Despite considerably higher power forward prices, operating earnings (EBITDA) are expected to drop -36-56 percent in FY22, according to the projection.

Credit Suisse believes the energy market downgrade cycle will be complete if consensus converges on the company’s FY23 guidance range, albeit it retains its lower-end predictions.

For the first time, guidance for FY22 and FY23 energy markets was issued alongside the June quarter report. FY22 EBITDA is expected to be $450-600 million, while FY23 is expected to be $600-850 million.

According to Goldman Sachs, FY22 was always going to be a low point for energy markets, but the outlook was worse than projected. While margins may be constrained in FY22, they should rebound in the following years.

The APLNG joint venture, which continues to succeed, was the only bright spot in the update for brokers. APLNG production in the June quarter was 173 PJ, bringing the year total to 701 PJ. The payout to Origin Energy for FY21 is $709 million, which is broadly in line with forecasts, but, as Macquarie points out, this is where the announcement’s good elements end.

Morgan feels that the downgrade to energy markets is more than offset by the higher projected prices obtained by APLNG in the short term, and so raises its oil price assumptions, resulting in an upgrade to integrated gas profits forecasts.

Retail prices and wholesale purchase costs have largely been determined, according to the broker, thus there is limited possibility for energy market earnings to rise in FY22. Higher market prices and volatility are expected to pass through to higher consumer pricing in FY23. Overall, Morgan feels the market undervalues the combination of electricity and LNG risk.

(Source: Fact Set)

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