Gas drives Origin Energy to strong quarterly result as spotlight on $18.7bn deal intensifies

The result will intensify debate about the value of Brookfield and MidOcean’s $18.7bn deal for Origin Energy, which is a watershed moment from Australia’s energy transition aspirations.

Origin Energy has posted a 21 per cent year-on-year jump in quarterly revenues from its gas business, a result that will intensify shareholder debate about the value of the $18.7bn takeover bid from Brookfield and MidOcean.

The Australian power and gas giant in March entered into a binding scheme implementation deed with investors to receive $8.912 a share, split between $5.78 a share and $US2.19 a share. But Origin has posted a series of strong financial results in recent weeks, the latest of which came on Monday when the company said revenues from its Asia Pacific LNG business for the three months ended June 30 totalled $11.19bn, up 21 per cent compared to the same period last year. The revenues, however, were down 11 per cent lower than the prior quarter due to lower realised oil prices.

Origin said it received a cash distribution from APLNG of $1.49bn for the year, net of hedging, up 4.2 per cent from 2021-22 financial year.

The APLNG unit has been a strength for Origin in the last couple of years, sheltering the company from weak market conditions across the retail electricity and gas business.

But with Australia’s wholesale electricity market returning to more normalised conditions, Origin is now seeing strong results across its APLNG and its energy businesses, chief executive Frank Calabria said.

“I’m pleased to report strong operational performance across both our Integrated gas and energy markets businesses,” Mr Calabria said.

“In Queensland, our teams worked hard to bring more wells online and optimise well performance, and this drove a recovery in gas production, following the impacts of wet weather in prior periods. Improved production has enabled Australia Pacific LNG to continue to meet the gas needs of export customers and provide a major contribution to the domestic market.”

Shares in Origin were little changed following the quarterly result, despite broad market weakness.

The quarterly announcement came as the Australian Consumer and Competition Commission continues to mull the $18.7bn offer for Origin Energy.

The decision of the ACCC is a watershed moment for Australia’s energy transition plans. Should the competition regulator approve the deal, Australia is likely to accelerate its transition away from fossil fuels.

Keen to satisfy the public interest test of the regulator, Brookfield said it will it invest between $20bn and $30bn in renewable energy generation, much needed if Australia is to meet its transition goals and achieve its net-zero by 2050 target.

Should the deal proceed, Brookfield and MidOcean will split up Origin. The private equity giant will acquire the energy markets business, comprising Origin’s electricity generation and retail business, while MidOcean will own Origin’s 27.5 per cent stake in APLNG.

The deal, however, must first overcome ACCC scrutiny. Earlier this month, the watchdog said its consideration is focused primarily on Brookfield’s ownership of AusNet and the scope of the owners of the private equity giant to be able to unfairly profit.

The focus of the ACCC on AusNet had been widely anticipated by the market and Brookfield, which offered the regulator guarantees in its application that it would ring-fence the transmission company should it succeed in its bid for Origin.

Still, the ACCC said it had noted that AusNet is Victoria’s principal electricity transmission network, it is one of just five electricity distribution networks in Victoria, and it is one of three gas distribution networks in the state.

Originally published as Gas drives Origin Energy to strong quarterly result as spotlight on $18.7bn deal intensifies