Switchwise.com.au Blog

Archive for February, 2010

Origin Energy profit up, churns 236K retail customers

Friday, February 26th, 2010

Despite eye-catching headlines in today’s papers about Origin Energy’s 94 per cent fall in first-half profit, the underlying numbers tell a different story with the energy company reporting a 28 per cent increase in underlying profit to $355 million for the six months to 31 December 2009.

The huge differential between these figures relates to Origin selling its interest in Australia Pacific LNG, which provided an extraordinary gain of $6.7 billion in last half’s profit.

Interestingly, despite increasing competition in the retail electricity and gas markets, Origin managed to increase its underlying retail EBITDA by 7 per cent to $320 million, due to “improved gross profit from natural gas and LPG together with benefits from a lower cost of serving our customers”.

However, a closer look at the retail numbers shows that Origin suffered a customer churn rate of 17 per cent, with churn of electricity customers in the competitive Victorian and Queensland markets being the highest at 26 per cent and 21 per cent respectively. The company lost 236,000 retail customers in the last 6 months but managed to re-acquire 232,000 customers for an overall net loss of 4,000 customers for the period. However, Origin was very fortunate to benefit from the free transfer of 17,000 customers when Jackgreen entered voluntary administration. Without this unexpected boost Origin would have been down 21,000 customers.

Whilst these numbers appear small compared to Origin’s customer base of 2.6 million it does show the significant challenge it faces maintaining its retail market share, especially if it wishes to maintain margins.

If you are interested, you can read more about Origin Energy’s financial results here.

Statutory net profit after tax was $371 million for the period, compared with $6.7
billion in the prior first half. The prior first half contained a significant item relating
to a gain on the dilution of Origin’s interest in Australia Pacific LNG which provided a
benefit of $6.7 billion in the statutory profit for that period.

Google gains approval to sell power in the US

Wednesday, February 24th, 2010

The United States Federal Energy Regulatory Commission (FERC) has given Google the green light to sell electricity and related services in the US. You might rightly wonder why Google would want to get into the power business and act as a utility – you think they would have better ways to make money.

Google says it wants to make itself carbon-neutral. Given the large number of data centres it operates, with probably thousands of servers in each, one could imagine the grand scale of Google’s electricity consumption. According to Google’s official blog, Google’s engineers did some analysis and found that an average Google search query consumes “about 1 kilojoule of energy and emits about 0.2 grams of carbon dioxide”. Obviously each search is tiny in isolation but multiply this figure by the billions of searches that it handles and it is clearly a big deal.

FERC’s approval gives Google the right to install as many solar panels as it likes in its quest to achieve carbon-neutrality. It also means that should Google generate lots of surplus solar power it could effectively resell this on the market; in other words Google could become a solar power generator and a net contributor to the electricity grid.

Google is already involved in energy in many ways, with applications like Google PowerMeter to assist consumers better manage their household energy consumption directly from their iGoogle homepage. Google has already signed up ten utility companies in North America and Europe to allow smart meters in their customers’ homes communicate with PowerMeter. There are also a couple of companies such as AlertMe in the UK selling self-install power management devices that are pre-configured to work with Google PowerMeter.

However, Google’s motives might not be entirely altruistic in helping the world use less energy; there is no doubt an excellent opportunity for Google to position itself as a large scale provider of energy management services to consumers and businesses around the world.

NSW electricity privatisation on life support

Saturday, February 20th, 2010

The Sydney Morning Herald yesterday reported the announcement by the NSW Treasurer that the sales process for the privatisation of the three State-owned electricity and gas retailers (EnergyAustralia, Integral Energy and Country Energy) had been put on hold. However, the Treasurer suggested that the delay was only short-term and that the sale was on track to complete by the end of this year. You can read the Treasurer’s well crafted media release on the Treasury NSW website. The opposition seized on the announcement, claiming that the sales process was dead at least until after the next election.

Apparently there have been concerns raised by the various parties bidding for these electricity assets around the complexity of the deal being offered by the Government. Yesterday’s announcement will only frustrate these bidders further given the significant effort they have already invested in the process.

We should know in June or July whether the sales process will be re-started and if significant changes have been necessary to address bidders’ concerns. Who said electricity was dull?