Origin Energy returns to profit as takeover talks continue

Origin Energy, one of the largest Australian power and gas suppliers, has returned to profit as talks continue with two North American suitors about an $18.4 billion joint takeover of the company.

The ASX-listed energy giant on Thursday reported a $399 million net profit for the six months to December, up from a $133 million loss a year earlier, helped by gains from commodity hedging. However, on an underlying basis, earnings plunged by more than 80 per cent to $44 million, as elevated coal and natural gas costs drove sharp increases in wholesale prices across the company’s Australian electricity generation and retailing business.

Origin Energy chief executive Frank Calabria described the company’s first-half results as “mixed”. Higher earnings driven by liquefied natural gas (LNG) sales from the company’s part-owned Australia Pacific LNG joint venture in Queensland had been offset by “more challenging” conditions in its domestic energy markets, he said.

The board said shareholders would receive a first-half dividend of 16.5¢, up from 12.5¢ a year earlier, amid an improved outlook for the second half of the financial year.

On Thursday, Origin told shareholders that it remained in “active engagement” with a bidding consortium including Canadian asset manager Brookfield and US-based private equity firm EIG about a possible binding $9-a-share takeover offer.

Under the consortium’s proposal, lobbed late last year, EIG is seeking to buy Origin’s 27.5 per cent interest in the Australia Pacific LNG venture, while Brookfield wants Origin’s domestic energy generation and retail division, and has outlined ambitious plans to invest another $20 billion to accelerate its roll-out of renewables this decade.

Origin said the bidding consortium had now substantially completed its due diligence, while “active engagement continues on a non-exclusive basis” about the submission of a binding proposal.

“Any binding proposal will be subject to a number of conditions, including approval from the Australian Competition and Consumer Commission and Foreign Investment Review Board and other terms and conditions, which will be subject to negotiation between the parties,” the company said.