Origin Energy Executive General Manager, Retail Jon Briskin’s speech at Australian Energy.

Week, 8 June, 2022.

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I would like to start today by acknowledging the traditional owners of the lands on which we are meeting today, the Wurundjeri people of the Kulin nation, and recognise their elders past, present and emerging. Origin supports the Uluru Statement from the Heart as part of our commitment to reconciliation and ensuring that Aboriginal and Torres Strait Islander families and communities, the oldest surviving continuous cultures in the world, have a say in the development of policies and actions that directly affect them. 

It is particularly timely to be here today to talk about the challenges and the opportunities that are facing our sector on the path of a major energy transition. 

I say timely, because the past two weeks in the Retail market have been unprecedented.  With the incredible rise in wholesale electricity and gas prices, more than a dozen retailers have stopped selling discounted market offers and are only offering the mandated, regulated default tariffs. Two retailers have failed. Plus you would have read that several retailers have now written to their customers encouraging them to seek alternative providers to avoid near triple digit percentage price rises. 

It has reached a point now where wholesale prices are much higher than what has been factored into the regulated price caps for standing offer customers, the DMO and VDO. For many retailers, those regulated tariffs do not provide an adequate enough allowance to recover their costs.  

As a provider of an essential service, the challenge Origin and all retailers face in this environment is doing the right thing by customers to help manage the burden of rising energy costs and cost of living more broadly. At the same time, we must make sure our businesses are sustainable and are able to recover the higher costs of doing business. 

It is a challenge facing regulators, retailers, and governments.   

As the shop front for the industry, and the bodies responsible for managing customer relationships – it is incumbent, especially on large retailers like Origin, to act responsibly, price fairly, and make sure that we protect our most vulnerable customers along the way. 

We are starting to communicate our 1 July price changes to customers this week.  

After the ACCC found last year that retail prices were at an 8 year low, like all retailers I suspect, we are in a position where we will be increasing our prices, which we know will be unwelcome news for customers. 

To help minimise the impact of price changes for our customers who are facing higher costs of living across the board, we are absorbing some higher energy costs to make sure that the vast majority of Origin customers pay no more than the Default Market Offer on 1 July. 

Additionally, we are prioritising support for our most vulnerable customers by protecting those in our Power On hardship program from the impacts of these price rises on 1 July.  

Supporting customers in need is central to our thinking and our actions. We may not always get it right all the time, but we are genuine in our commitment to support our customers, and I receive many “thank-yous” from customers who feel incredibly supported by Origin as they get back on their feet.  

While some will view our position as a large generator and retailer of energy as providing us with the size and scale to be able to do this more easily than smaller retailers, it is worth noting we are facing significant pressures across our generation portfolio through issues with coal supply. Origin is also a net-buyer from the wholesale power market – we only generate enough power for around half our customer load – and so we too, are impacted by the very high prices in the market today.  As you would have seen, last week we reduced FY22 guidance for our Energy Markets business. 

Over time, if we can bring more supply into the market, prices will ease and as we’ve done in the past, we will look to bring prices down again.  And hopefully soon.  

But as outlined at this event yesterday by Origin’s CEO Frank Calabria, for this to happen the immediate priority needs to be increasing output from existing coal fired power stations. To do this, we also need to look at addressing some of the coal supply issues affecting the sector, including for example, acting with urgency to prioritise rail deliveries to coal fired power stations needing supply. We are very pleased to see governments already supporting this action to increase rail prioritisation and get more supply to plants. Getting coal plants back in the market will also reduce the draw on gas-fired generation, alleviating some of the supply and price pressures in the gas market. 

In the medium term, the extra volume of renewables entering the power system will put downward pressure on wholesale prices. This bodes well for customers, but we recognise this may seem a long way from what customers are experiencing today. 

Origin for its part has a clear ambition to lead the transition to net zero through cleaner energy and customer solutions. We have announced we will exit coal fired power generation when Eraring closes in 2025, and we will replace it in our portfolio by rapidly scaling our investment in renewables and storage with firming from our existing fleet of gas peakers and pumped hydro. 

As evidence of our commitment, we recently announced our acquisition of the large scale Yarrabee Solar Farm development project in NSW that has the potential for up to 900MW, and we received NSW government approval for a 700MW large scale battery on the site of Eraring Power Station.  

And we will continue to lower our retail costs and focus on providing market leading customer service. We have already migrated half of our customers across to Octopus Energy’s market leading operating platform Kraken, with the other half due to be on this platform by the end of the calendar year.  

Achievement of this milestone makes us well placed to be able to pass through lower prices in the future.  

Finally, one of the most exciting developments that will underpin our ability to bring lower cost, clean energy solutions to our customers is the establishment of our Virtual Power Plant.  

We already have over 100,000 devices connected to our virtual power plant, with a capacity of 250MW – equivalent to one unit of a gas fired power plant. Our ambition is to increase this to 2GW over coming years. 

Our VPP uses advanced analytics and AI to virtually orchestrate of energy supply and demand across the network – including electric vehicles, home batteries, smart solar, hot water systems, as well as both small and large customer demand management.  

It has huge benefits for the network and for customers. By offsetting the need for additional investment in generation and network infrastructure, value and benefits can be more easily shared with customers.

We are already well on the path to delivering the VPP at significant scale, with multiple programs. 

This includes Spike – our residential demand management program which continues to go from strength to strength. We have over 71,000 customers on the platform now who have earnt over $3.1 million in reward points for reducing their energy during nominated peak demand events.  

Origin customers who have their home battery connected to our VPP, and receive discounts on their energy bill for doing so, engage with our digital platforms 4 times more frequently than an average non-battery customer. While customers in our EV smart charging trial with ARENA are receiving benefits for shifting their charging behaviours in response to different demand signals.  

And we continue to trial new solutions including our recent commencement of a trial with Energy Queensland to install pole mounted batteries in selected communities to test how we can share the benefits of batteries with customers.  

The success of these future energy solutions will provide customers with access to cleaner, smarter, affordable energy solutions. 


These are some of the reasons that, despite the challenges in the market today, we are optimistic about the medium to long term outlook for the market and for customers.  

If we want a cautionary tale on how challenging things can get, and how to best support customers through a period of escalating prices, then we need only look to the UK where I have seen the impacts first hand, having recently returned from visiting our strategic partner Octopus Energy.  

In the UK, the introduction of price caps on retailers in that market meant that no less than 30 retailers went to the wall when the wholesale price for energy went up last year. 

These retailers, who were able to compete on low prices with minimal long term hedges or risk management, were simply not in a position to withstand the increases in the wholesale market. Without the ability to absorb these costs increases or to pass on the higher costs to customers, they had to shut up shop and around 6 million customers were displaced. 

In the case of one large retailer, Bulb, they remain under ‘special administration’ until a sale or rescue of its business can be completed, as no other retailer is able to take on their customers today.  

There are a few important lessons we can learn here from this UK experience. 

Firstly, there is a need to ensure that all new retailers in the market are well capitalised with strong risk management practices, which can be implemented through a tightening of regulations.  

Secondly, regulated tariffs need to allow for proper cost recovery but not provide incentives for poor hedging practices. In the UK, they already conduct six-monthly price reviews, and are looking at making this 3 months, to shorten the lag time for retailers to recover higher costs. 

Thirdly, Supplier of Last Resort mechanisms, need to allow for incumbent retailers to recover their costs. Governments and regulators in the UK have taken action to share the risk with retailers, recovered through a levy on bills. 

And finally, and most importantly, the focus should be on improving customer protections for the most vulnerable customers – we believe this can be achieved through fast-tracking the Australian Energy Regulator’s (AER) vulnerability strategy. 

As people feel the impact of cost of living increases across the community, and energy prices go up, the most immediate and pressing priority is that we support customers who need right now it most through these price shocks. And hopefully you will see from what I have spoken though today that Origin is here to do that. 

And at the same time, it is integral that we work together as an industry with governments and regulators to help steer a way through while minimising impact to customers. Because in the long term, if we can navigate through these immediate challenges, then the benefits to customers of a cheaper, cleaner and smarter energy future are achievable and within reach.

ENDS 

Origin Energy CEO Frank Calabria’s speech at Australian Energy

Week, 7 June, 2022.

After a long period of relative stability in our power markets, we have entered a period of incredible change and volatility. The long-term energy transition that was already underway and accelerating, has collided with a major shift in the broader macroeconomic and geopolitical environment, causing acute price and security of supply events in global energy markets.  

With this context in mind, I want to begin my speech with a comment Canadian Prime Minister Justin Trudeau made at the World Economic Forum in Davos a few years ago, as it is very relevant to what I want to talk about today:  

“The pace of change has never been this fast, yet it will never be this slow again.”  

He continued: “You are rightly anxious about how quickly our existing business models are being disrupted. Still, if you’re anxious, imagine how the folks who aren’t in this room are feeling.”  

These are poignant remarks for a few reasons:  

  • The pace of change of the energy transition is accelerating. But at the same time, we are not moving fast enough to build out the low-emissions power system that will be needed to replace our ageing, emissions-intensive one. 
  • We are witnessing global and local energy supply and security concerns, extremely volatile commodity markets and very high prices. These are challenging times for our sector to navigate. There are some immediate steps we need to take, while other solutions will take time. 
  • There are challenges facing the broader economy too, with high inflation, cost of living pressures, an extremely tight labour market, ongoing supply chain pressures and rising interest rates.  
  • Against this backdrop, we must put ourselves in the shoes of our customers and the broader community. They are not at the decision-making table, but they are directly affected by the choices we make. 

Which brings me to the topic I’m here to talk about today: ‘Examining the impact of the energy transition on customers.’ 

Vision for the future 

This is a topic we are passionate about at Origin. Our strategy is aligned to our ambition to achieve net zero emissions by 2050. Our core belief is that the decarbonisation of energy will be good for customers and good for the planet. 

The energy transition will drive an influx of cheaper, cleaner renewable energy and storage. We believe that over time this will place downward pressure on wholesale prices, which will be good for customers. 

And we believe over time, this cleaner power system will underpin secure and reliable power, and this is clearly important for customers. 

The energy transition will also bring with it a range of cleaner, smarter and more connected energy solutions for residential customers and large businesses alike.  

Current state of play

While we firmly believe that where we are heading will be great for the planet and customers, and can reflect on significant progress to date, I think it is fair to say that from where we are all standing today, with the immediate challenges being experienced, this feels further away. 

So, where are we today? 

Innovation over the past decade or so, in the early phase of the transition, has delivered much in the way of positive change for our customers. Millions have started to access cleaner, cheaper energy solutions, predominantly through solar, and utility-scale renewables have grown rapidly in the National Electricity Market (NEM).   

