Origin will forge ahead with its renewable energy plans, despite new a government energy policy requiring more coal-fired power.
Speaking at its annual general meeting, Origin chief executive Frank Calabria said the company planned to have renewable energy generation accounting for 25 per cent of its portfolio by 2020, despite the federal government’s National Energy Guarantee which will require more coal and gas-fired power generation.
Origin chairman Gordon Cairns said the company would adopt a company-wide, science-based emissions reduction target by the end of the year on top of its renewables plan.
“Encouraging investment in new supply is a critical piece of the puzzle, and we have urged governments to resist intervening in short-term policy and instead focus on getting the long-term energy and climate change settings right,” Mr Cairns said.
“We urgently need policy certainty. We cannot wait until 2020 for investment decisions to be made if we are to meet ‘s 2030 emissions reduction target,” he said.
However, as the NEG is still a framework, companies have not yet included it within their operational strategies “due to the absence of further details,” Mr Calabria said.
Origin’s renewable target is a 10 per cent increase from current levels, and will comprise about 1200 megawatts of new solar and wind generation.
Mr Calabria said due to obligations for increased reliability, there could be increased investment in technologies and energy sources to meet these requirements and support intermittent sources such as wind and solar.
“Over time, as more lower emissions [generation sources] come in, and if is it intermittent, that will require us to match that obligation with reliability, so you would expect over time for that to continue to require an investment in reliability, whether that’s peaking generation, pumped storage, or batteries in the near to medium term, they’ll all be part of the mix to make sure it’s dispatchable,” Mr Calabria said.
Mr Calabria said there were no plans to extend the lifespan of its Eraring coal-fired power station in NSW beyond its scheduled 2030 closure, although it does plan to continue to push capacity.
Origin also reaffirmed its FY2018 EBITDA guidance of between $1.7 billion and $1.8 billion, “provided that market conditions and the regulatory environment do not materially change”, Mr Calabria said.
This forecast was supported by UBS research, which said the government reforms across gas and electricity markets are unlikely to materially affect the near-term earnings of Origin.
Concerns were raised ahead of the AGM, after activist investors announced intentions to change Origin’s constitution.
However, the resolutions overwhelmingly failed, with more than 95 per cent of shareholders voting against it.
Amidst the investor group’s calls to change the company’s constitution, they also called on Origin to shut Eraring before 2030, which was dismissed by the Origin board.
During his speech, this was met by a lone cheer from one member of the audience.
Origin unveiled a massive spike in profit and earnings with growth of about 50 per cent year on year.
It announced an underlying EBITDA increase of nearly 50 per cent, growing by $834 million to reach $2.5 billion. Underlying profit also increased by $185 million to reach $550 million.
Despite this, Origin still recorded a loss of $2.2 billion, driven by a non-cash impairment of $3.1 billion.
This was caused by pegging the value of its joint venture Pacific LNG project to an oil equivalent price of US70 per barrel, and its Browse Basin assets, 480 kilometres off Western ‘s shore, now being viewed as a stranded asset and uncommercial.
Origin has focused heavily on driving down its debt levels, cutting levels of existing debt by $1 billion to $8.1 billion, this was aided in part by the $1.585 billion sale of Lattice Energy to Beach Energy, however it will not pay dividends in 2017.
During the same period Mr Calabria saw a 33 per cent increase in his total remuneration, due to a boost in his short-term incentives, from $1.781 million in 2016 to $2.664 million in 2017.