Origin Energy, one of Australia’s leading energy companies, has announced an unexpected boost in earnings for its key energy markets division. This is the second time the company has raised its full-year earnings outlook, largely due to the stronger-than-expected performance of U.K.-based energy retailer Octopus Energy. The company now anticipates that underlying earnings before interest, taxes, depreciation and amortization (EBITDA) for its energy markets division for fiscal year 2023 will be between A$950 million ($628 million) and A$1,200 million, significantly higher than its previous range of A$600 million and A$730 million.
According to the company’s statement, Octopus Energy has seen a rapid return to more normal trading conditions in the United Kingdom, following a volatile first half. Origin holds a 20% stake in Octopus Energy, which last year contributed a loss of A$36 million to Origin’s EBITDA. Origin’s positive EBITDA contribution from Octopus is expected to be significant in the year to June 2023.
In addition to the U.K. gains, Origin Energy has also been able to secure additional coal supply at lower cost for its Eraring power plant, which has contributed to the earnings upgrade. Along with higher-than-expected coal deliveries under legacy contracts, the government’s A$125 per tonne price cap for coal sold to power plants in the states of New South Wales and Queensland has helped to reduce forward wholesale electricity prices. This reduction in prices is expected to lower consumer tariffs from 2024.
The company’s positive earnings outlook has resulted in a 0.4% increase in its shares, which are currently trading at A$8.38 as of 0017 GMT. The company is set to be taken over by a consortium led by Canada’s Brookfield. The recent earnings boost is likely to bolster Origin’s position ahead of the takeover, and may also provide a sense of reassurance to its shareholders.