Origin Energy posts $2.3b loss after power sector’s ‘challenging’ year

Origin Energy, one of Australia’s top power and gas suppliers, has posted a $2.29 billion full-year loss as the COVID-19 pandemic and rapid rise of renewable energy hammered prices across the business.

After stripping out one-off items, Origin posted underlying earnings of $318, down 69 per cent from a year ago, but ahead of consensus forecasts for $275.6 million.

Origin Energy chief executive Frank Calabria.Credit:Dominic Lorrimer

Following a year of significant upheaval across the energy sector, Origin this month flagged heavy write-downs due to sharply lower electricity prices and rising costs to fuel its fleet of power stations taking a severe toll. It warned investors that the pain would continue to be felt into 2022.

“Operating conditions were challenging this year due to low prices and the impacts of COVID-19 across our key commodities of electricity, natural gas and oil,” Origin chief executive Frank Calabria said on Thursday.

“Energy Markets headwinds are expected to persist into financial year 2022, though this should be largely offset by the strong performance of our integrated gas business.”

The company declared an unfranked final dividend of 7.5¢ a share, payable to shareholders of record on 8 September.

Origin and other top power utilities have been facing enormous pressure as the continued flood of cheap power from large-scale wind and solar farms and rooftop solar panels sends daytime wholesale power prices plunging to levels where coal and gas-fired generators are increasingly unable to compete. This year, EnergyAustralia brought forward the closure of Victoria’s Yallourn facility to 2028, four years ahead of schedule.

“Our immediate focus is on capital discipline and cost management to continue to build balance sheet resilience, with a rebound in energy markets earnings expected in financial year 2023,” Mr Calabria said.

Origin’s cash distribution from its jointly owned liquefied natural gas business in Queensland, Australia Pacific LNG, was $709 million.

Mr Calabria said the LNG business had been “outstanding” across the year, safely curtailing output when the impacts of the pandemic caused a global market oversupply last year, and “rapidly ramping up production when demand recovered.”

“Strong field capability and improved productivity helped deliver record low costs, with a distribution breakeven almost half what it was just three years ago, which supported a strong cash distribution to Origin,” he said.

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