Human beings! So vulnerable, venal and corrupt. It’s almost amusing from a high altitude.
Yet on the ground, it is closer to maddening.
The country’s largest coal power station will run for almost two years longer than planned after owner Origin Energy said an extension was needed to keep the grid secure amid a slower than expected rollout of renewable alternatives.
The 2880-megawatt Eraring Power Station near Newcastle, which supplies nearly a quarter of the state’s power, will remain operational until at least 2029 after Origin and the NSW government agreed to a two-year extension of an underwriting deal struck in 2024.
Eraring is the poster child for what has gone wrong with an energy transition that uses publicly subsidised coal to transition from privately owned coal, instead of low-carbon energy.
Sold to ORG for -$75m in 2013 by Treasurer Mike Baird, on the eve of QLD gas exports, Eraring has since been a monster cash cow for ORG.
Examine the sheer incompetence of Baird, who subsequently ascended to the position of Premier in a quintessential Australian manner.
ORG was most of the way through construction of its LNG export terminal in QLD at the time and about to take total control of local gas prices via its gas export cartel.
Gas was supposed to be the transition fuel to replace coal while renewables caught up.
In essence, Baird compensated ORG for acquiring the sole asset in NSW capable of sustaining the power grid, precisely when ORG was poised to seize control of that grid through gas exports.
This episode was entirely foreseeable, and Mike Baird’s career should have slid accordingly, from treasurer to serving burgers at Maccas.
However, I’m uncertain what Maccas would have done with him, as he paid customers to eat Big Macs before the company was sued for obesity.
This is the horrendous level of leadership you suffer from in Australia.
Nothing has changed since. Here’s a snapshot of the Albanese government’s proposed gas reservation and its impact on ORG.
Domestic gas price forward curves (Wallumbilla and DWGM) average A$12-13/GJ overthe next 2 years, which is >20% above our estimated LNG contract net-back price at a 12% slope to US$60/bbl Brent, and >50% above our average JKM net-back spot price forecast over 2026-2030. Considering we forecast a softening of global LNG prices (and net-back domestic gas prices) over the decade, the impacts of selling into A$8-10/GJ domestic gas prices to ORG and STO are minimal at ~1-3% to our 12m price target/NAV even under our severe reservation scenarios (a 20% annual total supply reservation, and a 20% total project life reservation).
Of course, the impact is neutral because the plan does not work, given it only applies to new gas projects.
Worse, if it comes with the scrapping of the ADGSM, the govenrment will have no mechanism to force the local price down with crashing net-back prices.
Your energy bills are skyrocketing due to this visionless, corrupt, venal, and stupid leadership.
