As fossil fuel prices continue to surge across the globe,record revenue from Origin’s liquefied natural gas (LNG) venture in Queensland has been offset by coal supply problems curbing output at its 2880-megawatt Eraring generator in NSW,forcing it to source expensive coal from other suppliers and buy more power from the grid to meet customer needs.
Origin chief executive Frank Calabria. The company said market conditions remained too uncertain to provide formal guidance on earnings.Nick Moir
The Australian power and gas giant on Thursday told shareholders that it remained unable to provide any profit targets yet for the year ahead because of the ongoing uncertainty in local and international energy markets.
“There remains uncertainty around the range of potential earnings outcomes for financial year 2023,” it said.
Wholesale electricity prices on the eastern seaboard have hit their highest average levels on record amid soaring fossil fuel costs and a series of coal-fired power station failures knocking out supplies.
Origin chief executive Frank Calabria described the turmoil as an “extraordinary combination of events”. After striking contracts for the supply for most of the coal it will need for Eraring this year and cranking up the plant’s output,Calabria insisted on Thursday that Origin was in a better position to withstand future shocks.
“With the coal power plant back into the system and running again ... that was a key catalyst,” he said. “We look in much better shape than we did a month or two ago.”
Market conditions in the past year had been “almost unparalleled”,Calabria said,and it was the company’s job to “make sure we manage the risk of those events recurring”.
Origin on Thursday reported its underlying profit had risen 30 per cent to $407 million for the 12 months to June 30.
The result was markedly lower than the $536 million analysts had been expecting. On a statutory basis,Origin recorded a $1.4 billion loss because of a $2.2 billion non-cash impairment flagged last month.
Demand for Australian LNG has risen amid the global energy crisis.Supplied
Shares in Origin slumped by as much as 7 per cent during the day before recovering to finish trading 2.6 per cent lower.
While higher commodity prices have hurt the company’s domestic energy division,sales revenue from Origin’s jointly owned Australia Pacific LNG (APLNG) project for the year surged to a record high. Western nations have been scrambling to reduce their reliance on Russian coal oil and gas,intensifying competition for spare LNG and deepening a global energy crisis that has been building since last year.
APLNG,which Origin jointly owns with US-based ConocoPhillips and China’s Sinopec,doubled its revenue to $9.2 billion for the year. Origin’s cash distribution was $1.6 billion.
Suhas Nayak,a portfolio manager with Origin investor Allan Gray,said conditions for Origin’s energy retailing business were “tough” and the outlook remained uncertain.
“Clearly there is a wide range of outcomes from here,” he said. “Although it’s probably not as wide as it was when they first withdrew guidance a couple of months ago.”
Macquarie analyst Ian Myles said Origin’s APLNG would continue to provide elevated cash flow and “offset the softness” in energy markets in the coming 12 months.
“The Eraring earnings drag is temporary,as revenues will reprice,” he said. “We believe Origin’s natural short position should enable it to capture the value from a surge in renewable energy from financial year 2025 to 2030.”
Announcing the full-year results on Thursday,Calabria said Origin Energy’s integrated business,which spans electricity generation,power and gas retailing and gas production,had navigated significant challenges from “high commodity prices and volatile wholesale energy prices,to fuel supply shortages and multiple weather events”.
Origin shareholders will receive a final dividend of 16.5¢ a share,up from 7.5¢ a year ago,the company said.
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