Bad news at energy giant
THE nation’s third-largest electricity company, EnergyAustralia, has been hit by a profit warning after suffering from volatile power market conditions and ongoing issues running its coal-fired power stations in Victoria and NSW.
Amid speculation it was considering a partial sale of the business, Energyaustralia faces a loss on forward electricity contracts of $Hk7.2bn ($1.3bn) for the June half after it was forced to buy expensive supplies in the market to cover a shortage of generation and allow it to meet customer contracts.
The Melbourne-based company, owned by Hong Kong’s CLP Group, has suffered a series of outages at its Yallourn coal plant in Victoria and has endured several years of coal supply problems at its Mt Piper power station in NSW.
Energyaustralia’s contribution to CLP’S operating earnings for the five months to May 31 was $Hk1.1bn lower than the same time last year, while the fair value of CLP’S forward contracts ballooned to $Hk7.2bn for the five months to May 31, from $Hk2.5bn in the first quarter of 2022.
The group is set to release its results on August 8.
“Generation output from the Yallourn Power Station has been affected by forced outages while Mt Piper Power Station has been fuel-constrained with lower than expected coal deliveries from Energyaustralia’s coal supplier,” CLP said in a statement.
“This has resulted in the business being short to the contract positions it has previously entered into and the business having to buy electricity in the high-priced spot market to cover these positions.”
Still, if wholesale prices remain high in the national electricity market, EnergyAustralia could ultimately benefit over the medium term, according to CLP.
“The increase in wholesale prices that is driving the unfavourable fair value movements should increase earnings for Energyaustralia’s energy segment business in the longer term, provided it can purchase fuel as required, generate and dispatch electricity at the higher prices,” CLP said.
The Australian Energy Market Operator last week suspended the national electricity market after it was forced to intervene and set caps on both power and gas, while blackout risks also threatened the system as generators refused to supply the market at lower capped prices.
Wholesale spot power prices rose five-fold in the first two weeks of June from the first quarter of 2021, the competition regulator said on Monday, with the huge power price surge linked to factors such as the war in Ukraine, the global gas crunch, a cold start to the southern hemisphere winter and a reliance on ageing coal-fired power stations.
The power operator slumped to an annual operating loss in February amid low power prices and coal outages and warned of a tough year ahead amid intense retail competition.
The company results fell to a $HK83M operating loss for the 12 months to December 31, from a $Hk1.69bn profit a year earlier.