PRESENTATION BY KEVIN MCCANN, CHAIRMAN, AND GRANT KING, MANAGING DIRECTOR OF ORIGIN ENERGY LIMITED (ORG)

“Origin Energy 2008 Annual General Meeting”

http://www.brr.com.au/event/52305

 

WEDNESDAY, OCTOBER 15, 2008, 3:30 PM.

 

            ORG    Well, ladies and gentlemen, welcome and good morning. Welcome to the Origin Energy’s 2008 Annual General Meeting. My name is Kevin McCann.

10                    I’m the Chairman of Origin Energy and I’ll be chairing today’s meeting.

 

      Female      Could you adjust the microphone so that we could hear, please? Thank you.

            ORG    Is that better?

      Female      Well, I think you have to make…

15        Male     It’s too soft.

      Female      I can’t hear from here.

            ORG    Okay. Is that better?

      Audience   Yes.

            ORG    Alright. It’s one of those microphones where I have to lean into it. Okay.

20  Female      It wants to be up close and personal to you.

            ORG    Okay. Thank you for your help.

      Female      Sure.

 

            ORG    Okay. It’s now 10:30 and there’s a quorum of shareholders present so I

25                    formally declare the meeting open and I’m pleased to welcome all shareholders here today. In addition to those present, the holders of 436 million shares or approximately 50% of the issued capital are here represented by proxy. The notice convening the meeting has been sent to all shareholders and I’ll take that as read. The minutes of the 2007 AGM have

30                    been signed and copies are available from the Company Secretary if you wish to inspect them.

 

                        Before I actually begin the proceedings, I’d like to introduce the Board and members of Senior Management who are here today. Up on the podium with

35                    me this morning, on my far right, is Dr. Roland Wiliams, who’s a Non-Executive Director. Next to him is Mr. Bruce Beeren, who’s a Non-Executive Director. Next to me, on my right hand, is Grant King, our Managing Director, and we’ll be hearing from Grant later today. That’s a picture of him there on the screen, I see. On my left, where am I, yes, on my left is Bill Hundy, the

40                    Company Secretary. Dr. Helen Nugent, who’s a Non-Executive Director. Helen is also Chair of our Audit Committee. Next to her is Mr. Trevor Bourne, Non-Executive Director. Trevor is also Chair of our Remuneration Committee. On the far left is Gordon Cairns, a Non-Executive Director. I should have said that Dr. Williams is our Chair of our Health Safety and Environment

45                    Committee.

 

                        Now, we also have here today the people who really manage the Company and have produced all of these outstanding results. The first is Karen Moses, our Chief Operating Officer for Australia. Next to her is Mr. Frank Calabria, who’s our Chief Financial Officer. Next is a new face, Mr. Carl McCamish. He’s our Executive General Manager handling Government Affairs and Communications and Corporate Development. Next to him is Melanie Laing, who’s our Executive General Manager of Human Resources, and Mr. David

5                      Baldwin. David is an Origin Executive who’s been seconded to Contact Energy, which is our subsidiary in New Zealand. For some reason, Rob, you are not mentioned, but Dr. Rob Willink -- Rob is Head of our upstream activities in hydrocarbons and has had a wonderful year. We’ve also got Mr. Duncan McLennan of KPMG. The Company’s auditor is present. If you could

10                    identify yourself, Duncan?

 

                        The order of business today will be that I’ll commence with an overview of our results and strategies for the past year. I’ll then ask Grant to comment on the results and also give you an account of some of our activities this year. You’ll

15                    find that extremely interesting. He’s got a very good presentation. Then I’ll outline the outlook for the coming year and then we’ll go to the business of the meeting.

 

                        We have refreshments which will be served at the end of the meeting and

20                    that will give you an opportunity to meet with Directors and Management after the formal meeting is concluded. Now, as I say, we’ve got all the senior management team who’ll be able to tell you a great deal about the Company.

 

                        Now, let me just turn to the Chairman’s Address and look at our results, and

25                    I’m starting by saying that it’s been a transforming and a successful year for Origin. It certainly has been transforming.

 

                        The definitive and defining events were the attempt by the BG Group to obtain control of Origin through a scheme of arrangement and then later

30                    hostile takeover offer, and then our announcement in September this year of a CSG to LNG joint venture with ConocoPhillips potentially worth up to A$9.6 billion.

 

                        But the Company has been active on other fronts. We have, for instance,

35                    completed the integration of the Sun Retail Business in Queensland. We have acquired the Uranquinty Power Station at Wagga Wagga in New South Wales. We did that in July. We’ve progressed a range of major development projects including a new gas fired power station at Darling Downs in Queensland and Mortlake in Victoria. Grant will describe those activities in

40                    more detail.

 

                        In 2008, Origin extended its financial track records in soliciting in 2000 by a significant outperforming the broader Australian Stock Market.

 

45                    Market capitalisation of the Company has grown from around $8 billion at the time of last year’s Annual General Meeting to some $13.5 billion today. Our weighted average share price in the month preceding last year’s AGM was $9.71 and the average price over the last month has been about $16 -- a one-year rise of 66%. This increase occurred despite sharp falls and volatility in the value of Australian shares over the same period. Origin is now in the Top 20 Australian companies, and if the Westpac-St. George merger proceeds, we will be in the Top 15, and what a transition that is.

 

5                      If I can go down memory lane, when I gave my first AGM speech, we were number 100 and now we are potentially at the end of this calendar year going to be number 15. So, we can all feel very proud, I think, of that accomplishment.

 

10                    Let me just describe how we see the Company going forward. We are an integrated fuel company, and by continuing our integrated fuel generator and retail strategy in 2007 and 2008, Origin has consolidated its position as firstly a leading producer, wholesaler and retailer of energy in Australia and New Zealand. We are the largest holder of proved and probable gas reserves in

15                    Eastern Australia (all of those are centred in Queensland, also at Queensland and offshore Victoria), the largest owner and developer of gas fired electricity generation in Australia and the largest green energy retailer in Australia.

 

                        Let me now look at the financial performance. Our results for 2007-2008

20                    reflect our success. The underlying profit for the year was $443 million, up 20% on last year and primarily derived from a very good second half performance. We had a statutory profit, in fact, of $517 million which included a number of one-off items such as the profit on the sale of our Networks business and the impact of fair value changes to financial instruments -- that

25                    was 13% increase. However, we think that underlying profit is the better way to look at our undertaking and that’s what we focus on.

 

                        Our focus on upstream resources and on generation has not been at the expense of our retail business. The year has seen the first full contribution

30                    from Sun Retail -- that’s the retail business in Queensland which helped in raising underlying earnings from the retail segment by 41% last year.

 

                        We have continued to deepen integration of the business through a substantial increase in upstream gas reserves and by continuing to pursue

35                    acquisitions and developments in electricity generation. Some $2.3 billion of development projects are currently underway in power generation alone, and Grant King will detail those in his address.

 

                        Overall, in the last year, we have spent $1.685 billion on capital expenditure

40                    and over 80% of that was growth expenditure.

 

                        Let me now turn to workplace safety. We’re very pleased this year to report a significant improvement in reduction of the number of safety-related incidents. Our total recorded incident frequency rate in this year has decreased from

45                    16.3 to 8.5, an improvement of over 47%. However, ladies and gentleman, we’re not complacent about this outcome and we strive for zero harm for our employees and contractor employees as well. Under our leadership of Dr. Williams and Grant King, safety remains one of the top priorities for the Board and Management and I can pledge that in the coming year we’ll devote increased resources and awareness to safety in our workplace.

 

                        Let me now turn to the environment. Over the past year, there’s been

5                      significant amount of policy work at State and Federal Government level to progress and appropriate response to climate change.

 

                        Origin believes that reducing the carbon intensity of our economy is an important environmental objective. We, at Origin, will continue to support

10                    development of effective policies, particularly relating to emissions trading, which will support the long-term reduction of carbon emissions, especially from the stationary energy sector, and that’s the sector in which we have an important role.

 

15                    We believe that Origin is well placed to contribute to this important environmental objective. We have extensive knowledge of the Australian energy markets and can and will contribute effectively to policy development. Origin has also positioned its business through investment in lower carbon technologies such as efficient gas fired generation and renewable energy

20                    sources to lead the way to a lower carbon future.

 

                        Let me now turn to coal seam gas. These are the events that transformed the Company in the last calendar year.

 

25                    It’s fair to say that in 2008, the broader Australian investment community finally came to appreciate the potential significance of Australia’s coal seam gas resource.

 

                        The surge in interest was led by the international energy companies with the

30                    BG Group, Petronas and Shell making investments in QGC, Santos and Arrow. The reason for this interest was the prospect of establishing an Eastern Australian LNG industry to supply demand for LNG from both global and particularly Asian customers.

 

35                    After more than a decade of investment in this area, Origin was at the beginning of the year and remains today the largest holder of CSG reserves and the leading developer of CSG in Australia.

 

                        Now, let me just turn to take you through the British Gas approach. As a

40                    result of its interest in our CSG assets, BG Group approached us on 30 April this year with a proposal to buy all the shares of Origin for cash price of $14.70 per share. After considerable negotiations, that was increased to $15.50 per share less any dividends paid on the shares.

 

45                    The Board, after careful consideration and with the benefit of both an upgrade in our CSG reserves and the Petronas benchmark for Santos’ CSG assets, determined that the offer significantly undervalued the Company.

 

                        BG returned on the 24th of June with a hostile bid at the same price, and again, the Board rejected this as undervaluing the Company. The successful monetisation of the CSG resources proved this to be the right decision.

 

5                      Let me now talk about the ConocoPhillips joint venture. In parallel with the initial rejection of the BG bid, the Board instigated a process to accelerate the monetisation of its CSG reserves and to ascertain whether participating directly in a CSG to LNG project could deliver greater value to shareholders than the BG bid.

10

                        Now, following a rigorous tender process which attracted extremely strong interest from a number of leading global energy companies, we announced on 8 September the selection of ConocoPhillips to acquire half our CSG interest and invest in the joint development of a four-train CSG to LNG project

15                    using our joint CSG reserves, and the total price, if those four trains go ahead, could be up to A$9.6 billion.

 

                        ConocoPhillips is paying, in effect, $1.88 a gigajoule for CSG 3P reserves for a four-train development. That price confirms the increased valuation for

20                    large-scale, high-quality CSG resources which are capable of supporting multiple-train LNG projects. It also confirmed, ladies and gentlemen, the inadequacy of the BG bid, which has subsequently lapsed.

 

                        The ConocoPhillips transaction is subject to only FIRB approval and we

25                    expect that that should be available and announced in early November. We expect completion and payment of the initial trunch of funds -- the US$5 million -- will follow shortly thereafter.

 

                        Now, let me look at our financial position. Origin is operating in a period of

30                    global financial turmoil which has led to the impairment of the effective operation of the world’s banking, financial systems and stock markets. The problems of these institutions have the potential to affect the world’s economy including Australia.

 

35                    At Origin, we applaud the actions of the Australian Government to enable Australian banks to raise the funding they require and reassure depositors of the safety of their deposits. Hopefully, initiatives announced this week in the United States and the other G7 countries, that is the major European countries and Japan, to restore the integrity of their banks and financial

40                    institutions will restore business and consumer confidence.

 

                        At Origin, we have the financial strength to fund a decade of growth and the LNG joint venture will add substantially to our already extensive portfolio of integrated energy developments.

45

                        Ladies and gentlemen, at a time when most companies face liquidity management challenges, Origin will enter the new year with minimal debt and one of the strongest balance sheets in corporate Australia.

 

                        Origin shareholders will also benefit in the shorter term from this transforming joint venture.

 

                        Firstly, we have continued to increase our dividend payments and we’ve

5                      made a final dividend payment of 13 cents fully franked and everyone will have received that. This takes total dividends for the year to 25 cents, up from 21 cents the previous year.

 

                        We’ve also announced that we will double the dividend to 50 cents per share

10                    by the payment of an additional 25-cent dividend following completion of the transaction with ConocoPhillips, and we hope that that will be done as quickly as we can subject to stock exchange formalities. Our intention is that dividends will remain at this high level with the target payout ratio of at least 60% of underlying earnings in the years to follow.

