AGL [ASX:AGL] Energy Sinks on Losses Caused By Decarbonisation

One of Australia’s leading billion dollar energy companies AGL Energy [ASX:AGL] posted a downcast report that primarily blamed decarbonisation plans and strategies for losses that struck across the board during its first half of the 2023 financial year.

AGL lost $1.1 billion in 1HFY23, which included $706 million in impairment charges tallied by the company’s decarbonisation plan outlined in September.

Underlying earnings before tax also went down by 16% with $604 million, and profits dropped 55%.

AGL’s share price plummeted more than 7% following the update, at $7.35 a share.

The stock was taken 11% below its sector, and 5.5% under the market average.

Source: TradingView

AGL stacks losses in challenging market and net-zero acceleration

The Australian energy retailer shared the disappointing announcement this morning, admitting to bottom-line losses for the first half of the 2023 financial year of more than a billion dollars in statutory figures, after tax.

Underlying EBITDA (earnings before interest, tax, depreciation, and amortisation) totalled $604 million, which was a 16% downgrade to the same time last year.

After just $84 million in underlying net profit (after tax), which was a 55% decline on 1H FY22, the company’s overall statutory loss after tax came to $1.1 billion ($1,075 million).

This marks the fourth consecutive drop in annual earnings and includes $706 million of impairment charges, also post-tax, that were chalked up by the company’s boosted decarbonisation plan, timeline, and expenses, as announced September last year.

AGL has been bullish on its refreshed strategy, which involves the closure of Loy Yang A, Torrens Island B, and Liddell Power stations, which will fiercely reshape the energy company’s portfolio.

The company decided to distribute 8 cents a share (unfranked) in interim ordinary dividends, half of what shareholders were earning a year ago.

AGL’s new CEO Damien Nicks said:

‘Our first half result reflects the impact of plant outages during challenging energy market conditions in July, the prolonged Loy Yang Unit 2 major outage caused by a generator rotor defect, and the closure of Liddell Unit 3 in April 2022, as we indicated in our FY23 financial guidance update in late-September 2022.’

AGL downgrades full-year estimates

Despite government interventions in bringing national energy prices down, AGL held onto the fact that prices have remained high in recent years.

However, guidance was still bumped lower, full-year core net profit initially predicted between $200 million and $320 million, to the newer, lower range of $200 million and $280 million.

EBITDA for the 2023 financial year was also initially estimated at between $1.25 billion and $1.45 billion in September but is now expected to be between $1.25 billion and $1.375 billion.

The company still expects its 3.2gigwatt development and transformation of thermal sites to low-carbon industrial Energy Hubs to progress to plan. With its units returning to service, Mr Nicks hopes to see a significant improvement in portfolio performance, complete with higher earnings in the second half and positive momentum into FY24.

Regards,

Mahlia Stewart,

For The Daily Reckoning Australia

All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.