Coal power troubles, the new energy market order, and a more than $A1 billion write-off of the value of its retail business have sent one of Australia’s big three generator-retailers into the red.
EnergyAustralia returned a loss of nearly $1 billion in the June half, contributing to an overall loss of $HK907 million for Hong-Kong based parent company CLP Holdings.
EnergyAustralia’s was hit by a combination of a crack-down on so-called standing offers, ongoing problems at its Victoria Yallourn brown coal generator and NSW Mt Piper coal generator, and a major haircut on hedging products.
The result suggests the party is over for Australia’s incumbent utilities, as the rapid uptake of rooftop solar and rise of renewable corporate power purchase agreements take their toll on an ageing fossil fuel fleet.
For EnergyAustralia, the biggest impact in the June half came from the introduction of default market offers by both the federal and Victoria governments, which came into effect on July 1.
These have forced the ‘gen-tailer’ to move 170,000, or 10 per cent of its customers, to new and lower tariffs. On top of this, the company lost another 50,000 customer accounts over the first half to competitors.
“Given these regulatory changes and the expected resulting change to the market …. the carrying value of the Retail CGU (cash generating unit) cannot be supported by the value in use,” it said in its account notes.
“As a result, the Group has recognised an impairment on Retail goodwill of HK$6,381 million (A$1,176 million).” Analysts expect the new rules to slash its retail earnings by around $60 million in the coming half.