoria.
Directors’ Report
55
5 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:
Directors
I Atlas
M Brenner
F Calabria
G Lalicker
B Morgan3
M McCormack
S Perkins
S Sargent
N Scheinkestel
J Withers
Scheduled
Additional
Audit
Sustainability Nomination
Safety &
H1
A2
H1
9
9
9
9
3
9
9
9
9
9
9
9
9
9
3
9
9
9
9
9
11
11
11
11
2
11
11
11
11
11
A2
10
10
11
10
2
11
11
11
11
9
H1
A2
H1
A2
H1
A2
-
4
-
-
1
4
4
-
4
4
-
4
-
-
1
4
4
-
4
4
-
5
5
5
-
5
5
5
-
-
-
5
5
5
-
5
5
5
-
-
-
2
-
-
1
-
2
2
2
2
-
2
-
-
1
-
2
2
1
2
Remuneration,
People &
Culture
H1
5
A2
5
-
-
-
-
5
5
5
-
-
-
-
-
-
5
5
5
-
-
Risk
H1
A2
5
5
-
-
2
-
5
5
5
5
5
5
-
-
2
-
5
5
4
5
1 Number of meetings held during the time that the Director held office or was a member of the Committee during the year.
2 Number of meetings attended.
3 Prior to the date of retirement on 19 October 2022.
The Board held nine scheduled meetings, including an annual strategic review and eleven additional meetings to deal with urgent matters.
There were also two scheduled workshops. In addition, the Board conducted in-person and virtual visits of Company operations at various
sites and met with operational management during the year.
6 Directors’ interests in shares, Options and Rights
The relevant interests of each Director as at 30 June 2023 in the shares and Rights over such instruments issued by the companies within
the consolidated entity and other related bodies corporate at the date of this report are set out below. There are no outstanding options
over shares.
Director
I Atlas
M Brenner
F Calabria
G Lalicker
M McCormack
S Perkins
S Sargent
N Scheinkestel
J Withers
Ordinary shares held
directly and indirectly
Restricted
shares
Performance Share Rights
(PSR) over ordinary shares
Restricted Share Rights
(RSR) over ordinary shares
50,000
28,367
886,642
100,000
100,000
80,000
41,429
33,365
29,980
-
-
-
-
463,071
618,3851
-
-
-
-
-
-
-
-
-
-
-
-
-
618,3811
-
-
-
-
-
1 The exercise price for Rights is nil. There are no outstanding Options.
No Director other than the Managing Director and Chief Executive Officer participates in the Company’s Equity Incentive Plan.
56
Annual Report 2023
Securities granted by Origin
Non-executive Directors do not receive Options or Rights as part of their remuneration. Non-executive Directors are eligible to participate in
the Non-executive Director Share Plan (NEDSP) which is a fee sacrifice plan. During the year, one allocation and vesting of Rights occurred
as a result of a Non-executive Director electing to participate in the NEDSP in FY22. No new participants entered the NEDSP and no further
fees sacrifice was made by the existing participant in FY23.
The following securities were granted to the five most highly remunerated officers (other than Directors) of the Company during the year
ended 30 June 2023:
J Briskin
G Jarvis
A Lucas
A Thornton
L Tremaine
Performance
Share Rights
(PSR) over
ordinary shares
Restricted
Share Rights
(RSR) over
ordinary shares
65,002
65,748
61,067
61,883
73,281
65,004
65,751
61,068
61,881
73,281
Restricted
Shares
90,819
93,268
61,348
100,836
110,146
Matching Share
Plan Rights1
Employee Share
Plan Shares
367
367
-
367
367
-
-
161
-
-
1 Matching Share Plan Rights were granted in accordance with the Employee Share Plan rules and disclosed to the ASX at the time of grant. The Employee Share Plan is available
to all eligible Origin employees. The Managing Director and Chief Executive Officer is not eligible to participate in the Employee Share Plan. The Employee Share Plan was
suspended from 1 April 2023. Refer to Section 3.7 of the Remuneration Report for further details.
The awards of Restricted Shares, Performance Share Rights, and Restricted Share Rights were made in accordance with the Company’s Equity
Incentive Plan as part of the relevant Executive’s remuneration. Further details on Rights granted during the financial year, and unissued shares
under Rights, are included in Section 7 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 2023, so no ordinary shares in
Origin were issued as a result.
Rights
814,297 ordinary shares of Origin were allocated from the Origin Energy Limited Employee Share Trust during the year ended 30 June 2023
on the vesting and exercise of PSRs under the Equity Incentive Plan, vesting and exercise of Matching Share Plan Rights granted under the
Employee Share Plan and vesting and exercising of Rights under the Non-executive Director Share Plan. No amounts were payable on the
vesting of these PSRs and Matching Share Plan Rights and, accordingly, no amounts remain unpaid in respect of any of those shares.
Since 30 June 2023, 3,389 ordinary shares were allocated from the Origin Energy Limited Employee Share Trust on the vesting of Matching
Share Plan Rights granted under the Employee Share Plan.
All shares in the Origin Energy Limited Employee Share Trust were purchased on market.
7 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 2023, the Company notified 24 environmental reportable incidents to the relevant regulators (Integrated Gas: 13 and Energy
Supply and Operations: 11). All of these incidents resulted in minor environmental consequences with the appropriate level of investigation
undertaken. All incidents are investigated, and lessons learned captured and shared across the Company. Integrated Gas received one Formal
Warning Letter and three Compliance Notices because of these incidents.
During the year ended 30 June 2023, Integrated Gas received two Prosecutions, one Penalty Infringement Notice, one Formal Warning Letter
and three Compliance Notices from the Department of Environmental Science and Department of Resources in Queensland for previous
incidents and other compliance related matters. Within Energy Supply and Operations there was one Formal Warning Letter received.
Directors’ Report
57
8 Indemnities and insurance for
10 Non-audit services
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 2023 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 2023.
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.
9 Auditor independence
There is no former partner or director of EY, the Company’s auditors,
who is or was at any time during the year ended 30 June 2023
an officer of the Origin Energy Group. The auditor’s independence
declaration for the financial year (made under section 307C of
the Corporations Act 2001 (Cth)) is attached to and forms part of
this Report.
The amounts paid or payable to EY for non-audit services provided
during the year was $840,000 (shown to the nearest thousand
dollars). Amounts paid to EY are included in note G7 to the full
financial statements.
Based on written advice received from the Audit Committee Chair
pursuant to a resolution passed by the Audit Committee, the
Board has formed the view that the provision of those non-audit
services by EY 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 EY 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 EY which may impact
on auditor independence.
11 Proceedings on behalf of the
Company
The Company is not aware of any proceedings being brought on
behalf of the Company, nor any applications having been made in
respect of the Company under section 237 of the Corporations Act
2001 (Cth).
12 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.
13 Remuneration
The Remuneration Report forms part of this Directors’ Report.
58
Annual Report 2023
Remuneration
Report
For the year ended 30 June 2023
The Remuneration Report for the year ended 30 June 2023 (FY2023) forms part of the Directors’ Report. It has been prepared in accordance
with the Corporations Act 2001 (Cth) (the Act) and Accounting Standards, audited as required by section 308(3C) of the Act.
Letter from the Chairman of the Remuneration, People and Culture Committee
Dear Shareholder
On behalf of the Remuneration, People and Culture Committee (RPCC) and the Board, I am pleased to present the Remuneration Report
for FY2023.
The Company has delivered strong results in a year characterised by extraordinary volatility of commodity prices in the early part of the year
and a changing regulatory environment. The results were driven by a recovery in earnings from Energy Markets and higher contributions from
Octopus Energy and Integrated Gas. Energy Markets earnings increased as higher wholesale prices flowed into customer tariffs. Octopus
Energy earnings increased due to the growth in retail customer accounts and the reset of regulated tariffs in the UK. In Integrated Gas,
higher global oil prices resulted in record revenue for Australia Pacific LNG during the period. Throughout the year, the management team
maintained its focus on executing the clear strategies to lead the energy transition, managing risks and ensuring reliable supply.
FY2023 remuneration outcomes
As foreshadowed in the FY2022 Remuneration Report, following comprehensive benchmarking the Fixed Remuneration (FR) of the CEO was
increased by 4.0 per cent at the start of FY2023. The FR of other Executive Key Management Personnel (KMP) increased by an average of
3.5 per cent, which is slightly less than adjustments applied to staff across the organisation more generally.
There were no changes to the variable pay structure or opportunity levels for executives in FY2023. Details regarding the Short Term Incentive
Plan (STIP) and Long Term Incentive Plan (LTIP) variable pay arrangements are provided in Sections 3.4 and 3.5 respectively.
Remuneration outcomes reflected the strength of operational and financial performance. In summary:
• Scorecard outcomes for the Short Term Incentive Plan (STIP) were 75.3 per cent of the maximum for the CEO, and ranged from
74.0 per cent to 90.2 per cent of the maximum for Other Executive KMP. The aggregate Executive KMP outcome was 79.3 per cent of the
maximum, reflecting the solid results for the year. Further details are provided in Sections 4.2.1 to 4.2.3.
• Long Term Incentive (LTI) awards tested during the year vested partially (16.0 per cent), based on the outcomes of four separate tests
on awards that were granted in the calendar years 2017 and 2019. Full details are provided in Section 4.2.4. Partial vests for each of
the last three years (following eight years of consecutive zero vests) reflect recent improvements in Return on Capital Employed (ROCE)
performance, and (as noted below) recent improvements in Total Shareholder Return (TSR) will be reflected in full LTIP vesting during
FY2024. These trends reflect consistent and strong improvements in long-term performance over the last four years.
On 9 November 2022, the Company received an indicative, conditional and non-binding proposal from a Consortium consisting of Brookfield
and MidOcean Energy (an LNG company managed by EIG) to acquire all the issued shares in the Company by way of a scheme of
arrangement and on 27 March 2023 executed a binding Scheme Implementation Deed (SID) in relation to the proposed scheme of
arrangement (Scheme). The Scheme remains subject to various conditions, including that Origin shareholders approve it at a meeting of
shareholders and that it receives court and regulatory approvals. Following receipt of the proposal, targeted retention arrangements were put
in place during December 2022 that covered 232 employees (at a conditional total value of $17 million) deemed critical to continuing safe
operations, including one member of the Executive KMP. See Section 3.7 for more details.
Remuneration for FY2024
Each year, the RPCC considers the remuneration framework’s continuing appropriateness in terms of Origin’s strategies and priorities. It also
considers the framework’s effectiveness and capacity to provide realisable remuneration that attracts and keeps the right people, drives their
focus and rewards execution.
While the Board concluded this year that the current framework and policy settings remain balanced and appropriate, the operation of the
equity components of the STIP and LTIP has been impacted by the execution of the SID. Remuneration arrangements relating to the Scheme
will be set out in a separate scheme booklet that will be provided to shareholders at the appropriate time. However, some changes to Origin’s
remuneration approach for FY2024 were also necessary because of the proposed Scheme. Since the proposal was announced, Origin’s
share price has become reflective of the proposed bid price. This impacts the assessment of performance, particularly in relation to the
use of a Relative TSR hurdle, which has been used historically within Origin’s LTIP. Further, the Scheme requires that no equity incentives
(including share rights and restricted shares) remain on foot after implementation of the Scheme, and the usual performance and deferral
periods associated with Origin’s equity incentives are beyond the likely timing of the proposed Scheme. Accordingly, the Board has approved
the following changes:
• Deferred STI – the FY2023 Deferred STI award (to be granted in September 2023) will be made in the form of Deferred Cash, subject to
the usual deferral periods. See Section 3.4 for further details.
• LTIP – the LTIP award (also to be granted in September 2023) will be made in the form of Deferred Cash, subject to a three-year deferral.
Further, it will be granted at a level equivalent to 75 per cent of the current opportunity level. It will also be subject to financial and
non-financial underpin conditions. See Section 3.5 for more details.
There are no other changes planned to the remuneration framework for FY2024.
Remuneration Report
59
There will be no changes to the structure or level of Non-executive Directors (NED) fees for FY2024.
Increases to FR in FY2024 for Executive KMP will be around 4.0 per cent, which is in line with employees from the wider organisation who
participate in annual market reviews. This includes the legislated increase to the Superannuation Guarantee Levy effective from 1 July 2023
and is consistent with prevailing market movements, economic conditions and benchmarks.
LTI vests that will occur during FY2024 include those for awards granted in November 2020. These awards will vest in full commencing at
the end of August 2023. Further details are provided in Section 4.2.4.
The Board’s view is that the remuneration outcomes over the last few years have appropriately aligned with business performance and
shareholder experience, as intended by the remuneration framework design.
Steven Sargent
Chairman, Remuneration, People and Culture Committee
60
Annual Report 2023
Report structure
The Remuneration Report is divided into the following sections:
1. Key Management Personnel
2. Remuneration link with Company performance and strategy
3. Remuneration framework details
4. Company performance and remuneration outcomes
5. Governance
6. Non-executive Director fees
7. Statutory tables and disclosures
1 Key Management Personnel
The Remuneration Report discloses the remuneration arrangements and outcomes for the people listed below, who are KMP, as defined by
AASB 124 Related Party Disclosures. Members of the RPCC are identified in the last column.
Name
Role
Appointed
Retired
Term as KMP
in FY2023
RPCC
e
v
i
t
u
c
e
x
e
-
n
o
N
e
v
i
t
u
c
e
x
E
S Perkins
I Atlas
M Brenner
G Lalicker
Chairman, Independent
Independent
Independent
Independent
d
r
a
o
B
M McCormack
Independent
B Morgan
S Sargent
Independent
Independent
N Scheinkestel
Independent
J Withers
F Calabria
Independent
Chief Executive Officer (CEO)
L Tremaine
Chief Financial Officer (CFO)
J Briskin
Executive General Manager, Retail
G Jarvis
A Thornton
Executive General Manager, Energy
Supply and Operations
Executive General Manager,
Integrated Gas
20-Oct-20
19-Feb-21
15-Nov-13
1-Mar-19
18-Dec-20
16-Nov-12
29-May-15
4-Mar-22
21-Oct-20
19-Oct-16
10-Jul-17
5-Dec-16
5-Dec-16
1-Nov-21
19-Oct-22
✓
✓
✓
Chair
Full
Full
Full
Full
Full
Part
Full
Full
Full
Full
Full
Full
Full
Full
The term ‘Other Executive KMP’ (abbreviated as ‘Other’ in tables and charts) refers to Executive KMP excluding the CEO.
‘Executive team’ is a broader reference to the Executive Leadership Team (ELT).
Remuneration Report
61
2 Remuneration link with Company performance and strategy
2.1 Overview of remuneration framework
Our remuneration framework is designed to support the Company’s strategy and to reward our people for its successful execution. It is
designed around three principles, which are summarised in the following table.
Principles and purpose
Process
Delivery and timeline
Remuneration
component
Fixed
Remuneration
(FR)
Short Term
Incentive
Plan
(STIP)
To attract and retain the
right people and pay fairly
and competitively.
Takes into account the size and complexity of the
role, and the skills and experience required for
success in the role.
All market-remunerated roles are benchmarked at
least annually to the median (between P40 and
P60) of corresponding roles in organisations with
comparable activity and scale, and with which Origin
competes for talent.
To drive focus and
discretionary effort.
Performance is tested at the end of a one-year
performance period.
It is measured and assessed against a balanced
scorecard, usually comprising up to 10 metrics
(accounting for 60% financial and 40% strategic
priorities), each with targets set at threshold,
expected (target) and stretch (maximum) levels.
The overall scorecard outcome for each participant
determines the proportion of the opportunity
that will be paid (up to a maximum of 100%
of the executive’s opportunity level). Threshold
performance scores 20% of stretch, and target
is defined as 60% of stretch (i.e. stretch is 167%
of target).
For Executive KMP, the maximum opportunity
level is equivalent to 167% of FR (or 100% FR at
target). For other members of the ELT, the maximum
is 125% FR (or 75% FR at target).
Results are subject to Board overview and discretion
to adjust formulaic outcomes up (but no higher than
the opportunity level) or down (including to zero).
Annual grants are made to executives based on their
capacity to influence long-term outcomes. The
awards are granted at the beginning of a three-
year performance period, and may be deferred
for up to five years (inclusive of the three-year
performance period).
For the CEO, the unrisked face value of the grant
is equivalent to 120% FR, with a risked value1 of
90% FR. For Other Executive KMP and other
members of the ELT, the unrisked face value is 80%
(risked value 60% FR).
Cash salaries, employer contributions
to superannuation and salary sacrifice
benefits paid continuously throughout
each year.
Awarded annually; 50% in cash payable
in September following the end of the
financial year, and 50% deferred for two
years following the cash payment.
Deferred elements awarded in August–
September 2022 (in respect of
FY2022 performance) were in the form
of Restricted Shares (restricted for
two years).
The whole of the STI award is forfeited
for resignation/cause prior to payment,
the deferred element is forfeited for
resignation/cause prior to release, and
both elements are subject to clawback.
For FY2024 only: Deferred elements to
be granted in August–September 2023
(in respect of FY2023 performance) will
be in the form of Deferred Cash to be paid
in August 2025.
For awards made in August–October
2022, the award was made at the unrisked
face value (120% FR for the CEO and
80% FR for Other Executive KMP). One
half was made conditional on Relative
TSR performance (delivered in the form
of Performance Share Rights (PSRs),
vesting at the end of the performance
period) and the other half on a suite
of underpinning metrics (delivered in
the form of Restricted Share Rights,
vesting over three to five years). Vested
rights were allocated into Restricted
Shares, with total deferrals (including
performance period) of five years.
Awards are forfeited for pre-vest
resignation/cause and subject to
post-vest clawback.
For FY2024 only: For awards to be
made in August–September 2023, the
award will be made at the risked value1
(90% FR for the CEO and 60% FR for
other executives), conditional on a suite
of underpinning metrics over FY2024,
FY2025 and FY2026, and is to be
paid in the form of Deferred Cash in
August 2026.
n
o
i
t
a
r
e
n
u
m
e
R
e
b
a
i
r
a
V
l
Long Term
Incentive
Plan
(LTIP)
)
R
V
(
To encourage focus on
long-term performance and
sustainability, and to build
executive share ownership in
the business.
1 See Section 3.2 for an explanation of risked value.
62
Annual Report 2023
2.2 Board oversight
Remuneration outcomes are subject to Board oversight and strong governance controls, as set out in Section 5.3. Origin believes that
observance of its values and leadership behaviours, and the quality of its relationships with its customers and the community, are inextricably
linked to the creation of shareholder value. Prior to making remuneration determinations, the full Board conducts formal reviews of
management that incorporate individual performance, risk management and leadership behaviours. The Board may adjust variable outcomes
up or down.
2.3 Minimum Shareholding Requirement for Executive Key Management Personnel
A key objective of the remuneration framework is to promote employee share ownership and to encourage employees to think and act as
owners. Equity is therefore a key element of remuneration, representing half of STI awards and the whole of LTI awards. This is supplemented
by other share plan arrangements, including salary sacrifice, share purchase and matching plans (see Section 3.7).
Executive KMP are required to build and maintain a substantial shareholding in the Company (that is, the Minimum Shareholding Requirement
(MSR)). Executives are not expected to purchase shares to meet the requirement. The MSR operates as an additional trading restriction,
which prevents the disposal of shares that have been generated from executive share plans (other than to cover arising tax liabilities)
until the MSR has been achieved and maintained. The requirement would normally be achieved within four years of the first equity grant
following appointment.
The MSR is referenced to one of two nominal multiples of FR, one for the CEO and one applicable to all Other Executive KMP. Following
changes to the LTIP in August 2020, the reference multiples are scheduled to increase from 200 per cent of the FR to 250 per cent of the FR
for the CEO, and from 100 per cent to 150 per cent of the FR for Other Executive KMP. The scheduled increase will be effective after August
2023, which is the earliest date the new plan can begin to impact vesting patterns.
For transparency, simplicity and practicability,1 the MSR is expressed as a number of shares rather than a dollar value. From time to time, the
Board changes this number, which is determined by taking into account changes in FR, changes to STI deferral or LTI opportunity levels, and
the medium-term share price trend. The current determinations of 620,000 shares (CEO) and 130,000 shares (Other Executive KMP) are
scheduled to increase to 720,000 and 160,000, respectively, in 2024.
Share rights awarded under incentive plans do not count towards the MSR obligation.
Table 7.4 (a) shows that the CEO and Executive KMP exceed both the current and FY2024 MSR requirements.
1 A practical consideration is that Executives periodically need to sell shares to meet Employee Share Scheme tax obligations. Any process of tagging shares for MSR according
to the share price of specific shares at grant or allocation (for example) would become exceedingly complex to track when parcels are disposed of according to other tags
(such as cost bases for capital gains tax purposes).
Remuneration Report
63
3 Remuneration framework details
3.1 Fixed Remuneration
FR comprises cash salary, employer contributions to superannuation and salary sacrifice benefits. It takes into account the size and complexity
of the role, and the skills and experience required for success in the role.
FR is reviewed annually, but increases are not guaranteed. Roles are benchmarked to the median of corresponding roles in organisations
with comparable activity and scale, and with which Origin competes for talent.2 In the absence of special factors, new or newly promoted
incumbents generally commence below this reference point and move to the median over time. FR may be positioned above this reference
point where it is appropriate to reward sustained high performance, for key talent retention or where it is necessary to attract and secure key
skills to fill a business-critical role. Accordingly, the individual positioning may vary between approximately the 40th and 60th percentile of
the reference market.
3.2 Variable Remuneration
Variable Remuneration (VR) enables pay to be adjusted upwards or downwards, depending on whether performance outcomes exceed or
fall short of expectations. Unlike bonus systems that pay for performance above expectations but do not reduce pay where performance falls
short, VR does both. It is important to note that the total of FR plus VR is set and benchmarked such that the at target outcome represents
the satisfaction of expected performance.
VR comprises the total of STI and LTI:
• The minimum VR is zero, where no STI or LTI is awarded, or where the STI scorecard outcome is zero and LTI is not awarded or all of it fails
to vest, or where discretion is exercised to reduce such awards or vesting outcomes to zero.
• The target VR represents the total of STI when it is awarded at the target level (60 per cent of maximum), plus the risked value of LTI of the
share rights awarded at face value3 (the present-day value of the probabilistic vesting outcome). The risked value of the Performance Share
Rights (PSRs) subject to a Relative TSR performance condition is 50 per cent of face value (supported by actuarial grant date valuations
over time). The risked value of Restricted Share Rights (RSRs) is considered for this purpose to be 100 per cent of face value. With the
same number of rights awarded equally, the overall risked value is therefore 75 per cent of the face value.
Accordingly, Target VR = (STI at 60 per cent of maximum) + (LTI at 75 per cent of face value allocation).
• The maximum VR is the total of STI awarded at the maximum level, plus the full face value of all LTI assuming 100 per cent vesting.
VR outcomes are subject to Board oversight and discretionary adjustment, as summarised in Sections 4.2 and 5.3.
For LTI grants in FY2024 only, the LTI allocation will be granted in Deferred Cash rather than share rights. Accordingly it will be granted at
75 per cent of the level at which it would have been made had it been granted in the form of share rights. In this instance, the maximum LTI
value is reduced to, and is the same as, the target LTI value.
3.3 Total Remuneration
Total Remuneration (TR) is the sum of FR and VR.
TR at target (TRT)
TR maximum (TRM)
=
=
FR
FR
+
+
target VR
maximum VR
TRT is benchmarked to the median of equivalent TRT in the reference market, with the intention that when Origin’s outcomes are at their
maximum possible (that is, TRM), they will be comparable to the top quartile of the reference TRT.
2 The prime reference is to ASX-listed organisations ranked between seven and 70 by average two-year market capitalisation (excluding foreign domiciles, listed investment
companies or similar), always including AGL, APA Group, Santos and Woodside.
3 The face value at the date of grant is represented by the share price on the date of grant. The face value of deferred equity elements (Deferred STI and LTI) is represented by
the current share price (present-day value) because it is not possible to predict future share prices.
64
Annual Report 2023
3.4 FY2023 Short Term Incentive Plan details
The following is a detailed description of the operation of the STIP.
Parameter
Award basis
Details
The annual performance cycle is 1 July to 30 June. Individual balanced scorecards are agreed, with shared Group
objectives and targeted divisional objectives. Objectives are set across financial categories (generally 60 per cent of the
weightings) and non-financial categories (generally 40 per cent). The CEO’s FY2023 scorecard details and outcomes
are shown in Section 4.2.
Scorecard operation
Individual objectives on the scorecard are referenced to three performance levels: threshold, target and stretch (with
pro-rating between each).
Threshold performance represents the lower limit of rewardable outcome for an individual objective – one that
represents a satisfactory outcome, often achieving year-on-year improvement and contribution towards delivery of
annual plans, but falling short of the target level. Threshold performance yields 20 per cent of the maximum (33 per cent
of target).
Target represents the expectation for achieving robust annual plans, yielding 60 per cent of the maximum.
Stretch performance represents the delivery of exceptional outcomes well above expectations, yielding the maximum
payout (corresponding to 167 per cent of target).
Opportunity level
Award calculation
and assessment
Delivery and timing
RS allocation
Service conditions and
cessation of employment
The opportunity level for FY2023 for all Executive KMP was unchanged at 100 per cent FR at target, with a capped
maximum of 167 per cent of FR.
Achievement and performance against each Executive’s balanced scorecard is assessed annually as part of the
Company’s broader performance review process and is subject to Board oversight and adjustment as detailed in
Sections 2.2 and 5.3.
The STI award is delivered in two parts, a cash element and a deferred element, each representing half of the award. Both
elements are delivered shortly after the end of the financial year to which they relate. The deferred element is delivered
in the form of Restricted Shares (RSs), that are restricted for two years. The award is subject to forfeiture if the service
conditions are not met (as set out below).
For deferred awards to be granted in FY2024 only (noting that these awards relate to FY2023 performance), the
deferred element will be delivered in the form of Deferred Cash, deferred for two years (until July 2025).
Where the deferred element is granted in the form of RSs, the number of RSs = Deferred STI amount divided by the
30-day volume-weighted average price (VWAP) to 30 June of the performance year just completed, rounded to the
nearest whole number.
Unless the Board determines otherwise:
• For resignation or dismissal with cause, the whole of an STI award is forfeited. Deferred elements from prior awards
that are within their restriction or deferral period are also forfeited.
•
In cases of death, disability, redundancy or genuine retirement (good leaver circumstances), to the extent that an STI
award is payable, it is delivered wholly in cash. Deferred elements from prior awards that are within their restriction
or deferral period remain on foot until the end of their restriction or deferral period.
Dividends
As the STI has been earned and awarded, RSs carry dividend entitlements and voting rights.
Remuneration Report
65
Parameter
Sourcing of RSs
Details
The Board’s practice is to purchase shares on market, but it may issue shares or make the award in alternative forms,
including Deferred Cash.
Governance and MSR
After restrictions on RSs are lifted, trading is subject to the MSR (see Section 2.3), the Company’s Dealing in Securities
Policy, and to the malus and clawback provisions in Section 5.3.
