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· Posted on
February 21, 2024

Origin Energy plunges to $2.3 billion loss

Renewables = good news for the environment. Bad news for Origin.

What's the key learning?

  • Just like Australia has its 'Big 4' banks, we also have our 'Big 3' utility providers: AGL, Origin Energy and EnergyAustralia. And Origin is the biggest.
  • Origin Energy posted a $2.3 billion loss this financial year as a result of billions in write-downs.
  • Write-downs are where a company needs to reduce the value of an asset because it no longer reflects the market value.

You know how we have the Big 4 banks? Welcome to the Big 3 utility providers - AGL, Origin Energy and EnergyAustralia. And with over 4 million customers, Origin Energy is the biggest of the bunch.

As Australia moves towards renewable energy sources, like solar panels and wind farms, Origin is diving straight into a pool of losses. And it's about $2.3 billion deep. Yiiiikes.

Because of COVID, rising operational costs of power stations and renewable energy sources driving down the cost of electricity, Origin's written-down more than $2 billion worth of assets.

So what's the key learning?

A write-down is when a company needs to reduce the value of an asset on the books because the market value of the asset has fallen below that number. 

Think about it like this: I've got a shoe factory worth $1 million. After a hail storm, the factory is only operating at around 70% capacity. That means I have to write-down the value of my factory by 30% - or $300,000. 

Write-downs are treated like expenses, and they come off your net profits at the end of the day. So if I had $200,000 in profits, but I wrote-down $300k in assets, my books are -$100,000. I need a better biz model.

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