The Australian Energy Market Operator has imposed price caps in all the four main states of the NEM and seized control of the market as it seeks to avoid blackouts.
Wave of outages
The squeeze comes amid a wave of coal power outages, high coal and gas prices and elevated demand during the cold snap.
The much higher forward electricity prices have left EnergyAustralia’s derivative contracts “out of the money” as the group calculates their value against current prices.
In its first-quarter report, CLP said losses on the contracts for the March quarter totaled $HK2.5 billion, a figure that has now ballooned higher in the following two months.
“The position for the first half of 2022 remains uncertain as it will be determined by the prices prevailing in the market as at 30 June 2022,” CLP said.
“The loss recorded at that time has the potential to be either more or less than the amount recorded at 31 May 2022, yet it is expected to remain materially unfavorable to the Group’s operating earnings.”
It said it would report the actual loss for the full six months at the group’s interim results on August 8.
CLP noted the unfavorable changes to the fair value of its contracts are not related to the underlying operating performance of its business. The losses are unrealized, reflecting rather “an opportunity cost versus prevailing prices at a particular point in time”.
It said the rise in wholesale prices should increase earnings for EnergyAustralia’s energy supply business in the longer term, “provided it can purchase fuel as required, generate and dispatch electricity at the higher prices”.
The coal supply problems at the Mount Piper generator near Lithgow have been an ongoing difficulty for EnergyAustralia for at least three years. They come as Origin Energy is also battling coal supply constraints at its 2880-megawatt Eraring coal power generator on the NSW Central Coast.