AGL Energy is committed to providing ongoing, transparent disclosure in relation to our approach to the progressive and final rehabilitation of assets at the end of their operational lives. AGL Energy has recently completed a review of our long-term rehabilitation obligations, in line with commitments made in the 2017 Rehabilitation Report. At the same time, the discount rate used to derive the present value of the estimated cash flows was reduced from 10% to 3%, consistent with standard accounting practice. The review resulted in an increase in the provision for environmental restoration of $1,112 million, which was reflected in AGL Energy’s financial statements for the period ended 31 December 2020.
AGL Energy currently undertakes progressive rehabilitation activities across a number of operational sites. These progressive rehabilitation activities cover AGL Energy’s obligations to:
progressively rehabilitate the parts of the Loy Yang Mine that do not impact ongoing production; manage and progressively cap ash dams and voids at AGL Macquarie; and progressively decommission gas wells that have ceased production in the upstream gas portfolio. The updated provision accounts for an increase in the scope and cost of the above progressive rehabilitation activities. Further, additional works are now required to meet AGL Energy’s end-state compliance obligations, which have increased due to a combination of both updated regulatory requirements and the establishment of formal closure plans as some assets approach end of life. These additional works will result in an increase in the cost to deliver AGL Energy’s rehabilitation program. The key drivers of increases in the estimated costs are as follows:
an increase in the lake level, shoreline and associated mine battering for the Loy Yang Mine, in line with AGL Energy’s latest rehabilitation plan and the Latrobe Valley Regional Rehabilitation Strategy; an increase in the estimated area and restoration efforts required for both the Liddell ash dam and Ravensworth void at AGL Macquarie in line with committed rehabilitation plans; an increase in the estimated work required to decommission gas wells at both Camden and in the Surat Basin, aligning to Codes of Practice in NSW and Queensland; and inclusion of additional project management costs to align with an owner-led delivery model, ensuring that AGL Energy oversees delivery of its obligations. A more granular breakdown of the forecast costs and updated provision amount as at 30 June 2021 is provided below, for each major generation site and AGL Energy’s upstream gas portfolio. For completeness, other smaller assets in the portfolio, as well as joint venture assets, have been included as “Other”.