APA Group CEO Rob Wheals plugs gas to fill coal shortfalls as profit surges
The nation’s largest gas distributor, APA Group, tips use of the fossil fuel to surge in the power grid as coal exits accelerate.
Gas pipeline giant APA Group has warned the early exit of coal could lead to a “trainwreck” in Australia’s electricity system and called for a new plan to ensure a smooth transition to renewable energy.
APA, which returned to profit for the first half of 2022, weighed into the role of coal in Australia’s energy mix amid a renewed debate over the rapid move away from the fossil fuel which has led the Morrison government to warn of price spikes.
Tech billionaire Mike Cannon-Brookes and his investment partner Brookfield plan to shut AGL’s coal plants by 2030 if they prove successful with a takeover of the utility, meaning Victoria’s Loy Yang A station would close 15 years earlier than currently scheduled. Origin Energy has also fast-tracked the closure of Australia’s biggest coal plant by up to seven years in mid-2025.
APA chief Rob Wheals said he supported cutting emissions more quickly but remains concerned a disorderly exit of the power stations may cause problems.
“We could see high prices if it’s not done in a managed way, because we don’t have sufficient other forms of energy. If they’re not done in a co-ordinated way, we will have shocks to the system,” Mr Wheals told The Australian.
“It makes sense that coal comes out and that it‘s replaced with renewable energy backed up by things like gas, which is lower emissions. But it’s got to be done in a co-ordinated and managed way and we need an orderly transition and national plan around it.”
States, the private sector and the federal government all working in different directions could lead to “chaos”, according to the APA boss.
“And chaos can only lead to a train wreck,” he added.
APA also pointed to the recent energy squeeze in Europe where utilities ran short on gas supplies.
“The recent European experience, where energy prices have more than doubled, demonstrates the risks associated with not having enough gas in the energy mix,” Mr Wheals said.
APA posted profit of $155m for the six month period after it was forced into an $11m loss a year ago following a writedown hit on its Orbost gas processing plant in Victoria.
Underlying earnings rose 4.5 per cent to $859m while the interim dividend lifted by 1c on the previous year to 25c per security.
Full-year distributions are expected to be 53c, up 4 per cent, and in line with previous guidance.
APA noted it had acquired all of the senior debt in the Tasmanian power cable known as Basslink and plans to convert it into a regulated asset and said touted an overall organic growth pipeline exceeding $1.4bn.
A long-talked about expansion into North America has yet to land any deals, although APA said it remains committed to a transaction if it stacks up.
“We are very clear through the energy transition that there will be billions of dollars of investment required in that energy transition in that market. And therefore we remain of the view that it is an attractive market. We expanded our scope to include a focus on identifying opportunities in electricity infrastructure, so that’s been the focus of the team,” Mr Wheals said.
APA owns 15,000kms of gas pipelines worth $21bn across Australia and delivers half the nation’s gas along with stakes in storage facilities, power stations and wind and solar farms. The company’s shares fell 1.4 per cent on Wednesday to $10.01.