Origin juggles profit with customer churn, coal with renewables

Origin Energy has reported increased earnings from electricity and natural gas for the first half of FY2018, at the same time as battling a big increase in it customer “churn” rate, with the company losing 47,000 retail customers over the past six months, presumably in search of a better, cheaper deal.

The story of Origin’s results – ignoring a major write off of gas field investments in Queensland – bears a strong resemblance to rival AGL – both are growing profits from higher electricity prices. Both are dealing with customer backlash from customers unhappy about higher bills.

In a media conference following the release of the gen-tailer’s results for the first half of the 2018 financial year, Origin boss Frank Calabria described a “very competitive” retail market, that cost more to participate in, and that was boosting customer “churn.”

But high electricity and gas prices, and increased sales of each, were also paying dividends to the company’s bottom line – if not to its shareholders – with an underlying net profit that rose from $173 million to $428 million in the six months ended December 31, 2016.

“We continued to make significant progress on our twin priorities of reducing debt and improving returns,” said Calabria in a statement accompanying the results.

“Origin remains focused on rebuilding the right to grow by reducing organisational complexity and cost, continuing to repair the balance sheet and adopting a disciplined approach to capital management.”

But equally important, he said later at the briefing, is “that we … must be competing at a lower cost and higher productivity than we are today,” in terms of the company’s retail business.

Meanwhile, Origin is striving to strike a similar sort of balance between its fossil fuel generation portfolio and renewables.

Calabria said the company was still committed to rolling out 1GW of new renewable energy between now and 2020 – starting immediately, with around 300MW on track for the next 6 months.

“We’re committed to halving emissions in line with Paris,” he said. “And we’re committed to being out of coal by 2032.

“There’s more to be done, but we’ve made progress.

On coal, Calabria reaffirmed a need to “make sure” coal came out of the Australian power system in “a progressive but steady way.”

“It’s a transition,” he said. “From our perspective, it’s about how we manage that transition without a high cost to customers.”

Calabria also told the briefing that any new investments in, or subsidisation of, carbon capture and storage technology by the Australian government would have no bearing on Origin’s plan to close its Eraring coal plant in 2032.

“It won’t change Origin’s plans to exit Eraring,” he said. “Subsidies are not the right way to go forward.”