Origin Energy is confident about its $6 billion investment in Australia’s biggest liquefied natural gas (LNG) project, despite a fall in annual profit.
The energy retailer, generator and producer says its net profit fell 70 per cent in 2010/11, to $186 million from $612 million in 2009/10.
The result was largely due to write-downs on assets, including geothermal projects, transaction costs from acquisitions, and a fall in the value of financial instruments.
Managing director Grant King said a better measure of the company’s performance was its underlying profit – up 15 per cent to $673 million.
He expects underlying profit to rise 30 per cent in the current year.
The company’s shares shot up 68 cents, or five per cent, to $14.26 on Tuesday, with investors liking the growth outlook, which the new Mortlake power station and new retailers will contribute to.
Mr King said he felt uneasy about the current volatility on global stock markets.
But he’s confident there’s no risk to the $US14 billion ($A13.49 billion) first phase of the company’s giant coal seam gas Australia-Pacific LNG project (APLNG) in Gladstone, Queensland – to which Origin has contributed $6 billion.
Origin has approved the first phase of its $20 billion two-train LNG joint venture project with ConocoPhillips but no decision has been made on when a second train will come online, although it is due within six months.
“When we see short-term volatility I do tend to say ‘goodness grief’,” he told reporters in a teleconference.
“The prospects of our company depend on what you think is going to happen in the next 30 years, not 30 minutes.
“The desire for less carbon intensive fuels is robust, therefore the broad economics and underpinnings of the LNG industry are very robust in that context.”
He insisted Origin would be able to fund all of its commitments, despite ratings agencies Moody’s and Standard and Poor’s raising concerns about funding.
The sales agreement with foundation customer state-owned China Petrochemical Corporation (Sinopec) is a $90 billion deal to provide 4.3 million tonnes a year for 20 years.
The rise in underlying profit reflected a 32 per cent rise in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to $1.782 billion, the company said.
Underlying retail EBITDA rose 38 per cent, to $785 million from $217 million, driven by the acquisition of NSW energy distributors Country Energy and Integral Energy.
Origin forecast underlying EBITDA to increase by about 35 per cent and underlying profit to increase by around 30 per cent for the current financial year, which Mr King described as a “really good place to be”.
It declared a final dividend of 25 cents, fully franked, steady with the prior year.
Origin said it had invested $5 billion in developing and growing its business through 2010/11, including $3.1 billion on the acquisition of the Integral Energy and Country Energy retail businesses and entry into the Eraring GenTrader arrangements.