15

                        We’ve also announced an on-market buy-back of ordinary shares up to the value of $1.275 billion. This is likely to commence in November. We will also consider other capital management initiatives which may include an off-market buy-back of ordinary shares.

20

                        Ladies and gentleman, in the coming year, the Board will again be focused on ensuring we deliver growth in shareholder value and earnings from operations. We’ll be intent on maximising the value of the financial strength in our balance sheet.

25

                        While the Board will review acquisition opportunities in its core business, it will be disciplined in its approach and will be mindful of the decline in asset values and the expectation of high returns from acquisitions.

 

30                    Now, what I intend to do is to hand over to Grant King to talk more about our operations and activities during the 2008 financial year. I’ll then resume to talk briefly about the Board and also about the outlook for the coming year.

 

                        Next, Grant.

35

            ORG    Thanks, Chairman, and good morning to all.

 

                        Since listing in 2000, Origin has had a strong record of delivering growth to shareholders.

40

                        We’ve had a compound annual growth rate in underlying earnings per share of 17%, and I think importantly for shareholders, a compound annual growth in dividends per share of 30%.

 

45                    Notwithstanding the recent turmoil in global financial markets that have seen significant reductions in the share prices of many companies, our shareholder return over this period has averaged 35%.

 

                        We’re clearly now living in uncertain economic times and many market commentators are predicting challenging times for the economy both globally and within Australia and the subsequent impact this will have on the outlook for Australian companies.

5

                        The Chairman in his address used the term a “decade of growth.” I’d like to talk briefly today to the projects and opportunities Origin has before it that will see Origin continue its record of continuing growth.

 

10                    We remain optimistic about our future even though the economic outlook looks more challenging than ever.

 

                        We have continued to grow Origin based on our strategy as a fuel integrated generator retailer. As a result, we have continued to invest in assets that grow

15                    our business. Historically, we have made a number of important retail acquisitions that have grown that side of Origin’s business, and particularly looking into the future, we will invest substantially in upstream and generation assets as you can see on this chart which looks forward over the next few years at the sort of investments we make. It’s these investments which would

20                    drive the Company’s growth over the next few years.

 

                        To talk you through each of these projects and to give you an idea of what your Company is involved in, I’ll just work basically down that list.

 

25                    The first of those, the offshore Otway Gas Project, was completed and fully commissioned just at the end of the last financial year. This project is now operating reliably and will be a significant new contributor to full year earnings this financial year.

 

30                    In July, we purchased the 640-megawatt Uranquinty Power Station from Babcock & Brown Power. This project was in an advanced stage of construction. The first of four turbines is now commissioned and the power station will be fully completed early next year. The acquisition of this power station is our first major investment in the New South Wales energy market

35                    and we’d be hopeful that there might be further opportunities to build our business in New South Wales in months and perhaps next year ahead.

 

                        Expansion of the Quarantine and Mt. Stuart Power Station in South Australia and Queensland is also progressing well. The expansion of these power

40                    stations will support our growing retail businesses in South Eastern Australia and Queensland. Both projects should be completed in 2009.

 

                        Kupe, our gas and liquids project in the Taranaki Basin in New Zealand, is also progressing well in very challenging circumstances. Demand for skilled

45                    labour, materials and resources in the petroleum industry is very high. Despite these challenges, we expect this project to be completed in the middle of next year.

 

                        Whilst Origin has contracted with a number of counterparties for renewable energy supply from wind farms, for example, Origin has now secured a number of development sites in our own right. Construction has commenced on a 30-megawatt project, a wind farm, the first of these sites in Cullerin in

5                      New South Wales. We expect this project to be the first of a number of renewable energy projects including wind, solar and geothermal that will be necessary for Origin to acquit its obligations under a number of State and Federal renewable energy schemes.

 

10                    Origin’s largest single power station project, the 630-megawatt Darling Downs Power Station, is also well into construction. This will be the largest combined cycle power station in Australia using highly efficient environmentally friendly gas turbine technology. It will use coal seam gas from Origin’s extensive coal seam gas reserves and support Origin’s large electricity retail business in

15                    Queensland. This project is targeted for completion in 2010.

 

                        In July, we announced our decision to proceed with the construction of the 550-megawatt Mortlake Power Station in Victoria. This power station will use gas from our interests in the Bass and Otway Basin Gas projects and support

20                    our electricity retail business in Victoria, particularly during periods of high electricity demand and high prices.

 

                        Through our 51.4% interest in our subsidiary, Contact Energy, we’re also exposed to a number of exciting projects.

25

                        Contact and Origin will jointly develop an underground gas storage facility in a depleted onshore oil and gas field in Taranaki Basin in New Zealand. This will be a critical piece of energy supply infrastructure that will hope balance gas supply and electricity demand in New Zealand.

30

                        Contact Energy also has a very strong and competitive position in geothermal energy in New Zealand. This gives the team at Contact Energy world class skills in geothermal energy. Contact is both redeveloping and expanding these assets with the first stage being the Te Mihi geothermal development

35                    and this project should be completed by 2011.

 

                        Renewable energy will also play an increasing role in the New Zealand energy supply. In addition to geothermal energy, Contact is developing some large wind farm projects. The biggest and most advanced of these is in the

40                    North Island of New Zealand which will have the capacity of 540 megawatts, and a name I can’t pronounce, so I’ll look to my New Zealand colleague there to help me in that regard. The project will be developed in stages with the first stage due on line in 2013.

 

45                    This set of opportunities provides significant momentum to Origin’s growth. In addition to these projects, the Company can now add the largest opportunity yet secured by Origin. The development of our extensive coal seam gas assets will supply the production of LNG for export to overseas markets.

 

                        Over the past 10 years, Origin has acquired and developed an extensive portfolio of coal seam gas acreage covering what we call the “sweet spots” in the Queensland Coal Seam Gas industry. With proven, probable and possible reserves of 10,000 petajoules and contingent resources in excess of 15,000

5                      petajoules, Origin has demonstrated a resource position that is substantially greater than required to support our domestic channels to market.

 

                        As the Chairman mentioned in his address, we conducted a CSG monetisation process to accelerate the development of these large coal seam

10                    gas reserves.

 

                        ConocoPhillips was the successful bidder in this process. They will acquire 50% interest in our coal seam gas assets for payment of up to $9.6 billion to establish a joint venture with Origin which will produce coal seam gas to

15                    satisfy both our existing domestic requirements and establish an export channel through the production of LNG.

 

                        Now, ConocoPhillips brings two important skills to our CSG to LNG joint venture, which will be established on completion of the transaction.

20

                        Firstly, they have extensive experience in the development, construction and operation of LNG projects. This is evidenced by the successful construction of the Darwin LNG project, which is the picture you see in your slide here. It’s only the second LNG project developed in Australia, and of course, in

25                    addition to the existing North West Shelf project.

 

                        In that picture you can see a train, what we call an LNG train. The Darwin train size is 3.5 million tonnes per annum, and it is the intention of ConocoPhillips and Origin in a joint venture that up to four of these trains will

30                    be built to be supplied by coal seam gas and produce LNG, so four times the size of the project that you see there in that picture.

 

                        The second important skill is Conoco’s long history of successful operation of coal seam gas projects in the United States. The San Juan Basin in New

35                    Mexico is the leading coal seam gas project in the world with annual production from this basin at a level somewhat similar to total gas production in Eastern Australia, some 25 years of experience in operating the coal seam gas in the San Juan Basin.

 

40                    We think these skills will greatly help Origin accelerate the development of our extensive coal seam gas position.

 

                        Origin is already the leading producer of coal seam gas in Australia through our established projects in Queensland. The establishment of the Origin-

45                    ConocoPhillips joint venture brings together two organizations committed to the development of the full potential, as I say, of our extensive coal seam gas interest.

 

                        The payment by ConocoPhillips to acquire their 50% interest in joint venture will transform Origin’s balance sheet and financial position.

 

                        The initial payment of US$5 billion will effectively eliminate Origin’s net debt

5                      and provide a substantial cash balance. As the Chairman has indicated, some of this cash will be used to fund an additional dividend and on-market buy-back of shares. Even after these commitments, the Company will still have substantial balance sheet capacity to fund growth.

 

10                    I trust that following this brief presentation, shareholders can see why we are optimistic about our future. We have a substantial set of projects ahead of us. We have some exciting opportunities through our exploration and development activities. We think that a number of interesting acquisition opportunities may also emerge given current market conditions. At a time

15                    when capital markets are in disarray and securing capital for growth is more difficult, we will be receiving a large cash injection by virtue of the ConocoPhillips transaction.

 

                        We believe that the next few years will present even more opportunities to

20                    grow Origin either by acquisition or development. Your Company, shareholders, is very well placed to pursue a decade of growth.

 

                        Thank you.

 

25        ORG    Thank you very much, Grant, and I think you’ll all agree with me that we have a very attractive future in terms of current operations and also in relation to growth opportunities and we are really well positioned given the disarray we see around us given our financial strength.

 

30                    Well, let me now turn to the outlook position. With all the events that have occurred within Origin and the world around us, I think it’s appropriate to make some comment on the outlook for the current financial year.

 

                        In the first quarter, our Australian business has performed in line with our

35                    expectations. As you may be aware, Contact Energy has had a more challenging start to the year due to unusually dry conditions in the South Island of New Zealand which substantially reduced generation in hydropower stations.

 

40                    More significantly, however, there’s been dramatic and unpredictable volatility in oil prices, interest rates and foreign exchange rates between the Australian dollar, the US dollar and the New Zealand dollar.

 

                        Furthermore, the pending completion of ConocoPhillips transaction will result

45                    in the receipt of US$5 billion and the timing and pricing of the previously advised on-market buy-back will all significantly affect the outlook for the full financial year.

 

                        However, based on current market conditions for oil prices, exchange rates and interest rates and allowing for a range of outcomes in relation to timing of receipt of the payment from ConocoPhillips and the subsequent on-market buy-back, Origin expects that underlying profit for the current financial year

5                      will be approximately 30% to 40% higher than the previous financial year.

 

                        I will now speak about Board operation.

 

                        Before concluding my address, I’d like to thank my fellow directors for their

10                    contribution and commitment this calendar year and the past year. The Board has been extremely busy, as you’d expect, with the BG transaction. We had 12 non-scheduled Board meetings in addition to 11 scheduled meetings, so that’s a total of 23 meetings through that financial year. Since July 1 this year, because we still had the BG transaction, we’ve had nine meetings, only two

15                    of which have been scheduled. The Board has spent a considerable amount of time evaluating the BG proposal, engaging in due diligence activities and preparing target statements and the like and reviewing evaluations. It has been extremely busy. We’ve also had the acquisition of the Uranquinty Power Station which occurred unexpectedly, the ConocoPhillips transaction which

20                    was a major exercise and a range of other significant decisions. We had a due diligence committee established to oversee the Origin target statement responding to the BG offer.

 

                        I’d like to thank, not only my colleagues, but also our Managing Director,

25                    Grant King, and the senior executive team especially as well as all our other employees for their work and contribution not only to our strong performance but also to the process to monetise our CSG assets, which culminated in the ConocoPhillips joint venture. Can I, on behalf of all shareholders, express special thanks to Grant King, our Managing Director. He led the defence to

30                    the BG offer and the CSG monetisation process. Ladies and gentleman, it was an outstanding performance, and can we congratulate Grant for what he’s done.

 

                        Finally, if this was a Chinese company, I’d be applauding the shareholders

35                    because thank you for your support. It was appreciated through the period of the BG transaction and it was heart warming to get so many letters from our retail shareholders who, I imagine, are here in strength today. Thank you for your support and we will continue to deliver on your behalf.

 

40                    So, that’s the end of my speech and what I’m now going to do is move into the formal part of the meeting.

