AGL shares dipped 3% to $19.69 yesterday after the company revealed higher costs from wholesale gas purchases in recent months. But the company said the extra cost would be taken in the 2016-17 financial year and would not impact its guidance for the 2015-16 financial year.
But it did warn that earnings from the company’s gas business could fall short by up to $100 million in the current financial year.
In a statement to the ASX yesterday, AGL said it had been forced to “acquire a higher than anticipated proportion of wholesale gas for the first quarter of FY17 from the spot market and other short-term sources.” (That’s the quarter we are currently in.)
"This has been driven by the recent curtailment of Queensland gas supply arising from safety issues at a key supplier’s project, other supply constraints in the gas market and increased demand at the AGL Torrens power station.
“These recent gas market constraints are not expected to have any impact on AGL’s ability to meet customer gas demand.
“However, given the unusually high prices prevalent in the spot market arising from strong East Coast demand, AGL expects a negative impact on its pre-tax wholesale gas margin in the first quarter of FY17 of approximately $35 million,” AGL told the ASX.
AGL said that while it expects to deliver earnings growth in 2016-17, it sees the total pre-tax contribution to margin from its Energy Markets gas portfolio in FY17 to be lower than FY16 by at least $100 million, thanks to:
"The above-mentioned $35 million impact; the expectation that the Queensland wholesale gas sales margin will remain attractive, but be approximately $1 per gigajoule lower than FY16 (on firm sales of 60 petajoules, unchanged from FY16), equating to a pre-tax impact of approximately $60 million lower margin in FY17; and slightly lower consumer market margins, including as a result of higher competition; and, and Flat business customer margins. AGL said that pending the completion of winter trading, it expects to provide formal guidance for 2016-17 Underlying Profit at its annual meeting on September 28."
“There is no change to AGL’s FY16 guidance for Underlying Profit in the upper half of the guidance range of $650 million to $720 million,” the company said yesterday.
