Loy Yang coal plant breakdown pummels AGL’s profits

AGL, the nation’s largest power supplier, has slashed its full-year profit target because of a breakdown of one of the generation units at its giant Loy Yang A coal-fired power plant in Victoria’s Latrobe Valley.

The company had previously expected underlying after-tax profit to be between $260 million and $340 million, but on Monday said it now forecast a range of $220 million to $270 million.

The company noted the financial impact of the outage cannot be recovered through insurance.Credit:Fairfax

Unit 2 at AGL’s Loy Yang A power plant was taken out of service on February 15 because of an electrical fault with the generator.

The company noted the financial impact of the outage cannot be recovered through insurance. It does not expect the unit to be back online until August 1.

“However, engineering assessments are continuing, and AGL will inform the market of any material changes to this timeframe,” it said.

Loy Yang A, which runs on brown coal, is Victoria’s biggest power station, supplying about 30 per cent of the state’s electricity. It’s the second time that Unit 2 has broken down in the past three years following a seven-month outage in 2019.

The latest breakdown is untimely for AGL, given wholesale electricity prices are on the rise in Victoria. Wholesale futures prices in Victoria have surged to $176 per megawatt-hour, up from less than $60 earlier this year.

Barrenjoey analyst Dale Koenders said the outage “adds to uncertainty” about AGL’s proposed demerger, under which it intends to split the company’s carbon-heavy power plants off from its retail arm and cleaner generation assets.

The board’s plan to break up the 180-year-old utilities giant into two entities – AGL Australia and Accel Energy – will be put to a shareholders vote on June 22.

“But Loy Yang adds to uncertainty around demerger … which we think needs to be resolved before investors consider whether to pay for these future earnings,” Koenders said.

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