Origin shares tumble despite $1.4b profit on soaring electricity prices

Origin Energy, the biggest Australian power and gas supplier, has soared to a bumper profit as higher electricity prices boosted its power plants and retailing business, but warnings of a softer year ahead triggered a sharp sell-off in the company’s shares.

The energy giant booked a bottom-line profit of $1.4 billion for the 12 months to June 30, up from $1.05 billion a year earlier. Underlying profit for the period surged nearly 60 per cent to $1.2 billion but still fell slightly short of analysts’ forecasts.

Origin Energy’s part-owned Octopus Energy has risen to become Britain’s biggest electricity provider.

Higher earnings from Origin’s domestic power plants and retailing division were attributed to its ability to charge customers higher prices over the past year after energy regulators raised maximum price caps in mid-2023 to make up for a blowout in generation costs.

Adding to mounting cost-of-living pressures, consumers across the eastern seaboard were hit with power bill increases of up to 25 per cent last year, primarily due to the impact of higher fossil fuel prices triggered by Russia’s invasion of Ukraine driving up wholesale electricity prices.

Origin also benefited from lower fuel costs at its biggest power station, Eraring, after NSW and federal governments imposed a $125-a-tonne cap on the price of coal sold to power stations in a bid to limit the impact of rising global prices on people’s bills.

However, Origin boss Frank Calabria said the level of earnings from its domestic energy business was unlikely to be repeated in the 2025 financial year after regulators imposed lower default power bill limits and the government coal price cap rolls off.

The company’s earnings target for the division for the year ahead was significantly lower than analysts’ forecasts.

Origin shares fell 9.4 per cent to $9.60 on Thursday.

Tom Allen, an energy analyst at UBS, said the mid-point of the guidance range was 13 per cent lower than consensus. “While fiscal year 2025 will see earnings reset lower, Origin reiterates that it sees structural tailwinds into the outlook,” Allen said.

For the first time since 2021, the Australian Energy Regulator this year opted not to hike the consumer price caps, known as “default market offers”, in most regions. Instead, from July 1, it has reduced prices for most customers on standard retail plans by up to 7 per cent for households and up to 10 per cent for small businesses.

Origin boss Frank Calabria warned that the past year’s earnings were unlikely to be repeated in the 2025 financial year.Credit: Trevor Collens

Figures supplied to a federal cost-of-living inquiry this week showed the number of Origin Energy customers seeking financial assistance had more than doubled in the past two years, with 98,000 customers on hardship program as of June.

Calabria said Origin was acutely aware of the pressure on household budgets amid the rising cost of living.

“We welcome energy bill relief for all households provided by federal and state governments, with Origin’s focus on supporting our most vulnerable customers with $100 million committed across fiscal years 2024 and 2025, including to freeze tariffs for these customers,” he said.

Calabria on Thursday also said Origin’s balance sheet remained strong, supporting an increase in shareholder returns and enabling capital to be reinvested in renewable energy and storage projects across the country.

“We continue to demonstrate good momentum on executing Origin’s strategy,” he said.

“We have established a pipeline of renewables developments in NSW, including the large-scale and advanced Yanco Delta wind farm development, along with the Ruby Hills and Northern Tablelands wind farms and Salisbury Solar Farm projects.”

Calabria added that Origin’s 2024 results highlighted the benefits of its “diverse portfolio”, which spans renewable energy, coal and gas-fired power stations, domestic energy and broadband retailing to 4.7 million customers, and its stake in its Queensland liquefied gas joint venture, Australia Pacific LNG (APLNG).

It owns 22 per cent of Octopus Energy, which has grown to become Britain’s biggest power and gas retailer, and is expanding rapidly into renewable energy and intelligent home electric appliances.

APLNG delivered greater production volumes across the year, but faced declining commodity prices as the global energy crunch eased and benchmark LNG prices retreated.

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