  • In 2010, around 65,000 households in Australia had rooftop solar. Today, it’s more than 3 million.   
  • In 2010, renewable energy represented less than 9% of the National Electricity Market. Today, it is closer to 30%.  
  • Australia now has the third highest per capital solar and wind generation output in the world.

At the same time, there have been major advancements in technology, particularly in the areas of battery storage, solar PV, and electric vehicles. For example, the costs of battery packs, one of the main components of storage systems, have declined by about 90 per cent over the past decade, and solar PV has declined a similar amount. 

These achievements not only highlight the positive progress we have already made; they provide further confidence that we can achieve what we are setting out to do. 

However, today we are experiencing an acute challenge in energy markets in Australia and across the world. This has been the result of a number of forces that have come together over recent times: 

  • Energy demand rebounded as the world came out of the pandemic lockdowns and this outstripped the ability of energy supply to respond, where in many cases investment in new supply had already been challenging. 
  • This was followed by Russia’s invasion of Ukraine where global energy supply and security fears and a move away from Russian energy exports have continued to drive up the price of all energy sources. 
  • And further, in Australia we have experienced coal power plant outages and coal supply issues, placing strain on electricity supply. 

This has culminated in an extraordinary rise in commodity prices: 

  • Coal prices have more than tripled in 2022 to average as much as $300/tonne.  
  • Oil has been hovering above US$110 per barrel for many months compared with an average price of US$80 per barrel last year.  
  • The price of lithium, a critical mineral for batteries, is nine times higher than it was at the start of last year. 
  • The wholesale price of electricity topped $400 a megawatt hour across the main states in the National Electricity Market last week, compared with an average price of less than $70 per megawatt hour last year. 
  • Spot gas prices on Australia’s east coast have risen from less than $10 a gigajoule at the start of this year to sit at between $30 and $50 a gigajoule in recent weeks.  

At a time of very high prices, it is appropriate to ask: where to from here for our sector? 

My belief is that we must continue to lean into the energy transition. The technological, economic, social, and environmental factors driving the transition are unstoppable forces and the advantages for customers and society over time are many. We therefore need to continue to drive towards those outcomes and deliver the transition at least-cost, in a way that is as smooth as possible, and as fair and equitable for all customers as we can. 

But we must also act with urgency today, to address the immediate challenges and volatility facing the market. 

These are highly uncertain times, and we have a responsibility to address our customers’ very real concerns over the security, reliability, and affordability, of their energy supply today.  

What is the energy transition? 

The energy transition is often talked about, but I’m not sure that what it means – the challenges, complexity, and opportunities it presents over a long period of time – are very well understood, particularly among customers. So, I would like to articulate how we think about the transition at Origin.

The energy transition is a multi-decade, large-scale, global transformation that will fundamentally change the way we source, produce, supply, distribute and use energy. At its core, the transition requires us to progressively dismantle our old energy system and replace it with a new, low emissions one.  

The scale of the transition for the energy sector represents an enormous opportunity between now and 2050: 

  • We estimate $120 trillion will need to be invested in the energy sector to reach net zero.  
  • We estimate that with electrification will come a tripling of demand for electricity.  
  • Storage will need to grow by a factor of 170, there will be an eight-fold growth in renewables, and significant growth in hydrogen as a clean fuel source. 
  • Australia is a likely to be a significant exporter of hydrogen, given our renewable energy potential and geographic proximity to energy hungry, growing Asian markets.  

This opportunity is very exciting but we should not underestimate the enormity of the challenge to successfully execute the engineering, construction and economic task associated with the transition. 

We need to get this right for customers, as the consequences of not doing so are too great. 

What do we need to do to stabilise markets today, and set up the transition to succeed? 

If we are to maintain a mandate from customers and the community to deliver a successful energy transition over time and achieve net zero, then we must first address the challenges facing the market today. 

At the same time, we must continue to move expediently with the transition. 

In practice this means delivering the necessary investment in renewable energy supply, firming (or dispatchable) generation, demand response and transmission necessary to underpin the new power system we are transitioning to. But also, recognising and acting to get our existing, yet ageing and sometimes unreliable, power system to perform the important role it needs to continue to undertake over the coming years.  

Getting these two things right simultaneously will be critical if we are to protect customers from lumpy price rises that they cannot afford on the way through. 

I’ll now talk about the key action to stabile markets today, along with the three things we need to do to deliver a successful transition over the longer-term. 

 1) The first and most immediate priority is to increase the output from existing coal fire power stations.  

The important role of coal power in the system today has been brought into stark focus by recent events. Coal plants still supply some 65 per cent (or two-thirds) of electricity and today are very important to both reliability and affordability. Recent coal plant outages, and coal supply and price challenges, have been the main driver of the very high wholesale prices we’re seeing. We must act swiftly, with industry and government working in concert, to bring as much coal supply back into the system as soon as possible, in order to put downwards pressure on the wholesale electricity price.  

To do this, we also need to look at addressing some of the coal supply issues affecting the sector, including for example, acting with urgency to prioritise rail deliveries to coal fired power stations needing supply.  

Getting coal plant back in the market, will also reduce the draw on gas-fired generation, alleviating some of the supply and price pressures in the gas market. 

2) Secondly, there is the vast build out of renewables that needs to be achieved in a relatively short period of time.  

The Federal Government aim is to achieve 82 per cent renewables in the electricity market by 2030. This is a strong and clear ambition for the sector to respond to, but a long way from the 30 per cent of the market renewables makes up today. Given the already high penetration of household solar, this will need to largely come from utility scale projects requiring grid connection.Page Break 

In Australia, major projects have the propensity to cost more, and take considerably longer, than expected. 

For Origin’s part, we are keen to play a role. In recent months, we have acquired 800 MW of solar development projects, to add to a further 500 MW of development options already in place. We are excited to progress these projects and help to bring on more renewable capacity in the market. But we also remain mindful of the propensity for delays to projects, and the impact of inflationary pressures when delivering a major infrastructure roll out across the energy sector. 

To support the rapid scaling of renewables supply, there is a need to maximise the efficiency, clarity and speed in the connection and planning approval process for new developments. There also needs to be a clear framework for the timely allocation of offshore wind acreage, and its connection to the onshore transmission network. 

3) Thirdly, critical to the build out of new renewable energy supply is the construction of additional transmission.  

The majority of new solar and wind developments will occur in regional areas. Connecting this supply to the major population centres, where demand is located, will require a $70 billion investment in transmission, the Federal Government estimates.  

Similar to the challenges with the renewables build, the risk is that these projects take longer, and cost more. Costs that are ultimately borne by customers on bills.  

4) Noting the inherent variability of renewable energy, is the need to invest in new firming capacity to maintain reliable supply for customers.  

Balancing tighter supply and demand in the market is an increasingly complex challenge, with the back-up, or firming, of variable renewable supply met by a combination of technologies. 

First, there will need to be substantially more storage added to the market, which can meet power needs when the wind is not blowing and the sun is not shining. Page Break 

Other dispatchable assets that can respond to spikes in demand or supply-side issues are required too, particularly for longer durations when battery storage is not yet suitable. Pumped hydro is an important part of this equation, and there are several potential projects in the works, including an expansion of our Shoalhaven pumped hydro scheme in Kangaroo Valley, south of Sydney. 

Gas peaking power stations will remain an essential part of the power system, particularly for when firming is needed over longer periods of time. Gas peakers can support the market over many days or weeks when batteries and pumped hydro alone cannot meet the market’s needs. These assets may run only once or twice a year, or even not at all. But they must be available in the market to underpin security of supply for customers. 

It’s worth highlighting just how significant the role of gas has been in the power market over the past week. Across the National Electricity Market, gas fired generation accounted for 425 GWh of output – with Origin’s gas fleet providing 145 GWh of this output, or almost 30 per cent of the total contribution by gas generation. Over June 2-June 3, our gas fleet (ORG GPG and tolling through Pelican Point) consumed 370 Terajoules of gas per day – these are by all accounts, the biggest gas consumption days for power generation in any recent memory.  

Significantly more firming capacity will be needed to support increased renewable supply as it comes online. Critical to the investment is the effective design and implementation of a new capacity mechanism to reward the key role these assets play in the market. We welcome the focus of the Federal Government and the Energy Security Board, on fast-tracking the development of a mechanism that supports long-term investments in this type of capacity.  

Virtual power plants, or VPPs, will also play an important role in balancing supply and demand. For example, we’ve targeted growth in Origin’s VPP to about 2 GW over coming years. There is significant, under-utilised capacity sitting in distributed energy assets in homes and businesses around the country. The technology that underpins VPPs enables us to aggregate and orchestrate these assets to help meet the needs of the market. Why is this important? Because by more effectively utilising all of the capacity already in the system, rather than just building new supply and transmission, we can potentially avoid some capital investment, which is ultimately paid for by customers. VPPs are a lower-cost, efficient way to help balance supply and demand in the market. 

Role of gas 

I would like to touch briefly on the role of gas in the transition more broadly, as this is a complex issue that tends to attract a lot of debate.  

Gas is critical to the energy system for the foreseeable future. As I’ve already mentioned, it is important for gas peaking to underpin reliable power supply for customers. It is also a major source of energy supply for heating homes in colder parts of the country, and for large businesses. In particular, it is a crucial input for many industrial processes with high heat load, for which today there is no clear, commercially viable alternative. In addition, it is a cleaner fuel than coal and safely transportable as LNG, so it can help displace more emissions intensive sources of energy in other nations that are also decarbonising. 

Today, there are also challenges in the gas market, with tightness of supply in southern markets and high prices. 

As with electricity, the immediate action required is to get more gas supply into the market. The east coast LNG producers have already responded to this call over the past week to support the domestic market with more gas. However, during peaks the pipeline carrying gas south reached its capacity. So even if LNG producers were to divert more gas supply to the domestic market, there is a physical constraint at this point in time in getting it south from Queensland. 

We need to acknowledge the important role gas will continue to play over the medium term, with governments and industry working together to ensure there are sufficient sources of gas to underpin security of supply for the domestic market. This will take more time, but it is the strongest action we can take to place downward pressure on prices for customers. 

The role of gas in the energy system will undoubtedly reduce over time as more sectors electrify and as alternative renewable fuel sources mature. And this will be crucial to getting the economy to net zero emissions. But in the meantime, we simply cannot remove a fuel from the energy system, for which there is no viable alternative today. Indeed, I would go so far as to say it is irresponsible for people to suggest we can. 

