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AGL shelves over A$1 bln investments in wind energy

Australia’s top operator of renewable energy assets, AGL Energy Ltd. (AGK.AX), will shelve up to A$1 billion worth of planned investments in wind energy, citing uncertainty in the government’s climate change policies.

AGL said on Friday the government’s current rebates for small renewable technologies, such as solar water panels and heat pumps, had flooded the market with cheap renewable energy certificates and put enormous pressure on the viability of its expensive wind projects.

News of AGL shelving its investments comes as the government said it would reshape its troubled clean energy scheme to separate the household market from large renewable project investments — a move aimed at unlocking some A$22 billion worth of planned investments. [ID:nSGE61O0OJ]

“We will not be making any commitments until new laws are passed. We have been having constructive dialogue with the government and we’re cautiously optimistic that these issues will be rectified during the coming winter parliament session,” Chief Executive Officer Michael Fraser said on a conference call.

The decision means AGL would defer about A$100 million in spending this year, which would cut its forecast full year capital expenditure by about a third to A$450 million.

Australia last year set a mandatory target of sourcing 20 percent of its energy needs from clean power.

The scheme enabled major energy companies to receive tradeable Renewable Energy Certificates, or RECs, which each represent one megawatt hour (MWh) of electricity generated from renewable energy.

But the value of RECs has plummeted by around half over the past six months to a low of about $30, reducing their worth to large-scale projects.

Wind projects put on hold by AGL include the A$800 million Macarthur wind farm in the southeastern state of Victoria as well as the Hallett 3 and Barn Hill wind projects.

Shares in AGL were up 4.1 percent at A$14.37 by 0428 GMT, after gaining as much as 4.2 percent. The broader index .AXJO was up 0.7 percent.

Uncertainty over the government carbon trading scheme has also led AGL to adopt a wait-and-see stance on whether to divest its 32.5 percent stake in a debt-laden coal-fired power station.

“We’re looking to see how the government’s carbon trading scheme will pan out and we’re in the middle of refinancing Loy Yang’s debt, which I’m confident will happen,” Chief Financial Officer Financial Stephen Mikkelsen told Reuters.

“We wouldn’t realise the value of the asset if we were to sell our stake now, so we have to wait and see before we can get a more certain view of its value.”

Analysts have speculated that AGL would be forced to sell its stake in Loy Yang due to debt refinancing concerns. The power plant is due to pay A$515 million in debt by November this year.


AGL said it was looking at alternative acquisition possibilities, following delays in the power privatisation process in New South Wales state.

“We are looking for opportunities to grow our upstream gas business…we’ve have done deals in the mid-A$100 million size and that’s a range we’re comfortable with, although the key focus remains on finding opportunities that have a good value,” Mikkelsen said.

The Sydney-based retailer said it remains interested in New South Wales state’s power assets if the privatisation proceeds, adding that should capital raising be required, it would likely be an entitlement offer favouring existing shareholders.

The firm on Friday beat analysts’ expectations and reported a 22 percent rise in its underlying net profit and reaffirmed its annual earnings guidance of between A$390 million-A$420 million. ($1=1.125 Australian Dollar)