Origin faces more uncertainty after year of ‘unparalleled’ challenges
Origin Energy, one of the nation’s largest power and gas suppliers, says it is unable to provide any profit targets for the year ahead because Australian and international energy market conditions remain too uncertain.
As the fallout from the war in Ukraine sends demand and prices for fossil fuels surging across the globe, Origin on Thursday said a year of record sales revenue from its Queensland liquefied-gas venture had been offset by the blow of higher coal costs and volatile prices hammering its east-coast electricity assets.
The Australian energy giant told shareholders its underlying profit had risen 30 per cent to $407 million for the 12 months to June 30.
The result was lower than expected, with market analysts expecting an average of $536 million. On a statutory basis, Origin recorded a $1.4 billion loss because of a $2.2 billion non-cash impairment flagged last month.
Origin chief executive Frank Calabria said it had been an “almost unparalleled” year of market conditions. The company said market conditions remained too uncertain to provide formal guidance on earnings.
“There remains uncertainty around the range of potential earnings outcomes for financial year 2023,” it said.
“Underlying earnings are expected to be higher, driven by growth in earnings from the gas business, while electricity gross profit is expected to remain suppressed.”
Shares in Origin were nearly 5 per cent lower in early trade on Thursday.
As western nations scramble to reduce their reliance on Russian energy imports, cargoes of coal, oil and natural gas have been in short supply, intensifying competition for deliveries and deepening a global energy crunch that had been building since last year.
Tight supplies have boosted sales at Origin’s Queensland liquefied natural gas (LNG) division. The venture, Australia Pacific LNG, 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.
However, international fossil fuel prices have also begun causing major disruptions across the eastern seaboard of Australia by increasing the cost of running the coal-fired power stations that supply two-thirds of the electricity grid, and driving up household power bills.
For Origin Energy, problems at a supplier’s mine has caused a shortage of the black coal the company needs to run its 2880-megawatt Eraring power plant in New South Wales, forcing it to curtail output earlier this year and contract more expensive coal supplies from elsewhere.
The shortage added to major supply fears across the grid, where a series of coal-fired power station unit outages combined with rising fuel costs to push wholesale electricity prices to record levels earlier this year and raised the threat of blackouts.
Origin on Thursday said it had now locked in contracts for 4.4 million tonnes of coal, which would cover most of the power plant’s needs this year.
“Despite the challenges faced by the industry recently, Origin has played a vital role in keeping the lights on for customers with other generators experiencing multiple outages, thanks to the excellent operating performance of our generation fleet,” Calabria said.
Announcing the company’s 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”.
“The value of Origin’s integrated business is evident in this result, as higher commodity prices drove strong earnings from integrated gas, helping to offset lower earnings from energy markets as it grappled with an almost unparalleled year in terms of market conditions,” he said.
Shareholders would receive final dividend of 16.5¢ a share, up from 7.5¢ a year ago, the company said.
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Source: Thanks smh.com