Deciding what a shrinking gas system is still worth

Every pipeline we own has an engineering life well beyond its likely commercial one. I set a stated economic-life case for each, reviewed annually with the chief financial officer and the board, based on contracted capacity, the customers behind it and the plausible dates on which those customers stop needing gas. For our western pipeline that date is 2042; for the eastern lateral it may be earlier. The life case shapes our tariff methodology in negotiations, the depreciation estimates our auditors test and the impairment questions the board must ask. I do not treat an economic life as a forecast of closure. It is the period over which we can responsibly expect customers to repay the capital, and it moves when contracts move. Stating it openly to customers has proved more useful than defending a long life that nobody believed.

A household heating load, a gas-fired peaking station and an LNG tank use our system in completely different ways. Annual throughput, the measure our sector grew up with, hides those differences. My team models each customer's daily profile and values capacity on the coldest twenty to thirty days separately from the energy moved across the year. That analysis supports winter-reservation contracts for storage, capacity charges that reflect firmness and franker conversations with retailers about which commitments are really for peak days. It also informs how we read AEMO's gas statements and adequacy warnings, which describe risk across the market rather than our own revenue. I take care never to present a warning of possible shortfall as evidence of a customer's willingness to pay. Only a signed contract provides that evidence.

Corrandale owns land, easements and sites near the electricity network that look suitable for batteries or other electricity projects. My experience is that the site matters less than the connection. Before we commit development money, I now ask for a connection pathway: the network service provider's view of available capacity, the transmission works the connection relies on, their published timing and what happens to our project if that timing moves. Planning documents from AEMO and updates from network businesses help, but upgrades in our region have slipped by years. A place in the connection process is a right to continue that process, not a promise that the project will export. I also keep community consultation behind the connection test, because asking neighbours to engage with a project whose timing we cannot support damages consent for every later proposal.

Long-term shareholders, project lenders and co-investors bring different expectations to an asset whose useful life is uncertain. Our two owners want stable yield, lenders want contracted revenue and a co-investor in a new asset wants a clear route out. I prepare each capital case so that every party can see what supports the return: contracted years, uncontracted years and the residual value we are assuming at the end. For the second LNG tank I recommended reaching 65 per cent contracted capacity before the investment decision. That gave lenders a basis for A$200 million of project debt and gave our owners a reason to commit equity without relying on a market shortage arriving on schedule. I would rather share a shorter, well-contracted asset with a partner than fund a long, speculative one alone and discover that its residual value was optimistic.

Leaving an asset or project is a strategic choice, not an admission of failure, and I try to plan it while buyers still exist. I look for three signals: the asset depends on one customer or an external project we cannot influence; its contracted life is shorter than its book life; or another owner can do more with it than we can. The battery project met the first test, because its value depended on a transmission upgrade that neither we nor any buyer could accelerate. When we exit, I want the obligations that matter locally, such as neighbour agreements, easement access and community funds, written into the sale terms even if that lowers the price. Buyers respect a clean set of commitments, and communities remember which owner honoured them when it no longer needed their goodwill.