Origin Energy has announced plans to divest its $1.8 billion-plus conventional oil and gas assets, in a move designed to divide the company’s focus between its consumer and renewables-centred energy markets business and a “simplified” LNG business.
The energy company said on Tuesday that it would float its upstream oil and gas business, creating a new, mid-cap diversified upstream gas company to be called Newco.
The move – the first major strategy to be delivered by new CEO Frank Calabria since he took up the reins from Grant King in October – stops short of a full exit from fossil fuels; Origin will still be the biggest developer of coal-seam gas in Australia, and the owner of gas fired generators and one big coal plant.
But as Calabria stressed in a conference call with reporters and analysts, it will allow Origin to focus – both strategically and financially – on its strengths in unconventional gas and renewable energy development.
“Our energy markets business is very much focused on a customer-led strategy and is well placed as we move into renewable energy,” Calabria said in response to a question from RenewEconomy.
“We are a business that doesn’t have long generation, long-term arrangements. We clearly see a future where solar power, both large-scale and rooftop, and batteries play a major role.”
Calabria said it was clear the networks’ role would change over time, too, and that Origin would be part of that future, and working with networks going forward.
Just how dramatically the energy market status quo is expected to change over the next 30-40 years was this morning highlighted by the findings of a new study by the CSIRO and the main networks lobby, Energy Networks Australia.
The network owners and scientists’ report found that wind and solar would provide nearly all generation by 2050, with a significant amount – between one-third and one-half – coming from the nation’s rooftops. Battery storage in homes and business, and located on the grid, or at renewable energy installations, would balance the output and provide most network stability services.
It also said that a decarbonised energy grid by 2050, with half of generation produced and stored locally, would save billions in upfront capital costs and consumer bills, and deliver a secure electricity system.
“We expect to go on that journey with costumers being more empowered, installing rooftop solar and batteries. It’s an exciting time for us going forward as it is for many participants in the industry,” Calabria said.
Calabria also said divestment of the company’s upstream oil and gas assets by IPO would allow it to “accelerate debt reduction” and improve the performance and returns of its core businesses.