EnergyAustralia takes a $1.3bn hit from coal outages and soaring prices
EnergyAustralia, one of Australia’s largest coal producers, has warned of a steep $1.3 billion loss from the combined impact of outages at its coal-fired power stations and soaring oil prices. electricity caused by the rising cost of fossil fuels.
EnergyAustralia is expected to make a big profit from soaring wholesale prices, especially as its Yallourn brown coal generator in Victoria can source fuel from the nearby mining pit.
But multiple and repeated breakdowns at Yallourn, as well as problems at its Mt Piper plant in New South Wales which could not source coal due to lower deliveries from its supplier, forced it to buy electricity at a high price on the wholesale market to meet the contracts it wrote to customers.
Revelation from Hong Kong-listed EnergyAustralia parent CLP confirms the fact that the price cap and market suspension that was introduced last week likely protected coal companies even more than they did consumers higher prices.
AGL is another generator that has also experienced multiple outages in both its Loy Yang A brown coal generator in Victoria and its Huner Valley units in Liddell and Bayswater. Origin was suffering from supply issues for its Eraring coal generator.
CLP said the “fair value” of its energy futures contracts had fallen from the HK$2.2 billion advised in mid-May to HK$7.2 billion (A$1.2 billion) now.
“In the five months ended May 31, 2022, production at Yallourn Power Station was impacted by forced outages while Mount Piper Power Station was fuel constrained with coal deliveries below supplier forecasts. coal from EnergyAustralia,” he said.
“This has resulted in the business running out of contract positions it previously entered into and the business having to buy power in the high-priced spot market to cover those positions.
“For the first five months ended May 31, 2022, EnergyAustralia’s contribution to the Group’s after-tax operating profit (excluding fair value loss) was approximately HK$1.1 billion lower than that of the same period in 2021.”
But it’s not all bad news for EnergyAustralia. Once these contracts are settled, it will probably benefit from the high prices on the wholesale market,
“The increase in wholesale prices driving the adverse movements in fair value is expected to increase profits for EnergyAustralia’s Power segment business over the longer term, provided it can purchase fuel as needed, produce and distribute electricity at higher prices.”
These high prices are likely to continue as high cost gas is expected to set the market price most of the time, and there are too many barriers for large amounts of renewables and storage capacity to enter the market soon. market.
EnergyAustralia is also a key backer of the so-called ‘capacity mechanism’ to be applied to coal generators, a move that most fear will generate windfall profits for coal generators, extend their life , retards renewables and leaves the grid exposed forever. aging and increasingly unreliable fossil fuel generators.
Yallourn, however, is set to close in 2028 after reaching an agreement with the Victorian government, the details of which have never been revealed.
Giles Parkinson is the founder and editor of Renew Economy, as well as the founder of One Step Off The Grid and the founder/editor of The Driven, focused on electric vehicles. Giles has been a journalist for 40 years and is a former economics editor and associate editor of the Australian Financial Review.