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Origin Energy (ASX:ORG) - Chief Executive Officer, Frank Calabria - The Market Herald
Chief Executive Officer, Frank Calabria
Source: Renew Economy
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  • Origin Energy (ORG) has updated its cost of supply guidance after losing a price review of gas purchased from Beach Energy (BPT)
  • The energy company expects a cost of supply increase of $30 million to $40 million in FY21 and an increase of up to $80 million in FY22
  • As a result of this, and other challenging market conditions, Origin has downgraded its earnings guidance to between $940 million to $1.02 billion
  • The business previously downgraded its profit earnings in February and reported a mixed bag of results during its recent half-year report
  • Shares in Origin Energy are trading down 8.72 per cent at $4.29

Origin Energy (ORG) has updated its cost of supply guidance after losing a price review of gas purchased from Beach Energy (BPT).

The review between the two companies was referred to arbitration and the arbitrator has now issued a partial award.

On the basis of that decision, Origin said the new gas price is likely to be materially above its expectations.

Specifically, the energy company expects a cost of supply increase of $30 million to $40 million in FY21 and an increase of up to $80 million in FY22.

As a result of the increase, Origin has downgraded its energy market earnings before interest, taxes, depreciation and amortisation (EBITDA) guidance from $1 billion to $1.4 billion down to $940 million to $1.02 billion.

"We are disappointed in this decision which we believe is wrong, and entirely inconsistent with our prior experience in the gas market," CEO Frank Calabria said.

"This will result in a gas price that does not reflect market prices, and it is, therefore, a very poor outcome," CEO, Frank Calabria said

The energy stock said subdued energy demand and wholesale pricing, along with a lower than expected contribution from Octopus Energy has also prompted the EBITDA downgrade.

Origin previously downgraded its profit and earnings guidance back in February and also reported a mixed bag of results during its recent half-year report.

Looking ahead, ORG said it's expecting challenging conditions in the energy market to continue into FY22, though it is expecting to benefit from a higher oil price.

Shares in Origin Energy are trading down 8.72 per cent at $4.29 per share at 3:35 pm AEDT.

ORG by the numbers
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