Sun shines on AGL after it announces solar focus

Australian energy provider AGL has unveiled plans to sell off more than A$1 billion worth of assets and cut costs by A$200 million ($214 million) within two years, sending its share price to its highest level in eight years.

AGL announced the asset sales and cost cutting plans yesterday as part of a wide-ranging restructure that will also see it focus heavily on solar energy and smart metering.

It also pleased investors by revealing its full-year underlying profit for 2014/15 will likely be in the top half of its A$575 million to A$635 million guidance range, up from A$562 million last year.

The announcements saw AGL shares jump A99c, or 6.4 per cent, to A$16.47 — their highest level since early 2007.

AGL aims to sell off around A$1 billion worth of assets by the end of the 2016/17 financial year, and IG market strategist Evan Lucas said the company’s controversial Gloucester coal seam gas project in New South Wales is likely to be cast off.

“It’s a big change, it would mean something like Gloucester could be on the chopping block, as well as a lot of other assets that don’t need to be there any more,” Lucas said.

AGL has already announced a review of the Gloucester project, which has been met with strong opposition from environmentalists.

It also plans to strip out A$200 million in operating and capital expenditure costs and Lucas said there was plenty of scope to do so within its retail operations.

“Obviously they have some very big legacy issues and some big overheads with regards to their retail business, with a lot of costs with regards particularly to employment, so that’s one area they could look to move out of.”

AGL is also making a push into the growing rooftop solar market as it looks to get ahead of a trend it says will transform the energy market.

“In the long-term, energy markets

In the long-term, energy

markets will be transformed by new decentralised products and services, including solar PV, battery storage, connected appliances and smart grids.

AGL

will be transformed by new decentralised products and services, including solar PV, battery storage, connected appliances and smart grids,” the company said.

“AGL understands that it must overcome internal constraints and needs to create an anticipatory culture able to take advantage of opportunities in a changing market environment.”

The falling cost of solar panels and government subsidies have seen the number of rooftop solar installations increase more than six-fold over the past five years.