DUET, Alinta and AGL all saw falls in their share prices following the Essential Services Commission’s recommendation of bigger-than-expected cuts.
Analysts said the cuts would affect multi-billion dollar plans by distributors Singapore Power and CKI (Cheung Kong Infrastructure Holdings) to float their Australian businesses. Alinta would also have to reconsider its plans fo setting up an infrastructure fund.
The ESC recommended an average real price reduction next year of 25.5% for Powercor and 22.3% for CitiPower, both owned by CKI. It also recommended a 16.5% cut for Singapore Power's TXU.
It proposed a 23.4% cut for Alinta-owned United Energy and a 14% reduction for AGL.
DUET (Diversified Utility and Energy Trusts) shares were knocked hardest by the news. DUET, which owns many energy assets, could have its earnings cut by up to $80 million if the decision is implemented.
DUET opened at $2.61 on Wednesday and closed at $2.49. It contniued falling on Thursday and opned at $2.42 on Friday.
Alinta opened at $9.97 on Wednesday and closed at $9.75. It also continued falling, to open at $9.55 on Friday.
AGL also suffered but managed to bounce back. Its shares opened at $14.17 on Wednesday and fell to A$13.85 by the close of the trading that day, but recovered somewhat to open at $13.95 today.
AGL forecast its revenue from distribution over the period 2006-2010 at A$752 million. Under the draft ruling it estimates that would fall to A$584 million.
ESC chairman John Tamblyn said the price reduction reflected favourable economic and financial conditions experienced between 2001 and 2005.
"The distributors have had a very good run for the last five years, with real interest rates falling substantially, electricity consumption higher than expected and significant unanticipated efficiency improvements," Tamblyn said.
