Ann: Review of Strategic Direction Outcomes & FY23 Guidance, page-23

So here's a possible outcome on the $20bn in capex:

75% (say $15bn) to solar plants and wind farms which can be geared >60% in debt if AGL maintains an investment grade credit rating. I reckon most of this $15bn will be spent by pension funds seeking sub-10% return. AGL shareholders shouldn't be investing in this. AGL will extract their return via the off-take ... and the more they get, they lower the return for the solar and wind farms. Woke pension funds will accept a lower return to show-off their green credentials. There is no shortage developers proposing solar farms, but there is a shortage of big investment grade off-take counter parties. Balance power is with AGL in getting a good return for shareholders.

25% (say $5bn) on firming (eg batteries, pumped hydro) which I'm guessing will be say 40-50% geared implying an equity cheque of $2-2.5bn. Batteries should be getting >10% return and this is where AGL has signalled they will spend shareholders' funds.

So that's an equity cheque for AGL of $2-2.5bn on this possibly scenario ... and a lot of this will be funded through internal cash generation. Morgans has AGL generating underlying EBITDA of $1.3bn and 1.8bn in FY24 and FY25 and Free Cashflow of $0.7 and $1.2bn.

Meanwhile, electricity prices will remain high so outlook over the next 2-3 years is more promising.

And AGL should also start to earn a "green" premium as it gets out of coal... but this might take a while. Depends how the banks and greenies see the new strategy.

Morgans has AGL on FY24 PE of 6.4x, EV/EBITDA of 3.7x and Free CF Yield of 18%. That's all off $1.4bn in forecast operating cashflow. For context, AGL generated $2.1bn in operating cashflow in FY20.

... and stock up today!

Not investment advice, and do your own research.