Reflections – what happens when we don’t get it right 

Current events unfolding in Australia bear a close resemblance to what unfolded in the UK over recent months.  

Extreme energy price volatility is pushing households into energy poverty and sending businesses to the wall. With inflation in the UK running at a 40-year high, living standards are falling. The cost of energy plays a large part in this inflation number, with households having faced a 54 per cent increase in their energy bills in April alone, and a doubling of these bills is forecast. 

The impact of volatile energy prices and retail price caps, which limited the ability of retailers to recover higher energy costs led to thirty energy suppliers failing in the UK, leaving a very large number of customers being transferred to Suppliers of Last Resort, who then must match this new customer demand with supply sourced from the wholesale markets – at very high costs. 

Governments and regulators have taken action to stabilise the UK market. For example, sharing the risk with retailers under the Supplier of Last Resort mechanism, recovered through a levy on bills, as well as tightening regulations for new business entrants. In addition, they are considering bringing forward the six-monthly price reviews for the price cap to quarterly, to shorten the lag time for retailers to recover higher costs. 

Closer to home, we are already seeing similar impacts of high wholesale prices playing out. Two retailers have gone under, with the Retailer of Last Resort mechanism being utilised by the regulator.  More than a dozen retailers have stopped selling discounted market offers in the market and are only offering the mandated, regulated default tariffs. You would have also heard about several smaller retailers writing to their customers encouraging them to seek alternative providers to avoid near triple digit percentage price rises. 

The risk is very high that small, exposed retailers will go under as they grapple with the significant increase in wholesale prices this year, just as we saw in the UK. 

Conclusion 

We are in extraordinary times. And it does make me reflect on my comment at the beginning; with all this disruption, how do you think those not seated at the decision-making table are feeling? 

Descriptors such as ‘apocalyptic’ and ‘chaos’ don’t really help the folks who aren’t in the room right now; our customers. However, we are in a position to act to stabilise a system that has been hit by a number of external shocks and protect customers from the worst impacts. 

We must continue to lean into the transition, given its potential to improve outcomes across energy security, affordability and achieve emissions reduction over time. 

But we must act with some urgency to stabilise markets today. First and foremost, by getting coal plant back online as quickly as possible to help stabilise the market and deliver some wholesale price relief. We must do this while at the same time rapidly accelerating the build of replacement renewable supply and firming.  

We must progress a NEM-wide capacity mechanism and prioritise transmission augmentation. And we should also learn from the UK and look to improve the Retailer of Last Resort mechanism, while also fast-tracking the Australian Energy Regulator’s (AER) vulnerability strategy, to improve protections for customers. If we don’t progress these initiatives while addressing the immediate challenges in the market with some urgency, we risk losing our mandate to deliver the energy transition.  

We must challenge ourselves, participants across the energy value chain, policy makers and governments to make the right choices that appropriately balance outcomes across decarbonisation, reliability, and affordability on behalf of customers. 

As a collective, we must also be honest with our customers and the wider public not just about our ambition to get to net zero, but the challenges and trade-offs we must make along this journey. We must show tangible progress on decarbonisation. And we must do so while showing care for our people affected by the transition.  

There will be a cost of delivering the transition, and it will take time to get there, so we need to help them see that the end result will be worth it. And we must continue to take steps that ensure the most vulnerable members of our community will be supported and won’t be left behind. 

The energy transition, executed well, is crucial for the planet. It can transform lives and businesses, in a good way. It will deliver many benefits to customers.  

Our purpose at Origin is to get energy right for our customers, communities, and planet. It’s an aspiration that acknowledges that we’re not there yet, and it’s one where our customers come first. 

ENDS 

Origin Energy has announced its support of the Uluru Statement from the Heart.

Origin Energy has announced its support of the Uluru Statement from the Heart.  

The Uluru Statement from the Heart is an invitation to all Australians from First Nations Australians, asking them to help build a better future by supporting the establishment of a First Nations Voice to Parliament enshrined in the Constitution and a Makarrata Commission for the purpose of treaty making and truth-telling. 

Origin CEO Frank Calabria said, “As a leading Australian company, we see opportunities to help achieve a reconciled nation and play a part in stopping the disadvantages currently being experienced by Aboriginal and Torres Strait Islander families and communities.  

“We support the Uluru Statement from the Heart as part of our strong commitment to diversity, equity and inclusion, and in addition to the targets in our Stretch Reconciliation Action Plan – across the areas of Indigenous employment, Indigenous recruitment, and cultural learning.” 

Origin acknowledges that Aboriginal and Torres Strait Islander cultures are the oldest surviving continuous cultures in the world, and is committed to creating a culture of respect and inclusion across all parts of the organisation. 

Origin’s operations are located on the land of Aboriginal and Torres Strait Islander Peoples and the company is committed to working constructively, transparently and in good faith in all interactions with Traditional Owners. 



Origin Energy Limited (Origin) provides the following update on operating conditions and earnings guidance.

There is currently extreme volatility across commodity markets, driven by a combination of global energy supply and security concerns, exacerbated by the impact of the Russian invasion of Ukraine, with subsequent unprecedented increases in international energy prices including coal, gas and oil. Domestically, coal plant outages and high coal and gas prices have contributed to a steep escalation in wholesale electricity prices.

The following guidance is based on current market conditions and the regulatory environment. Ongoing volatility in market conditions is likely and may adversely impact operations.

FY2022

For the 2022 financial year, Origin expects consolidated group Underlying EBITDA to be around the mid-point of the original guidance range of $1,950 – $2,250 million. 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 $1,700 – $1,800 million1, compared to the original guidance of $1,500 – $1,650 million, driven primarily by higher oil and LNG prices, with production and operating and capital expenditure at Australia Pacific LNG in line with expectations. The cash distribution to Origin net of oil hedging loss is expected to be around $1.4 billion, compared with the original guidance of >$1.1 billion.

In Energy Markets, ongoing challenges with coal supply have been impacting Eraring Power Station throughout FY2022. However, the situation has deteriorated significantly in recent weeks, with material under-delivery of coal compared to expectations, and with Centennial Coal notifying Origin of further production constraints at its Mandalong mine. Deliveries from the Mandalong mine are expected to be interrupted during the remainder of FY2022 and into the first half of FY2023. Equipment supply chain delays are also expected to impact coal deliveries in FY2023.

The recent material under-delivery of coal to Eraring results in lower output from the plant, additional replacement coal purchases at significantly higher prices, and is being exacerbated by coal delivery constraints via rail. In addition, the lower output from Eraring results in a greater exposure to the purchase of electricity at current high spot prices in order to meet customer demand.

As a result, Origin now expects Energy Markets Underlying EBITDA in FY2022 to be $310 – $460 million, lower than the original guidance range of $450 – $600 million.

FY2023

Origin had previously provided guidance for Energy Markets Underlying EBITDA for FY2023 of $600 – $850 million. Since the time FY2023 guidance was provided, there have been material developments in global and Australian energy markets.

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. Origin is part-way through finalising coal contracting arrangements for FY2023.

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

The current high commodity price environment is a net benefit for Integrated Gas, with higher sale prices more than offsetting higher input prices, including power costs.

Due to the factors outlined above, there is a very high degree of uncertainty around the range of earnings outcomes for the 2023 financial year. As a result, Origin has withdrawn all guidance for FY2023. Origin will continue to assess the outlook, with a view to providing an update at full year results in August.

Separately, Origin has now completed $185 million of its targeted $250 million share buy-back as announced in March 2022. The buy-back is expected to be completed over coming months.

Management will hold an investor and analyst call at 11:30am (AEST) this morning. Dial in details are on the company’s website.


1 Based on an effective lagged APLNG oil price of US$74/bbl, weighted average JKM price of US$28/mmbtu and AUD:USD exchange rate of 0.72.


Origin Energy Limited (Origin) advises that Octopus Energy Group Limited (Octopus) will continue its rapid expansion, with a fund managed by leading sustainable investor Generation Investment Management (GIM) to invest £211 million to acquire approximately 7 per cent of the company. GIM’s investment values Octopus at approximately £3 billion (A$5.5 billion).

Origin will invest an additional £38 million (~A$70 million*) in Octopus to maintain its 20 per cent equity interest in the company. Octopus is an energy retailer with approximately 5.3 million customer accounts, a technology and software provider licencing its proprietary platform, Kraken, to a growing list of leading energy retailers around the world, and a renewable asset manager with more than £3.4 billion of assets under management. Octopus is also increasingly focused on developing future energy products and services, including the decarbonisation of heat, smart meters and electric vehicle leasing and charging.

GIM will have an option to double its stake in Octopus under the same terms prior to 30 June 2022, with Origin having an option to invest to maintain its 20 per cent share if GIM exercises its option.

Origin CEO Frank Calabria said, “Since our investment in May 2020, Octopus has emerged as a global leader in energy retailing and technology, achieving significant growth in its home market and expanding into several international markets. It has also continued licencing its Kraken technology platform to leading energy retailers around the world with a target of 100 million customer accounts on Kraken by 2027.

“The rapid expansion of Octopus underpinned by its market leading technology has driven a tripling in the company’s value to approximately £3 billion since we made our initial investment.

“Origin’s additional investment demonstrates our confidence in Octopus’ strategy, management team and growth prospects, confirmed by GIM, which is one of the world’s most innovative sustainable investment funds. Our exposure to Octopus’ continued success is expected to be an important avenue of growth for Origin.

“In the competitive and fast-changing energy sector, a technology-enabled retail business that delivers superior customer experience at low cost will be core to Origin’s continued success. The strategic partnership with Octopus will help Origin achieve these objectives and strengthen our retail leadership, as we migrate our retail customers to Kraken by the end of 2022 and replicate its low cost, high service operating model, delivering an expected $100-150 million of cash benefits from FY2024.

“Importantly, Octopus has demonstrated its ability to deliver major customer migrations onto Kraken, moving more than 4.3 million customer accounts for E.On and nPower in the UK in less than 12 months,” Mr Calabria said.

On 26 September, Octopus agreed with the UK energy regulator to take on Avro Energy’s 1.1 million customer accounts under the supplier of last resort mechanism, enabling the company to keep the lights on for Avro customers and materially grow its customers base at a competitive cost. When combined with continued organic growth, Octopus’ total UK customer base is now approximately 5.3 million energy accounts comprising approximately 9.5 per cent of the UK market. In addition, Octopus expects approximately £250 million in licensing revenue over the next three years based on deals done to date to license the Kraken platform.

Octopus has also expanded into new markets, with strategic acquisitions in Spain, Texas and New Zealand. Octopus and Tokyo Gas have also progressed their entry into Japan, the world’s largest deregulated energy market, and are on track for their first electricity customers in October.

