Origin Energy lifts itself out of SAP doldrums

Origin Energy has sought to reassure investors there is a light at the end of the tunnel over its troubled SAP billing and customer management transformation.

The company's recent full year results for 2013-13 revealed the full impact the shaky migration of millions of customers onto the new system had on its bottom line.

Origin commenced its SAP overhaul – titled the Retail Transformation Program – in 2008, but work became more complex in 2011 when the energy retailer acquired Integral Energy and Country Energy from the NSW Government.

The acquisitions meant it picked up an extra 1.6 million customers being serviced on government legacy systems, along with the 2.6 million customers already on its own legacy systems.

The migration of NSW government customers was due to take four years and cost Origin $277 million on top of $422 million worth of transitional services payments to the NSW Government. The migration of Origin’s own customers cost another $260 million.

While both changeovers are expected to be completed early and below budget, they have also caused a number of hiccups for business operations.

Origin conceded that the implementation of the program had been challenging and had impacted Origin’s operational performance in both the prior and current financial years.

The billing cutover saw a peak of 180,000 late energy bills issued to customers in September 2012, which had a carry-on effect on the organisation’s cash flow. Bad and doubtful debt increased by $43 million as a result, with Origin stripping the figure out of its profit forecast.

The disruption also incurred an undisclosed number of customer losses at what has been described as “a time of increased competition in NSW”.

But Origin claimed to have stemmed the losses in the year since and reported a net increase of 7000 electricity and gas accounts in the second half of 2012-13.

It similarly claimed to be steadily reducing late bills, which were down to 24,000 as of June 2013.

It is currently spending a bit over $30 million each year to stabilise the new solution, which will provide “new capabilities in channel management and products and services to customers including online self-service and e-billing capability”.

All customers are expected to be transitioned to the new system by the end of October, with stabilisation activities to continue through 2014.

Origin declined to comment further on the project.