3.5 FY2023 Long Term Incentive Plan details
The following is a detailed description of the operation of the LTIP.
Parameter
Award basis
Opportunity and
value range
Details
LTIP awards are conditional grants of equity that may vest in the future, subject to the meeting of performance
conditions and/or underpinning criteria, and subject also to the Executive meeting service and personal conduct and
performance requirements. Awards are considered annually for approximately 75 senior roles that have significant
influence on long-term company performance.
The LTIP opportunity level reflects the capacity of the role to influence long-term sustainable growth and performance,
and is set with reference to market benchmarks (see Section 3.2). Opportunity levels are expressed as a percentage of
FR (at the commencement of the financial year in which the grant is to be made) and in terms of the total face value of
the awards (that is, not discounted for risk).
LTIP opportunity (percentage of FR)
Executive KMP
Minimum
Maximum
CEO
Other
0
0
120
80
Awards are granted at face value. The Board may determine that the allocation should be varied up or down; however,
in the normal course of events awards are granted at the maximum opportunity level (given that they are subject to
future performance and underpinning conditions, and are also subject to malus and clawback processes). The value of
an award is as follows:
• The minimum value is zero (which will be the case if the award fails to vest, is forfeited or is not awarded).
• The target value represents the risked or expected value of the maximum grant, taking into account the likelihood
of vesting (see Section 3.2).
• The maximum value represents the present-day face value of the maximum grant, assuming that 100 per cent of the
grant vests, ignoring the risks of achieving performance conditions and of the service requirements.
The actual or realised value of an LTIP award depends on the level of vesting and the share price at the time of vesting,
neither of which can be determined in advance.
LTIP awards are delivered in the form of share rights. The share rights do not carry any dividend or voting entitlements.
Each vested share right represents a right to a fully paid ordinary share (as an RS) in the Company and such additional
shares equal to the value of dividends (as determined by the Board) in the period from grant to exercise on the
underlying share on a reinvested basis. The terms and conditions applying to the share rights or RSs also apply to the
dividend-equivalent amounts and shares. The Board retains a discretion to make a cash equivalent payment to settle the
dividend-equivalent amount in lieu of an allocation of shares. The share rights are granted at no cost because they are
awarded as remuneration.
No dividend or dividend-equivalents are received by participants on share rights during a vesting period, and none
are received on share rights that do not vest. Shares allocated upon vesting of rights (including rights to a dividend-
equivalent amount) carry the same dividend and voting rights as other shares (including while they are subject to a
holding lock).
Vehicle, dividends and
voting rights
Number and type of
share rights
The total number of share rights to be granted is calculated by taking the face value of the award being made and
dividing it by the 30-day VWAP of Origin shares to 30 June preceding the grant, rounded to the nearest whole number.
The award is divided into two halves, each with its own vesting conditions.
One half of the share rights is awarded as PSRs that are subject to a Relative TSR (RTSR) performance condition with a
conventional vesting scale.
The other half of the share rights is awarded as RSRs where vesting is subject to Board discretion with reference to a suite
of underpinning conditions as described below. The number of RSRs will be divisible by three because this tranche is
further divided into three equal parts, which vest progressively as described below.
66
Annual Report 2023
Parameter
Details
Vesting and release
All of the share rights are deferred for five years.
PSR tranche
RSR tranche
The PSR tranche vests (subject to achievement against the RTSR vesting scale) into RSs at the end of the three-year
performance period, remaining under a holding lock for a further two years.
The RSR tranche vests (subject to Board discretion) progressively after three, four and five years. The part that vests after
three years is into RSs that remain under a two-year holding lock; the part vesting after four years is locked for a further
year; and the final part vests after five years into unrestricted shares.
The vesting dates corresponding to the three-year, four-year and five-year periods are determined as the second trading
day after the release of the respective full-year results. For awards granted in September and October 2022, these are
expected to be 26 August 2025, 25 August 2026 and 24 August 2027 (Release Date).
At all times before and after vesting, and after release from a holding lock, the share rights and shares remain subject to
malus and clawback provisions (Section 5.3). They may also be subject to trading restrictions arising from the MSR (see
Section 2.3) and from the Company’s Dealing in Securities Policy.
RTSR measures the Company’s TSR performance relative to a reference group of companies, assuming reinvestment of
dividends, measured over three financial years with vesting deferred for a further two years. It has been chosen because
it aligns Executive reward with shareholder returns. It rewards only when Origin outperforms the reference group; it
does not reward overall market uplifts. The market reference group is the S&P/ASX 50,1 representing a transparent and
widely understood group of companies with which Origin competes for investors, skills and talent. Narrower comparator
groups have not been chosen due to the small number of companies with investment profiles and operations similar to
those of Origin.
In calculating RTSR, share prices are determined using three-month VWAPs to the start and end of the
performance period.
Vesting occurs only if Origin’s TSR over the performance period ranks it higher than the 50th percentile of the group.
Half of the PSRs vest on satisfying that condition, and all of the PSRs vest if Origin ranks at or above the 75th percentile.
Straight-line pro-rata vesting applies between these two points.
In contrast to the PSR tranche, which is conditional on performance against a single external financial metric, the
RSR tranche is designed to vest in full unless there is a material deviation from Board expectations of performance
across approximately 30 key metrics. These metrics reflect the underlying health, performance and sustainability of the
Company and, since FY2021, are reported annually as the Key Sustainability Performance Measures in the Company's
annual Sustainability Report. They cover the four dimensions of Customer, Community, Planet (climate change and
environment) and People. If, at the review date for vesting, the Board considers management’s performance against the
totality of these underpinning indicators has not met its expectations, then it may reduce or cancel vesting accordingly.
Together, the PSR and RSR tranches provide a balance that incorporates a hard, single financial test with a holistic
assessment across the full range of performance areas that will position the Company for ongoing success. This
approach aligns management interests with those of shareholders and stakeholders by building Executive share
ownership and driving focus across the full range of key measures that align operations with long-term strategy.
The RSR vesting review process incorporates outcomes from the Executive Performance Review (described in
Section 5.3) and overall performance with reference to the underpinning indicators, in addition to risk and reputation
matters. Vesting decisions will be disclosed in the relevant Remuneration Report accompanied by a rationale for the
Board’s determinations.
Service conditions and
cessation of employment
Unless the Board determines otherwise:
• For resignation or dismissal with cause, all share rights are forfeited.
Sourcing
Arrangements for
FY2024 only
•
In cases of death, disability, redundancy or genuine retirement (good leaver circumstances), share rights remain on
foot subject to their original terms and conditions (other than the continuing service condition).
The Board’s preferred approach is to satisfy the vesting of share rights through the purchase of shares on market, but it
may issue shares or make the award in alternative forms, including cash or deferred cash.
LTI awards to be made in August–October 2023 will be in the form of Deferred Cash, as noted in the RPCC Chairman’s
introductory letter to this report. As noted in Section 3.2, the allocations will be at the target (risked) opportunity level.
For the CEO, this will be at 90% FR (instead of 120%), and for Other Executive KMP at 60% FR (instead of 80% FR).
The previous financial metric (Relative TSR) is not practicable in the current market circumstances. Accordingly, for
FY2024 only, the underpin arrangements that have previously applied to non-financial metrics will be extended to apply
to financial metrics. These awards will have a simple three-year vesting period, recognising that the rationale for further
exposure to long-term share price movement has been altered, and that the FY2024 award focus is on retention in the
early post-transaction phase.
1 The TSR reference group is set at the commencement of the performance period. For FY2023, it comprised: Aristocrat Leisure Ltd, Amcor Plc, Australia and New
Zealand Banking Group Ltd, APA Group, ASX Ltd, BHP Group Ltd, Bluescope Steel Ltd, Brambles Ltd, Commonwealth Bank Of Australia, Cochlear Ltd, Coles Group Ltd,
Computershare Limited, CSL Ltd, Dexus, Endeavour Group Ltd, Fortescue Metals Group Ltd, Goodman Group, GPT Group, Insurance Australia Group Ltd, James Hardie
Industries Plc, Lendlease Group, Mirvac Group, Mineral Resources Ltd, Medibank Private Ltd, Macquarie Group Ltd, National Australia Bank Ltd, Newcrest Mining Ltd,
Northern Star Resources Ltd, Qantas Airways Ltd, QBE Insurance Group Ltd, Ramsay Health Care Ltd, Rio Tinto Ltd, Resmed Inc, South32 Ltd, Scentre Group, Seek Ltd,
Stockland Corporation Ltd, Sonic Healthcare Ltd, Santos Ltd, Suncorp Group Ltd, Transurban Group, Lottery Corporation Ltd, Telstra Corporation Ltd, Treasury Wine Estates
Ltd, Westpac Banking Corp, Woodside Energy Group Ltd, Wesfarmers Ltd, Woolworths Group Ltd, and Xero Ltd.
Remuneration Report
67
3.6 Remuneration range and mix
The potential range for the CEO’s total remuneration in FY2023 was between a minimum of $1.95 million (his FR) to a target of $5.671 million
and a maximum of $7.565 million (FY2022: $7.276 million). The remuneration mix at target and at maximum is shown in the table below, which
shows the significant proportion of variable or performance-based pay and delivery in equity. Variable or performance-based pay represents
65.5 per cent of the CEO’s package at target outcomes, and 74.2 per cent at maximum outcomes. Forfeitable equity represents 48.3 per cent
at target outcomes and 52.6 per cent at maximum outcomes. Corresponding figures for the average remuneration mix for Other Executive
KMP are also shown in the table below.
Remuneration component
CEO
Other Executive KMP (average)
$’000, %TR
FR cash
STI cash
STI deferred equity
LTI conditional deferred equity
Total remuneration
Variable (performance-
related) component
Equity component
Target
1,955 34.5%
978 17.2%
977 17.2%
1,760 31.1%
5,671
100%
65.5%
48.3%
Maximum
1,955 25.8%
1,632 21.6%
1,632 21.6%
2,346 31.0%
7,565 100%
74.2%
52.6%
Target
980 38.5%
490 19.2%
490 19.2%
588 23.1%
Maximum
980 28.8%
818 24.1%
818 24.1%
784 23.0%
2,548 100%
3,400 100%
61.5%
42.3%
71.2%
47.1%
3.7 Other share plans and deferred remuneration arrangements
The Company operates a universal Employee Share Plan in which all full-time and part-time employees can choose to be eligible for awards of
up to $1,000 worth of Company shares annually, or else participate in a salary sacrifice scheme to purchase up to $4,800 in shares annually.
Under the $1,000 scheme (the General Employee Share Plan (GESP)), shares are restricted for three years or until cessation of employment,
whichever occurs first.
Under the Matching Share Plan (MSP), shares purchased under the sacrifice scheme are restricted for two years or until cessation of
employment, whichever occurs first. For every two shares purchased under the salary sacrifice scheme within a 12-month cycle, participants
are granted one Matching Right (MR) at no cost. The MRs vest two years after the cycle began, provided that the participant remains
employed by the Company at this time. Each MR entitles the participant to one fully paid ordinary share in the Company, or in certain limited
circumstances a cash equivalent payment. The MRs do not have any performance hurdles as they have been granted to encourage broad
participation in the scheme across the Company, and to encourage employee share ownership. All shares are currently purchased on market.
Directors are not eligible to participate in the above schemes, but may participate in the NED Share Plan (NEDSP) by sacrificing Board fees.
This plan is intended to facilitate share acquisition, enabling new Directors to meet their MSR obligations. All NEDs currently meet their MSR
or are recently appointed. In FY2023, there was one participant who received an allocation of shares under the plan.
Directors regularly assess the risk of the Company losing high-performing key people who manage core activities or have skills that are being
actively solicited in the market. Where appropriate, the Board may consider the selected use of deferred payment arrangements to reduce the
risk of such critical loss. From time to time, it may be necessary to offer sign-on equity to offset or mirror unvested equity, which a prospective
executive must forfeit to take up employment with Origin.
Following the receipt on 9 November 2022 of an indicative, conditional and non-binding proposal from the Consortium consisting of
Brookfield and MidOcean Energy to acquire all the issued shares in Origin by way of a scheme of arrangement, targeted retention
arrangements (valued at $17 million) were put in place in December 2022 that covered 232 employees who were deemed critical
to continuing safe operations. These arrangements focused on operational roles, especially those ineligible for Deferred STI and LTI
participation, which afford ongoing retention value. However, one member of the Executive KMP (Executive General Manager, Integrated
Gas) was included due to the unique characteristics of the proposed transaction and the criticality of stewardship in the period ahead (refer
to the disclosure in statutory table 7-2 (a)).
The operation of the share plans has been suspended and no awards are expected to be made under them during FY2024.
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Annual Report 2023
4 Company performance and remuneration outcomes
This section summarises remuneration outcomes for FY2023 and provides commentary on their alignment with Company outcomes.
4.1 Five-year Company performance and remuneration outcomes
The table below summarises key financial and non-financial performance for the Company from FY2019 to FY2023, grouped and compared
with short-term and long-term remuneration outcomes.
Five-year key performance metrics FY2019–23
FY19
FY20
FY21
FY22
FY23
Operational measures
Underlying earnings per share (EPS) (cents)
Net cash from/(used in) operating and investing activities (NCOIA) ($m)
Energy Markets underlying EBITDA ($m)1
Integrated Gas underlying EBITDA (total operations) ($m)
Adjusted net debt ($m)2
Strategic Net Promoter Score (sNPS)3
Total Recordable Injury Frequency Rate (TRIFR)4
Female representation in senior roles (%)5
CEO-1
CEO-2
Senior leadership roles
Origin Engagement Score (%)6
Origin Engagement Score (#)7
STI award outcomes
Percentage of maximum (%)8
Return measures
Closing share price at end of June ($)9
Dividends (cents per share)10
Annual TSR (%)
Three-year rolling TSR (CAGR % pa)11
Group Statutory EBIT ($m)
Underlying ROCE (%)12
LTI outcomes
LTI vesting percentage (%)
58.4
1,914
1,574
1,892
5,417
(9)
4.5
25.0
40.6
34.4
61
57.6
1,813
1,450
1,741
5,158
(3)
2.6
33.3
43.9
33.9
75
17.8
1,183
979
1,135
4,639
4
2.7
33.3
42.9
34.6
74
23.2
3,363
365
1,837
2,838
5
4.0
30.0
43.6
40.8
68
43.4
585
1,278
1,919
2,877
(2)
3.8
30.0
43.6
46.0
–
7.7
73.7
84.1
50.7
73.6
79.3
7.31
25
(26.1)
12
1,432
9.1
5.84
25
(17.7)
(8)
360
8.7
4.51
20
(19.7)
(20.6)
(1,833)
4.4
5.73
29
32.4
(0.4)
(745)
7.1
8.41
36.5
47.6
20.3
1,621
14.2
0
0
35.3
25.0
16.0
1 Earnings before interest, taxes, depreciation and amortisation.
2 Adjusted Net Debt for FY2021 includes first recognition of lease liability ($514 million) under AASB16.
3 sNPS is an industry-recognised measure of customer advocacy. The measures were previously presented on a final-quarter average for each year and have been restated as
the average over the whole of the relevant financial year.
4 TRIFR is the total number of injuries resulting in lost time, restricted work duties or medical treatment per million hours worked.
5 CEO-1 represents Executives reporting directly to the CEO. In line with market practice, it includes the CEO. CEO-2 includes roles directly reporting to CEO-1. ‘Senior
leadership roles’ captures the three reporting levels below CEO and includes roles with base salaries exceeding approximately $200,000 per annum.
6 Until FY2022, employee engagement was measured as an annual score obtained from a single independent survey conducted externally. Commencing in FY2023, employee
engagement is measured continuously through the year through the OfficeVibe online tool.
7 New methodology using OfficeVibe from FY2023. The score is out of 10.
8 This is the total dollar value of STI awarded for Executive KMP as a percentage of their total maximum STI. The percentage of STI forfeited is this amount subtracted from
100 per cent.
9 The opening share price for FY2019 was $10.03.
10 Dividends represent the interim plus final dividends determined for each financial year. For FY2023, this includes the final dividend determined on 17 August 2023 to be paid
on 29 September 2023. The amounts physically paid within each financial year are 10.0 cents, 30.0 cents, 22.5 cents, 20.0 cents, and 33.0 cents respectively.
11 TSR calculations use the three-month VWAP share price to 30 June, reflecting the testing methodology for Relative TSR ranking.
12 Underlying ROCE is defined in the ‘Glossary and Interpretation’ section. Underlying ROCE has been adjusted to exclude the impact of FY2022 $2.2 billion impairment
of goodwill.
Remuneration Report
69
4.2 Variable remuneration outcomes
4.2.1 Assessment process
The Board has adopted governing principles to apply when considering adjustments to measures that are used for remuneration purposes.
The starting points for setting STI scorecard targets are the relevant underlying measures from the financial accounts. Targets set at the
beginning of the year may be subject to events materially outside the course of business and outside the control of the current management,
in which case discretion may be required to vary targets or outcomes to reflect the intended purpose and/or actual results and achievements.
The principles provide a structured process for the consideration of adjustments and the exercise of discretion, and a decision framework that
seeks fairness (to both Executives and shareholders) and balance between favourable and unfavourable events.
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Annual Report 2023
4.2.2 Short-term performance and Short Term Incentive outcomes
STI awards are calculated on the basis of a balanced scorecard, with requirements set at threshold, target and stretch achievement levels. The
CEO’s FY2023 scorecard, showing measures, outcomes and results, is summarised below.4
CEO FY2023 STI scorecard
Measure, rationale and performance
Origin Net Profit Before Tax
(Origin NPBT) ($m)
Measure of earnings and profitability
The stretch result was driven by higher earnings from Energy Markets, Octopus
Energy and Integrated Gas. Earnings from Energy Markets increased as higher
wholesale prices flowed into customer tariffs. Earnings from Octopus Energy
increased due to higher customer accounts and the reset of regulated tariffs in
the UK. Earnings from Integrated Gas increased on higher commodity prices.
Origin NCOIA ex Futures Collateral
(Origin NCOIA) ($m)
Measure of effective cashflow generation
Higher earnings yielded stretch outcomes, notwithstanding unfavourable
working capital movement.
Energy Markets EBITDA
(EM EBITDA) ($m)
Measure of operating performance of the Energy Markets business
The same factors that contributed to the Origin NPBT outcome (without
the Integrated Gas factors) drove the stretch result for the Energy
Markets business.
APLNG Lowest Cost of Supply ($m)
Measure of capital and operating cost in the APLNG business
Financial measures
Cumulative Scope 1 Emissions Reduction (CO2-e)(%) FY2021–2023 against
2017 SBTi Baseline
Measure of progress against our decarbonisation strategy
Shared key priorities
To ensure alignment to strategic outcomes in the operational business
the 'Shared key priorities' measure was introduced for FY2023. Shared
key priorities includes measures, targets and outcomes connected to
Retail X delivery, renewables, storage, Virtual Power Plant (VPP) and
carbon objectives.
Strategic priorities
Non-financial measures
Total
Targets and outcomes
Result
Weight
Threshold
Target
Stretch
(% max)
15%
15%
15%
15%
60%
10%
30%
40%
100%
160
397
-271
16
513
563
614
1282
283
585
663
1278
2638
2538
2438
2627
20
60
100
81.1
8.0
9.0
10.0
9.1
20
60
100
67.7
20
60
100
66.7
20
60
100
75.3
100.0
100.0
100.0
24.2
81.1
63.9
67.7
66.7
75.3
The scorecard reflects financial and operating outcomes achieving 81.1 per cent of the maximum, accounting for 60 per cent of the STI
award. In addition, it reflects performance against the non-financial strategic priorities defined for the year (66.7 per cent of the maximum),
accounting for the remaining 40 per cent of the STI award. The overall scorecard outcome was 75.3 per cent of the maximum (125.8 per cent
of target).
4 The value for each of the three levels are shown along the top of the achievement bar and correspond to results of 20 per cent, 60 per cent or 100 per cent of the maximum,
respectively. The actual achievement is represented by the darker shading along the bar, while the achievement value is recorded below the bar.
Remuneration Report
71
Application of the principles described in Section 4.2.1 included the following:
• The one-off and unplanned financial impacts of the sale of Beetaloo and Canning were excluded.
• Penalties and legal costs associated with regulatory action excluded from underlying financial measures, were included for the purposes
of calculating the relevant metrics.
• The extremity of the La Niña weather events experienced during FY2023 had material impacts to the performance of APLNG beyond
the control of management, adversely impacting the upstream operator’s ability to access well sites to perform drilling, workover and
maintenance activities. The normal practice is not to make adjustments to remuneration metrics for weather events that are within the
forecastable or experiential range; however, the extremity of the impacts this year was well outside that range. The Board determined that
it would be appropriate to adjust for the atypical impact on this occasion. This affected the APLNG Production and Lowest Cost of Supply
metrics. In making the determination the Board noted management’s exceptional responses to achieve rapid recovery.
4.2.3 Executive Key Management Personnel Short Term Incentive outcomes
Origin’s NPBT and NCOIA targets, and therefore results, represent half of the financial metrics for all Executive KMP. The remaining financial
metrics for divisional Executive General Managers are based on divisional targets. Accordingly, scorecard outcomes ranged between 74.0
per cent to 90.2 per cent of the maximum.
Executive KMP
% of target
% of maximum
% forfeited
STI award
F Calabria
L Tremaine
J Briskin
G Jarvis
A Thornton
125.8
127.0
142.0
150.6
123.6
75.3
76.0
85.0
90.2
74.0
24.7
24.0
15.0
9.8
26.0
$’000
2,459
1,371
1,360
1,460
1,127
4.2.4 Long-term performance and Long Term Incentive outcomes
In FY2023, the Company’s share price increased 46.8 per cent (on top of 27.1 per cent in the prior year), and the three-year rolling TSR was
74.0 per cent (CAGR 20.3 per cent pa). The strong operational annual performance is complemented by stabilisation and growth over the
last five years, reflected in the return to partial LTI vesting in FY2021 following eight consecutive years of nil vesting.
LTI awards partially vested (16.0 per cent) during FY2023. Testing involved four different performance measures. Options granted in the 2017
calendar year were conditional on Relative TSR (RTSR) performance over five years – as measured against a peer group of ‘ten-up/ten-down’
companies in terms of market capitalisation. Origin’s TSR performance over that period failed to exceed the 50th percentile ranking, therefore
these awards lapsed. Half of the PSRs granted in the 2019 calendar year were conditional on RTSR performance over three years, as
measured against the S&P/ASX 50 peer group. This award also failed to exceed the 50th percentile ranking in the peer group, therefore it
also lapsed. The other half of the 2019 calendar year PSRs was conditional on ROCE performance over three years, measured separately in
the Energy Markets and Integrated Gas business units (equally weighted). The target for Energy Markets was a three-year average ROCE
(measured on an LTIP basis) of 9.24 per cent. With an actual average outcome of 4.32 per cent this component failed to vest and lapsed. The
target for Integrated Gas was a three-year average ROCE of 7.09 per cent. The actual achieved was 9.03 per cent, which approached the
stretch target of 9.09 per cent. Accordingly, this component vested at 98.5 per cent. The overall vesting outcome for executives depended
on the relative levels of individual awards received by executives in the 2017 and 2019 calendar years. The overall average was 16.0 per
cent. Awards that vested were settled in Restricted Shares (RSs) subject to an additional year of deferral (trading restriction).
As identified in the Letter from the Chairman of the Remuneration, People and Culture Committee, LTI vests that will occur during FY2024
include those for awards granted in November 2020. These awards will vest in full commencing at the end of August 2023. Half of that
grant was awarded as Performance Share Rights (PSRs) subject to a financial market condition (Relative TSR) vesting between 0 per cent
and 100 per cent depending on Origin’s TSR over three years relative to the peer group (S&P/ASX-50). Origin’s TSR over the period was
determined independently to be 74.04 per cent and at the 82.9th percentile of the peer group, resulting in 100 per cent vesting. The other
half of the grant was awarded as RSRs which vest subject to the review process described in Section 3.5. At the end of the year the Board
conducted an Executive Performance Review (summarised in Section 5.3), considering business and individual performance, risk assessment,
together with a three-year lookback (FY2021–FY2023 inclusive) over a holistic suite of metrics reflecting the underlying health, performance
and sustainability of its businesses and the Company overall. Following those reviews the Board determined that performance was strong and
without material deviation from its expectations. Specific reference was made to the Key Sustainability Performance Measures reported in
the Company’s Sustainability Reports. Following those reviews the Board determined full vesting for the RSRs. The PSRs vest into Restricted
Shares with a two-year trading restriction, and the RSRs vest progressively (one third in August 2023, with a two-year holding lock, the next
one-third in August 2024 with a one-year holding lock, and the final one-third is scheduled to vest in August 2025).
The trend in long-term performance outcomes aligns with the long-term performance of the business and with shareholder experience.
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Annual Report 2023
4.3 Total pay received in FY2023
In line with general market practice, a non-AASB presentation of actual pay received in FY2023 is provided below as a summary of real or
take-home pay. AASB statutory remuneration is presented in table 7-2 (a).
($’000)
Executive KMP
F Calabria
L Tremaine
J Briskin
G Jarvis
A Thornton
FR1
1,955
1,080
958
969
912
STI cash2
1,230
686
680
730
563
Short-term
equity3
Long-term
equity4
Actual total
pay received
1,267
708
740
664
368
464
182
92
281
45
4,916
2,656
2,470
2,644
1,888
1 FR is cash and superannuation received during FY2023.
2 STI cash represents the cash element of the FY2023 STI award.
3 Short-term equity represents the value of previously awarded equity from short-term arrangements (including STIP and grants under the Employee Share Plan) that were
vested or released (as relevant) during FY2023. The value is determined as the number of shares vested or released multiplied by the five-day VWAP immediately prior to the
date of vest/release. The amounts shown above relate to Restricted Share releases on 22 August 2022, arising from Deferred STI arrangements, plus GESP shares released
on 5 September 2022 and Matching Share Plan Rights vested on 21 October 2022.
4 Long-term equity represents the value of previously awarded equity from long-term arrangements (LTIP and other arrangements with deferral periods of three or more years)
that were released during FY2023. The value is determined in the same way as described in Note 3 above. The amounts shown all relate to releases on 22 August 2022 and
1 May 2023 (being three-year ROCE LTI awards and three-year restricted shares, respectively).
Remuneration Report
73
5 Governance
5.1 The role of the Remuneration, People and Culture Committee
The RPCC supports the Board by overseeing Origin’s remuneration policies and practices. It operates under a Charter (published on the
Company’s website at originenergy.com.au). The RPCC met formally five times during the reporting period.
Including its Chairman, the RPCC has four members, all of whom are independent NEDs (see Section 1 for details). The RPCC’s Charter
requires a minimum of three NEDs. In addition, there is a standing invitation to all Board members to attend the RPCC’s meetings.
Management may attend RPCC meetings by invitation, but a member of management will not be present when their own remuneration is
under discussion.
