The AGL Energy Limited (ASX: AGL) share price dropped after the Victorian government announced it will prevent the company from constructing a gas import terminal and pipeline at Western Point.
At the time of writing, shares in the energy producer are trading for $9.91, down 2.56%. However, the share price was up in morning trade on news the company would split, opening at $10.43.
For comparison, the S&P/ASX 200 Index is down 0.3%.
Let's take a closer look at the Victorian government's decision and AGL's response.
Victoria prevents Crib Point Project — cites the environmental impact
The AGL share price is responding badly to today's news. In a statement this morning, the Victoria's Labor government announced it would not allow the Crib Point gas terminal and pipeline to Pakenham to proceed.
The state's planning minister, Richard Wynne, said the project would have unacceptable environmental impacts.
It's very clear to me that this project would cause unacceptable impacts on the Western Port environment and the Ramsar wetlands – it's important that these areas are protected.
Ramsar wetlands are internationally important wetlands that are "representative, rare, or unique", according to the Commonwealth government.
In October 2018, the planning minister held an inquiry into the project to examine its potential environmental impacts. At the time, the minister cited the potential for significant environmental effects for the inquiry.
"This has been an exhaustive, open and transparent process and this is the right outcome for the local community, the environment and Victoria as a whole," Mr. Wynne said of the process.
AGL responded to the decision in a statement to the ASX. In it, AGL says it is "reviewing and considering its position in relation to the Minister's determination."
Additionally, the company estimates it has spent $130 million to date on the now presumably abandoned project.
AGL to split
As stated earlier, AGL announced this morning it intends to split its business in 2. Thus, "New AGL" will focus on energy retailing. "PrimeCo" on the other hand, will be an electricity generator. The news was initially a boon for the AGL share price.
In a statement, the company CEO and Managing Director, Brett Redman, said:
The proposed structural separation would give each business the freedom, focus and clarity to execute their own respective strategies and growth agendas, while playing an equally important, but different, role in Australia's energy transition.
AGL share price snapshot
The AGL share price has dropped 40.22% since this time last year. It is one of a few companies that continue to struggle because of the COVID-19 pandemic.
AGL has a market capitalisation of $6.3 billion.
