AGL shares plunge as company unveils ambitious green energy plan
AGL has increased its renewable energy and battery storage goals which it says are needed for grid stability but the targets will come at a cost, as it eyes selling assets.
Australia’s largest greenhouse gas emitter AGL Energy has pledged to increase its renewable and storage capacity target by 20 per cent as it swung to a full-year loss.
The country’s second-largest electricity and gas retailer posted a statutory loss of nearly $100m, which sent shares down as much as 14 per cent.
The company said it would aim to have 6 gigawatts of renewable and storage assets in place by 2030, compared with its previous goal of 5GW, but some investors were disappointed the target wasn’t more ambitious.
The upgraded target includes a new 3GW battery capacity, which the company said would underpin grid reliability as it retires coal-fired generation.
The announcement comes amid sustained pressure from the company’s largest shareholder, tech billionaire and climate activist Mike Cannon-Brookes, who has campaigned for a faster exit from coal and more aggressive investment in clean energy.
AGL said its revised climate action plan also incorporates tougher decarbonisation targets. Scope 1 and 2 emissions – those from its own operations and purchased energy – will be reduced at a faster pace, while scope 3 emissions – generated by customers using its products – are now targeted to fall 60 per cent following the closure of the company’s last coal plant.
Chief executive Damien Nicks said the revised target was driven by confidence that AGL could hit renewable energy goals, which is increasingly important to the company’s bottom line given its performance over the past 12 months.
“The resilience and flexibility of our asset portfolio helped mitigate the earnings impact of outages in our thermal plants, particularly in the second half of the year,” Mr Nicks said.
AGL reported an annual net loss of $98m, hurt by asset impairments and one-off charges.
On an underlying basis, which strips out one-off items, AGL reported a profit of $640m, down 21 per cent from the prior year and below some market forecasts.
AGL said earnings next year could also be softer, providing underlying profit guidance for the next financial year of between $500m-$700m.
Mr Nicks said the drop in profits was driven by a tough retail space and heightened costs - driven primarily by a spate of outages across its fleet of coal power stations.
AGL owns several coal power stations, using the electricity generated to service its customers. When its coal fleet is unavailable, it will have to purchase power on the wholesale market.
Mr Nicks said the company’s result would have been worse had it not been for its renewable assets, specifically batteries - underscoring the need for it to accelerate and execute its transition strategy.
While AGL says increasing its fleet of batteries will be lucrative and good for shareholders, the roll-out will require substantial fresh capital - underscoring the tension faced by AGL and other energy companies about how to invest in renewables while rewarding shareholders - all while under intense pressure from environmentalists.
To aid its plan, AGL said on Wednesday it will also explore the sale of its 20 per cent stake in Tilt, one of Australia’s largest renewable energy developers. Mr Nicks said the company will gauge market interest in Tilt and could reinvest that money into its renewable energy pipeline.
Proponents of AGL accelerating its transition to renewables gave a lukewarm response.
Brynn O’Brien, executive director of the activist investors, the Australian Centre for Corporate Responsibility, said the aspiration was modest and AGL could and should go further.
“AGL’s climate strategy is showing green shoots but overall, it continues to lack the ambition and pace that investors expect from Australia’s largest energy generator and greenhouse gas emitter,” said Mr O’Brien.
“As Australia’s largest electricity generator, AGL should be driving forward the build-out of bulk renewable power. We have not seen a real increase in ambition in this climate plan - the 2035 target of a modest 12GW remains unchanged, with just an incremental increase of 1GW in the interim target by 2030, which is really just a commitment to build some of it sooner.
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