EnergyAustralia posts half-year loss of over $100m

The result is a significant improvement on last year’s performance, but will dent the capacity of EnergyAustralia to invest in new renewable energy generation assets.

EnergyAustralia has recorded losses of more than $100m for the first six months of 2023, prolonging the financial troubles of the country’s third largest electricity and gas retailer.

The result will stoke concerns about EnergyAustralia’s capacity to find the much-needed funds to rapidly reshape the business towards renewable energy.

CLP Group, the Hong Kong-listed owner of EnergyAustralia, said the retailer recorded operating losses of $106m for the six month ended June 30, a significant improvement on the $1.55bn loss the retailer reported in the same six-month period a year ago.

Much of the loss, which is in contrast to the fortunes of local rivals AGL Energy and Origin Energy, was attributed to higher interest costs to service debt incurred in recent years.

The retailer’s chief executive Mark Collette said the result heralds the next stage of EnergyAustralia’s recovery after what he called a “difficult” 2022.

“Our first-half result is an early sign that we have emerged from the 2022 energy crisis as a stronger, more resilient business,” Mr Collette said.

“Better operational performance enables us to improve outcomes for our customers including reliability and affordability. And as our coal assets approach retirement starting with Yallourn in mid-2028, better financial performance enables us to accelerate the development of renewable and renewables-firming projects that will shape our future and support Australia’s clean energy transformation.”

EnergyAustralia endured a troubled 2022 when Australia’s wholesale electricity market soared to record levels amid a global energy crunch triggered by Russia’s invasion of Ukraine that sent prices for coal and gas soaring.

Coal is the dominant source of electricity in Australia, and while EnergyAustralia profited through its ownership of two coal power stations – generators entered into supply contracts that saw the country’s energy industry suffer significant losses.

EnergyAustralia was also forced to settle forward contracts that could not be covered because of reduced generation at its two coal power stations.

EnergyAustralia CEO Mark Collette.

EnergyAustralia did not provide any guidance for the rest of the year, but sources stressed the second-half period was traditionally a stronger financial period for energy companies as electricity and gas demand heightens during winter.

Still, the result may also dent the appeal of EnergyAustralia to would-be investors. CLP has for more than a year been looking to sell up to 50 per cent of the Australian electricity and gas retailer and a deal with Macquarie appeared to be close. That has since fallen through, elevating concern about EnergyAustralia’s capacity to invest much needed funds into new zero emission generation.

CLP chief executive Richard Lancaster declined to comment on Macquarie’s interest, but said the Hong-Kong based company had plenty of options and would take its time to find the right partner.

“We have been saying consistently that the energy transition will require significant capital investment, and for CLP, in order to support all of the markets in which we operate, we will have to make some choices and finding partners in businesses such as Australia,” said Mr Lancaster.

“Reaching a sensible arrangement is not something that can be done in a hurry. It does take some time. We are continuing to look for good partners that doesn’t necessarily need to be at an enterprise level either. We are looking for partners in projects and project level and perhaps in renewable energy or storage systems. So there’s quite a lot of opportunities for us.”

Origin Energy may soon be acquired by Brookfield and MidOcean in an $18.7bn deal, and the private equity giant has promised to invest between $20bn-$30bn in new renewable energy generation assets to rapidly reduce its carbon emissions.

EnergyAustralia said it was already seeing improved relaibility at Yallourn. Picture: Jason Edwards

AGL last year bowed to pressure from its largest shareholder, billionaire Mike Cannon-Brookes, and said it will close Australia’s biggest-emitting power plant a decade earlier than planned. To replace fossil fuel generation, AGL said it would develop a $20bn pipeline of renewable energy assets.

EnergyAustralia risks being left behind as it grapples with ongoing financial losses and interest in becoming a part-owner of the retailer appears sluggish.

To entice new interest, EnergyAustralia is seeking to improve its financial performance, investing millions to improve reliability.

CLP said major maintenance outages will be conducted on two generation units of Yallourn Power Station in the second half of the year to deliver what it said would be higher reliability and availability over the remaining operation to 2028.

Similar maintenance will be carried out on the plant’s other two units in 2024.

Mr Collette said the maintenance will cost approximately $400m but will improve the reliability of both coal power stations.

EnergyAustralia said it is already seeing improved reliability, with Yallourn generation availability averaging 77 per cent in the first half of the year, up from the 68 per cent seen one year earlier.

Yallourn, the second largest power station in Victoria, is scheduled to close in 2028 after EnergyAustralia struck a secret deal with the state government to ensure energy security for Australia’s second most populous state.

Originally published as EnergyAustralia posts half-year loss of over $100m