Origin Energy’s (ASX:ORG) shares nosedive over 15% today, here’s why

The shares of Origin Energy Ltd (ASX:ORG) traded in red today (June 1) after the energy company stated that it expects the Group’s FY22 consolidated Underlying EBITDA to be around the mid-point of the original guidance range of AU$1,950 - AU$2,250 million. The shares of Origin Energy Ltd, Australia’s second-largest power producer, slumped 15.766% at AU$5.770 per share on ASX at 1:31 PM AEST today.

The energy company has withdrawn its earnings outcomes for the 2023 financial year, given the high uncertainty across commodity markets and difficulty in securing coal for its Eraring power plant due to soaring spot energy prices. 

While maintaining that the challenges concerning coal delivery to Eraring Power Station are likely to persist into FY2023, the company believes that this will result in a material increase in coal purchasing costs because of high coal prices and continued exposure to high spot electricity prices.

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Origin Energy held that the ongoing challenges with coal supply have been impacting its key power plant throughout FY2022. As per the company, the recent material under-delivery of coal to Eraring led to lower output from the plant and additional replacement coal purchases at significantly higher prices. 

In view of these challenges, Origin has cut its Energy Markets Underlying EBITDA in FY2022 to AU$310 - AU$460 million, lower than the original guidance range of AU$450 - AU$600 million.

It is to be noted that Origin Energy’s woes indicate the extreme volatility in the country’s energy market. This market volatility is fuelled by soaring global coal and gas prices amidst the Russia-Ukraine crisis.

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Origin’s gas business offsets decline in Energy Markets earnings

Meanwhile, Origin’s gas business continues to benefit from rising global liquefied natural gas (LNG) prices, which is offsetting a decline in Energy Markets earnings.

The company has increased its integrated Gas and Corporate Underlying EBITDA to AU$1,700 - AU$1,800 million, compared to the original guidance of AU$1,500 - AU$1,650 million, driven primarily by higher oil and LNG prices.

In the last one year, Origin Energy shares have gained almost 44%, while the stock is down close to 7.74% year-to-date (YTD).

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