Why the Origin Energy Ltd share price is rocketing today

Shares in Origin Energy Ltd (ASX: ORG) have climbed 5.5% higher in afternoon trade after the energy generator and retailer announced a 15-year power purchase agreement with the Moree Solar Farm facility.

Under the agreement Origin has contracted for 100% of the electricity generated at the Moree Farm and it will also receive 100% of the Renewable Energy Certificates created by the solar farm, which will help Origin meet its obligations under the government’s renewable energy targets.

Origin says the Moree Solar Farm could create up to 145GWh of energy annually, which according to the company is enough to supply around 24,000 Australian households. Origin did not reveal how much it is paying to source the electricity, although the market seems pleased by the deal perhaps in part because it is in the renewables space.

While the shares are up 5% today they have still collapsed in half over the course of the past year, as  tumbling oil prices took their toll on the energy retailer and forced it into a capital raising to achieve a $5.5 billion debt reduction to reduce net debt to below $9 billion in FY2017.

The company has a lot of leverage to energy prices via its flagship Australia Pacific LNG project, although today’s news further demonstrates its commitment to profiting from renewable energy sources for long-term shareholders.

In the most recent half year Origin recorded underlying earnings of $868 million, versus $1.08 billion in the prior corresponding period.

Other energy majors like Woodside Petroleum Limited (ASX: WPL) and Santos Ltd (ASX: STO) are trading flat today as investors remain wary of the potential for more big falls in oil prices.

Why These 3 Blue Chip Shares Look Set to Soar in 2016

Discover The Motley Fool's top 3 blue chips for 2016. These 3 'new breed' shares pay fully franked dividends AND offer the very real prospect of significant capital appreciation. Simply click here to gain access to this comprehensive FREE investment report.

No credit card required.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.