A presentation on behalf of Origin at a recent EUAA event.

1. A Perspective on the Australian Energy Markets - 2011 Presentation to: National Energy Price & Market Update Seminar, EUAA Location: Melbourne Date : 20 June 2011

2. Introduction

3. Fuel Retailer Generator Who is Origin? Extensive thermal and renewable fuel position Australia’s largest energy retailer2 One of Australia’s largest generation portfolios1 Renewable Resources: Wind Geothermal Hydro Solar Electricity and Natural Gas Market Share in the NEM Regions Thermal and Renewable Opportunities represent generation development opportunities at various stages of the development process and which are subject to further commercial agreements, regulatory approvals or internal approval Based on customer accounts as at 30 June 2010 including pro forma adjustments for asset acquisitions as part of the NSW Energy Reform process

4. How does Origin think about the C&I market? Firstly – the Commercial & Industrial (C&I) market is BIG About 15 TWh and 30 PJ of annual energy usage will be re-contracted in FY12 That’s a total spend of over $3b to be allocated amongst suppliers Secondly – purchasing energy in C&I is becoming a strategic sourcing activity Positioned at a senior level within the organisation, often as a committee External advisors are often engaged to provide independent market knowledge The RFQ is usually complex and responses are similarly complex Finally – Origin aims to deliver value for all stakeholders We build a diversified portfolio across the demand and supply markets Our preferred operating model is to identify problems and propose solutions

5. What we talked about 12 months ago… Purchasing Strategy Page 5 Market Awareness Relationship Management

6. Energy Risk Management

7. Understanding the Corporate Risk Profile

8. What does a “supplier relationship” entail? Source : Adapted by Origin from “The Strategic Partnering Handbook”, Lendrum (2004) In a Trading relationship competition is with the wholesale market. Negotiations are typically weighted in favour of suppliers as there are many alternative buyers. Suppliers are risk adverse when a trading relationship exists. In a Basic relationship competition is with other C&I buyers. Opportunities are pursued where a balance can be struck between risk and reward. Opportunity cost is the main factor in supplier decisions. In a Key relationship there exists the greatest opportunity to create value. Transparency in dealings and a willingness to recognise value creation allow potential suppliers to solve problems and unlock value.

9. Energy Markets Update

10. The Fuel Triangle – Lots of Questions! Renewables Storage technology, smart grid? Geothermal, wind permitting, new technologies? SoS Scale International demand forAustralian gas and coal? Solar PV, dual-levers? eRET LNG Carbon Uncertainty Gas Coal Timing, price, compensation…?

11. Wholesale electricity market update Relative Costs of Supply Wholesale electricity prices are the dominant factor in determining the appropriate time to go to market. From 1 January 2011, the Renewable Energy Target (RET) scheme split into two components- the Small-scale Renewable Energy Scheme (SRES) and the Large-scale Renewable Energy Target (LRET). Primarily due to the high uptake of solar PV systems, the charges associated with SRES are now a significant contribution to costs associated with the supply of electricity in the NEM. Be aware that regulatory risk is significant and markets develop and change rapidly. Source : Origin, with reference to the wholesales market on 15/4/2011, excluding network costs and other fees and charges.

12. Wholesale electricity market update Source : http://d-cyphatrade.com.au, 16 June 2011 Current wholesale prices imply a carbon price impact of ~$15.50/MWh from July 2012. Please bear in mind that there are many factors that influence price. If we assume a carbon price of $20/tCO2 and no influence from other factors, this implies a greater than 75% probability of the carbon scheme beginning in July 2012. This is a significant increase on this measure, which was only 43% in mid-April.

13. Looking forward... Market liquidity and transparency is excellent up until the end of 2012, but poor beyond this time period. This implies high price risk in 2013 and beyond. Market activity has moved into the OTC market, with a resulting decrease in price transparency and commoditisation of risk. Source : Origin, using data from http://d-cyphatrade.com.au, 6 June 2011

14. Conclusions Energy is cheaper today than a year ago. That’s the good news. Uncertainty is higher today than a year ago. Expertise is more highly valued. In this environment, beware inconsistencies between your corporate risk profile and supplier relationship.