Origin entered into a strategic partnership with Octopus in May 2020, acquiring a 20 per cent equity interest for £215 million.

Octopus will use the investment to accelerate its growth strategy focused on international expansion of technology licencing and energy retail, including innovative customer solutions such as electric vehicle charging and leasing capabilities and electric heat pump services.

On completion of the initial GIM investment, Octopus Energy’s ownership will comprise 48.2 per cent Octopus Capital, 15.48 per cent Octopus founders and employees, 20 per cent Origin, 9.08 per cent Tokyo Gas and 7.25 per cent GIM.

*At an exchange rate of 0.533 AUD/GBP.

APPENDIX: SCHEDULE OF ORIGIN EQUITY PAYMENTS TO OCTOPUS ENERGY

Tranches (A$m)

FY2020

FY2021

FY2022

FY2023

Equity investment May 2020

128

90

~190

Equity investment December 2020

51

~10

~10

Equity investment September 2021

~70

Total

128

141

~270

~10

* Including transaction costs


Media
Anneliis Allen
Mobile: +61 428 967 166
Investors
Liam Barry
Mobile: +61 401 710 367

Origin’s purpose, Getting energy right for our customers, communities and planet, drives everything we do as an organisation. This purpose has guided us over the past 12 months as, despite the many challenges of the COVID-19 pandemic, our people went the extra mile to ensure we could provide affordable and reliable energy to our customers. We thank our teams for this dedication.

This year we focused on our position as a leader for positive change with our Where all good change starts campaign. Origin’s strategy is all about that positive change as we connect our customers to the energy and technologies of the future and lead the transition to a low-carbon economy.

To lead that change, Origin has a team of close to 5,000 people across Australia and the Pacific. That team includes Kurt Logan, who features on the front cover of this report. Kurt is a technician at our Condabri facility in Queensland, which as part of our Australia Pacific LNG joint venture, supplies around 30 per cent of Australia’s east coast gas demand.

Progress on our commitments

Origin’s FY2021 financial performance reflected a strong operational position against the headwinds of volatile commodities markets for electricity, natural gas and oil. Against this backdrop of economic uncertainty resulting from the pandemic, we demonstrated the strength of our diversified model: Integrated Gas with its gas production and exploration and Energy Markets with its position in generation and as a multi-product retailer with energy and broadband services.

Our focus on capital discipline and cost management allowed us to balance the priorities of paying down debt and delivering dividends to shareholders, while continuing to invest in targeted growth opportunities.

For the full year, Origin announced a statutory loss of $2,291 million, primarily comprising $2,247 million in non-cash charges, including impairments and a deferred tax liability. Our Underlying Profit of $318 million reflected lower commodity prices in the Energy Markets and Integrated Gas divisions. This was partially offset by lower operating costs for Australia Pacific LNG, retail cost savings, lower interest expense and oil hedging gains.

Origin’s Free Cash Flow remained robust at $1,140 million, enabling debt reduction of $519 million, while allowing for investment in growth and an unfranked final dividend of 7.5 cents per share.

In the gas growth assets, we continued exploration activities in the prospective Beetaloo and Canning basins. Our future fuels activities gathered momentum, with a number of hydrogen feasibility projects including a green ammonia export project in Tasmania’s Bell Bay expected to be completed by the end of 2021.

Origin is progressing work on updating our existing emissions reduction targets consistent with a 1.5 degree pathway. Our long-term aim is to achieve net zero Scope 1 and Scope 2 emissions by 2050, and as part of that ambition we introduced a short-term target to reduce our Scope 1 emissions by an average of 10 per cent per annum between FY2021 and FY2023, from a 2017 baseline. This target is linked to executive remuneration, and in FY2021 we achieved an 11 per cent decline in Scope 1 emissions compared to the baseline.

Our business performance

In Integrated Gas, Australia Pacific LNG maintained production of 263 petajoules (Origin share) driven by outstanding field performance, associated capital expenditure reductions and further improvements in operational efficiency. Underlying EBITDA was $1,135 million – a 35 per cent reduction on the prior year, primarily due to lower realised oil prices that were partially offset by lower costs.

Australia Pacific LNG’s performance was a standout, safely curtailing output when the market was subdued, and rapidly ramping up production when demand recovered. In FY2021, Australia Pacific LNG matched previous daily production records and shipped a record 130 cargoes for the year.

Across Energy Markets, lower electricity gross profit was driven primarily by the impact of lower wholesale prices on tariffs, higher network and metering costs, and assistance provided to customers adversely affected by the pandemic. This was partially offset by a reduction in the cost of energy. Lower gas margins were driven by a combination of lower gas tariffs, the roll-off of long-term capacity contracts and higher supply costs. Underlying EBITDA for Energy Markets was $991 million, down 32 per cent on the prior year.

In our Retail business our Strategic Net Promoter Score reached a record high and customer accounts increased by 30,000 through our Everyday Rewards plan and growth segments, including solar, broadband and community energy services. Our investment in Octopus Energy continues to exceed expectations. The rollout of the Octopus customer service platform, Kraken, gathered momentum with more than 250,000 customers benefiting from improved customer service. We continue to lead the industry on cost performance, achieving $110 million in savings since 2018 and we will achieve further savings as the Kraken rollout progresses.

Outlook

In our full-year results, we gave guidance to Underlying EBITDA in FY2022 of between $1,850–$2,150 million, compared to $2,048 million in FY2021. This reflects weaker performance from Energy Markets largely offset by an expected stronger contribution from Australia Pacific LNG.

We anticipate that challenging conditions for our Energy Markets business will continue this year, ahead of a rebound in FY2023 if current forward prices continue and flow through to tariffs.

Australia Pacific LNG is expected to achieve a distribution breakeven of between US$20–US$25 a barrel. With realised prices expected to improve in FY2022 due to the lag in oil price flowing through to long-term contract prices, it is estimated that net cash flows from Australia Pacific LNG to Origin will be greater than $1 billion in FY2022.

As always, guidance is provided on the basis that market conditions and the regulatory environment do not materially change, and is subject to the potential ongoing impacts of COVID-19 on demand and customer affordability.

Looking forward

Scott Perkins became Chairman at our Annual General Meeting in October 2020, after five years as a director. We were pleased to welcome Ilana Atlas, Mick McCormack and Joan Withers to the Board as independent Non-executive Directors. Their contribution to the Board has already proven invaluable. We thank Gordon Cairns, our previous Chairman, and Teresa Engelhard for their dedication to Origin during their directorships.

As we enter Origin’s third decade, we are excited by the possibilities that will come with the energy transition and look forward to supporting our customers while continuing to play our part in reducing Australia’s emissions. Origin’s business model is well placed to prosper in a low-carbon world. As shareholders we hope you share our excitement for the future.

We look forward to welcoming many of you to this year’s Annual General Meeting on 20 October, which will again be held virtually in response to the COVID-19 pandemic.

Thank you for your continued support.


Scott Perkins

Chairman


Frank Calabria

Chief Executive Officer

                  

 

Download the 2021 Annual Report (10.8 MB)

 



Message from our Chief Executive Officer 

I am pleased to present Origin’s second Modern Slavery Statement to progress our three-year Modern Slavery Maturity Plan.

As a leading Australian energy provider, employer, and partner to both domestic and global suppliers, we know that the decisions we make every day can significantly affect the livelihoods of many. That’s why our purpose drives everything we do to get energy right for our customers, communities and planet.

This year we continued to deliver on our three-year Modern Slavery Maturity Plan, developed in FY2020. This plan focuses on building our understanding and capabilities, improving our policies and processes, and enhancing engagement with our suppliers.

In FY2021, we upskilled our people and developed our human rights remediation process. We shared our human rights expectations with over 3,600 suppliers and continued to gain their buy in and commitment through negotiating our standard contract terms. We also continued to advance our processes, apply our rigorous modern slavery risk management methodology and delved more deeply into the practices of our high-risk suppliers and our operating locations.

Our position is clear – any form of modern slavery is unacceptable. While our assessments to date have not identified any known modern slavery practices in our operations or supply chain, we recognise eradicating modern slavery requires an ongoing dedication and acknowledgement that we all have a role to play. We believe that building our internal capability to effectively manage modern slavery risks is fundamental to achieving this ambition.

I am proud of the work Origin has done to date, what we are building for the future and our commitment to being the energy company “Where all good change starts”.

Frank Calabria
Chief Executive Officer

 

 

This year we continued to deliver on our three-year Modern Slavery Maturity Plan, developed in FY2020. This plan focuses on building our understanding and capabilities, improving our policies and processes, and enhancing engagement with our suppliers.

In accordance with ASX Listing Rule 3.17A, Origin Energy Limited (Origin) gives notice that two resolutions have been received under section 249N of the Corporations Act from a group of shareholders for consideration at the Company’s Annual General Meeting, to be held on Wednesday, 19 October 2022.

The Resolutions have been requisitioned by 115 shareholders representing approximately 0.0104 per cent of Origin shares on issue.

The ASX Listing Rules require Origin to lodge this notice within two business days of receipt of the requisition.

Origin respects the right of shareholders to requisition resolutions.

Origin’s Notice of Annual General Meeting will be released in September and will include the Board’s recommendation on each resolution to be considered at the meeting.

Contacts

Media
Anneliis Allen
Mobile: +61 428 967 166
Investors
Peter Rice
Mobile: +61 417 230 306

Quarterly Report (PDF 511 kB)

Origin Energy Limited (Origin) has released its Quarterly Report for the period to 30 June 2022, covering the performance of its Integrated Gas and Energy Markets divisions.

Integrated Gas:

  • Origin received cash distributions from Australia Pacific LNG of $1,595 million in FY2022, with $433 million received as unfranked dividends. The cash distribution net of oil hedging was $1,430 million.
  • Australia Pacific LNG revenue for the June quarter increased 6 per cent on the prior corresponding period, and FY2022 revenue increased 103 per cent, driven by higher spot LNG and realised oil prices.
  • Domestic gas sales volumes were 4 per cent higher in the June quarter, compared to the prior quarter.
  • Five JKM-linked spot cargoes were delivered in the June quarter (committed by April 2022), and a total of 15 in FY2022. North Asian LNG market prices delivered in the quarter averaged ~US$31/mmbtu.
  • June quarter Australia Pacific LNG realised gas price was A$16.43/GJ, comprising an average LNG price of US$14.24/mmbtu (contracted and spot) and an average domestic price of A$6.36/GJ (legacy and short-term).

