Origin Energy (ASX:ORG) share price on watch after $2.2 billion loss

Here's how the ASX 200 energy giant performed during FY21.

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The Origin Energy Ltd (ASX: ORG) share price will be one to keep an eye on today after the company released its report for the financial year 2021 (FY21) this morning.

The Origin Energy share price finished yesterday's session trading at $4.37.

Origin Energy share price in focus after a rough FY21

Here's how Origin performed during FY21:

Origin's energy markets segment brought in $991 million of underlying EBITDA – 32% less than it did in FY20.

Its electricity segment brought in $899 million of gross profit, a 24% decrease. While Origin earned around $447 million of gross profits from natural gas, representing a drop of 40%.

However, the company's solar energy segment saw $39 million of gross profits, a 26% improvement.  

Origin's integrated gas segment ended FY21 with an underlying EBITDA of around $1.1 billion – down 35% on the prior corresponding period.

Over FY21, the company paid out 20 cents of dividends per share. That represented 31% of its free cash flow for the period.

Origin ended FY21 with around $4.63 billion of debt and $472 million in cash.

What happened in FY21 for Origin Energy?

FY21 saw a number of wins for Origin and its share price.

The company opened 30,000 new customer accounts in the 12 months ended 30 June 2021. Origin now provides energy to 4.266 billion customers. Additionally, 35,300 customer payment plans were completed through its hardship program.

The company also reduced its Scope 1 and 2 equity emissions by 1.4 million tonnes or 8%. It installed 74 megawatts of solar on Australian homes and businesses and launched an electric vehicle fleet management solution.

Origin also progressed its renewable hydrogen and renewable ammonia opportunities, including a feasibility study in Tasmania.

However, the company was impacted by the pressure renewable energy has put on wholesale electricity prices. Additionally, it said governments were increasingly intervening in markets, placing more pressure on energy prices. While COVID-19 led to lower domestic volumes and higher supply costs.

Origin expects this pressure to continue in FY22.

In addition, Origin said customer expectations were changing. They now wanted integrated energy and lower emissions offerings and were creating their own energy using new technologies.  

What did management say?

Commenting on the results, Origin CEO Frank Calabria said:

Operating conditions were challenging this year due to low prices and the impacts of COVID-19 across our key commodities of electricity, natural gas and oil. Energy Markets headwinds are expected to persist into FY22, though this should be largely offset by the strong performance of our Integrated Gas business…

There were a number of operational highlights across Origin's two businesses, contributing to stable cash flows. Australia Pacific LNG was outstanding, safely curtailing output when the market was subdued, and rapidly ramping up production when demand recovered…

To address lower earnings in the near-term, we are focused on continued capital discipline and achieving the targeted $100-$150 million in retail cost savings by FY24, over and above the previous cost out target of $100 million achieved this year.

What's next for Origin Energy?

FY22 is shaping up to be another challenging year for Origin, and in turn, its share price.

In FY22, Origin expects its underlying EBITDA to be roughly the same as FY21's – somewhere between $1.85 billion and $2.15 billion. That figure is based on an Australia Pacific LNG realised oil price of US$68 per barrel and an exchange rate of US$1 to 75 Australian cents.

It also expects that its energy market's underlying EBITDA will fall to between $450 million and $600 million due to lower energy prices and higher procurement costs.

Origin anticipates its integrated gas and corporate underlying EBITDA to be between $1.4 billion and $1.55 billion in FY22.

The company believes increases in renewable energy will continue to put pressure on electricity prices. However, this will also increase the need for reliable capacities such as flexible gas-fired generation and battery storage.

Origin believes it's in a good position to supply such generation and storage. It expects its energy segment to bring in underlying EBITDA of $600 to $850 million in FY23.

Origin Energy share price snapshot

The Origin share price has fallen 9% year to date. It is also 25% lower than it was this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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