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.