The Origin Energy Ltd (ASX: ORG) share price is up 4.5% after giving a presentation to shareholders at an investor day briefing.
Origin Energy is one of Australia’s leading energy retailers, with substantial operations ‘upstream’ (i.e. in electricity generation and storage). Origin also operates a range of renewable energy projects, such as wind farms and solar panel farms. It’s also the leading gas producer in Australia.
Origin investor day
Origin launched an attack against the Federal policy initiative to force major energy businesses like itself and AGL Energy Ltd (ASX: AGL) to divest certain assets and also the idea of price regulation.
Origin pointed out that the ACCC noted the key drivers of electricity price increases have been the network (38%), wholesale (27%), green schemes (15%), retail costs (8%) and retail margin (13%).
Some analysts have argued that state-based energy networks have spent too much on building the infrastructure so they can charge more to recoup the costs.
Management pointed the finger at the government, saying that a lack of policy consistency from successive Governments has been a major factor. Origin was not pleased that the “Current” Government is focused on retail, which it said was cherry picking the ACCC’s recommendations.
Origin said that the current legislation increases investment risk in generation and may drive up prices. It said that pre-tax returns on capital employed in its Energy Markets business over the past five years had only averaged 9.7% – the company said an appropriate return is necessary for ongoing investment in generating capacity.
Is it worth investing in Origin shares?
Origin may have outlined the very reasons why investors need to be cautious about larger players in the energy sector. Unless the Labor Party is going to offer a nicer environment it’s unlikely that energy retailers will get out of the spotlight any time soon.
The customer only sees the big power bill from the energy retail company like Origin, so that’s who the customer and the politicians think is at fault.
It might be a better idea to consider reliable shares that aren’t facing government pressure such as the below shares.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).