Utility stocks are usually popular with investors because of their steady earnings and dividend flow. But the outlook over the next few years may be unsettled, at least in terms of the share price performance of the market leaders, Origin Energy and AGL.
First, there is the long-awaited initial public offering by Chinese-owned TRUenergy, which is expected to take place later in the year.
This may prompt some institutional investors to take money out of Origin and AGL to make room for TRUenergy in their portfolio.
Then there is the large appetite of AGL for cash - up to $2 billion over the next 18 months, which could take time for the market to absorb.
Origin, the sector leader, raised $900 million last year through a hybrid note issue and the focus now is on execution as it gears up for production from the Asia Pacific export gas project in Queensland from mid-2015, along with moving to protect its position in the retail energy market, where it is under pressure from AGL in particular.
A warm winter and cool summer have hurt the volumes of gas and electricity sold in the December half, with subdued conditions likely to extend well into this year.
The mild weather led to a decline of 1.8 per cent in electricity volumes. Gas sales volumes were also soft. AGL's gas sales fell 20 per cent in the half.
Energy efficiencies, high prices and sluggish industrial activity are weighing on demand. The flipside is this is helping to hold down wholesale electricity prices, which is giving margins a lift.
A number of analysts have "buy" recommendations on Origin while some have cut AGL to a "hold" as they digest its proposal to take full control of Loy Yang A power station, the largest power station in Victoria.
AGL's interim net profit of $232 million was in line with forecasts, but was overshadowed by the Loy Yang deal, which will involve raising $1.5 billion - $650 million through an issue of subordinated notes and $850 million via a rights issue.
And with plans to spend another $1 billion to build the Dalton gas power station and Newcastle gas storage unit, along with a smaller power station at Mount Isa, it may seek another $400 million.
Origin's large exposure to the export gas project in Queensland has turned some analysts cautious over its higher risk profile.
"APLNG will be important for the next few years. It's at the easy stage," said UBS analyst David Leitch, referring to the fact that any potential delays will only become apparent closer to start-up.
Analysts are focused on Origin getting returns on the $3 billion acquisition of two government-owned energy retailers in NSW a year ago - Integral Energy and Country Energy - and the number of customers lost to AGL, which is seeking to gain up to 500,000 extra household customers by mid-2014.
Origin controls 47.2 per cent of the NSW retail electricity market, ahead of TRUenergy's 35.8 per cent and AGL's 14 per cent.
The level of "churn" in NSW, which is the number of households changing supplier, ran at around 15 per cent for much of the December half, well below the 30 per cent in Victoria.
Origin's December half underlying net profit of $494 million was ahead of forecasts. But higher interest costs will weigh on the full year, with management leaving its year to June forecasts unchanged.
Origin's loss of 112,000 customers in the December half, with much of that occurring in NSW, turned some analysts cautious, until it steadies its market position.
"We expect Origin to turn this around in this half," Goldman Sachs analysts said.
Origin gained a head start on its rivals by moving to secure control over its own gas supplies to feed its energy demand, which boosted margins and forced AGL and
Earnings growth for all of the energy companies will be buoyed by weak wholesale electricity prices over the next few years, with little pick up in demand expected.