@noomxx100% agree that there is a fundamental relationship between pricing, value and future investment returns...
I am in no way naĂŻve to this - my argument continues to be that AGL is a behemoth that has put itself in the wrong position... and is not doing enough (or barely anything) to correctly reposition themselves. My continued concern is based on the future fundamentals to determine a value to AGL.
Sure - presently AGL has something that the Australian market needs - in the form of its coal power generators. We know Liddell will retire imminently, we know Bayswater has another ~10 years of effective life and will be exposed to coal spot pricing in the next two years. Loy Yang has a long life and its own supply of coal...but ALL of these assets are being put under the same profitability constraints due to the impact on price insensitive solar power generation - which removes any profitability from operations for ~10 hours of the day. Then there is BESS coming online at scale, which will also attack peak profit periods first and then effectively work towards smoothing the price fluctuation over time... both peak (negative impact for AGL) and floor pricing will smooth over time due to the impact of BESS with scale (IMO).
We also know that the retirement of these coal power plants will cost a lot of money... which is not currently funded... provisioned sure... but those provisions are not cash in the bank account.
That being said - you yourself have said that the Accel business is a nil value proposition and the current implied value of AGLs price now is due to the future value of NEW AGL
AGL spinning off its renewables into PowAR co has exposed them to overpriced PPAs which will not come due for renewal for some time yet.
This upcoming demerger removes what I used to see as one of the best benefits - its vertical integration & associated synergies... clearly in a falling NEM market - this model may no longer be "best" either.
Then there is the issue of competition... both in the generation space & in retail... AGL have had it good... I cannot see the future being as comfortable for them. My post yesterday was to point out that Telsa - is now directly competing in the BESS space - being one of the most established suppliers of BESS... the impact of (increasing levels of) arbitrage on NEM spot price will in the ST-MT also hurt AGL... as BESS will dispatch during peak, but also recharge during floor - when solar is generating at its peak.
The last month has been positive for the SP - but we have had these waves occurring for over 12 months... a sustained fall, broken periodically by a rise for a few weeks before another fall. Issuing dividends fully underwritten clearly does not help with this either.
I find it a genuine issue to forsee AGLs future revenue being maintained with any form of certainty... and to that end - how do you determine a value & price?
Without clearer action on what AGL will do in the future - I really struggle to value AGL now.
(20min delay)