Origin Energy Limited (ORG) Earnings Call Transcript & Summary

All right. Good morning, everyone. I'm Frank Calabria, the CEO of Origin, for everyone that's joining. And I'm joined here today by my colleagues in the front row. And what we'll do is a number of those colleagues will present through today, and so will I. And at the conclusion of that, as Peter said, we'll be available for questions. The first thing I'd like to do though is just to start by acknowledging the Aboriginal and Torres Strait Islander peoples as the Traditional Owners of the lands on which we meet today, and I'd like to acknowledge their continuing connection to land, water, sea and sky. And I'd like to pay my respects to the Gadigal people of the Eora Nation for those that are here with me today who are the Traditional Custodians on the land here, and I'm sure there are many other Traditional Custodians that you're all joining from as we speak today. It is timely to hold an investor briefing today. There are so many exciting aspects that are happening in Origin. And I'd be fair to say there's been a lot that's been happening with the energy industry as well. And I hope we are able to draw that out for you today to see not just the progress and momentum we've been making, what we can see that's in front of us but also the ambition to lead the energy transition as we go forward. If I turn to the next slide, which is now Slide 5. We have a purpose. It's why we exist. We like to remind all of our stakeholders. It's very important to our people, but it should be important to everyone that thinks about, I think, energy, and that is that we're getting energy right for our customers, communities and planet. Now turning to our strategic framework. This is a framework that we communicated to investors when we launched the new strategy in 2022. And so we're repeating it here. But I thought it was worth just pausing on. And the first is that we have a belief that decarbonization will be good for the environment but also good for shareholders and customers. And when we think about a decarbonizing world, the energy transition is presenting many great growth opportunities. We have assets and capabilities that are a competitive advantage, and we hope to draw that out and that you see that today. And then the last limb of that is that we take a systematic and disciplined approach to capital, and I think we can demonstrate a track record of that. But also today, that's a key part of why we brought investors and analysts together, so that you understand how we fund both distributions and invest in growth. So this framework for strategy is all about creating sustainable value. So why are we best placed to capture value and grow? Well, I think it sits in the basis that we hold a competitive advantage that enables value creation through the transition. We have a leading customer position, a world-class platform, 3 gigawatts of gas-fired generation, a competitive gas supply, a world-class CSG resource and an LNG asset, and we had exposure to the Octopus global growth opportunity. And when you combine that with capabilities, we see that, that is very difficult to replicate. And even if you could, it would be very expensive and take some time. If you add to that a strong combined cash flow, and I say combined cash flow and diversified across Energy Markets and Integrated Gas in addition to what is a very strong balance sheet that starts the position, it brings together our view that we are best placed with the ability to both fund shareholder distributions and efficiently invest to capture what are both existing growth opportunities but also the future growth opportunities in what I think you would all understand is such a large trend when we think about both the energy transition and everything that, that entails. So let me just put the context around why we think there are these opportunities. And the first is that both growing electricity demand and growing renewables provides opportunities. The recent ISP has electricity demand growing in the NEM by 16% by 2030, and that's driven by electric vehicles, electrification and also AI data centers. And I'm sure you've all reported, watched just how dynamic that forecasting for what will be electricity demand. Let me start with the fact that decarbonization is electrification, and therefore, I think all of it points to actually strong demand growth. But at the same time, that demand growth is going to be coupled with elevated levels of price variability on a daily seasonal basis, and we'll talk a bit more about that. At the same time -- and so before I go to the renewables, it's worth understanding that if you thought about the growth in demand and you want to connect that back to Origin, think about our customer business in retail and Origin Zero, which Jon and James will talk about. If you talk about elevated levels of daily and seasonal price variability, then think a bit about the core DNA of Origin, which is actually managing flexibility and think about the assets that we have today. With renewable energy projected to grow to be 82% by 2030, that's another significant opportunity because there will be a blend of renewables and both short-duration storage and flexible long-duration firming generation needed to meet this demand and achieve the decarbonization goals. I wouldn't be fixated. Yes, it's going to be a challenging target by 2030. But by whatever stretch, whatever target you set, it is an enormous amount of renewable energy that needs to come into the system. So yes, it provides a blend of opportunities to invest into that growth. But at the same time, it should not be missed that existing assets, I think, are going to be more valuable, and in particular, those that are both scarce today and difficult to invest at this point. And by that, I mean our gas-fired generation. And if you want to have that, you've got to have a gas supply. And therefore, they'll both play a very significant role. I talked about elevated price variability that provides opportunities. It provides opportunities for storage and VPP. And today, it's actually providing an opportunity for gas-fired generation. That variability has grown. Intraday spreads have grown 3x. In 2018, it was a $90 average intraday spread. Today, it's $290 on an average basis for 2024 year-to-date. And at the same time, in 2023, if you wanted to measure it by negative prices, 25% of all days in 2023 had a negative price. And so when we talk about daily variability before we even contemplate events in the market, unreliability of coal leaving the market and the growth we just talked about, combined with an increasing amount of variable renewable generation, we can see that this is a large opportunity to do efficiently, both through, as I say, batteries and VPP, which are able to move both electrons and value from the middle of the day to the evening peak and through all of those events. The second piece to actually -- and I think this is becoming better understood if we now move to the next slide, is that in addition to this daily variability, there are going to be longer-duration events, and they will increase. And that does provide more value to that longer flexible generation of energy over time. And so that provides more value to the largest gas fleet in the market, which is what Origin has with 3 gigawatts. We use South Australia as a guide to the future market. It's a market without coal-fired generation today. And in 2022, it doesn't mean every year will be the same, but it's a good year to understand, there were greater than 250 events where you needed firming generation for greater than 8 hours. At the same time, we've got a forecast that has coal leaving the system with over 90% of it projected to leave by 2035. So everyone will have their own view of how fast these events can occur. But I think the trend is irrefutable that there are going to be more variability and longer-duration events that need to be met by those technologies that can operate for longer hours over time. And that's why we believe that flexible long-duration energy, which is the scarce resource as coal leaves the system, is going to play a vital role balancing the market. We also believe that price variability is expected to persist over the longer term. I've heard many people talk about, well, batteries will flatten the curve, and it will happen quickly. So just put this into perspective. Everyone's focused on 2030, all right? But if we even played out to 2040. And here, we have the ISP growing electricity demand by 3% compound annual growth. And I know you look at those drivers, and you'll probably think, okay, I can see electric vehicles. Electrification could have a range of outcomes depending on your view on data center load growth, and you may all have a view about whether or not hydrogen is the one that wins in the next decade. But if I then went back to my earlier statement that decarbonization is electrification and you have got demand growth, that means you could find that electrification is greater than hydrogen demand in your own assumptions. But with such a projected large amount of growth in the system, look what it means for renewable energy to meet it. We are all focused on what it means to get to an 82% by 2030, 34 gigawatts. But everyone forgets between 2030 and 2040, if that grows anywhere close to it, that means building another 33 gigawatts. Adjusted growth rates by 2%, you'll still find those numbers are very large. With that amount of renewable energy coming into the system, it will need to be firmed by short-duration and long-duration energy. And that is why we believe that you'll see price variability persisting for a longer term than most people are predicting today. The other large significant trend in the sector, and I think it's being more appreciated over time as you hear more data points from here and across the globe, is that the growth in distributed energy resources and connected devices is very, very large. And at the same time, we've got an increase or an explosion in data and digital capability. The combination of those 2 are absolutely changing the way we engage with customers, we manage supply and demand and that we deliver better outcomes for customers through cheaper energy and a better experience. The opportunity here needs to be captured through a series of capabilities, and you need both a customer base, an understanding of wholesale energy markets and assets that can be optimized on a day-to-day basis in real time. What you need to have as the core of that is, and you should ask this, whether others do, do they have the data lake, do they have the data assets, do they have the analytics capability and do they actually have the orchestration capability because all of those are foundational before you think about offering products to customers. And that is where Origin is today, and that's what makes us well placed to capture this opportunity because it will increasingly be part of the supply and demand mix on a daily basis as part of the future energy system. I did talk at a high level about our competitive advantage, but I thought it would be before you -- we got into the team, and they talked about their various businesses. I wanted to make sure there was actually a snapshot of why we hold the view and how they all come together in a little more depth. For customers, it's about a leading customer position. You'll hear from Jon and James where we sit in the market. It's about a brand. It's about being lowest cost to serve. It's also about being a trusted partner for the transition, who is going to solve decarbonization for large business, who is going to take small businesses and homes along that journey and who's going to be able to offer the products and services in what we see as an increasingly electrifying world with distributed assets. And it needs a world-class platform. And when we use that term, we mean not only a billing and customer platform like Kraken. It's also about a virtual power plant. It's underpinned by that analytics capability I just talked about. For energy supply, our competitive advantage lies in having the largest gas-fired generation fleet, which is very difficult and costly to replicate. It's about a flexible wholesale gas supply to get it to those power stations and also to our customers. And it's about having a customer and supply position that provides the ability to invest new assets into that demand, whether that demand is met and will be met by, as I said, renewable storage and new generation assets. And the core DNA of managing flexibility. We're a business that's been managing a short energy position for 20 years. And we think that, that DNA is going to be increasingly vital in the variability of the energy world going forward. Our energy resources. I think you'll hear from Andrew today just how world class that CSG resource is and the high quality of that LNG asset. And we have resource and reserves that will extend beyond the contracted profile, and we can talk about how we're delivering that at low cost. And then lastly, I think about our competitive advantage lying in the ability for us to participate in the global energy transition opportunity and participated through technology, through the Octopus, a company that's DNA is technology before it was energy. And secondly, the new markets in which it's operating and particularly what it's doing in the U.K. market. This is not a new slide for investors, but I want to leave it with everyone because what you'll hear today is not just what we've progressed over the last several months, and it was only several months ago that we were underbid. So people should think about it's less than 6 months. What we've accelerated since then, I think you'll see, has quite a bit of momentum behind it. We are playing -- laying out our plans in more definition for you now over the next several years, but our aspiration and ambition is to lead the energy transition. So we see lots of opportunities that are emerging every day. And if you just put a slice in time and looked at the market today in the external context and then did that 2 years ago, you would find yourselves having quite 2 very different narratives when you're writing for your investment committees or whether you're writing to your clients. And that's what you should be thinking about because there are lots of opportunities that are emerging that will play itself out. And I'm very confident that Origin will find those value pools and find those opportunities as we go through. So our ambition remains the same, which is to lead the energy transition through cleaner energy and customer solutions. Our strategy is across those 3 pillars: unrivaled customer solutions, accelerate renewables and cleaner energy but also to deliver reliable energy through the transition. All are very important to create value. And the reason we include this slide is really, as you think about the team coming up, just look at the color coding. That's all so that you can see how that all links to the strategy that we're executing on and that it all aligns very strongly to that. So now I'm going to hand over to the team. We're going to get Jon up and followed by James on the customer section and look forward to speaking to you later.

