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PM scraps NEG

On Monday, Prime Minister Malcolm Turnbull tore up the National Energy Guarantee (NEG) amid party room pressures in an attempt to hold on to his leadership.

The decision has left various energy companies in limbo, with proposed investments in new gas infrastructure now shrouded in uncertainty.

As part of the decision, targets for emission reductions have been abandoned, with the government recommending the implementation of default pricing.

In addition, as a last resort the government could order divestiture of assets or businesses for companies not rectifying “unacceptable” outcomes regarding price.

The Australian Financial Review reported the backdown on the NEG could strike trouble for large energy companies.

The publication quoted Hayberry Global Fund’s Matthew Blumberg as saying, “It is going to be a very difficult competitive environment to operate in where the government, with the power to separate the wholesale and retail businesses of AGL, Origin or EnergyAustralia, is monitoring each strategic move that is made in the market.”

Questions now remain around $3-5 billion of proposed investment in new gas-fired power stations, with EnergyAustralia head of energy Mark Collette saying the investment was now “harder without policy certainty”.

The NEG had received endorsement from a range of energy and infrastructure companiesincluding the Australian Energy Council, AGL, pipeline operator Jemena and Dow Chemical.

With an integrated energy and climate policy now off the table, market uncertainty is left in its wake.

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