Origin Energy rejects gas squeeze after $2.3bn loss
Origin Energy does not expect the east coast will face gas shortfalls in 2022 given spare LNG capacity.
Origin Energy said the forecast for a potential gas shortfall in 2022 will be avoided given the spare capacity of Queensland LNG producers to send spare supplies south to users after it reported a giant $2.3bn loss following writedowns.
The Australian Competition and Consumer Commission warned on Tuesday a shortfall of 2 petajoules could arise across the entire east coast gas market next year if Queensland LNG producers export all of their gas, ratcheting up tensions with the energy giants.
But Origin, operator of the Australia Pacific LNG plant in Queensland‘s Gladstone, said the expected 101PJ of uncontracted supplies from exporters next year meant it did not expect any gas squeeze to eventuate given the tiny forecast deficit.
“The domestic market continues to be well supplied, and I’m confident that the market will continue to be well supplied into the next year,” Origin chief executive Frank Calabria told The Australian. “I just don’t see that being an issue.”
ACCC chairman Rod Sims said the three Queensland producers — APLNG along with Santos’ GLNG and Shell’s QCLNG — did not adequately comply with a supply pact agreed with the Morrison government in January.
But Mr Calabria disputed the ACCC‘s assessment.
“I see APLNG complying with the Heads of Agreement. We offer uncontracted gas to the domestic market and we do that before the commencement of every calendar year. Then based on production if there’s more gas available as that plays out, then we offer it again through the year. From my perspective, I just continue to see the east coast gas market today continues to be well supplied.”
Origin is one of Australia’s largest electricity retailers and generators and also owns a 37.5 per cent share in the Australia Pacific LNG export plant in Gladstone, Queensland.
The energy giant slumped to an annual loss of $2.3bn after taking a hit from a major writedown, and expects another tough year ahead before a recovery from 2023 as power prices improve.
The statutory loss of $2.29bn was triggered by a giant impairment as old renewable power contracts and the value of its Eraring coal plant was cut, previously disclosed to the market on July 30.
Origin’s energy market earnings fell 32 per cent to $991m, within guidance, due to lower wholesale prices and further pain is ahead with 2022 earnings for the unit estimated between $450m-$600m.
A rebound is anticipated for 2023 as power prices rise with a result forecast between $600m-$800m.
Mr Calabria said the 2022 financial year may represent the bottom of the market.
“The result is reflective of the wholesale prices we saw over the last 12 months on average because they‘re selling the revenues for the next year. But on the basis that current forward price prevails for electricity, you would expect to see that rebound occurring in 2023.”
Underlying annual profit dropped 69 per cent to $318m, which beat consensus of $269m, but also underscored a tough 12 months of trading from lower electricity and gas prices.
The company will pay a dividend of 7.5c per share.
Utilities including Origin and AGL are being battered by a storm of low wholesale electricity prices as wind and solar supplies continue to be developed, while moves by both state and federal governments to underwrite new generation has also depressed market conditions.
Earnings on an underlying basis also fell by just over a third to $2.04bn, just ahead of analysts’ consensus.
Its integrated gas unit earnings also fell by 35 per cent to $1.13bn due to lower oil prices although this is seen recovering in the 2022 financial year with oil at $US70 a barrel.
Origin is one of four major energy companies involved in a high level group to strike a united position on controversial energy reforms, thwarting irate renewable developers worried the changes will decimate investment in new supply.
Coal, gas and hydro plants will be paid under the plan to guarantee future capacity when the grid is facing periods of peak demand that threaten reliability rather than being paid on an “energy only’’ basis for the power that is used by consumers.
While Origin favours a targeted model for new dispatchable resources, it supports the reforms being worked through to reflect the accelerating transition to renewables underway in the national electricity market/.
“It‘s not about extending coal. It’s about getting the right settings such that you get that investment and you get the orderly transition from one to the other.”
Origin fell 4.1 per cent to $4.19 on Thursday.
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