Thank you very much, Frank, and good morning, everyone. I am Jon Briskin. And together with my colleague here, James Magill, we lead what is Australia's largest energy retail business. I put this slide up not just to talk to you about the scale of our retail business but also the breadth of our service offering. And whether you look across any of those product areas or any of the customer segments, we have grown. And it's not just in that electricity and gas. If you look now, we have almost 0.5 million customers where we're helping residential high-rise apartment buildings with lower-cost embedded network. Accounts, we have over 150,000 broadband customers. We have, in James' business, over 10% of customers now receiving services other than the core commodity. And across all this is our VPP, and Tony will touch on this later. But this would be Australia's -- I think Australia's largest VPP, if not the largest in the world. And we continue to grow in EVs and solar and battery sales continue to contribute megawatts through to our VPP as well. Our business has some clear competitive advantages, as Frank highlighted. The first is when you ask customers which retailer -- which energy retailer they're aware of, which are the top 3 that they would consider or who would they prefer, Origin dominates all 3 of those measures. Our customer experience continues to win awards. We have 17,000 customers rate us 5 star on Trustpilot. And we've just implemented a new operating model with our migration of Kraken, which gives dedicated customer service support for our cohorts of customers. But importantly, underneath this is our capability on technology. Kraken is a world-class platform. It's complemented with VPP, Loop -- Loop, VPP. And that gives us the data, the analytics and the system for us to now accelerate our product development. We'll be able to deliver even better service to our customers and do so more efficiently. And I know our competitors are all sort of considering their platform choices. And I would say, I mean, I feel I'm in an enviable position today to be now through that migration with the opportunity for white space ahead of us. On channels, we have been very effective on the Origin-owned sales channels. We are #1 in moves. We've added to that by acquiring 2 mover services businesses during the year. We're #1 in helping new property connections. We're #1 in helping property developers build those embedded networks into high-rise residential developments, a growing segment. Finally, on partnerships, we continue to work well with our partners, both as an access to customers but also to augment our products or our rewards for our customers. And I think these are the foundations in addition to what you'll hear that will really set us apart. And if I move on to the next slide, what you can see is that the evidence of that, it's been a terrific year in a lot of ways. Coming through the migration of Kraken, we are now in a growth phase. We've got 140,000 customers that we've grown, but it's across every single product account. Our churn is 7% below the market churn. And I've included there a group up of all of our products across our consumer and business segments, the earnings chart of that. And that is driven -- you can see quite substantial earnings growth that is driven by the strength of our customer base and our growing customer base, our multi-product offerings, the growth in our community energy services business as well as continuing to improve the tenure and lower the churn of our customers. And clearly, we're not stopping here. We're doubling down. And what we're going to do as we focus in the future is become the most loved brand. We need to set ourselves apart much in the same way that Octopus has done in the U.K. We'll continue to focus on exceptional experiences for our customers. We'll do so through the digitization of those experiences. We're using AI, and we will continue to do that to empower our energy specialists. And when customers do call us, we talk more and more about how do we provide that outrageously good customer experience. Electrification is obviously a key facet of our growth engine. And I'll touch on some of those aspects of that in the next couple of slides. And finally, we need to deliver lower cost. We're working hard to offset some of the industry and cyclical headwinds that we've been facing around costs, but we're delivering our services more efficiently, and we will continue to push on that. Just touching on the electrification. As Frank noted, I mean, this is a unique opportunity. There is an exponential growth in distributed assets in the home and in the business. We're seeing, obviously, more electric vehicles. We're seeing batteries. More and more customers are asking us about heat pumps. And the opportunity is clearly for us to be able to shift that demand to the times of the day that provide both the lowest cost but also propositions for customers that provide them with the lowest carbon emissions. And through our VPP, we're literally doing that at the moment with hundreds of thousands of assets that we're scheduling. We send schedules every 5 minutes for what we want those assets to do. There's plenty of examples we're working on. Just to illustrate a couple, our EV PowerUp tariff now lets customers select how much they want their car to be charged for and by what time. And we will just optimize the times of the day or the evening to deliver that at the lowest cost for customers. Or we will launch very shortly our battery maximizer tariff, which will allow customers to be able to discharge their battery for a premium feed-in tariff during those periods of the evening when energy -- when we can pay them more for energy. And obviously, energy is higher cost. And so we're working on this to package up for our customers to provide end-to-end solutions for electrification. And we could translate that into growth in value. And what we see here as we look beyond is a 2x growth for customers that are energy or commodity only through to the potential customer lifetime value for those that are starting to move through that electrification journey into the multi-products that we see. And that's driven by, obviously, increasing demand as we see EVs and heat pumps come on board through our sales into solar batteries and packaging that up for solutions for customers that flow into our VPP, the flexibility benefit that we get through our VPP as well as the contribution from the natural essential services in the home, which also now includes broadband. So with that, I'll hand to James. And you'll take us through Origin Zero.

Good morning, everybody. Okay. So Origin Zero was set up about 2.5 years ago, predicated on the belief that large businesses would be actively pursuing reduction of their scope 1, 2, 3 emissions and they'll be a key part of the energy transition and that we, as Origin, could build on existing capabilities, build some new ones to help them on that transition path. And the core value proposition of Origin Zero is that we can offer a broad suite of services to help them with the transition backed by reliable brand, deep expertise and capital where appropriate and required. Let me just walk through some of the services that we offer to give an explanation of the business. So we categorize the services into 4 areas. Number one, the energy supply, what you'd expect from Origin. And this, of course, ranges from simple energy supply agreements to much more complex solutions that deal to the energy supply provenance, duration, flexibility, incorporating existing or preexisting PPAs and so forth. And the second area is where we can reduce the carbon emissions and costs at the customer's site. This is a very active area in this environment where customers can reduce carbon and cost at the same time. That's highly attractive. And in practice, that's solar. It's storage. It's connecting distributed assets to the VPP for new revenue streams. And it's energy efficiency. The third element is the electrification as a big aspect in large businesses. And that's moving away from coal, diesel, gas to electric assets. That's happening on many fronts. The technology and economics don't exist in all cases, but many, it does. And a fast-growing area for Origin Zero is the e-mobility business. I'll talk about that in a moment. And then the final area is providing offsets for any residual emissions. It's early part of the market. We think it will grow. And we just want to be in a position where we can offer our customers access to offsets, whether for compliance or voluntary reasons. And so we set up the business, as I said, just over 2 years ago. We had a strong position in C&I. We had about less than 1% of customers engaging in a product other than commodity, and now we're over 10%. And e-mobility business is growing. We've got 900 EVs under management. We have about 230 megawatts connected to the VPP. So we're early days, but we've got momentum. And the business is growing, and we can see clearly growth ahead of it. So that's how we offer value to our customers. And I kind of just think more internally how we create value for shareholders. I kind of think about this in 3 themes. The first is the distributed energy resources. So as I said, it's a very active area for us now. It's very appealing to customers, and we'll create margin through the deployment of those distributed assets. And then just -- or more importantly then is the orchestration of those distributed energy resources. That's through load shifting and playing into ancillary markets and sharing that value with customers. And so if I -- I'll bring in some practical examples. So Coles have a very impressive sustainability plan. Part of that is deploying distributed assets to their portfolio. And we're a partner of theirs. And in that first tranche, we're delivering 20 megawatts of solar and storage. We're orchestrating that storage. But in addition, there's about 150 sites, were predominantly fridges. We're orchestrating those and playing that into the FCAS markets. And then a recent example was the city of Melbourne, where they have an aspiration to make renewable energy more accessible for their citizens. And in that first pilot with them, we're building, designing, deploying 1 megawatt of storage and orchestrating that in a kind of a community setting. The third -- sorry, the second element is the e-mobility services. And we are providing quite a wide range of services to help our business customers transition to electric vehicles. And so I've got here as an example Kingspan. And here, we provided the diagnostics, the total cost of ownership of moving to electric vehicles. We spec the EV charging, and then we're leasing electric vehicles to them in a number of different sites. A fast growth area for us is a product which is a salary sacrifice EV subscription. And Accenture were the latest large business to sign up with us. And so now Accenture employees can offer their employees a monthly subscription from their pretax income for an EV, and they can choose from a range of over 50 models. Between the leasing and subscription, as I said, we have about 900 EVs under management. That comes from about 100 business customers. We're seeing month-for-month growth here. And of course, we deliver value through that vehicle, but also in time will come the commodity growth, and then the orchestration of the flexible load. The third element, of course, is the core commodity business. So we have about 1.5 terawatt hours of data center load, which is a key growth sector and has been much talked about, and we organize around those sectors. So there are other growth sectors that we organize around so we can cater more for that specific segment and their requirements. The lifetime value dynamics that Jon described earlier are prevalent for C&I. And I'd say there's kind of a very acute focus on pricing for the consumption profile and shape, and that really plays into the sectors that we play in. And so a couple of examples here, Scentre Group and BlueScope. Scentre, we have a 6-year electricity supply agreement, 100% LDCs. We give them kind of a flexible purchasing product where they access live by pricing. BlueScope is just shy of 1 terawatt hour where we have incorporated an existing PPA, so they can retain the value from that. And we're working with them on a flexible Demand Response product and a series of decarbonization initiatives. And so these are 3 themes, but in practice, they intertwine, of course. If we take an embedded network, we would supply electricity to the gate meter. We would deploy distributed assets and orchestrate them behind that meter. And then in many cases, we're supplying EV charging and car sharing facilities. So they do interplay. And today, the majority of earnings from Origin Zero is in the -- that third element, the commodity. But as you get towards 2030, we would expect that to maintain and grow, but that would represent about 1/3 of the earnings. So it's more 1/3, 1/3, 1/3 with them more coexisting with each other. Okay. So we've mentioned the VPP a couple of times here. I'll get Tony to talk to the capability in a second. I would say from the customer-facing businesses Jon and I lead, the emphasis is very much on how do we innovate around the product and pricing to build on those megawatts, incentivize that load shifting and then share that with customers. So Jon described the EV PowerUp plan as an example. With large businesses, typically, it's where we would have revenue share arrangements and different risk and reward structures. So batteries as an example. And we would see continued growth in EVs, distributed assets, storage across all sectors. And in the large business, there's more flexibility in production, and that's actually starting to figure into some of our customers' capital plans. I'll just get Tony just to talk a bit to the capability. Thank you.

