Origin Energy has warned that growth in its net profit will halt this year as it battles the Queensland government over electricity prices and weakening energy demand.
The flat forecast from managing director Grant King comes despite Origin, Australia’s biggest electricity retailer, posting a strong full year profit that increased five-fold to $980 million.
Underlying performance also improved, with underlying profit of $893 million in the year to June up 33 per cent from $673 million in the previous year.
Origin shares were punished, down 74 cents, or nearly six per cent, to $12.20 at 1600 AEST.
Morningstar analyst Gareth James said he thought investors were concerned about near-term growth, with capital expenditure stopped due to its focus on its liquefied natural gas (LNG) development in Queensland.
About 90 per cent of earnings come from its energy retail and generation business but the Australian Energy Market Operator (AEMO) is forecasting slowing growth in energy demand through to 2020.
Origin has also launched legal action against the Queensland Competition Authority’s (QCA) decision to regulate power prices to a level the company says is too low.
Mr King said the decision would have a negative impact of about $60 million this year.
Fellow retailer AGL complained about the price tariffs on Wednesday, with both companies worried about the policy spreading to other states and saying they would scale back activities in Queensland as a result.
“There is substantial uncertainty in respect to the QCA decision, we have sought a review on the decision but whether that review produces a better outcome for us and what it will say in respect of forward years is unclear,” Mr King told reporters.
AEMO’s forecast for Australian electricity demand growth through to 2020 in terms of gigawatt hours is materially less than it was six months ago.
Customers that are more energy efficient, increased use of solar panels and a slowing economy are among the factors, which puts downward pressure on wholesale electricity prices.
Origin also lost 160,000 customers during the year, many of them to rival AGL, which stole business that Origin picked up through the privatisation of NSW electricity assets.
Mr King said he was confident Origin would now keep its customers, having implemented a new IT system that enabled it to now develop new products to win customers.
The company will also pass on more than $1 billion in extra costs related to the carbon tax to customers.
The energy markets business, which includes energy generation and retail, increased earnings before interest, taxes, depreciation and amortisation (EBITDA) by 33 per cent or $388 million to $1.6 billion.
The new NSW businesses boosted that and, combined with New Zealand’s Contact Energy’s $400 million EBITDA, meant most of the total underlying EBITDA of $2.3 billion came from energy markets.
Origin’s net profit was boosted by selling down to 37.5 per cent its stake in the $23 billion Australia Pacific LNG project in Queensland with a further sale down to 30 per cent due in the next year.
The project is one of three massive coal seam projects that will use plants at Gladstone in Queensland and will drive Origin back to average 10-15 per cent annual growth, Mr King said.
Origin declared an unchanged final fully franked dividend of 25 cents per share.
