AGL faces profit slump
THE Mike Cannon Brookes-backed AGL Energy has signalled a pullback in profit expectations as electricity market “chaos” extends into 2023, warning coal station breakdowns that crippled the grid this winter were likely to be repeated as old plants neared retirement age.
Annual profit has plummeted by 58 per cent to $225m, missing consensus forecasts of $244m, amid volatile market conditions. It will hold off providing 2023 guidance until late September, when a strategy review is completed.
Underlying earnings fell 27 per cent to $1.21bn as a series of coal breakdowns, including a major outage at Loy Yang A, hit at a time of high wholesale prices, forcing the electricity retailer to buy expensive supplies in the market.
The result reflected “lower realised contracted and wholesale customer prices, increased costs of capacity to cover periods of peak electricity demand, and the absence of the Loy Yang Unit 2 insurance proceeds recognised in 2021”, chief executive Graeme Hunt said.
“Other factors that negatively impacted the result included planned and unplanned plant outages, unprecedented market volatility and suspension, milder weather, increased residential solar volumes and margin compression via customer switching.”
The company will pay a dividend of 10c per share, with a total dividend of 26c per share, down 65 per cent on the previous year.
Its statutory profit of $860m, which bounced back from a $2bn loss the year before, included a $486m hit from onerous contract provision revaluations, impairments and costs associated with the demerger and restructuring.
AGL said its business had a resilient outlook amid ongoing volatility in the electricity sector.
“AGL is largely hedged for the 2023 financial year, however, from 2024 AGL is well positioned to benefit from sustained higher wholesale electricity pricing as hedge positions progressively roll off,” the company said.
Australia’s largest electricity generator has endured a torrid year after being forced to dump long-held plans to split into two companies after intense pressure from Mr CannonBrookes, the company’s largest shareholder and billionaire climate activist.
AGL is now searching for both a new chief executive and chairman after Mr Hunt and Peter Botten resigned in the wake of losing the demerger vote.
The power giant said the selection process for a new chair “is well advanced” and it expects to announce an appointment some time before the 2022 annual general meeting in November.
A global search for a new CEO has also started, along with new nonexecutive directors.
A new strategy is being prepared with several board members due to deliver an update on its future direction in late September.
Mr Cannon-brookes’ private investment group Grok Ventures is searching for a board role to reflect its status as the company’s largest shareholder.