Origin Energy best placed for energy transition: UBS

The news: UBS has tipped Origin Energy as its most preferred Australian utility, highlighting its exposure to Australia's energy transition. In an analyst note, UBS said Origin has a key role to play in decarbonising Australia’s electricity sector through an accelerated exit from coal and its investment in high returning batteries, virtual power plants and offtaking renewable generation.

The numbers: UBS forecasts a 6% to 7% dividend yield (fully franked) over FY24-26 and a 13% EBITDA compound annual growth rate (CAGR) in Origin’s energy markets division over FY23-27. Origin’s share price has risen 15.4% over the past year and stands at $8.46 as at 3:15pm AEDT.

The context: Origin owns the largest fleet of peaking generation assets in Australia, making it positively leveraged to rising evening peak prices. Last year, intraday electricity price volatility reached new highs and UBS believes Origin’s gas peaking portfolio can benefit from growing price premiums as coal capacity exits the market, placing a heavier burden on gas.

What they said: UBS analyst Tom Allen said: “We believe [Origin] has the best placed generation portfolio for an energy market in transition”.