 

                        The first item is the financial report and the reports of directors and auditors for the yearend of 30 June 2008 and these are now laid before the meeting

45                    for consideration. We don’t vote or adopt the accounts, but it does give you an opportunity to comment and ask questions. You can ask questions or make comments on the Management and the Company and may ask questions of the auditor on the conduct of the audit, the preparation, the content of the auditor’s report, accounting policies adopted by the Company, and any matter relating to the independence of the auditor. We have received some written questions from shareholders which I will ensure I dealt with in the course of proceedings today. We have not received any written questions that are required to be answered by the auditor, but if there are any questions

5                      that shareholders have, Mr. McLennan of KPMG…

 

      Female      Kevin, could you get a little bit more friendly with that microphone?

            ORG    Yes, the problem is that the mic is… this is a bit short so I end up feeling like Quasimodo.

10  Female      Sorry.

            ORG    Is that better?

      Female      Yes, except if you drift away again.

 

            ORG    Yes, okay. Well, I’ll hunch, okay. I don’t think we’ll be coming back to this

15                    venue.

 

                        Right, so if there are any questions of the auditor, we will deal with those through the Chair. Can I ask that we, for the convenience of all shareholders, those of you who want to ask questions, stand up, show your card, and

20                    identify yourself as a shareholder? There are roving microphones and we can put your questions. I would ask you to state your name and whether you’re a shareholder or a proxy.

 

                        I may refer questions or operational detail to the Managing Director or the

25                    Chief Financial Officer if they are financial. If those of you have customer complaints, can I all put you to Karen Moses and she’s very good at dealing with those sorts of issues.

 

                        I should also note that the Remuneration Report is to be considered for

30                    adoption as the next matter on the agenda, and so comments on remuneration will defer until then.

 

                        So, ladies and gentlemen, the financial reports are open for commentary and question.

35

                        Can I have a question? Yes, gentleman, in the front here?

 

            Q         Mr. McCann, Peter Berger, shareholder. I would like to know what steps have you or the Board taken to find out whether ConocoPhillips can actually raise

40                    the funds to become a joint venture partner with us.

 

            ORG    Sure. Well, ConocoPhillips, we did the due diligence on ConocoPhillips. ConocoPhillips is one of the largest integrated energy companies in the world. We have looked at their balance sheet. We have done financial checks

45                    and we believe that they will be capable of meeting their obligations as soon as the FIRB approval has been received, and we believe that they have the resources to meet the next set of obligations, which is funding the work to be done which needs to be undertaken before we make a decision to proceed, and we believe that they have the resources to meet the balance of their commitment to the LNG projects. They are a very large well-resourced outstanding company.

 

            Q         A supplementary question. That is a good general answer, and Enron was a

5                      big company too once, but the thing is, do you know how much they’ll be loaning on debt?

 

            ORG    I think I’ve got this right, Grant, they had a cash balance, or Frank can tell me, they had cash balances of how many millions?

10

            ORG    They’re operating -- they generate $25 billion.

 

            ORG    I will give you the microphone.

 

15        ORG    In terms of ConocoPhillips, they generate $25 billion operating cash flow per annum. They have undrawn debt facilities in excess of $7 billion based on the last information that we have seen and produced, and they deploy $25 billion of that cash flow into an on-market buy-back, $10 billion of that $25 billion in an on-market buy-back. So that tells you that they have substantial surplus

20                    cash flow and able to actually make the commitment of the purchase price to Origin. They, therefore, have the capacity out of their cash flow to make that commitment. However, our understanding has been that over the last several months that they’ll use a mixture of their undrawn debt facilities and also that cash flow to make that commitment, and we feel confident that that’s the

25                    case, that they’re not actually required to access the debt markets in a serious way to make this commitment.

 

            Q         Thank you. I have a question although related sort of matter. With our LNG fields in Queensland, how far down the track are we to quell the local farmers’

30                    (inaudible) (0:38:10) and to actually get approval to start drilling up there?

 

            ORG    The person who’s best able to answer that is -- Karen, are you able to answer it or Paul Zealand or Grant?

 

35        ORG    We are already operating in all of those key coal seam gas areas in Queensland.

 

      Female      Your microphone is not on.

 

40        ORG    Okay, sorry. Can somewhat turn this microphone on? Can you hear me now?

 

                        We are already operating in Queensland. We have established relationships with both the local communities and the local communities/regulators if you’d like to use that term and have appropriate environmental management plans,

45                    etc., in place. The issue for us is to scale up the level of activity -- not begin the activity, the activity is already well underway. So, we’re currently producing the level at around 40 petajoules a year, 40 units a year. We’re already on a path to grow that to 110 petajoules a year and that would need to grow again about roughly 200 petajoules a year per train. So, I mean, we’re not doing something we haven’t already done, but it is also fair to say that it will be a challenge to scale up that activity and we will need to work very closely with the community to make sure that everybody can benefit from the investment that will occur in that region.

5

            ORG    Right. Is there a question from the other side of the room? Yes.

 

            Q         Will Rogers from the Australian Shareholders Association, and this morning I’m representing over 900 shareholders. Mr. Chairman, my question really

10                    relates to the management going forward, all right. The coal seam gas transaction and the ConocoPhillips transaction open up some wonderful opportunities and we see a lot of the headlines in the charts this morning, growth leading largest. These major projects bring this technology and require a management task. Can you comment on the additional

15                    management talent or expertise that we’re going to need to get the return for our shareholders as we go forward? This is a quantum leap in terms of the size of this company and it is going to take some new talents going forward.

 

            ORG    Yes. Well, thanks for that question and that’s a good one. The position

20                    actually is that the Conoco transaction is a joint venture… I’ll just make sure I don’t go off the stage. The problem with leaning forward is I keep pushing the thing forward.

 

                        It is a joint venture, so the downstream part of the joint venture, which is the

25                    construction of the port facilities and the LNG plant, is something that Conoco has done in the Darwin plant which we saw in the presentation by Grant King and which they have done elsewhere in the world, so that is going to be a Conoco activity. We will be seconding people from Origin to work with Conoco on that.

30

                        In terms of the upstream activity, Mr. Paul Zealand, who heads our upstream CSG activity, has a team of people who are already doing extensive work in proving up reserves and resources, and there will be some addition to those people but that is manageable. With the present turmoil in the stock market

35                    and uncertainty in relation to some of our coal seam gas competitors, we think that will work in our favour because we’re a very attractive company to work for and a very attractive company, if you’re an outsider, to come and join.

 

40                    So, I think that in terms of the LNG project, that is reasonably well-covered. In terms of the rest of the company, Grant has been and the Board have been very active in strengthening    the senior executive team. Carl is an Australian who came back from England. He’s part of the flow-back that we’re now encountering, but there are other key hires that we’re considering and we will

45                    certainly be moving to where necessary to restructure the management arrangements to reflect the increased size of the company to make sure that Grant has more support in the strategic area, so that’s something that is in hand. But I can assure you that the LNG project is -- while it has very big numbers, the combination of Origin’s skill upstream and Conoco’s experience downstream is going to fit very well together.

 

                        Yes, Mr. Tilburn.

5

                        Jack, what might help the course today, and I know that this is a very happy meeting, is why don’t you give me all your questions and then I’ll work my way through them.

 

10        Q         Very well. Thank you. Ladies and gentlemen, my name is Jack Tilburn. I’m a very activist shareholder. I never did think companies are doing their very best for their shareholders and I’ll give Mr. McCann a bash, a couple of ideas here.

 

15                    One of your slides, sir, had that your company (inaudible) (0:43:54) has caring, listening and learning attitude, behaviour and conduct and all of that. Most companies don’t worry about all that, but you, Mr. McCann, do have the caring, the listening and the learning as a good Chairman.

 

20                    Ladies and gentlemen, I started off my homework with stating that there was a very involved and complex letter from the Chairman to our shareholders dated the 22nd of September. I tried to read it two or three times. It’s a Pandora’s Box indeed.

 

25                    Number one, the British Gas offer was terminated and eliminated. Okay, we know that. Number two, Mr. McCann, the offer from ConocoPhillips is to be accepted for a 50% share on the coal seam gas and liquid natural gas project for an amazingly large $9.6 billion.

 

30                    The man down the front there gave a question about, “I wonder how good ConocoPhillips are with their moneys because of the financial (inaudible) (0:44:57) around the world.” Well, we hope it will go through, payments from ConocoPhillips.

 

35                    Now, sir, the first question, and then there’s a much bigger one, the foreign exchange rates -- they’re going up and down like the yo-yo, you mentioned in the letter about an exchange rate of about 83 cents, American to 83 cents Australian. Well, now our Australian dollar has moved right down to 63 cents, so I’d like to ask you about how you go about fixing the exchange rates, if you

40                    can, when you deal with ConocoPhillips and you’re going to do the dotting of the I’s and the crossing of the T’s.

 

                        Now, ladies and gentlemen, I want to get onto just one big question, please Mr. McCann, today. I read about your annual dividend of 25 cents per share.

45                    Well, fair enough, but I always thought that Origin Energy, compared to other companies such as (inaudible) (0:45:56) with a pretty lousy and miserable payoff, generates a larger amount than that, 50% to 60%, but other companies can go up to 70% to 75%. Not that I know that much. Now, I did read that you’re going to give us a special dividend of 25 cents per share. Well, we’ll be, that’s great. It will fill our pockets out may be well after Christmas though. Now, sir, this is the very big question. I was reading about your on-market buy-back of shares costing only $1.27 billion, not $1.27 million these days but $1.27 billion. That’s one hell lot of money. That’s spare

5                      money that you have got. Most companies worry about the spare capital money in making mergers and acquisitions. Well, you don’t seem to be doing that at the moment, although what is a merger acquisition with ConocoPhillips on the bandwagon. Now, I think seriously really, as you know, Mr. McCann, the matters of capital management -- capital management, and ladies and

10                    gentlemen, what Mr. McCann didn’t mention unfortunately because nothing is perfect in this world, this is not a perfect company, he’s not a perfect Chairman although he tries to be, we have three capital management plans. A special dividend plan, ladies and gentlemen, a capital return plan and buy-back plan. Now, I don’t think special dividend of 25 cents per share is very,

15                    very great, very, very worthwhile. I think it’s paltry, I think it’s pathetic and I think it’s devil.

 

                        Now, the matters of the buy-back. This is a comment, I’m making a comment on these three plans, and then I shall sit down. Thank you. Well, I was an

20                    intelligent high school teacher.

 

                        Buy-back plan. This is unequal, Kevin, unfair, unreasonable, only satisfies the very big, rich (1) funds people, (2) the institutions, I don’t trust them, and (3) the nominate companies. The small retail investors who are here today, thank

25                    you, the small retail investors are left out in the cold, are left out of the loop, because like myself we wish to retain our shares, our equity, so that we receive twice yearly the dividends that you give to us, and I hope that you’ll go up.

 

30                    Now, capital return, ladies and gentlemen, this is for the equality. Equality – of equalness for us all from all shareholders, and we should be looking at that.

 

                        Special dividend with franking credits is superior in capital management plans. As you should know, Kevin, the special dividend with franking credits,

35                    with franking credits which would help us in the taxation returns, is superior to a capital return and a buy-back.

 

                        So I’d like you to take up the (inaudible) (0:49:02) and look at those three plans and tell us what you think and how you’re going to help us. Thank you,

40                    ladies and gentlemen.

 

            ORG    Thanks, thanks, Jack. Well, let’s deal with the first thing, the foreign exchange rate. The obligation of ConocoPhillips is to pay Origin US$5 billion, and when that money is received, it’s converted into Australian dollars, Australian

45                    dollars of the day. Now, we have made an announcement on Monday, which perhaps you haven’t caught up with, but what we did say is that we have taken out some options which provide that if the Australian dollar goes higher than 83 cents to the US dollar, we get protection. We have not taken protection on the downside and so whatever the dollar is less than 83 cents will be converted at the then exchange rate, and we share the benefit of that with ConocoPhillips. So, now Frank Calabria, our CFO, will tell you -- if today’s exchange rate, I think was 70 cents. Frank, what would be -- and this is only an illustration because it’s moving around -- what would be the

5                      translation on that basis?

