Gas cartel eaten by coal cartel

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It’s cold comfort for punters being reamed by the energy cartels but take a moment to enjoy the earnings release of Origin energy today. The card-carrying member of the gas cartel is being hollowed out by the coal cartel:

Origin Energy Limited (Origin) reports underlying profit rose 30 per cent to $407 million for the full year ended 30 June 2022, as strong commodity prices drove higher earnings in Integrated Gas, offset by lower earnings in Energy Markets due to very challenging market conditions.

Underlying EBITDA rose to $2,114 million, compared to $2,036 million in the prior year.

On a statutory basis, Origin has announced a loss of $1,429 million, reflecting a $2,196 million non-cash impairment. A $4,354 million uplift of in-the-money Energy Markets derivative assets associated with the hedging of high wholesale electricity and gas prices resulted in the requirement to recognise the non-cash impairment of goodwill. This does not reflect the performance of the business, future cash flows, or any impact to future value.

Origin benefitted from a record cash distribution from Australia Pacific LNG of $1,595 million, due to higher realised oil and spot LNG prices. This distribution contributed to a strong free cash flow position of $1,062 million.

…Origin CEO Frank Calabria said, “The value of Origin’s integrated business is evident in this result, as higher commodity prices drove strong earnings from Integrated Gas, helping to offset lower earnings from Energy Markets as it grappled with an almost unparalleled year in terms of market conditions.

“Overall, I’m pleased with how the business navigated a myriad of challenges from high commodity prices and volatile wholesale energy prices; to fuel supply shortages and multiple weather events, while being able to deliver higher underlying profit and strong cash flow.

“Higher fuel costs and coal supply constraints limiting output from Eraring Power Station were among the factors contributing to a decline in Energy Markets earnings. There were also highlights, including a strong performance in natural gas, growth in total customer accounts, and recent improvements in coal supply to Eraring. We’ve now locked in contracts for 4.4 million tonnes of coal supply — the majority of our needs for FY2023.

In short, ORG’s gouging of the local gas market was smashed by its own power division losses as it was gutted by coal cartel gouging. The write-down is odd given the hedges were in the money. Something going on there I don’t understand.

Nationalise the entire mess. This is nothing but a few individuals arbitraging war, the national interest, and monopoly assets for their own personal gain.

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Energy is the key input into our civilisation and it has been handed over to a white-collar mafia.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.