Feb. 23 (Bloomberg) -- AGL Energy Ltd., the Australian utility building the southern hemisphere’s largest wind farm, said it will likely hold back $2 billion of additional projects until prices for renewable-energy credits increase.
“Add to that the fact that we don’t have a price on carbon and no price signal to proceed with new wind farms,” Managing Director Michael Fraser said by phone today after the company reported a 3.7 percent drop in underlying first-half profit.
While the country has yet to impose a cost on carbon emissions, power retailers have to buy renewable energy certificates from clean generators under the government’s plan for 20 percent of electricity to come from alternatives to coal and petroleum by 2020. Government subsidies for solar power producers prompted an increase in household panel installations, causing a glut of the certificates that pushed down prices.
The market for the certificates has remained “soft and soggy” even after the government revised the program to encourage larger-scale projects, Fraser said. “It’s going to take, in our view, until around 2014 or 2015 for that surplus to wash through the system.”
AGL dropped 1.4 percent to close at A$14.46 a share in Sydney. The benchmark S&P/ASX 200 Index fell 0.2 percent.
The company estimated it would spend as much as A$6 billion in the next decade on gas-fired power stations and renewable energy projects if the Australian government imposes a price on carbon emissions, said Fraser. He serves on a business group set up by the government to tackle greenhouse gas pollution.
Prime Minister Julia Gillard’s Labor Party government has “a very clear view on introducing a carbon tax by July 1 of next year,” he said. “The ball is in the court of the Greens Party and the opposition as to whether they are going to play ball and give business the certainty they are looking for.”
AGL is developing 672 megawatts of renewable energy capacity, including the 420-megawatt Macarthur wind farm in Victoria, and planning to make a final investment decision on the Dalton gas-fired power station in the second half of 2011, it said in its earnings statement to the Australian stock exchange today.
First-half profit excluding one-time items dropped to A$226.2 million, in line with company’s estimates, after a lower-than-expected earnings from the Loy Yang coal-fired power station in Victoria, AGL said. The plant’s contribution to profit dropped by 98 percent, or A$22.4 million, because of lower pooled electricity prices in the state.
The power and gas retailer added 42,000 New South Wales electricity customers in the last six months, and “that’s before we’ve put our foot on the accelerator,” Fraser said.
AGL in December set a target of adding as many as 500,000 accounts in the state during the next three years after failing to acquire any assets in New South Wales’ sale of power retailers and contracts to trade electricity production.
To contact the reporter on this story: James Paton in Sydney email@example.com.
To contact the editor responsible for this story: Amit Prakash at firstname.lastname@example.org.