Energy giants tip more big profits

The east coast’s big power retailers and generators are set for another year of bumper profits amid high electricity prices.

The east coast’s big power retailers and generators are set for another year of bumper profits.

The east coast’s big power retailers and generators are set for another year of bumper profits amid high electricity prices as Origin Energy yesterday joined rival AGL Energy in predicting it can come close to replicating 2017-18’s ­record profits.

But the strain on retail customers is showing.

• THE DEAL: Meet the woman driving Shell Australia

Origin yesterday reported a $13 million increase in bad or doubtful debt expenses last financial year, reflecting higher prices and more customers going on to payment plans.

Origin released its 2017-18 accounts yesterday, revealing its power generation and retailing unit earned record before-tax ­operating profit of $1.81 billion, up 21 per cent, as it reaped the benefits of higher wholesale power prices driven largely by the abrupt closure of the Hazelwood brown coal power station in Victoria.

graphic of earnings for power giants

The windfall was revealed a week after AGL Energy, the nation’s biggest power retailer and generator, reported before-tax operating profit jumped 20 per cent to a record $2.23bn.

AGL’s after-tax profit was a record $1.59bn.

The other “big-three gentailer”, Hong Kong-owned EnergyAustralia, last week said first-half after-tax profit rose to $375 million, from $129m a year ago.

Despite a forecast easing of wholesale power prices, the record earnings for the energy giants, which saw years of low returns when power prices were low, are set to be replicated this year.

Both AGL and Origin said power profits were expected to be in line with or slightly below last year’s record, despite the lower wholesale prices.

Victorian and NSW wholesale prices have come back to levels of $80 to $90 per megawatt hour, down from levels of $120 for much of last year. However, they are still double where they were a couple of years ago.

The energy giants’ bumper profits have been released as debate in Canberra swirls around the national energy guarantee and the best way to cut power prices.

Origin chief executive Frank Calabria, whose company will absorb $80m of power costs this year to keep its NSW retail tariffs flat, said he thought wholesale prices would continue to fall.

But he said customers were doing it hard and that the NEG should be legislated to avoid potential price spikes like those when Hazelwood closed. “There are a lot of Australians out there seeing the price increase who are finding it hard in a cost-of-living sense,” he told The Australian yesterday.

Origin has a policy to get out of coal-fired power by 2032, when its Eraring coal-fired power station in NSW is due to close.

Mr Calabria said the trend towards lower cost renewable power would continue without a national energy policy but that there would be a much greater danger of price spikes as the energy sector transitioned from its current coal-­dominated mix.

“The spike in wholesale prices is a big issue for consumers and the industry and we don’t want that to occur,” he said.

The energy boss said companies such as Origin needed certainty to be able to invest early in reliable power as coal-fired power stations gave notice they would close.

“We need to make sure if ageing plant is going to leave the National Electricity Market there is enough combination of reliable, lower-emitting technology coming in,” Mr Calabria said.

While the power giants’ prospects look good, they are not as good as investors had hoped.

Origin shares fell 6.4 per cent yesterday because analysts had hoped the company would be able to make more profit from electricity. When AGL released its profit guidance for this year, its shares fell 4 per cent.