AEL as a pure short thesis on Victoria

Ive been toying with the idea of AEL as the most pure short on the Victorian economy possible. Would love feedback on the idea if anyone has any.

The thesis is really centred around the CFMEU and its political grip on the state. The C part of the union has slowly killed off the "FMEU" part in Victoria. The Forestry, Mining and Energy industries have essentially been legislated out of existence. Over the short term this is fine, but what happens when the legacy gas fields deplete?

So the plan is to built LNG import terminals. Under that scenario, AEL is pricing local gas at parity to LNG (or even at a premium for security of supply). That is a great situation as pipeline gas is fundamentally lower cost as it doesn't need to be liquified, shipped and re-gassed. Its also able to utilize depleted wells for storage of the LNG. To me this is the most likely situation, and the business becomes an absolute cash-cow with that arbitrage.

The secondary plan is to divert gas from QLD LNG operations. Well thats all great but those cargoes are already pre-payed for by the likes of Japan and Korea. Breaking those contracts and stealing their LNG is close to a declaration of war to those countries, and we will never do it in large volumes. They depend on our energy more than us, and they built our whole industry, for them.

A bear case would be that somehow there is so much LNG in the world that it becomes so cheap that it becomes cheaper than the pipeline gas being produced in Victoria. This is possible, but physics dictates this should be unsustainable over long periods of time. This is especially true if AEL is genuinely competent on the execution side, which recent progress at Orbost suggests is becomeing more and more the case. I can also see a world where the federal govt forces Woodside to send cheap LNG cargoes from the west to the east coast, which would also have the same effect.

Another bear case is that Victoria is so politically hostile to business that if they can, the govt will just demonize the industry and take the profits or enforce price caps. This could happen too but it only exacerbates the supply issues as it sends a signal that companies aren't welcome in the state. I can also see a world where energy intensive business are treated similarly and forced to close, reducing demand and shielding the residential users (voters).

The bull case is that we f it all up everybody cuts and runs once the music stops. If those LNG terminals aren't built, gas local gas will skyrocket. If we cant pump gas from QLD though aging infrastructure, gas will skyrocket. Hell, even if LNG does work, suddenly we are competing on price with Europe and Asia (which spikes every so often).So for me, a small position because your basically putting you money in a state which is hostile toward capitalism, but even in the base-case we should see significant price rises in the next few years. Oil and Gas is a crap business, but the dynamics in Victoria are such that this is a special situation.