The following diagram sets out the role of the RPCC and its operational relationships with the Board, management, stakeholders and
external advisors.
5.2 Remuneration advisors
The RPCC engages external advisors from time to time to conduct benchmarking, advise on regulatory and market developments, and
review proposals and reports. Protocols have been established for engaging and dealing with external advisors, including those defined as
remuneration consultants for the purposes of the Act. These protocols are to ensure independence and avoid conflicts of interest.
The protocols require that remuneration advisors are directly engaged by the RPCC and act on instruction from its Chairman. Reports must be
delivered directly to the RPCC Chairman. The advisor is prohibited from communicating with Company management, except as authorised
by the Chairman, and even then, this is 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.
The RPCC generally seeks information rather than specific remuneration recommendations within the definition of the Act, and this was
the case during FY2023. Guerdon Associates was appointed for this period – no remuneration recommendations as defined under the Act
were provided.
In addition, the RPCC makes use of general market trend information from a variety of commercial and industry sources, and has access to
in-house remuneration professionals who provide it with guidance and analysis on request.
The recommendations that the RPCC makes to the Board are based on its own independent assessment of the advice and information
received from these multiple sources, using its experience and having careful regard to the principles and objectives of the remuneration
framework, Company's performance, shareholder and community expectations, and good governance.
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Annual Report 2023
5.3 Remuneration governance and oversight
The Board’s oversight of executive performance and remuneration outcomes is rigorous and multi-phased. Its processes in overseeing
performance and remuneration can be divided into the stages set out below, which are designed to ensure that outcomes are fair to executives
and stakeholders, consistent in approach, and governed by documented principles.
5.3.1 Through the performance period
Throughout the STI performance year and LTI vesting periods, the Board monitors and reviews management performance against financial
and non-financial targets, including factors affecting the original assumptions underlying the setting of targets at the beginning of the relevant
performance periods.
Potential adjustments that may be required are considered under a set of protocols that cover materiality, symmetry of treatment for
favourable and unfavourable events, the degree to which events are foreseeable and controllable by management, and the impact of Board
decisions (for example, mergers and acquisitions). Any adjustments are subject to Board approval at the end of the performance period.
The outcome from this stage comprises preliminary STI outcomes and preliminary LTI vesting outcomes.
5.3.2 At the end of the financial year
At the end of each financial year, the full Board conducts a formal Executive Performance Review of the CEO and each member of the ELT,
including the preliminary remuneration outcomes. The review is a formal and holistic process that considers:
•
risk, audit, compliance and reputation matters (including whistle-blowing, discrimination, bullying or harassment complaints, and safety
and employee relations matters);
• enterprise and business strategy contribution; and
•
leadership habits and behaviours.
The process includes taking feedback from the:
• Chair of the Health, Safety and Environment Committee;
• Chair of the Audit Committee;
•
Internal Auditor;
• General Counsel and EGM Company Secretariat, Risk and Governance; and
• Executive General Manager, People and Culture.5
As a performance review process, the output includes performance feedback and identifies specifically whether there are any matters
that warrant the exercise of downward discretion to modify individual executives’ preliminary remuneration outcomes. In exceptional
circumstances, the Board may exercise upward discretion, within the capped opportunity level.
During this stage, the Board will also consider whether any exercises of discretion are appropriate on a collective basis, and in the overall
context of ensuring that the outcomes represent a reasonable and fair reflection of the Company’s performance from the perspective of
all stakeholders.
The output from this stage comprises final STI outcomes and final LTI vesting decisions.
5.3.3 Beyond the performance period
Issues may emerge after final results have been notified where the Board deems that those results are no longer appropriate, or that the results
would give rise to receiving an inappropriate benefit. Where such issues emerge before payment has been made or before rights have vested
or shares have been released from trading locks, the Board may reduce or cancel the award or the vesting level, and/or extend the period of
a trading lock under the Company’s malus provisions. The deferral period for equity (two years for STI and five years for all tranches of LTI)
means that the exercise of malus is available for significant periods of time.
Where benefits have been paid, vested or released, the Company’s clawback provisions give the Board further powers to recover cash
proceeds from the sale of shares and to recover cash awards. These powers may be limited by statute or regulation.
Of course, fraud, dishonesty, gross misconduct, negligence, breach of duties and other serious matters would have consequences additional
to the remuneration impacts described above.
Downward discretions have been exercised by the Board from time to time, both to STI outcomes and to LTI allocations or vesting outcomes,
to provide better alignment of variable pay outcomes with the broader context and overall circumstances of the Company. There have been
no circumstances to date in which the Board has sought to apply the clawback provisions.
5.4 Change of control and capital reorganisation
If a change of control event occurs, the Board may determine that all or a specified number of unvested or restricted deferred incentives will
vest or cease to be subject to restrictions.
On a capital reorganisation, the Board may determine the manner of adjustment of the number of unvested Share Rights and Options held by
participants 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.
5 For the Executive General Manager, People and Culture, the feedback is from the CEO and/or the Chair of the RPCC.
Remuneration Report
75
6 Non-executive Director fees
6.1 Remuneration policy and structure for Non-executive Directors
NED remuneration comprises fixed fees with no incentive-based payments. This ensures that NEDs can independently and objectively assess
both Executive and Company performance.
Board and committee fees take into account market rates for similar positions at relevant Australian organisations (of comparable size and
complexity) and fairly reflect the time commitments and responsibilities involved. The aggregate cap for overall NED remuneration remains
at $3.2 million pa, as approved by shareholders in 2017.
The Origin Chairman receives a single fee that includes committee activities, while other NEDs receive a NED Base Fee and separate fees
for their role on specific committees (other than the Nomination Committee, which is considered within the NED Base Fee). All fees include
superannuation contributions.
The table below summarises the structure and level of NED fees. No change to the fee structure or quantum is proposed for FY2024.
Office
Board
Audit Committee
RPCC, Safety and Sustainability Committee, and Risk Committee
Nomination Committee
1 The Chairman fee is inclusive of committee fees.
Chairman
6771
57
47
nil
FY2022 and FY2023 ($’000)
Member
196
29
23.5
nil
6.2 Minimum Shareholding Requirement for Non-executive Directors
To align the interests of the Board with those of shareholders, NEDs are required to build and maintain a substantive shareholding in the
Company (the MSR). NEDs may purchase shares directly or through the NEDSP that was last approved by shareholders in 2022. The NEDSP
is a fee sacrifice plan that allows NEDs to acquire share rights (rights to acquire fully paid ordinary shares in the Company) subject to the terms
of the grant. The NEDSP is intended to facilitate the acquisition of shares for new Directors to meet their MSR obligation while recognising that
opportunities for direct purchases by Directors may be limited. NEDs are expected to reach their MSR within three years of their appointment.
During FY2023, one NED received a share allocation under the NEDSP in respect of the fees sacrificed during FY2022.
The NED MSR is determined from time to time as a number of shares referenced to a nominal multiple of fees. The determination takes into
account changes in fees and share prices over time. The nominal reference multiple is 100 per cent of the annual base NED fee for all NEDs
except for the Chairman of the Board, where it is 200 per cent of the annual base NED fee. The current share determinations of 28,000 shares
for NEDs and 56,000 shares for the Chairman are to be increased to 36,000 and 72,000, respectively, from August 2024.
Share rights held by NEDs under the NEDSP will count towards the satisfaction of NED MSR obligations because they are funded through
sacrifice of fees by the participating Director. The shares allocated on vesting of the share rights are bought on market on behalf of the Director
and are not subject to forfeiture.
Table 7-4 (b) shows that all NEDs meet the current MSR obligation.
76
Annual Report 2023
7 Statutory tables and disclosures
Table 7-1 Executive service agreements
The main terms of service agreements for Executive KMP as at 30 June 2023 are set out in the table below.
Basis of contract
Notice period
Ongoing
• Twelve months by either party for CEO; six months for Other Executive KMP
• Shorter notice may apply by agreement
• No notice in defined circumstances1
Termination benefits for cause
Statutory entitlements only
Termination benefits for resignation
Notice as above or payment in lieu of notice that is not worked; current-year STI forfeited; unvested
equity lapses; statutory entitlements
Termination benefits for other than resignation
or cause
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;2 statutory entitlements.
For redundancy (Other Executive KMP only) 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 78 weeks.
Remuneration
Remuneration is reviewed annually or as required to maintain alignment with policy and benchmarks.
1 These circumstances include but are not limited to serious, persistent or wilful misconduct, breach of contract, or conduct likely to seriously injure the reputation of
the Company.
2 For cases of death, disability, genuine retirement or other extraordinary circumstances as approved by the Board.
Table 7-2 (a) Executive KMP statutory remuneration ($’000)
Short term
Long term
Totals
Post-
employment
benefit Other1
Base
salary
Cash
STI2
Leave
accrual3
Cash-
based
incentives4
Share-
based
incentives5
Accounting
remuneration
At risk
(%)
Share
based
(%)
Executive Director
F Calabria
Other Executive KMP
J Briskin
G Jarvis
A Thornton6
L Tremaine
Executive total
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
1,927
1,855
935
905
946
916
889
535
1,057
1,023
25
24
28
24
25
24
25
16
25
24
53
51
26
14
65
25
100
60
49
44
1,230
1,171
680
535
730
550
640
396
686
649
2023
2022
5,754
5,234
128
112
293
3,966
194
3,301
179
44
(107)
150
143
63
160
113
(89)
16
286
386
406
—
224
—
241
—
264
—
226
—
2,084
2,352
777
805
848
932
589
555
883
911
5,904
5,497
2,563
2,433
2,998
2,510
2,667
1,675
2,837
2,667
1,361
—
5,181
5,555
16,969
14,782
63
64
66
55
61
59
56
57
63
58
62
60
35
43
30
33
28
37
22
33
31
34
31
38
1 Represents non-monetary benefits including insurance premiums and fringe benefits (such as car parking, electric vehicle use and travel expenses).
2 STI cash represents one half of the STI award. STI cash is 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 Deferred STI.
3 Movement in leave provision over the reporting period. Negative movement indicates that leave taken during the year exceeded leave accrued during the current year.
4 For FY2023 Deferred STI is delivered in the form of deferred cash arrangements.
5 Share-based incentives include Restricted Shares, PSR and RSRs granted as Deferred STI or LTI respectively. Share-based remuneration is that portion of the accounting value
of equity granted or to be granted for the current and prior periods attributable to the reporting period. Where vesting of the equity is conditional on a non-market hurdle (for
example, ROCE, or the underpinning metrics in the LTI RSR tranche) in following reporting periods, the accumulated expense is adjusted for the number of instruments then
expected to be released or vested. In good leaver circumstances, a bring-forward of future-period accounting expense may occur where a cessation of employment occurs
before the normal vesting date. See Note G3 for details on share-based remuneration accounting.
6 For FY2023, Cash STI also includes the value of the deferred remuneration retention arrangement ($450,000 conditionally payable after three years) attributable to the
period. For FY2022, the pro-rata period for KMP office was from 1 November 2021 to 30 June 2022.
Remuneration Report
77
Table 7-2 (b) NEDs statutory remuneration ($’000)
Short term
Board and
committee fees
Other1
Post employment
Superannuation
contributions
Total
remuneration
NEDs — current
I Atlas
M Brenner
G Lalicker
M McCormack
S Perkins
N Scheinkestel2
S Sargent
J Withers
NEDs — former
J Akehurst3
B Morgan4
NED total
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
220
207
288
273
199
200
247
239
652
653
242
66
265
267
247
241
—
83
86
262
2,446
2,491
0
0
0
0
0
0
0
0
16
0
0
0
0
0
0
0
—
0
0
0
16
0
23
21
25
24
21
20
25
23
25
24
25
7
25
24
25
24
—
8
8
24
202
199
243
228
313
297
220
220
272
262
677
677
267
73
290
291
272
265
—
91
94
286
2,648
2,690
1 Represents non-monetary benefits including insurance premiums and fringe benefits (such as car parking and travel expenses).
2 For FY2022: J Akehurst retired on 20 October 2021; N Scheinkestel was appointed on 4 March 2022.
3 For FY2022, J Akehurst retired on 20 October 2021; N Scheinkestel was appointed on 4 March 2022.
4 For FY2023, B Morgan retired on 19 October 2022.
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Annual Report 2023
Table 7-3 Details of equity grants made during the reporting period
Equity grants made to KMP during the reporting period are listed below. The grants are at nil cost to the recipient and none of the instruments
granted have an exercise price.
For Share Rights, exercise is automatic at vest and the expiry date is the same as the vest date. Share Rights that fail to meet the relevant
performance conditions lapse effective on the test date, which may be prior to the scheduled vest date.
Number
granted
Grant date
fair value ($)1
Exercise
price ($)
Grant date
Vest date2 Expiry date
Executive Director
Type
F Calabria3
Performance Share Rights
Restricted Share Rights
Restricted Shares (Deferred STI)
Other Executive KMP
J Briskin
Performance Share Rights
Restricted Share Rights
Matching Rights
Restricted Shares (Deferred STI)
G Jarvis
Performance Share Rights
Restricted Share Rights
Matching Rights
Restricted Shares (Deferred STI)
A Thornton
Performance Share Rights
Restricted Share Rights
Matching Rights
198,980
198,978
198,696
65,002
65,004
367
90,819
65,748
65,751
367
93,268
61,883
61,881
367
Restricted Shares (Deferred STI)
100,836
L Tremaine
Performance Share Rights
Restricted Share Rights
Matching Rights
Restricted Shares (Deferred STI)
73,281
73,281
367
110,146
3.17
5.64
6.13
3.63
6.13
0.46
6.13
3.63
6.13
0.46
6.13
3.63
6.13
0.46
6.13
3.63
6.13
0.46
6.13
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
19-Oct-22
19-Oct-22
5-Sep-22
25-Aug-25
25-Aug-25
25-Aug-25
2025–2027
21-Aug-23
—
5-Sep-22
5-Sep-22
1-Sep-22
5-Sep-22
5-Sep-22
5-Sep-22
1-Sep-22
5-Sep-22
5-Sep-22
5-Sep-22
1-Sep-22
5-Sep-22
5-Sep-22
5-Sep-22
1-Sep-22
5-Sep-22
25-Aug-25
25-Aug-25
24-Aug-25
2025–2027
20-Oct-24
26-Aug-24
—
—
25-Aug-25
25-Aug-25
24-Aug-25
2025–2027
20-Oct-24
26-Aug-24
—
—
25-Aug-25
25-Aug-25
24-Aug-25
2025–2027
20-Oct-24
26-Aug-24
—
—
25-Aug-25
25-Aug-25
24-Aug-25
2025–2027
20-Oct-24
26-Aug-24
—
—
1 For MRs, the fair value is per $1 contributed by the Executive.
2 For Restricted Shares, the vest date is the date that trading restrictions are lifted (other than restrictions arising from MSR or the Dealing in Securities Policy).
3 F Calabria was granted 198,980 PSRs and 198,978 RSRs, as approved at the 2022 Annual General Meeting under ASX Listing Rule 10.14.
Remuneration Report
79
Table 7-4 (a) Details of, and movements in, equity rights and ordinary shares of the Company Executive KMP
The following table summarises holdings and movements of rights and ordinary shares held (directly, indirectly or beneficially, including by
related parties) over the reporting period (or KMP portion of the period), including grants, transactions and forfeits, by value and by number.
See Table 7-5 for further details of the terms and conditions of those rights.
Type
Held at start1
Number
Value ($)
No. vested
Number
Value ($)6
disposed4 Held at end1,5
Granted/acquired2
Exercised3
Forfeited/
Executive Director
F Calabria
Options
401,288
—
—
—
—
—
Performance Share Rights
872,147
198,980
630,767
111,375
111,375
676,046
Restricted Share Rights
419,403
198,978
1,122,236
Shares7
1,039,642
310,071
1,218,006
Other Executive KMP
J Briskin
Options
Performance Share Rights
Restricted Share Rights
Matching Rights
Shares7
G Jarvis
Options
Performance Share Rights
Restricted Share Rights
Matching Rights
Shares7
A Thornton
Options
Performance Share Rights
Restricted Share Rights
Matching Rights
Shares7
L Tremaine
Performance Share Rights
Restricted Share Rights
Matching Rights
Shares7
86,910
263,197
137,433
720
—
—
65,002
65,004
367
235,957
398,475
2,227
389,065
123,018
556,720
93,219
274,633
140,490
720
—
—
65,748
65,751
367
238,665
403,054
2,227
268,800
127,530
571,733
—
—
34,925
87,091
43,491
720
61,883
61,881
367
126,949
112,823
322,983
155,301
720
73,281
73,281
367
224,635
379,331
2,227
618,125
266,010
449,213
2,227
728,645
152,658
675,195
0
—
0
0
—
0
0
—
0
30,937
30,937
187,788
0
528
—
0
0
528
—
0
0
2,943
—
0
33,000
33,000
200,310
0
528
—
0
0
528
—
0
10,725
10,725
0
528
—
0
528
—
0
2,943
—
0
65,101
0
2,943
—
41,250
41,250
250,388
126,432
0
528
—
0
528
—
0
2,943
—
0
0
0
401,288
341,367
0
0
0
618,385
618,381
1,349,713
86,910
94,825
0
0
0
93,219
101,146
0
0
-
34,925
32,873
0
0
0
0
202,437
202,437
559
512,083
0
206,235
206,241
559
396,330
0
105,376
105,372
559
239,772
228,582
228,582
559
881,303
1 The number of instruments that were held at the start/end of the reporting period.
2 Rights to equity and shares in the Company granted to Executive KMP during the reporting period under the Equity Incentive Plan, as listed in Table 7-3. These were provided
at no cost to the recipients.
3 All rights currently listed in this table are automatically exercised upon vesting.
4 Forfeited Options and PSRs were granted on 30 August 2017, 18 October 2017, 30 August 2019 and 18 October 2019.
5 Other than rights and shares disclosed elsewhere in this Remuneration Report, no other equity instruments, including shares in the Company, were granted to KMP during
the period.
6 After vesting and after payment of any exercise price. The value of rights exercised is calculated as the closing market price of the Company’s shares on the ASX on the date
of exercise, after deducting any exercise price. The exercise price for all of the rights referenced in this table is nil.
7 Shares include purchases and transfers in, and shares received upon the vesting and exercise of share rights (F Calabria: 111,375; J Briskin: 31,465; G Jarvis: 33,528; A Thornton:
11,253; L Tremaine: 41,778). It includes allotments of fully paid ordinary shares purchased by the Executive under the MSP (number of shares acquired: G Jarvis 734; J Briskin
734; A Thornton: 734; L Tremaine: 734). The value of shares shown relates to the value of restricted shares granted (as set out in Table 7-3). No value is attributed to the balance
of shares acquired, as they represent shares arising from the exercise of share rights (the value of which is shown in the relevant share rights line of this table) or shares purchased
by the Executive under the MSP.
80
Annual Report 2023
Table 7-4 (b) Details of, and movements in, ordinary shares of the Company – NEDs
NEDs — current5
I Atlas
M Brenner
G Lalicker
M McCormack
S Perkins
S Sargent
N Scheinkestel
J Withers6
NEDs — former
B Morgan7
Type
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Held at start1
Acquired2
Disposed3
Held at end1,4
50,000
28,367
100,000
100,000
80,000
41,429
33,365
26,000
0
0
0
0
0
0
0
3,980
47,143
0
0
0
0
0
0
0
0
0
0
50,000
28,367
100,000
100,000
80,000
41,429
33,365
29,980
47,143
1 The number of instruments held at the start/end of the reporting period.
2 Purchases and transfers in.
3 Sales and transfers out.
4 Other than shares disclosed elsewhere in this Remuneration Report, no other equity instruments, including shares in the Company, were granted to KMP during the period.
5 NEDs are not issued shares under any incentive or equity plans. Acquisitions include purchases of shares on market, or pursuant to the Company’s dividend reinvestment plan
or the August 2015 Entitlement Offer.
6 At the start/end of the reporting period, J Withers did not hold any NEDSP share rights. On 2 September 2022, J Withers was granted 3,980 NEDSP share rights pursuant to
a salary sacrifice arrangement under the NEDSP. Each NEDSP share right had a value of $6.28, being the VWAP of Origin shares traded on the ASX over the five trading days
period ending the day before the grant date (total value of $24,994). On 23 February 2023, all the NEDSP share rights vested and were automatically exercised into 3,980 fully
paid ordinary shares, subject to a disposal restriction in accordance with the terms of the NEDSP. The value of the NEDSP share rights exercised was $31,840 and is calculated
as the closing market price of the Company’s shares on the ASX on the date of exercise ($8.00).
7 B Morgan retired on 19 October 2022. As such, the ‘held at end’ balance is at this date.
Remuneration Report
81
Table 7-5 Summary of share rights outstanding
The table below lists all the share rights outstanding at 30 June 2023 that have been granted to current or former employees (including
Executive Directors and Executive KMP) under equity-based incentive plans. Equity-based incentives are not granted to NEDs. No terms of
equity-settled share-based transactions have been altered or modified subsequent to grant. Share rights that failed to meet their performance
hurdles on test dates on or before 30 June 2023 lapsed effective on that test date. Details of awards granted in prior years, including applicable
service and performance conditions, are summarised in prior remuneration reports corresponding to the reporting period in which the awards
were granted.
Granted
Performance Share Rights
3-Nov-20
6-Sep-21
20-Oct-21
5-Sep-22
19-Oct-22
Restricted Share Rights
3-Nov-20
3-Nov-20
3-Nov-20
6-Sep-21
6-Sep-21
6-Sep-21
20-Oct-21
20-Oct-21
20-Oct-21
5-Sep-22
5-Sep-22
5-Sep-22
19-Oct-22
19-Oct-22
19-Oct-22
Matching Rights
25-Feb-22
6-May-22
1-Sep-22
24-Oct-22
23-Feb-23
31-Mar-23
Number outstanding
Number
held by KMP
Earliest
vest date1
933,721
1,018,466
235,989
1,002,438
198,980
315,246
315,246
315,246
344,630
344,630
344,630
78,663
78,663
78,663
338,236
338,236
338,236
66,326
66,326
66,326
52,959
50,139
47,348
62,021
53,406
50,325
391,573
268,559
235,989
265,914
198,980
130,524
130,524
130,524
89,519
89,519
89,519
78,663
78,663
78,663
88,639
88,639
88,639
66,326
66,326
66,326
392
376
352
464
336
316
21-Aug-23
26-Aug-24
26-Aug-24
25-Aug-25
25-Aug-25
21-Aug-23
26-Aug-24
25-Aug-25
26-Aug-24
25-Aug-25
24-Aug-26
26-Aug-24
25-Aug-25
24-Aug-26
25-Aug-25
24-Aug-26
23-Aug-27
25-Aug-25
24-Aug-26
23-Aug-27
20-Oct-23
20-Oct-23
20-Oct-23
20-Oct-23
21-Oct-24
21-Oct-24
1 The vest date for PSRs and RSRs granted since 2018 does not include the trading restriction of approximately one to two years that applies to the shares allocated on vesting.
Where no expiry is given, automatic exercise applies at vesting. To the extent that rights fail to meet the relevant performance conditions, they will lapse effective on the test
date, which may be on or before the vest date.
Loans to Key Management Personnel
No loans have been made, guaranteed or secured, directly or indirectly, by Origin or any of its subsidiaries, at any time throughout the year,
in relation to any KMP including to a KMP-related party.
Signed in accordance with a resolution of the Directors:
Scott Perkins
Chairman
Frank Calabria
Managing Director and Chief Executive Officer
Sydney, 17 August 2023
Sydney, 17 August 2023
82
Annual Report 2023
Lead Auditor’s
Independence Declaration
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Auditor’s Independence Declaration to the Directors of Origin Energy Limited As lead auditor for the audit of the financial report of Origin Energy Limited for the financial year ended 30 June 2023, I declare to the best of my knowledge and belief, there have been: a) No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; b) No contraventions of any applicable code of professional conduct in relation to the audit; and c) No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit. This declaration is in respect of Origin Energy Limited and the entities it controlled during the financial year. Ernst & Young Andrew Price Partner Sydney 17 August 2023 Financial Statements
Financial
Statements
30 June 2023
83
Primary statements
Income statement
C Operating assets
and liabilities
Statement of comprehensive income
C1
Trade and other receivables
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the
financial statements
Overview
A Results for the year
A1
Segments
A2 Revenue
A3 Other income
A4 Expenses
A5 Results of equity accounted investees
A6 Earnings per share
A7 Dividends
B Investment in
equity accounted
joint ventures
and associates
G Other information
G1 Contingent liabilities
G2 Commitments
G3 Share-based payments
G4 Related party disclosures
G5 Key management personnel
G6 Notes to the statement of cash flows
C2 Exploration and evaluation assets
C3 Property, plant and equipment
C4 Intangible assets
C5 Provisions
C6 Other financial assets and liabilities
G7 Auditors' remuneration
C7 Impairment of non-current assets
G8 Master netting or similar agreements
G9 Deed of Cross Guarantee
G10 Parent entity disclosures
G11 Government grants and assistance
G12 Subsequent events
Directors’ Declaration
Independent
Auditor’s Report
D Capital, funding and
risk management
D1 Capital management
D2 Interest-bearing liabilities
D3 Contributed equity
D4 Financial risk management
D5 Fair value of financial assets
and liabilities
E Taxation
E1
Income tax expense
E2 Deferred tax
F Group structure
B1
Interests in equity accounted joint
ventures and associates
F1 Controlled entities
F2 Business combinations
B2 Investment in APLNG
B3 Investment in Octopus Energy
Holdings Limited
F3
Joint arrangements and investments
in associates
F4 Assets and liabilities held for sale
B4 Transactions between the Group and
and disposals
equity accounted investees
84
Income statement
for the year ended 30 June
Revenue
Other income
Expenses
Results of equity accounted investees
Interest income
Interest expense
Profit/(loss) before income tax
Income tax expense
Profit/(loss) for the year
Profit/(loss) for the year attributable to:
Members of the parent entity
Non-controlling interests
Profit/(loss) for the year
Earnings per share
Basic earnings per share
Diluted earnings per share
Annual Report 2023
Note
A2
A3
A4
A5
A3
A4
E1
2023
$m
16,481
45
(16,229)
1,324
51
(194)
1,478
(420)
1,058
1,055
3
1,058
2022
$m
14,461
150
(16,315)
959
61
(190)
(874)
(551)
(1,425)
(1,429)
4
(1,425)
A6
A6
61.3 cents
(81.5) cents
60.9 cents
(81.5) cents
The income statement should be read in conjunction with the notes to the financial statements.
Financial Statements
85
Statement of comprehensive income
for the year ended 30 June
Profit/(loss) for the year
Other comprehensive income
Items that will not be reclassified to profit or loss, net of tax
Actuarial gain on defined benefit superannuation plan
Investment valuation changes
Items that can be reclassified to profit or loss, net of tax
Foreign currency translation reserve:
Reclassified to income statement
Translation of foreign operations
Cash flow hedges:
Reclassified to income statement
Effective portion of change in fair value
Total other comprehensive income, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Members of the parent entity
Non-controlling interests
Total comprehensive income for the year
Note
E1
E1
E1
E1
E1
E1
2023
$m
2022
$m
1,058
(1,425)
-
9
(62)
290
(1,557)
(303)
(1,623)
(565)
(568)
3
(565)
1
3
(103)
598
(310)
2,385
2,574
1,149
1,144
5
1,149
The statement of comprehensive income should be read in conjunction with the notes to the financial statements.
