Australia’s AGL flags $2.1 bln charge as energy price outlook worsens
AGL factoring in a “sustained and material reduction” in energy prices due to the slump in the wholesale power market and government plans to underwrite new power plants.
New Delhi: Australia’s AGL Energy Ltd expects to book A$2.69 billion ($2.1 billion) in charges, it said on Thursday, as the dour outlook for energy prices forced it to write down the value of its assets and previously signed wind energy contracts.
AGL shares dived 6.7% – their biggest drop in nearly six months – to A$11.06 in early trade, with AGL factoring in a “sustained and material reduction” in energy prices due to the slump in the wholesale power market and government plans to underwrite new power plants.
It decided to set aside A$1.92 billion for long-term wind offtake agreements it entered between 2006 and 2012 at prices that were much higher than the current spot and forecast prices. Of the rest, A$1.11 billion is for environmental restoration provisions, while A$532 million relates to the impairment of coal and gas generation and legacy natural gas production assets.
“We are of the view that it is hard to see a rebound in prices due to the structural change in wholesale electricity and the continued underwriting of new generation,” RBC Capital Markets analyst James Nevin said in a note.
The charges were not expected to impact the company’s full-year underlying profit, and were expected to support fiscal 2022 and 2023 profit by A$50 million to A$80 million, AGL said. Thursday also saw Origin Energy lower its energy markets core earnings forecast to between A$1 billion and A$1.14 billion, from A$1.15 billion to A$1.30 billion, citing the pandemic’s hit on demand, milder summer conditions and rising gas costs.
Shares in the gas and power retailer plunged by their most since Aug. 20 last year, falling 6.9% to A$4.62.
Source: energy.economictimes.indiatimes
