Setback for AGL Energy as Loy Yang coal power plant hit with fresh delay
AGL Energy has suffered a fresh supply setback with its giant Loy Yang A coal plant in Victoria facing a further one-month delay before returning to service.
AGL Energy has suffered a fresh supply setback with its giant Loy Yang A coal plant in Victoria facing a further one-month delay before returning to service due to a rotor defect.
Unit 2 of the electricity company’s Loy Yang A power station first went offline on April 15 following an electrical fault with the generator.
It was initially due back in service on August 1, which was then put back until the second half of September. AGL blamed global supply chain issues and problems securing the specialised parts needed to fix the fault.
The latest hitch cropped up during testing in the final assembly of the unit’s generator rotor, with a part defect detected that requires GE to manufacture a new part in Switzerland. The return of the unit has now been pushed back to the second half of October, with AGL to change the outage plans of other units to reflect the new timeline.
The financial hit from having the unit down for more than six months will be unveiled at its closely watched strategy update due in the last week of September, when AGL will deliver earnings guidance for the 2023 financial year.
The company said the extra delay will not have a material impact on its guidance given the strong performance of its broader coal fleet in August and September – which includes Liddell and Bayswater in NSW – as its units returned to service after breakdowns and maintenance over winter.
RBC has previously estimated the loss of a quarter of Loy Yang’s capacity could cut profit by $25m a month, with the broker assuming AGL will be required to buy additional electricity from the spot market given shortfalls caused by the breakdown.
Victoria’s largest power station provides 30 per cent of the state’s power needs. AGL suffered a similar problem at Loy Yang A in 2019 with a seven-month breakdown. While it recovered $100m in lost earnings from business interruption insurance, it has now shed those insurance benefits.
The country’s largest power company has been busy rewriting its centrepiece strategy, ever since it was forced to ditch demerger plans following a campaign led by Atlassian billionaire Mike Cannon-Brookes.
Expectations were firming that a new chair to replace Peter Botten would be named at the looming update, sources said, handing more credibility and weight to the new strategy. A replacement for chief executive Graeme Hunt could be introduced later in the year.
The future of AGL’s giant coal power stations will be among the most closely scrutinised aspects of the company’s revamp, according to top 10 shareholder Van Eck.
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