One of the country’s largest energy providers has backed itself into a corner, as it continues to bleed cash.
AGL announced on Thursday it had lost $2.06 billion over the last financial year, as the rise of renewable energy shakes up the market and plunders the profit margins of traditional power producers.
“There has been continued uncertainty regarding energy policy and an acceleration of the market forces that determine our strategy,” chair Peter Botten said. “This has included increasing pressure for energy companies and society as a whole to take accelerated action on climate change.”
Pressure on AGL has been exacerbated by a flood of cheap power produced by new solar and wind projects that have helped drive down wholesale prices. Botten described it as an “extremely challenging” market for AGL.
Accused of being “the biggest climate polluter” in the country by Greenpeace, AGL operates three of Australia’s old coal power stations, including Bayswater and Liddell. Together they represent a quarter of Australia’s total coal-burning output.
It has made AGL the prime target of environmental advocates and analysts alike who point out that its refusal to adapt carries an enormous cost.
“AGL claims that it is “not in position to commit to develop the necessary replacement electricity generation capacity” to replace its coal-fired power stations,” Dan Gocher, climate director at the Australasian Centre for Corporate Responsibility (ACCR), said.
“Unfortunately for AGL shareholders, the market will take care of replacing that capacity, which will make AGL’s coal-fired power stations unprofitable and destroy even more shareholder value.”
AGL’s share price has tanked 70% since its peak in 2017. Greenpeace Australia senior campaigner Glenn Walker likened its financial decline to the sinking of the Titanic.
“AGL’s leadership should have been prepared years ago for the renewable energy transition, but a series of bad captain’s calls from the coal-obsessed leadership team have seen the company double down on its coal-fired power stations – and now investors are paying the price for this poor navigation,” Walker siad.
AGL clients are beginning to jump ship
AGL’s ten-figure loss follows a $1 billion profit the year prior, and comes at a time when pressure on thermal coal ratchets up.
AGL’s largest customer is aluminium smelter Tomago. On Wednesday, it announced it would replace its contract with AGL’s Bayswater plant with renewable energy when it ends in 2028.
Using around a tenth of New South Wales’ energy, Tomago’s exit is expected to slash carbon emissions and is “effectively a death knell” for the Bayswater plant, according to Gocher.
Earlier this week, a landmark paper from the Intergovernmental Panel on Climate Change (IPCC) suggested it is still possible to mitigate the most extreme impacts of climate change, but only via rapid and wide-reaching action.
But AGL says it won’t replace its coal-fired stations.
“In the same week the IPCC delivered its “final warning” to humanity via its Sixth Assessment Report (AR6), AGL has told its shareholders that it simply will not adhere to the Paris Agreement,” Gocher said.
“AGL claims that it is “not in position to commit to develop the necessary replacement electricity generation capacity” to replace its coal-fired power stations.”
With a view to mitigating future financial losses, and cutting Australia’s carbon emissions, Walker says AGL investors need to demand action.
“With AGL’s AGM fast approaching, shareholders should be asking AGL’s leadership the tough questions about whether the company can steer a path towards a renewable future, or whether they’re prepared to go down with the coal ship with Graeme Hunt as captain.”