 

            ORG    If the exchange rate is about 70 cents, then we would receive A$6.7 billion which is clearly $700 million more than $6 billion if it was 83 cents, so we do anticipate quite a bit of upside based on the lower exchange rate. But we do

10                    share some of that with ConocoPhillips as do they share the costs of those options, and as a result, we are benefiting from the lower Aussie dollar at the moment.

 

            ORG    Thanks, Frank. Now the second question, Jack, is you’ve expressed the view

15                    that the additional dividend being paid is miserable. Jack, you forgot to mention actually the capital gain you got on your shares, but I presume that’s just a lapse of memory.

 

                        The 25 cents is not a special dividend. It is a dividend in recognition of the

20                    fact that we have said we’re going to lift our payout ratio from about 40% to 60%. Now, the reason why we had a 40% payout ratio was that we were a great company, and those of you sitting around the room today and unlike the rest of you, we have seen a capital appreciation in our shares. That is almost unique in the Australian stock market, so we were great stock and we’ve

25                    delivered on that promise.

 

                        We also recognise, though, that as a result of the ConocoPhillips transaction, we can afford to provide higher payouts, and special dividends frankly disappear like the spring snow that you get them and then they go.

30

                        What we’re promising the shareholders, or predicting for the shareholders, is a payout ratio of 60%, so that we can continue that 25-cent dividend in the next period as well. So you’re going to get 25 cents as soon as we receive the ConocoPhillips payment, and hopefully that, subject, as I said, to

35                    formalities, that will be paid sometime in November/early December, so you’ll get that money, and then in the interim dividend next year, you’ll get a similar payment. So that is a continuing situation.

 

                        Now, the capital management, I think there’s only, I only mentioned two.

40                    There is the increased dividend. There is the on-market buy-back. I foreshadowed that one of things we may look at, and as I may, is an off-market buy-back.

 

                        Now, the Board will be looking at the benefits of an on-market buy-back. One

45                    obvious thing is it helps provide stability to the share price at the time of uncertainty and volatility. You do not have to sell your shares. It means that you’ll have – you, retail shareholders, will continue to have you shares. But if you do want to sell them, you’ve got a more stable market. The off-market buy-back has certain franking advantages which we’ll be looking into. But we think that what we’ve forecasted or proposed is a prudent way to use some of the cash. We think there’ll be wonderful opportunities to reinvest the balance of the money in great projects. As Grant King mentioned, some of those projects might be acquisitions. To be having cash in this present market is a

5                      wonderful opportunity that practically no other Australian company enjoys. So, we see our role as making sure that we give you some immediate benefits, but also continue to provide benefits in the future.

 

                        Now, can I ask, any, is it the gentleman down the back?

10

            Q         Mr. Chairman, my name is Blake, I have two questions. In April of this year, it was reported in the media press to the effect that Executives of Origin Energy took advantage of options, they were afforded by Origin Energy, enabling them to trigger the actual realisation of those options by converting them to

15                    shares. Accordingly, the report stated that further two, when approached by British Gas, they, the Executives, were able to obtain a price of $16 that was shown by reason of the approach at that time by British Gas. Now, I thought, so cheesed off frankly, that I did accept the British Gas offer. You might say, “Well, aren’t you glad you didn’t?” but I continued and I missed out on the 15-

20                    30 that I (inaudible) (0:55:21) went down to last week, and I would’ve made 20 cents a share, but that’s just an (inaudible) (0:55:25). Now, I do put it to you that it was untoward and I regarded it at that time someone inside trading, that those options should have been exercised, realising of course that they were inside knowledge.

25

                        The second question I would like to ask relates to Curtis Island, the particular LNG processing plant to this region. What financial percentile will Origin Energy have in that particular development?

 

30        ORG    Well, let me deal with your assertion, firstly, about what happened in April. When Origin came to the stock market in 2000, we inherited a share scheme, option scheme, from Boral, and in 2007, I became aware because of a -- I’m sorry, earlier than that, I think it’s 2006 -- I became aware of that fact that our scheme had a provision in it that I did not think was appropriate. The mere

35                    statement or the mere proposal of a takeover bid triggered option rights. So, in 2006, we amended the scheme to provide that there needed to be, in effect, a change of control, and so, all the options granted after that period were subjected to the new regime. The options that have been issued prior to that period were still subject to the old Boral scheme.

40

                        At the time of the approach by BG, we took legal advice from Clayton Utz. We also took Queen’s Counsel’s advice, and that advice was that the Board could do nothing to prevent the exercise of the options. They had ipso facto vested in the Executives. It is not correct to say that the Executives were

45                    insiders and that they took active steps to exercise their options. They were automatically vested in the Executives.

 

                        As a technical matter, it is not an insider trading matter where options are exercised by Executives. The insider trading would occur if they subsequently disposed off their shares. None of the Executives disposed off their shares. So, the shares were vested but they continue to hold them.

 

                        I can assure the shareholders that we have changed the regime, and if we

5                      get another approach, that will not trigger off options in the way that occurred in that matter. But as soon as we became aware of that situation a couple of years ago, we changed the rules.

 

                        In relation to Curtis Island, I think we have a 50% interest in the LNG plant.

10                    We are negotiating for a site with the Queensland government and we are having a very cooperative discussion with that government in relation to a site.

 

                        Yes, lady, in the front?

15

            Q         (Inaudible) (0:58:46), a proxy holder, she’s actually lost her voice at the moment, so she’s asked me to ask a question on her behalf. Chairman said Origin operates on minimum debt. What is the debt/equity ratio? As in, what is Origin’s gearing?

20

            ORG    Well, I’ll pass that to the CFO as to the gearing as of today, and then perhaps, Frank, you can tell us what the gearing will be post payment from ConocoPhillips.

 

25        ORG    Sure. Origin’s target gearing ratio is 40% to 45%, debt to total capitalisation, which is debt plus equity, so 40% to 45%, and currently sits at the top end of that range today prior to receipt of the funds from ConocoPhillips, so we’re sitting I think just above that 45% today. We will move to a situation, following receipt of those funds, where we’ll have no net debt. We’ll in fact have

30                    positive cash, and even should we execute the on-market buy-back up to the limit that’s being stated, we would expect the balance of 2009 not be having a net debt position.

 

                        That doesn’t mean we won’t retain facilities. We will retain facilities because

35                    they are valuable in the market today, but we will repay them and not draw on them until they’re required, which we don’t see for, I think, over a sort of 18- to 24-month period. We won’t start commencing the drawdown of those facilities.

 

40                    As to the target gearing ratio going forward, that’s a matter the Board is considering in the short term, considering the fact that we have a large obligation with an LNG plant and a different mix of business towards that upstream and we’ll consider that, but in my mind, it would be no more aggressive than the 40% to 45%. In fact, it’s likely to be and that would be the

45                    top end of the range that we would contemplate going forward.

 

            ORG    Do you have a second question?

 

            Q         What determines the spacing of the wind turbines? How far apart are they?

 

            ORG    Sorry, can I have that question again?

 

            Q         Wind turbines, what determines the spacing of the wind turbines? How far

5                      apart are they?

 

            ORG    Okay. Well, here’s the wind turbine expert in the Company. Here’s the CEO.

 

            ORG    Better engineers than me determine the spacing.

10

                        Can someone turn this on?

 

                        Yes, it’s an engineering question, and better engineers than I figure that out, but that would be something around 100 and 150 metres.

15

            ORG    Is that all your questions? Thank you. There’s a gentlemen down the front here.

 

            Q         Mr. Chairman, Kent (Inaudible) (1:01:43), I’m shareholder from Melbourne. A

20                    couple of questions. I am a little unclear about the ConocoPhillips deal. My simple question is have we received any money yet? Yes or no?

 

            ORG    The answer is no.

 

25        Q         Thank you. My next question is I don’t understand our minority holding in Contact Energy. I know they listed on the New Zealand Stock Exchange as a separate company. What are our intentions there and do we intend to go to 100% or do we intend to get out of that all together? How do we come to have a minority holding?

30

            ORG    Look, actually, Contact is a subsidiary. We hold 51% of that company, so it’s a subsidiary of Origin. We find that a very attractive investment and our present intentions are to maintain that holding.

 

35        Q         Another question is why are we a minority?

 

            ORG    I think I chose my words very carefully and we’re very comfortable with 51%.

 

            Q         I will just have another small question. It’s not really a question. I’m a big

40                    believer in gas-fired cars and traction, all things in place of coal, and the demand for gas is increasing in a huge way. For instance, in Melbourne, we have a terrible drought. We had no rain in September. We have no rain up to date. We are building a large diesel plant (inaudible) (1:03:14) and I imagine that most states in the lower half will be doing the same. But if there will be

45                    huge usage of gas, no doubt, do you have any plans about being able to supply that sort of gas in time?

 

            ORG    Well, I’ve made a couple of responses that we are building the Mortlake plant which is in Victoria, a gas-fired plant, and Dr. Willink has a very aggressive exploration program scheduled for 2009 in the southern part of Victoria in the Otway Basin and the Bass Basin, and so we are very attracted to establishing more gas resources in Victoria.

 

5          Q         I’ve seen very large wind mill plants in the USA and there is a thought that maybe wind mill plant there could be constructed to run a diesel plant, but I’m not quite sure about the mechanics about how many wind mills one would need to run a diesel plant to the size…

 

10        ORG    Yes, I think we look at it in relation to the Federal Government’s target of 20% renewable. We believe that there should be a mix of renewables. We’ve invested in solar, we’ve invested in non-volcanic geothermal investments, and as Grant King pointed out, we’ve got a wind farm under construction near Goulburn in New South Wales, but we’re certainly open to looking at projects

15                    elsewhere in Australia and we have significant potential for projects in New Zealand which were shown on the screen. So yes, wind power is the conventional renewable source at present and we will certainly, in these troubled times, be well positioned to potentially acquire development sites or assets at attractive prices.

20

                        Now there’s a question down the back.

 

            Q         Mr. Chairman, Charles Edwards, appreciative proxy holder and happy shareholder. Before we go too far, I think we should give some credit to the

25                    Company for some very good performance figures that we’re in the annual report and on the screen, and in particular, you mentioned in relation to a previous question that I remember some years ago that the Company was criticised, wrongly in my opinion, for paying out a 40% dividend payout ratio because you said then as you’ve said now that this would grow as the

30                    Company grows. The Company was in a growth phase. It’s now material and you’ve delivered on your promises.

 

                        You’ve handled the BG potential takeover handsomely and I think we’re all much more stable and wealthy for it, but at the risk of sort of going a little bit

35                    generally almost on a personal level, there’s one thing that does concern me that maybe this crosses if not over yet, a bit like the second shoe falling in the apartment, that the Depression did not start in 1929 when the stock market crashed. It actually started about two to three years later when various factors combined to create the Depression, one of which in current days could be a

40                    worry for companies in general as well as our own that a lot of the housing mortgage rates in America are due to be re-rated upwards and could actually exacerbate the already tricky situation. We’ve started with subprime mortgage loans that were then shipped off from the American proportions.

 

45                    Just in general, you as an experienced director of a number of companies ranging fairly widely over the economic landscape, just as I say, almost on a personal level and with particular reference to Origin, what sort of insulation can Australia and Origin in particular take against the possible fall of the second shoe in two years’ time and the various turbulence in money markets and the oil price which is virtually hard? In general, how can we insulate ourselves? In particular, is Origin able to still plough forward two to three years out with a falling oil price as at current date?

 

5          ORG    Good. Look, that is an excellent question. Can I just correct one point? You said we are now a mature company. In fact, we still see ourselves as a company with significant growth where I mentioned that we’re spending about 1.7 billion in capital programs in this financial year and we’ve got some 2.5 million of major projects in the pipeline. So, we think that with interest rates

10                    looking like they’re going to go even lower, opportunities to reinvest the Conoco money attractively are very extensive.

 

                        Look, we had quite an interesting…no one in top table? Okay. I hope it’s not me. Sorry about that.