86
Statement of financial position
as at 30 June
Annual Report 2023
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivatives
Other financial assets
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 (PP&E)
Exploration and evaluation assets
Intangible 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
Interest-bearing liabilities
Derivatives
Deferred tax liabilities
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total parent entity interest
Non-controlling interests
Total equity
2023
2022
Note
$m
$m
C1
D4
C6
F4
C1
D4
C6
A5
C3
C2
C4
D2
D4
C6
C5
F4
D2
D4
E2
C5
D3
463
2,548
180
1,100
467
101
120
4,979
60
1,576
341
6,255
3,169
-
2,493
75
13,969
18,948
2,152
136
192
901
418
455
277
229
15
620
3,371
182
3,174
860
-
90
8,297
45
3,075
243
6,245
3,255
286
2,523
51
15,723
24,020
3,485
131
316
1,590
727
59
242
378
-
4,775
6,928
3,066
1,174
386
50
586
5,262
10,037
8,911
6,901
1,492
498
8,891
20
8,911
3,074
1,744
1,359
37
856
7,070
13,998
10,022
6,877
3,109
11
9,997
25
10,022
The statement of financial position should be read in conjunction with the notes to the financial statements.
Financial Statements
Statement of changes in equity
for the year ended 30 June
$m
Contributed
equity
Share-based
payments
reserve
Balance as at 1 July 2022
6,877
237
Profit/(loss)
Other
comprehensive income
Total comprehensive
income for the year
Dividends provided for
or paid
Movement in contributed
equity (refer to note D3)
Share-based payments
Total transactions with
owners recorded directly
in equity
Balance as at 30 June 2023
-
-
-
-
24
-
24
6,901
Balance as at 1 July 2021
7,138
Profit/(loss)
Other
comprehensive income
Total comprehensive
income for the year
Dividends provided for
or paid
On-market share buy-back
(refer to note D3)
Movement in contributed
equity (refer to note D3)
Share-based payments
Total transactions with
owners recorded directly
in equity
Balance as at 30 June 2022
-
-
-
-
(250)
(11)
-
Foreign
currency
translation
reserve
716
-
Hedge
reserve
2,147
-
228
(1,860)
228
(1,860)
-
-
-
-
944
222
-
494
-
-
-
-
287
72
-
2,075
494
2,075
-
-
-
-
-
-
-
-
-
-
716
2,147
-
-
-
-
-
6
6
243
226
-
-
-
-
-
-
11
87
Total
equity
10,022
1,058
(1,623)
(565)
Fair
value
reserve
Retained
earnings
Non-
controlling
interests
9
-
9
9
-
-
-
-
18
5
-
4
4
-
-
-
-
-
9
11
1,055
-
1,055
25
3
-
3
(568)
(8)
(576)
-
-
(568)
498
1,792
(1,429)
-
(1,429)
(352)
-
-
-
(352)
11
-
-
(8)
20
20
4
1
5
-
-
-
-
-
24
6
(546)
8,911
9,475
(1,425)
2,574
1,149
(352)
(250)
(11)
11
(602)
25
10,022
(261)
6,877
11
237
The statement of changes in equity should be read in conjunction with the notes to the financial statements.
88
Statement of cash flows
for the year ended 30 June
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Government grants received
Cash (used in)/from operations
Income tax paid, net of refunds received
Net cash (used in)/from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Acquisition of exploration and evaluation assets
Acquisition of other assets
Investment in Octopus Energy
Acquisition of other investments
Interest received from other parties
Net proceeds from sale of non-current assets
Australia Pacific LNG (APLNG) investing cash flows
Divestment of ten per cent share in APLNG
Receipt of Mandatorily Redeemable Cumulative Preference Shares (MRCPS) interest
Receipt of unfranked dividends
Proceeds from APLNG buy-back of MRCPS
Net cash from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Joint venture operator cash call movements
Settlement of foreign currency contracts
Australian Energy Market Operator (AEMO) cash deposits
Interest paid1
Repayment of lease principal
Dividends paid to shareholders of Origin Energy Ltd, net of Dividend Reinvestment Plan (DRP)
Dividends paid to non-controlling interests
Repayment of Debt Service Reserve Account (DSRA) loan to equity accounted investees
Buy back of shares on-market
Purchase of shares on-market (treasury shares)
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate changes on cash
Cash and cash equivalents held for sale at the end of the year
Cash and cash equivalents at the end of the year
1
Includes $21 million (2022: $17 million) of interest payments on leases.
Annual Report 2023
2023
$m
18,972
(19,596)
184
(440)
(193)
(633)
(372)
(11)
(92)
(173)
(32)
43
72
-
-
1,783
-
1,218
1,050
(1,265)
66
(48)
290
(163)
(71)
(568)
(8)
-
-
(4)
(721)
(136)
620
(1)
(20)
463
2022
$m
14,663
(14,105)
-
558
(27)
531
(162)
(65)
(109)
(268)
(124)
2
6
1,957
50
433
1,112
2,832
2,896
(4,752)
(70)
(46)
(290)
(191)
(73)
(313)
(1)
(51)
(250)
(75)
(3,216)
147
472
1
-
620
Note
G11
G6
D3
D3
F4
The statement of cash flows should be read in conjunction with the notes to the financial statements.
Financial Statements
89
Overview
Origin Energy Limited (the Company) is a
for-profit company domiciled in Australia.
The address of the Company’s registered
office is Level 32, Tower 1, 100 Barangaroo
Avenue, Barangaroo NSW 2000. The
nature of the operations and principal
activities of the Company and its controlled
entities (the Group or Origin) are described
in the segment information in note A1.
On 17 August 2023, the Directors resolved
to authorise the issue of these consolidated
general purpose financial statements for the
year ended 30 June 2023.
Basis of preparation
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 (IFRS) as
issued by the International Accounting
Standards Board;
• on a historical cost basis, except for
derivatives and other financial assets
and liabilities that are measured at fair
value; and
On 27 June 2023, the AASB issued
amendments to AASB 112 Income
Taxes. The amendments to AASB 112
give companies temporary relief from
accounting for deferred taxes arising
from the Organisation for Economic Co-
operation and Development’s international
tax reform (Pillar Two income taxes)
and also introduce qualitative and
quantitative disclosures to assist the
users of financial statements to better
understand a company’s exposure to
income taxes arising from the reform,
particularly before legislation implementing
the rules is in effect. The temporary relief
from accounting for deferred taxes was
applicable immediately and retrospectively
upon issue of the amendments while the
disclosure requirements are effective for
the Group for reporting periods beginning
1 July 2023.
The Group has applied the temporary
relief from accounting for and disclosing
information about deferred tax assets and
liabilities related to Pillar Two income taxes.
As at the reporting date, the Group
continues to monitor the developments
around the implementation and enactment
of Pillar Two income taxes in the
jurisdictions it operates in and the detailed
impact assessment of the amendments to
AASB 112 is ongoing.
• on a going concern basis.
Use of judgements and estimates
The financial statements:
• 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;
• do not early adopt any Accounting
Standards and Interpretations that have
been issued or amended but are not yet
effective; and
• present reclassified comparative
information where required for
consistency with the current
period's presentation.
New standards and interpretations
not yet adopted
A number of new standards, amendments
to standards and interpretations are
effective for annual periods beginning after
1 July 2023, which have not been applied in
preparing the Group’s financial statements.
None of these are expected to have a
significant effect on the Group with the
exception of AASB 2023-2 Amendments
to Australian Accounting Standards –
International Tax Reform – Pillar Two
Model Rules.
Preparing the financial statements in
conformity with Australian Accounting
Standards requires management to make
judgements and apply estimates and
assumptions that affect the reported
amounts of assets, liabilities, income and
expenses. The estimates and associated
assumptions, which are based on
historical experience and various other
factors believed to be reasonable under
the circumstances, form the basis of
judgements about carrying values of
assets and liabilities that are not readily
apparent from other sources. Actual
results may differ from these estimates.
Throughout the notes to the financial
statements, further information is provided
about key management judgements and
estimates that we consider material to the
financial statements.
The Group's
operating environment
In the prior year, the Group's operating
environment experienced very challenging
energy market conditions, with high
prices and periods of supply constraints.
This was most evident with the Ukraine
war and the move by many countries
away from importing energy from Russia.
This drove higher global energy prices
and caused countries to place greater
national importance on energy security.
These factors have had wider impacts
on consumers, businesses and the
overall economy.
The Group’s operating environment has
become less volatile with a lower
commodity price environment in the
current year.
The economic impacts of the changes
in the Group's operating environment
due to market conditions have
implications for various line items in the
financial statements.
Binding Scheme
Implementation Deed
On 27 March 2023 the Company
entered into a binding Scheme
Implementation Deed (the Scheme) with
the Consortium comprising affiliates
of Brookfield Renewable Partners L.P.
(Brookfield Renewable), together with its
institutional partners and certain other
global institutional investors, and MidOcean
Energy, an entity managed by EIG Partners,
for the acquisition of all the issued shares
in the Company (the Scheme Transaction).
Subject to the conditions of the Scheme,
Brookfield Renewable and its institutional
partners and investors will own the Energy
Markets business and Corporate functions
and MidOcean Energy will acquire the
Integrated Gas business which includes
Origin’s investment in APLNG.
The Company and the Consortium are
targeting implementation of the Scheme
by early in the 2024 calendar year. The
actual timing for implementation of the
Scheme will depend on the timing for
satisfaction of the required regulatory and
shareholder approvals. The Consortium
lodged an application with the Australian
Competition and Consumer Commission
on 5 June 2023, in accordance with the
terms of the Scheme.
Climate change
Origin’s ambition is to lead the energy
transition through cleaner energy and
customer solutions. With a long-term
ambition to achieve net-zero emissions
by 2050, the Group is committed to
progressively decarbonising its business
and providing the solutions to help
customers transition to a low-carbon future.
The Group has identified certain key
physical and transition risks relating to
climate change. These include potential
changes in market supply and demand for
energy, government policy and regulation
in relation to climate change, extreme
weather events and other
90
Annual Report 2023
Overview (continued)
technological advancements that might
occur as the transition to a low-carbon
economy unfolds.
The Group continues to monitor climate-
related legislation and policies that
impact the financial statements and will
incorporate any required changes as
they arise. We recognise that there is
significant uncertainty around the pace
of decarbonisation and differing pathways
to net zero across the global economy.
Future changes to the Group’s ambition
or realisation of global decarbonisation
ambitions quicker or more slowly than
currently anticipated may impact some of
the Group’s significant judgements and
key estimates.
In preparing the financial statements, the
key judgements and estimates consider
a range of economic conditions that are
forecast to exist over the remaining useful
lives of the Group's assets, including
expectations about future operations,
the current outlook for commodity
prices, discount rates, capital expenditure
requirements and market supply and
demand profiles. Climate change-related
risks will impact those areas of the financial
statements that are subject to estimation
uncertainties and can also introduce more
volatility in assets and liabilities carried at
fair value.
Climate change-related risks impact the
significant judgements and estimates in the
following notes to the financial statements:
• B2 - Investment in APLNG
• C3 - Property, plant and equipment
• C4 - Intangible assets
• C5 - Provisions - restoration
• C7 - Impairment of non-current assets
• D5 - Fair value of financial assets
and liabilities
In February 2022, the Group announced
plans to accelerate its exit from coal-fired
power generation submitting notice to the
Australian Energy Market Operator (AEMO)
of its intention to bring forward the closure
of the Eraring Power Station (Eraring) to
as early as August 2025. Prevailing market
conditions will continue to be assessed
which will help inform the final timing for
closure of all four units at Eraring.
As at 30 June 2023 and consistent with the
prior year, a closure date of August 2025,
the end of the required three and a half
year notice period to AEMO, remains the
Group’s best estimate of useful life and has
been used in the accounting assessments
presented within these financial statements;
namely, the recoverable amount estimates
in the Energy Markets Generation CGU
(note C7), useful life assumptions of Eraring
in calculating depreciation expense (note
C3) and timing of associated restoration
activities recognised in the provision
balance (note C5).
The Group recognises the increase in
legislative momentum to address climate
change-related risks and opportunities,
including the Australian Government’s
emissions reduction target legislated in
September 2022 and the amendments
to the Safeguard Mechanism which have
come into force mid-2023. The Group has
considered the impact of these legislative
requirements in line with accounting
standard requirements, with no impairment
required as at 30 June 2023 due to the
introduction of the Safeguard Mechanism.
Paris Agreement and climate scenarios
The Group unequivocally supports the goal
of the Paris Agreement and believes the
world must pursue efforts to limit global
average temperature rise to 1.5°C above
preindustrial levels. The Group recognises
that there are a range of possible energy
transition scenarios that align to this goal.
In line with our commitment at the 2022
Annual General Meeting, we have disclosed
the estimates and judgements used in
presenting a quantified climate analysis.
The Group’s climate scenarios disclosed are
based on the following:
•
International Energy Agency (IEA) Net
Zero Emissions by 2050 scenario (NZE)
as presented in their World Energy
Outlook 2022 (WEO 2022) (November
2022) publication.
• Wood Mackenzie1 (Woodmac) 2022
Accelerated energy transition 1.5-
degree scenario (2022 AET-1.5°C).
•
IEA Announced Pledges scenario (APS)
(WEO 2022).
Both the IEA NZE and Woodmac 2022
AET-1.5°C scenarios are intended to be
consistent with the goal of the Paris
Agreement to limit average temperature
rise to 1.5°C.
However, the Group recognises that
globally we may not be on a trajectory
consistent with the IEA NZE 1.5°C pathway
and therefore have also included the IEA
APS scenario. The APS scenario considers
the impact of all pledges announced as of
September 2022 by governments to meet
net zero goals, and is estimated to limit the
global average temperature rise to 1.7°C.
Climate scenarios – assumptions
and methodology
Although all potential financial reporting
consequences under any climate scenario
are impracticable to fully assess, the Group
has used the following assumptions in order
to assess the impact of a climate scenario to
the financial statements.
IEA APS and IEA NZE Scenarios
The IEA APS and IEA NZE scenarios
released in the WEO 2022 present
commodity pricing starting from historical
market balances in 2021. To reflect the
economic challenges the business will face
in the energy transition, the Group has used
the oil, LNG and carbon prices from the
Group’s FY2024 base case assumptions
used for impairment assessment and
assumed a straight-line interpolation to the
earliest subsequent period provided by the
IEA APS and IEA NZE scenarios. A straight-
line interpolation is then assumed between
each of the IEA price points provided up
to 2050, where prices are held flat for any
subsequent periods. As all prices presented
in the IEA WEO 2022 are 2021 real unit
pricing, the Group has adjusted these prices
by an assumed 2.5% per annum inflation
factor to reflect 2023 real unit pricing.
Woodmac 2022 AET-1.5°C Scenario
The Woodmac 2022 AET-1.5°C scenario
presents commodity pricing for each
year through to 2050 based on 2022
real unit pricing. For use in the Group’s
scenario analysis, these prices have
been uplifted by an assumed 2.5%
inflation factor to reflect 2023 real unit
pricing. No other adjustments have been
made to the Woodmac 2022 AET-1.5°C
commodity pricing.
Limitations of scenario analysis
Scenarios do not constitute definitive
outcomes or probabilities, and scenario
analysis relies on assumptions that may or
may not be, or prove to be, correct and may
or may not eventuate. Scenarios may also
be impacted by additional factors to the
assumptions disclosed.
While each of the climate scenarios
presented are founded on differing
assumptions, central themes across each
of these scenarios include the need for
swift policy action, technological uplift, and
investment in the energy transition on an
unprecedented global scale. It is difficult to
predict, which if any, of these assumptions
and scenarios may eventuate.
Furthermore, the IEA has recognised that
the transition is extremely challenging
and that globally we are not on the IEA
NZE pathway.
1 The data and information were obtained from the Accelerated Energy Transition 1.5-degree scenario 2022, a product of Wood Mackenzie. Wood Mackenzie is a global insight
business for renewables, energy and natural resources. The data and information provided by Wood Mackenzie should not be considered advice; be relied upon; copied or
used except as expressly permitted by Wood Mackenzie. Wood Mackenzie takes no responsibility for the use of this data or information except as specified in an agreement
with Wood Mackenzie. For further information on their operations refer to their website: https://www.woodmac.com/
Financial Statements
91
Overview (continued)
The Group’s base case assumptions used
for impairment consider the most current
observable and actual market conditions
to develop management’s best estimate
of future economic outcomes as required
by the Accounting Standards. Therefore
in its design, the Group’s base case
assumptions used for impairment differ to
the key assumptions used in the scenarios
presented in the climate analysis.
Notwithstanding, the Group will continue
to take action across the business both
now and beyond 2030 with the ambition
of reaching net zero Scope 1, 2 and 3
emissions across our value chain by 2050.
Commodity price assumptions 2
The commodity prices used in the climate
scenarios are as follows (presented in 2023
real unit pricing):
Brent Oil
USD/bbl
100
75
50
25
0
2025
2030
2040
2050
IEA APS
scenario
IEA NZE
scenario
Woodmac 2022
AET-1.5°C
scenario
USD/mmbtu
LNG
40
30
20
10
0
2025
2030
2040
2050
IEA APS
scenario
IEA NZE
scenario
Woodmac 2022
AET-1.5°C
scenario
Carbon
USD/t
320
240
160
80
0
2025
2030
2040
2050
IEA APS
scenario
IEA NZE
scenario
Woodmac 2022
AET-1.5°C
scenario
The AEMO “Strong Electrification” scenario
per their 2022 Electricity Statement of
Opportunities (August 2022) (ESOO)
publication provides supply and demand
forecasts for both the gas and electricity
sector that are aligned with the IEA
NZE scenario. The AEMO “Strong
Electrification” forecasts are used in
conjunction with the IEA NZE commodity
assumptions in the graphs above to develop
relevant energy market pricing.
In presenting the quantified climate
analyses, we have assumed in all climate
scenarios that carbon pricing has been
applied to Scope 1 emissions above the
estimated Safeguard Mechanism facility
baseline and all Scope 2 emissions. For the
IEA NZE and Woodmac 2022 AET-1.5°C
scenarios, the Group has also assumed
a net zero grid by 2035 and therefore
has no Scope 2 emissions beyond 2035.
This is intended to be consistent with
the economic principles that support the
AEMO “Strong Electrification” scenario and
has therefore been applied when modelling
these selected 1.5°C scenarios.
The quantified impact of applying
the climate scenarios to the financial
statements are as follows:
Energy Markets
For Energy Markets, the application of the
IEA NZE and AEMO “Strong Electrification”
climate scenarios result in a net favourable
position compared to the outlook from
the base case assumptions used for
impairment, benefiting existing assets such
as the peaking generation fleet and Power
Purchase Agreements (PPAs). Increased
electrification of the National Electricity
Market (NEM) and other growth areas
such as electric vehicle penetration and
an increase in connected services as
customers decarbonise their homes will
provide further opportunities for the retail
business. The climate scenario valuation
assumes closure of Eraring in August 2025,
which therefore limits the exposure of the
carrying value of assets in the Energy
Markets segment to long-term commodity
price movements. There is no expected
impact to the useful lives of the remaining
assets or restoration and rehabilitation
provisions under the IEA NZE scenario.
Accounting standards require any decision
as to impairments or reversals to be
based on management’s best estimate
of economic conditions over the assets
remaining useful life. Given the IEA
NZE scenario is not viewed as the
most likely economic outcome, it is
not an appropriate basis on which to
determine or quantify impairment or
potential impairment reversals. Historical
impairments within the Energy Markets
segment have largely pertained to goodwill,
which, in accordance with accounting
standards, cannot be reversed.
Investment in APLNG
For the Group’s investment in APLNG,
the outcomes of the climate scenarios are
as follows:
Carrying value as at 30 June 2023 5,469
$m
Impairment arising in
selected scenarios:
IEA APS
Woodmac 2022 AET-1.5°C
IEA NZE
nil
nil
2,440
The climate analysis disclosed is presented
based on the adjustment of pricing
assumptions alone, the exception being
the IEA NZE and Woodmac 2022
AET-1.5°C scenarios where no scope
2 emissions are assumed from 2035
onwards. This is intended to be consistent
with the assumption of the net zero
grid by 2035 applied in the AEMO
“Strong Electrification” scenario. No other
adjustments or mitigating actions have
been applied and all modelling is
conducted in accordance with AASB and
IFRS measurement requirements.
In practice these valuations do not reflect
any actions management may take in order
to reduce negative outcomes and further
grow the business. If presented with such
a sustained low-price environment, APLNG
would adjust future long-term expenditure,
production and operations in order to
reduce the overall unfavourable impact,
therefore the illustrative impairments
presented under the climate scenarios
above are likely higher than what
would transpire.
2 The data presented in the graphs as the Woodmac 2022 AET-1.5 °C scenario was obtained from the Accelerated Energy Transition 1.5-degree scenario 2022, a product of
Wood Mackenzie. The data and information provided by Wood Mackenzie should not be considered advice; be relied upon; copied or used except as expressly permitted
by Wood Mackenzie. Wood Mackenzie takes no responsibility for the use of this data or information except as specified in an agreement with Wood Mackenzie.
92
Annual Report 2023
Items excluded from the calculation of
underlying profit are reported to the
Managing Director as not representing the
underlying performance of the business
and thus are excluded from underlying
profit or underlying EBITDA. These items
are determined after consideration of the
nature of the item, the significance of the
amount and the consistency in treatment
from period to period.
The nature of items excluded from
underlying profit and underlying EBITDA
are shown below.
• Changes in the fair value of financial
instruments not in accounting hedge
relationships, to remove the significant
volatility caused by timing mismatches
in valuing financial instruments and
the related underlying transactions. The
valuation changes are subsequently
recognised in underlying earnings when
the underlying transactions are settled;
• Realised and unrealised foreign
exchange gains/losses on debt held
to hedge USD-denominated investment
in APLNG;
• Significant redundancies and other costs
in relation to business restructuring,
transformation or integration activities;
• Gains/losses on the sale or acquisition of
an asset/entity;
• Transaction costs incurred in relation to
the sale or acquisition of an entity;
•
Impairments of assets;
• Significant onerous contracts;
• Deferred tax liability recognition/
utilisation relating to the
APLNG investment;
• Large-scale Generation Certificates
(LGCs) net shortfall charge; and
• Other significant non-recurring items.
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 investees,
earnings per share and dividends.
A1 Segments
The Group's operating segments are
presented on a basis that is consistent
with the information provided internally to
the Managing Director, who is the chief
operating decision maker. This reflects the
way the Group's businesses are managed,
rather than the legal structure of the Group.
The reporting segments are organised
according to the nature of the activities
undertaken and are detailed below.
• Energy Markets: Energy retailing and
wholesaling, power generation and LPG
operations predominantly in Australia.
• Share of Octopus Energy: Origin's
•
investment in Octopus Energy Holdings
(Octopus Energy). This investment was
previously included in the Energy
Markets segment.
Integrated Gas: Origin's investment
in APLNG, exploration interest in the
Cooper-Eromanga Basin and costs
associated with growth initiatives such
as hydrogen. It also includes overhead
costs (net of recoveries from APLNG)
and costs incurred in managing Origin’s
exposure to LNG pricing risk and
impacts of its LNG trading positions. For
greater transparency, the investment in
APLNG is presented separately from the
residual component of the segment.
• Corporate: Various business
development and support activities
that are not allocated to operating
segments, including corporate treasury
and tax items.
Underlying profit and underlying EBITDA
are non-statutory (non-IFRS) measures.
The objective of measuring and reporting
underlying profit and underlying EBITDA
is to provide a more meaningful and
consistent representation of financial
performance by removing items that distort
performance or are non-recurring in nature.
Financial Statements
93
A1 Segments (continued)
Segment result for the year ended 30 June
Share of
Integrated Gas
$m
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Energy Markets
Octopus Energy Share of APLNG
Other
Corporate
Consolidated
External revenue
15,406 13,636
-
-
-
-
1,075
825
-
-
16,481
14,461
EBITDA
2
(367)
240
(36) 2,246
2,134
Depreciation and amortisation
(501)
(424)
-
-
-
-
917
(22)
(689)
(94)
(200)
3,311
842
(24)
(4)
(1)
(527)
(449)
(2)
(1)
(501)
(792)
(101)
139
(51)
(1,062)
(1,090)
2
4
-
-
(1,163)
(1,138)
(87)
1,184
1,044
897
(709)
(98)
(201)
1,621
(745)
-
48
51
(194)
(420)
(3)
13
(190)
(551)
(4)
51
(194)
(420)
(3)
61
(190)
(551)
(4)
(501)
(792)
139
(87)
1,184
1,044
897
(661)
(664)
(933)
1,055
(1,429)
(846)
1,574
(190)
(2,342)
-
-
-
-
-
-
-
-
-
-
-
-
991
(331)
(40)
(112)
105
1,131
253
(62)
27
(3)
90 (2,407)
1,244
(393)
113
100
(560)
(675)
113
(560)
308
(1,836)
Total significant items
(1,036)
(768)
Segment underlying
profit/(loss)4
Underlying EBITDA4,5
535
1,038
(24)
401
139
240
(87)
1,184
1,044
(347)
(268)
(764)
(258)
747
407
(36) 2,246
2,134
(327)
(297)
(90)
(88)
3,107
2,114
1
Interest income earned on MRCPS in the prior year has been allocated to the Integrated Gas - Other segment.
2 Interest expense related to general financing is allocated to the Corporate segment.
3 Income tax expense for entities in the Origin tax consolidated group is allocated to the Corporate segment.
4 Underlying profit and underlying EBITDA are non-statutory (non-IFRS) measures.
5 Underlying EBITDA equals segment result and underlying profit/(loss) adjusted for: depreciation and amortisation; share of ITDA of equity accounted investees; interest
income/(expense) net of $9 million (2022: $4 million) interest unwind significant item; income tax expense; and NCI.
