AGL half year profit almost doubles as higher prices boosts margins
The big energy utility and retailer AGL has reported an almost doubling of its first-half net profit driven by its wholesale market business.
- AGL first-half +91pc to $622m driven by higher margins and higher prices in electricity generation
- Chief executive Andrew Vesey says prices may have peaked as spot prices and volatility are falling
- Dividend raised by 32 per cent, but shares fall on fears of greater retail competition
The $622 million profit for the six months to December 31 represented a 91 per cent jump on the previous corresponding period.
It was also a period where prices paid by households for their electricity and power soared.
Underlying profit — excluding one-off items — was up 27 per cent to $493 million.
"The increase reflected strong margin growth in its wholesale markets, which more than offset a small decline in customer [retail] markets margin and planned increases in operating expenditure," the company said in a statement to the ASX.
AGL chief executive Andrew Vesey said he was well aware of the impact high energy prices were having on customers.
"We are committed to delivering further solutions to customers in coming months and in doing all this at the lowest possible cost", Mr Vesey said.
Prices may have peaked
Mr Vesey said wholesale prices may have peaked for the time being.
"Lower spot prices and lower volatility mean the moderation should continue," he told an investor briefing.
While the wholesale markets supported the result, times were far tougher in the retail market as competition heated up and political pressure bore down on the company.
Mr Vesey said the downward pressure on retail margins was not just an event stimulated by pressure from state and federal governments, but a permanent change in the fabric of the market.
"The whole market is entering and increased shopping around and competition."
Shareholders were big winners with a 32 per cent increase in the interim dividend to 54 cents per share, largely thanks to better cash flow and a stronger balance sheet and $310 million cut in net debt.
However that was not enough to head off concerns about rising costs and AGL shares were sold down by 1.7 per cent to $22.04 in morning trade.
Thursday, February 15, 2018
Subscribe to weekly updates
- Orica CEO Caldreron: ACCC’s gas price transparency move will help local firms
- Snowy Hydro CEO sees room for all storage projects
- Frydenberg asks energy regulator to probe electricity price-gouging claims
- Tesla’s giant battery in Australia reduced grid service cost by 90%
- Clean Energy Regulator confirms the RET is met
- Delta Electricity in $410m pumped hydro push
- Australia is the only G20 country without nuclear power. Why?
- Hong Kong's Alinta Energy offers $250m for Muswellbrook's Liddell power station
- AEMC says grid operating to standards, prompts call for new standards
- AGL to build $400m gas-fired power plant