15

                        Before I gave my outlook statement, we did have a board meeting and we had a discussion about the impact of a slowdown in Australia on our operations, and historically, Origin has not been particularly susceptible to a reduction in GDP. The downstream business is very much a utility business

20                    and there’s been no notable decline in consumption.

 

                        Look, yes, I’m like… I’m not going to get into prediction business, I do sit on numerous boards and really it’s very hard. It depends on which sector you’re in. If you’re in certain sectors, you seem to be impervious. If you’re in other

25                    sectors, you feel the economic change very quickly. There’s quite a few bank directors sitting on the board too and they’ve had interesting times in the last few months. But we think that our industry, generally, is well placed and our Chief Executive reminded us at the board meeting that we invest over a long term. So, sure, oil prices have come down, but he’s also reminded us that the

30                    Australian dollar decline means that we get virtually the same Australian return as we were getting when oil was $140 and the exchange rate was 96 cents.

 

                        So, we feel that if we invest through the cycles and these projects have long

35                    lead times, the LNG project, if it’s approved at the end of 2010-2011, might be operating until 2014, so it’s a long lead time and people make those investment positions based on the facts as they know them at the time.

 

                        So, I’d leave you, and to give you the profit upgrade that we gave you today,

40                    we did take into account our current conditions, but of course, they’re extremely volatile. So with all those qualifications, we are pretty confident that we are well placed to manage a slowdown if that occurs.

 

                        Yes, there’s a gentlemen behind the pillar.

45

            Q         Good morning, John Agnew.

 

            ORG    Could I get you to sort of… half the room probably can’t see you.

 

            Q         Okay. Hi, John Agnew, shareholder. I was wondering if potentially you might be a sitting duck if you got so much cash on hand and there are a lot of (inaudible) (1:11:30) funds out there to probably make money in a similar sort of thing. Are there any strategies to perhaps extend beyond Australia and

5                      New Zealand? Maybe you’ll correct that if I should say overseas.

 

            ORG    Yes, look, geographic diversification is something we have looked at. We’ve got a very modest investment in Vietnam where we’ve got an interesting oil and gas player, which Dr. Willink was able to get for us because of good

10                    relations between Vietnam and Australia and other connections.

 

                        The geographic diversification is something we would be cautious about because you’ve got to be able -- if you’re going to diversify geographically, you’ve got to have something compelling to bring to that market which the

15                    market has not already got, but there are some areas where we think we might have some advantages, renewable energy being one. We are experts in volcanic geothermal activities via the Contact investment and we are finding that there may be opportunities in that field, but I can assure you that we’re not simply going to be buying non-core assets. We’re going into non-

20                    core businesses simply because we have a lot of money on our balance sheet.

 

            Q         That’s good, but there’s a significant risk, isn’t there? Like you’re in the same situation as you were a few months ago where…

25

            ORG    You mean takeover risk. I would have thought actually we’re in a better position because we have on the table an independent expert’s report suggesting that we are trading at a deep discount to value. Now, it’s hard to get to that value given the turmoil in the markets and the turmoil is shared by

30                    just about everyone in the market. So competitors are also less confident of where they’re going. So we’re not complacent, but we feel that we’ve moved on from BG. BG took the view that they couldn’t match the ConocoPhillips transaction, and if a predator did emerge, we’d be looking for full value for shareholders.

35

                        Yes, Jack.

 

            Q         Thank you. I wish to draw your attention and everybody else’s attention except somebody that might be an ignoramus. On page 5, sir, you have the

40                    matter of ConocoPhillips and the coal seam gas and the liquid natural gas, and you mentioned the word “monetisation” process or program. I don’t understand the term at all, monetisation. Would you explain that to us, please?

 

45                    The second thing, and I will finish on the third thing, on the matter of a very serious trouble of asbestos removal on page 21, the New Plymouth Power Station made us have a mere $30 million -- repeat $30 million -- charge to our profit and loss account. Well, it certainly wasn’t on the profit side, Kevin, as you know. $30 million expense went on the loss side, so we’re down the tube very badly. I was wondering how in the hell all that happened.

 

                        The next thing is a suggestion or comment. I’ve been peering up the glossary

5                      page, ladies and gentlemen, on inside back cover, and I do think, Kevin, that it’s printed very badly, it’s unsatisfactory. I know everybody says, “At the great 82 years of age, Mr. Tilburn, you’re eyes have gone.” Well, maybe. But that inside back cover, I do think it’s a great pity that it’s published and printed on a green background. If every newspaper in Australia was printed on a green

10                    background, such as the Boral Sydney Morning Herald and The Australian, nobody would buy them. They couldn’t read it. What the hell, the print is on a green background. I think so that Mr. Hundy and the secretariat should strive to see if they could not include it in black and white after the five-year financial history because I think it’s wasted, squandered, money down the

15                    drain, and that 9 out of 10 people or 90 out of 100 couldn’t read it, couldn’t see it, and couldn’t read it properly.

 

                        So, thank you very much for your reply to those things, and don’t forget, you are a caring, listening and learning company.

20

            ORG    Jack, thank you for that. I agree. It is very hard to read. So, we’ll take that on Board and get something that’s more reader-friendly.

 

                        In relation to the New Plymouth Power Station, that was an issue our

25                    management inherited. The New Plymouth Power Station was a very old power station. We’re aware of the asbestos. We felt that it was safely contained. We established that that was not the case, and so as a result of RHS requirements, it was necessary for us to remediate that situation. That happens from time to time with old power stations and old assets where you

30                    locate asbestos. It was a significant amount of money, but we were satisfied as a Board and the Contact Board was satisfied that they had acted properly in the way they did to stabilise the asbestos in the past.

 

                        Now, monetisation, I think that’s a wonderful word. What it means is that we

35                    were taking coal seam gas assets. We were putting them up to international tender to see whether we could convert assets that we thought were very valuable into cash or cash equivalents, and that’s exactly what we did. So that’s what monetisation means. Hopefully, that answers the question.

 

40 Shareholder A quick one.

 

            ORG    Yes.

 

   Shareholder A comment…

45

            ORG    I think you need a mic. Hang on.

 

   Shareholder Sorry. Anyway, the comment is that I always thought that a sophisticated investor like Mr. Tilburn would understand that if a company does an on-market share buy-back, it’s a good thing because as they buy up shares and cancel them, the individual value of our shares goes up, and so one shouldn’t twinge about it. The other good thing is that an on-market buy-back can in fact reduce the volatility. So, in other words, a company will buy it when

5                      they’re down to help the price not fall down anymore, and I think that an on-market buy-back is a good thing for us, not a bad thing, and I think Mr. Tilburn should know that.

 

            ORG    Yes. I couldn’t have put that better. Thank you.

10

                        Okay. We’ve got a gentleman down the front.

 

            Q         Ladies and gentlemen, I’m sure my daughter has got a microphone complex on the phone. Ladies and gentlemen, my name is (Inaudible) (1:19:21) Cox,

15                    I’m a reasonably small shareholder. Unlike most of you here, I’m very pleased to see our shares at $15.50 as against about $9.50 this time last year, and you will recall last year I was suggesting that it’s a big mistake to give options to the Board members which immediately did increase the number of shares on offer and therefore reduced the value of our shares. I’m very pleased to

20                    see now that the reverse is happening, that we’re now having a buy-back of shares. I’m suggesting that if we didn’t have all those shares going out as options and went out as pure payment, we would be financially better off as shareholders and the Company would have had a deduction on their profits which would have been subjected to…I mean, the profits are subject to less

25                    income tax.

 

                        Now, I hope this is not too complex, but everyone seemed to think that the share buy-back is a good thing. I think it may be a good thing individually for shareholders, but how did it arise in the first place? Personally, I’d regard to

30                    see the shares on the market rather than a huge debt. I think, as I said earlier, we will not have any debt if we have at the moment the ConocoPhillips offer, but we are sure going to debt and that will mean that our shares are again subject to some reductions because the debt has to be financed by interest. Interest means that we don’t get the money as

35                    dividends. Anyhow, that’s the first question that I have to ask the Chairman. If it is not possible to try to give the members of the Board financial equivalents to what they would obtain if they did have the options of shares. Because this would mean that the income tax on the profits that we make would be that much less because they had the deduction there, and we as shareholders

40                    would not have more shares closing in the market.

 

                        Now, I’ve been conscious of the fact that after the ConocoPhillips arrangement, there is an estimate (inaudible) (1:21:54) saying it was at least $1000. They went up to $1,799 and they’re now back to no more than the

45                    British Gas offer which was rejected some time ago. Millions of shares are being traded, and someone for some reason, I’m not in below of what is happening in people’s minds, but there are certainly a lot of shares being traded at the moment at $1,550. As the Chairman has said, it’s a good future we hope for. I hope it’s right.

 

                        But there are two things I would also remind you of. First and foremost, oil shares in America such as ConocoPhillips can go down very severely as well as up. I only did mention Exxon Mobil, the greatest oil company, has been up

5                      as high as $93. It’s now just recently, yesterday, to come to $73 again. That is a tremendous drop in value. ConocoPhillips may be subject to the same sort of problems. So, I’m very, very blasé perhaps about the whole thing, but I would recommend that we don’t get too overjoyed at the offer until the money is coming into hand. Certainly, the other question that I have about whether

10                    we give options or whether we pay money is also, I think, worthy of a consideration. Thank you, gentlemen.

 

            ORG    Mr. Cox, I’ll give you the same response as I gave you last year. I don’t agree with you. In our view, long-term incentives such as options or share

15                    performance rights do align the executives with shareholders. If there is any company where management has performed, it has to be Origin Energy. I sometimes think people are very hard to please. So I have to say to you we will not be following your suggestion and we support equity grants.

 

20                    Secondly, it’s important to note that less than 2% of the capital is held by options in the hands of executives.

 

                        The third point I’d make, you’ve made an observation about the volatility of the share price, again I think you’re a bit hard to please given that the market

25                    overall has fallen. I mean, some stocks have fallen 70%. Banks have fallen 30% or 40%. We are going through a period of unprecedented turmoil, and yes, the price has gone up as much as $1,799 and it’s back to $1,550 but it will be surprising if it wasn’t given the state of the equity markets.

 

30                    Right, are there any other questions? Yes, gentlemen on the front.

 

            Q         (Inaudible) (1:24:55) Mr. Chairman. I’m a new shareholder. In relation to Mr. Tilburn’s comments about the asbestos...

 

35        ORG    It is going off, sorry. I’m just having trouble turning it off. It seems to be broken. Sorry?

 

            Q         In relation to the $30 million cost of cleanup explanation, as someone that has suffered extreme high exposure to asbestos, I commend the Company

40                    on the expenditure of $30 million to clean that up, and in a company saying that it’s a caring company, you have cared for your workers and anyone that enters or exits that plant. I commend the Board on that $30 million because look how much other companies are going to be up for in compensation to people that were exposed to it and this company deserves a good pat on the

45                    back and I am quite happy with the price of my shares. Thank you very much.

 

            ORG    Thank you for those comments. We appreciate them.

 

            Q         I’m Allison Newkirk and I’m here as a proxy for my mother. Have I got this right, (Inaudible) (1:26:09) Cox? I just want to ask a question on your environmental policy, but I presume it wouldn’t be appropriate now, would it be?

5

            ORG    All right, now is the time you can ask questions about the company

 

            Q         I noticed on your environmental policy that you are reducing your carbon emissions and also participating in carbon trading. That’s great, but I think the

10                    climate scientists have said that even if we have zero emissions tomorrow, we’re still in deep trouble because of the carbon that’s in the air already, and I just wonder whether you have researched anything about using the carbon that’s already there, combining it with sea water and introducing man-made carbonates?

15

            ORG    Look the short answer to that is no, but in terms of doing our bit, we are heavy investors in solar and in geothermal both in New Zealand and Australia. We believe that by investing in gas-fired plants, we’ll enable emissions to be significantly cut in Australia, so we’ve invested in that and

20                    we’ve invested in…we’re looking at wind technology as well. So, this is the greenest energy company in Australia. Under the leadership of our Chief Executive, we were early movers in the field. When people didn’t believe in gas-fired power stations, we made a commitment to coal seam gas and gas offshore in Victoria, and so we believe that through a variety of fuel sources,

25                    there’s a real opportunity by 2020 to take those steps. We don’t think we have any particular expertise in how you might capture carbon in the atmosphere and so we haven’t pursued that alternative.

