Power provider AGL Energy’s profits plunge 22%, shares down

AGL Energy has posted a fall in full year underlying profit and flagged another due to accelerating “operating and market headwinds”.

Residential and business power provider AGL Energy has posted a 22 per cent plunge in underlying profit and flagged an even lower result for 2020-21.

The company reported underlying profit for the 2019-20 financial year of $816 million, which was within its guidance range, and forecast a fall to between $560 million and $660 million for the current financial year.

That’s after an expected net benefit of up to $100 million in insurance proceeds related to the months-long outage of Unit 2 at the Loy Yang power station in Victoria, which was sparked in May last year by an electrical short inside the generator.

Chief executive Brett Redman admits it was a major event, saying the company’s energy supply portfolio was diverse and resilient enough to deliver steady power generation, but it still sought more flexibility and decentralised capacity.

An outage at Loy Yang power station in Victoria started in May 2019 and lasted months. Picture: Julian Smith, AAP

Mr Redman said the company’s current operating environment was one of wholesale price volatility, rising operating costs and increased financial pressure on residential and business customers.

He said 2020-21 would be a year of considerable uncertainty.

“Market and operating headwinds to AGL’s margin from the maturing of lower cost gas supply contracts and sharp falls in wholesale prices for electricity and renewable energy certificates have accelerated as a result of the pandemic,” he said.

“COVID-19 will lead to higher expected credit losses from customer hardship and potentially increased operating costs to ensure safe and reliable continued operation at AGL’s generation plant.”

Shares in AGL were down more than 10 per cent at $15.22 in late-morning trade.