Australia's Origin Energy raises earnings forecast for energy markets, shares rise 8%
Australia's Origin Energy increased its full-year earning?outlook? for its energy retail division, citing higher electricity margins that helped the firm exceed market expectations.
The shares of the electricity retailer and gas retailer jumped 8.1% intraday to A$11.970. This was their largest intraday percentage increase in almost three years. The slow rollout of solar and wind on both coasts, coupled with tight gas markets, is forcing Australia's states to run coal plants longer than they planned. This, despite the fact that demand for renewable energy has shifted and policies have been changed. The New South Wales government recently extended the lifespan of Origin Energy’s Eraring power station until 2029. This highlights the performance of the energy market division for the past year. David Tuckwell is chief investment officer of ETF Shares. He said that the 'extension of Eraring coal station to 2029' gives Origin more stability and certainty in its domestic power business. This was reflected by the upgrade.
The firm's energy markets division is expected to earn between A$1.55 ($1.25 billion) and A$1.75 ($1.25 billion) in operating profits for the full year, compared to its previous outlook of A$1.40 up A$1.70. The midpoint is higher than the Visible Alpha consensus estimate of A$1.62 billion.
Energy market division, Australia's largest retail energy business by customers, reported A$860m in operating earnings for the six-month period ending December 31. This is up 17% on a year ago.
Origin reported a underlying profit of A$593million, which is above Visible Alpha's estimate of A$577.9million, but lower than the A$924million reported a year ago.
The integrated gas division, which includes Origin’s stake in Australia Pacific LNG project (APLNG), and its?LNG Trading operations, saw operating earnings fall by over 31%, to A$860 millions, due to lower realised prices and decreased production.
Tuckwell stated that investors have largely overlooked APLNG's profits, as gas profits are a function of commodity prices.
Origin has also announced a 30 Australian cents interim dividend per share. This is unchanged from the previous year.
(source: Reuters)
