Latest on Victorian power prices; Discussing Five Utility Stocks: APA, MEZ, AST, MCY and CEN

  • Dec 22, 2019 AEDT
  • Team Kalkine
Latest on Victorian power prices; Discussing Five Utility Stocks: APA, MEZ, AST, MCY and CEN

Scorching heat temperatures, the slowdown in AGL Energy’s (ASX: AGL) Loy Yang A coal-fired power plant to come online and delay in repair of Origin Energy Limited (ASX: ORG) gas power plant has affected the power supply in Victoria to a great extent. Loy Yang A coal-fired power plant is expected to come back online on Monday, while Origin Energy’s power plant is likely to resume operations on 30th December 2019.

The two major electricity retailers of Australia, ORG and AGL, have already advised of price hikes in Victoria despite continuing pressure from Canberra for additional cuts. The two retailers are on track to raise Victorian default offer price from 1st January 2020 due to higher network costs and increased prices for wholesale power.

The repair work at the two key plants has kept power supply below par in the last few months in Victoria. Moreover, the wholesale prices are expected to increase amid anticipation of a hotter than normal summer.

Given this background, let us discuss a few utility stocks (close competitors of ORG and AGL) listed on the ASX that might get affected by the variations in power prices:

APA Group Announced New Gas Transportation Agreement with AGL Energy

A leading energy infrastructure business of Australia, APA Group (ASX: APA) has recently notified that it has entered into a new gas transportation agreement with AGL Energy (ASX: AGL) on the East Coast Grid. It is a multi-asset, multi-service two-year agreement commencing on 1st January 2020, which replaced an expiring contract with AGL.

As per APA’s CEO and Managing Director, Mr Rob Wheals, the company’s aim is to offer options in its services to support customers manage their energy supply needs.

Recently, the company also announced an estimated FY20 interim distribution of 23.0 cents per security for the six months ending 31 December 2019, which represents a 7 per cent increase over FY19 interim distribution of 21.5 cents per security. The company has set 11th March 2020 as payment date for the interim distribution and has informed that Distribution Reinvestment Plan remains suspended for this security.

The company anticipates its distributions per security to be in the order of 50.0 cents per security for the full year to 30 June 2020.

APA closed the trading session at $11.58 on 19th December 2019, with a rise of 0.87 per cent relative to the last closed price. The stock has delivered a return of 34.6 per cent on a YTD basis.

Meridian Energy Released Operating Report for November 2019

One of the leading power companies in New Zealand, Meridian Energy Limited (ASX: MEZ) released operating results for November 2019 on 17th December 2019. The company announced a rise in hydro storage from 111 per cent to 175 per cent of the historical average in the month to 10th December 2019.

The company mentioned that monthly inflows were 174 per cent of historical average and national electricity demand was 2.7 per cent up on the prior corresponding period in November 2019. New Zealand recorded its hottest November in 2019, with rainfall remaining well above average in the west and south of the South Island and much drier elsewhere.

Storage in Meridian’s Waiau catchment was 126 per cent of the historical average at the end of November 2019, which was well above the average, while South Island and North Island storages sat at 186 per cent and 124 per cent of average on 10th December 2019.

The company’s retail sales volumes were also 26.9 per cent higher than November 2018 in November 2019.

MEZ settled the day’s trade at $4.72 on 19th December 2019, with a fall of 0.63 per cent in comparison to the last closed price. The stock has generated a return of 49.09 per cent on a YTD basis and 206.12 per cent in the last five years.

AusNet Services Group Chosen by AEMO to Develop Major Transmission Upgrade

Energy player, AusNet Services Group (ASX: AST) has recently been chosen by the AEMO to own, build and operate the contestable assets for the Western Victoria Transmission Network Project, comprising mainly of the interface and associated network alterations to support the new contestable assets.

The Project entails planning and approvals, land assembly, stakeholder and community engagement and design and construction, planned over few years.

The agreements between AusNet Services Group and Australian Energy Market Operator for the Western Victoria Transmission Network Project follow the completion of Regulatory Investment Test for Transmission and an extensive competitive tender process for the contestable assets.

On conclusion of construction of the Project, the company will collect long-term fixed payments, escalated yearly.

AST ended the trading session with a rise of 0.28 per cent on 19th December 2019, at $1.76. The company’s stock has generated a YTD return of about 14.29 per cent.

Mercury Announced the Appointment of New Chief Executive

An electricity generation and electricity retailing firm based in New Zealand, Mercury NZ Limited (ASX: MCY) has recently announced the appointment of Mr Vince Hawksworth for the position of Chief Executive of the electricity retailer and generator. His role will commence from 28th April 2020, informed Mercury.

Mr Hawksworth will substitute for Fraser Whineray, who is going to leave the company in March before picking up a fresh role at Fonterra. Mr Hawksworth holds significant understanding in the energy sector in Australia and New Zealand, encompassing retail and generation.

As per Prue Flacks, the company’s Board Chair, Mr Hawksworth’s appointment was the result of a vast and strong search process. The new appointment is expected to allow the company to build further on this robust platform for the advantage of its several and varied stakeholders.

Mr Flacks believes that Mr Hawksworth’s experience places him well to lead the company via its next phase as it complements wind generation into Mercury’s renewable energy portfolio.

The appointment of Mr Hawksworth follows the recent appointment of Ms Hannah Hamling to the company’s board, whose role will commence on 1st February 2020.

MCY settled the day’s trade at $4.72 on 19th December 2019, with a rise of 2.16 per cent in comparison to the last closed price. The stock has generated a return of 30.14 per cent on a YTD basis and 68.93 per cent in the last five years.

Contact Released Operating Report for November 2019

In a recent update, the electricity generation firm, Contact Energy Limited (ASX: CEN) has released monthly operating report for the month of November 2019.

The company announced the following results for its Customer business and Wholesale business segments:

  • Its customer business recorded:
    • Mass market electricity and gas sales of 313 GWh, relative to 317 GWh in prior corresponding period (pcp).
    • Mass market electricity and gas netback of $90.48/MWh, in comparison to $92.82/MWh in pcp.
  • Its Wholesale business recorded:
    • Contracted Wholesale electricity sales, including that sold to the Customer business, totalled 596 GWh, relative to 657 GWh in pcp.
    • Electricity and steam net revenue of $68.50/MWh, in comparison to $68.01/MWh in pcp.
    • Electricity generated (or acquired) of 718 GWh, relative to 796 GWh pcp.
    • The unit generation cost, which includes acquired generation, was $23.90/MWh, compared to $29.16/MWh in pcp.

CEN ended the trading session, at $7.07 on 18th December 2019, with a rise of 2.17 per cent. The company’s stock has generated a YTD return of about 22.9 per cent.


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