Origin Energy Expects EBITDA to Increase, Australia

Origin Energy Expects EBITDA to Increase

In conjunction with Origin’s full year results announced on August 23, 2012, Origin announced that, based on then prevailing market conditions, it expected underlying EBITDA to increase by around 10% and Underlying Profit to be in line with the 2012 financial year.

Having reviewed actual performance for the first four months of the financial year and based on current forecast for performance for the remaining eight months, Origin is revising its guidance for the 2013 financial year from around 10% increase to a 5–10% increase in underlying EBITDA. This revised guidance to underlying EBITDA will also result in a reduction in Underlying Profit of 5–10% compared to the prior year.

The August guidance referenced the impact that regulatory uncertainty, particularly related to pricing decisions made by the Queensland Competition Authority was having on the ability to issue guidance. Origin has previously advised that is has sought a judicial review of that decision.

Regulatory uncertainty continues to affect our trading conditions. The Clean Energy Regulator recently issued revised estimates for cost of the Small-scale Technology Certificates (STC) to be recovered by Retailers in their electricity pricing for the year commencing January 1, 2013. The regulator increased the previously advised estimates for the Small-scale Technology Percentage (STP) to be recovered from approximately 8% to 19%.

It has been the practice of pricing authorities to include the estimated STP in their pricing decisions for the relevant year. Given the revised estimates have been released after the pricing determinations have been made, particularly in Queensland and New South Wales, Origin will have no clear means of recovering the increase in the second half of the current financial year. This increase represents an additional cost to Origin of approximately $40 million. Origin’s review of forecast trading conditions for the remainder of the financial year is that it will not be able to absorb those costs within prior guidance.

Origin has been calling for the Climate Change Authority to conduct an effective review of the cost of the RET scheme of which the SRES is a part. This need is evidenced by the inability of regulators and the industry to forecast with the necessary degree of accuracy the impact this part of the scheme is having on installation activity and costs that ultimately should be paid by customers.

As a result of the revised estimate by the Clean Energy Regulator, the total cost of the SRES to be ultimately recovered from customers is approximately $1.4 billion adding further pressure to household electricity bills.

Origin also notes that the Essential Services Commission of South Australia (ESCOSA) has released a draft pricing decision to be finalised by year end to take effect from January 1, 2013 which adds increased uncertainty to prior profit guidance.

[mappress]
LNG World News Staff, November 09, 2012