AustralianSuper's strong opposition to Origin Energy (ASX:ORG) folding and agreeing to be bought late last year by a joint venture of Canadian and US investors has certainly paid off for Origin shareholders.
The final price in the offer from the two bidders was $9.53 each, and Origin's shares were up 11% from that level at Wednesday's close of $10.60—that's better than inflation.
More importantly, Thursday's annual result revealed millions of dollars in revenue and earnings that would have accrued to the bidders, not the shareholders of Origin.
And, wait, there's more: Shareholders will get a 78% jump in total dividend for the year to 55 cents a share, from 36.5 cents for 2022-23, with a final dividend of 27.5 cents a share—more than 33% above the 20 cents paid as the final a year ago.
So, all thanks to AustralianSuper, which still holds more than 15% of Origin. It also saved the Origin board from making a very stupid mistake and selling the company too cheaply.
But the surge in revenue, earnings, and dividends is likely to be a nice, one-off bonus for Origin and the power sector. On Wednesday, AGL reported what it said was a one-off surge in earnings and revenue but made it clear that would not happen this year. On Thursday, it was rival Origin Energy's turn to reveal a surge in revenue and earnings, which it said would not return for a repeat run.
Origin revealed a near one-third rise in profits for the year, as earnings soared in its energy generation, retail, and gas businesses. But CEO Frank Calabria said he expects profits to fall in energy markets—which includes generation, retail, and trading—in the coming year, which is what AGL pointed to on Wednesday.
Origin reported a net profit of $1.397 billion for the year to June 30, up from $1.055 billion in 2022-23. Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA), a measure of core company profitability, rose to $3.528 billion from $3.107 billion. The underlying profit increased to $1.183 billion, $436 million higher than the prior year, on higher earnings in the Energy Markets and Integrated Gas divisions.
"We are acutely aware of the pressure on household budgets at this time given the rising cost of living," Mr Calabria said in Thursday's release. He said Origin was supporting its most vulnerable customers with $100 million committed this year and next, including a freeze on tariffs for these accounts. "An important factor in helping to keep downward pressure on prices is ensuring reliable energy, and it is pleasing to see how well our generation fleet performed," he said.
The company revealed that output from the ageing Eraring coal-fired power station, set to keep running until August 2027 under a deal struck with the NSW government, rose by 2.1 terawatt hours to 14.3 TWh. Australia Pacific LNG production (from Queensland) rose 3% to 694 petajoules, with 150PJ sold into the domestic market in the June year.
Higher earnings lifted free cash flow to $1.296 billion, from $965 million in the previous financial year, partly to cover the cost of the country's transition from fossil fuels.
CEO Calabria said the balance sheet remains strong, with good cash generation supporting an increase in returns to shareholders and enabling capital to be reinvested into renewables and energy storage.
Origin said it expects higher electricity demand due to electrification, the uptake of electric vehicles, and the expansion of data centres. But like AGL, 2023-24 was as good as it gets, with Origin saying the coming year's outlook for earnings looks weaker with electricity profit forecast to fall as tariffs ease and on higher coal costs.
Moody’s Ratings liked the Origin result, saying in a note on Thursday, "Origin's strong results for fiscal year 2024 are credit positive, benefiting from higher customer electricity prices that incorporated higher wholesale (generation) costs of previous years. The resulting strong cash flow translates into healthy credit metrics, solidly positioning Origin at its present rating level, notwithstanding its transition and customer-oriented growth investment pipeline as well as its recent decision to lift its dividend payout ratio. The company’s credit metrics, while remaining strong, are likely to moderate as retail electricity margins retreat on lower wholesale and retail cost allowances, and given the end of Australia’s legislated coal price cap."