Thanks, James. My name is Tony Lucas. So you see both Jon and James have talked really about the customer propositions, which are key to the VPP. But the other thing that Frank talked about was really our trading DNA and the fact that we manage a short position. We started development of the VPP a number of years ago because we saw that the capability that we had in trading and the sort of wave of distributed assets and data that was going to come at us that we needed to extend that into managing lots of distributed assets. This is an in-house developed capability. It's fully integrated with the trading position that Greg manages. And what we seek to do is to move demand and to move assets into periods of either low prices or negative prices or bring assets on to the system that can help alleviate prices in periods of high demand. The key to the success of a VPP though is really the customer proposition and sharing that with customers and customers seeing value with that. And both Jon and James talked about that be multifaceted, which is not only just price and value but also carbon. It's had significant growth since we started to really scale it. I'll take Jon's credit that it is the world's largest, but I'd certainly say it is the world's largest from a residential perspective. And really, what we've done is go around and mop up as much residential, what I'd call untapped, I guess, load that we can go and control in the market today. The next wave of the next of assets will really come from the electrification drive, the uplift in things like EVs, community batteries, distributed energy assets in people's homes and businesses. So we're 1.4 gigawatts today, plan to get to 2 gigawatts by 2026, but we certainly won't stop there. We think this is a large opportunity. With that, I'll hand to Greg.

Okay. Good morning, everyone. My name is Greg Jarvis. I'm the EGM for supply and operations, and I do all the trading side of things. So look, the Origin portfolio is very well placed to manage the carbon transition in what is a very volatile market. Routinely, we see prices at the maximum levels, and we also see negative prices sort of nearly every day. So it's a very volatile market, and we have to manage that. We have the largest thermal gas peaking fleet, which provides valuable capacity for long durations when renewables aren't available. And this is supported, as Frank mentioned, by a very flexible gas portfolio, which is a competitive source advantage in our portfolio. Eraring continues its role in providing capacity to the market under agreement with the New South Wales government out to August 2027. We are well advanced in building out our battery and renewable projects to manage the transition. This portfolio is very flexible and very difficult to replicate. So just first, turning to Eraring, our only coal-fired plant. We recently closed the agreement with the New South Wales government to provide reliable energy to the market out to August 2027. In return, the New Sale Wales government will provide financial downside protection if the plant proves to be uneconomic. Eraring is a very flexible plan, allowing us to turn down the baseload units from 720 megawatts to 180 megawatts, which has been very important to managing when prices are low in the middle of the day. We have hedged all our coal portfolio for fin year '25 to expected reduction, and we are looking to hedge our coal contracts out to August '27. So the thermal peaking fleet is the biggest in the market, and we have assets located right across the NEM. These assets play a vital role in managing evening peaks, extreme weather, outages and renewable droughts. These assets will become even more valuable as more baseload coal is phased out from the system. These assets are very expensive to replace. As you can see in the second graph there, that sort of indicates how cap prices have increased in value, which is a sign of growing market volatility and the increasing value of firm capacity. So just turning to our gas supply. Supporting the thermal gas peaking plant is our gas portfolio. It's been a source of competitive advantage for many years, and it's managed by a very experienced gas trading team. We can move gas right up and down the East Coast to support our customers in generation fleet. We have gas storage contracts and with pipelines and storage facilities. We are also looking to develop additional storage in the South via the Golden Beach storage project as we see more storages needed to just manage the peaking power requirements in the NEM. We also believe that the Southern gas market will ultimately require import terminals, and our portfolio is well placed to manage JKM risk. Today, we already manage LPG and LNG physical trading cargoes. So we have a lot of experience in managing sort of LNG shipments. So this graph shows the Origin's energy position, and Frank have alluded to this. We have over 20 years. We've typically managed our position by being long capacity to cover the high-price events and short energy. We manage the short energy position by either buying low price hedges, buying from the pool when pool prices are really low, and we've seen that more recently with very low pool prices in the middle of the day, or we buy more coal and we run Eraring harder. But going forward, we can build into the short energy position through building up to 4 to 5 gigawatts of renewables and storage into this position. Clearly, we can build more renewables and storage based on economics at the time. So that short position is what I think is a real opportunity to sort of build out our portfolio. So turning to batteries. We are increasing the flexibility of the Origin portfolio by building out our battery opportunities. The aim is to have a battery in every state of the NEM. We've committed to 3 so far in New South Wales, Eraring Stage 1, which is 460 megawatts, 2 hours. And that's on track and on budget to be delivered this quarter coming. Vic, we have the Mortlake battery, which is a 300-megawatt 2-hour battery. And in Queensland, we've originally signed up a PPA with Supernode for 250 megawatts for 2 hours. In our potential opportunities, as you can see in the bottom chart, we have a number of options. Our aim is to have at least one battery in every state. So as you can see in this graph, battery turns are good with increasing intraday spreads. I believe this will continue as more renewables come into the system. There will be also other sources of revenues from batteries, including avoided cap costs and FCAS markets. We can avoid maintenance costs on our gas fleet by not running over small-duration events. So we use batteries instead. So battery is very complementary to our portfolio. So turning to renewables. Origin has made rapid progress in building out our portfolio of renewables at various stages of development. One of the key requirements for the success -- for a successful site is access to transmission. We are closely following transmission developments and target projects that get access to market. Any development of future opportunities will depend on returns, and we may also see government underwriting schemes such as CIS to lower the risk. The transmission is key, and that's where we locate our projects. So just turning to a recent purchase, is the Yanco Delta wind farm. It is strategically located in the South-West Renewable Energy Zone of New South Wales, next to key transmission infrastructure and is a quality resource. It's on a high plane, flat as a tack. And it's a great site to develop wind. This represents a unique opportunity to bring a material volume of renewable energy supply into the market relatively quickly to help meet the needs of our customers. We now look forward to working closely with the local community and other stakeholders and progressing this project to construction. So on that note, I'm going to hand over to you, Tony.

Thank you. What I wanted to give was really a context of really the transition of that wholesale portfolio and what that might mean. You'll all be familiar with the electricity gross margin, I guess, dollars a megawatt hour and dollars a gigawatt hour that we quote. What you see is we -- sort of long term, we would average around $30, maybe a bit above $30, swings around a bit, plus or minus $10. You'll see through the energy crisis there, it fell away significantly, and you can see that lagged impact really of the tariff recovery in the current fin year. What I wanted to do was to give you sort of an indication of how we see that 4 to 5 gigawatts playing out and what that would do to that gross margin -- unit gross margin. So with this measure, it is an integrated gross margin. So it does include retail. It does include Origin Zero, and it does include the wholesale and trading business. But the impact of putting the -- just the 4 to 5 gigawatts in, so not the growth that you're seeing that we expect to get in Origin Zero or the growth that Jon talked about or anything further above the wholesale and trading investment or the VPP. We would expect to have a range of $25 to $40 a megawatt hour going forward as we transition Eraring out and bringing that 4 to 5 gigawatts of replacement. What would see us at the upper end of that range, if you like to think about that, would be a much -- a messier transition, if I call it that. So cap prices staying higher for longer, perhaps a double up as Eraring comes out and we bring assets in, and obviously, any future growth that we get in Jon or James' business or through the VPP would push us obviously further above that range. In terms of gas, we obviously expect to run at that sort of $4 a gigajoule average that we have. We see the electrification not impacting that too much in terms of the switch out, the margin that we earn and depending on customers, obviously, the margin that we earn in gas customers and the margin we earn in electricity customers. On a margin basis, it's not too different. You'll obviously get some efficiency gains with that switch out. But that portfolio, as Greg has indicated, is quite long-duration lessee contracts and pipeline and transport contracts. Okay. I'll hand to Andrew.

