In fact, he is so concerned about the volatility in the market in the year ahead that he refuses to give profit guidance, something that has been a feature of Origin’s results for many years.
“The reality is we haven’t given that guidance right now because it is against the backdrop of those very high [wholesale] prices [in June],” he says.
Calabria argues that Origin’s integrated business, which brings together a generation business and a retail customer base of 4.5 million customers. Also, its stake in the APLNG project in Gladstone is delivering record levels of cash flow.
Carefully orchestrated switch
The volatility in energy markets and uncertainty about the impact of new federal government carbon reduction targets for 2030, has led to Origin’s market rating being smashed from 15 times earnings to about 12 times.
Calabria says the switch from coal to new technologies in the energy market will have to be carefully orchestrated to ensure there is not a repeat of the recent volatility in wholesale prices.
“Electricity produced by renewables is cheap, but it’s not there when you need it,” he says. “Renewables will be there, and they will be cheap, but that’s not when you need the energy, and therefore someone needs to still solve the fact that the energy needs to be made available when you need it.”
It is difficult to build a solid case for investment in Origin when you combine all the uncertainty about its financial outlook and the possibility that Mike Cannon-Brookes will force AGL Energy to transition out of coal-fired power faster than expected.
At the ASX, capital investment in technology is increasing because the replacement software for the 26-year-old CHESS clearing and settlement system keeps being delayed.
Chief executive Helen Lofthouse revealed on Thursday that the CHESS project has now cost $216 million and the company would this year spend between $115 million and $125 million on capex.
Lofthouse described this as being “a shade higher” than the 2021 expenditure of $105 million. It is hard to see how a potential 19 per cent growth in capex deserves such a description.
The worrying aspect of the blowout in ASX’s technology investment expenditure is that similar amounts are being spent by market participants who are forced to implement the CHESS replacement software.
ASX, which has lost $2.6 billion in value over the past 10 months, has seen its price earnings ratio slashed to 29 times from 35 times. It has managed to maintain a relatively generous market rating because of its 72 per cent profit margin.
ASX, like Origin, needs to deliver technological change as quickly as possible for shareholders and the nation, given that they are providing mission-critical infrastructure.
