Power giant AGL (ASX: AGL) has reported a half-year loss of $1.1 billion today as a result of decarbonisation plans, a reduction in forward pricing for electricity, and forced outages.
In an announcement to shareholders, AGL reported an impairment charge of $706 million as a result of its sped-up decarbonisation plans, which have been heavily supported by Australian billionaire Mike Cannon-Brookes – the group’s largest shareholder.
The decision has seen AGL push forward the closure of Loy Yang A - a coal-fired power station in Victoria’s Latrobe Valley station - to 2035, and aim to exit coal-fired generation that same year.
An additional $622 million loss was attributed to “financial instruments”, which AGL CFO Gary Brown said primarily “reflects the impact of a drop in forward prices for electricity on a net bought position”.
The group’s underlying profit sunk by 55.2 per cent to $87 million, with earnings also falling by 16 per cent to reach $604 million.
AGL noted that market volatility and forced outages in July 2022 accounted for a $135 million loss in underlying profit, while $73 million was lost due to a prolonged outage at Loy Yang.
“As units have returned to service, we’ve seen a significant improvement in portfolio performance at the end of the first half,” said AGL CEO Nicks, who was permanently given the role one month ago.
“We expect to have higher earnings in the second half of FY23, in line with guidance, and continued positive momentum into FY24.
“We also made good progress in advancing our 3.2-gigawatt development pipeline and the transformation of our thermal sites to low-carbon industrial Energy Hubs.”
AGL recorded customer growth across its electricity and telecommunications businesses, with 61,000 new consumers on its books - but the result was impacted by an 8.4 per cent rise in the cost of fuel across the period.
Nicks noted the government’s Energy Price Relief bill, designed to improve energy affordability through temporary caps and ceilings on domestic gas and coal prices, had reduced future wholesale electricity prices.
However, the CEO also said that “prices remain elevated compared to FY20 and FY21 levels”, which AGL “expects to see reflected in strong earnings growth for FY24”.
“Whilst we do support certain measures, namely the customer bill rebates as well as the role of the Safeguard Mechanism, we are concerned that the commodity price intervention has created regulatory uncertainty for coal and gas suppliers, undermining their business and investment confidence,” Nicks said.
“I must emphasise that policy certainty and clarity is key to encourage new investment in clean energy generation and supply to ensure the pace of Australia’s energy transition.”
The company slightly narrowed its guidance for underlying net profit in FY23 of between $200 million and $320 million to between $200 million and $280 million.
The goal post for underlying earnings was also shifted to between $1.25 billion and $1.375 million, having previously been estimated to be between $1.25 billion and $1.45 billion.
AGL’s results come three months after Cannon-Brookes succeeded in his attempts to install four nominees onto the board of energy giant, following two attempts to take over the company via his investment vehicle, Grok Ventures.
When those bids failed Grok acquired a major stake in the company and thwarted AGL’s planned demerger which would have created two entities - AGL Australia and Accel Energy.
Shares in AGL are down 10 per cent to $7.16 each at 12:09pm.
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