Category: Business

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All but one sector on the Australian sharemarket has failed in early trade, putting the local index’s seven-day winning streak at risk following a fall on Wall Street overnight.

At 10.20am AEST, the benchmark S&P/ASX 200 was trading 0.7 per cent lower at 6,947.8 points, with the utilities sector suffering the biggest drop, declining by 2.2 per cent. AGL Energy dropped 1.8 per cent while gas pipeline company APA Group lost 2.8 per cent after its gains earlier this week.

Major miners BHP, Rio Tinto and Fortescue were all down at the open by more than 1 per cent, while the big four banks also lost ground. The Commonwealth Bank opened 1.2 per cent lower, while Westpac was down by 1.3 per cent.

Despite the early fall on Wednesday, the local bourse has enjoyed a strong last month as investors adjusted to the reality of central banks increasing interest rates to tackle inflation. The onset of global interest rate rises had sent sharemarkets lower in the first half of the year, but the Australian index is now up 6.2 per cent over the past 30 days.

The technology sector was the only sector to add value in early trade on Wednesday, moving 0.4 per cent higher.

US stocks dipped on Tuesday on Wall Street following another day of meandering trading, as Wall Street debates whether the market’s strong recent run is the start of a turnaround or just a temporary blip.

The S&P 500 fell 27.44, or 0.7 per cent, to 4,091.19 after drifting between a loss of 0.9 per cent and a gain of 0.5 per cent through the day. The Dow Jones Industrial Average dropped even more, losing 402.23, or 1.2 per cent, to 32,396.17, largely because of a tumble for equipment maker Caterpillar. The Nasdaq composite held up better, but still slipped 20.22, or 0.2 per cent, to 12,348.76.

Treasury yields climbed through the day as concerns calmed a bit that the first visit by a US Speaker of the House to Taiwan in 25 years could spark conflict between the world’s two largest economies. Analysts also cited comments by Federal Reserve officials that suggested continued hikes to interest rates are coming in order to knock down inflation.

The S&P 500 is down nearly 1 per cent so far this week after spurting in July to its best month since late 2020. It was a rare winning stretch for the market, which has struggled this year under worries about the highest inflation in 40 years and rising interest rates from the Federal Reserve to combat it.

One staff member claimed employees had not been paid for the past month, including super, and were directed to the government’s Fair Entitlement Guarantee scheme to make a claim for funds.

Simon Cathro and Andrew Blundell of Sydney boutique Cathro Partners were appointed administrators and were working with some of Metigy’s management to put together the pieces.

In a statement on Tuesday, Cathro’s partners said they were investigating a sale of the company’s assets and intellectual property and seeking a “quick resolution”.

fire comes out

“We are exploring the urgent sale of Metigy’s assets and intellectual property as part of the voluntary administration process and consider a sale could be an outcome in this process,” the statement said.

They gave no reason why Metigy went into administration. Cathro was not answering calls on Tuesday.

David Fairfull, a serial entrepreneur who was Metigy’s co-founder/CEO and a substantial shareholder, was listed as the company’s sole director and secretary in ASIC filings. He could not be reached on Tuesday.

Fairfull and Johnson Lin founded the company in 2015, and raised more than $25 million from external investors including Five V Capital and Thorney Investment Group. Melbourne firm Cygnet Capital oversaw a funding round in 2020, introducing a handful of institutions to the company/

A recent presentation from one of its investors said Metigy had grown revenue at more than 300 per cent in both the 2020 and 2021 financial years, and had more than 25,000 clients across 92 countries.

The company provides small businesses with a platform that can give them insights on potential customers for marketing purposes. It had about 30 investors, according to documents filed with ASIC.

ASIC bonds

Australia’s corporate regulator, ASIC, declined to comment when asked if it was involved in the administration. Australia’s insolvency laws give administrator Cathro Partners full access to Metigy’s records and staff, and will oblige it to report anything suspicious to ASIC.

The situation comes amid a stark change in fundraising conditions for private and public technology companies, both in Australia and offshore, causing tech companies to rein in spending and cut jobs.

If you want to understand the nature of Australia’s energy crisis right now, look beyond the headlines and the rhetoric from both sides off the fossil fuel fence, and just take a look at market prices.

Australian consumers – both big and small – are being ripped off at the petrol pump, at the power socket, and the gas pipelines by a massive industry used to setting its own rules and regulations, and having its own way with markets and governments.

Australia has no shortage of gas, that much is now clearly well established. But what should also be recognized is that it has no shortage of gas cartel like behaviour, even if the country’s impotent regulators prefer to look the other way.

On Monday, something extraordinary happened. On the same day that the Australian government finally dared to call its bluff, and threaten the imposition of the so-called “gas trigger”, prices plunged on both the electricity futures market and the gas market.

It was as if the fossil fuel industry had been caught red handed, like a trillion dollar toddler with its hand in the cookie jar, its pockets full of sugary sweets and its mouth bursting with lollies as it protested its innocence. It insists, always, that it only ever has the consumer at heart.

Gas prices plunged in Victoria – from around $30 a petajoule to just $12, and in NSW from $30 to $20, with predictions of further falls to match the Victoria price.

