Origin Energy's quarterly: A tale of two halves

THE latest quarterly report from Origin Energy, eastern Australia’s LNG exporter and domestic energy retailer, puts into sharp relief the very different challenges being faced in international and domestic energy markets. 
Origin Energy's quarterly: A tale of two halves Origin Energy's quarterly: A tale of two halves Origin Energy's quarterly: A tale of two halves Origin Energy's quarterly: A tale of two halves Origin Energy's quarterly: A tale of two halves

Origin LNG performing well, energy business less rosy

Sally Bogle

Origin's domestic gas and electricity retail business continues to experience lower demand for its products as the installation of solar generation, batteries and other forms of generation gathers pace. 
 
These latter operations are proving a challenge not just for Origin but for all downstream incumbents as they struggle to determine a clear path forward in the trend to decentralise energy.   
 
"We see Origin's business as relatively bifurcated," RBC Capital Markets analyst Gordon Ramsay wrote in a morning note. 
 
He said while ‘APLNG operational performance continues to stand out and should benefit from pricing tailwinds … the Energy Markets business faces significant headwinds from subdued demand and lower forward electricity pricing". 
 
For his part, Origin CEO Frank Calabria remains upbeat.
 
"We continue to target significant retail cost savings and are on track to achieve $100 million in savings by the end of FY2021. We're pleased to see growth in Origin customer accounts over the period, particularly in Community Energy Services."
 
In the short term though, continued impacts of COVID-19 and unusually mild summer weather contributed to subdued demand and wholesale pricing across electricity and gas markets at Origin in its quarter to March 2021. 
 
Electricity demand fell 4% year on year with gas demand down 27% as COVID continued impacting service sector business volumes and demand for gas-fired generation in particular.
 
Gas sales volumes decreased 27% on the March 2020 quarter with a 19% decrease in the business segment due to expiry of contracts and COVID-19 impacts, even as spot prices rose slightly. 
 
Retail volumes were flat with higher customer numbers offsetting lower small business usage. Gas used in generation fell 59% due to lower electricity pool prices.
 
The company said the verage National Electricity Market spot electricity price for the March quarter was $36.3/MWh, a significant decrease from $70.6/MWh in the March 2020 quarter and $7.5/MWh lower than the Dececembere 2020 quarter.
 
Outside of COVID-19 this was also down trso extreme events including bushfires and strong winds which disrupted interconnection and Snowy Hydro generation during the March 2020 quarter.
 
Origin is up 1.26% to $4.16 giving the company a market cap of $7.23 billion. In January last year shares were worth close to $9 each.