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EnergyAustralia pays dearly for gas, consumers pay more

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CSIRO_ScienceImage_2646_Yallourn_Power_Station

Major Australian power generator and retailer EnergyAustralia has reported an 18 per cent drop in net profit for the first half of 2017, in a result that mirrors the conflicting states of dysfunction currently gripping the nation’s energy market.

In its interim results statement, EnergyAustralia’s Hong Kong-based parent company CLP Holdings painted a picture of a gen-tailer whose wholesale division has been stung by inflated gas prices, even though it is also the owner of the Yallourn brown coal generator.

Its retail division, however, clawed back ground thanks to stronger demand and those generous retail margins that recently piqued Malcolm Turnbull’s interest.

Add to that the ongoing policy uncertainty, and a shrinking coal generation portfolio that is being squeezed by both renewables and gas, and you have operating earnings that decreased 15.5 per cent to HK$758 million ($A1.2 billion) from the same period last year.

“Against a backdrop of uncertain energy policies, the energy market in Australia remains very challenging, leading to a period of high and volatile wholesale prices,” said CLP Holdings CEO Michael Kadoorie.

“EnergyAustralia is both a buyer and seller in the wholesale market and in times of high volatility the
prospective value of those energy contracts can vary significantly,” Kadoorie said.

While the retail business performed well, the CLP report said that EnergyAustralia’s “margins were adversely affected” by high and volatile prices in the wholesale market, “as gas became increasingly scarce and expensive, one ageing coal‐fired generator was removed from service, and regulatory uncertainty continued.”

But the report also acknowledged the impact all this was having on the consumer, and the limited role coal-fired generation could play in providing any relief.

“Higher wholesale prices and the higher demand … have adversely impacted purchase costs for our mass market electricity customers,” the report said.

“This was only partially offset by the increased contribution from generation during the period. The closure by ENGIE of its Hazelwood Power Station in Victoria combined with the continued operation of Alcoa’s Portland Aluminium smelter had a significant impact on market dynamics and wholesale prices.

“We acknowledge the impact higher energy prices have on customers and we will continue to find ways to support our most vulnerable customers,” the report said.

“Further, with our customers in mind, we will continue to look for fresh ways to remove cost and complexity from our business. We expect the retail market to remain competitive, and will concentrate on our customer‐focused strategy to continue to improve our retail business by focusing on meeting customer needs,” it said.

On renewables, the report said EnergyAustralia had made significant progress on its pledge of last year, to underpin the development of up to 500MW of new wind and solar through power off take deals.

“So far this year, significant progress has been made with five contracts signed (four solar farms and one wind project) which will produce 390MW of energy for EnergyAustralia,” the report said.

“In addition, we are involved in a number of potential clean energy projects including pumped hydro in South Australia, and energy recovery at Mount Piper. These projects, if successful, will further diversify our generation mix.”

The report also noted that the gen-tailer was poised to start providing other consumer services, including the smart solar inverter system it was offering in partnership with Redback Technologies, which will help customers to optimise their solar self consumption.  

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  • Joe

    Not sure what is going on with Energy Australia who is my electricity retailer. From July the media headline was rate increase in tariffs of 19% here in NSW. But I did The Maths and my tariff is actually up by 21%. They sent me an email yesterday …”Loyalty Rates” are in….. and I get a 2% discount off both my Daily Supply Charge and Usage Rates. They are also doing some sort of Green Offset of the electricity that I pull from the Grid. And from July my FiT went up from 6.1 cents to 12.5 cents. You’d almost say that Energy Australia is here to help.

    • Robert Westinghouse

      Energy Australia (owned by the Chinese) is here to help the Chinese. FIT of 12.5…yes very generous when we are paying 2-3 times that. My EA prices when up 22% and I a waiting for the next bill to get gouged again. The government should NEVER sell utilities to foreign governments… I forgot our government has a foot in the US and a foot in China…I am saving for more PV and more batteries and let EA die – it is a foreign company why should we care

      • Joe

        Robert, don’t get me wrong. I’m not waving the EA Supporters Flag, all the electricity majors are ‘Sharks’. I have my had Solar PV for a few years now and The Batteries will come….as long as Standards Australia don’t stymie me with this proposed ‘Bunker ‘ nonsense.

  • riley222

    Well , they’ve finally prompted me to go solar.(I know, I know). Worked out our increase on the last time of use bill, 24%. Enough, I’m on the way , with an aim to go with batteries when they have just a bit more financial incentive. Way to go EA, doing your bit to encourage solar uptake.

    • MaxG

      The incentive is already there… the longer you wait, the more money you loose — it is that simple.

      • riley222

        I’m wondering who’s going to be left actually paying the bills. In the residential space those that can’t supply their own electricity are generally not in the position to keep absorbing price hikes.
        Another great example of the stupidity of privatisation for ideological reasons, Still going on, in NSW we have the upcoming total privatisation of public transport. Anyone with an ounce of foresight can see the eventual result, but on they go, facts smothered by buzzwords and b.s.
        Ideologically driven vandals.

        • MaxG

          I have figured quite a while ago, that the public has been sold out… and as such have decided to remove myself from the system, by eliminating as many bills as possible. Electricity was the first, many followed, and at present I have to pay 5 bills: land tax, car rego and insurance, Internet, and food (I am not producing at present).
          This was such a liberating experience, it is almost indescribable. As a result, I buy and have less junk, I have shortened my work time, hence have more time, focus on things like — life has been great. I do not use social media, other than facebook to connect with family abroad… and like e-mail, I control when I use it; do not use smart phones; if I am on the road it is switched off, until I need to use it.
          What has this all to do with privatisation? Everything; not being a customer means not feeding the leeches.
          Someone accused me of being anti-social by generating my own energy and not supporting the public good. I replied by saying, since it has been privatised it has become a product like any other I can chose to buy or not, and I decided not to.

          So yes, “ideologically driven vandals”, and I call them idiots and criminals…

        • nakedChimp

          those aren’t ideological vandals, they are clever naked chimps that see an opportunity to own a monopoly for their own benefit.
          And all this happens, because the government was taking up loans to invest into the economy (and some of it for votes naturally) and can’t keep up with rates.
          Selling the family silver cutlery to the ones that did lend the money to them to be able to cover some of the rate payments.
          As this will not cover all debt, this game will go on until everything is handed over and the government (public) is bankrupt.
          At this stage usually we get a revolution or some other political stunt that turns a country into a dictatorship and burn everything down (WW3 anyone?) to start fresh.
          Ye-Ha.

          PS: the taxpayer will pay those bills in the end, some way or another.

  • Don McMillan

    Without investment in to Gas exploration , gas prices can never go down.