for growth
Capital expenditure for growth and transformation consistent with publicly disclosed plans.
We recognise the importance of our investment decisions in creating and sustaining long-term value. Our existing business and robust financial position provide a strong platform from which to invest in Australia’s energy future and pursue new growth opportunities.
In December 2017, AGL set out in detail its capital investment plans for FY18 through FY20 with specific reference to the company’s strategic objectives. Detailed commentary in relation to capital expenditure outcomes in FY18 is available in the Operating & Financial Review section of the Annual Report.
Highlights of key capital investment projects
We continue to see opportunities for investment in electricity generation assets that provide renewable and near-zero emission, complementary firm capacity.
Silverton and Coopers Gap wind farms: During FY18, we reached financial close and started construction of the Coopers Gap Wind Farm in Queensland on behalf of the Powering Australian Renewables Fund. Once commissioned, Coopers Gap will be the largest wind farm by capacity in Australia at 453 MW. We have also substantially progressed construction of the 200 MW Silverton Wind Farm near Broken Hill, New South Wales.
NSW Generation Plan: In December 2017, we announced our NSW Generation Plan, which sets out how we plan to affordably and reliably replace the Liddell coal-fired power station, which is scheduled to close in 2022. The NSW Generation Plan proposes a mix of high-efficiency gas-fired power stations, renewables, battery storage and demand response, coupled with an efficiency upgrade at Bayswater Power Station and conversion of generators at Liddell into synchronous condensers.
A key part of this plan is delivering a total of 1,600 MW of renewable energy generation (including Coopers Gap and Silverton). We have also agreed to purchase 300 MW of generation from at least two new solar power stations to be built by a third-party project developer in New South Wales, with the first of these plants close to reaching financial close by the end of FY18.
As the cost of renewables continues to fall and the price of gas remains high, it is economically difficult to make an investment case for baseload gas-fired generation. However, we continue to see a case for the development of gas-fired peaking plants to provide ‘firming’ output to complement intermittent, renewable plant. In April 2018, we announced that we would construct a 252 MW gas-fired power plant located near Tomago, New South Wales. AGL is also exploring the potential to build an additional 500 MW of gas-fired capacity in NSW as part of Stage 2 of the NSW Generation Plan. Read more about our NSW Generation Plan in the Power station transition and closure section.
We have forecast a total of $490 million of capital expenditure for Stage 1 of the NSW Generation Plan for FY19. For full details refer to the December 2017 Investor Day Presentation.
During FY18, we also began construction of the $295 million Barker Inlet Power Station in South Australia. The 210 MW gas plant will use reciprocating engines to deliver reliable, dispatchable energy to the National Electricity Market. The new power station will replace two of the four ‘A’ station turbines at the Torrens Island Power Station, which AGL plans to progressively mothball from 1 July 2019. The Barker Inlet Power Station units will be able to ramp from zero to full capacity in five minutes and are 28% more efficient than the units they will replace.
Visit the Power station transition and closure section for details on our transition plans for our thermal generation fleet.
Investment in retail customers
Following the deregulation of the Western Australian gas market in 2017, we continued our expansion into the Western Australian gas market, with 21,348 gas customers as at 30 June 2018.
Consistent with our strategic objectives, we are continuing our shift to more personalised retailing – using smarter solutions, technology and services to empower and provide services to our customers. In FY18, we continued delivering outcomes as part of our $300 million Customer Experience Transformation program.
Investment in wholesale gas
We continue to pursue multiple options to strengthen the supply of gas and develop our portfolio in response to a dynamic and volatile market. In June 2018, we announced several key milestones in relation to our proposed liquefied natural gas (LNG) import jetty project at Crib Point in Victoria. Refer to the Energy market evolution section for further details.
Investment in our people
To help build our culture and drive engagement of AGL people, we are focusing on delivering a digital transformation through the People, Processes and Performance Transformation (PT3) program. This program is focused on driving changes to ways of working to assist and engage our people and enhance overall business performance. Refer to the Workplace culture and talent section.