Extreme weather reduces net profit

Extreme weather events in Queensland, New South Wales, Victoria and South Australia are expected to reduce AGL’s forecast 2011 underlying net profit after tax (NPAT) by $30 million to $35 million.

Recent weather events which have affected the national electricity market include co-incident very high temperatures in South Australia, Victoria and New South Wales; a record heat wave in Sydney; Cyclone Yasi; and major flooding in Queensland.

These events resulted in several days of record electricity demand in New South Wales and the highest ever recorded electricity demand in South Australia, coupled with extended periods of high and volatile electricity prices, according to AGL.

The 242 MW Yabulu power station, over which AGL has dispatch rights, was shut down ahead of Cyclone Yasi. There was also disruption of gas supplies and transmission constraints to the 282 MW Oakey power station.

These events exposed AGL to increased customer demand for electricity during a period of higher underlying pool prices of up to $12,500 per MW hour (compared with recent wholesale electricity pool prices of below $40 per MW hour).

AGL has previously advised that underlying NPAT for FY2011 would be in the range of $450 million to $480 million. In light of the above events, and a relatively flat preliminary first half result, 2011 underlying NPAT earnings guidance has been revised to between $415 million and $440 million.

The first half to 31 December, 2010, was characterised by mild temperatures across the four states in which AGL operates. This resulted in relatively flat electricity consumption despite solid growth in customer numbers.

Low wholesale electricity prices resulted in the first half contribution from AGL’s 32.5 per cent interest in the Loy Yang power station declining by $22 million compared with the previous corresponding period. The net effect (subject to completion of the half year review by AGL’s auditors and to board approval) is that the interim FY2011 underlying NPAT to be announced on 23 February, 2011, is expected to be approximately the same as in the previous corresponding half year.