NZ's cold snap chills AGL shares

By CNN's Grant Holloway

SYDNEY, Australia (CNN) -- Shares in Australian energy company AGL slumped again Friday as the company warned its full-year profit would fall by about 10 percent to $115 million.

AGL shares fell Aust. 36c to Aust. $8.24 by noon on the Australian Stock Exchange as the company revealed a tale of woe concerning its 66 percent owned New Zealand subsidiary Natural Gas Corporation Holdings Ltd.

The shares fell Aust. 39c to Aust. $8.60 Thursday, having traded as high as Aust. $13 last December.

Natural Gas told the New Zealand Stock Exchange it expected to lose more than $100 million in the current financial year after being hit by a string of commercial disasters.

These included abnormally high wholesale electricity prices, problems in the hedge, spot and retail electricity markets, the unplanned sale of a retail business and the need to restructure existing electricity generation contracts.

"These actions have been forced upon NGC by serious imperfections in the operation and structure of the New Zealand electricity market," AGL managing director Greg Martin said in a statement Friday.

Market investigation sought

"These are unprecedented circumstances," he said.

The key to Natural Gas's woes seems to be its failure to hedge against unexpectedly high wholesale electricity prices in New Zealand which were brought about by a severe cold snap beginning around the end of May this year.

Martin said Natural Gas was seeking an investigation by the Independent Market Surveillance Committee of the New Zealand Electricity Market (NZEM) into the operation of the electricity market.

Martin said AGL's position in the Australian energy market, remained "robust".

"AGL has almost two million energy customers in Australia and we have adequate supply arrangements in place to meet the needs of both our gas and electricity customers in all of the States in which we trade," he said.