Share of ITDA of equity
accounted investees
EBIT
Interest income1
Interest expense2
Income tax expense3
Non-controlling interests (NCI)
Statutory profit/(loss)
attributable to members of
the parent entity
Reconciliation of statutory
profit/(loss) to segment result
and underlying profit/(loss)
Fair value and foreign
exchange movements
Disposals, impairments,
business restructuring
and other
Tax and NCI items excluded
from underlying profit
94
Annual Report 2023
A1 Segments (continued)
Segment result for the year ended 30 June
$m
Fair value and foreign exchange movements
Increase in fair value of derivatives
Net (loss)/gain from financial instruments measured at fair value
Exchange loss on foreign-denominated debt
Fair value and foreign exchange movements
Disposals, impairments, business restructuring and other
Loss on disposal - Beetaloo1
Recycling of foreign currency translation reserve to the income
statement on wind up - Origin Energy Hydro Bermuda1
Loss on divestment - APLNG equity accounted investment
Loss on sale - other assets
Disposals
Impairment - Energy Markets
Impairments
Restructuring costs2
Transaction costs
Transformation costs
Business restructuring
Deferred tax liability utilisation/(recognition) - APLNG
Net capital gains tax on divestment - APLNG3
Gain on dilution of investment - Octopus Energy
Provision for legal matters
LGC net shortfall charge
Onerous contracts provision4,5
WINconnect other income
Other
Total disposals, impairments, business restructuring and other
Total significant items
1 Refer to note F4.
2023
2022
Gross
Tax and NCI
Gross
Tax and NCI
259
(114)
(40)
105
(106)
62
-
-
(44)
-
-
(4)
(29)
(93)
(126)
-
-
-
(13)
(77)
350
-
260
90
195
(77)
34
12
(31)
31
-
-
-
31
-
-
1
9
28
38
180
-
-
-
-
(105)
-
75
144
113
1,155
85
(109)
1,131
-
-
(113)
(1)
(114)
(2,196)
(2,196)
(51)
(5)
(27)
(83)
-
-
44
(22)
(151)
48
67
(14)
(2,407)
(1,276)
(347)
(26)
33
(340)
-
-
-
-
-
-
-
15
2
8
25
(39)
(172)
-
-
-
(14)
(20)
(245)
(220)
(560)
2 Relates to the early closure of the Eraring Power Station. Refer to note C5.
3 The prior year amount includes $394 million of capital gains tax, offset by a $222 million tax benefit pertaining to utilisation of carry-forward capital losses.
4 These amounts represent the non-cash movement during the year relating to the Group's onerous contract. Future realised gains or losses will be recognised within underlying
profit. Refer to note C5.
5 The gross amounts include onerous contract provision movement of $359 million (2022: $51 million) and interest unwind of $9 million (2022: $4 million).
Financial Statements
95
A1 Segments (continued)
Segment assets and liabilities as at 30 June
Integrated Gas
Energy
Markets
Share of
Octopus
Energy
Share
of APLNG
Other
Corporate
Assets held
for sale
Consolidated
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
$m
Assets
Segment assets
10,712 15,982
-
-
-
-
1,264
972
153
155
80
-
12,209
17,109
Investments
accounted for using
the equity method
(refer to note A5)
Cash, funding-
related derivatives
and tax assets
10
11
776
413
6,038
6,392
(569)
(571)
-
-
-
Total assets
10,722 15,993
776
413 6,038 6,392
695
401
-
-
463
616
666
821
21
101
-
-
-
6,255
6,245
484
666
18,948 24,020
Liabilities
Segment liabilities
(4,382)
(6,713)
Financial liabilities,
interest-bearing
liabilities, funding-
related derivatives
and tax liabilities
Total liabilities
(4,382)
(6,713)
-
-
-
-
-
-
Net assets
6,340 9,280
776
413 6,038 6,392
(203) (1,362) (4,126) (4,701)
Additions of non-
current assets
396
429
173
268
-
-
24
65
2
4
-
-
(898) (1,763) (4,742) (5,522)
(4,130)
(4,918)
(8)
(15)
86
-
(4,138)
(4,918)
- (10,037) (13,998)
-
-
8,911
10,022
595
766
-
(898)
(1,763)
(612)
(604)
(7)
-
(5,899)
(9,080)
96
Annual Report 2023
A2 Revenue
2023
$m
Sale of electricity
Sale of gas
Pool revenue
Solar and batteries
Other revenue
Total revenue
2022
$m
Sale of electricity
Sale of gas
Pool revenue
Solar and batteries
Other revenue
Total revenue
Retail
4,408
1,397
-
-
30
Business and
Wholesale
3,267
2,204
2,796
-
9
LPG
-
740
-
-
-
5,835
8,276
740
4,166
1,185
-
-
30
5,381
2,891
1,627
2,608
-
28
7,154
-
705
-
-
-
705
Solar and
Energy
Services
Integrated
Gas
-
1,075
-
-
-
Total
7,906
5,568
2,796
105
106
1,075
16,481
-
825
-
-
-
825
7,183
4,456
2,608
107
107
14,461
231
152
-
105
67
555
126
114
-
107
49
396
The Group's primary revenue streams relate to the sale of electricity and natural gas to retail (residential and small to medium enterprises),
business and wholesale customers, the sale of generated electricity into the National Electricity Market (NEM), and the sale of physical LNG
cargoes that form part of an LNG trading portfolio.
Key judgements and estimates
The Group recognises revenue from electricity and gas sales once the energy has been consumed by the customer. When determining
revenue for the financial period, management estimates the volume of energy supplied since a customer's last bill. The estimation of
unbilled consumption requires judgement and is based on various assumptions including:
• volume and timing of energy consumed by customers;
• allocation of estimated electricity and gas volumes to various pricing plans;
• discounts linked to customer payment patterns; and
•
loss factors.
Management also uses unbilled consumption volumes to accrue network expenses incurred by the Group for unread customer electricity
and gas meters.
The calculation of unbilled revenue requires significant judgement in estimating the level of energy consumption by customers during the
unbilled period to 30 June 2023. The Group uses a backcasting model and volume-matching process to provide a reliable estimate of
unbilled revenue as at 30 June 2023.
Retail contracts
Retail electricity is generally marketed through standard service offers that provide customers with discounts on published tariff rates.
Contract duration can vary with some contracts providing a discount on published rates for a limited term, while other contracts have no
fixed duration. Contracts generally require no minimum consumption, and can be terminated by the customer at any time without significant
penalty. The supply of energy is considered a single performance obligation for which revenue is recognised upon delivery to customers at
the offered rate. Where customers are eligible to receive additional behavioural discounts, Origin considers this to be variable consideration.
Business and wholesale contracts
Contracts with business and wholesale customers are generally medium to long-term, higher-volume arrangements with fixed or index-linked
energy rates that have been commercially negotiated. The nature and accounting treatment of this revenue stream is largely consistent
with retail sales. Some business and wholesale sales arrangements also include the transfer of renewable energy certificates (RECs), which
represent an additional performance obligation. Revenue is recognised for these contracts when Origin has the 'right to invoice' the customer
for consideration that corresponds directly with the value of units of energy delivered to the customer. Pool revenue relates to sales by Origin
generation assets into the NEM, as well as revenue associated with gross settled PPAs. Origin has assessed it is acting as the principal in relation
to transactions with the NEM and therefore recognises pool sales on a gross basis. Revenue from these sales is recognised at the spot price
achieved when control of the electricity passes to the grid.
Financial Statements
97
A2 Revenue (continued)
Solar and Energy services
Solar and Energy Services revenue primarily relates to sales of solar, batteries and Community Energy Services. Solar and batteries revenue
includes the sale, installation, repairs and maintenance services of solar photovoltaic systems, and battery solutions, to residential and business
customers. Revenue is recognised at the point in time that the system is installed, or the service provided is complete. Community Energy
Services supplies electricity and gas within embedded network sites. Similar to retail contracts, the supply of energy is considered a single
performance obligation for which revenue is recognised upon delivery to the customers at the offered rate.
LPG and Integrated Gas
Revenue from the sale of LPG (Energy Markets segment) and LNG (Integrated Gas segment) is recognised at the point in time that the
customer takes physical possession of the commodity. Revenue is recognised at an amount that reflects the consideration expected to
be received.
A3 Other income
Net gain on dilution of investments1
Fees and services, and other income
Other income
Interest earned from other parties2
Interest earned on APLNG MRCPS
Interest income
1 The prior year amount relates to a gain on dilution of the Group's equity accounted investment in Octopus Energy.
2 Interest income is measured using an effective interest rate method and recognised as it accrues.
A4 Expenses
Cost of sales1
Employee expenses2
Depreciation and amortisation
Impairment of non-current assets3
Net loss on divestment4
Impairment of trade receivables (net of bad debts recovered)
Increase in fair value of derivatives
Net loss/(gain) from financial instruments measured at fair value
Net loss on sale of assets5
Net foreign exchange loss
Onerous contracts provision6
Other7
Expenses
Interest on borrowings
Interest on lease liabilities
Unwind of discounting on long-term provisions
Interest expense
1
Includes variable lease payments of $31 million (2022: $24 million).
2 Includes contributions to defined contribution superannuation funds of $71 million (2022: $60 million).
3 Refer to note C7.
4 The prior year amount relates to the divestment of 10 per cent of Origin’s investment in APLNG.
5 The current year amount primarily relates to the disposal of Beetaloo and wind up of Origin Energy Hydro Bermuda. Refer to note F4.
6 Refer to note C5.
7 Includes low-value assets and short-term leases payments of $8 million (2022: $3 million).
2023
$m
2022
$m
-
45
45
51
-
51
2023
$m
14,487
804
527
-
-
148
(259)
114
42
63
(359)
662
44
106
150
13
48
61
2022
$m
13,388
690
449
2,196
113
65
(1,155)
(85)
2
128
(51)
575
16,229
16,315
155
21
18
194
169
17
4
190
98
Annual Report 2023
A5 Results of equity accounted investees
for the year ended 30 June
2023
$m
APLNG1,2
Total joint ventures
Octopus Energy3,4
Gasbot Pty Limited
Gaschem Sydney
Total associates
Total
2022
$m
APLNG1,2
Total joint ventures
Octopus Energy3,4
Gasbot Pty Limited
Gaschem Sydney
Total associates
Total
Share of EBITDA
Share of ITDA
Share of net
profit/(loss)
2,246
2,246
240
(1)
2
241
2,487
2,134
2,134
(36)
(1)
-
(37)
(1,060)
(1,060)
(101)
-
(2)
(103)
(1,163)
(1,086)
(1,086)
(51)
-
(1)
(52)
2,097
(1,138)
1,186
1,186
139
(1)
-
138
1,324
1,048
1,048
(87)
(1)
(1)
(89)
959
1 APLNG's summary financial information is separately disclosed in notes B2.1, B2.2 and B2.3.
2 Included in the Group’s share of net profit is $2 million (2022: $4 million) of MRCPS interest income, in line with the depreciation of the capitalised interest in APLNG’s result.
Refer to note B2.1.
3 The Group holds a 20 per cent interest in Octopus Energy and has significant influence over the entity. The prior year interest was 18.7 per cent. Refer to note B4 for details
regarding changes in ownership interest during the year.
4 Included in the Group's share of net profit is $20 million (2022: $18 million) of depreciation, relating to the fair value attributed to assets at the acquisition date. Refer to note B3.
as at 30 June
$m
APLNG1
Octopus Energy2
Gasbot Pty Limited
Gaschem Sydney
Total
1 APLNG's summary financial information is separately disclosed in notes B2.1, B2.2 and B2.3.
2 Octopus Energy's summary financial information is separately disclosed in notes B3.1 and B3.2
Equity accounted investment
carrying amount
2023
5,469
776
-
10
2022
5,821
413
1
10
6,255
6,245
Financial Statements
99
A6 Earnings per share
Weighted average number of shares on issue-basic1
Weighted average number of shares on issue-diluted2
Statutory profit/(loss)
Earnings per share based on statutory consolidated profit
Statutory profit/(loss) $m
Basic earnings per share
Diluted earnings per share
Underlying profit
Earnings per share based on underlying consolidated profit
Underlying profit $m3
Underlying basic earnings per share
Underlying diluted earnings per share
2023
2022
1,720,567,672
1,753,612,216
1,731,006,904
1,762,126,506
1,055
(1,429)
61.3 cents
(81.5) cents
60.9 cents
(81.5) cents
747
43.4 cents
43.2 cents
407
23.2 cents
23.1 cents
1 The basic earnings per share calculation uses the weighted average number of shares on issue during the year reduced by shares bought-back and excluding treasury
shares held.
2 The diluted earnings per share calculation uses the weighted average number of shares on issue during the year reduced by shares bought-back and excluding treasury shares
held. It is also adjusted to reflect the number of shares that would be issued if outstanding Options, Performance Share Rights, Deferred Share Rights, Restricted Shares and
Matching Share Rights were to be exercised (2023: 10,439,232; 2022: 8,514,290).
3 Refer to note A1 for a reconciliation of statutory consolidated profit to underlying consolidated profit.
A7 Dividends
The Directors have determined to pay a fully franked final dividend of 20 cents per share, on ordinary shares. The dividend will be paid on
29 September 2023. Dividends paid during the year ended 30 June are detailed below.
Final dividend of 16.5 cents per share, partially franked to 75 per cent, in respect of the financial year ended
30 June 2022, paid 30 September 2022
(2022: 7.5 cents per share, unfranked, in respect of the financial year ended 30 June 2021, paid
1 October 2021)
Interim dividend of 16.5 cents per share, fully franked, in respect of the financial year ended 30 June 2023, paid
24 March 2023
(2022: 12.5 cents per share, unfranked, in respect of the financial year ended 30 June 2022, paid
25 March 2022)
Total dividends provided for or paid
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)
2023
$m
2022
$m
284
132
284
568
453
304
220
352
86
304
100
Annual Report 2023
B Investment in equity accounted joint ventures and associates
This section provides information on the Group’s equity accounted investments including financial information relating to APLNG and
Octopus Energy.
B1 Interests in equity accounted joint ventures and associates
Joint ventures and associates
APLNG1
Octopus Energy2
PNG Energy Developments Limited3
Gasbot Pty Limited
Gaschem Sydney
Reporting date
30 June
30 April
Country
of incorporation
Australia
United Kingdom
31 December
PNG
30 June
Australia
31 December
Germany
Ownership interest (per cent)
2023
27.5
20.0
-
35.0
25.0
2022
27.5
18.7
50.0
35.0
25.0
1 APLNG 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 APLNG as a joint venture.
2 Octopus Energy is a separate legal entity. The Group’s investment is equity accounted as a result of the Group’s active participation on the Board and the Group’s ability to
impact decision making, leading to the assessment that significant influence exists.
3 PNG Energy Developments Limited was deregistered on 26 October 2022.
Of all the above joint ventures and associates, only the interests in APLNG and Octopus Energy have a material impact on the Group at
30 June 2023.
B2 Investment in APLNG
This section provides information on financial information related to the Group's investment in the equity accounted joint venture APLNG.
B2.1 Summary APLNG income statement
for the year ended 30 June
2023
2022
$m
Operating revenue
Operating expenses
EBITDA
Depreciation and amortisation expense
Interest income
Interest expense – MRCPS
Other interest expense
Income tax expense
ITDA
Statutory result for the year
Other comprehensive income
Statutory total comprehensive income2
Underlying profit for the year3
Underlying EBITDA for the year3
Total
APLNG
11,259
(3,091)
8,168
(1,659)
87
-
(440)
(1,850)
(3,862)
4,306
-
4,306
4,306
8,168
Origin
interest1
2,246
(456)
24
-
(121)
(509)
(1,062)
1,184
-
1,184
1,184
2,246
Total
APLNG
9,362
(2,486)
6,876
(1,563)
9
(141)
(328)
(1,456)
(3,479)
3,397
-
3,397
3,397
6,876
Origin
interest1
2,134
(495)
3
(48)
(105)
(445)
(1,090)
1,044
-
1,044
1,044
2,134
1 Origin's interest is 27.5 per cent. Prior to 8 December 2021 it was 37.5 per cent.
2 Excluded from the above is $2 million (2022: $4 million) (Origin share) of MRCPS interest income that has been recognised by Origin, in line with the depreciation of the
capitalised interest in APLNG’s result above. Refer to note B2.2. This adjustment is disclosed under the Integrated Gas - Other segment on the 'share of ITDA of equity
accounted investees' line in note A1.
3 Underlying profit and underlying EBITDA are non-statutory (non-IFRS) measures.
Income and expense amounts are converted from USD to AUD using the average exchange rate prevailing for the relevant period.
Financial Statements
B2.2 Summary APLNG statement of financial position
100 per cent APLNG
as at 30 June
$m
Cash and cash equivalents
Other assets
Current assets
Receivables from shareholders
Property, plant and equipment
Exploration, evaluation and development assets
Other assets
Non-current assets
Total assets
Bank loans – secured
Other liabilities
Current liabilities
Bank loans – secured
Other liabilities
Non-current liabilities
Total liabilities
Net assets
Group's interest of 27.5 per cent of APLNG net assets
Group's impairment expense1
Group's own costs
MRCPS elimination2
Investment in APLNG Pty Ltd3
101
2022
1,544
788
2,332
312
32,083
558
142
33,095
35,427
776
766
1,542
7,075
3,569
10,644
12,186
23,241
6,392
(477)
18
(112)
5,821
2023
1,720
910
2,630
324
32,441
510
149
33,424
36,054
885
647
1,532
6,489
6,078
12,567
14,099
21,955
6,038
(477)
18
(110)
5,469
1 Relates to impairments taken by the Group in the year ended 30 June 2020.
2 During project construction, when the Group received interest on the MRCPS from APLNG, it recorded the interest as income after eliminating a proportion of this interest
that related to its ownership interest in APLNG. At the same time, when APLNG paid interest to the Group on MRCPS, the amount was capitalised by APLNG. Therefore, these
capitalised interest amounts form part of the cost of APLNG's assets, and these assets have been depreciated since commencement of operations. The proportion attributable
to the Group’s own interest (37.5 per cent prior to 8 December 2021 and 27.5 per cent thereafter) is eliminated through the equity accounted investment balance.
3 Includes an increase of $245 million due to foreign exchange that has been recognised in the foreign currency translation reserve. Also included is a reduction of
A$1,783 million (US$1,198 million) relating to unfranked dividends received from APLNG.
Reporting date balances are converted from USD to AUD using an end-of-period exchange rate of 0.6629 (2022: 0.6891).
Key judgements and estimates
The carrying amount of the Group's equity accounted investment in APLNG is reviewed at each reporting date to determine whether there
is any indication of impairment or reversal of impairment. Where an indicator of impairment exists, a formal estimate of the recoverable
amount is made. The Group’s assessment of the recoverable amount uses a discounted cash flow methodology and considers a range of
macroeconomic and project assumptions, including oil and LNG price, AUD/USD exchange rates, discount rates and costs over the asset's
life. No impairment loss or reversal of impairment was recognised during the year.
Climate change is a material risk that can affect the Group’s operations through current and future climate-related legislation and policies
and climate related scenarios. Future climate related conditions, legislation and policies may have an impact on future commodity prices,
foreign exchange rates, discount rates, inflation, global market supply and demand conditions and whether reserve quantities are capable
of economic extraction. Refer to the Strategy and climate risks section in the Overview.
102
Annual Report 2023
B2.3 Summary APLNG statement of cash flows
100 per cent APLNG
for the year ended 30 June
$m
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Net cash from operating activities
Cash flows from investing activities
DSRA loan repaid by Origin
Acquisition of property, plant and equipment
Acquisition of exploration and development assets
Acquisition of intangibles
Proceeds from sale of assets
Interest income
Net cash used in investing activities
Cash flows from financing activities
Payments relating to other financing activities
Repayment of lease principal
Payment of interest on lease liabilities
Repayment of borrowings
Payments of transaction and interest costs relating to borrowings
Payments for buy-back of MRCPS
Payments of interest on MRCPS
Payments of ordinary dividends
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate changes on cash
Cash and cash equivalents at the end of the year
2023
2022
11,767
(3,583)
8,184
-
(469)
(12)
(1)
2
82
(398)
-
(64)
(27)
(813)
(311)
-
-
(6,483)
(7,698)
88
1,544
88
1,720
9,529
(2,459)
7,070
51
(393)
(22)
(1)
68
8
(289)
(22)
(55)
(15)
(694)
(233)
(3,544)
(145)
(1,573)
(6,281)
500
905
139
1,544
Cash flow amounts are converted from USD to AUD using the exchange rate that approximates the actual rate on the date of the cash flows.
Financial Statements
103
B3 Investment in Octopus Energy Holdings Limited
Octopus Energy is an energy retailer and technology company incorporated in the United Kingdom and is not publicly listed. During the year
the Group's ownership interest increased from 18.7 per cent to 20 per cent following additional investments by the Group. Refer to note B4
for further details.
The following table summarises the financial information of Octopus Energy, as included in its financial statements, adjusted for differences
in accounting policies. The table also reconciles the summarised financial information to the carrying amount of the Group's interest in
Octopus Energy.
B3.1 Summary Octopus income statement
for the year ended 30 June
$m
Operating revenue
Statutory result for the year
Other comprehensive income
Statutory total comprehensive income2
Underlying profit for the year3
Underlying EBITDA for the year3
2023
Total
Octopus
Energy
Origin
interest1
2022
Total
Octopus
Energy
24,285
795
-
795
795
1,200
159
-
159
159
240
8,562
(345)
-
(345)
(345)
(180)
1 Origin's interest is 20 per cent. In the prior year it was 20 per cent prior to 1 December 2021 and 18.7 per cent thereafter. Refer to note B4.
2 Excluded from the above is $20 million (2022: $18 million) (Origin share) of amortisation relating to the fair value attributed to assets at the acquisition date.
3 Underlying profit and underlying EBITDA are non-statutory (non-IFRS) measures.
Income statement amounts are converted from GBP to AUD using the average rate prevailing for the relevant period.
B3.2 Summary Octopus Energy statement of financial position
100 per cent Octopus Energy
as at 30 June
$m
Current assets1
Non-current assets
Current liabilities2
Non-current liabilities2
Net assets
Group's interest of 20 per cent (2022: 18.7 per cent) of Octopus Energy
net assets
Goodwill, fair value adjustments and equity-settled transactions3
Group's own costs
Group's carrying amount of the investment in Octopus Energy4
2023
11,998
1,729
(5,894)
(5,735)
2,098
420
350
6
776
Origin
interest
(69)
-
(69)
(69)
(36)
2022
2,961
570
(2,867)
(11)
653
122
285
6
413
1 Current assets include cash and cash equivalents of $7,686 million (2022: $800 million).
2 Includes current financial liabilities and non-current financial liabilities of $3,298 million (2022: $1,732 million) and $5,735 million (2022: $11 million) respectively.
3 Includes goodwill and other fair value adjustments on initial recognition of the Group's equity accounted investment in Octopus Energy.
4 Includes a movement of $173 million related to an additional investment during the year and $51 million related to foreign exchange that has been recognised in the foreign
currency translation reserve (2022: $19 million).
Reporting date balances are converted from GBP to AUD using an end-of-period exchange rate of 0.5250 (2022: 0.5665).
The associate has no contingent liabilities as at 30 June 2023.
104
Annual Report 2023
B4 Transactions between the Group and equity accounted investees
APLNG
Service transactions
The Group provides services to APLNG including corporate services, upstream operating services related to the development and operation
of APLNG's natural gas assets, and marketing services relating to coal seam gas (CSG). The Group incurs costs in providing these services and
charges APLNG for them in accordance with the terms of the contracts governing those services.
Commodity transactions
Separately, the Group has entered agreements to purchase gas from APLNG (2023: $636 million; 2022: $401 million) and sell gas to APLNG
(2023: $40 million; 2022: $17 million). At 30 June 2023, the Group's outstanding payable balance for purchases from APLNG was $59 million
(2022: $25 million) and outstanding receivable balance for sales to APLNG was nil (2022: $7 million).
Funding transactions
The Group received unfranked dividends of $1,783 million (2022: $433 million.)
On 18 July 2023 the directors of APLNG determined unfranked dividends to be paid to shareholders. The Group received unfranked dividends
of US$65 million (A$98 million) on 26 July 2023.
On 15 August 2023 the directors of APLNG determined further unfranked dividends to be paid to shareholders. The Group expects to receive
US$115 million on 29 August 2023.
In the prior year, Origin repaid $51 million of the DSRA loan from APLNG under the APLNG project finance debt service reserve
account requirements.
In the prior year the Group received A$1,162 million of MRCPS buy-backs and reflected a reduction in the MRCPS non-current financial
asset. Related MRCPS dividends of A$50 million were recognised as interest income. The APLNG MRCPS were fully bought back as at
30 June 2022.
Octopus Energy
Additional equity transactions
On 9 August 2022 an additional investment of £94 million (A$163 million) was paid by the Group to Octopus Energy to restore its 20 per cent
equity interest.
In January 2023 the Group invested a further £5.6 million (A$10 million), following further investments by other shareholders, to maintain its
20 per cent equity interest.
Financial guarantee
The Group provided a financial guarantee to Octopus Energy’s financiers and during the year, $6 million (2022: $9 million) was recognised
within other income in respect of the financial guarantee income. The financial guarantee expired in March 2023.
Kraken technology platform milestone payment
The £10 million (A$20 million) final milestone payment was paid in May 2023.
Financial Statements
105
C 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.
C1 Trade and other receivables
The following balances are amounts due from the Group's customers and other parties.
Current
Trade receivables net of allowance for impairment
Unbilled revenue net of allowance for impairment
Other receivables
Total current
Non-current
Trade receivables
Total non-current
2023
$m
867
1,457
224
2,548
60
60
2022
$m
724
2,107
540
3,371
45
45
Trade and other receivables are initially recorded at the amount billed to customers or other counterparties. Unbilled receivables represent
estimated gas and electricity supplied to customers since their previous bill was issued. The carrying value of all receivables, including unbilled
revenue, reflects the amount anticipated to be collected.
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, historic collection trends and expectations about future economic conditions.
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 energy revenue to recognise.
Credit risk and collectability
The Group minimises the concentration of credit risk by undertaking transactions with a large number of customers from across a broad range
of industries. Credit approval processes are in place for large customers and all 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. For some
debtors, the Group may also obtain security in the form of deposits, guarantees, deeds of undertaking or letters of credit, which can be called
upon if the counterparty defaults.
Debtor collectability is assessed on an ongoing basis and any resulting impairment losses are recognised in the income statement. The Group
applies the simplified approach to providing for trade receivable and unbilled revenue impairment, which requires the expected lifetime credit
losses to be recognised when the receivable is initially recognised. To measure expected lifetime credit losses, trade receivables and unbilled
revenue balances have been grouped based on shared credit risk characteristics and ageing profiles. A debtor balance is written off when
recovery is assessed to be no longer possible.
106
Annual Report 2023
C1 Trade and other receivables (continued)
As at 30 June 2023, the allowance for impairment in respect of trade receivables and unbilled revenue is $238 million (2022: $186 million).
The average age of trade receivables is 22 days (2022: 18 days). Other receivables are neither past due nor impaired and relate principally
to generation and hedge contract receivables. The ageing of current trade receivables and unbilled revenue at the reporting date is
detailed below.
