Origin shares stumble despite delay in Eraring closure
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More news: Shares in Origin Energy are down 0.6% to $10.10 in a weak Australian market after the energy producer and retailer agreed with the NSW government to delay closure of the Eraring coal-fired power station in the state by two years.
Any losses during this period will be underwritten by the state government, while profits are to be shared.
RBC Capital Markets analysts said the decision was "a necessary step" to prevent potential NSW power shortages after Origin initially planned to start a stage shut down of Eraring in August 2025.
They retained an 'outperform' rating on the stock, along with their $11 price target.
Origin Energy, NSW govt agree to delay Eraring plant closure
The news: Origin Energy and the New South Wales government have agreed to delay the closure of the Eraring coal-fired power station by at least two years to 2027.
The numbers: Under the Generator Engagement Project Agreement (GEPA), Origin has agreed to extend operations at Eraring to 19 August 2027 and will generate at least 6 TeraWatt hours of electricity during both FY26 and FY27.
Origin may recover a portion of Eraring losses from NSW using an agreed formula but is capped at $225 million per annum. If Eraring operations are profitable during that period, Origin will pay the NSW Government 20% of Eraring’s agreed profit, capped at $40 million per annum.
The context: The deal, which comes after months of negotiations, will ease concerns about reliability of electricity supply during the transition to renewables but will anger environmental activists because of the potential for taxpayer compensation for coal-fired electricity.
Eraring is Australia's largest coal-fired power station, supplying around 25% of NSW's needs. The power plant was due to close in August 2025 as part of NSW's move away from fossil fuel energy sources, but the state government agreed to discuss an extension following a recommendation in a report by energy expert Cameron O'Reilly on the state's transition to renewables.
What they said: Origin CEO Frank Calabria said: “We believe this agreement strikes the right balance, with an extension to operations enabling Eraring to continue supporting security of electricity supply in New South Wales through the energy transition, while making compensation available to Origin in the event economic conditions for the plant are challenging".
The source: ASX announcement