Yes. Thanks, Tony. Morning. I'm Andrew Thornton, EGM of Integrated Gas, and I'll take the opportunity this morning to talk through the performance of APLNG and the outlook for continued value creation as we leverage what we believe are 2 key points of difference in our business: one, which Frank mentioned earlier, which is the world-class unconventional resource, which continues to outperform; and then secondly, a unique operating model, which we think is best placed to optimize that resource. So we'll start with the resource. So today, we sit with virtually every key operational metric ahead of expectations versus FID. And the reservoir is no exception to that. And it's not just a matter of producing out a finite amount of reserves and producing it out. We've seen -- what we've actually seen is 2,500 petajoules of increased resource base since 2017, and generally, production from existing wells declining at a slower rate than originally anticipated. And the graph on your left there shows a group of wells in our Talinga, Orana field, forecast over 3 distinct periods of time. And we should say while this is a representative sample, actually, it's broadly reflective of a trend we're seeing over most parts of our field. What it does demonstrate is consistent improvements in actual and forecast production as we incorporate learnings about coal quality, net pay and permeability from operating the asset over the last decade. And practically, what it means is we're forecasting additional recovery from our fields. And what that then creates is the opportunity for us to invest in debottlenecking activities to ensure that we can produce that out and optimize the base over time. And the other 2 charts there is exactly what we've seen. So we've seen strong field performance and a focus on base optimization has enabled us to sustain production over time and certainly over the last several years without having to ramp up drilling. We do see this as a differentiator to our competitors who've had to invest in bigger drilling programs in order to meet their production objectives. And the drilling that we have done over the last few years, in particular, has been very targeted and focused on small packages where there's existing [indiscernible] processing capacity and to progress our exploration and appraisal program. So to fully capitalize on the strong resource, what we need to be good at is safely and rapidly making the changes in the field that's required to optimize base production. And specifically, when we say optimize the base, what we really mean is the activities that we do every day to maximize production from our wells, gathering lines and facilities at the lowest possible cost. There's a few examples outlined on this slide, and I'll just outline -- I'll just run through a couple of them. So firstly, optimizing wells. This is the cheapest source of gas that we can get our hands on. And what the aim is to remove back pressure on wells so that you can increase the flow rate. You get there by positioning pumps in wells at the lowest possible spot to then allow pumping off the fluid that sits above the gas and then exposing the maximum amount of gas producing coals, which sounds easy enough, but what you need to do is to do that well, you have to have really good intelligence on what sits in the reservoir. To do that, we've invested in downhole gauges and then ensuring we have the right pumps at the right part of the life cycle for each well. And you can see there our efforts in optimizing wells has led to a very material acceleration of production of more than 100 TJs a day. Next item in the stack in terms of cost is to repair wells and bring wells back online that have failed. You'll know that we did build up a large backlog of offline wells over the last few years through COVID, and then we had flooding issues over the last several years. And we're progressively bringing that down over time, and we now sit above 90% well availability on average. We're also focused on lowering the cost of each work-over that we do to ensure they're done more efficiently each year. And we've done that pretty effectively since FY '22. We reduced the average work-over cost by 13%. We've done that by upgrading the work-over rig fleet and also improving our planning and execution practices. We also have a track record of investing in field interconnect pipelines. And the way you think about that is we didn't build the GPFs with perfect knowledge at the start of the project. And so in some areas of the field -- in a lot of areas of the field, we've got more gas than expected. And so the cheap -- the way to access the cheapest possible gas is not to drill fields and drill wells where there's haulage. It's actually drill the lowest possible -- the best gas that we have and then transport it to where there's haulage through interconnect pipelines. And we've managed to do that very effectively and been able to accelerate 250 TJs a day of production through building interconnect pipelines and then accessing that low-cost gas in the right areas. And all of that -- all of this work to optimize the base has enabled a material reduction in the number of new wells we've had to drill over recent years, which brings us to our ambition, which is to maintain a low cost of supply below $4 a gigajoule on average for the next 5 years. And you can call it a stretch, a BHAG target, but what it is, it's what we're going after as a team and what we're working very hard to achieve. And to do that, we're going to have to continue to be very focused on optimizing the base. We do see a lot more opportunity ahead beyond what we've already been able to achieve. That will mean continuing with what we've done. So continuing to optimize each well, continuing to lower the inventory of off-line wells. But we do see a significant opportunity beyond that to increase the reliability of our well fleet. And we'll do that through investments in artificial lift systems to keep wells online and minimize future work-over spend. And for those not familiar with ALS, ALS is the equipment. So the surface and subsurface equipment on a well, which allows you to draw off the fluids and allow the gas to flow. And as our fields mature, we need different type of ALS systems. And so when you're at the beginning of the life of the field, you've got a lot of water. You have a different set and type of pump. It's good to do that. As our fields mature, then there'll be less water to pump off. And so we'll -- you'll need different types of pumps, and that should allow us to enter a zone where we have and extend our mean time between failure. In addition, another one just to point out, in addition to the larger infrastructure projects I referred to earlier is also -- we'll continue to debottleneck the network through implementation of many small field-based projects. And so just to give you a sense, for example, in FY '25, we'll do over 200 small projects out in the field. And they'll include things like loop lines, separators, low-point drains. And it's all to try and remove back pressure on and accelerate production. We do know that eventually we will need to drill more wells. So this is not an in-perpetuity thing. And to maintain a low cost of supply when we do have to ramp up drilling, we'll have to get more efficient and lower the cost of those new development packages. And we'll do that through efficiencies in drilling and connection unit costs and by investing in digital tools that allow operators to very quickly see the opportunity for optimization. And then ultimately, we'll automate some of those activities as well. And so for example, we've already implemented tools that use AI to improve maintenance and reliability outcomes in the field. And then also I want to point out that we have a large, privileged acreage position with unexploited resources with the diversity in place and geological types. And so we'll touch again on exploration activity in a second, but effectively, we'll continue to invest in an exploration program where most of our exploration plays are located next to existing infrastructure and provide, if we're successful, an opportunity to tie in additional gas. The final point, I mentioned at the beginning of my section here, we had -- we saw 2 key points of difference in our business, world-class unconventional resource and also a unique operating model. And I did want to touch on that now because I acknowledge that aiming for a low cost of supply in a commodity business is not especially unique. But what we do think is unique is not so much what our strategy is but how we're going to go about it. And it's worthwhile touching on the history here. We started operations as an entirely functional organization. So we had an operations team, a development team and drilling team. And at one level, that's very efficient. Economies of scale go to where the work is. But what we found was that's entirely unsuited towards optimizing the base. And the reason for that is that once you get through drilling a large stock of wells, you're moving from a mentality of mass standardization. You're punching up 300 wells a year to mass customization, where if you're trying to optimize the value of each well, each well is different. And what's important is being able to move very quickly and have frontline operators make the changes and do the work that they see in front of them rather than based on an objective or a policy set from up high. And on that basis, we've designed an operating model that fits that context. And for APLNG, that's an asset-led model. And so effectively, what we've done is divided up the field into geographic units, and each one of those units have the capability embedded in small frontline teams to be able to make all the value-based decisions they need to make to optimize their run of wells. So think about a multiskilled operator partnered with a site-based engineer, partnered with a remote ops person in Brisbane and a production engineer, doing everything and having the autonomy to make decisions to create value on their run of wells. And that's very different to how we've run historically and how our competitors run today. The phrase we use to sort of capture what we're trying to achieve here is together, we own it. And we think about, in essence, our team acting like that in 100% of the business. The office serves the field. The leaders serve the team and not the other way around. This is all supplemented with access we have to global best practice and the support we get from our partners, in particular, ConocoPhillips, who we've been able to effectively work with to access their deep subject matter expertise and technology from the Lower 48; and also Hilcorp via Hilcorp's CEO and Origin Board Director, Greg Lalicker, who -- and if you don't know Hilcorp, Hilcorp, best in the business in the U.S. at managing and creating value from late-life unconventional assets. And so the combination of those 2 opportunities, ConocoPhillips on technical technology, Hilcorp on operating models prove very effective and a lot of value add to Origin as upstream operator. So I'd be overstating it to say we've arrived at our destination. We haven't. We're still tweaking it, but we think this is really important to get right because what it does mean is that we can drive much faster decisions at the front line that are aligned to optimizing value. And the evidence point for this is back on the first slide. So we've -- just this financial year, we've hit production records, and we've done that without having drilled many new wells that have actually added production to that. And so working very hard to try and continue to refine this approach because as fields inevitably do decline at some point in the future, we'll have more wells the same or less production. And if you look anywhere in other markets on the model, we think this is the model that will work in unconventional resources. Okay. Finally, as has been pointed out a number of times through the different speakers today, gas will continue to play a critical role in supporting the energy transition. We do think APLNG is really well placed to meet that opportunity. Most of our near-term production is contracted to either domestic customers or LNG -- or LNG SPAs. Those SPAs run through to 2035. And so you can see beyond that, there's a significant amount of reserves and resources, so circa 50% that we expect to still be there by the time of the end of the SPAs in 2035. And you think about that as any exploration success would then be on top of that. And so with LNG, demand growth is expected to be robust. Combined with APLNG's long life processing infrastructure, we do see opportunities to meet customer demand over the medium to long term. So I'll finish to say, in summary, APLNG, world-class resource, which combined with what we believe is a very unique operating model and a great team leads us to be very well positioned to support the energy transition and create some value along the way. I'll hand over to James.

Yes. Come on, Jon. Clearly, there was an Investor Day in the last month on Octopus. So there's not much new information here, except to say that the high-growth opportunity continues. And the information you'll see in these slides really do point to the fact that just to remind the messages, exceptional growth in the U.K., 55 net additions in the month of April -- 55,000 net additional customers joined Octopus in the U.K. in April. And I think May is about the same. So yes, markets may continue to get more competitive. Switching may rise, but that is incredible organic growth that they're delivering in their retail market. Strong growth in international markets. We're seeing growth at similar stages like the U.K. are being probably better than some of the markets in which they're operating. But their key focus there is to take those businesses to scale in as quickly a time as possible because that's when you can actually operate a retail business, and you will need scale in those markets. Strong trusted brand. I think you can see the cost to serve advantage. And Jon highlighted earlier about where we see the benefit of flexibility and other products and services. It's a very similar story in the U.K. That flexibility is probably playing out, I think, Jon, more particularly right now because of the high penetration of electric vehicles when you think about where our VPP has gone through a range of other distributed asset devices.

Yes. And maybe the only add here is that internationally as well as the U.K., like Spain, has enormous opportunities in the middle of the day that shift demand so that as they grow in those countries, you'll see extra value come through that.

Yes. Then we talk about margins in the tech business. They're continuing to grow. They've got obviously the contracted customers. You would have seen that contracted customer account growth. They're now in the process of essentially just really literally bringing those from contracted to live customers generating revenue. So there will be quite a lot of that customer base by the end of this next financial year that will be -- actually will be on the system and paying. The other thing, too, just to think about this, 51 days to migrate the 1.8 million customers from Shell, 51 days, done. That's where core DNA in technology and process and an ability to move fast is beyond the assets you hold. And they are separating these businesses. So Greg would have given that message when you saw -- and I do urge people to have watched the Investor Day. They are separating. They're running separately now. Everything we are seeing in flexibility, they are seeing now. They are seeing storage play out. The benefit of integration over time hasn't yet been tapped. It's really a retail business, but now they're putting themselves in a position to really integrate across the chain. And you would have probably then seen recently the equity that was announced around the same time at the Investor Day, so we're very pleased to have invested and gone up the register to USD 7 billion EV only 6 months ago. So we can see no shortage of momentum, but it does provide us with an opportunity, and it's also been an organization where we've learned a lot. And now as they enter into a more integrated way, there's a flow of information going back the other way about how you operate an integrated and trading business. Anything else?

I think you've covered it.

Okay. Thanks very much. And now we'll go to capital management, Tony.

