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    Origin withdraws FY2023 guidance citing market uncertainties

Summary

The company is finding it hard to source coal for its Eraring power station.

by: Shardul Sharma

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Origin withdraws FY2023 guidance citing market uncertainties

Australian gas and power supplier Origin Energy has withdrawn all guidance for the year to June 2023 due to uncertainties in the global and Australian energy markets, it said on June 1.  

Origin had previously provided guidance for energy markets underlying EBITDA for FY2023 of A$600 ($430.7mn) - A$850mn. Since the time FY2023 guidance was provided, there have been material developments in global and Australian energy markets, it said.

The company is finding it hard to source coal for its Eraring power station. “The challenges with coal delivery to Eraring power station are expected to persist into FY2023. This is expected to result in a material increase in coal purchasing costs given high coal prices and continued exposure to high spot electricity prices.”

While Origin has worked closely with coal suppliers to secure additional coal supply by rail, there are limitations to the amount of coal that can be delivered to the plant by this method. Therefore, there is uncertainty regarding the plant’s output in FY2023, it added. Origin said it is part way through finalising coal contracting arrangements for FY2023.

Higher domestic gas prices are expected to provide a benefit in FY2023, however. Origin holds a largely fixed price gas portfolio in FY2023 which is expected to benefit from higher market prices, it said.

For the year to June 2022, Origin expects consolidated group underlying EBITDA to be around the mid-point of the original guidance range of A$1.95 - A$2.25bn. Higher earnings from integrated gas as Australia Pacific LNG benefited from strong commodity prices, are expected to offset a decline in energy markets earnings.

Integrated gas and corporate underlying EBITDA is expected to be higher at A$1.7 - A$1.8bn, compared to the original guidance of A$1.5 - A$1.65bn, driven primarily by higher oil and LNG prices, with production and operating and capital expenditure at Australia Pacific LNG in line with expectations.

In energy markets, ongoing challenges with coal supply have been impacting Eraring throughout FY2022, Origin said. However, the situation has deteriorated significantly in recent weeks, the company added. As a result, Origin now expects energy markets underlying EBITDA in FY2022 to be A$310 - A$460mn, lower than the original guidance range of A$450 - A$600mn.