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Prashant Mehra

Origin Energy lifts earnings forecast

Origin is still awaiting a binding takeover proposal from Brookfield and private equity firm EIG. (Dan Peled/AAP PHOTOS) (AAP)

Takeover target Origin Energy has lifted the earnings forecast for its energy and markets division, but lowered expected production of liquefied natural gas.

The power and gas retailer on Friday said full year underlying earnings before interest, tax, depreciation and amortisation for its core energy markets business will rise to between $600 million and $730 million, up from its previous estimate of $500 million to $650 million.

The improvement has been driven by a likely increase in natural gas and electricity gross profit, as well as improved coal delivery under legacy contracts, Origin said.

The company specified it would avoid any impact from the federal government's temporary capping of wholesale domestic gas and thermal coal markets late last year.

"No material impact is expected on FY2023 Energy Markets earnings as a result of the introduction of the $12/GJ (giagjoule) cap on uncontracted gas, given gas supplies for the year had been almost entirely contracted prior to the cap coming into effect," it said in a statement to the ASX.

The guidance excludes the potential impact of any compensation Origin may receive to recover coal costs that exceed the price cap of $125 per tonne, or further coal supply contracts that may be executed at the capped price, it added.

The group has also lowered the production estimate from its Australia Pacific LNG project, following wet weather earlier in the year. Output for this financial year is now forecast at 660-680 petajoules, down from 680-710 PJ.

However, the prospects for its LNG trading business have improved following additional hedging, which will result in a further $140 million to $180 million of earnings. LNG trading EBITDA for FY23 is now expected to be $40 million to $80 million.

The upgrade comes as Origin awaits a binding takeover proposal from Brookfield and private equity firm EIG. They proposed a cash takeover at $9 a share in November but are yet to complete due diligence.

By 1130 AEDT, Origin Energy shares were up two per cent at $7.47 each.

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