Origin Drops on Project Costs, Profit Forecast: Sydney Mover

Origin Energy Ltd. (ORG), Australia’s biggest electricity retailer, fell the most in more than four years after reporting a cost blowout at its A$25 billion ($26 billion) gas project and cutting its full-year profit forecast.

Origin fell 8 percent to A$11.44 in Sydney trading at 11:12 a.m., the most since Oct. 10, 2008. Standard & Poor’s Financial Services cut Origin’s credit rating to BBB from BBB+.

The company raised the cost estimate at Australia Pacific liquefied natural gas project in Queensland state by 7 percent to A$24.7 billion. It cut its forecast for full-year underlying profit for the second time in three months, estimating earnings will be 10 percent to 15 percent below the previous year, from 5 percent to 10 percent, because of high power prices in the state.

“We expect to downgrade both our fiscal 2013 net profit forecast and our fair value estimate is likely to be impacted by the APLNG cost blowout,” Morningstar Inc. analyst Gareth James said in an e-mailed note. The blowout “is disappointing and unexpected,” he said.

Net income fell 34 percent to A$524 million for the six months to Dec. 31, the Sydney-based company said today in a statement

“The first half of the financial year was characterized by more challenging operating conditions in the energy markets segment, which has impacted profit and cash flow,” Chairman Kevin McCann said in the statement.

China Petrochemical Corp., known as Sinopec Group, owns 25 percent of APLNG, leaving Origin and Houston-based ConocoPhillips (COP) with 37.5 percent each. Origin said in July that it’s looking to keep about 30 percent of the project after the partners jointly agreed to reduce their stakes further.

To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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