Eric Johnston in 'The Australian' will have these comments in print on Tuesday 13 December 2022:
"Labor’s radical coal and gas price caps wiped more than $1.6bn off electricity and gas producers on day one, ironically exceeding the amount Canberra has pledged to spend on electricity subsidies for low-income households and small businesses.
The transfer of funds directly away from investors is the real world effect of a policy designed to prevent “wartime profiteering” playing out. The wartime quip came from federal Industry Minister Ed Husic, showing the level of discussion around the table when it comes to shaping economically significant policies.
Australia is not at war and nearly every country that is reliant on coal or gas to power their grids is in the same boat when it comes to soaring prices. But unlike Australia, many seem to be seeking a supply solution first.
The Albanese government’s decision to up-end a functioning market with price caps as well as longer term pricing restrictions will have serious implications, particularly when it comes to securing enough gas supply to power industries in years to come.
Consortiums looking to build an LNG import terminal, which is the only realistic solution to quickly getting more gas into eastern Australia in the near future, have suddenly seen their financial returns diminished. This raises doubt over whether these projects will now get off the ground.
Origin Energy’s investors could be the biggest losers in the near term, with doubts growing over the power generator’s friendly $18.4bn takeover by Brookfield and EIG. The bid remains under due diligence, but looming regulatory intervention could put a different value on Origin’s LNG export operations, which are set to go to EIG. This LNG business directs uncontracted gas back into the local market, which suddenly has less value. Falling electricity prices from the 12-month price caps are a net negative for Origin and rival generator AGL, which both have pledged to spend billions of dollars in a green transition. Origin shares ended down 7.9 per cent, while AGL was off 2.6 per cent, as wholesale electricity futures started to drop..."
(20min delay)