Hello again. So what I want to do is you've heard from the team really on the strong performance of the businesses from the retail business, wholesale and the APLNG asset. And really, what that manifests is really 2 strong, diversified earnings streams from the 2 businesses. And you'll see there in fin year '22, obviously, I talked about it before. It came through in the electricity gross margin slide. But we've had a strong recovery from the Energy Markets business from the energy crisis that we saw in fin year '22. We continue to see strong adjusted free cash flow. We'd expect a stronger second half from the Energy Markets business following the tariff increases that caused the working capital build in that first half. And then finally, we're expecting fully franked distributions from APLNG in late fin year '24. What that strong cash flow delivers and has delivered is significant deleveraging of the balance sheet, which has placed Origin in a strong position not only to invest in the transition but also to return distributions to shareholders. And it's led to also a higher return on capital employed well above our 10% ROCE target that we have quoted externally before. The strong track record of both underlying business performance and disciplined capital management has led to improved shareholder returns both from a step-up in distributions over time but also more recently in share price appreciation. When we talk about disciplined capital management, what we talk about here is to ensure there is a strong competition for capital between reinvestment, acquisitions and growth projects and additional dividends. Excess cash flow after ordinary dividends will be applied to maintaining a strong capital structure, major growth projects or acquisitions and additional shareholder distributions. We actively review and manage the portfolio through time, which I will cover in a later slide. When we talk about capital management, we have a rigorous investment evaluation, and we applied a disciplined approach to investment decisions. We take a very systematic approach to assessing every single investment decision. So firstly, strategy. Does the investment fit our strategy, our internal capabilities? How does our existing position or portfolio derisk or enhance the return of that investment? And how is it aligned with our climate targets? Second, on risk management. Will scenario and stress test the investment under a range of scenarios and market outcomes? This would include regulatory changes, geopolitical events, market prices and also carbon -- different carbon prices and schemes. And lastly, investment returns. We're disciplined on returns and assessing these against hurdle rates. We'll assess not only the returns but the variability of those returns to ensure the risk profile of investment is adequately represented. And we'll also rank our investment opportunities and the returns of those investments to ensure that we are maximizing the value -- maximizing value and returns. Finally, sorry, returns on ownership. So this is really the second limb of our -- what I would say is our capital management approach. And that's our decision really on balance sheet funding versus utilizing third-party capital through either contracting or tolling or offtake agreements. For Origin really, this comes down to the benefit of control or ownership benefit, what I'll talk to. And so let me start first with the top right. These are assets which benefit from being under our control. They're highly hard to replicate in a contract and off-balance sheet -- in a contract or an off-balance sheet or contracting-type model, and these assets tend to lend themselves to balance sheet funding. Examples of these would be things like open-cycle gas turbines where you need the ability not only to supply the gas and have the flexibility of dispatch right through the gas development, some brownfield battery sites because of their connection characteristics, retail bolt-on acquisitions and perhaps things like carbon offset development. If I move to the top left now and classify these assets, these are assets where we're able to replicate the control or the operational benefit through contracting. So with these assets, we would look to bring on a funding partner, underpin the asset with a tolling or contracting arrangement. And that way, we can access low cost of capital and Origin's integrated customer -- integrated portfolio, including our customer book, our wholesale position and the platform with the -- perhaps the virtual power plant, and some of these examples create a very capital-efficient way to fund these assets and bring them into the portfolio. It can also derisk asset classes. If I move to the bottom left, when we look at operating renewables, we would say they have a low control -- what we call a low control benefit. So generally, the dispatch of renewables is a function of the weather pattern absent transmission constraints. And so there is limited benefit in us having those on balance sheet and under control. And they're easily replicated with off-balance sheet arrangements like power purchase agreements, and we would seek to fund these off balance sheet. If I move to the middle right, where we do see value is in the early-stage renewable assets. Origin can bring its customer base, its trading portfolio, its experience and credibility to early-stage development of renewable assets. The development and derisking of these sites through time can create value which Origin can monetize in a number of ways. We can aggregate the customer demand into offtake agreements. We can bid these assets into the Commonwealth investment scheme or a combination of both. Ultimately, we would look to sell these assets down, therefore, enhancing their return to Origin, or in the event of a full sale, crystallizing the value entirely. So in summary, our capital management assessment looks at the different funding options and ensures competition for capital versus alternate structure, and that way, ensures capital efficiency. I just want to run through some of our planned on-balance sheet capital investment. So we think we'll run at somewhere between $250 million and $300 million of what we would call sustained CapEx. So that's the likes of maintaining Eraring, the gas-fired fleet, the LPG business. And then you would have seen us commit to 750 megawatts of battery projects. That's about $800 million. And we're targeting really what we range as an 8% to 11% return on those. We think the upside is skewed to volatility and a messy transition. And then Greg touched on some of the other assets, which are subject to FID that we might be committing to, which is 240-megawatt of Eraring Stage 2 battery, and of course, the Yanco Delta wind development project. And there's some capital estimates for those. What I want to talk about is really the funding of those. And I think what I need to highlight is with the renewables, I'd like you to think of that firstly in 2 ways or 2 phases. They don't necessarily run sequentially. So the first stage really is Yanco Delta, and what Greg has done is highlight that in the 4 to 5 gigawatt target as covering the retail load. We think that is the most advanced wind project in the South-West REZ. It has scale. It has resource and it has timing. And we'll look to develop that and bring it into the portfolio at the lowest -- what we call the lowest levelized cost of energy. We look to contract most, if not all, of that offtake volume, and we'll hold a small stake through construction and partner to reduce Origin's capital overlay. And that's actively underway. What I'd highlight as the second phase is really those other assets, which Greg has highlighted, which are early-stage development where we can create value, as I described before, bringing Origin's integrated portfolio, early-stage development capability, derisk and enhance the value through time with either a full or majority sell-down preconstruction. The requirement of the market for renewables is large. You heard from Frank it was 34 gigawatts to 2030. And you can sort of read that as halfway there, 50% of the way there. And so the opportunity is quite large. There are different government schemes, and the Commonwealth investment scheme details are still unknown, and likewise, base -- what I'd say our base returns in renewables. So we'll continue to develop early-stage renewables to create value enhanced returns, and we'll keep assessing where returns are in the renewable asset class and where Origin can add value to that asset class. On batteries, we'll partner with third-party capital, where Origin is able to obtain the full charge and dispatch rights and therefore provide us with the full value of having that storage asset in the portfolio and maintain and improve capital efficiency. This also allows us to contract a shorter duration of the battery life, which as I highlighted before, can derisk the asset in terms of not locking us into potential technology changes. So because it has a shorter contract life, as technology develops in the storage space, we'll have the ability to either recontract into that with a different technology or look at a different technology at the end of the asset life -- or end of that contract. A recent example you would have seen that we announced was the 250-megawatt 2-hour agreement in Queensland. If you looked at why that's called Supernode, it actually sits on the regional reference node of Queensland. And so that's what we would say is highly desirable versus alternate for us. Okay. So dividend policy. Our new dividend policy target is an ordinary dividend payout each financial year of a minimum of 50% of free cash flow. This represents an increase on the previous payout ratio of 30% to 50%, and it reflects a strong balance sheet and robust outlook for our 2 core businesses. The actual cents per share payout will vary with financial performance over time. The minimum of 50% payout structure allows us to look through any cash flow variability from year-to-year, particularly associated with working capital movements to ensure a more stable distribution year-on-year, and you've seen us do that this year. We expect to generate significant franking credits over the foreseeable future and with tax paid from both Energy Markets, and the receipt of frank dividends from APLNG for this recent distribution will take the form of franked dividends going forward. Consistent with our previous dividend policy, the Board maintains the discretion to adjust distribution according to economic condition -- conditions. So a resilient capital structure. So we commit to investment-grade and maintaining an investment grade. Baa2 drives our capital management decisions. We stress test the portfolio from a range of both commodity prices, regulatory and operational risk to ensure investment-grade rating. And the current balance sheet is both in a strong position to fund into the energy transition and are flexible to capture potential opportunities in the future. Lastly, I want to talk about active portfolio management. So what you would have seen us through time is we continue to assess our portfolio. We're seeking opportunities either to invest in growth opportunities to recycle capital from lower-growth nonstrategic assets to higher-growth strategic assets. And also, you would have seen us, with things like the aggregated channels and even some of the initiatives that we've started, add value to the existing business. Thank you. And with that, I'll hand to Frank.

Thanks very much, Tony. Well done. Okay. Just in wrap up, last slide. I hope you've seen from the presentation today, a lot of opportunities are going to emerge from the energy transition. And they're going to present themselves, and I think Origin is in a great place to take advantage of that. It is enabled by our competitive advantage. And that advantage, you need to think about across the entire chain: customers, energy supply, a platform that links those 2 together and energy resource. And I think the team has done a good job to highlight the capabilities they've built across the various aspects of the business. We also have that exposure to the Octopus global growth opportunity. The strength of having combined cash flows from 2 businesses that also have some diversification benefit gives us the ability to pay now a dividend pursuant to the new distribution policy, and at the same time, to meet the existing commitments. I hope you can see, therefore, our ability to navigate the exit of Eraring, the timing of storage, the timing of all of the assets coming in, including the benefit from the gas-fired generation, can be done capitally very efficiently. Greg just danced straight over that on his slide earlier, but we will do that very efficiently. And that also needs us with a balance sheet capacity to be able to pursue other opportunities as they emerge. We have seen a lot of opportunities, and I think that brings me to my last point. Choosing those, you have to believe that we all systematically make good choices. We started life with a balance sheet constraint that forced that discipline. I think we've lived by that discipline over the years. But you're right to ask that with the balance sheet capacity and with so many opportunities that we will systematically allocate that well. And I'd ask you to measure us by that performance and also by the decisions we make. There is always a balance between us seeking returns for you as shareholders, managing the risk and getting the right portfolio of choices, not having too much in build phase and seeing other opportunities that are emerging as we progress. And we've seen a lot of those, and that's what we'll do. And hopefully, you've got a framework from which you can assess the way we'll make decisions. So thank you very much. We'll now move to questions, and thanks to the team. I think, Pete, are they -- team coming up, and then we'll fire away. We'll get Pete there.

Maybe just to start at the macro level first. Return on cost to serve [ equal ] capital target, sort of circa 10%. You infer you're going a bit more towards a capital-light model. Should that target actually be raised to a higher level?

