AGL Energy back in the black, but sights set on green

Marion Rae |

AGL’s profit jump was driven by fewer plant outages and more stable market conditions.
AGL’s profit jump was driven by fewer plant outages and more stable market conditions.

Electricity and gas giant AGL Energy is pressing ahead with a multibillion dollar pipeline of projects amid fears Australia’s renewable energy targets are off track.

AGL has almost doubled its development pipeline since the 2022 stoush with its biggest shareholder billionaire Mike Cannon-Brookes who forced the company out of the slow lane on shuttering coal plants.

Reporting a solid return to profitability in its half-year results released on Thursday, AGL also rejected accusations it had exploited energy users hit by years of surging power bills.

“We are acutely aware of the cost of living pressures both our customers and the broader community is under,” chief executive Damien Nicks told AAP.

Former anti-monopoly tsar Professor Allan Fels has alleged Australia’s biggest energy companies, airlines and supermarkets are price gouging consumers and generating extortionate profits.

However. Mr Nicks said AGL had plenty of competitors.

“We have a large retail footprint but we compete with the likes of Origin Energy, Alinta,” he said.

“We are in a very, very competitive market.” 

Mr Nicks said the company’s $70 million support program targeted people in hardship because it was important to keep them connected.

A file photo of Damien Nicks
AGL chief Damien Nicks rejected accusations the energy giant had been exploiting customers. (Bianca De Marchi/AAP PHOTOS)

AGL announced a half-year net profit of $576 million, compared with a loss of $1.075 billion a year ago amid an energy shock and the impending closure of the coal-fired Liddell Power Station.

Shares in AGL surged 10.9 per cent to $8.85 in afternoon trade as investors welcomed the solid result and interim dividend of 26 cents per share – more than triple a year earlier.

Underlying earnings before interest, tax, depreciation and amortisation rose to $1.07 billion in the half, up 78 per cent.

Revenue fell 20.8 per cent to $6.18 billion in the six months to December 31, but the underlying profit of $399 million was sharply higher than $87 million a year earlier.

In line with a strong first half, AGL pushed its fiscal 2024 guidance for underlying profit to the top of the guidance range of $680 million to $780 million.

Mr Nicks said the strong operational and financial performance provided “headroom” for investment in the future business and energy transition for Australia’s biggest emitter.

“Coal ultimately exits the market over the next 12 years so we have to – as a market, and as an industry – have that pipeline and build it out,” he said.

But financial details were yet to come from the federal government on the expanded Capacity Investment Scheme, which aims to fast-track 32GW of generation investment.

“We’ll see where it makes sense for us to be that, or not,” Mr Nicks said.

Separately, an agreement is in place with the Victorian government for the ongoing operation and closure of Loy Yang A power station in 2035.

Chief financial officer Gary Brown said AGL was well-placed to deploy up to $4 billion by 2030 towards the transition of its energy generation portfolio, supported by strong cash flow and a larger and more diversified pool of capital.

AGL plans to add 12 gigawatts of firming and renewable capacity by 2036, and said the development pipeline had grown from 5.3GW to 5.8GW since August.

In the meantime, coal-fired power plants can “flex” down in the middle of the day when solar energy is dominant and prices are low, without causing extra wear and tear.

UBS energy analyst Tom Allen welcomed the earnings upgrade and AGL’s “clearer insight” into how it will replace coal assets expected to retire over the next decade.

Wholesale energy prices were lower across all states after government caps on coal and prices, fewer outages, mild weather and increasingly higher penetration of solar in the national electricity market.

AGL’s total fuel costs for gas and coal generation fell 28.6 per cent in the first six months of FY24.

But Mr Brown said it was too early to comment on the price outlook for fiscal 2025.