$m
Unbilled revenue
Not yet due
Less than 30 days
31-60 days past due
61-90 days past due
Greater than 91 days
Total
2023
2022
Gross
1,473
629
114
50
36
260
2,562
Impairment
allowance
(16)
(35)
(4)
(7)
(7)
(169)
(238)
Gross
2,120
539
86
49
30
193
3,017
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
Amounts written off
Balance as at 30 June
186
148
(96)
238
Impairment
allowance
(13)
(8)
(5)
(9)
(8)
(143)
(186)
186
65
(65)
186
Financial Statements
C2 Exploration and evaluation assets
Balance as at 1 July
Additions
Disposal2
Transfers to assets held for sale
Exploration write-off
Balance as at 30 June
107
20221
$m
245
65
-
-
(24)
286
2023
$m
286
11
(263)
(8)
(26)
-
1 The prior year closing balance primarily related to the Group’s 77.5 per cent share in the Beetaloo Basin joint venture with Falcon Oil & Gas (Beetaloo asset) and the Group's
interests in several permits in the Canning Basin with Buru Energy and Rey Resources.
2 The current year movements mainly relate to the disposal of Beetaloo. Refer to note F4.
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 for;
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. If it is concluded that the carrying value of an exploration
and evaluation asset is unlikely to be recovered by future exploitation or sale, an impairment is recognised in the income statement for
the difference.
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. Additionally, future climate-related conditions,
legislation and policies may impact whether reserve quantities are capable of economic extraction. The recoverability of these assets
continues to be monitored by the Group. Such estimates and assumptions may change as new information becomes available.
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 PP&E.
108
Annual Report 2023
C3 Property, plant and equipment
Owned
Right-of-use (ROU)
Total
Plant
and equipment
Land
and buildings
Capital work
in progress
Plant
and equipment
Land
and buildings
$m
2023
Cost
Less: Accumulated
depreciation and
impairment losses
Total
Balance as at 1 July 2022
Additions
Net restoration movement
Disposals
Modifications to lease terms
Depreciation/amortisation
Transfers within PP&E
Transfers to assets held for sale
6,030
(3,852)
2,178
2,303
72
13
(26)
-
(316)
164
(32)
185
(78)
107
115
-
-
-
-
(2)
-
(6)
107
Balance as at 30 June 2023
2,178
2022
Cost
Less: Accumulated
depreciation and
impairment losses
Total
Balance as at 1 July 2021
Additions
Net restoration movement
Disposals
Modifications to lease terms
Depreciation/amortisation
Transfers within PP&E
Transfers to intangibles
Effect of movements in foreign
exchange rates
Balance as at 30 June 2022
5,952
194
(3,649)
2,303
2,458
41
(31)
(9)
-
(216)
60
(3)
3
2,303
(79)
115
112
6
-
-
-
(3)
-
-
-
115
420
-
420
371
213
-
-
-
-
(164)
-
420
371
-
371
317
114
-
-
-
-
(60)
-
-
371
287
400
7,322
(92)
195
169
35
-
-
43
(46)
-
(6)
195
(131)
269
297
-
-
(5)
9
(32)
-
-
269
(4,153)
3,169
3,255
320
13
(31)
52
(396)
-
(44)
3,169
266
397
7,180
(97)
169
84
127
-
-
12
(54)
-
-
-
(100)
297
320
1
-
(78)
85
(31)
-
-
-
(3,925)
3,255
3,291
289
(31)
(87)
97
(304)
-
(3)
3
169
297
3,255
Owned PP&E
PP&E is recorded at cost less accumulated depreciation, 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.
Depreciation is calculated on a straight-line basis so as to write off the cost of each asset over its expected useful life. Leasehold improvements
are amortised over the period of the relevant lease or estimated useful life, whichever is shorter. Land and capital work in progress are
not depreciated.
The estimated useful lives used in the calculation of depreciation are shown below.
• Buildings, including leasehold improvements 10 to 50 years
• Plant and equipment 3 to 30 years
Financial Statements
109
C3 Property, plant and equipment (continued)
Leased PP&E
The Group's leased assets include commercial offices, power stations, LPG terminals and shipping vessels, motor vehicles and other items
of equipment.
ROU assets are recognised at the commencement of a lease. ROU assets are initially valued at the corresponding lease liability amount
adjusted for any payments already made, lease incentives received, or initial direct costs incurred when entering into the lease. Where the
Group is required to restore the ROU asset at the end of the lease, the cost of restoration is also included in the value of the ROU asset.
ROU assets are depreciated on a straight-line basis over the shorter of the lease term or the useful life of the ROU asset. The carrying amounts
of ROU 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.
Refer to note D2 for discussion of the recognition and measurement of associated lease liability balances.
Key judgements and estimates
Recoverability of carrying values: Estimates of recoverable amounts are based on an asset’s value-in-use or fair value less costs to sell,
whichever is higher. The recoverable amount of these assets is sensitive to changes in key assumptions.
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 the operating life is determined. The estimated useful lives of our assets align with our climate
change strategy commitments.
Eraring Power Station useful life: The useful life of Eraring remains unchanged at August 2025 for the purpose of accounting assessments
presented within these financial statements. Prevailing market conditions will continue to be assessed which will help inform the final timing
of closure of all four units at Eraring. Refer to the Strategy and climate change risks section in the Overview.
Restoration provisions: An asset's carrying value includes the estimated future cost of required closure and rehabilitation activities. Refer
to note C5 for the judgement related to restoration provisions.
Climate change risks: Future climate-related conditions, legislation and policies may have an impact on these estimates and continues to
be monitored.
Lease term: Where lease arrangements contain options to extend the term or terminate the contract, the Group assesses whether it is
'reasonably certain' that the option to extend or terminate will be exercised. Consideration is given to all facts and circumstances that create
an economic incentive to extend or terminate the contract. Lease liabilities and ROU assets are measured using the reasonably certain
contract term.
110
Annual Report 2023
C4 Intangible assets
Goodwill net of impairment losses
Software and other intangible assets
Accumulated amortisation
Total
Reconciliations of the carrying amounts of each class of intangible asset are set out below.
$m
Balance as at 1 July 2022
Additions1
Transfers to assets held for sale
Amortisation expense
Balance as at 30 June 2023
Balance as at 1 July 2021
Additions2
Transfers from PP&E
Impairment3
Amortisation expense
Balance as at 30 June 2022
2023
$m
1,964
1,786
(1,257)
2,493
Goodwill
Software
and other
intangibles
1,965
-
(1)
-
1,964
4,136
25
-
(2,196)
-
1,965
558
103
(1)
(131)
529
522
183
3
-
(150)
558
2022
$m
1,965
1,684
(1,126)
2,523
Total
2,523
103
(2)
(131)
2,493
4,658
208
3
(2,196)
(150)
2,523
1 Additions include amounts relating to the build of the Kraken technology platform and $6 million of other intangibles related to the acquisition of Yanco Solar Farm.
2 Includes $77 million of software and other intangibles related to the acquisition of WINconnect Pty Ltd and $25 million of goodwill. Additions also include $15 million related
to the acquisition of Yarrabee Solar Farm and $12 million related to the acquisition of the Carisbrook Solar Farm.
3 Relates to the impairment of Energy Markets segment goodwill. Refer to note C7.
Goodwill is stated at cost less any accumulated impairment losses and is not amortised. Software and other intangible assets are stated at cost
less any accumulated impairment losses and accumulated amortisation. 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 9 per cent (2022: 11 per cent).
Key judgements and estimates
Recoverability of carrying values: Refer to note C7.
Financial Statements
C5 Provisions
$m
Balance as at 1 July 2022
Provisions recognised
Provisions released
Payments/utilisation
Unwinding of discounting
Transfers to liabilities held for sale
Effect of movements in foreign exchange rates
Balance as at 30 June 2023
Current
Non-current
Total provisions
111
Total
1,234
43
(407)
(87)
18
(1)
15
815
229
586
815
Restoration1
Onerous
contracts2
Other3
629
11
(44)
(11)
9
(1)
-
593
397
-
(359)
-
9
-
15
62
208
32
(4)
(76)
-
-
-
160
1 The closing balance includes amounts relating to the restoration of the Eraring Power Station site and other generation gas power station locations. Also included within this
balance are rehabilitation provisions for contamination at existing and legacy operating sites.
2 All material contracts in which the unavoidable costs of meeting the obligations exceed the economic benefits are deemed onerous and require a provision to be recognised
upfront. This balance relates to an onerous contract provision of $62 million (US$41 million) (2022: $397 million (US$273 million)) for the LNG sales contract with ENN.
3 The closing balance of other provisions primarily relates to costs for compliance with safety standard requirements relating to the Eraring ash dam wall, costs associated with
the new Myuna Bay Recreation Centre facility, costs associated with the Eraring Power Station closure and a make good provision relating to existing property leases.
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 risk-free rate that reflects
current market assessments of the time value of money. The unwinding of the discount is recognised in each period as interest expense.
At each reporting date, the restoration provision is remeasured in line with changes in discount rates, and changes to the timing or amount
of costs to be incurred, based on current legal requirements and technology. Any changes in the estimated future costs associated with:
• Restoration and dismantling are added to or deducted from the related asset; and
• Environmental rehabilitation are expensed in the current period.
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. Future social, regulatory and climate-related conditions and policies may have an impact on these estimates and will
continue to be monitored.
The useful life of Eraring remains unchanged at August 2025 for the purpose of accounting assessments presented within these financial
statements. Prevailing market conditions will continue to be assessed which will help inform the final timing of closure of all four units at
Eraring. Refer to the Strategy and climate risks section in the Overview.
112
Annual Report 2023
C6 Other financial assets and liabilities
$m
Other financial assets
Measured at fair value through profit or loss
Settlement Residue Distribution Agreement units
Environmental scheme certificates
Investment fund units
Debt and other securities
Equity securities
Measured at fair value through other comprehensive income
Equity securities
Measured at amortised cost
Futures collateral
AEMO cash deposits
Debt instruments
Total other financial assets
Other financial liabilities
Measured at fair value through profit or loss
Environmental scheme surrender obligations
Measured at amortised cost
Futures collateral
Financial guarantees1
Total other financial liabilities
2023
2022
Current
Non-current
Current
Non-current
73
349
-
7
-
-
38
-
-
467
369
49
-
418
56
-
61
100
1
70
-
-
53
341
-
-
-
-
109
444
-
14
-
-
3
290
-
860
417
304
6
727
70
-
59
22
1
51
-
-
40
243
-
-
-
-
1 Financial guarantee contracts are initially recognised at fair value. Subsequently, they are measured at either the amount of any determined loss allowance or at the amount
initially recognised less any cumulative income recognised, whichever is larger. The prior year financial guarantee related to the working capital facility entered into by Octopus
Energy with its financiers, as referred to in note B4, for which the Group had provided a guarantee.
C7 Impairment of non-current assets
Cash-generating units
Assets are grouped together into the smallest group of individual assets that generate largely independent cash inflows (cash-generating unit
or (CGU)). The Energy Markets segment consists of the following materially distinct CGUs:
• Retail CGU: incorporates Mass Market customers, Commercial & Industrial customers and the Wholesale & Trading businesses for
electricity and natural gas commodities. The Wholesale & Trading business includes various electricity power purchase agreements and
major wholesale gas supply contracts.
• Generation CGU: incorporates cash flows from Origin's power stations.
• LPG CGU: supplies and distributes LPG to residential and business locations across Australia and the Pacific.
The carrying amounts of the CGUs are reviewed at each reporting date to determine whether there is any indication of impairment. Where
an indicator of impairment exists, or where goodwill is present, a formal estimate of the recoverable amount is made.
Only the Retail CGU contains a material goodwill balance and an impairment assessment of the recoverable amount was performed in the
current and prior year.
Financial Statements
113
C7 Impairment of non-current assets (continued)
Recoverable amount
The recoverable amount of the Retail CGU has been determined using value-in-use models that include an appropriate terminal value. The
value-in-use calculations are sensitive to a number of key assumptions requiring management judgement, including future commodity prices,
regulatory policies, and the outlook for the market supply-and-demand conditions. The key assumptions used by the Group in its impairment
assessment are shown in the table below.
Key assumptions
Energy Markets
Commodity prices
Future commodity price assumptions impact the recoverability of carrying values and are reviewed at least twice annually.
The Group's 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.
Long-term
growth rates
Cash flows are projected for the term of electricity PPAs and major wholesale supply contracts in the Retail CGU. Other Retail
CGU cash flows are projected for five years. The growth rate used to extrapolate Retail cash flows beyond the initial period
projected averages 2.3 per cent, analogous to long term Consumer Price Index.
Customer numbers
This is based on a review of actual customer numbers and historical data regarding levels of customer churn. The historical
analysis is considered against current and expected market trends and competition for customers.
Gross margin and
operating cost
This is based on a review of actual gross margins and cost per customer, and consideration of current and expected market
movements and impacts.
Discount rate
Discount rates used are the pre-tax equivalent of a post-tax discount rate of 7.5 per cent (2022: 7.2 per cent).
Climate risk
The Group continues to develop its assessment of the potential impacts of climate change and the transition to a low-carbon
economy and this has been considered in the assumptions used as part of the recoverable amount assessment.
No impairment loss was recognised during the year (2022: $2,196 million). The impairment loss in the prior year was allocated to goodwill in
the Retail CGU and cannot be reversed in future periods.
Refer to the Strategy and climate change risks section in the Overview for further analysis of the recoverable amount of non-current assets
applying the Group’s climate scenario analysis.
114
Annual Report 2023
D 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.
D1 Capital management
The Group’s objective when managing capital is to make disciplined capital allocation decisions between investment in growth, distributions
to shareholders and to maintain an optimal capital structure while maintaining access to capital. Management believes that a strong
investment-grade credit rating (Baa2) and an appropriate level of net debt are required to meet these objectives. The Group's current credit
rating is Baa2 (stable outlook) from Moody's.
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, the maturity profile of existing debt facilities, the 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 (target range of approximately 20 to
30 per cent) and an adjusted net debt to adjusted underlying EBITDA ratio (target range of 2.0x to 3.0x). These targets are consistent with
attaining a strong investment-grade rating. Underlying EBITDA is a non-statutory (non-IFRS) measure.
The gearing ratio is calculated as adjusted net debt divided by adjusted net debt plus total equity. Net debt, which excludes cash held by
Origin to fund APLNG-related operations, is adjusted to take into account the effect of FX hedging transactions on the Group’s foreign
currency debt obligations. The adjusted net debt to adjusted underlying EBITDA ratio is calculated as adjusted net debt divided by adjusted
underlying EBITDA (Origin's underlying EBITDA less Origin's share of APLNG underlying EBITDA and Origin’s share of Octopus Energy
underlying EBITDA plus net cash flow from APLNG) over the relevant rolling 12-month period.
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.
Borrowings
Lease liabilities
Total interest-bearing liabilities
Less: Cash and cash equivalents excluding APLNG-related cash1
Net debt
Fair value adjustments on FX hedging transactions
Adjusted net debt
Total equity
Total capital
Gearing ratio
Ratio of adjusted net debt to adjusted underlying EBITDA
1 This balance excludes $93 million (2022: $48 million) of cash held by Origin, as upstream operator, to fund APLNG-related operations.
Bank debt facility repayment
On 19 August 2022 Origin made an early repayment of a US$20 million syndicated bank facility tranche.
2023
$m
2,713
545
3,258
(370)
2,888
(11)
2,877
8,911
11,788
24%
1.2x
2022
$m
2,855
535
3,390
(572)
2,818
20
2,838
10,022
12,860
22%
1.9x
Debt maturity
On 4 April 2023 Origin repaid the €150 million ten-year note issued under the Euro Medium Term Note program. The notes had been
swapped to A$186 million.
Financial Statements
115
D2 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
2023
$m
2022
$m
-
128
128
64
192
515
2,070
2,585
481
3,066
29
228
257
59
316
508
2,090
2,598
476
3,074
Borrowings 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.
Lease liabilities are initially measured at the present value of future lease payments discounted at the Group's incremental borrowing rate.
Where a lease includes termination and/or extension options, the impact of these options on the amount of future payments is included where
exercise of such options is considered reasonably certain to occur. Interest expense is charged on outstanding lease liabilities that reduce over
time as periodic payments are made.
The lease liability is remeasured when certain events occur, including changes in the lease term or changes in future lease payments such as
those resulting from inflation-linked indexation or market rate rent reviews. On remeasurement of lease liabilities, a corresponding adjustment
is made to the ROU asset.
The contractual maturity of lease liabilities is disclosed within the liquidity table in note D4.
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
2023
$m
-
814
1,771
2,585
2022
$m
123
508
1,967
2,598
Some of the Group's borrowings are subject to terms that allow the lender to call on the debt in the event of a breach of covenants. As at
30 June 2023, the Group's borrowings were in compliance with covenants.
116
Annual Report 2023
D3 Contributed equity
Ordinary share capital
Opening balance
On-market share buy-back1
Less treasury shares:
Opening balance
Shares purchased on market
Utilisation of treasury shares on vesting of employee share schemes
and DRP
Total treasury shares
Closing balance
2023
2022
2023
2022
Number of shares
$m
1,722,747,671
1,761,211,071
-
(38,463,400)
6,913
-
(5,899,184)
(6,046,328)
(500,000)
(13,748,516)
4,652,424
13,895,660
(1,746,760)
(5,899,184)
(36)
(4)
28
(12)
7,163
(250)
(25)
(75)
64
(36)
1,721,000,911
1,716,848,487
6,901
6,877
1 During the prior year, a buy-back of 38.5 million shares was completed. The total consideration paid for shares bought back on-market was $250 million at an average price
of $6.50 per share.
Ordinary shares
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.
Treasury shares
Where the Group or other members of the Group purchase shares in the Company, the consideration paid is deducted from the total
shareholders' equity and the shares are treated as treasury shares until they are subsequently sold, reissued or cancelled. Treasury shares are
purchased primarily for use on vesting of employee share schemes and the DRP. Shares are accounted for at a weighted average cost.
D4 Financial risk management
Overview
The Group's day-to-day operations, new investment opportunities and funding activities introduce financial risks, which are actively managed
by the Board Risk Committee. These risks are grouped into the following categories:
• Credit: The risk that a counterparty will not fulfil its financial obligations under a contract or other arrangement.
• Market: The risk that fluctuations in commodity prices, foreign exchange rates and interest rates will adversely impact the Group's result.
• Liquidity: The risk that the Group will not be able to meet its financial obligations as they fall due.
Risk
Credit
Market
Liquidity
Sources
Risk management framework
Financial exposure
Sale of goods
and services and
hedging activities
The Board approves credit risk
management policies that determine the
level of exposures it is prepared to accept.
Credit limits are allocated to counterparties
based on publicly available credit
information from recognised providers
where available.
Notes C1, C6 and D4 disclose the carrying amounts of
financial assets, which represent the Group's maximum
exposure to credit risk at the reporting date. The Group
utilises International Swaps and Derivative Association
(ISDA) agreements to limit exposure to credit risk by
netting amounts receivable from and payable to individual
counterparties (refer to note G8).
Purchase and sale
of commodities and
funding risks
Ongoing business
obligations and new
investment
opportunities
The Board approves policies that ensure
the Group is not exposed to excess
risk from market volatility. These policies
include active hedging of price and volume
exposures within prescribed cash flow at
risk and value at risk limits.
The Group centrally manages its liquidity
position through cash flow forecasting
and maintenance of minimum levels of
liquidity determined by the Board. The
debt portfolio is periodically reviewed to
ensure there is funding flexibility and an
appropriate maturity profile.
See below for further discussion of market risk.
Analysis of the Group's liquidity profile as at the reporting
date is presented at the end of this section.
Financial Statements
117
D4 Financial risk management (continued)
Market risk
The scope of the Group's operations and activities exposes it to multiple markets risks. The table below summarises these risks by nature of
exposure and provides information about the risk mitigation strategies being applied.
Nature
Sources of financial exposure
Risk management strategy
Commodity price
Future commercial transactions and recognised assets and
liabilities exposed to changes in electricity, oil, gas, coal or
environmental scheme certificate prices
Foreign exchange
Foreign-denominated borrowings and investments and future
foreign currency denominated commercial transactions
Interest rate
Variable-rate borrowings (cash flow risk) and fixed-rate borrowings
(fair value risk)
Due to vertical integration, a significant portion of the
Group's spot electricity purchases from the NEM are
naturally hedged by generation sales into the NEM at
spot prices. The Group manages its remaining exposure
to commodity price fluctuations within Board-approved
limits using a mix of commercial contracts (such as
fixed-price purchase contracts) and derivative instruments
(described below).
The Group limits its exposure to changes in foreign
exchange rates through forward foreign exchange
contracts and cross-currency interest rate swaps. In certain
circumstances, borrowings are left in a foreign currency, or
swapped from one foreign currency to another, to hedge
expected future business cash flows in that currency.
Significant foreign-denominated transactions undertaken
in the normal course of operations are managed on a
case-by-case basis.
Interest rate exposures are kept within an acceptable range
as determined by the Board. Risk limits are managed
through a combination of fixed-rate and fixed-to-floating
interest rate swaps.
Derivatives to manage market risks
Derivative instruments are contracts with values that are derived from an underlying price index (or other variable) that require little or no initial
net investment, and that are settled at a future date.
The Group uses the following types of derivative instruments to mitigate market risk.
Forwards
Futures
Swaps
Options
A contract documenting the underlying reference rate (such as benchmark price or exchange rate) to be paid or received on
a notional principal obligation at a future date.
An exchange-traded contract to buy or sell an asset for an agreed price at a future date. Futures are net-settled in cash without
physical delivery of the underlying asset.
A contract in which two parties exchange a series of cash flows for another (such as fixed-for-floating interest rate).
A contract in which the buyer has the right, but not the obligation, to buy (a call option) or sell (a put option) an instrument at
a fixed price in the future. The seller has the corresponding obligation to fulfil the transaction if the buyer exercises the option.
Structured
electricity products
A non-standardised contract, generally with an energy market participant, to acquire long-term capacity. These contracts
typically contain features similar to swaps and call options.
Derivatives are carried on the balance sheet at fair value. Movements in the price of the underlying variables, which cause the value of the
contract to fluctuate, are reflected in the fair value of the derivative.
The method of recognising changes in fair value depends on whether the derivative is designated in an 'accounting' hedge relationship.
Derivatives not designated as accounting hedges are referred to as 'economic' hedges.
Fair value gains and losses attributable to economic hedges are recognised in the income statement and resulted in a $270 million gain (2022:
$1,153 million gain) for the year. Fair value gains and losses attributable to accounting hedges are discussed in the Hedge Accounting section.
118
Annual Report 2023
D4 Financial risk management (continued)
$m
2023
Economic hedges
Commodity contracts
Foreign exchange and interest rate contracts
Total economic hedges
Accounting hedges
Commodity contracts
Foreign exchange and interest rate contracts
Total accounting hedges
Total
2022
Economic hedges
Commodity contracts
Foreign exchange and interest rate contracts
Total economic hedges
Accounting hedges
Commodity contracts
Foreign exchange and interest rate contracts
Total accounting hedges
Total
Hedge accounting
Assets
Liabilities
Current
Non-current
Current
Non-current
751
27
778
322
-
322
1,100
1,112
5
1,117
2,016
41
2,057
3,174
1,183
2
1,185
391
-
391
1,576
1,766
-
1,766
1,309
-
1,309
3,075
(706)
(10)
(716)
(185)
-
(185)
(901)
(1,417)
(48)
(1,465)
(125)
-
(125)
(1,590)
(1,051)
(10)
(1,061)
(82)
(31)
(113)
(1,174)
(1,526)
(3)
(1,529)
(161)
(54)
(215)
(1,744)
The Group uses two types of hedge accounting relationships, as detailed below.
Fair value hedge
Cash flow hedge
Objective of
hedging
arrangement
To hedge our exposure to changes in the fair value of a recognised
asset or liability or unrecognised firm commitment, caused by
interest rate or foreign currency movements.
To hedge our exposure to variability in the cash flows of a
recognised asset or liability, or a highly probable forecast
transaction caused by commodity price, interest rate and
foreign currency movements.
Effective
hedge portion
Hedge
ineffectiveness
All changes in the fair value of the underlying item relating to
the hedged risk and the change in fair value of derivatives are
recognised in profit and loss at the same time.
The effective portion of changes in the fair value of
derivatives designated as cash flow hedges are recognised
in the hedge reserve.
Certain determinants of fair value, such as credit charges included in derivatives, or mismatches between the timing of
the instrument and the underlying item in the hedge relationship, can cause hedge ineffectiveness. Any ineffectiveness is
recognised immediately in profit or loss as a change in the fair value of derivatives.
Hedged item sold
or repaid
The unamortised fair value adjustment is recognised immediately
in profit or loss.
Amounts accumulated in the hedge reserve are transferred
immediately to profit or loss.
Hedging instrument
expires, is sold, is
terminated or no
longer qualifies for
hedge accounting
The unamortised fair value adjustment is recognised in profit or
loss when the hedged item is recognised in profit or loss. This may
occur over time if the hedged item is amortised over the period
to maturity.
The amount previously deferred in the hedge reserve is only
transferred to profit or loss when the hedged item is also
recognised in profit or loss.
At 30 June 2022 and 30 June 2023 all derivatives designated in hedge accounting relationships are cash flow hedges.
Financial Statements
119
D4 Financial risk management (continued)
Cash flow hedges
A number of derivative contracts have been designated as cash flow hedges of the Group's exposure to foreign exchange, interest rate and
commodity price fluctuations. Designated derivatives include swaps, options, futures and forwards.
The Group's structured electricity products, though important to the overall risk management strategy, do not qualify for hedge accounting.
As such, they are not represented in the summary information below.
2023
Nominal hedge volumes
FX and interest
EUR 600m
Electricity
13.1 TWh
Hedge rates
AUD/EUR 0.62;
Fixed 3.2%
$22-$300/MWh
Propane
104k mt
US$490-US$620/mt
Crude oil & gas
1,406k barrels
(crude oil);
11.9 tBtu (gas)
US$53-US$94/bbl
(ICE Brent);
US$6.5-US$37.2/
MMBtu (JKM)
Timing of cash flows – up to
Sep 2029
Dec 2026 Oct 2024 (ICE Brent);
Dec 2025 (JKM)
Dec 2026
Carrying amounts - $m
FX and interest
Electricity
Crude oil & gas
Propane
Hedging instrument – assets1
Hedging instrument – liabilities1
Hedge reserve2
Fair value increase/(decrease) - $m
Hedging instrument
Hedged item
Hedge ineffectiveness3
Reconciliation of hedge reserve - $m
Effective portion of hedge gains/(losses)
Transfer of deferred losses/(gains) to:
– Cost of sales
– Finance costs
Tax on above items
Change in hedge reserve (post-tax)
-
(31)
45
(18)
18
-
(19)
-
(30)
15
(34)
564
(198)
(366)
(1,918)
1,918
-
149
(59)
(99)
(656)
645
(11)
(215)
(186)
(1,704)
-
575
(1,344)
(484)
-
201
(469)
-
(10)
10
(19)
19
-
(13)
(6)
-
6
(13)
1 Hedging instruments are included in the derivatives balance on the statement of financial position.
2 No hedges have been discontinued or de-designated in the current year.
3 Hedge ineffectiveness is recognised within expenses in the income statement as a change in fair value of derivatives.
Total
713
(298)
(410)
(2,611)
2,600
(11)
(433)
(2,194)
(30)
797
(1,860)
120
Annual Report 2023
D4 Financial risk management (continued)
Market risk
The following is a summary of the Group's market risk and the sensitivity of financial instrument fair values to reasonably possible changes in
market pricing at the reporting date.
