By Clancy Yeates
Origin Energy expects stronger profit growth in the year ahead, as it reaps the benefits from a recent string of gas and electricity investments.
The Sydney-based utility today posted a 10 per cent increase in its full-year underlying profits, to $585 million, after a year of high spending on oil and gas exploration.
In early trade, Origin shares had dipped 0.8 per cent to $15.48, in line with the broader market.
The increase in profits was driven by a strong performance in its electricity businesses – including a 70 per cent jump in pre-tax earnings in generation and a 20 per cent rise from its power retailing arm.
On a statutory basis, profits slumped 91 per cent to $612 million. However, this measure provides a more volatile gauge of Origin’s earnings for this year’s profits because it comes after Origin booked $6.7 billion in earnings after selling assets to ConocoPhillips last year.
Origin has used the cash it earned from ConocoPhillips to fund development of growth assets, the company said in a statement.
In the year ahead, Origin expects a bigger increase in underlying profits of 15 per cent, thanks to the first full-year contributions from the Darling Downs power station in Queensland and several gas projects.
However, analysts say any signs of progress on the NSW power privatisation and its liquefied natural gas ambitions are likely to be the key driver of its share price.
On its crucial $35 billion Australia Pacific LNG project with ConocoPhillips, Origin said it would consider a final investment decision in the next year. It is the only east coast LNG project that has not yet secured a long-term customer.
The NSW government says it will complete its troubled power privatisation by the end of this year, with bids due in November, and Origin is tipped as a likely acquirer.
“During the past two years, Origin has progressively redeployed some of the benefits of the Australia Pacific LNG transaction to fund the development of operating assets. As a result of this, a number of projects and acquisitions have made initial or increased contributions to Origin’s financial performance this year,” the managing director of Origin, Grant King, said.
Net debt increased to $2.8 billion while revenue increased six per cent, to $8.5 billion. The company held its dividend steady at 25 cents a share.
cyeates@smh.com.au