In the electricity market, the futures price for “baseload” contacts in multiple markets did a rapid about turn, plunging more than $15/MWh in one day. Maybe it was just a coincidence.

Try as they might, the regulators have struggled to find any evidence of gaming, just of perfectly legal “re-bidding”. The industry has even evolved its own vocabulary – opportunistic cost, for instance – to assign some sort of economic rationale, if not moral justification, for the exploitation of consumers.

As energy analyst Dylan McConnell noted this week, the spectacular price falls “belled the cat” on the fact that Australian gas producers, and many other parts of the industry, have been enjoying windfall profits at the expense of consumers, and justifying it by pointing to international prices.

It’s a story, as we have noted, of a fossil fuel industry that has lost all perspective, and has effectively thrown away its social license. But still it craves more money and regulatory indulgence.

Bruce Robertson, an energy finance analyst from the Institute for Energy Economics and Financial Analysis, says the report from the Australian Competition and Consumer Commission that attracted so much attention on Monday has confirmed there is no shortage of gas in Australia.

“This is a contrived shortfall. It doesn’t exist. There is an abundance of gas – an embarrassment of riches – on the east coast of Australia,” he told RenewEconomy.

“What’s happening is that these companies are just starving the gas market. It’s what they’ve been doing consistently since 2015.”

Robertson says the east coast gas market has all of the features of a cartel, in that just a few companies control 90% of the supply, they have been reported to be using anti-competitive practices, and they are forcing prices up above international levels .

“What the ACCC report actually outlines is that there’s a gas cartel operating… the report forensically details all of those three things, and yet it doesn’t call them a cartel.

“We have all these things happening, and yet they won’t actually call it what in economic terms it is: a cartel.”

The clean energy industry has been able to launch a few devastatingly effective raids on the gas cartels so far.

The most notable is perhaps the influence of the original Tesla big battery in South Australia that broke the cartel that had been openly rorting frequency markets by making all but 1MW of supply available at low prices, and then charging a fortune for the remaining MW that flowed through the entire market.

The oil market is another case in point. The previous federal government slashed the fuel excise in half, and is now arguing that it be extended to protect consumers. The refiners, meanwhile, are making off with huge margins and profit lifts.

Wind and solar can sometimes break the control of the fossil fuel generators when they produce enough to that they become the price setters, not coal, gas or hydro.

So can other technologies such as demand response, but the incumbent fossil fuel industry has fought such initiatives, including energy efficiency, with tooth and nail.

In the last two months, under the cover of international price spikes, the legacy industry – largely but not exclusively fossil fuels – has been able to do what it wants, except when it went too far and forced the market operator to suspend the market.

In the UK, the government and the regulator are sick of it, and are now seeking to design new markets that will ensure that the low price of wind, solar and storage is not polluted by the cartel-like practices of the fossil fuel industry.

Robertson says the Australian federal government and the regulators need to take stronger action and be smarter about the problem at hand, which means thinking of alternatives like efficiency and regulation rather than just supply.

“The idea that you can chat to these companies and ask them to play nicely is off with the pixies,” he says.

“The same applies to the idea that we can produce more gas and it will reduce prices. We’ve tried that time and time and time again over the last six years and it doesn’t work. We need to get a grip and do something that will work.

“Cartels are illegal. Price fixing is illegal… What we have is a government that is cow-towing to an illegal price fixing organization to the detriment of the Australian people.”

Robertson also suggests that the developers of the massive and duplicated LNG terminals around Gladstone in Queensland are breaking the approval conditions for their projects, which essentially was a guarantee that export activities would not impact the domestic market.

“We also have a government that is refusing to enforce the rules under which those conditions were made. They’ve had an immense effect on prices and in many cases pushed them above international prices.

“Someone has got to call it out for what it is: obscene. We’re being held for ransom by a cartel and the government refuses to prosecute.”

Many analysts suggest a windfall tax to ensure Australian consumers get some benefit from the massive profits being earned by the gas industry and the fossil fuel industry in general.

Robertson’s preferred solution is domestic gas reservation on all fields, and forcing the price down to a similar level of Western Australia.

“This has to end – we’ll see massive job losses and genuine hardship for anyone who is not well off if we don’t do something. It’s not hard to do, it’s called legislation it’s called government policy.

“We need to do it now. Like literally today, we need to start drawing up this legislation and get it happening. Get a domestic gas reservation that sets aside more than what we need.”

We need more than that.

Greens Senator Sarah Hanson-Young on Tuesday noted the energy system, as it stands, is obviously broken.

“These big gas companies have been ripping off customers, consumers, households and small businesses for far too long

“They’re making windfall profits. They’re not paying enough tax. And they’re taking Australians for a ride. There is no shortage of gas here in Australia. We’ve got plenty of it.”

But Hanson-Young says rather than green-lighting yet more gas and coal projects, “one of the things we’ve got to really do is fast track the transition… of our energy grid making sure we have it powered by renewables and storage. That would make cheaper, more reliable power and push down prices very, very quickly.”

The NSW Coalition government gets it. Industry gets it. Investors get it. Consumers get it. Why doesn’t the federal government get it?

See also: “Exciting and pivotal moment:” NSW prepares for big switch from coal to renewables