Origin Energy surges to $1b profit as power grid pain eases
By Nick Toscano
Power and gas giant Origin Energy has swung to a full-year profit of more than $1 billion as it recovers from a turbulent 12 months of power plant disruptions and volatile electricity prices hammering Australia’s east-coast grid.
Origin, one of the largest Australian energy companies, told investors on Thursday it had made a net profit of $1.06 billion for the year to June 30, up from a $1.4 billion loss a year earlier.
Origin Energy could close its Eraring coal-fired power station in NSW by as early as 2025.Credit: Dean Sewell
Stripping out one-off costs, Origin’s underlying profit soared more than 83 per cent across the year to $747 million, surpassing market analysts’ forecasts. The board declared a final dividend of 20¢ a share, up from 16.5¢ last year.
Origin Energy chief executive Frank Calabria on Thursday said operational performance had been strong across the business, with higher earnings from its domestic energy generation and retailing division, its gas assets and its stake in Britain’s Octopus Energy.
“The strong operational performance underscores the value of Origin’s strategic positioning in the energy transition, with an advantaged portfolio of assets and growth options,” he said. “Origin remains well-positioned to capture value for shareholders and deliver benefits to our customers and communities.”
The result marks a significant turnaround for Origin, as the company’s proposed $18.7 billion takeover by Canadian asset manager Brookfield and United States-based investor EIG faces regulatory scrutiny.
Last year’s heavy losses for Origin came as coal supply problems at its Eraring power plant in New South Wales forced it to contract additional supplies at record-high prices as the war in Ukraine was deepening a global energy crunch, partly offsetting soaring revenue from Origin’s sales of liquefied natural gas (LNG) overseas.
Calabria on Thursday said earnings in Origin’s domestic energy business had improved following the Albanese government’s introduction of temporary caps on the price domestic coal sales, which have driven down the cost of generating power.
The uplift also came as Origin and other major retailers, including AGL and EnergyAustralia, have been allowed to increase consumer bills across Australia’s eastern states by hundreds of dollars a year to recoup last year’s significant rises in the wholesale cost of energy.
Wholesale prices – what retailers pay for electricity before they sell it on to their customers – blew out to record levels across eastern Australia last year due to power-plant outages and coal mine flooding curtailments.
The result marks a significant turnaround for Origin, as the company’s proposed $18.7 billion takeover by Canadian asset manager Brookfield and United States-based investor EIG faces regulatory scrutiny.Credit: Bloomberg
“We have significantly increased our support for customers, recognising the cost-of-living challenges across the economy, including the contribution of higher energy prices,” Calabria said. “We are targeting $45 million to support customers in hardship this year.”
Origin is now expecting further growth in its domestic energy business across the 2024 financial year, while sales from its Queensland liquefied natural gas (LNG) joint venture were tipped to remain strong.
The proposed takeover of Origin is subject to regulatory clearance from the Australian Competition and Consumer Commission, which is due to decide by September 28. It will then be put to Origin Energy shareholders for a vote.
If it succeeds, Brookfield and EIG will divide Origin’s assets between them. Brookfield, which is seeking to buy Origin’s large domestic energy generation and retailing business, has vowed to invest up to $30 billion to roll out new renewable energy and storage projects in a bid to become Australia’s largest clean energy owner by the end of the decade.
EIG is seeking to buy Origin’s 27.5 per cent interest in the Australia Pacific LNG gas venture, a domestic gas supplier and a major exporter of liquefied natural gas to buyers in Asia.
Origin last year gave notice of its intention to fast-track the retirement of Australia’s largest coal-fired power station, the 2880-megawatt Eraring generator in NSW, by up to seven years – from 2032 to as early as 2025 – and outlined new goals for “multi-gigawatt” growth in renewable energy by the end of the decade.
However, the company has committed to continuing to assess market conditions before making decisions on the timing of the closures of Eraring’s four units to ensure the grid is equipped to handle their withdrawal.
The new NSW energy minister, Penny Sharpe, has listed energy security as a priority for the new government, and has not ruled out striking a deal with Origin to help keep Eraring open for longer if required.
Australia is experiencing one of the fastest energy transitions globally, as coal-fired power stations, which supply the bulk of the nation’s electricity, increasingly bring forward their closures while renewable energy continues to grow. The federal government is aiming for the grid to be 82 per cent renewable by 2030.
However, energy officials are becoming increasingly worried about the slow rollout of new projects and thousands of kilometres of new high-voltage transmission lines that will be vital to supporting renewable energy and compensating for coal plants’ closures.
More to come
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