EnergyAustralia slumps to annual loss of $14m, on hunt for investors

EnergyAustralia, the nation’s third largest electricity company, is hunting for investors to help fund its multibillion-dollar pipeline of projects.

EnergyAustralia’s power plant at Yallourn, Victoria. Picture: NCA NewsWire/Daniel Pockett

EnergyAustralia, the nation’s third largest electricity company, is hunting for investors to help fund its multibillion-dollar pipeline of projects in a move that could further accelerate a shake-up of the country’s big power players.

Amid speculation it has kicked off a review that could lead to a partial sale of the business, its parent company, Hong Kong-listed CLP, said it was seeking partners and cited a deal it had previously struck with pension giant CDPQ for its Indian business as a potential model it would consider for Australia.

“We are recognising that the energy transition is capital-intensive and will require quite substantial investments,” CLP chief executive Richard Lancaster said. “To try and meet all these investment requirements on our own is going to stretch us beyond our capabilities.

“So we have said over the years that we would like to find partners to work with and that would include partnerships in our businesses, such as we have done with CDPQ coming in to join us in our India business.”

EnergyAustralia has “options to partner with other investors or other companies in the sector in order to help fund our participation in the energy transition in Australia”, the company told analysts on Monday night.

Rumours about a move to find a partner emerged as energy retailers struggle to maintain strong earnings due to several years of low wholesale power prices and cheap renewable energy eating into the profits of big coal generators, including ­EnergyAustralia.

The search for partners effectively adds EnergyAustralia to a bulging list of power companies undergoing a corporate transformation as a fast-paced transition from coal to renewables takes shape.

AGL has just rejected an $8bn bid by the Mike Cannon-Brookes consortium while Alinta Energy is believed to be considering options for a sale of part or all of the business, five years after its Hong Kong owners purchased the electricity generator and retailer for $4bn.

New EnergyAustralia chair Jane McAloon.

Meanwhile, private equity powerhouse Brookfield and US-based infrastructure investor GIP were thought to be weighing an acquisition of Origin Energy last year when its share price was about $4.

The power giant slumped to an annual operating loss on Monday amid low power prices and coal outages and warned of a tough year ahead amid intense retail competition, falling to a $HK83m ($14m) operating loss for the 12 months to December 31 from a $HK1.69bn profit a year earlier.

It blamed a tough year on low wholesale prices that also hit its two main rivals, AGL Energy and Origin Energy, while also pointing to higher gas costs and a hit from its Yallourn plant, which cut output due to flooding.

Several one-off charges also weighed including the settlement of litigation following the sale of its Iona gas storage plant and costs to safeguard the Yallourn site. The Melbourne-based company expects a difficult 2022 even as power prices have begun to recover this year.

“As the pace of the energy transition in Australia increases, the industry as a whole will face volatile and uncertain operating conditions, including an increasingly competitive landscape,” CLP said in its earnings statement on Monday.

“Against that backdrop, EnergyAustralia may continue to be affected by challenging market conditions during 2022, including the continuation of low realised wholesale electricity prices, higher gas costs and intense competition in retail energy markets.”

The electricity giant EnergyAustralia earlier on Monday appointed Jane McAloon as chair, replacing Graham Bradley who will step down after a decade in the role.

Ms McAloon, who has sat on the company’s board since 2012, will take on the role from April 28.

She holds a raft of other directorships with gold producer Newcrest Mining, insurer Allianz Australia, United Malt Group and is an advisory board member with law firm Allens.

She previously held corporate roles with BHP, AGL Energy and, before that, several jobs with the NSW government.

“Jane has deep experience across a range of sectors experiencing rapid change, as well as a genuine desire to engage key stakeholders as we continue to navigate the complex transition before us,” said Mr Lancaster.

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EnergyAustralia hired Morgan Stanley earlier in February to conduct a review of its business, including a potential selldown.

The company supplies electricity and natural gas to more than 1.7 million residential and business customers throughout Australia.

The company saw its first-half earnings crash in August by nearly a third amid flooding at its Yallourn coal plant in Victoria, when it flagged market conditions would remain tough due to lower wholesale power prices and a jump in gas costs.

It confirmed the closure of Yallourn by mid-2028, four years early, sparking the Morrison government to raise fears over a hit to prices and reliability in the national power grid.

New CEO Mark Collette took over from Cath Tanna, who stepped down on July 1 after seven years in the top job.

Mr Bradley has previously questioned the continuation of Scott Morrison’s interventionist approach in the electricity sector, arguing its planned $400m Tallawarra gas plant in NSW had been delayed due to uncertainty over the federal government’s plan to underwrite generation.