Last Thursday, AGL Energy notably wrote down the value of their production assets and contracts by $2.7 billion. Origin Energy and the Queensland government’s coal generators similarly wrote down the value of their assets.
AGL’s write-down is, remarkably, worth more than a third of the value of the total shareholders’ equity in the company.
This is a seminal event in Australia’s electricity industry. AGL is the oldest and by far the largest electricity company in Australia. Long a concessionaire of the NSW government, it went out of its way after its liberation to build a portfolio of coal-fired power stations, so that it is now Australia’s biggest single greenhouse gas emitter.
AGL attributed the write-down to much lower wholesale prices, which they think will be sustained due to “lower technology costs” (in other words new renewable generators will produce electricity much more cheaply than the prices that their coal generators have been paid in the past).
They also singled out “policy measures to underwrite new build of electricity generation”. This refers, in the main, to the recently legislated policy of the NSW government to ensure that 12,000 megawatts of additional renewable electricity generation is built in the state by 2030. AGL, and its NSW coal generator peers, bitterly opposed this policy.