Morgan Stanley has cut its earnings outlook for AGL and Origin, forecasting that so many Australians are keen to buy Tesla’s Powerwall or similar home battery systems that there will be a big fall in grid power needs.
Tesla this month unveiled a suite of home batteries designed to save for use at night energy generated from solar panels during the day. Tesla says it’s all about weaning the world off fossil fuels.
The analysts at Morgan Stanley estimate the two retail power companies could see earnings fall by $30 million to $40 million in the 2017 financial year, rising to $90 million-$100 million in 2020.
“This potential downward revision of earnings is in the same order of magnitude experienced by the companies over the 2009-13 period when the first wave of household solar and energy efficiency came through,” Morgan Stanley says.
About 2.4 million Australian households are willing to spend up to $10,000 on a home battery system if the payback period for the investment is 10 years, according to an AlphaWise survey of 1,602 in March.
“The conventional results confirm our view that industry headwinds in merchant utilities continue, and give us conviction that the surprisingly strong level of interest in solar and battery systems is real,” Morgan Stanley says.
The retrofit market, about 1.1 million households with solar panels already installed, will be among the first to adopt the new batteries.
AGL and Origin are expected to work hard on a competitive response, leveraging customer data and relationships and balance sheets.
“But we think the replacement earnings streams may only partly offset the revisions to core earnings, or may be lost to new entrants,” Morgan Stanley says.
AGL this month got the jump on Tesla, announcing that it is the first local Australian utility to launch a household battery product.
The electricity provider has also changed its policy, saying will combat climate change by not building another coal-fired power station and making sure all existing plants are closed by 2050.
Morgan Stanley remains overweight on Origin, which has 4.3 million customers, with modest profit growth expected in 2016 and good revenue from LNG sales. It’s underweight on AGL, which has 3.8 million customers.
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