Electricity provider AGL Energy shares tumbled with the company posting its second-biggest six-month net loss due to plant outages and soaring supply costs, Reuters reported.
AGL said a horror stretch of power plant failures and volatile wholesale markets squeezed underlying profit in the first half ended December 31 by 55% to just $87 million—little more than half of what analysts had forecast.
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A previously disclosed write-down due to a sped-up closure of a coal-fired power station brought a net loss of $1.08 billion. Compounding the gloom, AGL lowered the top of its full-year underlying profit forecast range by one-eighth.
Shares in AGL tumbled 12% on Thursday, against a 0.4% decline in the broader market—the company’s biggest one-day drop since 2007.
UBS analysts called the trading update “a soft result with slower than expected pass-through of rising electricity prices”. Jefferies analysts called the results announcement “a very weak set of numbers”.
New AGL CEO Damien Nicks criticised the federal government’s decision to impose wholesale price caps from December which had forced down retail prices for coal-powered electricity, limiting benefits to AGL from owning the mine that supplies much of its coal.
AGL buys in its gas, but the benefit of the $12/Gj price cap -was limited by suppliers withdrawing from negotiations to seek better prices elsewhere, Nicks said in an interview with Reuters.
The company had enough contracted gas supply for current residential needs, but AGL had to buy gas for about 40 commercial customers on the spot market at about $40 per gigajoule then pay the customers rebates, Nicks added.
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“That is not a long-term solution,” he said.
“A long-term solution is … some of those negotiations with the big gas producers coming back into play so that we can bring gas back into the market.”