Energy Markets:

  • FY2022 electricity sales volume up 6 per cent compared to FY2021. A 13 per cent increase in business volumes from net customer wins more than offset a 2 per cent decrease in retail volumes due to lower usage reflecting continued uptake in solar and energy efficiency.
  • FY2022 gas sales volume down 1 per cent compared to FY2021. Lower business and retail volumes were partly offset by increased gas to generation primarily due to higher outages of baseload coal generators, lower renewable output, and higher electricity demand in the June quarter.
  • Progress has been made on coal contracting for FY2023, with 3 million tonnes now contracted of a target of 5 to 6 million tonnes. The contracted supplies are from both legacy priced contracts and contracts priced at market forward prices at the time of contracting.
  • 2.2 million accounts (1.7 million customers) now migrated to Kraken and on track to migrate all electricity and gas customers by the end of calendar year 2022.
  • Additional $163 million (£94 million) to be invested in Octopus Energy to maintain a 20 per cent equity interest, following continued strong performance and growth prospects.
  • $4.4 billion uplift of in-the-money derivative assets associated with the hedging of high wholesale electricity and gas prices results in the requirement to also recognise a $2.2 billion Energy Markets non-cash impairment (subject to final audit and approval procedures). This impairment does not reflect the performance of the business or impact future value.

Origin CEO Frank Calabria said, “In an extraordinarily challenging quarter for the energy industry globally and in Australia, with elevated commodity prices and significant power supply challenges across the NEM, I’m very pleased with how the business has helped meet the energy needs of customers.

“Origin’s generation fleet played a critical role in providing reliable supply to customers, with output from Eraring Power Station rising by 30 per cent and output from our gas peakers surging by 82 per cent from the previous quarter, to help cover supply shortages in the market.

“We have made good progress in addressing coal supply constraints at Eraring, having received strong support from coal suppliers, rail network providers and the NSW government to increase rail deliveries, notwithstanding a short-term interruption in July as flooding impacted rail services in the Hunter region. Coal contracting for FY2023 has also progressed well and is now halfway complete towards our target for 5 to 6 million tonnes.

“In the retail business, the migration of customers to Kraken continues at pace with more than 2.2 million customer accounts now on the platform, and we are on track to complete the migration of all electricity and gas customers by the end of this calendar year.

“As recently announced, Origin will invest an additional $163 million (£94 million) in Octopus Energy, to maintain our 20 per cent stake in the leading UK technology and energy company.  The continued growth of Octopus, and recent challenges in the UK and global energy markets, have underscored the significant advantage provided by the market-leading Kraken platform and low-cost operating model as the energy transition accelerates.

“In the gas business, Australia Pacific LNG has performed very strongly this financial year, with revenue more than doubling on the strength of commodity prices. Origin’s cash distribution from Australia Pacific LNG was $1,595 million for the financial year.

“In addition, Australia Pacific LNG has continued to play an important role in providing secure supply to customers on Australia’s east coast, increasing gas supply to the domestic market by 4 per cent in the June 22 quarter” Mr Calabria said.

 UnitJun-22 QTR Mar-22 QTR% Change Jun-21 QTR% ChangeFY2022FY2021% Change 
Integrated Gas – APLNG 100%   
ProductionPJ170.5170.6(0%)172.6(1%)692.5700.7(1%) 
SalesPJ166.9160.14%169.7(2%)664.3656.21% 
Commodity revenue$m2,741.52,577.46%1,353.5103%9,256.74,551.8103% 
Average commodity priceA$/GJ16.4316.102%7.98106%13.936.94101% 
Energy Markets         
Electricity salesTWh9.58.96%8.610%35.533.56% 
Natural gas salesPJ69.042.961%59.117%229.4231.3(1%) 
Corporate         
Origin capex$m655518%92(29%)336339(1%) 
Origin investments$m1188n/m8n/m392161144% 


Origin Energy Limited (Origin) will invest an additional £94 million (~$163 million*) in Octopus Energy Group Limited (Octopus) to maintain its 20 per cent equity interest and support the UK technology and energy company to continue its rapid expansion.

Since Origin’s last investment in September 2021, Octopus has made significant progress across its retail, renewable energy, and technology businesses. Octopus has grown to become the UK’s fifth largest energy retailer, increasing its customer base by 25 per cent to 3.1 million customers (5.5 million customer accounts). It recently entered the French market through the acquisition of Plum Energie, adding 90,000 customers and the Kraken segment is profitable and has doubled its revenue forecast for the next three years, to more than £500 million. In addition, renewable energy assets under management have increased by £600 million, to £4 billion.

Underscoring Kraken’s global appeal in the energy transition is its ability to rapidly transform both business operations and customer experience. In just two years, Octopus has successfully migrated 8.7 million customer accounts for E.ON energy in the UK, delivering both cash savings and an uplift in customer experience. Following the recent agreement with EDF UK, more than 25 million customer accounts are now contracted on the platform, with many other opportunities being pursued, including Kraken for water and broadband and Kraken Flex.

The price of Origin’s investment is the same as the last investment in September 2021. It follows recent investments in Octopus by other major international investors, Canada Pension Plan Investment Board (CPP Investments), Generation Investment Management1 (GIM) and Tokyo Gas, which have invested a total £175 million in the latest funding round.

Recent capital raisings now value Octopus at more than £3.5 billion, representing close to a four-fold increase in value since Origin’s initial investment in May 2020.

Origin CEO Frank Calabria said, “We are very impressed with the way Octopus has navigated an incredibly challenging period for the UK energy market, with the company emerging much bigger and as the UK’s fifth largest retailer, better placed to deliver on its vision and growth strategy.

“Recent events have clearly underscored the significant advantage Octopus’ low-cost operating model and market-leading technology platform, Kraken, provides in a rapidly changing energy landscape, with Octopus able to grow and thrive while other companies failed to survive amid the consolidation of UK retailers.

“Octopus has already grown materially in value since Origin’s initial investment in 2020, and we believe our incremental investment provides a return well above our internal hurdle and is strategically aligned with our ambition to lead the energy transition to net zero. We believe Octopus provides an important avenue for future growth,” Mr Calabria said.

In Origin’s business, the migration of all electricity and gas customers to Kraken is progressing well and on track to be completed by the end of the 2022 calendar year.

As of today, more than 2.3 million customer accounts are on Kraken, well over half of Origin’s customer base, and customer happiness has continued to rate highly and above expectations as migrations have scaled up. Productivity performance has been strong, and Origin is on track to achieve the targeted cost benefits.

“We are delighted with the progress we are making on Kraken and the transformation of our retail operating model. Developing and operating Kraken in the complex Australian energy market further underscores our belief that the already profitable platform will be a leading global enterprise software platform through the energy transition,” Mr Calabria said.

*At an exchange rate of 0.577 AUD/GBP.


1 GIM’s most recent investment is subject to GIM obtaining required regulatory approvals.

APPENDIX: SCHEDULE OF ORIGIN EQUITY PAYMENTS TO OCTOPUS ENERGY

Tranches (A$m)FY2020FY2021FY2022FY2023
Equity investment May 202012890~190
Equity investment December 202051~10~10
Equity investment September 2021~70
Equity investment in August 2022   ~163
Total128141~270~173

* Including transaction costs


Media
Anneliis Allen
Mobile: +61 428 967 166
Investors
Peter Rice
Mobile: +61 417 230 306

About Octopus Energy

  • Part of the Octopus Group, Octopus Energy is a global clean energy tech business launched in the UK in 2016.
  • Octopus has expanded rapidly and now operates in 13 countries, including the United Kingdom, Australia, Italy, France, Spain, United States and New Zealand. Octopus has also established a strategic partnership with Tokyo Gas in Japan, the world’s largest deregulated energy market.
  • Octopus is the UK’s fifth largest energy retailer, serving 3.1 million customers.
  • Octopus’ proprietary technology platform, Kraken, has been licensed to a growing number of leading retailers around the world, including Origin, E.ON and EDF UK. Kraken supports more than 25 million customer accounts globally.

Origin will donate $100,000 to community organisations providing emergency support to NSW residents impacted by the floods, while providing support to affected customers and matching Origin employee donations to relief efforts. 

Origin CEO Frank Calabria said, “These most recent floods across NSW are having a devastating impact on so many people, many of whom were still recovering from earlier flood events.

“We recognise impacted communities need immediate support today, which is why we are donating $100,000 towards the emergency response efforts of Australian Red Cross, Salvation Army and Foodbank.

“We will also be providing NSW SES emergency evacuation centres that are powered by Origin with a financial contribution to help cover their energy costs for this period.”

Both residential and small business customers who have been affected by the floods may be eligible for support through Origin’s Power On program. Where a customer’s property has been destroyed or they are unable to live or work in their property for an extended period, Origin will be offering additional bill relief.

“I encourage any customers who have been impacted by the floods and are in need of financial support to contact us so that we can assist,” Mr Calabria said.

Customers can contact Origin via phone or LiveChat on Origin’s website where they can also easily request payment extensions and set up payment plans via My Account. 

Origin employees who volunteer for flood recovery efforts are eligible for volunteering leave, and any donations made by Origin employees to the Australian Red Cross, Salvation Army, Foundation for Rural & regional Renewal and Foodbank will be matched by the Origin Energy Foundation.

Media

Stuart Osbourne

M: +61 427 586 401

Message from the Chief Financial Officer 

I am pleased to present Origin’s 2021 Tax Contribution Report, detailing the taxes we paid in the 2021 and 2020 financial years.

Our disclosure in this report aligns with the recommendations of the Board of Taxation’s voluntary Tax Transparency Code, which aims to increase transparency around how much tax businesses pay and why.

This report details how the Origin Group meets its taxation obligations. Origin is open about our tax arrangements and how we comply with all applicable tax laws and regulations.

In the 2021 financial year, we paid $26 million to federal and state governments comprising payroll tax, excise, and fringe benefit tax. This has reduced by $249 million from the previous year, primarily due to no income tax paid in the 2021 financial year, as a consequence of tax loss incurred in the 2020 financial year1. The tax loss was mainly attributable to the tax depreciation claimed on the remaining tax base of the Browse Basin exploration permits and a realised foreign exchange loss on debt maturity. Origin creates significant economic value through the performance of our Integrated Gas and Energy Markets divisions. In addition to paying taxes, our business contributes to Australia’s economic growth through employment, procurement of goods and services and community and infrastructure investments.

Our purpose of getting energy right for our customers, communities and planet is at the centre of everything we do, committing us to making a positive contribution to the communities in which we operate and the broader Australian economy. I am proud to share our sixth voluntary tax contribution report.

