AGL lowers profit guidance after station’s coal unit breakdown
AGL Energy will take a $73m hit to its profit and has lowered its annual earnings guidance after the breakdown of a major coal unit at its Loy Yang A power station in Victoria’s Latrobe Valley.
The state’s largest power station, which provides 30 per cent of Victoria’s power needs, has been without a quarter of its capacity since an electrical fault knocked out Unit 2, while it also lost supplies from a second unit late last week.
The 180-year-old power giant said the impact would be $73m pre-tax or $50m after tax for the 2022 financial year, based on the unit returning to service on August 1.
However, it also cautioned that engineering assessments were continuing and it would keep the market updated on any changes to the time frame.
Underlying profit after tax for 2022 is now forecast at a $220m-$270m range compared with the previous $260m-$340m band.
AGL said underlying earnings for 2022 have also been lowered to between $1.23bn and $1.3bn, from the prior $1.275bn-$1.4bn estimate.
Some $60m of the $73m charge will be recorded in the 2022 financial year, which equates to $41m after tax, with $13m, or $9m after tax, expected in 2023. The power retailer confirmed it did not hold insurance benefits to cover the outage.
Loy Yang A started operations between 1984 and 1988. AGL bought the station in 2012 and recently completed a $60m upgrade to change old analog systems to digital control technology.
AGL suffered a similar problem at Loy Yang A in 2019 with a seven-month breakdown. While it recovered $100m in lost earnings from business interruption insurance, it has now lost those insurance benefits.
The coal plant breakdown represents a missed opportunity for an earnings bounce given spiralling wholesale electricity prices, analysts say.
Wholesale futures spot prices have tripled to $176 per megawatt hour for the second quarter of 2022, from an average of $57 per megawatt hour for the fourth quarter of 2021. There are worries the huge wholesale price bump, if prolonged, will filter through to higher household bills.
AGL is nearing a major shareholder vote in June on a controversial plan to split the company in two, just months after the company rejected two takeover bids from the Mike Cannon-Brookes and Brookfield consortium.