AGL Energy’s coal plants, Bayswater and Loy Yang, could face the exit earlier than planned, UBS says
AGL’s twin coal plants, Bayswater and Loy Yang A, could exit the grid earlier than planned, according to UBS analysts.
AGL Energy’s giant coal plants in NSW and Victoria could shut even earlier than planned due to a tough operating environment for the fossil-fuel generators in the electricity grid, UBS has said.
The 180-year-old power giant announced on Thursday a plan to close the doors of the Bayswater coal plant in NSW’s Hunter Valley up to five years early by 2030, while Victoria’s Loy Yang A facility faces the axe from 2040, ahead of its earlier expected retirement in 2048.
But those dates could come forward again, with Bayswater potentially shut by 2028 and Loy Yang A by 2035, 13 years before the Victorian plant’s scheduled retirement date.
“We consider plant closures may be accelerated further to 2028 and 2035 respectively due to long-term operating headwinds,” UBS analysts said.
AGL chief executive Graeme Hunt hinted at a similar conclusion on Thursday, telling The Australian the exit dates could come forward again, implying closures in the 2020s for Bayswater and 2030s for Loy Yang A as solar and wind rout the economics of baseload coal.
Analysts are also closely watching AGL opening talks with partners to establish a fund called the Energy Transition Investment Partnership, aimed at supporting Accel in funding low-carbon developments with a 2700 megawatt pipeline of projects included in the scheme.
It is likely to set up the investment group in a similar fashion to the low-capital model of PowAR, the clean energy joint venture it owns with the Queensland government’s QIC and the Future Fund.
Macquarie notes term sheets have been issued, with the fund ideally to be created before June.
“Accel’s level of investment is yet to be determined albeit most likely in the range of 30-50 per cent. Based on a $4.1bn-$4.7bn capital expenditure range for all the projects and a 50-50 debt equity structure, the fund would need as much as about $2.1bn-$2.4bn, of which Accel’s potential contribution is $500m-$600m,” Macquarie analysts noted.
AGL fell 5.9 per cent to $6.84 on Friday following a 3.2 per cent drop on Thursday after the release of its half-year results.
Mr Hunt, AGL’s former chairman who took the helm in July last year, will head its coal-dominated generation arm known as Accel should a planned split of the company go ahead.
AGL Australia, a green-focused energy retailer, will be led by AGL’s current chief customer officer, Christine Corbett, with a shareholder vote on the split set to take place in the June quarter.
Separately, electricity giant EnergyAustralia has flagged plans to raise capital to help fund a string of power generation projects, including a giant battery, gas plant expansion and pumped hydro.
“I’d expect to see us raising capital as we haven’t raised debt for a few years,” EnergyAustralia managing director Mark Collette told the RenewEconomy podcast.
“I’d expect to see us out there and continuing to grow our business by investing in those projects of the future.
“A lot of what we see our business looking like in 2030 comes from the things that we’re building now and the things that we’ve also got the ideas and the development plans for, things like Lake Lyall.
“In order to get there it does involve billions of dollars worth of investment and, in the context of our business which has got an asset value of $6.5bn, that’s a big number. If every company is facing that sort of investment in the future, it brings to life that it does mean there’s a lot of capital to raise from a lot of sources in order to bring this energy transition to life.”
EnergyAustralia, owned by Hong Kong’s CLP, has hired Morgan Stanley to conduct a review of its business, The Australia’s DataRoom column reported this week.
It is understood the investment bank may be looking for a strategic partner, leading to a partial sale.