Bullying the management of AGL Energy by Prime Minister Turnbull and his government has blown up in his face with yesterday’s annual meeting in Sydney being told AGL has no intention of changing course and keeping the ageing and inefficient Liddell coal fired power station in the Hunter Valley region of NSW open beyond its scheduled closure in 2022.
AGL Energy chairman Jerry Maycock and CEO Andy Vesey both made it clear to the AGM that AGL will not deviate from its push into reneweables.
The AGM was held the same day as the Prime Minister again tried to pressure major gas exporters to provide more gas for the domestic market or face caps on the level of their exports next year.
There was an agreement, but it looked more political than business rational.
Messrs Maycock and Vesey told shareholders there was a host of reasons why the government’s push to extend its life makes no sense.
The chairman reminded the meeting that AGL had not set the closure date – the NSW Government (the previous owner) had.
"When considering the future of Liddell, it is important to acknowledge that it is a plant that is approximately 45-years old and that, at the time that AGL acquired it, the intention of the NSW Government, its previous owner, was to close the plant in 2022," Mr Maycock said.
Mr Maycock also poured cold water on the government’s alternative attempt to get AGL to sell Liddell to let another company run it. He said the sale of the Liddell power plant would be “challenging".
“While it may be technically possible to extend the life of the power station, the costs of doing so in a way that ensures that the plant is even moderately reliable are certain to be substantial,” Mr Maycock told the meeting.
Selling the plant to a new owner who would keep it open would also be challenging because it would be “difficult to ‘unbundle’ from AGL’s wholesale portfolio” and physically difficulty to separate from the nearby, interconnected Bayswater plant. “Any new owner would obviously need to pay AGL for the value of the asset in the period of remaining life to 2022,” Mr Maycock said.
“They would also need to make a highly complex and risky set of assumptions about a wide range of obligations up to and/or beyond 2022.
“These would include fuel and other operating costs, capital costs, subsequent closure and rehabilitation costs, as well as social costs.”
Mr Vesey spent the much of his address to the meeting explaining how AGL would replace the capacity lost at Liddell, including new wind and solar farms, up to 750 megawatts of new gas-fired plants and a 100-megawatt (MW) upgrade to the more modern and larger Bayswater coal plant next door to Liddell. A 250 MW battery at Liddell and demand response will also come into play, he said.
“We are confident that between our actions and those of the market the impact of Liddell’s planned closure in 2022 will be mitigated," said Mr Vesey.
AGL shares eased 0.8% to $22.85. Issue over.
