Welcome return to profit for EnergyAustralia but daunting transition hurdles remain

EnergyAustralia has posted a half-year profit but there are still concerns about how Australia’s third largest electricity and gas retailer will fund its transition.

Mark Collette, managing director of EnergyAustralia, at the firm’s new Tallawarra B gas-fired power station. Picture: Arsineh Houspian.

EnergyAustralia’s has posted earnings of more than $100m for the first six months of 2024, marking a welcome return to profitability but doing little to quell concerns about the capacity of the country’s third largest electricity and gas retailer to fund its transition.

CLP Group, the Hong Kong-listed owner of EnergyAustralia, said the retailer recorded earnings of $HK611m ($122.3m), well up on the $HK590m loss it recorded during the same period last year.

In 2022 EnergyAustralia reported first-half losses of $1.55bn after Australia’s wholesale electricity market soared to record levels amid a global energy crunch triggered by Russia’s invasion of Ukraine.

Prices for coal and gas soared and while EnergyAustralia profited through its ownership of two coal-fired 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’s largest generator, the Yallourn coal power station, is set to retire in 2028. Picture: Jason Edwards

With significant debts incurring interest, EnergyAustralia has fallen behind the performance of its largest competitors Origin Energy and AGL Energy.

But the return to profitability will fuel hopes that EnergyAustralia is making solid progress, and CLP said its Australian unit profited from strong performance across its coal assets.

Australia has increased its coal use in recent months amid constrained renewable energy output, while policy settings also incentivised coal power station operators to increase output.

But EnergyAustralia faces challenges, particularly around replacing its coal power station fleet.

Last year it pledged to spend $5bn by 2030 to develop renewable energy generation assets to replace coal power generation, but is likely to have to seek partners, with CLP indicating it will prioritise its Chinese and Hong Kong businesses.

Industry sources have said EnergyAustralia’s transition pipeline is daunting. The company’s largest generator, the Yallourn coal power station, is set to retire in 2028. Yallourn was a major driver of EnergyAustralia’s return to profit after the company spent $400m to improve its reliability – a prudent investment as Australia increased its reliance on coal.

EnergyAustralia has also been hit by misfortune. In June, The Australian revealed its $300m gas power station in NSW had quietly suffered problems, which meant it remained closed despite being “opened” months earlier.

While EnergyAustralia is not responsible for the delays, they are a hammer blow to the company – which was positioning the peaker to capitalise on periods of intraday price volatility.

NSW this winter ­experienced sustained periods of high wholesale electricity prices, when EnergyAustralia could have fired up the facility and dispatched electricity to the grid and earned lucrative returns.

Originally published as Welcome return to profit for EnergyAustralia but daunting transition hurdles remain