Yes. there's no doubt that as you go more capital light, you would expect -- and one of the things that's hard to actually provide definitive on this, a good example would be the renewables because if you're actually going to cycle that capital, how do I give you a return on the way through? So you would expect a higher return through that early-stage development phase than that 10%. That's right. And I think if you looked at the storage, if you looked at the macro level, we firmly have a belief that it's actually quite difficult to then model all of those various market outcomes. So what you would expect us to do, and I think this is the approach we've taken, is what do you expect the base return for those assets to be under a reasonable set of scenarios. And then if you looked at the stressing of those either way, what we would -- what Tony wrote in the slide, but what I would really emphasize, is that we see those outcomes skew to the upside. We're not relying on all of those events to occur to get those returns. If you then looked at some -- certainly capital light, we see returns higher than that 10%, to answer your question. It does come down to the nature of those investments as to where you set them, and we -- hopefully, that's giving you a guidance about that. The last thing, too, is that in some of the fast-growth areas, and clearly, you're assessing that against the return profile with the distribution of outcomes that's much greater. And so definitely, we're targeting higher returns there. And I think Greg would highlight that if you're doing a gas storage where it requires you to drill, do technical work, we're certainly going for returns well above that as well. So hopefully, that gives you a range. We don't -- you shouldn't look at the -- you shouldn't look at them as being a uniform set of returns. We're looking for the various classes of assets.

And just segueing to that, you talk about the development profile. Other companies who are into predevelopment and pre-FID having to expense all of those costs. Just interested in what that expense drag is going to be on the business because you actually had quite a few wind farm, battery and other things well ahead of FID starting to appear in the business.

Yes. So from early stage through, we would put it in like tens of millions depending on how far and how far along we hold that. I think there's probably 2 things that are -- the sort of the Commonwealth investment scheme coming in and then also the renewable energy zones and the way that you have to bid for transmission access and the like is actually, in a way, making those projects have to be held -- I won't say longer but to a much more mature stage to be able to access those rights. And so we would see that that's probably changing a little bit in terms of in history, you might have been able to sell out of projects a bit earlier. But I think we will put it in the tens of millions. Greg, do you have...

Yes. Look, they are low-cost options at this point for the longer-term one. So I don't think we're getting ahead of ourselves. But what I said before is what we are really interested in is looking at where the transmission will be built, and it's nearly hunting for those grounds and getting in early. Yes.

Okay. And just one final question. Your CapEx guidance of sort of $250 million to $300 million. Eraring is closed by 2027. You're telling me your batteries are going to reduce the turning or switching out of your gas plants. Everything tells me CapEx should be going down, yet you're having a pretty high number for the next 5 years.

Yes, that does include Eraring. So obviously, we've extended into 2027. Has to be closed in terms of that agreement by 2029. So I'll just guide you that, that includes the Eraring CapEx.

Therefore, if Eraring is out, that number does drop by 50%. Is that right? Order magnitude? That makes more sense. Just to be clear. But everyone's timing there, Eraring, you'll all have your models when Eraring is coming out. The deal is done at '27, '29, but you're absolutely right. As we operate today, that's the run rate.

Tom Allen from UBS. Thanks for the presentation this morning. Looking for some color on just maintaining that 2 to 3x net debt to EBITDA. Playing out that additional detail you shared today on the development profile. It looks like you've got a lot still quite a lot of balance sheet capacity. How did the Board weigh up the new payout ratio at a minimum of 50%? And perhaps talk to the upside risk of the potential to pay higher, certainly near term on that CapEx outlook.

Yes. Thanks, Tom. Obviously, we're starting at a very low point, which is great. And if you're heading into an investment program as we invest in the transition, that's exactly where you do want to start. Obviously, the top end of that is important to us because it's tied to our Baa2 rating. And so we have a view that we'll be back inside the 2 to 3 through the capital program but also through executing on the dividend policy. So we expect to be back in that range but better to be starting from the very strong position we're at today.

Maybe a question for Tony or James. Just if you could share some color talking to the scale of the VPP that's required to drive some meaningful margin growth in the electricity portfolio. And maybe just a comment on the product evolution that you think that Jon has helped that you'll be able to drive to achieve some of that margin expansion.

Yes. So the VPP contributes to the margin today. Obviously, with the assets, if you thought about a battery that Greg has in his portfolio that has 100% of that output with the assets that we have in the VPP, we wouldn't have 100% access to a lot of the assets. And then the assets themselves have various characteristics. So I think in the past that we're sort of highlighting there, I think that we sort of see an uplift of -- in the retail business of 2x [ CLV ]. When we've talked about in a wholesale sense, we look at that as we were -- capture at $15, which they weren't. But if we were looking at caps at $15, we would say that the VPP probably has a range of 20% to 35% of that cap value depending on the assets that you put into the business. So I think as that grows, we will count sort of more and more of that as firm in the portfolio. But it contributes margin today, and we see that coming through.

Do you want to talk about ramping up products, Jon, scaling the types of products, where that comes?

Yes. I mean there's enormous opportunity. Obviously, I highlighted some of the ones around EV, battery. We sort of highlight some of the small business ones that we have just around management of certain retail like, for example, retail segments, which consume more during the day, and how we apply that through some of our tariffs. I think the -- probably the point on product evolution needs to be complemented with channels and access. And one of the things we've been particularly effective and will grow is the network of distributed asset installers that aren't just those that are Origin branded that we've been able to now access and get load onto the VPP, which is actually significant like it is a real cottage industry still out there in terms of those distributed assets, and we've been able to get a lot of that load coming now through the VPP.

And you can imagine the large business, and it's a very commercial conversation. It's usually around you deploy that asset, and then you're standing with a customer to trade on their behalf, and then how much risk customer want to take and that payment kind of being commensurate with that. It's usually very intertwined with the energy supply agreement as well because obviously you want some flexibility. And I think customers are getting a better understanding of the opportunities. And I think more exciting phase now is as customers start to have their own capital plans and build out devices or look at their production, they're thinking about with our advice about how they can build in flexibility to that.

If I can just sneak one more question, too. Just on the gas margin outlook in the Energy Markets business, heading into what looks to be a very tight East Coast gas market. One of the strengths of the Origin portfolio is having long-dated access to inexpensive gas supply. If the market unfolds as expected, where gas prices rise higher, we potentially move to LNG import parity prices. Is there not meaningful upside risk to Origin's gas margin outlook given that in a relative or competitive sense, Origin's competitors that don't have as long dated and as inexpensive gas supply are all having to pass on a much higher cost of gas to customers?

Yes. So you could look back in history of that gas margin, obviously, through the energy crisis and how it reacted to that as sort of an indicator. The thing I would add is the market is generally at either JKM or links depending on which kind of region you're at. We would see that, obviously, the tightening of it needs solving. And there's obviously a lot of talk, and Greg can chat about that, which is the import terminals that would then make it, if you like, more linked to JKM. But if that JKM market was to tighten, obviously, our legacy contracts, our long portfolio would benefit, and you could see the history of that and through the energy crisis.

Yes. Yes. Look, absolutely. And I think it's been well quoted in the market, the tightening of the -- especially the gas markets in the South. They are tight. We are really seeing Gippsland coming off. It's evidenced today. So not only do we see import terminals, but I think that more gas storage is really required. This is -- we're currently really solving a gas market for winter today. But ultimately, we have to get more gas molecules in the system as well. So that's where I see import terminals. So the combination of it will be important for those markets.

Yes. The other thing probably to add also is when we look through at electrification and perhaps a reduction of industrial load or residential load in those scenarios, there is a significant uptick in demand coming from gas-fired generation as well. So on the demand outlook, sort of looks pretty robust. You'll see different segments change, but it also looks pretty robust. So we don't see that shortness in the South being resolved by demand falling away.

Gordon Ramsay, RBC Capital Markets. I was just looking at your slide here on Origin's energy position, looking out to 2030, where NEM purchases are going to grow significantly, and the company is stating that the growth in renewables and storage will supply their retail customers. I'm just wondering if that exposes the company to additional risk on the pricing side in the market going forward.

Really, I'll open up new...

So we're distinguishing here between retail load and large customer load that gets repriced on a regular basis. And clearly, what we're focused on is making sure that we have the assets underpinning the retail demand. And because there are schemes currently out there that we don't know where that lands in terms of the Commonwealth investment scheme and we're in a market where C&I is always repricing, I'd say we're managing the price risk associated with the retail demand, but we're leaving ourselves open to understanding how we supply into the large C&I customers. So that's -- and that has always been something we've had to think about because those customers, they'll be the very large ones that have an appetite to go longer term for PPAs or have had -- but most of those customers are contracting on short duration. And therefore, we'll match that with the best possible choices. It does make it a much more different investment decision to invest in a large renewable without the duration of the contracts that support that, and that's a judgment around what we think is market or merchant exposure versus contracted exposure.

Yes. I think -- sorry, the only other thing that I would add, and Greg can answer more, is that those early-stage renewable projects also give us the ability if we see value to convert those into -- and obviously into that, if you like, that hedge position or that integrated portfolio. And probably the other thing is that we don't really know yet the details of the Commonwealth investment scheme and what that does to the contracting market and how C&I access those. That's all pretty unclear and really being worked through by regulators and policy settings and customers now.

Gordon, it wasn't designed to scare anyone. It's -- the other important graph, which is not in the pack is we're long capacity.

And how is that?

So with long capacity, we do not get ourselves exposed to very high price events. So let's just bring this to life. In a day like today, there's Queensland. It's probably negative. I'm guessing it's negative prices, negative $30. We're short energy, great position to be in, right? If it goes up at PM peak tonight, probably will, we'll run our peakers into it. And that's what we're playing all the time. And along the way, if market changes, we can run coal harder or things like that. So that flexibility is, I think, an advantage. And it's certainly advantage going forward. When we have a customer base, we can build renewables into that short energy position, but we have a long-term capacity position to firm it all up. So I think that's a real advantage.

Just one more for me, just on Octopus. Clearly, it's been a terrific investment for Origin. And the Kraken platform is amazing. How long do you continue to be kind of in a situation where you're forced into a rights issue all the time where you're continuing to stay whole going forward? Obviously, your company is quite comfortable with the position right now. But is 22.7% magic number and you just want to stay there? Or is there a possible dilution in the future?

