AGL Energy expands renewable pipeline through $250m purchase as profits jump 189pc

The retirement of Patricia McKenzie is a surprise after just two years in the job, but the outgoing chair has said she came in to stabilise the company and annual results demonstrate that the job is done.

AGL Energy may speed up the rollout of renewable energy projects after tripling its annual profit on the back of strong coal generation, while guiding for higher-than-expected earnings in the 2025 financial year with wholesale electricity prices to remain high.

Australia’s second-largest electricity and gas retailer announced annual profit of $812m as it reaped the benefits of having its power stations increase output in a bid to capitalise on a jump in wholesale electricity prices.

An acceleration in the rollout of renewable energy projects would boost Australia’s ailing transition away from coal and also to the federal government which is under mounting pressure to demonstrate that its target for having renewable energy generate 82 per cent of the country’s electricity by 2030 is viable.

The increase in profit came as AGL enjoyed success across its generation portfolio, in particular the company’s flexible fleet, which was bolstered when AGL said it had struck a deal to acquire Firm Power and Terrain Solar for $250m. The acquisitions will bolster AGL’s renewable energy pipeline, with both companies having 27 zero-emission projects in development.

AGL now has a pipeline of more than 14GW of renewable energy projects, in excess of the 12GW it has said it will need to transition away from coal.

Not all the projects will be developed, chief executive Damien Nicks said, but he conceded that success of its flexible fleet could incentivise them to bring its plethora of batteries now in the works to market earlier than envisaged.

“Never say never to anything, if it makes sense to bring it into the market, we’ll do it,” Mr Nicks said when asked if the success of its Torrens Island battery had incentivised the company to rush out new projects.

AGL and Australia’s other coal power station operators will have been bolstered by a cold winter and a renewable energy drought, analysts said.

Demand for electricity spikes during winter but renewable energy generation was curtailed when Victoria endured a so-called wind drought that increased its reliance on fossil fuels and incentivised the likes of AGL to boost coal generation.

The uplift in performance has strengthened AGL’s balance sheet. AGL said underlying profit had hit a five-year high and was hitting the top end of market forecast. AGL further solidified its standing with investors by forecasting a smaller-than-expected slide in earnings next year.

AGL said underlying net profit next year would total $530m-$730m, an outlook that sent shares AGL up nearly 2 per cent.

“It is a very strong financial performance, but also importantly, a very, very strong operational performance,” Mr Nicks told The Australian.

The result was the catalyst, however, for the surprising departure of AGL’s chairwoman, Patricia McKenzie.

Ms McKenzie has been chair for two years, a tumultuous time for the company as its largest shareholder, Mike Cannon-Brookes, led opposition to plans for a split of the business and pushed for more aggressive emission reductions. She said it was time for her to step aside.

“When I became chair, at a challenging period in AGL’s history, my objective was to stabilise the company and set it on a path to take a leading role in the transition of the energy industry towards a more sustainable future,” she said on Wednesday.

Mr Nicks paid tribute Ms McKenzie. “I think her leadership has been absolutely key to getting us into the solid position that we are in today,” he said.

“She has been a big part of putting together our strategy, delivering that strategy, delivering of our results. “I have a huge amount of respect for Patricia.”

Ms Mackenzie will be replaced by energy and infrastructure executive Miles George, a former chief executive of Clean Energy Council and Infigen Energy. He was also an adviser to the Australian Energy Market Operator.

UBS analyst Tom Allen said Mr George brought substantial experience and would help AGL’s renewable energy build-out.

Mr George joined the board of AGL in 2022. His appointment was supported by Mr Cannon-Brookes, who used his position to reject other candidates and nominate a spate of his own nominees.

The activism of Mr Cannon-Brookes fractured the company but relations have been reset under Mr Nicks. A spokesman for Grok, Mr Cannon-Brookes’ private investment company that owns the AGL shareholding, did not immediately respond to requests for comment.