Another day, another impairment

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AGL Energy has announced a decision to cease exploration and production of natural gas assets at Moranbah, Silver Springs and Spring Gully. The company expects to sell all of these assets with the exception of the gas storage and related plant at Silver Springs, Moranbah. Note today's announcement indicates this may take some time. AGL will not proceed with the Gloucester Gas Project (including relinquishing its Petroleum Exploration License for the Gloucester region) and will cease production at the Camden Gas Project in 2023. The company expects to recognise an impairment charge of $640 million after tax against the carrying value of these assets in its 1H16 accounts, with this amount including an increase in its rehabilitation provisions.The company indicates this outcome will have minimal impact on its underlying profit for FY16, but of course that's simply by definition as UPAT excludes significant items. Per the 2015 AGM on 30 September 2015, FY16 UPAT guidance was $650 million to $720 million, ‘assuming normal trading conditions for the rest of FY2016.’ AGL Energy reports for 1H16 on 10 February.


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Patrick Poke

It's not even 10 am and there's already another one. South32 have just announced a $1.7b write down in their South African Manganese operations...

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Kym Sheehan

Since writing this wire, South 32 has announced a non-cash charge of US$1.7 billion on after tax against a number of its assets, including its Australian and South African manganese assets, South Africa energy coal assets. following completion of a review. This charge will be reflect in the 1H16 results, due for release on 25 February 2016.

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Kym Sheehan

It's one of the themes and what concerns me is that typically remuneration schemes, being based on underlying results, can simply ignore them.

Medium screen shot 2017 02 28 at 8.02.18 pm

Patrick Poke

A very interesting point Kym. Management can make poor capital allocation decisions in boom times and blow investors' cash, but then not share in the pain when asset writedowns comes. Seems rather one-sided doesn't it?

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