I don't come on here often but was eager to see the discussion with MCB pushing his way into the company and the new labour Government attaining power. Here is a short take on my 1) responses to some of the previous posts, and, 2) an outlook for where AGL may be going.
Responding to:
@xbayrockx,
@CbrMaroon,
@dsx2,
@jberry55,
@Christos12Firstly an insight into
Renewables vs. Coal from a (corporate) investment standpoint:
When comparing energy production methods, the universally used (and recognised) benchmark is the calculated Levelised Cost of Electricity (LCOE) which essentially takes into account all the lifetime costs of producing electricity (initial capitol, operating costs, maintenance, damages, decommission etc.) and baselines that across the total amount of power the asset is expected to produce throughout its operation. The result is a figure measured in $/MWH (or equivalent) and dictates the minimum price energy companies need to sell electricity in order to break even over the lifespan.
1 In 2015, the CSIRO completed a study and found that wind energy was equally competitive with coal (assuming no carbon capture), solar and other renewables still were considerably more expensive than 'dirty coal' at this time.
2 Throughout the time since, solar (on a utility scale) has seen a significant reduction in LCOE and is now
more competitive than every other energy production method as seen in the graph below (lower LCOE = better investment / cheaper energy production over lifespan).
3 It is anticipated that solar's LCOE will decrease by 60% by 2030 making it by far the cheapest form of electricity generation.
3 Whilst wind has also reduced in LCOE its reductions are less significant as wind turbines already operate near the Betz Limit (physical limitation due fluid dynamics) and thus any further advancements won't offer big returns.
1
Figure pulled directly from CSIROs 2020 report on electricity generating cost report3Hence, moving forward, the best 'bang-for-buck' investment a company can make right now for power generation is within renewables (solar & wind). It is important to note however, that these LCOE figures do not account for storage of electricity during off-peak times and periods of high supply. This said, storage costs have seen a similar, dramatic reduction in cost, and when coupled with further reductions in solar's LCOE will inevitably become more economic than any traditional 'baseline' power supply. In response to what production AGL should be building now the answer is solar and wind - for both cheaper energy prices and better investments.
(Practical, real world evidence of the LCOE can be seen on the OpenNEM website with the 'average value' figure for each production type reflecting the LCOE shown in the figure above)4Next, the
Energy Storage Dilemma & MCB's (potential) use of coal:
A few have pointed out that MCB is getting deep into AGL whilst it still holds all of its 'dirty' production facilities, and even went out of his way to cancel the demerger to ensure they stayed within. I sense a lot of hysteria that he plans to immediately shut down these projects as soon as he has control, or milk them for extreme profits. He is a smart man and has been very open regarding why he wants these 'dirty' production facilities to stay within the company. Specifically, having the full portfolio and decade of revenue from the 'dirty' facilities will enable greater access to financing options enabling investments for building and acquiring renewable energy generation facilities.
5 Further, (and not discussed in any interviews I have seen from him) AGL needs to have the ability to produce base-load power throughout the next decade whilst better (more affordable) storage solutions come online. I anticipate, MCB will hold onto the 'dirty' plants until energy storage costs significantly reduce (which they are expected to do) thus making a better investment later on (closer to 2035).
With respect to energy storage, AGL has very little and I believe now is a bad time for the company to invest in such projects. That said Australia is currently set up well with Snowy 1.0 still not operating at maximum capacity for energy storage. With the introduction of 2.0 in 2026 Australia's (namely NSW/VIC) energy storage needs will be met temporarily without costing AGL (and its shareholders - us) anything. The issue (risk) this presents in the short term (until AGL invests in storage) is the political game between states and other storage companies as to whether they accept to store the surplus electricity produced by an increased renewables portfolio.
Finally, the
(speculative) future for AGL with MCB in the reigns:
MCB is a smart man, and importantly he is money driven and looking for an investment. His buy into the company (and potential leadership / board presence) will open up many opportunities for the company to invest in further energy production assets. There is 0 doubt he will invest in building/acquiring renewable energy sources, however, this should be of no issue to any of the shareholders as they are already the most promising energy investment and will continue to be for the long future. With MCBs involvement, I have some speculations about where AGL may head:
- Big investments in building / acquiring more generation facilities (green facilities to replace the dirty ones, plus bullish investments to capitalise the growing energy market).
- Increased funding, through international investors, bonds and loans etc. that would not have been as easily accessible prior to his buy in.
- Investment for innovation and technology, particularly in the space of managing supply and demand through distributed storage (e.g. electric cars).4, 5
Hence, I speculate that should MCB not buy out the company entirely, and he not screw the investments, and he not play the game for strict personal gain, AGL (the stock) should:
- Reduce dividend amounts over next 10-15 years for reinvestment into the company
- Operate at cost, or at loss for 10-15 years while reinvesting
- Profit from significant capitol gains after the next 15-20 years, especially if innovation is undertaken through the company for distributed supply-demand management.
Caveats:
Obviously the opinions and speculations from myself provide little insight to what the stock will actually do, and whilst MCB has been thus-far transparent with his motives and plans I cannot trust he won't divert the profit to a private company in his name. E.g. he sets up a trust of personal wealth to loan AGL at a high rate expecting returns on investment, or contracts out to a private company in his name for construction and operation of new production assets. About me: I am a novice investor with little exposure & experience with the stock market, however, I have qualifications as an Aeronautical Engineer (specialised in wind turbines) and stay up-to-date with the feasibility of renewable energy production, I am not as current with storage solutions. Personally, I back MCB and believe he will likely turn AGL around and bring big gains to the company through his involvement.
1. M.O.L. Hansen,
Aerodynamics of Wind Turbines, 2007.
2.
CSIRO 2015 Report.
3.
CSIRO 2020 Report.
4.
OpenNEM.5.
ABC The Business, 30 May 22. [7:45]
5.
Rosemary Barnes, Vehicle to Grid (V2G) technology explained, 2021.
(20min delay)