Australia revives divestment threat for big power companies

The policies include forcing companies that generate and sell electricity to divest generation assets as a last resort

By BLOOMBERG

MELBOURNE • Australia’s re-elected coalition government is preparing to revive its “big stick” energy policy designed to compel companies to cut wholesale power prices and guarantee supply, The Australian newspaper reported.

Passing the laws would be a priority when Parliament returns, expected to be in the first week of July, according to the report, citing an interview with Energy Minister Angus Taylor.

The legislation would also place greater pressure on states to fast-track approvals for generation projects underwritten by the federal government and open up more gas supply, according to the article. Taylor’s office didn’t respond to requests for comment.

The policies include forcing companies that generate and sell electricity to divest generation assets as a last resort.

Origin Energy Ltd, one of the biggest so-called energy “gentailers”, lost as much as 3.3% on Wednesday morning in Sydney, while AGL Energy Ltd declined 1.7%. The nation’s benchmark S&P/ASX 200 Index fell as much as 1%.

Australia has struggled in recent years with rising power prices and regional grid stability.

As the nations ageing coal plants close and successive governments have fumbled trying to chart a path forward that ensures reliable power and reduces carbon emissions, Prime Minister Scott Morrison has focused attention on lowering prices for consumers.

Australia’s energy industry has criticised the government, which had failed to pass the legislation after it was initially proposed, for what it says is policy uncertainty that’s discouraged new investments.

“If it’s designed to break up energy companies, I just don’t think that’s the way to go about achieving lower prices,” Frank Calabria (picture), Origin’s CEO, said at a conference in Brisbane on Tuesday.

Morrison’s government in April named 12 proposed projects, representing 3.8GW of new capacity, that government may underwrite to boost generation. Those include five powered by gas and six using pumped hydropower, as well as an upgrade to an existing coal plant. — Bloomberg