 

            Q         Okay, thank you.

30

            ORG    Yes. The gentlemen down the back.

 

            Q         Yes, I was just briefly reminded. Last year, one of the big points of interest from the Chair was the investment by Origin in geodynamics, the so-called

35                    hot rocks technology. Can you give us an update over the last 12 months of the technical as well as financial progress to Origin of that investment? Is the technology a go or not because it was criticized at the time as being a bit sort of edgy and not proven fully. What’s your investment?

 

40        ORG    What I’ll do is I’ll pass it onto Grant King, I think, to answer.

 

            ORG    Thanks, Jim. I would have said last year that it would take many years to know whether it was a viable technology and that remains true. An additional well or a further development well is being drilled called (inaudible) (1:29:06)

45                    and that’s currently in the process of being tested, but it will take quite a number of years to know whether it’s a viable technology, and that’s the nature of these things and they’re really not overnight successes.

 

            ORG    Next one at the back.

 

            Q         David Pitt. I understand that the Company has cancelled the dividend reinvestment plan after November and I wonder whether it can give consideration for reinstating that and also whether the special dividends that’s

5                      being paid could also be put into the dividend reinvestment plan. I’m speaking on behalf of little shareholders.

 

            ORG    Sure. If I could just correct you, it’s not a special dividend. It’s an additional dividend, and I’m not being semantic. The reason we’ve called it additional is

10                    we’re going to keep paying it. Special dividend is you get once and that’s it. This 25-cent dividend is a signal that we’re going to lift our payout. We have suspended the DRP because we actually don’t want capital and that’s why we are undertaking a buy-back. So, at this point of time, the Company has no need for capital and we don’t think it’s in the Company or the shareholders’

15                    interest to maintain the DRP. So we won’t, for the foreseeable future, I would think, be looking at a DRP.

 

            ORG    There’s a lady down the back.

 

20        Q         Thank you. (Inaudible) (1:30:38) is my name, shareholder. I think my question has really been answered when you spoke to a lady earlier, but I’d like to congratulate the Company on its environmental initiatives, and just be reassured that in the present political and economic climate there would be no dilution or degrading of that environmental emphasis.

25

            ORG    Well, thank you for that. No, we see climate change and carbon intensity in the atmosphere as a long-term problem and we believe that it is important to develop a response to that and we are working with the government on designing the design of the emission trading system. It really is a political

30                    decision as to when that’s introduced, but we certainly are committed to continuation of that dialogue with government in order to get a viable program established when it actually commences. As I say, it is a political decision.

 

                        Right, sorry. There are a couple of questions over on the left.

35

            Q         I’m Peter Beattie, a shareholder. You’ve mentioned in the previous year a sliver of solar cell technology. I was just wondering what was happening with that at the moment. Is it still being advanced or…?

 

40        ORG    Look, again I think I’ll pass it over to Grant King.

 

            ORG    Yes is the short answer. We now have a product developed to the point where we’re going to produce small quantities from our current development facility that will move into the market. So the answer is yes, we continue to

45                    develop that technology. Did you hear that?

 

            Q         Yes, thanks.

 

            ORG    There’s a gentleman down the back.

 

                        Okay, so we’ve covered, I think, everyone on my left. Is there anyone on the right who would like to ask a question?

 

5                      If not, thank you very much, and I’ll move onto the next item which is the adoption of the Remuneration Report.

 

                        This is set out in the 2008 Annual Report and then in the Notice of Meeting. The Remuneration Report details the remuneration paid to Directors and key

10                    management personnel as well as the Board’s policy for determining the nature and amount of that remuneration. While the vote on the Remuneration Report is advisory only and does not bind the Company or the Directors, it is the intention of the Board that the comments and the votes by shareholders will be taken into account in the formulation of future remuneration practices

15                    and policy and the presentation of future Remuneration Reports. The Directors recommend that shareholders vote in favour of adopting a Remuneration Report.

 

                        Could I have a shareholder move the resolution that the Company adopt the

20                    report?

 

   Shareholder I move that one.

 

            ORG    Thank you. And we need a seconder. Thank you.

25

                        Now, I’ve received one written question from our shareholder, Dr. Peter Tillman, in relation to the compensation table.

 

      Female      Speak up.

30

            ORG    Okay, is that better?

 

            Male     Yes.

 

35        ORG    I’ve received one written question from a shareholder, Dr. Peter Tillman, in relation to the compensation table on Section 7.2 of the Remuneration Report. The question was why does the 2008 table have totals whereas the 2007 table does not? The answer is the format of the table has changed. There is no requirement to include a total, but we did so to provide additional

40                    information for the current year only. We can and will include totals for both the current and prior years in future reports.

 

                        On the screen, I…no, I’m sorry. Now, what I’d like is any discussion about the Remuneration Report, if I could. Any questions? Comments? Yes?

45

            Q         Will Rogers again. We have two concerns with the Remuneration Report. One is that the long-term incentive plan and payment is based on a single hurdle. Now, fortunately for Origin this year, our TSR has gone up significantly. However, other companies are having significant issues with, as TSR goes down, Executives are paid significant bonuses while the shareholder return is lower, so that’s one concern. The second concern, and we tilled over this one last year, why is that you’re continuing to test the long-term incentive bonus payments after the plan is completed? That is at years 4

5                      and 5. Have you considered other metrics that would be used in addition to TSR in the Remuneration plan?

 

            ORG    Look, thank you for that question. I had sat on other Boards and we have used other metrics such as earnings per share, and in financial institutions,

10                    return on equity is also used. I’ve also had suggested to me that we should have metrics that are peculiar to the company itself. The problem with that is, as Telstra found out, if you don’t disclose the metrics and their commercial inconfidence, you get shareholder disquiet. Overall, most of the investors, particularly institutional investors, favour the TSR metric, but I will certainly

15                    undertake to go back to the Remuneration Committee and deal with your point. I’m aware that other companies have twin metrics.

 

                        In terms of the retesting of the hurdles, we do that because the way the hurdles are structured, if we have an event of great volatility such as the

20                    events we’ve encountered on the stock market over the last few days or few months rather, you could get a situation where it’s all or nothing in terms of the options. So we’ve taken the view that they should be retested, only twice, at the end of year 4 and the end of year 5. We think that that probably saves the shareholders because it means that they do not have to allot more

25                    options to take account of the fact that it is a sudden death test. So after taking on the Board your comments of last year, we concluded that we would stay with the retesting on the fourth and fifth year, and most of our… in fact, all of our institutional shareholders are comfortable with that. I’ve had no other observations apart from the ASA. So we will not be acting on that

30                    recommendation, but I am happy to take back your other suggestion to the Committee.

 

                        I think there’s question here.

 

35        Q         Charles Edwards, proxy holder. Briefly, to re-echo, Mr. Rogers pointed out the broader measure. Surely, a combination of TSR and earnings per share, which is a common metric in many top companies, is a much broader reflection because I note on page 6 of the report that earnings per share on statutory profit is up 8%, and of course because of the one-off heavy hitting

40                    factors of the possible takeover, the TSR would have gone up abnormally largely in the last year. Surely, the double metric would give a better averaging up to two metrics of TSR and earning per share, which is a fairly common dual metric for a lot of major companies. Could we not really consider that for next year?

45

            ORG    Yes. Using statutory accounts is hazardous frankly because the… and I know and I wouldn’t want to have hurt feelings when I say this, but the accounting standards really don’t take into the account the kind of hedging we undertake. The hedges are regarded as ineffective hedges and the result is we get large movements with the P&L on the balance sheet as a result of the kind of hedges we rate. So we couldn’t use the statutory accounts. We would have to use the underlying profit which involves elements of subjectivity. It doesn’t probably give you the safeguards you want, but I think you’ll find the

5                      companies that use EPS are not a majority. Actually, they’re a minority but there are some very large and well-regarded companies that use the twin metrics, and as I said, we will take that back to the Remuneration Committee and have a look at it.

 

10                    Jack?

 

            Q         Thank you again, Mr. Kevin McCann, and I’d like to offer my congratulations and praise for a very well-presented Remuneration Report in this year’s annual report. I particularly apply to page 29, Levels of Remuneration, also

15                    the subheading that pay is linked with performance, and I think that this Company does all that very well. I’d also like to say that on page 32, your Director’s fee structure is well pronounced. I think you are aiming for or going to receive, which you can just comment on, increases for 2009 which I thought I saw in a column on page 32, if you can confirm that. Also, I would

20                    like to give praise to the well set-out compensation tables for 2008 on double page, also pages 34-35, also tables for 2007, compensation tables set out on pages 36-37, and I have asked many other companies to try to match that and to come on Board because they are well presented and not squeezed, so you can’t read them. Just a comment, please, on the Director’s fee structure,

25                    page 32. I do you think that you have upgraded it. Thank you.

 

            ORG    Well, thanks. Thanks, Jack. We will actually probably be debating this under the resolution Dealing with Director’s fees, but let’s deal with it now. Yes, there is an increase and we’ve explained the difference between fees in 2008

30                    and 2009, but I’m not quite sure what your final question was.

 

            Q         I was just going to ask that you confirm that there has been suitable and satisfactory increases for the Directors set out on page 32.

 

35        ORG    Yes, look, that is subject to the vote later. We haven’t presumed. Unless we get a favourable vote on the Director’s remuneration, we’ll have to scale back.

 

                        Okay, any other questions on the Remuneration Report?

 

40        Q         Thanks, Mr. Chairman. I’m Peter (Inaudible) (1:42:35), a shareholder. I’m looking at 3.1, which sets out the remuneration objective, to attract, retain and motivate employees to deliver superior performance. We’ve heard from you today and you implied that the Company is not having a difficulty attracting good staff, and I’ve seen both the Executive and staff, and I think we are

45                    comfortable with the superior performance of the Company, shareholder value, and the way forward. What I haven’t heard is anything about your retention. Could you say something about the turnover right in this company and whether you consider it satisfactory?

 

            ORG    Yes, look, we had two issues of retention in the past year. The first area was mainly in the coal seam gas area, which as you know a large number of companies were promoted to get into that area and we were finding that there was headhunting and poaching going on with some of our key upstream

5                      Executives and so we needed to put in place a retention arrangement in order to ensure we had their services. That became very much like the situation we had in Western Australia. There were issues also with -- what’s that? Could we stop that rattling noise? So, that was also the same situation, the hydrocarbon and gas fuel where we had great pressure on salaries and

10                    retention.

 

                        The other area of retention occurred when we were subjected to the bid by BG. That obviously was very destabilizing for key Executives and we therefore took the view that it was important that we didn’t have an exit of key

15                    people from the Sydney office or from other positions, and therefore, we took the view that it was appropriate to place retention arrangements which ensured we had the benefit of their services.

 

                        Now, hopefully we’re entering into labour market where there will not be

20                    perhaps, certainly hopefully in the head office, we won’t have the same concerns and in the case of the upstream area, it’s still a very hot employment market, but hopefully may not be quite as heated as it was earlier this calendar year.

 

25                    Is there another… so we’ve covered that side of the room. Anyone on this side of the room who would like to ask me a question?

 

                        Right. Now, I will show on the screen the proxy votes to be cast. As you can see there’s significant…

30

                        Okay, can you hear me now? That better? Can you hear me?

 

      Audience   Yes.

 

35        ORG    Good, thank you.

 

                        Right. Undirected proxies held by the Chair will be cast in favour of the motion. I’d like now to put the motion, all those in favour, please raise the yellow voting card. Thank you. Those against. I declare the motion carried.