Lawrie Tremaine
Chief Financial Officer

 

 

As a signatory to the Board of Taxation’s voluntary Tax Transparency Code, this year we have published our sixth Tax Contribution Report. 

Origin Energy Executive General Manager, Retail Jon Briskin’s speech at Australian Energy.

Week, 8 June, 2022.

*Check again delivery

I would like to start today by acknowledging the traditional owners of the lands on which we are meeting today, the Wurundjeri people of the Kulin nation, and recognise their elders past, present and emerging. Origin supports the Uluru Statement from the Heart as part of our commitment to reconciliation and ensuring that Aboriginal and Torres Strait Islander families and communities, the oldest surviving continuous cultures in the world, have a say in the development of policies and actions that directly affect them. 

It is particularly timely to be here today to talk about the challenges and the opportunities that are facing our sector on the path of a major energy transition. 

I say timely, because the past two weeks in the Retail market have been unprecedented.  With the incredible rise in wholesale electricity and gas prices, more than a dozen retailers have stopped selling discounted market offers and are only offering the mandated, regulated default tariffs. Two retailers have failed. Plus you would have read that several retailers have now written to their customers encouraging them to seek alternative providers to avoid near triple digit percentage price rises. 

It has reached a point now where wholesale prices are much higher than what has been factored into the regulated price caps for standing offer customers, the DMO and VDO. For many retailers, those regulated tariffs do not provide an adequate enough allowance to recover their costs.  

As a provider of an essential service, the challenge Origin and all retailers face in this environment is doing the right thing by customers to help manage the burden of rising energy costs and cost of living more broadly. At the same time, we must make sure our businesses are sustainable and are able to recover the higher costs of doing business. 

It is a challenge facing regulators, retailers, and governments.   

As the shop front for the industry, and the bodies responsible for managing customer relationships – it is incumbent, especially on large retailers like Origin, to act responsibly, price fairly, and make sure that we protect our most vulnerable customers along the way. 

We are starting to communicate our 1 July price changes to customers this week.  

After the ACCC found last year that retail prices were at an 8 year low, like all retailers I suspect, we are in a position where we will be increasing our prices, which we know will be unwelcome news for customers. 

To help minimise the impact of price changes for our customers who are facing higher costs of living across the board, we are absorbing some higher energy costs to make sure that the vast majority of Origin customers pay no more than the Default Market Offer on 1 July. 

Additionally, we are prioritising support for our most vulnerable customers by protecting those in our Power On hardship program from the impacts of these price rises on 1 July.  

Supporting customers in need is central to our thinking and our actions. We may not always get it right all the time, but we are genuine in our commitment to support our customers, and I receive many “thank-yous” from customers who feel incredibly supported by Origin as they get back on their feet.  

While some will view our position as a large generator and retailer of energy as providing us with the size and scale to be able to do this more easily than smaller retailers, it is worth noting we are facing significant pressures across our generation portfolio through issues with coal supply. Origin is also a net-buyer from the wholesale power market – we only generate enough power for around half our customer load – and so we too, are impacted by the very high prices in the market today.  As you would have seen, last week we reduced FY22 guidance for our Energy Markets business. 

Over time, if we can bring more supply into the market, prices will ease and as we’ve done in the past, we will look to bring prices down again.  And hopefully soon.  

But as outlined at this event yesterday by Origin’s CEO Frank Calabria, for this to happen the immediate priority needs to be increasing output from existing coal fired power stations. To do this, we also need to look at addressing some of the coal supply issues affecting the sector, including for example, acting with urgency to prioritise rail deliveries to coal fired power stations needing supply. We are very pleased to see governments already supporting this action to increase rail prioritisation and get more supply to plants. Getting coal plants back in the market will also reduce the draw on gas-fired generation, alleviating some of the supply and price pressures in the gas market. 

In the medium term, the extra volume of renewables entering the power system will put downward pressure on wholesale prices. This bodes well for customers, but we recognise this may seem a long way from what customers are experiencing today. 

Origin for its part has a clear ambition to lead the transition to net zero through cleaner energy and customer solutions. We have announced we will exit coal fired power generation when Eraring closes in 2025, and we will replace it in our portfolio by rapidly scaling our investment in renewables and storage with firming from our existing fleet of gas peakers and pumped hydro. 

As evidence of our commitment, we recently announced our acquisition of the large scale Yarrabee Solar Farm development project in NSW that has the potential for up to 900MW, and we received NSW government approval for a 700MW large scale battery on the site of Eraring Power Station.  

And we will continue to lower our retail costs and focus on providing market leading customer service. We have already migrated half of our customers across to Octopus Energy’s market leading operating platform Kraken, with the other half due to be on this platform by the end of the calendar year.  

Achievement of this milestone makes us well placed to be able to pass through lower prices in the future.  

Finally, one of the most exciting developments that will underpin our ability to bring lower cost, clean energy solutions to our customers is the establishment of our Virtual Power Plant.  

We already have over 100,000 devices connected to our virtual power plant, with a capacity of 250MW – equivalent to one unit of a gas fired power plant. Our ambition is to increase this to 2GW over coming years. 

Our VPP uses advanced analytics and AI to virtually orchestrate of energy supply and demand across the network – including electric vehicles, home batteries, smart solar, hot water systems, as well as both small and large customer demand management.  

It has huge benefits for the network and for customers. By offsetting the need for additional investment in generation and network infrastructure, value and benefits can be more easily shared with customers.

We are already well on the path to delivering the VPP at significant scale, with multiple programs. 

This includes Spike – our residential demand management program which continues to go from strength to strength. We have over 71,000 customers on the platform now who have earnt over $3.1 million in reward points for reducing their energy during nominated peak demand events.  

Origin customers who have their home battery connected to our VPP, and receive discounts on their energy bill for doing so, engage with our digital platforms 4 times more frequently than an average non-battery customer. While customers in our EV smart charging trial with ARENA are receiving benefits for shifting their charging behaviours in response to different demand signals.  

And we continue to trial new solutions including our recent commencement of a trial with Energy Queensland to install pole mounted batteries in selected communities to test how we can share the benefits of batteries with customers.  

The success of these future energy solutions will provide customers with access to cleaner, smarter, affordable energy solutions. 


These are some of the reasons that, despite the challenges in the market today, we are optimistic about the medium to long term outlook for the market and for customers.  

If we want a cautionary tale on how challenging things can get, and how to best support customers through a period of escalating prices, then we need only look to the UK where I have seen the impacts first hand, having recently returned from visiting our strategic partner Octopus Energy.  

In the UK, the introduction of price caps on retailers in that market meant that no less than 30 retailers went to the wall when the wholesale price for energy went up last year. 

These retailers, who were able to compete on low prices with minimal long term hedges or risk management, were simply not in a position to withstand the increases in the wholesale market. Without the ability to absorb these costs increases or to pass on the higher costs to customers, they had to shut up shop and around 6 million customers were displaced. 

In the case of one large retailer, Bulb, they remain under ‘special administration’ until a sale or rescue of its business can be completed, as no other retailer is able to take on their customers today.  

There are a few important lessons we can learn here from this UK experience. 

Firstly, there is a need to ensure that all new retailers in the market are well capitalised with strong risk management practices, which can be implemented through a tightening of regulations.  

Secondly, regulated tariffs need to allow for proper cost recovery but not provide incentives for poor hedging practices. In the UK, they already conduct six-monthly price reviews, and are looking at making this 3 months, to shorten the lag time for retailers to recover higher costs. 

Thirdly, Supplier of Last Resort mechanisms, need to allow for incumbent retailers to recover their costs. Governments and regulators in the UK have taken action to share the risk with retailers, recovered through a levy on bills. 

And finally, and most importantly, the focus should be on improving customer protections for the most vulnerable customers – we believe this can be achieved through fast-tracking the Australian Energy Regulator’s (AER) vulnerability strategy. 

As people feel the impact of cost of living increases across the community, and energy prices go up, the most immediate and pressing priority is that we support customers who need right now it most through these price shocks. And hopefully you will see from what I have spoken though today that Origin is here to do that. 

And at the same time, it is integral that we work together as an industry with governments and regulators to help steer a way through while minimising impact to customers. Because in the long term, if we can navigate through these immediate challenges, then the benefits to customers of a cheaper, cleaner and smarter energy future are achievable and within reach.

ENDS 

Origin Energy CEO Frank Calabria’s speech at Australian Energy

Week, 7 June, 2022.

After a long period of relative stability in our power markets, we have entered a period of incredible change and volatility. The long-term energy transition that was already underway and accelerating, has collided with a major shift in the broader macroeconomic and geopolitical environment, causing acute price and security of supply events in global energy markets.  

With this context in mind, I want to begin my speech with a comment Canadian Prime Minister Justin Trudeau made at the World Economic Forum in Davos a few years ago, as it is very relevant to what I want to talk about today:  

“The pace of change has never been this fast, yet it will never be this slow again.”  

He continued: “You are rightly anxious about how quickly our existing business models are being disrupted. Still, if you’re anxious, imagine how the folks who aren’t in this room are feeling.”  

These are poignant remarks for a few reasons:  

  • The pace of change of the energy transition is accelerating. But at the same time, we are not moving fast enough to build out the low-emissions power system that will be needed to replace our ageing, emissions-intensive one. 
  • We are witnessing global and local energy supply and security concerns, extremely volatile commodity markets and very high prices. These are challenging times for our sector to navigate. There are some immediate steps we need to take, while other solutions will take time. 
  • There are challenges facing the broader economy too, with high inflation, cost of living pressures, an extremely tight labour market, ongoing supply chain pressures and rising interest rates.  
  • Against this backdrop, we must put ourselves in the shoes of our customers and the broader community. They are not at the decision-making table, but they are directly affected by the choices we make. 

Which brings me to the topic I’m here to talk about today: ‘Examining the impact of the energy transition on customers.’ 

Vision for the future 

This is a topic we are passionate about at Origin. Our strategy is aligned to our ambition to achieve net zero emissions by 2050. Our core belief is that the decarbonisation of energy will be good for customers and good for the planet. 

The energy transition will drive an influx of cheaper, cleaner renewable energy and storage. We believe that over time this will place downward pressure on wholesale prices, which will be good for customers. 

And we believe over time, this cleaner power system will underpin secure and reliable power, and this is clearly important for customers. 

The energy transition will also bring with it a range of cleaner, smarter and more connected energy solutions for residential customers and large businesses alike.  

Current state of play

While we firmly believe that where we are heading will be great for the planet and customers, and can reflect on significant progress to date, I think it is fair to say that from where we are all standing today, with the immediate challenges being experienced, this feels further away. 

