Last week’s announcement by the Australian Competition and Consumer Commission (ACCC) that it had instituted proceedings in the Federal Court against Origin Energy Limited (ASX: ORG) is concerning for shareholders but needs to be kept in perspective.
The ACCC is alleging that Origin made “false or misleading representations and engaged in misleading or deceptive conduct.” This is certainly not great and developments will need to be monitored by shareholders however any negative implications are likely to be more short-term in nature with the long-term investment thesis for Origin still intact.
Here are 3 reasons to keep holding your Origin Energy shares –
1) Origin is the leading integrated energy markets business in Australia and New Zealand, incorporating a diverse fuel portfolio, a diverse generation portfolio and a leading retail customer base. This provides Origin’s shareholders with multiple earnings streams and allows for the steady payment of fully franked dividends.
2) Origin has positioned itself along with Santos Limited (ASX: STO), Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) as a regionally significant player in natural gas and LNG. Origin’s APLNG Project is on track to deliver first LNG by mid-2015. This will, in management’s words, create a “step change in Origin’s earnings and cash flow.”
3) Carbon tax or not, voters and governments are increasingly demanding cleaner energy. Origin arguably has some catching up to do compared with peer AGL Energy Ltd (ASX: AGK) and its large portfolio of wind assets however Origin’s growing position in renewables which include geothermal, hydro and wind assets will see is offering in this space improve.
Companies with strategic assets such as Origin are often subject to significant regulation. This regulatory risk shouldn’t be underestimated and any proceedings should be analysed, as a successful prosecution not only means fines but more importantly it could lead to restrictions which affect future profitability.