AGL Energy will shelve about $2 billion worth of wind-farm investment until the price of renewable energy certificates improves and there is a price on carbon.
AGL managing director Michael Fraser announced this yesterday as Australia’s largest energy retailer unveiled an underlying profit of $226.2 million for the six months to December 31, down 3.7 per cent from the previous corresponding period.
The result was in line with expectations although Loy Yang A power station contributed only $22.4 million, a drop of 98 per cent, due to lower pooled electricity prices.
Analysts expressed concerns about AGL’s operating cash flow of $101 million. Mr Fraser said the cash position was a result of spending close to $100 million buying renewable energy certificates (RECs). Those certificates, each of which represents 1 megawatt-hour of power, have flooded the market and are now trading at about $35.
”There is a surplus of 31 million RECS that are being carried at the end of 2010 and we are still to see the final number,” Mr Fraser told BusinessDay. ”That has been created by having included small-scale solar into the scheme and then all of the heavy subsidies that it got. That has been fixed, supported by both sides of Parliament, but it is going to take some time for that to wash through the system.
”Until there is a price signal there and RECs recover, we are not going to commit to building any more wind farms. There is about $2 billion in wind projects that we aren’t proceeding with until we see that price signal,” Mr Fraser said.
The AGL boss, who is on the federal government’s business round table on climate change, said he was supportive of the government’s hybrid tax-and-trading scheme.
”The predominant mood of the round table is ‘let’s get on with it’,” Mr Fraser said. ”The government has been clear that it wants a scheme in place from 1 July next year and that will include transitional assistance for the electricity generation sector and trade-exposed industries. The ball is now in the court of the Coalition and the Greens.”
Mr Fraser said rising energy prices were a concern for many Australians and called on the federal government to ease the burden.
”If you look at rising electricity prices there is a windfall GST gain for the government,” he said. ”We say that should be provided as a rebate to those who can’t afford those price rises.”
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