AGL sinks to $1.1b loss on ‘challenging’ market Angela Macdonald-SmithSenior resources writer
Feb 9, 2023 – 8.39am
AGL Energy has posted a bottom-line loss for the first half of more than $1 billion, while core profit halved, but new chief executive Damien Nicks has given a more positive outlook for the second half and beyond.
The major gas and power provider halved its interim dividend after the underlying profit of $87 million for the December half fell well short of a market consensus estimate of $160 million.
The bottom-line loss of $1.075 billion was dragged down by a previously flagged writedown on the accelerated closure of a large coal power plant in Victoria and an accounting loss on the value of hedge contracts.
AGL slightly downgraded its full-year from September’s estimate of full-year core net profit of between $200 million and $320 million to between $200 million and $280 million.
Underlying earnings before interest, tax, depreciation and amortisation for 2022-23, which was estimated at between $1.25 billion and $1.45 billion in September, is now expected to be between $1.25 billion and $1.375 billion, AGL said.
Mr Nicks, who was appointed last month after acting in the role since the departure of Graeme Hunt in last year’s corporate and management upheaval, said the first-half numbers reflected several difficulties in the first half, including plant outages during last winter’s energy crisis on the National Electricity Market, and the upcoming closure of the remaining units at the Liddell generator in the Hunter Valley.
But he said the performance of the business had picked up towards the end of the half, and gave a more positive outlook for the second half of 2022-23.
“Importantly, as units have returned to service, we’ve seen a significant improvement in portfolio performance at the end of the first half,” Mr Nicks said.
“We expect to have higher earnings in the second half of FY23, in line with guidance, and continued positive momentum into FY24.”
Mr Nicks said that while government intervention to rein in energy prices had cut forward prices for wholesale power, they remained “elevated” compared to recent years, which AGL expects “to see reflected in earnings growth for FY24″.
Still, he voiced concern about the temporary price caps and the proposed mandatory Code of Conduct for gas producers that is currently under consultation, saying they had “increased regulatory instability and uncertainty” and hit business confidence among gas and coal producers.
“Policy certainty and clarity is key to encouraging new investment required for the transition,” he said.
Mr Nicks said AGL increased customer services in both energy and telecommunications despite the market volatility and made progress in the half developing its 3.2 gigawatt pipeline of proposed projects and in work to convert its thermal generation sites to low-carbon industrial sites.
The overhaul in the board and top management at AGL last year came after the company was forced to abandon a controversial plan to split the business in two led by Mr Cannon-Brookes, the co-founder of tech giant Atlassian.
AGL then accelerated its decarbonisation plan, bringing forward dates for the closure of its major coal power stations, however pressure from some investors remains for it to further speed the process to align with Paris climate goals.
Mr Nicks said on Thursday the next major step in the company’s decarbonisation would be the closure of Liddell in April, noting that AGL also committed in November to bringing forward the shutdown of its Torrens Island B gas power plant to mid-2026.
“By closing and transitioning the Liddell power station and site to a clean energy hub, this represents one of the most significant decarbonisation initiatives in Australia in 2023,” he said.
Mr Nicks said AGL would share further details of its business strategies at an investor day to be held in mid-2023.