Risk
USD exchange rate
Exposure
• USD debt
• FX and commodity derivatives with USD pricing
Euro exchange rate
• Currency basis on the cross-currency interest rate
swaps (CCIRSs) swapping euro debt to AUD
Interest rates
•
Interest rate swaps
• Long-term derivatives and other financial assets/
liabilities for which discounting is significant
Electricity forward price
• Electricity forward price
Oil forward price
• Commodity derivatives
Renewable Energy
Certificates (REC)
forward price
Liquidity risk
• REC forwards
• Environmental scheme certificates
• Environmental scheme surrender obligations
Relationship to financial instruments value
A 10 per cent increase/decrease in the USD exchange rate
would increase/decrease fair value by $101/ ($104) million
(2022: $47/ ($48 million).
A 10 per cent increase/decrease in the EUR exchange rate
would increase/decrease fair value by $10 million (2022:
$6 million).
A 100 basis point increase/decrease in interest rates
would impact fair value by $4/($9) million (2022: ($27)/
$26 million).
A 10 per cent increase/decrease in electricity forward
prices would increase/decrease fair value by $105 million
(2022:$355 million).
A 10 per cent increase/decrease in oil forward prices
would decrease/increase fair value by $223 million (2022:
($140)/$139 million).
A 10 per cent increase/decrease in renewable energy
certificate forward prices would increase/decrease fair
value by $29 million (2022: $32 million).
The table below sets out the timing of the Group's payment obligations, as compared to the receipts expected from the Group's financial
assets, and available undrawn facilities. Amounts are presented on an undiscounted basis and include cash flows not recorded on the
statement of financial position, such as interest payments for borrowings.
2023
$m
Bank loans and capital markets borrowings
Lease liabilities
Net other financial assets/liabilities
Derivative liabilities
Derivative assets
Net liquidity exposure
Less than
one year
One to
two years
Two to
five years
Over
five years
(220)
(99)
545
226
(964)
1,253
289
515
(91)
(94)
144
(41)
(459)
1,002
543
502
(1,029)
(212)
13
(1,228)
(321)
559
238
(990)
(1,836)
(322)
156
(2,002)
(376)
174
(202)
(2,204)
The Group has $370 million of cash and $2,849 million in committed undrawn floating rate borrowing facilities expiring beyond one year.
2022
$m
Bank loans and capital markets borrowings
Lease liabilities
Net other financial assets/liabilities
Derivative liabilities
Derivative assets
Net liquidity exposure
Less than
one year
One to
two years
Two to
five years
(343)
(88)
(69)
(500)
(2,104)
3,975
1,871
1,371
(211)
(69)
76
(204)
(959)
1,736
777
573
(749)
(166)
52
(863)
(314)
941
627
(236)
Over
five years
(2,082)
(364)
74
(2,372)
(285)
347
62
(2,310)
The Group had $572 million of cash and $2,702 million in committed undrawn floating rate borrowing facilities expiring beyond one year.
Financial Statements
121
D5 Fair value of financial assets and liabilities
Financial assets and liabilities measured at fair value are grouped into the following categories based on the level of observable market data
used in determining that fair value:
• Level 1: The fair value of financial instruments traded in active markets (such as exchange-traded derivatives and RECs) is the quoted market
price at the end of the reporting period. These instruments are included in level 1.
• Level 2: The fair value of financial instruments that are not traded in an active market (such as over-the-counter derivatives) is determined
using valuation techniques that maximise the use of observable market data. If all significant inputs required to fair value an instrument are
observable, either directly (as prices) or indirectly (derived from prices), the instrument is included in level 2.
• Level 3: If one or more of the significant inputs required to fair value an instrument is not based on observable market data, the instrument
is included in level 3.
2023
Derivative financial assets
Other financial assets at fair value
Financial assets carried at fair value
Derivative financial liabilities
Other financial liabilities at fair value
Financial liabilities carried at fair value
2022
Derivative financial assets
Other financial assets at fair value
Financial assets carried at fair value
Derivative financial liabilities
Other financial liabilities at fair value
Financial liabilities carried at fair value
Note
D4
C6
D4
C6
D4
C6
D4
C6
Level 1
$m
1,044
478
1,522
(592)
(369)
(961)
Level 1
$m
1,917
623
2,540
(471)
(417)
(888)
Level 2
$m
1,310
69
1,379
(883)
-
(883)
Level 2
$m
3,382
73
3,455
(2,294)
-
(2,294)
Level 3
$m
322
170
492
(600)
-
(600)
Level 3
$m
950
74
1,024
(569)
-
(569)
The following table shows a reconciliation of movements in the fair value of level 3 instruments during the year.
Balance as at 1 July 2022
New instruments recognised in the year
Net cash settlements paid/(received)
Gains/(losses) recognised in other comprehensive income
Gains/(losses) recognised in profit or loss
Change in fair value
Cost of sales
Balance as at 30 June 2023
Total
$m
2,676
717
3,393
(2,075)
(369)
(2,444)
Total
$m
6,249
770
7,019
(3,334)
(417)
(3,751)
$m
455
80
(258)
12
(655)
258
(108)
122
Annual Report 2023
D5 Fair value of financial assets and liabilities (continued)
Valuation techniques used to determine fair values
The various techniques used to value the Group's financial instruments are summarised in the following table. To the maximum extent possible,
valuations are based on assumptions that are supported by independent and observable market data. For instruments that settle more
than 12 months from the reporting date, cash flows are discounted at the applicable market yield, adjusted to reflect the credit risk of the
specific counterparty.
Instrument
Fair value methodology
Financial instruments traded in
active markets
Interest rate swaps and CCIRS
Forward foreign
exchange contracts
Quoted market prices at reporting date.
Present value of expected future cash flows based on observable yield curves and forward exchange rates at
reporting date.
Present value of future cash flows based on observable forward exchange rates at reporting date.
Electricity, oil and other commodity
derivatives (not traded in
active markets)
Present value of expected future cash flows based on observable forward commodity price curves (where
available). The majority of the Group's level 3 instruments are commodity contracts for which further detail on
the significant unobservable inputs is included below.
Other financial instruments
Discounted cash flow analysis.
Long-term borrowings
Present value of future contract cash flows.
Future climate-related conditions, legislation and policies may have an impact on market prices. Refer to the Strategy and climate change risks
section in the Overview for further analysis of the Group’s climate scenario analysis.
Fair value measurements using significant unobservable inputs (level 3)
The following is a summary of the Group's level 3 financial instruments, the significant inputs for which market observable data is unavailable,
and the sensitivity of the estimated fair values to the assumptions applied by management.
Instrument
Electricity
derivatives
Unobservable inputs
Relationship to fair value
Forward electricity swap price curve
Forward electricity cap price curve
Forecast REC prices
A 10 per cent increase/decrease in the unobservable inputs would
increase/decrease fair value by $201 million (2022: $256 million).
Day 1 fair value adjustments
For certain complex financial instruments, such as the structured electricity products, the fair value that is determined at inception of the
contract using unobservable inputs does not equal the transaction price. When this occurs, the difference is deferred to the statement of
financial position and recognised in the income statement over the life of the contract in a manner consistent with the valuation methodology
initially applied.
Reconciliation of net deferred gain
Balance as at 1 July 2022
Value recognised in the income statement
New instruments recognised in the year
Balance as at 30 June 2023
Classification of net deferred gain
Derivative assets
Derivative liabilities
Balance as at 30 June 2023
$m
484
(87)
(27)
370
187
183
370
Financial Statements
123
D5 Fair value of financial assets and liabilities (continued)
Financial instruments measured at amortised cost
Except as noted below, the carrying amounts of non-current financial assets and liabilities measured at amortised cost are reasonable
approximations of their fair values.
The table below reflects debt instruments reported within non-current interest-bearing liabilities on the balance sheet. Non-current lease
liabilities, which are also reported within non-current interest-bearing liabilities are excluded. The fair value of these financial instruments
reflects the present value of expected future cash flows based on market pricing data for the relevant underlying interest and foreign exchange
rates. Cash flows are discounted at the applicable credit-adjusted market yield.
Liabilities
Bank loans – unsecured
Capital markets borrowings – unsecured
Total1
Fair value
hierarchy level
2
2
Carrying value
Fair value
2023
2022
2023
2022
$m
$m
$m
$m
515
2,070
2,585
508
2,090
2,598
539
1,975
2,514
542
1,874
2,416
1 Non-current interest-bearing liabilities in the statement of financial position include $2,585 million (2022: $2,598 million) as disclosed above, and lease liabilities of $481 million
(2022: $476 million).
124
Annual Report 2023
E Taxation
This section provides details of the Group's income tax expense, current tax provision, deferred tax balances and tax accounting policies.
E1 Income tax expense
Income tax
Current tax expense
Adjustments to current tax expense for previous years
Deferred tax expense
Total income tax expense
Reconciliation between tax expense and pre-tax net profit
Profit/(loss) before income tax
Income tax using the domestic corporation tax rate of 30 per cent (2022: 30 per cent)
Prima facie income tax expense on pre-tax accounting profit:
– at Australian tax rate of 30 per cent
– adjustment for tax exempt charity (Origin Foundation Limited)
– adjustment for difference between Australian and overseas tax rates
Income tax expense/(benefit) on pre-tax accounting profit at standard rates
Increase/(decrease) in income tax expense due to:
Share of results of equity accounted investees
Unfranked dividends received - APLNG
Deferred tax liability (utilisation)/recognition - APLNG
Loss on divestment - APLNG equity accounted investment
Net capital gains tax on divestment - APLNG
Impairment of carrying value of Energy Markets goodwill
Accounting loss on disposal - Beetaloo
Net capital gains tax on disposal - Beetaloo
Deferred tax liability reversal on disposal - Beetaloo
LGC shortfall charge
Recycling of foreign currency translation reserve to the income statement on wind up - Origin Energy
Hydro Bermuda
Other
Under provided in prior years
Total income tax expense
Deferred tax movements recognised directly in other comprehensive income and equity (including foreign
currency translation)
Financial instruments at fair value
Provisions
Other items
2023
$m
586
(2)
(164)
420
2022
$m
100
(2)
453
551
1,478
(874)
443
(1)
1
443
(397)
535
(180)
-
-
-
32
33
(64)
35
(19)
2
(23)
-
420
(797)
(5)
(3)
(805)
(262)
2
-
(260)
(300)
130
39
33
172
659
-
-
-
67
-
9
809
2
551
886
(10)
-
876
The Company and its wholly owned Australian resident entities that met the membership requirement 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.
Financial Statements
125
E1 Income tax expense (continued)
Key judgements and estimates
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 and there will be sufficient future taxable profits against which the benefits can be utilised.
A deferred tax liability is recognised for taxable temporary differences associated with investments in joint ventures unless the Group is
able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future. The deferred tax liability in respect of the investment in APLNG represents carried forward equity accounted earnings
that are expected to be distributed to Origin via dividends from APLNG in the foreseeable future. In determining the forecast distributions
from APLNG, the Group’s assessment of future cash flows considers a range of macroeconomic and project assumptions, including oil and
LNG prices, AUD/USD exchange rates, discount rates and costs over the asset's life.
At 30 June 2023, the Group has recognised a deferred tax liability of $528 million. The remaining unbooked balance is not expected to
reverse in the foreseeable future through the payment of future dividends, through sale or through a capital return. The unrecognised
portion is disclosed in note E2.
Income tax expense recognised in other comprehensive income
$m
Gross
Tax
Net
Gross
Tax
Net
2023
2022
Actuarial gain on defined benefit
superannuation plan
Investment valuation changes
Foreign currency translation reserve:
Reclassified to income statement
Translation of foreign operations
Cash flow hedges:
Reclassified to income statement
Effective portion of change in fair value
Other comprehensive income for the year
E2 Deferred tax
-
12
(62)
282
(2,224)
(433)
(2,425)
-
(3)
-
8
667
130
802
-
9
(62)
290
1
4
(103)
584
-
(1)
-
14
(1,557)
(303)
(1,623)
(443)
3,407
3,450
133
(1,022)
(876)
1
3
(103)
598
(310)
2,385
2,574
Deferred tax balances arise when there are temporary differences between accounting carrying amounts and the tax bases of assets and
liabilities, other than 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;
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
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.
126
Annual Report 2023
E2 Deferred tax (continued)
Movement in temporary differences during the year
1 July
2021
Recognised
in income
Recognised
in equity
Acquisition
of
subsidiary
30 June
2022
Recognised
in income
Recognised
in equity
Recognised
in current
tax
liability
Asset/(liability)
$m
Employee benefits
Provisions
Tax value of carry-forward tax
losses recognised
PP&E
Exploration and evaluation assets
Financial instruments at fair value
Investment in APLNG
APLNG MRCPS elimination (refer
to note B2.2)
Business-related costs
(deductible under
s.40-880 ITAA97)
ROU assets
Lease liabilities
Intangibles
Other items
Net deferred tax liabilities
80
430
1
(215)
(67)
347
(669)
4
(17)
-
36
(13)
(397)
(39)
48
(15)
26
(121)
139
1
(5)
(5)
(20)
(18)
22
1
3
-
10
-
-
-
(886)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(25)
-
84
423
1
(179)
(80)
(936)
(708)
33
6
(139)
161
(23)
(2)
14
(114)
-
41
78
(40)
180
-
4
(1)
3
1
(2)
(453)
(876)
(25)
(1,359)
164
30 June
2023
98
314
1
(138)
(2)
(179)
(528)
33
10
(140)
164
(22)
3
(386)
-
5
-
-
-
797
-
-
-
-
-
-
3
805
-
-
-
-
-
-
-
-
-
-
-
-
4
4
Unrecognised deferred tax assets and liabilities
Deferred tax assets have not been recognised in respect of the following items:
Revenue losses - non-Australian
Petroleum resource rent tax, net of income tax
Acquisition transaction costs
Intangible assets
Deferred tax liabilities have not been recognised in respect of the following items:
Investment in APLNG1
2023
$m
2022
$m
4
119
57
8
188
5
119
57
8
189
(759)
(759)
(685)
(685)
1 The deferred tax liability in respect of the investment in APLNG has not been recognised in full during the year as not all of the temporary difference is expected to reverse
in the foreseeable future.
Financial Statements
127
F 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, associates, controlled entities, and changes made to the Group structure during the year.
F1 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
Ownership interest per cent
2023
2022
Origin Energy Limited
Origin Energy Finance Limited
Huddart Parker Pty Limited1
FRL Pty Ltd1
Origin Energy Power Limited1
Origin Energy SWC Limited1
Sun Spot 5 Pty Ltd2
Sun Spot 6 Pty Ltd2
Yarrabee Project Co Pty Ltd
Yarrabee Project Trust
Yarrabee One Pty Ltd
Yarrabee One Trust
Origin Energy Wind North Pty Ltd
Navigator North Holding Pty Ltd
Navigator North Project Pty Ltd
Origin Energy Wind North Trust
Navigator North Holding Trust
Navigator North Project Trust
Origin Energy Wind South Pty Ltd
Navigator South Holding Pty Ltd
Navigator South Project Pty Ltd
Origin Energy Wind South Trust
Navigator South Holding Trust
Navigator South Project Trust
Origin Energy Eraring Pty Limited1
Origin Energy Eraring Services Pty Limited1
Origin Energy Upstream Holdings Pty Ltd
Origin Energy B2 Pty Ltd
Origin Energy Browse Pty Ltd
Origin Energy West Pty Ltd
Origin Energy C6 Pty Limited
Origin Energy C5 Pty Limited
Origin Energy Future Fuels Pty Ltd
Origin Energy Upstream Operator Pty Ltd
Origin Energy Holdings Pty Limited1
Origin Energy Retail Limited1
Origin Energy (Vic) Pty Limited1
Gasmart (Vic) Pty Ltd1
Origin Energy (TM) Pty Limited1
Cogent Energy Pty Ltd
Origin Energy Retail No. 1 Pty Limited
Origin Energy Retail No. 2 Pty Limited
NSW
Vic
Vic
WA
SA
WA
NSW
NSW
Vic
Vic
Vic
Vic
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
Vic
Vic
Vic
NSW
Vic
Vic
Vic
Vic
Vic
SA
Vic
Vic
Vic
Vic
Vic
Vic
100
100
100
100
100
100
100
100
100
100
100
100
80
80
100
80
80
100
80
80
100
80
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
100
100
100
100
100
1 Entered into ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 and related Deed of Cross Guarantee with Origin Energy Limited.
2 Controlled entity has a financial reporting period ending 31 December.
128
Annual Report 2023
F1 Controlled entities (continued)
Origin Energy Electricity Limited1
Eraring Gentrader Depositor Pty Limited
Sun Retail Pty Ltd1
OE Power Pty Limited1
Origin Energy Uranquinty Power Pty Ltd1
OC Energy Pty Ltd1
Origin Energy Eraring Battery Pty Ltd
Ten Ants Connect Pty Ltd
WINconnect Pty Ltd
Nextgen Utilities Pty Ltd
Carbon Energy Management Technologies Pty Ltd
LM Unit Trust (No 1)
Carbon R&D Pty Ltd
Origin Energy International Holdings Pty Limited
Origin Energy PNG Ltd2
Origin Energy PNG Holdings Limited2
Origin Energy Tasmania Pty Limited1
The Fiji Gas Co Ltd
Origin Energy Contracting Limited1
Origin Energy LPG Limited1
Origin (LGC) (Aust) Pty Limited1
Origin Energy SA Pty Limited1
Hylemit Pty Limited
Origin Energy LPG Retail (NSW) Pty Limited
Origin Energy WA Pty Limited1
Origin Energy Services Limited1
OEL US Inc.
Origin Energy Asset Management Limited1
Origin Energy Pipelines Pty Limited1
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
Angari Pty Limited1
Oil Investments Pty Limited1
Origin Energy Southern Africa Holdings Pty Limited
Origin Energy Vietnam Pty Limited
Origin Energy Singapore Holdings Pte Limited
Origin Energy (Song Hong) Pte Limited
Origin Future Energy Pty Limited
Origin Energy Metering Coordinator Pty Ltd
Origin Energy Resources NZ (Rimu) Limited
Incorporated in
Ownership interest per cent
2023
2022
Vic
Vic
Qld
Vic
Vic
Vic
NSW
NSW
Vic
Vic
WA
WA
WA
Vic
PNG
PNG
Tas
Fiji
Qld
NSW
NSW
SA
Vic
NSW
WA
SA
USA
SA
NT
Solomon Islands
Cook Islands
Vanuatu
Western Samoa
American Samoa
Singapore
SA
SA
Qld
Vic
Singapore
Singapore
NSW
NSW
NZ
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
66.7
100
100
51
100
100
100
100
100
100
100
100
100
100
100
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1 Entered into ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 and related Deed of Cross Guarantee with Origin Energy Limited.
2 Controlled entity has a financial reporting period ending 31 December.
Financial Statements
129
F1 Controlled entities (continued)
Origin Energy VIC Holdings Pty Limited1
OE JV Co Pty Limited1
Origin Energy LNG Holdings Pte Limited
Origin Energy LNG Portfolio Pty Ltd1
Origin Energy Australia Holding BV2
Origin Energy Mt Stuart BV2
OE Mt Stuart General Partnership2
Parbond Pty Limited
Origin Energy Foundation Ltd
Origin Renewable Energy Investments No 1 Pty Ltd
Origin Renewable Energy Investment Trust
Origin Renewable Energy Pty Ltd
Origin Energy Geothermal Holdings Pty Ltd
Origin Energy Geothermal Pty Ltd
Origin Energy Chile Holdings Pty Limited
Origin Energy Wind Holdings Pty Ltd
Wind Power Pty Ltd
Origin Energy Hydro Bermuda Limited
Origin Energy People Services Pty Ltd
Origin Energy Upstream People Services Pty Ltd
Incorporated in
Ownership interest per cent
2023
2022
Vic
Vic
Singapore
Vic
Netherlands
Netherlands
Netherlands
NSW
NSW
Vic
Vic
Vic
Vic
Vic
Vic
Vic
Vic
Bermuda
NSW
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
100
100
100
-
-
1 Entered into ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 and related Deed of Cross Guarantee with Origin Energy Limited.
2 Controlled entity has a financial reporting period ending 31 December.
Changes in controlled entities
• Sun Spot 6 Pty Ltd was acquired on 5 August 2022.
• Origin Energy B2 Pty Ltd was sold on 9 November 2022.
• Origin Energy Hydro Bermuda Limited was wound up on 10 January 2023.
• Origin Energy Wind North Pty Ltd, Origin Energy Wind North Trust, Origin Energy Wind South Pty Ltd and Origin Energy Wind South Trust
were incorporated on 21 April 2023.
• Navigator North Holding Pty Ltd, Navigator North Holding Trust, Navigator North Project Pty Ltd, Navigator North Project Trust, Navigator
South Holding Pty Ltd, Navigator South Holding Trust, Navigator South Project Pty Ltd and Navigator South Project Trust were acquired
on 27 April 2023.
• Origin Energy People Services Pty Ltd and Origin Energy Upstream People Services Pty Ltd were incorporated on 23 June 2023.
F2 Business combinations
There were no significant business combinations during the year.
F3 Joint arrangements and investments in associates
Joint arrangements are entities over whose activities the Group has joint control, established by contractual agreement and requiring the
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.
Associates are entities, other than partnerships, for which the Group exercises significant influence, but no control, over the financial and
operating policies, and which are not intended for sale in the near future.
Of the Group's interests in joint arrangements and associates, only APLNG and Octopus Energy have a material impact on the Group at
30 June 2023 (refer to Section B).
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:
• Browse Basin
•
Innamincka Deeps Geothermal
• Cooper-Eromanga Basin
130
Annual Report 2023
F4 Assets and liabilities held for sale and disposals
Assets and liabilities held for sale
LPG Pacific
On 8 November 2022 the Group entered into an agreement to sell Origin’s LPG business in the Pacific. This includes the Group's
wholly-owned entities in Vanuatu, American Samoa, Samoa and Cook Islands, and controlled entities in Fiji, Papua New Guinea and the
Solomon Islands. There are a number of conditions and regulatory approvals required before the sale can be completed and the assets and
liabilities relating to the sale have been classified as held for sale as at 30 June 2023.
Canning Basin
On 10 February 2023 Origin executed an agreement with Buru Energy Limited (Buru) to exit from its participating interests in the seven
Exploration Permits in the Canning Basin, the respective Joint Operating Agreements and the Farm-in Agreements. The terms of the sale
provide for Origin to provide Buru with up to $4 million to fund a seismic survey and for Buru to provide Origin with future reimbursement
payments of up to $34 million, conditional on the achievement of key development and production milestones. Settlement of the transaction
remains subject to regulatory approvals.
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total current assets
Non-current assets
PP&E
Exploration and evaluation assets
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest-bearing liabilities
Employee benefits
Total current liabilities
Non-current liabilities
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Carrying amount of NCI
Disposals
Beetaloo
30 June 2023
LPG Pacific
Canning Basin
$m
$m
20
12
13
1
46
44
-
2
1
47
93
5
3
1
9
3
2
-
5
14
79
20
-
-
-
-
-
-
8
-
-
8
8
-
-
-
-
-
-
1
1
1
7
-
On 19 September 2022 the Group entered into a Share Sale Agreement with Tamboran (B1) Pty Ltd for the sale of 100% of the shares of Origin
Energy B2 Pty Ltd, which holds a 77.5% interest in three exploration permits in the Beetaloo Basin. Completion of the transaction occurred
on 9 November 2022 for upfront consideration of $60 million and a royalty based on wellhead revenues produced from the three Beetaloo
permits. This resulted in a pre-tax loss on disposal of $106 million.
Origin Energy Hydro Bermuda Pty Limited
On 10 January 2023 Origin Energy Hydro Bermuda Pty Limited was wound up. A net gain on disposal of $62 million was recycled to the
income statement from the foreign currency translation reserve on wind up.
Financial Statements
131
G Other information
This section includes other information to assist in understanding the financial performance and position of the Group, and items required to
be disclosed to comply with accounting standards and other pronouncements.
G1 Contingent liabilities
Discussed below are items where there is a possible obligation whose existence will be confirmed only by uncertain future events not wholly
within the Group’s control, or where a present obligation exists, it is either not probable that the Group will have to make future payments, or
the amount of future payments is not capable of reliable measurement.
Joint arrangements and associates
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.
In October 2018, Origin and the other APLNG shareholders agreed to indemnify one of APLNG’s long-term LNG customers (following that
customer's election to defer delivery of 30 cargoes over six years (2019-24)) should APLNG fail to supply make-up cargoes to that customer
prior to the expiry of the LNG supply contract. The customer will pay APLNG for the deferred cargoes and APLNG expects to resell the
gas to other customers and deliver the deferred cargoes to the long-term LNG customer between 2025 and the end of the LNG supply
contract. The indemnity was provided severally in accordance with each shareholder’s proportionate shareholding in APLNG. At the inception
of the agreement, any obligation or liability on the part of the shareholders will only be confirmed by the occurrence or non-occurrence of
future events.
Legal and regulatory
Certain entities within the Group (and joint venture entities, such as APLNG) are subject to various lawsuits and claims as well as audits
and reviews by government, regulatory bodies or other joint venture partners. In most instances, it is not possible to reasonably predict the
outcome of these matters or their impact on the Group and accordingly is not probable that future payments will be made. 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 potentially contaminated. For sites
where it is likely that a present obligation exists, and it is probable that an outflow of resource will be required to settle the obligation, 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 in 2015, 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 the FID, reach certain thresholds. These
obligations have not been provided for at the reporting date as they are possible obligations that are dependent upon uncertain future events
not wholly within the Group’s control.
Bank guarantees
There are no contingent liabilities arising from bank guarantees held by the Group that are required to be disclosed as at the reporting date,
as these have either been provided for, or an outflow of economic benefits is considered remote.
The Group's share of guarantees for certain contractual commitments of its joint ventures is shown at note G2.
132
Annual Report 2023
G2 Commitments
Detailed below are the Group's contractual commitments that are not recognised as liabilities as there is no present obligation.
Capital expenditure commitments
Joint venture commitments1
2023
$m
786
183
2022
$m
108
237
1
Includes $180 million (2022: $121 million) in relation to the Group's share of APLNG’s capital and joint venture commitments.
G3 Share-based payments
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 (ESP).
The table below shows share-based remuneration expenses that were recognised during the year.
Equity Incentive Plan
Employee Share Plan
Total
2023
$m
25
1
26
2022
$m
29
4
33
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 granted
prior to FY2018 were offered in the form of Options and/or Share Rights. From FY2019 onwards, equity incentives are granted in the form of
Share Rights and/or Restricted Shares (RSs). Only RSs carry dividend and voting entitlements. To the extent that Share Rights ultimately vest,
a dividend equivalent mechanism operates.
