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The Origin Energy Ltd (ASX: ORG) share price is on the rise today, outperforming the broader market trend. While the S&P/ASX 200 Index (ASX:XJO) is experiencing a downturn of 0.46%, the energy provider's shares closed yesterday at AU$10.16 and are currently trading at AU$10.35 apiece, marking a 1.87% increase.
This surge in share price follows an announcement from Origin regarding the extension of operations at the Eraring Power Station, a significant development that has implications for the company's future trajectory.
Origin revealed that it has reached an agreement with the New South Wales government to postpone the retirement of Eraring by two years. The decision aims to bolster the security of the state's electricity supply amidst the ongoing energy transition.
Under the newly established Generator Engagement Project Agreement (GEPA), Eraring will continue its operations until at least 19 August 2027. Previously, Origin had planned to shut down the 2,880 MW black coal plant as early as August 2025, depending on market conditions.
The agreement also includes provisions for potential compensation from the New South Wales government to cover operating costs incurred by Origin during the extension period. Origin stands to recover a portion of any operating losses at Eraring, capped at AU$225 million annually. Moreover, if Eraring generates profits during this period, Origin will pay the NSW government 20% of those profits, up to AU$40 million per year.
Commenting on the extended operations, Origin CEO Frank Calabria emphasized the agreement's balance between maintaining electricity supply security and addressing economic considerations. Calabria highlighted the importance of providing certainty to Eraring employees, suppliers, and the local community as the plant transitions towards retirement.
In alignment with its commitment to environmental sustainability, Origin reiterated its intent to phase out coal generation as renewable energy alternatives become more viable. The company plans to construct a large-scale battery at Eraring, with the initial phase comprising a 460 MW two-hour battery set to commence operations by late 2025.
Despite broader market fluctuations, Origin's strategic decisions regarding Eraring have positively influenced investor sentiment, reflected in the company's share price performance. With today's gains factored in, Origin's share price has appreciated by 24% over the past 12 months, underscoring investor confidence in the company's resilience and adaptability amid evolving market dynamics.