So, where are we today? 

Innovation over the past decade or so, in the early phase of the transition, has delivered much in the way of positive change for our customers. Millions have started to access cleaner, cheaper energy solutions, predominantly through solar, and utility-scale renewables have grown rapidly in the National Electricity Market (NEM).   

  • In 2010, around 65,000 households in Australia had rooftop solar. Today, it’s more than 3 million.   
  • In 2010, renewable energy represented less than 9% of the National Electricity Market. Today, it is closer to 30%.  
  • Australia now has the third highest per capital solar and wind generation output in the world.

At the same time, there have been major advancements in technology, particularly in the areas of battery storage, solar PV, and electric vehicles. For example, the costs of battery packs, one of the main components of storage systems, have declined by about 90 per cent over the past decade, and solar PV has declined a similar amount. 

These achievements not only highlight the positive progress we have already made; they provide further confidence that we can achieve what we are setting out to do. 

However, today we are experiencing an acute challenge in energy markets in Australia and across the world. This has been the result of a number of forces that have come together over recent times: 

  • Energy demand rebounded as the world came out of the pandemic lockdowns and this outstripped the ability of energy supply to respond, where in many cases investment in new supply had already been challenging. 
  • This was followed by Russia’s invasion of Ukraine where global energy supply and security fears and a move away from Russian energy exports have continued to drive up the price of all energy sources. 
  • And further, in Australia we have experienced coal power plant outages and coal supply issues, placing strain on electricity supply. 

This has culminated in an extraordinary rise in commodity prices: 

  • Coal prices have more than tripled in 2022 to average as much as $300/tonne.  
  • Oil has been hovering above US$110 per barrel for many months compared with an average price of US$80 per barrel last year.  
  • The price of lithium, a critical mineral for batteries, is nine times higher than it was at the start of last year. 
  • The wholesale price of electricity topped $400 a megawatt hour across the main states in the National Electricity Market last week, compared with an average price of less than $70 per megawatt hour last year. 
  • Spot gas prices on Australia’s east coast have risen from less than $10 a gigajoule at the start of this year to sit at between $30 and $50 a gigajoule in recent weeks.  

At a time of very high prices, it is appropriate to ask: where to from here for our sector? 

My belief is that we must continue to lean into the energy transition. The technological, economic, social, and environmental factors driving the transition are unstoppable forces and the advantages for customers and society over time are many. We therefore need to continue to drive towards those outcomes and deliver the transition at least-cost, in a way that is as smooth as possible, and as fair and equitable for all customers as we can. 

But we must also act with urgency today, to address the immediate challenges and volatility facing the market. 

These are highly uncertain times, and we have a responsibility to address our customers’ very real concerns over the security, reliability, and affordability, of their energy supply today.  

What is the energy transition? 

The energy transition is often talked about, but I’m not sure that what it means – the challenges, complexity, and opportunities it presents over a long period of time – are very well understood, particularly among customers. So, I would like to articulate how we think about the transition at Origin.

The energy transition is a multi-decade, large-scale, global transformation that will fundamentally change the way we source, produce, supply, distribute and use energy. At its core, the transition requires us to progressively dismantle our old energy system and replace it with a new, low emissions one.  

The scale of the transition for the energy sector represents an enormous opportunity between now and 2050: 

  • We estimate $120 trillion will need to be invested in the energy sector to reach net zero.  
  • We estimate that with electrification will come a tripling of demand for electricity.  
  • Storage will need to grow by a factor of 170, there will be an eight-fold growth in renewables, and significant growth in hydrogen as a clean fuel source. 
  • Australia is a likely to be a significant exporter of hydrogen, given our renewable energy potential and geographic proximity to energy hungry, growing Asian markets.  

This opportunity is very exciting but we should not underestimate the enormity of the challenge to successfully execute the engineering, construction and economic task associated with the transition. 

We need to get this right for customers, as the consequences of not doing so are too great. 

What do we need to do to stabilise markets today, and set up the transition to succeed? 

If we are to maintain a mandate from customers and the community to deliver a successful energy transition over time and achieve net zero, then we must first address the challenges facing the market today. 

At the same time, we must continue to move expediently with the transition. 

In practice this means delivering the necessary investment in renewable energy supply, firming (or dispatchable) generation, demand response and transmission necessary to underpin the new power system we are transitioning to. But also, recognising and acting to get our existing, yet ageing and sometimes unreliable, power system to perform the important role it needs to continue to undertake over the coming years.  

Getting these two things right simultaneously will be critical if we are to protect customers from lumpy price rises that they cannot afford on the way through. 

I’ll now talk about the key action to stabile markets today, along with the three things we need to do to deliver a successful transition over the longer-term. 

 1) The first and most immediate priority is to increase the output from existing coal fire power stations.  

The important role of coal power in the system today has been brought into stark focus by recent events. Coal plants still supply some 65 per cent (or two-thirds) of electricity and today are very important to both reliability and affordability. Recent coal plant outages, and coal supply and price challenges, have been the main driver of the very high wholesale prices we’re seeing. We must act swiftly, with industry and government working in concert, to bring as much coal supply back into the system as soon as possible, in order to put downwards pressure on the wholesale electricity price.  

To do this, we also need to look at addressing some of the coal supply issues affecting the sector, including for example, acting with urgency to prioritise rail deliveries to coal fired power stations needing supply.  

Getting coal plant back in the market, will also reduce the draw on gas-fired generation, alleviating some of the supply and price pressures in the gas market. 

2) Secondly, there is the vast build out of renewables that needs to be achieved in a relatively short period of time.  

The Federal Government aim is to achieve 82 per cent renewables in the electricity market by 2030. This is a strong and clear ambition for the sector to respond to, but a long way from the 30 per cent of the market renewables makes up today. Given the already high penetration of household solar, this will need to largely come from utility scale projects requiring grid connection.Page Break 

In Australia, major projects have the propensity to cost more, and take considerably longer, than expected. 

For Origin’s part, we are keen to play a role. In recent months, we have acquired 800 MW of solar development projects, to add to a further 500 MW of development options already in place. We are excited to progress these projects and help to bring on more renewable capacity in the market. But we also remain mindful of the propensity for delays to projects, and the impact of inflationary pressures when delivering a major infrastructure roll out across the energy sector. 

To support the rapid scaling of renewables supply, there is a need to maximise the efficiency, clarity and speed in the connection and planning approval process for new developments. There also needs to be a clear framework for the timely allocation of offshore wind acreage, and its connection to the onshore transmission network. 

3) Thirdly, critical to the build out of new renewable energy supply is the construction of additional transmission.  

The majority of new solar and wind developments will occur in regional areas. Connecting this supply to the major population centres, where demand is located, will require a $70 billion investment in transmission, the Federal Government estimates.  

Similar to the challenges with the renewables build, the risk is that these projects take longer, and cost more. Costs that are ultimately borne by customers on bills.  

4) Noting the inherent variability of renewable energy, is the need to invest in new firming capacity to maintain reliable supply for customers.  

Balancing tighter supply and demand in the market is an increasingly complex challenge, with the back-up, or firming, of variable renewable supply met by a combination of technologies. 

First, there will need to be substantially more storage added to the market, which can meet power needs when the wind is not blowing and the sun is not shining. Page Break 

Other dispatchable assets that can respond to spikes in demand or supply-side issues are required too, particularly for longer durations when battery storage is not yet suitable. Pumped hydro is an important part of this equation, and there are several potential projects in the works, including an expansion of our Shoalhaven pumped hydro scheme in Kangaroo Valley, south of Sydney. 

Gas peaking power stations will remain an essential part of the power system, particularly for when firming is needed over longer periods of time. Gas peakers can support the market over many days or weeks when batteries and pumped hydro alone cannot meet the market’s needs. These assets may run only once or twice a year, or even not at all. But they must be available in the market to underpin security of supply for customers. 

It’s worth highlighting just how significant the role of gas has been in the power market over the past week. Across the National Electricity Market, gas fired generation accounted for 425 GWh of output – with Origin’s gas fleet providing 145 GWh of this output, or almost 30 per cent of the total contribution by gas generation. Over June 2-June 3, our gas fleet (ORG GPG and tolling through Pelican Point) consumed 370 Terajoules of gas per day – these are by all accounts, the biggest gas consumption days for power generation in any recent memory.  

Significantly more firming capacity will be needed to support increased renewable supply as it comes online. Critical to the investment is the effective design and implementation of a new capacity mechanism to reward the key role these assets play in the market. We welcome the focus of the Federal Government and the Energy Security Board, on fast-tracking the development of a mechanism that supports long-term investments in this type of capacity.  

Virtual power plants, or VPPs, will also play an important role in balancing supply and demand. For example, we’ve targeted growth in Origin’s VPP to about 2 GW over coming years. There is significant, under-utilised capacity sitting in distributed energy assets in homes and businesses around the country. The technology that underpins VPPs enables us to aggregate and orchestrate these assets to help meet the needs of the market. Why is this important? Because by more effectively utilising all of the capacity already in the system, rather than just building new supply and transmission, we can potentially avoid some capital investment, which is ultimately paid for by customers. VPPs are a lower-cost, efficient way to help balance supply and demand in the market. 

Role of gas 

I would like to touch briefly on the role of gas in the transition more broadly, as this is a complex issue that tends to attract a lot of debate.  

Gas is critical to the energy system for the foreseeable future. As I’ve already mentioned, it is important for gas peaking to underpin reliable power supply for customers. It is also a major source of energy supply for heating homes in colder parts of the country, and for large businesses. In particular, it is a crucial input for many industrial processes with high heat load, for which today there is no clear, commercially viable alternative. In addition, it is a cleaner fuel than coal and safely transportable as LNG, so it can help displace more emissions intensive sources of energy in other nations that are also decarbonising. 

Today, there are also challenges in the gas market, with tightness of supply in southern markets and high prices. 

As with electricity, the immediate action required is to get more gas supply into the market. The east coast LNG producers have already responded to this call over the past week to support the domestic market with more gas. However, during peaks the pipeline carrying gas south reached its capacity. So even if LNG producers were to divert more gas supply to the domestic market, there is a physical constraint at this point in time in getting it south from Queensland. 

We need to acknowledge the important role gas will continue to play over the medium term, with governments and industry working together to ensure there are sufficient sources of gas to underpin security of supply for the domestic market. This will take more time, but it is the strongest action we can take to place downward pressure on prices for customers. 

The role of gas in the energy system will undoubtedly reduce over time as more sectors electrify and as alternative renewable fuel sources mature. And this will be crucial to getting the economy to net zero emissions. But in the meantime, we simply cannot remove a fuel from the energy system, for which there is no viable alternative today. Indeed, I would go so far as to say it is irresponsible for people to suggest we can. 

