AGL shares plunged to a nine year low of $12.28 on Monday after the company revealed yet another earnings downgrade because of technical problems at its ageing coal-fired power station in NSW.
The shares ended a rough session at $12.54 after the company lowered its profit forecast for the year to next June.
The company is now expecting underlying full year post-tax profit to be between $500 million and $580 million rather than between $560 million and $660 million.
AGL earned an underlying profit of $861 million for the year to June 30, 2020, so this year’s underlying result could be down as much as 30%.
Seeing the company reported an underlying result of $1.04 billion for the year to June 2019, the drop could be as much as 50% from the result two years ago.
The profit downgrade was due to a fire at the Liddell Power Station in the Hunter Valley area of New South Wales last Friday.
A fire started in the generator transformer of Unit 3 during an oil cooler filter replacement. The unit was unlikely to start working gain until March next year and the company expects the impact of the outage and replacing the transformer to be about $25 million.
“The update to AGL’s 2020-21 guidance range reflects this impact as well as increasing earnings pressure arising from recent trading performance and a continued deterioration in market and operating conditions in Wholesale Electricity,” AGL told shareholders on Monday afternoon.
AGL said it couldn’t recover the financial impact from insurance in future years.
In 2020-21 and 2021-22 its profits will be boosted by insurance payments relating to outages at Loy Yang power station in Victoria in 2019.
It warned of further declines in wholesale electricity earnings in 2023 “as hedging positions established when wholesale prices were materially higher progressively roll off, and are re-contracted at lower levels reflecting the deterioration in wholesale prices”.
The entire energy sector will be hit by the weakening trading situation thanks to the continuing rise in renewables such as solar and wind power.
