Armed with the knowledge that financial realities will form the basis of AGL’s Final Investment Decision next year on the Gloucester Gas Project, several of the region’s anti-coal seam gas residents recently made the trip down to Melbourne for the company’s annual general meeting with shareholders.
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“There was a good crowd protesting peacefully with signage when we got there,” Groundswell Gloucester’s Julie Lyford said.
Accompanied by Jenni O’Neill, Burrell Creek’s Bruce Robertson, Manning Clean Water Action Group’s Chris Sheed and Christine and Terry Stanton, Ms Lyford said the majority of questions asked during the AGM surrounded Gloucester but that board chairman Jeremy Maycock remained evasive with his answers.
“This is probably the biggest issue facing AGL’s corporate brand, and nobody spoke against us,” she said, adding that she had questioned Mr Maycock on the company’s moral responsibility in terms of adequate insurance and compensation to the community.
In the spotlight were questions from former investment analyst Bruce Robertson targeting AGL’s financial responsibilities to shareholders.
“From my perspective, AGL were very evasive about the write-down of their Gloucester Gas Project”, he said, referring to July’s announcement the value of the Project had been written down by approximately $193 million after tax to be worth just $131 million.
“I asked them how they came to that amount, and in particular what gas price they used. But they wouldn’t divulge it.”
AGL said that Mr Robertson was advised that the cost of producing gas at Gloucester is commercially sensitive and “therefore is not going to be disclosed publicly.”
“But I wasn’t asking that! I was asking what price of gas they had used to determine the $131 million dollar value of the Project. This is not commercially sensitive material,” a frustrated Mr Robertson said.
AGL also said that the price of gas today is not the only factor that would determine whether a project is worthwhile.
“A gas project produces gas for many years and accordingly it is the gas price over the entire life of the project that determines the value of the project.”
According to Mr Robertson, the costs surrounding the Gloucester Gas Project are very high when contrasted to the returns.
“Most gasfields cost $3 to $5.50 per gigajoule (GJ) at the well head. In the last annual report AGL received $3.87 per GJ for its gas. But the Gloucester Gas Project has been costed at $8 per GJ,” he said, referring to a report ‘Solving for X’ which had been written by AGL economists.
AGL said that the report did not represent its commercial view for the cost of producing gas at Gloucester, and that the report carried a “disclaimer that the views are those of the authors,” based on publicly available sources of estimates of gas production costs.
But Mr Robertson said that AGL had constantly quoted that report in relation to the forecast gas shortage on the east coast of Australia, which was their “social justification” for the Project.
“Either they believe what they write, or else they don’t. They can’t have it both ways. In my opinion the project is totally worthless,” Mr Robertson said.
“I think that AGL’s accounts are actually creating a false market in their refusal to disclose the right asset base.”