Reflections – what happens when we don’t get it right 

Current events unfolding in Australia bear a close resemblance to what unfolded in the UK over recent months.  

Extreme energy price volatility is pushing households into energy poverty and sending businesses to the wall. With inflation in the UK running at a 40-year high, living standards are falling. The cost of energy plays a large part in this inflation number, with households having faced a 54 per cent increase in their energy bills in April alone, and a doubling of these bills is forecast. 

The impact of volatile energy prices and retail price caps, which limited the ability of retailers to recover higher energy costs led to thirty energy suppliers failing in the UK, leaving a very large number of customers being transferred to Suppliers of Last Resort, who then must match this new customer demand with supply sourced from the wholesale markets – at very high costs. 

Governments and regulators have taken action to stabilise the UK market. For example, sharing the risk with retailers under the Supplier of Last Resort mechanism, recovered through a levy on bills, as well as tightening regulations for new business entrants. In addition, they are considering bringing forward the six-monthly price reviews for the price cap to quarterly, to shorten the lag time for retailers to recover higher costs. 

Closer to home, we are already seeing similar impacts of high wholesale prices playing out. Two retailers have gone under, with the Retailer of Last Resort mechanism being utilised by the regulator.  More than a dozen retailers have stopped selling discounted market offers in the market and are only offering the mandated, regulated default tariffs. You would have also heard about several smaller retailers writing to their customers encouraging them to seek alternative providers to avoid near triple digit percentage price rises. 

The risk is very high that small, exposed retailers will go under as they grapple with the significant increase in wholesale prices this year, just as we saw in the UK. 

Conclusion 

We are in extraordinary times. And it does make me reflect on my comment at the beginning; with all this disruption, how do you think those not seated at the decision-making table are feeling? 

Descriptors such as ‘apocalyptic’ and ‘chaos’ don’t really help the folks who aren’t in the room right now; our customers. However, we are in a position to act to stabilise a system that has been hit by a number of external shocks and protect customers from the worst impacts. 

We must continue to lean into the transition, given its potential to improve outcomes across energy security, affordability and achieve emissions reduction over time. 

But we must act with some urgency to stabilise markets today. First and foremost, by getting coal plant back online as quickly as possible to help stabilise the market and deliver some wholesale price relief. We must do this while at the same time rapidly accelerating the build of replacement renewable supply and firming.  

We must progress a NEM-wide capacity mechanism and prioritise transmission augmentation. And we should also learn from the UK and look to improve the Retailer of Last Resort mechanism, while also fast-tracking the Australian Energy Regulator’s (AER) vulnerability strategy, to improve protections for customers. If we don’t progress these initiatives while addressing the immediate challenges in the market with some urgency, we risk losing our mandate to deliver the energy transition.  

We must challenge ourselves, participants across the energy value chain, policy makers and governments to make the right choices that appropriately balance outcomes across decarbonisation, reliability, and affordability on behalf of customers. 

As a collective, we must also be honest with our customers and the wider public not just about our ambition to get to net zero, but the challenges and trade-offs we must make along this journey. We must show tangible progress on decarbonisation. And we must do so while showing care for our people affected by the transition.  

There will be a cost of delivering the transition, and it will take time to get there, so we need to help them see that the end result will be worth it. And we must continue to take steps that ensure the most vulnerable members of our community will be supported and won’t be left behind. 

The energy transition, executed well, is crucial for the planet. It can transform lives and businesses, in a good way. It will deliver many benefits to customers.  

Our purpose at Origin is to get energy right for our customers, communities, and planet. It’s an aspiration that acknowledges that we’re not there yet, and it’s one where our customers come first. 

ENDS 

Origin Energy has announced its support of the Uluru Statement from the Heart.

Origin Energy has announced its support of the Uluru Statement from the Heart.  

The Uluru Statement from the Heart is an invitation to all Australians from First Nations Australians, asking them to help build a better future by supporting the establishment of a First Nations Voice to Parliament enshrined in the Constitution and a Makarrata Commission for the purpose of treaty making and truth-telling. 

Origin CEO Frank Calabria said, “As a leading Australian company, we see opportunities to help achieve a reconciled nation and play a part in stopping the disadvantages currently being experienced by Aboriginal and Torres Strait Islander families and communities.  

“We support the Uluru Statement from the Heart as part of our strong commitment to diversity, equity and inclusion, and in addition to the targets in our Stretch Reconciliation Action Plan – across the areas of Indigenous employment, Indigenous recruitment, and cultural learning.” 

Origin acknowledges that Aboriginal and Torres Strait Islander cultures are the oldest surviving continuous cultures in the world, and is committed to creating a culture of respect and inclusion across all parts of the organisation. 

Origin’s operations are located on the land of Aboriginal and Torres Strait Islander Peoples and the company is committed to working constructively, transparently and in good faith in all interactions with Traditional Owners. 



Origin Energy Limited (Origin) provides the following update on operating conditions and earnings guidance.

There is currently extreme volatility across commodity markets, driven by a combination of global energy supply and security concerns, exacerbated by the impact of the Russian invasion of Ukraine, with subsequent unprecedented increases in international energy prices including coal, gas and oil. Domestically, coal plant outages and high coal and gas prices have contributed to a steep escalation in wholesale electricity prices.

The following guidance is based on current market conditions and the regulatory environment. Ongoing volatility in market conditions is likely and may adversely impact operations.

FY2022

For the 2022 financial year, Origin expects consolidated group Underlying EBITDA to be around the mid-point of the original guidance range of $1,950 – $2,250 million. 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 $1,700 – $1,800 million1, compared to the original guidance of $1,500 – $1,650 million, driven primarily by higher oil and LNG prices, with production and operating and capital expenditure at Australia Pacific LNG in line with expectations. The cash distribution to Origin net of oil hedging loss is expected to be around $1.4 billion, compared with the original guidance of >$1.1 billion.

In Energy Markets, ongoing challenges with coal supply have been impacting Eraring Power Station throughout FY2022. However, the situation has deteriorated significantly in recent weeks, with material under-delivery of coal compared to expectations, and with Centennial Coal notifying Origin of further production constraints at its Mandalong mine. Deliveries from the Mandalong mine are expected to be interrupted during the remainder of FY2022 and into the first half of FY2023. Equipment supply chain delays are also expected to impact coal deliveries in FY2023.

The recent material under-delivery of coal to Eraring results in lower output from the plant, additional replacement coal purchases at significantly higher prices, and is being exacerbated by coal delivery constraints via rail. In addition, the lower output from Eraring results in a greater exposure to the purchase of electricity at current high spot prices in order to meet customer demand.

As a result, Origin now expects Energy Markets Underlying EBITDA in FY2022 to be $310 – $460 million, lower than the original guidance range of $450 – $600 million.

FY2023

Origin had previously provided guidance for Energy Markets Underlying EBITDA for FY2023 of $600 – $850 million. Since the time FY2023 guidance was provided, there have been material developments in global and Australian energy markets.

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. Origin is part-way through finalising coal contracting arrangements for FY2023.

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

The current high commodity price environment is a net benefit for Integrated Gas, with higher sale prices more than offsetting higher input prices, including power costs.

Due to the factors outlined above, there is a very high degree of uncertainty around the range of earnings outcomes for the 2023 financial year. As a result, Origin has withdrawn all guidance for FY2023. Origin will continue to assess the outlook, with a view to providing an update at full year results in August.

Separately, Origin has now completed $185 million of its targeted $250 million share buy-back as announced in March 2022. The buy-back is expected to be completed over coming months.

Management will hold an investor and analyst call at 11:30am (AEST) this morning. Dial in details are on the company’s website.


1 Based on an effective lagged APLNG oil price of US$74/bbl, weighted average JKM price of US$28/mmbtu and AUD:USD exchange rate of 0.72.


Origin, in collaboration with Accenture and Google Cloud, has launched an Australian-first DIY online solar tool that uses 3D data, visual AI and advanced analytics to provide customers with quick, accurate and tailored recommendations of how solar will perform on their rooftops and their potential savings within 10 minutes.


Origin’s General Manager of Retail Sales and Marketing, Duncan Permezel said: “This market-leading technology will save customers time by providing them with a quick assessment of how solar will support their household’s energy requirements, including how much it will cost to install and how much they can potentially save.

“The tailored and detailed nature of the solution makes it easy for customers to understand the potential benefits of solar energy for their home and make an informed decision about what’s best for them.”

Available now for customers in Sydney, Melbourne, Brisbane, Adelaide and Canberra metropolitan areas, the platform uses machine learning to calculate the most suitable solar product for any household.

Calculations are based on details including roof pitch, area and shading from obstructions, coupled with insights on specific household energy consumption.

The solution was developed by Origin in collaboration with Accenture, whose data scientists designed and deployed it, working closely with Google Cloud.

The platform can provide customers with solar power generation forecasts, system and installation costs, potential energy and bill savings, and details on the investment break-even point, providing a complete assessment of the merits of a potential investment in solar panels.

“Previously, prospective solar customers would need to speak with a sales agent and schedule a site inspection to gain this level of personalisation and detail in their quote, a process which can sometimes take weeks,” said Mr Permezel.

“For customers who would prefer to chat to a solar expert or have someone visit their home to inspect their roof, that level of service is still something we provide. This DIY online solar platform is another way that we are trying to make it easier for more customers to access cleaner, smarter and more affordable energy solutions.”

Ben Tulloch, a managing director and lead for the Accenture Google Cloud Business Group in Australia and New Zealand, said: “This innovative solution was built by Accenture data scientists with expertise in solar and industrial engineering, and showcases the potential of cloud as a launchpad for powering advanced analytics and visual AI.  Our goal is to help Origin grow through hyper-personalised solar offerings for more than two million households.”

Alister Dias, VP of Google Cloud in ANZ, said: “Solving for climate change is a top priority for Google Cloud, and this innovative new solution by Origin, made possible by our collaboration with Accenture, is a great example of how we can equip households across Australia with the platform to make a difference.”

Origin is the largest solar installer in Australia, having installed more than 1.6 million solar panels on Australian roofs in the past 15 years. More than one in four Australian homes now have solar panels, and rooftop solar capacity is projected to triple by 20301.

Customers in serviceable areas interested in learning more about whether their home is suitable for solar and what their potential costs and savings could look like can find the Origin Solar Assessment Tool by entering their address and following the prompts at  www.originenergy.com.au/solar/quote

1 Figure sourced from Australian Government Positive Energy Solar