Poles and wires giant Spark Infrastructure has warned heavy-handed government intervention in the energy sector has made it difficult to prepare the grid for an influx of wind and solar power.
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Spark on Friday told investors at its annual meeting that regulators had slashed what network companies can charge households at the same time as introducing more risk in to the system. That combination meant it was more difficult for it to handle challenges such as supporting the development of renewable energy.
"The Australian energy landscape is at an inflexion point," Spark Infrastructure chief executive Rick Francis said at the meeting.
"There was a political drive to tighten expenditure across the network but there needs to be substantial investment to prepare it for more renewables. Those decisions were made with a short-term focus."
Mr Francis said the industry was transitioning away from coal-fired power but increasing levels of government intervention had made this transformation difficult and potentially dissuaded investment in new infrastructure.
Spark currently controls $17 billion worth of poles and wires electricity networks in Victoria and South Australia.
He said the government had cracked down hard on networks to cut costs by encouraging the energy regulator to slash what companies like Spark, Ausgrid and Citipower can charge households.
These companies have their profitability set by the Australian Energy Regulator (AER) as an allowed overall rate of return which then is passed on to electricity retailers and eventually their customers. These costs account for about a third of household power bills.
It came after these network companies were accused of gold plating their infrastructure, over-investing in the grid to the tune of $20 billion, and raising power bills by around $700 a year.
"The commercial reality is the market needs substantial new investment to replace coal," Mr Francis said.
"Despite an environment of uncertainty...we are optimistic about the opportunities ahead. With the re-election of the Coalition government we are looking forward to greater clarity of climate policy and transition actions to provide stability and certainty for new investment. We also look forward to a more cooperative and aligned regulatory environment."
Spark Infrastructure chairman Doug McTaggart said changes to regulations late last year forced Spark to write-down about $270 million in assets after losing a tax battle, setting a potential precedent for more industry asset write-offs.
This forced the company to become a taxpayer sooner than anticipated, which Mr McTaggart said in the current environment was another serious blow for the company.
"Ironically, these reductions in returns come at a time of increased risk in our sector and when more investment is needed than ever in our network infrastructure as we transition to a low emissions future," he said.
"We have been on the public record with our many concerns about the longer-term impacts of these changes."
The increasing regulatory pressure has done little to dim Spark's dividends.
The company reaffirmed its likely dividend payout for the financial year of at least 15 cents per share.
Macquarie analysts were pessimistic about the future of the sector, stating it has reached "peak gas and electricity - it's all downhill from here".
It added that "government ambition [is] acting as brakes" on the growth of the industry.
The Australian Energy Regulator was approached for comment.
Spark Infrastructure's share price was flat at $2.345 late on Friday afternoon.
- SMH/The Age