Look, I wouldn't say anything is a magic number, but on the journey we've been to date, we're very pleased, and in fact, pleased that we went up. Sent a signal that we would go up the register. I think it's actually got itself in a position now where the organic growth it has before as it can fund through its U.K. retail and its Kraken businesses. That doesn't mean they may not see other opportunities, but we're confident we can see them growing organically and they're able to do that. You're asking questions though that could be presented to us if there's greater step-out opportunities, and let's assume that they occur. I do think that we will just assess that as it comes up to us -- as it comes to us because I think it's hard to predict all those scenarios. I think the separation of the business is an important thing. It shouldn't signal anything other than these businesses are going to go down their paths. There will be capital allocation choices that we'll make over time. But from our perspective, I don't have a fixed rule on that. We do debate it. I think that's part of portfolio management. The momentum behind it though right now, if I was to leave that with you, the momentum behind where it is in terms of addressable market for the customers that it's going on to the platform feels that there's still quite a lot of upside on the Kraken side. And clearly, it's to play out, but they're going into the retail markets. That's probably the area that you can see that over time on the energy, the businesses look similar from an energy markets. Different starting points, but they're going to -- they're going to look very similar over the long duration. But we will just make the calls about whether or not we think that's a good allocation call. We recognize it's a growth call. It's not likely to be a dividend call. It's a growth call, and we'll just take it from there. They've diversified their shareholder base between ourselves and Octopus Capital. We're over 50% with the founders. So from our perspective, we're very pleased with where we are at the moment.

It's Nik Burns here. Just maybe a follow-up on the question on Octopus around cost to serve. You had chart up there showing Origin's cost to serve is 15% below DMO. Octopus, I think, is 38% below a competitor. I appreciate they're not like-for-like, but you've just completed the rollout of Kraken. Just wondering and through your -- your shareholding in Octopus, whether that provides any insight in terms of what they're doing. What can you do in your business to potentially bring your cost to serve even lower? Appreciate you've got -- there are some headwinds ahead, but obviously, that will be captured in the DMO over time. So can you bring that lower?

No problem. Jon can talk you through that. You can talk through...

Yes. So Nik, we're currently in a benefits realization phase as we speak. And what we have seen is that the total FTE in our business now on a like-for-like basis has dropped quite considerably below where it was when we started the migration. We have those cost offsets. And in particular, I would call sort of doubtful debts as you've seen revenue increase. Cost of living pressures has played through. And in fact, some of that also got captured in the recent DMO and VDO changes as well. There is a lot that presents us opportunity ahead of us. We're embarking on a number of the initiatives that are more embedded into Octopus. In particular, they now interact a lot of their e-mail conversations through AI. We're starting to embark on that. We have some assisted AI conversations with our customers that present to our energy specialists over time. We think that automation gets better and better. We see a lot of opportunity continuing in our digital deflection and again, some fantastic lessons from there. And thirdly, around our product development and how we simplify some of the interactions that are sort of inherent in our market and don't necessarily exist in theirs, but how we learn from that and build that into our products that they are all the areas that still we continue to focus on improving.

That's great. Maybe just flipping to a question on gas peaking. Again, Frank, you've talked about the increasing value over time from your gas peaking fleet. How -- normally, increased value provides an opportunity for further investment in that space. So I think we've asked the question before, but is there any opportunity for Origin to expand its gas peaking fleet?

There are opportunities to do that. And I think that market will need more. The key thing really at the moment is that it's not catered for under the CIS. So we do want to actually see -- it's likely that will be just renewables and storage and exclude gas. It's not excluded from the New South Wales scheme. But we would need to see that signal. And it's not so much the value -- and we're assessing this all the time by the way. The value is very good in the short to medium term, even medium term, even a bit longer. They're very long-dated assets. So you're really thinking about that investment over the full life cycle of a gas peaker, which is 20, 25 years. It's more they may not run very often later in their lives. And therefore, how do you think of the profile of those returns given the intensity of the asset around it? We have the ability, I believe, and the opportunity. It's getting back to the capital allocation, is that an investment that we see is robust and often it's returns when you've got quite a few moving parts and open questions about how design of market would be right now. But we assess that it is one where we assess actively all the time. We think more is going to be required, and we'll see what's likely in our view, looking at it today that each state is going to make its decisions about firming given where the boundaries are around the CIS, and we'll continue to engage with the states there and probably, in particular, New South Wales as it's probably having coal come out earlier. But no commitment at this point. But certainly, if you looked at an organization that has the existing fleet, the gas supply and all of the inherent capabilities, it's obviously in our sweet spot. It's just getting comfortable around the profile of that investment and making an allocation choice. We clearly start from a stronger position because we have a lot of bigger fleet. And those that would be coming out of coal that don't hold that fleet would be required, I think, to replace it earlier than we need, which is enabling us to go into storage first, which we think -- those returns are very front-end weighted in our view. And therefore, you're not -- and you think about whether it's a 10-, 12-year contract or even those assets playing out over 20 years, that profile looks very constructive. And so you're thinking about that is a much more capital efficient returning asset over that short to medium term. But I do believe, based on those trends, longer, flexible duration energy is going to be required in this market. And when you look at the alternative choices that are available as coal exits, gas is clearly the scalable choice. And so therefore, it's not escaped us. It's just getting comfortable around the return profile and the risks with it. Okay. We've now got Lindsay Donnelly, who's going to channel questions from outside the room.

Thank you, Frank. Just a reminder for investors on the line, you can ask questions on your screen. Also say that the Investor Relations team is always happy to take questions off-line.

Ask as many as possible for Lindsay through the next week.

Any tricky ones, I'll give to Frank first. First question, is there a scenario where a 50% payout sees the balance sheet under geared in the medium term? And if so, how would excess capital be used? Will Origin hold itself to a minimum leverage of 2x adjusted debt to EBITDA?

Look the 50% payout are minimum. And so what's implied by that is if there was an opportunity to return more to shareholders, we would choose to do that. And so yes, I think it's implicit in the minimum and not having a maximum.

Other scenarios around that depending on the rate in which capital comes in, timing, asset portfolio. There's a range of scenarios in terms of that playing out. So there are potential scenarios, yes.

Another nice, easy one for you. In the absence of EBITDA guidance in this pack, should we assume that the prior guidance holds?

So I'm going to send this back, I said, to the Investor Relations team. Do we actually have to put the statement, reaffirm guidance? They said, no because everyone will assume it's reaffirmed. But clearly, there's some feedback for the team. We have no change to guidance. Absolutely reaffirmed.

Slightly moving into the growth space. Now what role does Origin play in the emerging AI and data center demand thematic for both on-grid and off-grid data center connections?

Yes. So I think we work very closely with the hyperscalers and colocations. And I think the interesting theme with AI is that the proximity of data centers to population is now as important. So that opens up opportunities not just for that volume growth but the location of where they are. And so the customers that we're working with are looking at exponential growth forward. And so there is opportunity around the electricity supply, of course, whether that's on or off or a mixture, but then also the demand side management and how you're making energy efficiency, the backup generation, the utilization of kind of that demand and then kind of turnkey services. So there's quite a few things that we're looking at. I don't know if want to cover the supply.

Look, the data centers, typically, they like contracting long term. Great for building renewable assets off the back of their demand. And also these data centers' firming capacity is very important for them. They don't want data centers to go down. So there's opportunities there as well. So a great customer segment. And I mean I think you're all seeing how fast it's growing.

I think it's -- I'll just add to Greg's point. It's one of the sectors where, as he said, that they like the contract long. So therefore, when you're thinking about it, you can look at the full suite of whether investing into that or supplying it through the portfolio are choices available to us.

A question here on the medium term, $25 to $40 range for electricity. What cap price ranges should we have in mind? And similarly, what wholesale price ranges?

So we've probably bought -- like I would say we're more sort of sensitive to the cap price in that scenario than necessarily the wholesale price. So we do have cap prices moderating from the level they are now in our forward outlook. How fast they moderate is probably very questionable. There will be others that say that, that stays higher for longer given the transitions taking longer and then also if you looked at the sheer amount of coal coming out and the capacity that has to replace that. So we do have some moderation in that outlook. If they were to stay higher, we would push more towards the top end of that depending on recovery of the DMO tariff, et cetera.

We don't have cap prices going higher than where they are in the market today, if you're wanting to ask that question. And in fact, therefore, you can form your view around cap prices. I think what Tony showed earlier and I sort of highlighted briefly is that if you look at that over the next several years, you've got judgments around how long Eraring, when storage comes in, where are cap prices, they'll all be feeding into that range. And you can certainly see that, that can provide growth in its own right, but then it will be all around the sensitivity around the timing of those. And you're right, you can actually think through that, but we certainly don't have cap prices rising to achieve the top end of that outcome.

Okay. Just picking up on a thread there in your comment, Frank, one of these questions. How does Eraring uncertainty in terms of asset life and potentially reliability towards the back end impact balance sheet management, if at all?

I'll open up, and then Tony and Greg can follow. You can -- look, firstly, the assets, we've never compromised the CapEx along the way. It's gone through its every year. One of the 4 units has gone through, and we've never had to make a decision that compromise one of those units. So I think in terms of the quality of that asset and the state of that asset and the midlife it went through just before we're purchasing it, it's actually in very good condition. Clearly, I should also state these assets are 40-plus years old. And so as a result, the unreliability that you're seeing that comes with the sector does come with aging, whether that's tube leaks and various things like that, but nothing fundamental. And hopefully, we continue to manage that well. So I think in terms of along the way, it's more going to be market-related matters that you're going to see new energy and new capacity come into the market, and you'll all have judgments as to the timing of those. And so I don't think it's about us running the asset. It's around really in response to a market that's changing. That's the first thing on Eraring. Therefore, the timing of what we're bringing in, we think we're under no regrets of what we're doing in storage. Look at the market every day today. Look at what's happening over this period of time. Is coal going to get any more reliable? We therefore think that they're actually going to earn their way irrespective of when we bring them in. The real timing key now is the timing on the Yanco Delta. Remember, we're thinking about that project into our retail book, not to -- as a developer. So we've got to really just make sure we're at the low cost of energy as the best development coming into that. And we like the scalability. We like the topography. We like the wind speeds. We like everything with that. That's probably the key call, and we're just moving on the basis that we're into that time frame. And remember, we're only allocating capital through the development phase. So we're not stopping on that. And we'd rather be on the right side of that equation, bringing it in. But maybe Greg and Tony have some further comments about that. So that's how we think about that timing, to be clear.

Yes. I think, Frank, you covered it pretty well. But just to reiterate, we have not avoided any CapEx on Eraring. We've maintained those units right through. I think it's just false economy to shortchange the maintenance and have those units trip. But in saying that, I mean, Frank is absolutely right. Only last month, we saw an event in New South Wales, where a number of coal-fired units, they're just aging. They fell off. We had fall events. It was administered before you know it, and it was on a reasonably modest autumn day, right? So we are seeing that kind of volatility. As far as Origin was concerned on that day, we had -- we're running well our Shoalhaven, Uranquinty, VPP and all these other assets to hedge ourselves out. So that's, I think, a sign of the times and why capacity is very important in the system.

