AGL update on Portland hedging contract
AGL Energy Limited (AGL) today announced that it has received notification from the first of the four owners of the Portland aluminium smelter in Victoria terminating, under the terms of existing agreements, its electricity hedging contracts with AGL. It is expected the other three partners in the Portland facility will follow suit over coming days.
AGL expects the Portland facility to continue to operate, meaning physical demand for electricity from the smelter will continue.
The hedging contracts are due to take effect from November 2016 and there is a 12-month notice period for termination (i.e. termination will occur in August 2017). As such, AGL continues to expect the contracts to contribute to earnings in FY17.
Any potential earnings impact on AGL from FY18 onwards is currently limited by the strong futures market outlook for wholesale electricity prices.
AGL notes that, in anticipation of a termination event, the fair value of the contracts in question was written down in its FY16 accounts by $187 million post-tax.
AGL is one of Australia’s leading integrated renewable energy companies and is taking action to responsibly reduce its greenhouse gas emissions while providing secure and affordable energy to its customers. Drawing on over 175 years of experience, AGL serves its customers throughout eastern Australia with their energy requirements, including gas, electricity, solar PV and related products and services. AGL has a diverse power generation portfolio including base, peaking and intermediate generation plants, spread across traditional thermal generation as well as renewable sources including hydro, wind, solar, landfill gas and biomass.