(i) Short Term Incentive
Short Term Incentive (STI) includes the award of RSs, which are subject to trading restrictions for a set period of time (generally up to
two years), after which they become unrestricted, provided that the employee remains employed with satisfactory performance. Once
unrestricted, the shares are transferred into the employee's name at no cost. The face value of RSs measured at grant date is recognised as
an employee expense over the related service period. RSs are forfeited if the service and performance conditions are not met.3
(ii) Long Term Incentive
The Long Term Incentive (LTI) awards include the award of Share Rights, which vest subject to performance conditions. Generally, half of
each LTI award is made in the form of Performance Share Rights (PSRs) and is subject to a market hurdle, namely Origin’s Total Shareholder
Return (TSR) relative to a Reference Group of ASX-listed companies, as identified in the 2023 Remuneration Report. The remaining half of
each LTI award is made in the form of Restricted Share Rights (RSRs), where vesting is subject to Board assessment with reference to a suite
of underpinning conditions, as set out in the 2023 Remuneration Report.
The number of awards that may vest are considered separately for PSRs and RSRs. For the PSR awards, which are subject to the relative TSR
hurdle, vesting only occurs if Origin’s TSR over the performance period ranks higher than the 50th percentile of the Reference Group. Half of
the PSRs vest if that condition is satisfied. All the PSRs vest if Origin ranks at or above the 75th percentile of the Reference Group. Straight-line
pro-rata vesting applies in between these two points. The PSR grants made in FY2023 have a performance period of three years. Vesting is
into RSs with a trading restriction for a further two years (total deferral five years). For the RSR awards, the Board will determine the vesting
outcome shortly before each of three progressive vesting dates at years three, four and five by reference to a broad range of performance
indicators. Vesting is into RSs which all have trading restrictions until the end of the fifth year.
Prior to FY2021, the LTI awards include the award of PSRs, such that half of the award is subject to the TSR hurdle, and the remaining half of
each LTI award is subject to an internal hurdle, namely Return on Capital Employed (ROCE), as set out in the relevant remuneration report.
For awards granted in FY2020 that are subject to the ROCE hurdle, half of the ROCE tranche is allocated to Energy Markets and the other
half to Integrated Gas. Each tranche is tested separately and vest separately. Vesting for each tranche only occurs if the average actual annual
ROCE outcomes over the performance period for the relevant business meets or exceeds the average of the annual ROCE targets, which are
reflective of delivering WACC for the relevant business. Half of the relevant PSRs will vest if the ROCE target is met. All the relevant PSRs vest
if the ROCE target is exceeded by two percentage points or more. Straight-line pro-rata vesting applies in between. The last tranche of these
PSRs that were subject to the ROCE hurdle, vested in FY2023. The LTI awards granted after FY2020 are no longer subject to the ROCE hurdle.
Vested share rights are automatically exercised upon vesting, and there is no exercise price. Upon exercise, a vested award is converted into
one fully paid ordinary share that is subject to a post-vesting holding lock for a set period (generally up to two years) and carries voting and
dividend entitlements.
3 The Equity Incentive Plan Rules set out exceptional circumstances, such as death, disability, redundancy or genuine retirement, (‘good leaver’ circumstances) under which
RSs are released at cessation unless the Board determines otherwise.
Financial Statements
133
G3 Share-based payments (continued)
In relation to Share Rights awarded since FY2021, upon vest, a dividend equivalent amount will be delivered in the form of additional shares
equal in value (as determined by the Board) to the amount of dividends that would have been paid and re-invested had the participant held
the underlying shares during the period from the grant date through to the relevant vesting date.
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 circumstances4, unvested Share Rights 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 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 granted during the year.
For RSRs subject to the underpinning conditions, the initial fair value at grant date is the market value of an Origin share, and the recognised
expense is trued up at each reporting period to the expected outcome as assessed at that time.
Set out below is a summary of RSRs and PSRs issued during the financial year.
Grant date
Grant date share price
Exercise price
Volatility
Risk-free rate1
RSRs
RSRs
PSRs
PSRs
05 Sep 2022
19 Oct 2022
05 Sep 2022
19 Oct 2022
$6.13
Nil
-
-
$5.64
Nil
-
-
$6.13
Nil
38%
3.29%
$3.63
$5.64
Nil
38%
3.48%
$3.17
Grant date fair value (per award)
$6.13
$5.64
1 Where the risk-free rate is nil, these RSR tranches are subject to a number of underpinning conditions to be assessed by the Board; therefore, the risk-free rate is not relevant
to their valuation.
Equity Incentive Plan awards outstanding
Set out below is a summary of awards outstanding at the beginning and end of the financial year.
Weighted
average
exercise
price
PSRs
RSRs
DSRs
RSs
Outstanding at 1 July 2022
Granted
Exercised/released
Forfeited
Outstanding as at
30 June 2023
Exercisable as at 30 June 2023
Options
1,222,882
-
-
1,222,882
-
-
$7.37
4,332,463
1,201,418
516,996
1,627,291
2,258,298
1,213,686
-
42,681
3,389,594
3,429,303
-
-
-
-
-
-
-
Outstanding at 1 July 2021
3,105,221
$6.32
5,670,304
-
-
1,882,339
-
-
-
1,296,535
397,663
2,236,713
995,169
1,311,963
-
48,834
Granted
Exercised/released
Forfeited
Outstanding as at
30 June 2022
Exercisable as at 30 June 2022
-
-
-
-
1,222,882
$7.37
4,332,463
2,258,298
-
-
-
-
-
-
45,556
-
45,556
-
-
-
8,001,126
3,565,032
3,890,357
252,808
7,422,993
-
6,695,155
4,929,061
3,156,022
467,068
8,001,126
-
The weighted average share price during 2023 was $7.34 (2022: $5.45). The options outstanding as at 30 June 2023 were tested on 30 June
2023; they did not satisfy the vesting conditions and lapsed on 22 August 2023 in accordance with the Equity Incentive Plan rules.
For more information on these share plans and performance rights issued to key management personnel, refer to the Remuneration Report.
4 The Equity Incentive Plan Rules provide that Share Rights, and RSs arising from STI arrangements, are forfeited on cessation of employment, except in ‘good leaver’
circumstances or unless the Board determines otherwise. The offer terms provide guidance for the exercise of that discretion, specifically that the Share Rights and RSs will
not normally be forfeited in cases of 'good leavers' (such as those ceasing employment due to death, disability, redundancy or genuine retirement).
134
Annual Report 2023
G3 Share-based payments (continued)
Employee Share Plan
Under the ESP, all eligible employees have a choice of either participating in the $1,000 General Employee Share Plan (GESP) or the Matching
Share Plan (MSP). As a result of entering into the binding Scheme Implementation Deed with the Consortium, the operation of the ESP has
been suspended from 31 March 2023 and no awards under the ESP are expected to be made during FY2024.
Under the GESP, all employees of the Company who are based in Australia and have been continuously employed as at 1 March of the
performance year, are granted up to $1,000 of fully paid Origin shares conditional on Board approval. The shares are granted for no
consideration. Shares awarded under the GESP 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.
Under the MSP, all eligible employees may elect to purchase shares via a salary sacrifice arrangement, which commences on 1 October of the
performance year. The shares under this plan are allotted quarterly and are subject to a trading restriction for a set period (generally two years)
or until cessation of employment. The Company matches the purchased shares on a one-for-two basis with allocation of additional Matching
Rights (MRs) which vest at the same time as the restriction is lifted for the purchased shares. Vesting of MRs is conditional on the employee
remaining in continuous employment at that time. MRs are forfeited if the service conditions are not met.5
Details of the shares awarded under the GESP during the year are set out below. The cost per share represents the weighted average market
price of the Company's shares on the grant date.
2023
2022
Grant
date
29 Aug 2022
6 Sep 2021
Shares
granted
587,972
587,972
813,637
813,637
Cost per
share
$6.18
$4.36
Total
Total
Set out below is a summary of MRs outstanding at the beginning and end of the financial year.
Outstanding as at 1 July 2022
Granted
Exercised/released
Forfeited
Outstanding as at 30 June 2023
Exercisable as at 30 June 2023
Total cost
$'000
3,634
3,634
3,547
3,547
MRs
398,900
227,610
293,321
16,991
316,198
-
5 The Employee Share Plan Rules and the offer terms of the MSP provide that MRs are forfeited on cessation of employment, except in ‘good leaver’ circumstances (such as
those ceasing employment due to death, disability, redundancy or genuine retirement) or otherwise determined by the Board.
Financial Statements
135
G4 Related party disclosures
The Group's interests in equity accounted entities and details of transactions with these entities are set out in notes B1 and B4.
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.
G5 Key management personnel
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
Total
2023
$
2022
$
12,475,074
11,222,909
332,703
1,646,936
5,181,356
306,469
385,726
5,554,712
19,636,069
17,469,816
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 that 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 DRP;
• participation in the ESP and Equity Incentive Plan;
•
•
•
terms and conditions of employment or directorship appointment;
reimbursement of expenses incurred in the normal course of employment;
sale of energy and energy services; and
• purchases of goods and services.
136
Annual Report 2023
G6 Notes to the statement of cash flows
Cash includes cash on hand, at bank and in short-term deposits, net of outstanding bank overdrafts. The following table reconciles profit to
net cash provided by operating activities.
Profit/(loss) for the year
Adjustments for non-cash ITDA
Depreciation and amortisation
Net financing costs
Income tax expense
Non-cash share of ITDA of equity accounted investees
Adjustments for other non-cash items
Increase in fair value of derivatives
Decrease/(increase) in fair value of financial instruments
Unrealised foreign exchange loss
Net loss on divestment
Impairment of non-current assets
Loss on sale of assets
Write-off of PP&E
Gain on dilution of investment
Impairment losses recognised - trade and other receivables
Non-cash share of EBITDA of equity accounted investees
Exploration expense
Share-based payment expense
Changes in assets and liabilities:
– Receivables
– Inventories
– Payables
– Provisions
– Other
– Futures collateral
Tax paid
Total adjustments
Net cash (used in)/from operating activities
Reconciliation of movements of liabilities to cash flows arising from financing activities
$m
Balance as at 1 July 2022
Proceeds from borrowings
Repayment of borrowings/other liabilities
Repayment of lease principal
Changes to leases
Foreign exchange adjustments and other
non-cash movements
Reclassification
Balance as at 30 June 2023
Liabilities from financing activities
Current
borrowings
Non-current
borrowings
Lease
liabilities
Other financial
(assets)/
liabilities
257
-
(272)
-
-
20
123
128
2,598
1,050
(1,050)
-
-
110
(123)
2,585
535
-
-
(71)
81
-
-
545
12
-
57
-
-
(38)
-
31
2023
$m
2022
$m
1,058
(1,425)
527
143
420
1,163
(348)
182
40
-
-
42
13
-
148
449
129
551
1,138
(1,220)
(46)
109
113
2,196
2
-
(44)
65
(2,487)
(2,097)
23
25
745
(11)
(1,492)
(325)
(16)
(290)
(193)
(1,691)
(633)
24
29
(1,052)
(68)
1,308
16
(90)
471
(27)
1,956
531
Total
3,402
1,050
(1,265)
(71)
81
92
-
3,289
Financial Statements
137
G7 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.
Amounts received or due and receivable by the auditor of the Parent Company and any other entity in the
Group for:
Auditing the statutory financial report of the Parent Company covering the Group
Auditing the statutory financial reports of any controlled entities
Auditing financial statements as required under the Scheme Implementation Deed
Fees for other assurance and agreed-upon-procedures services under other legislation or
contractual arrangements
Sustainability assurance
Fees for other services
Tax compliance1
Total
Amounts received or due and receivable by affiliates of the auditor of the Parent Company for:
Auditing the statutory financial reports of any controlled entities
Total fees to overseas member firms of the Parent
Company auditor
Total remuneration to Parent Company auditor
Auditing of statutory financial reports of any controlled entities by other auditors
Total auditors' remuneration
2023
$'000
2022
$'000
2,042
215
1,191
15
241
840
4,544
-
-
4,544
264
4,808
2,225
73
-
9
250
879
3,436
69
69
3,505
206
3,711
1 This amount relates to the Group's share of tax compliance work billed. An amount of $865,000 (2022: $879,000) was recharged to APLNG in respect of its share and is
excluded from this amount.
138
Annual Report 2023
G8 Master netting or similar agreements
The Group enters into derivative transactions under 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
the reporting date. The net amount column shows the impact on the Group's statement of financial position if all set-off rights were exercised.
2023
Derivative assets
Derivative liabilities
2022
Derivative assets
Derivative liabilities
Amount offset in
the statement of
financial
position
$m
Amount
in the statement
of financial
position
$m
Related amount
not offset
$m
Gross amount
$m
4,109
(3,508)
9,855
(6,940)
(1,433)
1,433
(3,606)
3,606
2,676
(2,075)
6,249
(3,334)
(1,041)
1,041
(2,070)
2,070
Net
amount
$m
1,635
(1,034)
4,179
(1,264)
G9 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 in
the event that one of those entities is wound up. The controlled entities that are party to the Deed are shown in note F1.
The following consolidated statement of comprehensive income and retained profits, and statement of financial position, cover the Company
and its controlled entities that 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
Net loss on divestment
Interest income
Interest expense
Profit/(loss) before income tax
Income tax expense
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income for the year
Retained earnings at the beginning of the year
Dividends paid
Retained earnings at the end of the year
2023
$m
16,230
27
(16,155)
1,185
(67)
-
51
(197)
1,074
(434)
640
-
640
436
(568)
508
2022
$m
14,299
19
(13,520)
1,046
(2,196)
(113)
59
(198)
(604)
(615)
(1,219)
-
(1,219)
2,007
(352)
436
Financial Statements
139
G9 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
Assets classified as held for sale
Other assets
Total current assets
Non-current assets
Trade and other receivables
Derivatives
Other financial assets1
Investments accounted for using the equity method
PP&E
Intangible 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
Deferred tax liabilities
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
1
Includes investment in subsidiaries relating to entities outside the Deed of Cross Guarantee.
2023
$m
2022
$m
322
3,549
178
1,038
346
4
117
5,554
2,078
1,557
108
5,479
3,036
2,385
75
14,718
20,272
2,024
139
64
886
385
454
276
215
2
4,445
3,771
996
1,143
390
50
565
6,915
11,360
8,912
6,901
1,503
508
8,912
481
4,404
170
2,901
732
-
87
8,775
1,909
3,074
93
5,832
3,052
2,419
51
16,430
25,205
3,361
133
87
1,010
688
59
240
373
-
5,951
3,856
977
1,740
1,394
37
814
8,818
14,769
10,436
6,877
3,123
436
10,436
140
Annual Report 2023
G10 Parent entity disclosures
The following table sets out the results and financial position of the parent entity, Origin Energy Limited.
Origin Energy Limited
Profit
Other comprehensive income, net of income tax
Total comprehensive income for the year
Financial position of the parent entity at year end
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Contributed equity
Share-based payments reserve
Foreign currency translation reserve
Hedge reserve
Fair value reserve
Retained earnings1
Total equity
2023
$m
717
211
928
576
19,494
20,070
6,022
3,191
9,213
6,901
243
910
(32)
4
2,831
10,857
2022
$m
505
512
1,017
743
17,418
18,161
4,274
3,421
7,695
6,877
236
664
3
4
2,682
10,466
1 Refer to note A7 for details of dividends provided for or paid of $568 million.
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 F1.
G11 Government grants and assistance
Government grants and assistance are recognised when there is reasonable assurance that the associated conditions will be complied with
and the grants/assistance will be received. Government grants relating to expenses are recognised in profit or loss over the same period as
the relevant expense.
In December 2022 the NSW Government introduced a legislated domestic coal price cap. During the year the Group recognised
compensation of $223 million to relating to supply coal contracts that exceeded the price cap. Of this amount, $168 million has been
recognised in cost of sales in the consolidated income statement and $55 million has been recognised in inventory in the consolidated
statement of financial position. Cash of $184 million has been received and a receivable of $39 million has been accrued for compensation
recognised but not yet paid at 30 June 2023.
G12 Subsequent events
Other than the matters described below, no item, transaction or event of a material nature has arisen since 30 June 2023 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.
Dividends
On 17 August 2023, the Directors determined a fully franked final dividend of 20 cents per share, on ordinary shares. The dividend will be paid
on 29 September 2023. The financial effect of this dividend has not been brought to account in the financial statements for the year ended
30 June 2023 and will be recognised in subsequent financial statements.
APLNG dividends
On 26 July 2023 the Group received unfranked dividends from APLNG of US$65 million (A$98 million).
On 15 August 2023 the directors of APLNG determined further unfranked dividends to be paid to shareholders. The Group expects to receive
US$115 million on 29 August 2023.
Financial Statements
141
Directors’ Declaration
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 2023 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; and
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 F1 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 2023.
Signed in accordance with a resolution of the Directors:
Scott Perkins
Chairman
Frank Calabria
Managing Director and Chief Executive Officer
Sydney, 17 August 2023
Sydney, 17 August 2023
142
Annual Report 2023
Independent Auditor’s Report
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Independent Auditor’s Report to the Members of Origin Energy Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Origin Energy Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2023, the consolidated income statement, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a. Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2023 and of its consolidated financial performance for the year ended on that date; and b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. Financial Statements
143
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Carrying Value of the Energy Markets Group of Cash Generating Units (CGUs) Why significant How our audit addressed the key audit matter In accordance with the requirements of Australian Accounting Standards, the Group is required to test all CGUs annually for impairment where goodwill is present. Where no goodwill is present, the Group must assess for indicators of impairment and impairment reversal each reporting period. The Group assesses the recoverable amount of each CGU using a discounted cash flow forecast to determine value in use. No impairment loss or reversal of impairment across any of the Energy Market CGUs was recognised during the year. The carrying value of the Energy Markets Group of CGUs is significant at 30 June 2023. As disclosed in Note C7, assumptions used in the forecasting of cash flows require significant judgment. In particular the forecasting of long-term energy and commodity price assumptions is subjective and complex in nature. As a result of the significance of the carrying value and inherent judgment and complexity in the cash flow forecasts we considered the recoverability of the carrying value of the Energy Markets group of CGUs and the related disclosures in the financial report to be significant to our audit. Our audit procedures included the following: • Considered whether indicators of impairment or impairment reversal were present for each of the three CGUs within the Energy Markets Group of CGUs. • Assessed whether the methodology applied by the Group in testing the recoverable amount of each CGU met the requirements of Australian Accounting Standards. • Assessed the basis for the determination of the Group’s CGUs based on our understanding of the nature of the Group’s business, the interdependence of cash flows, and the economic environment in which it operates. • Tested the mathematical accuracy of the discounted cash flow models. • Assessed the cash flow forecasts with reference to historical budgeting accuracy and current trading performance, historical growth rates, historical operating results, market data and forecasts, ratio analysis, and discussions with management and senior executives. • Where long term supply or sales contracts are in place, agreed the forecast revenue and costs to the contract terms and rates. • For the Generation CGU within the Energy Markets Group of CGUs, compared the useful lives of assets assumed in the impairment model to the Australian Energy Market Operator (“AEMO”) closure dates. • Involved our energy market modelling specialists to assess the conclusions reached by the Group’s internal specialists in respect of forecast energy prices, forecast generation volumes, forecast capacity prices and marginal loss factors. • Involved our valuation specialists to: o Assess the discount rates and terminal growth rates with reference to publicly available information on comparable companies in the industry and markets in which the Group operates; and o Perform sensitivity analyses and evaluate the impact of reasonably possible changes in assumptions on the recoverable amount. • Cross checked the Group’s net assets to other available information including market capitalisation and the Binding Scheme Implementation Deed signed on 27 March 2023. • Considered the potential impacts of climate risk on the recoverable amount by analysing the forecast energy price assumptions applied by management, asset useful lives and the possible changes to commodity prices resulting from the transition to a low carbon future. • Evaluated the adequacy of the related disclosure in the financial report. 144
Annual Report 2023
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Carrying Value of APLNG Equity Accounted Investment Why significant How our audit addressed the key audit matter At 30 June 2023, the Group’s equity accounted investment in Australia Pacific LNG Pty Limited (APLNG) had a carrying value of $5,469 million. No impairment or impairment reversal was recorded. As disclosed in Note B2.2, the carrying amount of the Group's equity accounted investment in APLNG is reviewed at each reporting date to determine whether there is any indicators of impairment or impairment reversal. Where an indicator of impairment or impairment reversal exists, a formal estimate of the recoverable amount is made. Oil price is a significant assumption used in this assessment and is inherently subjective. Changes in this assumption can lead to significant changes in the recoverable amount. Due to the significance of this investment relative to total assets and the inherent complexity in forecasting commodity prices and future market outlooks, we considered the carrying value of this investment to be a key audit matter. In fulfilling our responsibilities as Group auditor, we considered the work performed by the EY Component Auditor responsible for auditing APLNG, which includes auditing the carrying value of APLNG’s assets at the Joint Venture level. These oversight procedures included: • Sending instructions to the EY Component Auditor detailing the scope to be covered for the purposes of our audit of the Group. This included the risk associated with impairment or impairment reversal. • The Component Auditor confirmed compliance with the instructions provided and reported the results of their procedures to us. • To ensure sufficient oversight, we, as the Group audit team: o Held frequent meetings with the Component Auditor to discuss the outcome and extent of their procedures. o Reviewed underlying working papers and documentation of the Component Auditor for selected areas of audit focus. In addition, we undertook the following additional procedures with the assistance of our valuations specialists: • Considered whether information existed that was contrary to the EY Component auditor’s conclusion in respect of the existence of impairment or impairment reversal for APLNG at 30 June 2023 and may represent objective evidence of a significant or prolonged change in value of the investment, including: o Considered changes to market conditions during the period including changes and volatility in key macro-economic assumptions such as oil price and gas price with reference to broker and analyst data and publicly available peer company information. o Evaluated possible changes to the APLNG discount rate with reference to external market data including government bond rates and comparable company data. o Considered the impact of climate risk on the asset life and key macro-economic assumptions. o Undertook sensitivity analysis for reasonably possible changes in key assumptions which included price sensitivity analysis using scenarios developed by the International Energy Agency. • Considered available market information including trading and reserve multiples as a cross check of the carrying value of the Group’s equity accounted investment. • Assessed the climate related disclosures in respect of APLNG for accuracy and consistency with other publicly disclosed information. Financial Statements
145
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Unbilled Revenue Why significant How our audit addressed the key audit matter At 30 June 2023, the Group recognised unbilled revenue net of an allowance for impairment of $1,457 million as disclosed in Note A2 and C1. Unbilled revenue represents the value of energy supplied to customers between the date of the last meter read and the reporting date where no bill has been issued to the customer at the end of the reporting period. The estimation of unbilled revenue is considered a key audit matter due to the complex estimation process and significant audit effort required to address the estimation uncertainty. Key factors that require consideration impacting the complex estimation process include: • Estimation of customer demand and energy consumption, which is impacted by weather, an individual customer’s circumstances and market volatility. • Application of different customer rates across different regulated and unregulated markets. The Group’s disclosures in respect of the unbilled revenue estimation process are included in Notes A2 and C1 of the financial report. Our audit procedures included the following: • Assessed whether the methodology used to recognise unbilled revenue met the requirements of Australian Accounting Standards. • Assessed the effectiveness of the Group’s controls governing energy purchased, energy sold and the customer pricing process. • Evaluated the unbilled revenue calculation as follows: o With the assistance of our data analytics specialists, assessed the calculation methodology of the unbilled revenue model. o Compared inputs used in the calculation to supporting data such as historical temperature data, volume data provided by the Australian Energy Market Operator (AEMO) and solar-feed-in data. o Tested the reasonableness of the Group’s allocation of energy consumed to residential and small and medium enterprises (“SME”) with reference to historical billing data. o Compared the prices applied to unbilled customer consumption with historical and current billing data. o Reviewed the Group’s reconciliation of volumes acquired from AEMO against volumes sold and volumes purchased as used by the Group in their analysis. o Compared the historical accuracy of the unbilled revenue accrual by comparing the historical accrual to final billing data and performing a trend analysis of the accrual year on year. o Tested the accuracy of the unbilled revenue accrual for business customers by comparing the unbilled revenue accrual to subsequent invoices. • Evaluated the adequacy of the related disclosures in the financial report including those made with respect to judgements and estimates Information Other than the Financial Report and Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s 2023 annual report, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. 146
Annual Report 2023
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ► Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ► Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. ► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s Financial Statements
147
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation report. However, future events or conditions may cause the Group to cease to continue as a going concern. ► Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. ► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2023. In our opinion, the Remuneration Report of Origin Energy Limited for the year ended 30 June 2023, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young Andrew Price Partner 17 August 2023 148
Annual Report 2023
Share and Shareholder
Information
The information set out below was applicable as at 28 July 2023.
Corporate Governance Statement
The Company’s Corporate Governance Statement can be found on its website at originenergy.com.au/governance
Substantial shareholders
As at 28 July 2023, the Company received notice of three substantial holders:
Shareholder
AustralianSuper Pty Ltd
State Street Corporation
Vanguard Group
Date notice
received
1 July 2022
26 July 2023
28 April 2022
Number of
shares in notice
Percentage of
capital in notice
218,137,581
90,806,575
88,061,736
12.66%
5.27%
5.00007%
Number of equity securities holders and voting rights
As at 28 July 2023 there were:
•
122,057 holders of 1,722,747,671 ordinary shares in the Company;
• 67 holders of 3,389,594 Performance Share Rights, 68 holders of 3,429,303 Restricted Share Rights; and
• 754 holders of 314,212 Matching Share Rights.
Only ordinary shares of the Company are quoted. Only holders of ordinary shares are entitled to attend and vote at a meeting of members.
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 ordinary share held.
No other equity securities hold voting rights.
Analysis of holdings
Fully paid ordinary shares
Performance share rights
Holdings Ranges
Holders
Total shares
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
55,271
48,411
11,168
7,022
22,838,329
116,461,183
79,470,126
145,664,031
100,001-9,999,999,999
185
1,358,314,002
Totals
122,057
1,722,747,671
Holdings Ranges
Holders
Total rights
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-999,999,999
Totals
0
0
8
50
9
67
0
0
49,277
1,385,398
1,954,919
3,389,594
100.00
%
1.33
6.76
4.61
8.46
78.85
100.00
%
0.00
0.00
1.45
40.87
57.67
Share and Shareholder Information
Restricted Share rights
Holdings Ranges
Holders
Total rights
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-999,999,999
Totals
0
0
8
51
9
68
Matching Share Plan matched rights
0
0
49,290
1,425,093
1,954,920
149
%
0.00
0.00
1.44
41.56
57.01
3,429,303
100.00
Holdings Ranges
Holders
Total rights
%
1-1,000
754
314,212
100.00
1,001-5,000
5,001-10,000
10,001-100,000
100,001-999,999,999
0
0
0
0
0
0
0
0
0.00
0.00
0.00
0.00
Totals
754
314,212
100.00
Unmarketable parcels
5,186 shareholders held less than a marketable parcel as at 28 July 2023.
Top 20 holdings
Shareholder
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
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