Volumes : were softer last week, down 5% across the National Electricity Market compared with the same week last year. Warmer weather in NSW was, in our view, responsible for most of the decline. NSW volumes were down 11% and Vic down 5% for the week compared to previous corresponding period (PCP).
Future prices: FY17 futures prices fell for the second straight week with little change in in the outer years.
Spot electricity prices:. remained high, compared to PCP although 30% off last week’s levels.
REC prices were unchanged
Gas prices : eased back in the past week to more “normal” Winter levels. Lower electricity demand, and towards the end of the week strong wind generation in South Australia likely took some of the pressure off gas supply. Gas prices and gas electricity demand are interlinked. One development we expect to see from this Winter is even more focus on gas storage. Gas demand is seasonally low in Summer and this Summer we expect gas producers, traders and consumers to try store in anticipation of an even tighter physical market next Winter.
Utility share prices:. Mostly outperformed the broader ASX200 lead by AGL, APA and other yield oriented stocks. ORE underperformed the market following its quarterly report. The market is becoming concerned that other lithium producers are also expanding production and this may put pressure on lithium prices. In August many companies will report their result for the year to June 2017 and in some cases provide “guidance” as to FY18 expectations. For us the biggest feature will be the performance of the AGL and ORG energy market segments (retail and generation) in the June half and the comments around outlook. APA’s short term pipeline rental income will also be of interest.
Also, we are getting close to finding out the price that will be paid for the 50.4% of Ausgrid which the NSW Govt is selling off. Although the FIRB is one issue in this sale, by far the biggest uncertainty for buyers would seem to be the outcome of the AER’s appeal to the Federal Court from this year’s Australian Competition Tribunal decision to reject most of the AER’s regulatory determination for NSW. We will return to this case on another occasion.
Figure 3: Weekly and monthly share price performance Figure 3: Weekly and monthly share price performance
Volumes
Figure 4: electricity volumes
Base load futures
Figure 9: Baseload futures financial year time weighted average
Gas prices
Figure 10: STTM gas prices to 15 July
Figure 10: STTM gas prices to 15 July
David Leitch is principal of ITK. He was formerly a Utility Analyst for leading investment banks over the past 30 years. The views expressed are his own. Please note our new section, Energy Markets, which will include analysis from Leitch on the energy markets and broader energy issues. And also note our live generation widget, and the APVI solar contribution.
David Leitch is a regular contributor to Renew Economy and co-host of the weekly Energy Insiders Podcast. He is principal at ITK, specialising in analysis of electricity, gas and decarbonisation drawn from 33 years experience in stockbroking research & analysis for UBS, JPMorgan and predecessor firms.