MELBOURNE, Australia--AGL Energy Ltd. (AGL.AU) isn't backing down on plans to build a gas-import facility on Australia's east coast, the electricity generator's answer to a jump in prices even as the country is set to soon be the world's largest exporter of liquefied natural gas.
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The company on Thursday said it had selected Crib Point on Victoria state's Western Port as the preferred site for an import jetty and pipeline, which would take advantage of an existing network of pipelines as well as industrial port facilities.
If the project goes ahead, AGL would invest about 250 million Australian dollars (US$197.2 million) and begin construction in 2019 to bring the import terminal into operation within a couple years.
The plans, which advance a proposal unveiled by the energy company last November, were disclosed as AGL reported a swing back to a profit in the last financial year and forecast higher earnings over the year ahead.
A strong balance sheet allowed the company to take a longer-term view and invest profits in renewable energy sources and strategic projects, said Richard Wrightson, the company's general manager for wholesale markets, adding a terminal and pipeline has the potential to supply all of Victoria's household and business gas needs.
"This project will enable access to the world market for gas, injecting some much-needed competition into the Australian market and help ease the tight gas supply," Mr. Wrightson said.
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A jump in prices and the threat of a natural-gas shortfall in southeastern markets prompted Prime Minister Malcolm Turnbull's government to introduce new powers this year to restrict LNG exports in an effort to force producers to prioritize domestic consumers. The move took aim at three big LNG plants built on Curtis Island in northeast Queensland in recent years, which opened the region to global gas markets and buoying what had been comparably low local prices.
The Australian Energy Markets Operator in June forecast a finely balanced domestic gas market, after warning in March of a looming supply shortage as early as the next Australian summer when demand picks up.
The three liquefaction plants on the east coast account for almost half of Australia's annual LNG exports and have positioned the country to overtake Qatar as the leading shipper of the fuel as early as 2019, supplying energy-hungry markets in Asia including South Korea, Malaysia and Japan.
Last November, AGL told investors it was investing A$17 million to examine a possible LNG import facility, and expected a final decision on whether to proceed in 2019. Chief Executive Andy Vesey said the surge in global supplies and a move toward shorter-term contracts had opened the possibility of Australia tapping other markets, including the U.S., for gas.
The utility, one of the country's oldest companies, swung sharply back to profit over the 12 months through June as it benefited from higher wholesale electricity prices and cost cutting.
It reported a net profit of A$539 million after a loss of A$408 million the year before as it absorbed charges for its decision to exit gas exploration and production to focus on commercial and retail energy sales in the face of the global slump in crude-oil prices.
Stripping out one-time items, including a loss of A$263 million in the just-ended year from changes in fair-value accounting, earnings for the year were 14% higher at A$802 million, the company said. That was marginally ahead of its guidance for earnings of up to A$800 million.
It forecast an underlying profit for the new year of between A$940 million to A$1.04 billion, subject to normal trading conditions and no adverse impacts from policy and regulatory uncertainty, as it earnings in its electricity arm continue to expand and its gas business returns to margin growth.
The tightened natural-gas market along Australia's southeastern seaboard has coincided with the retirement of aging coal-fired power stations and a move by suppliers to develop new wind- and solar-generation, increasing electricity-price volatility.
AGL, traces its roots to 1837 and the company responsible for introducing gas lighting to Sydney streets, said it would pay a final dividend of A$0.50 a share to bring the full-year payout to A$0.91, up from A$0.68 last year.
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(END) Dow Jones Newswires
August 09, 2017 21:28 ET (01:28 GMT)