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AGL turns down gas-fired Torrens Island capacity

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AGL Energy will shut down the first of four gas-fired 200MW ‘B’units at its Torrens Island Power Station within three months.

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The company announced this morning it had informed the Australian Energy Market Operator (AEMO) that it intends to mothball the gas-fired Torrens B1 unit in October, a month after it mothballs the last of its Torrens ‘A’ units on Adelaide’s north-western outskirts.

It follows an announcement last week that AGL will demerge into two separate listed companies next year to split its retail and baseload generation functions.

AGL says today’s Torrens Island decision follows the continued decline in South Australian forward prices and the volume of new capacity that has come into the market, creating challenging conditions that do not support the financial viability of operating all four ‘B’ units.

The mothballed unit will take six months to bring back online should market conditions change.

AGL Chief Operating Officer, Markus Brokhof said the decision followed careful consideration of reliable supply against the changes in capacity requirements and pricing.

“We will continue to provide South Australians with access to reliable and affordable electricity. We have assessed all publicly available information and are confident there is sufficient capacity available to AEMO to ensure system strength,” he said.

“Our decision to mothball this unit has no impact on any of our 400 South Australian jobs.

“Torrens Island continues to be an important site for our future generation plans, including its development as a low-carbon industrial energy hub of the future.”

Based on the power station’s maintenance cycle, AGL says the B1 unit is the most appropriate to be mothballed and preserved for a potential recall.

AGL will continue to operate the remaining three 200MW B units, along with the adjacent Barker Inlet power station and will review the decision should there be material changes to the market conditions.

The Torrens Island ‘A’ station’s four 120MW generating units began operating in 1967 with the 800MW ‘B’ station’s four units coming into service in 1976. It is South Australia’s last remaining baseload power generation site.

AGL has already mothballed three Torrens A units, with the remaining unit to be mothballed this September and retirement planned for September 2022.

Its 210MW Barker Inlet Power Station came online in 2019. Stage two of the project is yet to be built but has the potential to double capacity.

The company also announced plans to build a 250MW grid-scale battery on Torrens Island in November, with a final investment decision following in March this year.

“Construction of our 250MW grid-scale battery is planned to begin later this year, making it the first of AGL’s planned 850 MW of batteries to get underway,” Brokhof said.

“This new grid-scale battery along with the Barker Inlet power station that commenced operations in 2019 demonstrates our commitment to playing a leadership role in the state’s energy transition.”

Publicly listed AGL Energy last week confirmed its intention to undertake a demerger to create two energy businesses with separate listings on the Australian Securities Exchange.

Under the demerger proposal, AGL Energy will become Accel Energy Limited, an electricity generation business focused on the accelerating energy transition.

Accel Energy will demerge a new entity, AGL Australia Limited, a multi-product energy-led retailing and flexible energy trading, storage and supply business.

AGL Australia will retain the AGL brand.

Accel Energy will run the Torrens Island operation and the 351MW Hallett Wind Farms in the state’s Mid North as well as the 91MW Wattle Point Wind Farm near Edithburgh on Yorke Peninsula.

It will also be responsible for interstate coal-fired plants Yang A (Victoria), Macquarie Generation (NSW) and Victorian wind farms at Macarthur and Oaklands Hill.

AGL Energy Chairman, Peter Botten, said AGL Energy had created significant value for shareholders in the past through the integration of strong retail and baseload energy generation businesses.

“However, the impact of recent challenging market conditions on our financial performance emphasises that AGL Energy is now at an inflection point, as the transition of the energy sector accelerates, driven by the rapid evolution in renewables and decentralised energy technology, customer needs and community expectations,” he said.

“For Accel Energy, this means focusing on the transition of its existing electricity generation assets and investment in the long-term rejuvenation of its valuable operating sites as low-carbon industrial energy hubs, as well as new clean energy projects.

“For AGL Australia, it means focusing on being Australia’s leading two multi-product energy retailing business while investing in flexible energy trading, storage and supply and decentralised energy services.”

After the demerger, AGL Energy shareholders would hold one share in each of Accel Energy and AGL Australia for every share they own in AGL Energy on the applicable record date.

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