Power supplier Origin Energy (ASX:ORG)
has lost its appeal against oil and gas explorer Beach Energy (ASX:BPT)
’s pricing of gas and wholesale electricity.
The pricing arbitration occurred after the two energy players failed to reach a mutual understanding on the pricing of gas under an agreement to review product prices once every 3 years. The arbitration ruling against Origin’s favour has prompted the company to reduce its full-year energy earnings guidance of between $1 billion and $1.14 billion to $940 million and $1.02 billion.
Origin's CEO expressed, “We are disappointed in this decision which we believe is wrong, and entirely inconsistent with our prior experience in the gas market”.
Origin Energy (ASX:ORG)
anticipates a gas price substantially exceeding expectations, equivalent wholesale arrangements and the average market price on the market.
The company says, “this will result in a gas price that does not reflect market prices, and it is therefore a very poor outcome.”
Origin has lifted its outlook for cost of supply by $30 million for FY21. A further $60 million to $80 million increase is projected for the next financial year.
Shares in Origin Energy (ASX:ORG)
are trading 7.98 per cent lower at $4.32