40                    Thank you very much.

 

                        The next item is the election of Directors. There are two Directors seeking re-election under the rotation provisions of Origin’s constitution and the requirements of the ASX listing rules. The two Directors retiring and seeking

45                    re-election under these requirements are myself and Bruce Beeren. No other nominations for election as Director have been received and no other persons will be eligible for election today. The Directors seeking re-election have been recommended for re-election by the Board other than the Directors themselves. In other words, we didn’t participate in that recommendation.

 

                        The first item then is Bruce Beeren. Bruce joined the Board as an Executive Director in March 2000. He retired as an Executive Director on 31 January 2005, but he continues on the Origin Energy Board as a Non-Executive

5                      Director. He’s a member of the Audit Remuneration and Nomination committees. He has 30 years experience in the energy industry. He was Chief Executive Officer of VENCorp, the Victorian gas system operator when it was established in 1997, and held several senior management positions at AGL including Chief Financial Officer and General Manager of AGL Pipelines.

10                    He’s a Director of Contact Energy since 2004, Coal & Allied Industries Limited since 2004 and Equipsuper since 2002. As you will see from what I have had to say, he’s had considerable experience in the energy industry. He has also significant financial and commercial experience which we have valued on the Audit and Remuneration committees. He was also a member of the due

15                    diligence committee which we established this year to determine the correctness and validity of our target statement which we gave to the shareholders. The Board, with Bruce’s abstention, unanimously recommends his re-election, and with pleasure, I’d ask Bruce to say some words on your election. Can you speak from there?

20

            ORG    Thank you, Chairman. The first thing to ask is, can you hear me? No? Yes? That’s good. That’s a good start.

 

                        As Chairman mentioned, I’ve been involved with Origin since it demerged

25                    from Boral. In fact, I was involved before that. I was brought in originally by Tony Berg to help him to achieve the demerger from Boral. I definitely feel privileged about being involved with such a successful company and to have, even to a small extent, contributed to that success.

 

30                    My energy experience now, it’s been embarrassing to say, but is now up to 35 years. As the Chairman mentioned, I’ve been, I was 20 years with AGL and there I headed up the Finance and Business Development team for something over 10 years. When I joined Origin, I was performing a similar role. Also, at AGL, I established a Gas Pipeline Group which was

35                    subsequently listed as the Australian Pipeline Trust. Most of that experience, I believe, is still relevant to the issues that face Origin today.

 

                        On the finance side, I’ve been a fellow of CPA Australia now for around 25 years, and for 15 years, I’ve been the CFO of major listed companies. So, I

40                    believe that in terms of financing and accounting issues, I can actively participate in Board discussions of those matters.

 

                        It’s clear that Origin has an exciting and a challenging few years ahead of it. I believe that my knowledge of the Company, its people, its industry, and my

45                    finance background will enable me to make a useful contribution to the Board discussions in the future. I therefore hope that you will endorse my election for a second term as a Non-Executive Director. Thank you.

 

            ORG    Thanks, Bruce. I’ll move that Bruce Beeren be elected as a Director of the Company. Can I have a seconder? Thank you very much.

 

                        The matter is now open for discussion, ladies and gentlemen. Any

5                      shareholder who would like to make any comments? If not, I have pleasure putting the motion. All those in favour? Thank you. All those against? We have carried Bruce with only one descent. What I forgot to do is give you the proxies, didn’t I? Are the proxies coming up? But, actually that’s not going to be necessary. So congratulations.

10

            ORG    Thank you, ladies and gentlemen.

 

            ORG    Okay. Now, I’m the next candidate, so I’ll ask Grant King to take the chair. He’s been appointed by the Board for that purpose and Grant will take

15                    charge.

 

            ORG    Thanks, Chairman.

 

                        Mr. McCann retires by rotation and seeks re-election in accordance with the

20                    constitution. Kevin joined the Board as Chairman in February 2000. He’s Chairman of the Nomination Committee and a member of the Audit Remuneration and Health and Safety and Environment committees. Kevin is also Chairman of Healthscope Limited since March 1994 and Sydney Harbour Federation Trust. He will retire as the Director and Chairman of

25                    Healthscope Limited at the conclusion of its Annual General Meeting to be held, I think, at the end of this week. He’s the lead Independent Director of Macquarie Group Limited joining the Board in August 2007, Independent Director of Macquarie Bank Limited since 1996 and Director of Bluescope Steel Limited since May 2002. He has practiced as a commercial and

30                    corporate lawyer at Allens Arthur Robinson, the national law firm, for over 34 years. He was Chairman of Allen Allen & Hemsley and Allens Arthur Robinson for nine years. He’s also a member of the Australian Takeovers Panel and the Council of the National Library of Australia. He sits on the Australian Institute of Company Directors of Corporate Governance

35                    Committee. His community activities include the Chair of the Development Council and the National Library of Australia. He has extensive legal and commercial expertise particularly in the resources industry and is experienced as a Director of successful Australian companies together with the service on the State and Commonwealth authorities being valuable to the Origin Energy

40                    Board and his role as Chairman. He has also played a key role in the successful defence to the hostile takeover bid by BG Group PLC and the successful monetisation of the Company’s CSG resources which led, of course, to the joint venture with ConocoPhillips.

 

45                    The Board recommends his re-election. Now, I’d like to also ask Kevin to say a few words.

 

            ORG    Thanks, but I need to take down notes.

 

            ORG    What about it?

 

            ORG    Well, thank you, ladies… Can you hear me, ladies and gentlemen? Working? Good.

5

                        As in the case of Bruce, it’s been a privilege to serve as Chairman and Director of Origin Energy in the 10 years I’ve been on the Board, and as a result of that 10 years of experience, I believe I’ve now got significant experience of the Australian energy industry, both the upstream, the mid-

10                    stream and the downstream. It is a complex industry. Some parts were very heavily regulated. Others are open to international competition, but I think I’ve got an understanding of how the industry works. I was a participant as a Board Member in the Integrated Energy Strategy which has turned out to be so successful and has added significantly to shareholder wealth.

15

                        In the case of BG, Grant mentioned that. I think my experience as a lawyer and as a Company Director who has participated in a number of hostile takeovers, I think I’ve got the experience and that is needed in these challenging and difficult times when you get transactions like BG to see them

20                    through and work with management and our external advisers. Also, I have had a considerable experience in energy joint ventures as a lawyer and more recently as a Board Member of other boards, and so I think I could make a contribution to that. In other boards, as Grant mentioned, I’m stepping down from Healthscope -- that was a deliberate decision to give myself more time

25                    to serve the shareholders at Origin. I recognized that more is expected of a Chairman of a major company such as Origin and we are now a significant force in Australia, and so that’s going to take time working with my colleagues, with the community, politicians, and going to visit the sites more than I have in the past.

30

                        I also have considerable corporate governance experience through the AICD. I write on the field and have an interest in making sure that this is a well-regulated company and that we are working hard for you.

 

35                    So, thank you very much for your support in the past and I hope that I have your support going forward.

 

            ORG    Thanks, Chairman. It’s my pleasure to actually move the motion that Mr. Kevin McCann be re-elected as Director of the Company. If I can have

40                    someone second that motion? Thank you very much. The matter is now open for discussion.

 

   Shareholder Thank you. Ladies and gentlemen, the retail investors of this great Company, I wish to state, it is my glee and joy to speak for the re-election of Mr. Kevin

45                    McCann to the Board of Origin Energy Limited for another three years, for Origin’s progress and prosperity, for all of us. Mr. McCann is a true and a superb gentleman and scholar. All the very best in the next three years, Kevin.

 

            ORG    After that, are there any other questions? If not, I might take the liberty.

 

                        On the screen, I’m showing you how shareholders are directed that the proxy votes be cast. I don’t know how you’ve missed out on a few there, but -- so

5                      now, I put the motion. Will all those in favour, please, raise your yellow voting card? Thank you. Against? Okay. Thank you. I think that is certainly enough, gentlemen, to constitute a re-election. Congratulations.

 

            ORG    Well, thank you very much, ladies and gentleman, and I can assure you that

10                    along with the rest of my hardworking team and the management team we’ll be working to do even better for you. Thank you, Jack, too.

 

                        The next item of business is the proposed increase in the aggregate limit of fees that may be paid to Non-Executive Directors. An increase in the

15                    maximum annual aggregate limit of fees that can be paid to Non-Executive Directors is sorted from the existing limit of $1.6 million to a new limit of $2.2 million. The aggregate annual limit at $1.6 million was approved in October 2006. It’s proposed to increase the limit to enable the Company to pay directors in accordance with market rates for companies of comparable

20                    market capitalisation profits, revenue, and complexity, and to allow for the appointment of at least one additional director of this financial year.

 

                        Let me just elaborate briefly on that. This Company’s capitalisation has moved very rapidly as a result of the identification by the market of the

25                    importance and value of our coal seam gas, and that culminated in the ConocoPhillips transaction. The Company now is one of the three major, we call ourselves an integrated energy company, but if you look at the stock exchange lists today, you have BHP Billiton, you have Rio Tinto which is a subject of takeover bid BHP, you have Woodside Petroleum, and now you

30                    have your company, Origin Energy. That is a really dramatic rise. The workload of the Directors is going to increase because there’ll be the need of Directors, not only to oversight the LNG Project, there’ll be a process of visiting assets more frequently, meeting our people, and also we will be developing the Board as they understand more about LNG, LNG marketing,

35                    the transportation of LNG, and so on.

 

                        There’s also the climate change debate which is absolutely pivotal for this Company, a very, very important issue, and my colleagues would have to spend a lot of more time on that. Apart from the regular Board meetings, we’ll

40                    be instituting a course of further education for directors offline in a series of workshops. So, it’s going to be a busy and demanding Board, and every one of our directors is up to the task and has shown enormous enthusiasm about participating in the future.

 

45                    I have mentioned in my correspondence to you that we are looking to appoint an additional director. That director will be someone who has experience in LNG. Dr. Willinks has such experience, but we feel that because so much of our assets are now to be found in the LNG area, and we are going to spend very large amounts of money in exploration over the next two or three years for conventional hydrocarbon oil and gas, particularly gas, we need to strengthen our knowledge in that area and that process is underway.

 

                        I should note that there are no termination benefits paid to Non-Executive

5                      Directors from office, and in bringing this recommendation to the Board, we’ve taken advice from external consultants, Mercer and Godfrey Remuneration Group, and I can assure you that we are not in the top quota, we are probably somewhere between 60% to 70% quota, and I think we felt that that was appropriate. As the market cap of the Company increases, we

10                    will probably come down the quartile curve.

 

                        Now, can I have firstly, a motion that, well, sorry -- would a shareholder move, please, that the aggregate limit of fees payable to Non-Executive Directors be increased in accordance with the resolution set out in item 4? Thank you. Can

15                    I have seconder? Thank you very much. The matter is now open for discussion, ladies and gentlemen.

 

                        Yes, gentleman, down at the back.

 

20 Shareholder Mr. Chairman, I would normally be quite happy to support a raise in the Director’s fees of about $200,000. However, $600,000 had upon 2006 raise, I think it’s the exact raise then, but I remember it was quite substantial raise on the previous Non-Executive Director salary. Sure, we’ve had a wonderful rise in the share price owing to the extraneous offer from BG and that has been a

25                    wonderful rise in the shareholders returns. According to the annual report, dividends were up 19%, the statutory profit 13% rise, EBITDAF up 12%, EPS -- earnings per share up 8%, and yet, this is a rise of 37% which I must admit I think is just excessive given that you’ve already mentioned that I take on Board the fact that the market capitalisation of the Company has risen and

30                    due attention should be given to that. I would suggest that on the current scales that a lot of that has been factored in, and if we are to use as one example or reason for a raise, such a large raise as given in the notice of meeting that there were an extra dozen meetings of the Board, that was obviously due to the one-off factor of the takeover offer and any incoming

35                    director would have to factor that in, that at least once in his triennium and probably even once every year, there would be some issue that would require a bit of extra meetings or extra director’s duty, peaks and troughs, that’s part of the game, and I would suggest that this Board is fairly and reasonably remunerated with that in mind.

