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Origin posts loss amid ‘unparalleled year’ for energy

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Gas and electricity company Origin Energy has announced a loss for full-year 2022 amid “an almost unparalleled year” for energy markets.

Origin reported on Thursday a statutory loss of $1.429 billion for the year ended June 30, reflecting a $2.196 billion impairment charge associated with the hedging of high wholesale electricity and gas prices.

“This does not reflect the performance of the business, future cash flows, or any impact to future value,” the company said.

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An underlying profit of $407 million, up 30 per cent, was reported on higher earnings in gas, offset by lower earnings in the energy markets division, in what Origin chief executive Frank Calabria described as “an almost unparalleled year in terms of market conditions”.

Origin said it benefited from a record cash distribution from Australia Pacific LNG of $1.595 billion, on higher oil and spot LNG prices.

This distribution contributed to a strong free cash flow position of $1.062 billion, Origin said.

The operator of ageing coal-fired Eraring, Australia’s largest power station, said higher fuel costs and coal supply constraints limiting output contributed to a decline in earnings.

“There were also highlights, including a strong performance in natural gas, growth in total customer accounts, and recent improvements in coal supply to Eraring,” Mr Calabria said.

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“We’ve now locked in contracts for 4.4 million tonnes of coal supply – the majority of our needs for FY2023.”

Origin said there remained uncertainty around earnings for 2023 but underlying figures were expected to be higher, driven by the gas business, while profits were expected to remain “suppressed”.

The risk of coal under-delivery remained, including due to rail and mine performance.

Origin will continue to assess the outlook for the business with a view to providing an update when there is less uncertainty.

Origin anticipates further growth in underlying earnings in 2024, dependent on fuel and energy prices and the extent to which these are reflected in customer tariffs, the outcome of a price review on gas supply, and delivery of targeted retail savings.

Origin declared a final dividend of 16.5 cents per share, franked to 75 per cent, for a total dividend of 29 cents per share, representing 47 per cent of free cash flow.

Focusing on capital management, the board suspended the dividend reinvestment plan until further notice.

-AAP

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