Category archive: Mineral & Resources

AGL Announces Power Price Drops

AGL has announced price drops for power in New South Wales, Queensland and South Australia, following competitor Origin’s similar move this week.

Residential electricity prices will be cut by 0.3 percent in NSW, 1.5 percent in Queensland and 0.4 percent in SA, much lower than what market analysts predicted.

“While these price cuts are slight, they’re part of a downward trend that is emerging as more investment in new sources of supply comes into the market,” said AGL’s chief customer officer Melissa Reynolds, referencing the increasing network and green costs.

“We understand power prices have been high and that has put pressure on many households.”

On Tuesday, Origin announced that it will cut residential electricity prices in south-east Queensland and SA by 1.3 percent and 1 percent respectively, while maintaining the same prices for NSW and the ACT.

Origin’s Power Price Changes. Source: Origin/ABC

Both drops are far lower than the Australian Energy Markets Commission’s (AEMC) forecast, which expected 5.8 percent fall in NSW, 7 percent in south-east Queensland and 6.9 percent in SA in 2018-19.

Julian Meehan Adani

Queensland Government Considers Using Public Funds for Adani Road Project

The Queensland government is considering covering the $100 million cost of road access for Adani coal mine, despite promising that no taxpayers fund would go to the project.

The ABC said documents obtained under a right to information revealed the Palaszczuk government is still in negotiations with Adani and Isaac Regional Council about upgrading access to the proposed Carmichael mine site in central Queensland.

However, the Department of Transport and Main Roads said no decision has been made yet.

In November, Palaszczuk said she would not rule out helping the local council fund the access road. A spokesman for the government said it would cooperate with local councils in regard to their infrastructure needs. “Significant projects can impact on local road networks and improvements to those networks can benefit the greater community,” he said. “Costs associated with major projects are recovered by the state on a commercial basis.”

The ongoing negotiations have received backlash. “Annastacia Palaszczuk has lied to Queenslanders and has broken yet another election promise,” said Opposition Leader Deb Frecklington.

The Mackay Conservation Group said the government must rule out funding the road project. “The Queensland Coordinator General recommended Adani be responsible for road upgrades and Adani said it would pay for the upgrade,” said the group’s spokeswoman Maggie McKeown. “Why then would the premier spend public funds on this project?”

AGL to Build $400 Million Gas-Fired Power Plant in NSW

AGL will build a $400 million gas-fired power plant near Newcastle, NSW to replace the ageing Liddell coal-fired station.

The energy company said it is assessing sites for a 252-megawatt facility development, due for completion in the end of 2022.

“AGL is committed to supporting the orderly transition of Australia’s electricity generation capability to modern, clean and reliable energy supply,” said AGL chief executive Andy Vesey.

“That’s why we gave seven years’ notice of when we intend to close the Liddell power station at the end of 2022 and we are pleased to commit today to build the power station near Newcastle.”

AGL also said there were plans to “assess the potential” to develop a further 500 megawatts of gas-fired generation capacity, pending commercial and industrial demand.

The company’s announcement to the Australian stock exchange followed pressures from the federal government to sell Liddell power plant instead of closing it. Rivalling company Alinta has expressed interest in acquiring the power plant to keep it open until 2029.

Federal Environment Minister Josh Frydenberg said Liddell’s closure would still bring blackout risk, even with the replacement plan. “That’s why it’s really important that the executives of AGL consider on its merits this offer that comes from Alinta,” Frydenberg said.

The Australian Energy Market Operator (AEMO) said there would be a potential shortfall in capacity of 850 megawatts if Liddell was to be closed, but it also said AGL’s replacement plan “would deliver sufficient dispatchable resources to fill the identified 850MW resource gap”.

Rio Tinto Appoints Simon Thompson as New Chairman

Rio Tinto has appointed former investment banker Simon Thompson to be its new chairman starting March 2018.

Serving as a non-executive director in the company’s board since 2014, Thompson will be replacing 63-year-old Jan du Plessis.

“Mr Thompson has over 20 years’ experience working across five continents in the mining and metals industry,” the mining company said in a statement. Thompson has also chaired private equity firm 3i Group and British exploration company Tullow Oil.

Du Plessis also welcomed the changeover. “I am really pleased to be succeeded by Simon, especially given how closely we have worked together since he joined the board some three years ago,” said du Plessis. “I am handing over the baton at a time when the business is in great shape and Rio Tinto has the strongest balance sheet in the sector.”

Thompson said: “I look forward to leading the board as we work with [chief executive Jean-Sebastien Jacques] and his team to ensure that Rio Tinto continues to deliver superior returns for its shareholders by maintaining its capital discipline and ‘value-over-volume’ approach.”

Upon taking over the position, Thompson is expected to deal with increased scrutiny surrounding issues like alleged coverup of losses in Mozambique in 2011 and corruption in the Republic of Guinea.

News: Petrol Prices Rise in Australia as OPEC-Led Deal Takes Effect

Petrol prices have risen by up to 20 cents a litre in a number of areas in Australia, following the December agreement between the Organisation of the Petroleum Exporting Countries and non-OPEC oil producers to cut production.

According to the Australian Institute of Petroleum, the national average price of unleaded increased by 2.2 cents over the week to Sunday to 128.3 cents per litre.

While Melbourne prices remained steady at $1.22 per litre, Sydney and Adelaide’s prices reached above $1.40. Other capital cities fell in between these extremes, with prices around $1.30 a litre.

There were also some local variations, with some parts of Tasmania – such as Hobart and Launceston – reaching $1.46 a litre.

Experts have recommended motorists to fill up quickly before the prices rise even further.

“The low petrol prices are not sustainable and prices are likely to lift markedly in coming days,” said Savanth Sebastian of stockbroking firm CommSec.

The Australian Competition and Consumer Commission (ACCC) warned that the price hike could be exacerbated by the falling Australian dollar.

“The ACCC is concerned that petrol prices are increasing in Sydney, and those in Melbourne, Brisbane and Adelaide may increase in the coming days,” said ACCC chairman, Rod Sims.

“Motorists should get in early, shop around, and consider filling their tanks before prices jump.”

Sebastian said the petrol price hikes would be applied around the world.

“The focus now shifts to see if oil producers comply with the stated production cuts,” said Sebastian.

“The early indications are that producers are already notifying customers in Asia, Europe and the US of cuts to oil deliveries from January. Importantly for motorists it means higher pump prices in the medium term.”

Finance Trends: Construction Industry

Financing in the construction industry continues to be a challenge for many contractors in the United States, according to Todd A. Feuerman of Construction Global.

He states that “even during the pre-recession period, lending to construction firms presented challenges to most banks.” Feuerman suspects “that this was due to a number of economic factors, including the sensitivity of contractors to economic cycles, revenue fluctuations from year to year, excess competition and the expansion of the construction industry”.

Additionally, Feuerman concludes that “there are other credit underwriting issues that continue to challenge banks in lending to construction firms, including prominent construction company failures, the unpredictable nature of the work, estimates used in the preparation of financial statements, diminished gross profit margins with continued backlog profit erosion, lending against bonded accounts receivable and addressing “quasi liens” on accounts receivable secured with joint check agreements”.