EnergyAustralia profits are down by 15.5% after a summer squeeze on the East coast electricity market and increasing gas prices.
Chairman Michael Kadoorie has described the current business climate as being “very challenging” as operating earnings dropped to $122 million in June.
Speaking during a results statement in Hong Kong, Sir Michael said EnergyAustralia profits dipped sharply due to the impact of “significant volatility” in the value of energy contracts.
“Against a backdrop of uncertain energy policies, the energy market in Australia remains very challenging, leading to a period of high and volatile wholesale prices.”
EnergyAustralia chief executive Cath Tanna is one of seven retail electricity bosses that have been summoned to Canberra by Prime Minister Malcolm Turnbull on 9 August in an intervention intended to bring about action to minimise price hikes for consumers. In its earnings statement CLP Group, which owns EnergyAustralia, pointed to several reasons prices had risen for energy users, including the shutdown of Engie’s old Hazelwood coal-fired power station in Victoria, regulatory uncertainty and rising gas prices.
Despite EnergyAustralia profits being down; retail performed well
Despite EnergyAustralia profits going down, its retail business, which sits behind Origin Energy’s and AGL Energy’s in size, had “performed well”, supported by higher sales of electricity and gas. The business increased gross margins as a result of higher prices and usage, but the impact was outweighed by higher gas supply costs and increased purchasing of power on the wholesale spot market at “high” prices.
“Although the market remained competitive, our retention of existing customers continued to be favourable to overall market churn, and we have increased the total number of customer accounts,” CLP said of EnergyAustralia.
CLP said it expects wholesale electricity prices to “remain volatile and at high levels” compared to the past, providing a brighter outlook for its generation business. It said it would continue to seek ways to support vulnerable customers, and “will continue to look for fresh ways to remove cost and complexity” from its business.
The Hong Kong player, which also has operations in southeast Asia, India and China, noted the “significant progress” EnergyAustralia had made in supporting new renewables projects, with five contracts signed to underpin new solar and wind projects. It is also examining a pumped hydro storage project in South Australia and an “energy recovery” project at the Mount Piper generator in NSW.
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