40

                        I would suggest also that if we are to seek another director, that would cost the Company, let’s say $150,000 to $200,000 on the current director’s fees and allowing perhaps small increase in that, that’s well below the $200,000 plus $400,000 totaling $600,000 of the sort under this resolution. Surely, if

45                    another director were to be placed on the Board, that would also take a lot of the heat out of the argument of the extra director’s duties that some of the load could be spread around with another director. Might I suggest that $600,000 in the current circumstances, even allowing for the good news that’s come out through the meeting and I acknowledge that, is just a little bit too much in sending rather a message of greed to a lot of people who may not understand the fuller workings of the Company, but would this not be a time for some sort of moderation particularly in the light of a fairly recent, only two years ago, increase in director’s fees also.

5

            ORG    Well, thank you for those remarks.

 

                        Let me just remind you that BG was an extraordinary period, but you remember that in 2007, we were the subject of an approach by AGL. AGL

10                    wanted to merge with this company on a no-premium merger of equals, and there were some elements of our -- certainly a lot of journalists who persuaded that this was an excellent, excellent move and should be endorsed. It took our Board -- I think, we had that year something like an extra 10 meetings to dispose of that. The year before that we tried to have a

15                    dual listed company merger with Contact. That was again a year in which the Board had numerous additional meetings, both in Australia and in New Zealand, to do that transaction. I have a group of outstanding directors working with me. Frankly, in order to attract first-class people, they’re not driven by money because there are other ways they could spend their time,

20                    but they are attracted to this company. They are attracted to the management. They are attracted to the ideals. We have a first-class Board and I believe very strongly that they should be remunerated, and every year frankly, has been an extraordinary year. Now, I’m with you. I’m all for hoping that FY09 is an easy year, but I don’t expect so. This year, we are seeing

25                    turmoil in financial markets. While we have said to you we think that we will be relatively well placed for that, these are still very challenging times. So, I don’t think the workload is going to diminish.

 

                        Secondly, the additional director may well be an internationally based director

30                    and there will be additional travelling expenses and so on and fees that may need to be paid.

 

                        Thirdly, we do want some headroom. We’re not going to take the whole of the $600,000 and pay that to ourselves. That’s not what’s being proposed, but it

35                    is to give us reasonable headroom.

 

                        If the resolution is not passed, the fees that we have proposed for this current year cannot be paid and we’ll have to scale back. So, I would ask you to take those into account and I do believe that, by all means, where a Board is

40                    coming forward for fee increases and they haven’t delivered you’re entitled to be utterly skeptical, but this Board and management has delivered. So, that’s the reason why we have put this before you today.

 

                        Now, can I ask… Yes, Mr. Rogers?

45

   Shareholder In terms of director salaries, it feels like we’re in Wall Street. Okay? This year, the plan is to pay the directors an additional 33%. We support, okay, the plan to bring on an additional director. Hey, that’s good. But are the directors suddenly 33% more talented or putting in 33% more effort? I doubt they can put in 33% more effort because they’re already doing a fabulous job. We’ve a strong Board. They’re working hard. Are they 33% more talented? Simple question at the end, Mr. Chairman, becomes when would you expect to come back to us for an increase in this (inaudible) (2:08:58)?

5

            ORG    Okay. Let me just, one point that was made by the previous speaker. As a result of the new dividend policy, dividends of this Company will increase by 50%. So, it’s true that if you looked at the fees or the dividends that were being paid for the 30th of June 2008, it is the percentage you cited, but we

10                    have said that we are going to give you an additional dividend of 25 cents and that will be maintained across the cycle. So, dividends, I should stress are going up by 50%.

 

                        You said we were 33% more. Well, can I pose to you, it’s now a different

15                    company. It is a company whose market capitalisation, revenues and assets have increased by much more than 33%, and therefore, I think it is not inappropriate and the advisers we consulted took the view that we were not in the top quota. We’re not in the 75th quota. We were somewhere between 60% and 70% quota. So, our peer companies are paying their directors more

20                    than your Board is being paid and it’s a question of what is equitable, what is appropriate, and that’s the basis we come before you.

 

                        Am I again to come to you and seek a further increase next year? My present intention is no. Certainly not, no.

25

                        Yes?

 

   Shareholder Thank you. It is a good afternoon. Mr. Chairman, thank you very much for all that’s been done. It just strikes me that keeping the external directors, the

30                    Non-Executive Directors, who brought in that their knowledge of what’s going on in the world around them and in particular in relation to the markets. Now, lawyers and accountants in particular are people who are… Nine years was the traditional time that the Non-Executive Director was in position, after which they didn’t really have all that much new things to contribute that the

35                    employee people have already caught up with. I suggest that one and possibly two of the existing Non-Executive Directors would see their timing or their value expiring during the current term. I missed out on the current meeting. Thank you very much.

 

40        ORG    Thank you. I think your point is more directed to director’s terms, but let me take that up although it’s not strictly what we’re talking about here. Some companies do have time limits on Boards, other companies don’t, and I’ve seen both being adopted in different Boards that I sit on. I think on the whole, we are conscious, or in fact, we are very conscious of the need to renew the

45                    Board and engage in succession planning. I think that a flexible system is better than an absolute system where you have a term and that’s it. So, we are conscious of the need to renew the Board. In terms of years by dates, look, really, today on public companies, and particularly this Board, there are no passengers on the Board. There’s no way to hide. If you’re not performing, that would become very apparent with the Board that we’ve got, and I can assure you that none of us are immune each year. When we’re coming up for re-election, we are reviewed. We also review the performance of the Board, both internally and we’re going to do that externally. So, we are constantly

5                      looking for ways to improve performance, but I can assure you that there are no people whose usefulness will expire in the next three years. Everyone on the Board will be performing, and I hope that with some of the programs we set in place, our performance will be enhanced.

 

10                    Yes?

 

   Shareholder My name is (Inaudible) (2:13:50) Cox and I’m sorry to get up again, but there’s one small point, Mr. Chairman, which I think rather challenges our intelligence. You said you had an expert look at this and you came to a

15                    conclusion that this is a right figure. Can you tell me anywhere where an expert who is not being paid a good sum of money to come up with (inaudible) (2:14:18) that this is a good thing? I think it’s absolutely wasting our money and (inaudible) (2:14:23) our intelligence to use that as an excuse. Now, you’ll get the money because the numbers you’ll find in the voting there

20                    will be quite substantial. There’s no need to waste our money on these so-called experts. It’s just ridiculous. We ask you in the future to please consider where that money should be spent perhaps on bouquet for all officers or something else. It is certainly not going to impress anyone who likes to think about it. Thank you.

25

            ORG    Look, the Directors on the Board bring a lot of experience in terms of fees paid in other Boards and that is all useful information, but we do need to understand what other companies pay their Directors. Yes, we could probably over a period of time get a lot of that information, but it is presented to us. I’m

30                    not perhaps as cynical as you are about the people who give us this advice and I think that for us simply to come to you and seek an increase in fees without the benefit firstly of our own experience and then secondly seeing what is done in another places would not be the right way to proceed. So, we’d probably have to disagree. I’m sure we’ll agree on something over a cup

35                    of tea.

 

                        Jack?

 

   Shareholder Thank you, (inaudible) (2:16:03). Thank you, Mr. Kevin McCann, Chairman

40                    of our very, very great company. In this debate, I wish to come on and help the Board. I wish to defend the Board and I made a note here or notes. It is all fair and reasonable and in justice to give approval of this vital and necessary resolution for an increase in Director’s remuneration or fees. The Company has done so very good for all of us, shareholders, and it is only proper and

45                    correct to reward, to reward these Directors adequately and appropriately under all the circumstances of the global meltdown that our Company and our Directors have to be rewarded. I emphasise the word “rewarded” again. (Inaudible) (2:16:51) that somehow they seem to be figures like in Wall Street. Well, I must come back and say that the other day I saw the not-so-great USA Senate investigating Mr. Fuld, who was the Chairman of Lehman Brothers, and he got paid out only $400 million. Well, we’re a hell along way to that man away from Wall Street. Mr. McCann, we’re only down in Brick Street and this is a salary package, fee package, which is only right and

5                      proper that everybody should vote for. Thank you.

 

            ORG    Thanks, Jack. Okay. Are there any speakers for or against the motion? Yes, someone down the back, yes.

 

10 Shareholder Good afternoon, Mr. Chairman. Ron (Inaudible) (2:17:57) is my name, a shareholder. I agree with some of the previous speakers who support the addition of one more director.

 

                        I do not believe though in the current circumstances that an increase in

15                    salaries of such magnitude is appropriate. I note that you would go from $430,000 to $570,000. On your current salary, you’re getting more than the Prime Minister and more than any Leader of the Opposition. I do not think it’s justified. I do not think that your reasons are justified. You’ve tried it out the same old argument, increasing Director’s responsibilities, what they’re getting

20                    elsewhere in the market. A lot of us are thinking that some of these salaries being paid elsewhere are overinflated in any case. It’s a self-generating process to employ consultants to view what other people are getting and then seek an increase on that basis. You can imagine what will happen after this meeting if these were approved. Next time around, other companies in the

25                    same area will be saying, “Oh, Origin got an increase, we’re entitled to an increase” without any proper justification. Thank you.

 

                        I suggest to those small shareholders too that if they don’t take notice of what you are going to display at the moment in relation to those voting for the

30                    motion because the bulk of those votes will be from the institutions whose executives have got the best of interest than you getting an increase. Thank you.

 

            ORG    Okay, I think I’d simply be repeating myself, so thank you for those

35                    comments.

 

                        Yes, gentlemen down the back.

 

   Shareholder Mr. Chairman, my name is (Inaudible) (2:20:07) shareholder. Maybe you

40                    would get less criticism if you indicated that maybe the increase would be somewhere near the CPI. Maybe you wouldn’t get so much criticism because you are a bit above the CPI. But on the other hand, you said that Directors who enjoy working in the company, is it possible they may refuse the increase?

45

                        I agree with Mr. Cox. I believe you don’t need to employ people to tell you the increase is justified. I’d like to see the money retained in the company and come to us and say, “We’ve done XYZ. We believe we should be remunerated better than we are now.” Don’t waste our money going to consultants. The government’s doing enough of that now.

 

            ORG    All right. Thank you for that.

5

                        Any other speakers for or against the motion? If not, I think we’re all done.

 

                        I’ll show the proxy votes. Any undirected proxies, I’ll be voting in favour of the motion if we go to a poll. Can I have all those in favour? Thank you. Can I

10                    have all those against? I declare the motion carried.

 

                        The next item is the renewal of the proportional takeover provisions in the constitution.

 

15                    Under the Corporation’s Act, such a revision must be reviewed by shareholder approval every three years. The current provision will expire on 20 October 2008, so its renewal is considered by shareholders today. The effect of the article is to convene a meeting of shareholders in the event that a proportional takeover bid is made. A proportional takeover bid, I should say,

20                    is fairly rare in Australia. I can think of only a handful, but what it provides is it’s often made to all shareholders but only in respect to the specified proportion of each shareholder’s shares. What it can mean is that a bidder can take effective control of the company without paying a control premium. If the resolution is passed, it would mean that shareholders would have to be

25                    consulted as to whether they would allow a proportional bid to proceed, and if they did approve, then it could go ahead.

 

                        So I think that really the fact that control can pass without a premium is the reason why we think the article should be retained. The BG transaction was

30                    not a proportional bid. It was a bid to the whole of the company. It requires a 75% majority shareholders entitled to vote on the resolution. I confirm that the Board recommends the shareholders vote in favour of the amendment.

 

                        Could I have a shareholder move the resolution, please? Thank you. Can I

35                    have a seconder? Thank you.

 

                        Ladies and gentlemen, the matter is open for discussion. Any discussion? If there is no discussion, then I’ll have pleasure in putting the motion. All those in favour? Anyone against? I declare the motion carried. Thank you very

40                    much, indeed.

 

                        That concludes the formal part of the business. If you are like me, I’m really hanging out for a cup of tea. I’ll look forward to a sandwich and having a chat to some of you over lunch.

45

                        Thank you very much.

 

PRESENTATION CONCLUDED

 

 

 

 

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