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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.
