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AGL Energy Ltd (ASX:AGL) shares fall on plans to upgrade gas supply

AGL Energy Ltd (ASX: AGL) is stepping closer to opening a new gas import jetty at Crib Point in Victoria.

On Tuesday morning, gas infrastructure operator APA Group (ASX: APA) announced a deal with AGL for the development and construction of the Crib Point pipeline and the transportation of gas to the domestic market. AGL later announced an agreement with the Port of Hastings Development Authority for the long-term use of a berth at Crib Point.

Both the agreements are subject to regulatory approval and a final investment decision by the AGL board expected in FY19, with delivery of first gas in FY21.

AGL has further increased its exposure to this project by $65 million, in addition to the $37 million already committed.

The rationale of the investment is having an additional source of gas for the southern states, addressing the potential shortfalls that may arise in the Victorian market from 2021. According to AGL CEO Andy Vesey, the project will reduce AGL’s exposure to traditional gas supply sources in Victoria and to volatile Queensland gas markets, and ease the pressure on wholesale gas prices.

The prospect of such long-term developments failed to excite investors during Tuesday’s trade, and AGL fell 1% to $21.02.

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