Yes. The only thing I'd add is that the risk management framework assesses all of the outage and probability of outage based on the parameters we see coming through from the plant. So that would force Greg to have to go and recontract if we saw a deterioration in that asset by remodeling all of the risk limits.

Thank you. Now moving -- a couple of questions on APLNG. Are we concerned that by delaying drilling until costs are lower based on some unknown future, combined with forecast for falling oil prices in real terms as renewables rise, that we're borrowing from the future to shore up cash flow now?

Yes. So I mean first thing to say is the targeted supply and production is a joint venture decision and a range of different kind of considerations that go into that. And firstly, at about 700 petajoules, which is broadly where we've been operating, that first thing to note is that Curtis Island is full. It's above the nameplate capacity. So there's -- no additional capacity can go through Curtis Island. Then in relation to our GPFs, a decent number of them are full. And so to be running ahead -- much ahead of 700 petajoules, you're probably looking at like some kind of major infrastructure investment and other train in a GPF for some larger pipeline. So that's a consideration we can make. But then it's really just an acceleration decision, and so spend the capital, high production now versus produce it out in the future. So that's one consideration. The second consideration is then how do we best maintain that production. We think we don't have to -- we don't see any near-term ramp-up in drilling. We think there's enough, as we talked about earlier, enough base optimization activities to keep us busy for a while doing that. We will eventually have to ramp up drilling. So as I said, that is a certainty. What drives that is, one, performance of the reservoir. And there's naturally uncertainty. There's always uncertainty in that. If you talk to reservoir engineers, there's a range of uncertainty; two, how effective we are at optimizing the base; and then three, it's a market call as well and -- because any production above, yes, we can produce a lot less than 700 and still hit contract, and that's always a choice we make as well. But yes, anything above contracted levels, it's an assessment of LNG spot markets. You can take a view on where you think they might be at the end of the decade and then domestic demand and regulatory certainty. APLNG has a conditional exemption on the mandatory code for the next -- the end of 2025. We don't have any certainty beyond that. So there are a range of considerations that go into it.

Okay. Thank you. This question might be more for Lawrie. It is APLNG related. Now that APLNG is paying tax, does this mean that dividends Origin receives will be fully franked from now on?

Yes. So as most would know, Origin has been receiving unfranked dividends for a couple of years now and therefore has had a cash tax burden for Origin. We're transitioning now to a point where APLNG will be paying tax, and we'll be distributing franked dividends to Origin. And so because both companies have roughly a 30% tax rate, it will be a zero-sum game. It will be equal and offsetting tax paid by APLNG will offset -- will mean lower tax paid by Origin in the future. There will be some timing differences around that, though, particularly in transition. So as we -- as APLNG transitions into being a taxpayer, they will have partially -- they'll be paying partially franked dividends for a period of time. And so just to go a little further into detail on that, they only started paying -- they paid their first installment in the second half of this current financial year. And so for that reason, the 2024 dividends would therefore be partially franked and quite lowly franked actually, so to be less than 20% franked. And so you'll see some distortion in -- the point I make about equal and offsetting. You'll see distortion in that just through time and particularly through that transition.

Okay. Thank you, Lawrie. So I've got 3 more questions at the moment. I'll do those, and then we'll return to the room to see if there are any more. Can we touch on the progress of hydrogen as a part of the portfolio, particularly given recent advancements with the hydrogen hub in the Hunter Valley?

Yes, I can take that one. So anyone who's following it. Hydrogen is pretty tough. So if you had asked that question 2 or 3 years ago, we would have had a near-term view of potential demand and near-term view of the take-up of hydrogen as a part of the overall energy mix. We still have a belief that it's important, and we still have a belief that it's required to decarbonize those harder to abate sectors that can't electrify. So that view hasn't changed, but it is -- we do have a view it's going to come later. Part of that is -- the primary one is simply cost. So we need the cost to come down. The cost comes down through economies of scale. Economies of scale come through deployment. There's been very little deployment. That all being said, we have, I think, one of the more prospective projects in the Hunter Valley. We're partnering with Orica on that. And it's potentially attractive because there's an existing plant, their ammonia plant. And so there's some things that we don't have to rebuild from scratch. We've got good support -- government support on funding from that so far. We were shortlisted on the Headstart funding program. The next step then is really to move forward through that process to hopefully secure Headstart funding. We're only shortlisted at this point. And then there are a range of commercial and technical matters to work through before we'd be in a position to take FID towards the end of the calendar year, all things going well.

Thank you. How would a potential change in government and nuclear shift your thinking around capital deployment?

Firstly, nuclear as an alternative just isn't scalable today. So it won't -- the nuclear may will be part of the debate, but we do genuinely believe nuclear is a decade away unless there's something that I don't know at the moment. It's more likely to be small modular rather than great big-scale plants of the existing technology -- generation technology. So I think the key question will be what would happen in the intervening period and what would government policy be around because we will still have to manage a transition. And so what does -- the new government would be, does it change any of the other policies or the other frameworks that are being put in place between now and when that's available? That would be probably the key call. When we make decisions today, the decisions we allocate capital to, one of the scenarios is what would happen if those policy changes were made. So we feel very comfortable with the decisions we're making, but it's more likely to be what would happen in the intervening period before that technology is potentially available and the cost available to it, that becomes probably the key question.

Yes. I would agree. Unlikely to meet any of that 2030 requirement potential that maybe could play into the 2040, but still not scalable today.

Okay. Thank you. Last question I've got here. What do we think about AGL's investment in Kaluza? Is it equivalent to Kraken? What are the main differences?

I'll make a couple of points. Firstly, I think what you're seeing here is a trend where retailers are now needing to modernize their technology stack. Like that's full stop. And Frank talked about having the data lake and the analytics and everything that go with it to be able to take advantage of the flexibility in the future. So I guess first point there is that, that obviously bodes very well for Kraken and Kraken's growth into utilities into the future. As I said, the second point would be I'm glad I'm on the other side of this. It's -- these are challenging, these migrations, and they're probably all the more challenging when they haven't been done necessarily at scale with others as well. So I know OVO is obviously a sort of [indiscernible] Kaluza. AGL, I think, will be its first scalable test case of that. So they'll have a big task ahead of them, I'm sure they know it, to do that migration and to do it successfully. Then thirdly, I mean, as it relates to sort of features, functionality and capability, the thing that really does impress on me with the team at Kraken is that these are tech people who in their DNA, they started the business with the idea of not building an energy retail position but actually building a technology platform to solve it. And that is a different mindset and a different capability. What's come out of that is the U.K.'s largest electricity retail business and a growing presence in many, many markets. But what has also come out of that is 53,000 -- 53 million customers contracted across many different geographies and the experience and learning that you get through that and the improvement on product. We certainly are happy with our position.

Okay. More questions? Any more questions in the room?

Just if I could ask one question about the messy transition. One of the key parts of the VPP is the access of EV battery. Tesla is very clear in their warranties that the use of a stationary energy source towards the warranty. Does Origin have any risk from that?

So you're right. Currently, at the moment, in terms of EVs that are connected, including the Tesla, it is about optimizing the charge. It's not about vehicle to grid. I think most of the vehicle manufacturers are at that point at the moment, which is that avoids the warranty. I think there might be maybe 1 or 2 test cases that have been tried. It would certainly unlock a huge amount of flexibility, but that's all ahead of us. That's not what the VPP does today, but it would be an opportunity if it came along.

And the value that we're saying -- in response to Tom's earlier question where the value is emerging, we're not assuming that vehicle to grid. So we're looking at the flexibility of all of those assets today, and it's really optimizing charge stationary batteries coming in. The hot water systems is a large asset class already deployed. So we're relying on what is available today. It is a watch to see whether the vehicle to grid emerges to be even a bigger opportunity.

Can you -- on that VPP, can you maybe give us sort of color on how you see the New South Wales government policy? They're giving solar handouts. They now giving battery handouts. How that accelerates maybe past your 2 gig mark? And secondly is a lot of this is all premised about having smart meters at households and being able to have the Internet interact. Where are you in the Origin portfolio of smart meter rollout versus, I think, the AEMO ex Victoria's sort of like 42%?

Yes. So smart meter. So we are -- there is -- as you would have seen with AEMO, now the rapid deployment of smart meters and the accelerated deployment. We're well on our journey there. We have -- we're certainly focused on those customers. We could connect directly to the VPP as a priority, and we've certainly done a lot of that smart meter deployment there. We're probably -- I think our -- I think we're around 25% of our net of customer base. I just have to sort of validate that. But we're on a path, and we certainly will do that quicker where we see more VPP opportunities.

Yes. And in terms of government subsidies to either encourage electrification or more distributed assets, we would see that as what's our ability to go and capture that and catch it onto the VPP. What we spent a lot of time doing is in the past, we've tried models where we sell solar, where we sell assets. And you can be the largest market participant and have a very small market share. So what we've done here is completely different approaches. We've created what we call a sales platform. We can onboard OEMs. We can onboard installers and sellers and look at that as how we access more VPP volumes. So to the extent that those subsidies drove additional volume through that, we would seek to capture as much of that as we could.

Might be worth just talking about that because the lead times not only [indiscernible] data and analytics platform and all of the capability is also enrolling all of the various OEM technologies and all of the vehicle types. So part of that is actually opening up your world to be able to connect them immediately, and that's where a lot of the team's lead time has been going in over the last 12 to 24 months.

Yes. So you spent quite a lot of time, obviously, I think initially sort of building all of the -- I call it, the pipe work to get access to different assets. So whether that's maybe dealing with distribution networks, dealing with OEMs, dealing with the likes of perhaps Tesla to open up all of those channels. And then I think the second thing, which is we put a lot of time and effort into, is how do you broaden your sales reach and be in that conversation with the customer when they're installing that asset when perhaps they're not doing it through Origin.

And so therefore, we'd see the growth to be well beyond the Origin customer or the Origin channel. All right. Thanks very much for your time this morning. Hopefully, you found it informative. The IR team, we're all available for more questions. Please don't hesitate to contact us around that. And thanks very much for spending some time with us this morning. Appreciate it. Thank you.