AGL has tripled profit while electricity prices soar

Greg Wood/AFP/Getty ImagesGreg Wood/AFP/Getty Images
  • AGL posted statutory net profit of $1.59 billion, up 194%.
  • Underlying profit was $1.02 billion, up 28%.
  • AGL acknowledged “households are facing cost-of-living pressures because of the higher energy bills”.

Profit at AGL, Australia’s largest electricity generator, have surged by 194% to $1.59 billion as power bills to consumers keep rising.

Underlying profit after tax was up 28% to $1.023 billion, in the upper half of AGL’s guidance range, reflecting strong earnings growth in Wholesale Markets.

CEO Andy Vesey says the result reflects the benefits of multibillion-dollar investments in electricity generation, meaning strong returns from higher wholesale electricity prices.

“This increase in prices in the broader electricity market has mostly been a result of the abrupt closure of non-AGL power stations such as Hazelwood in 2017 and Northern in 2016 and higher input costs for coal and gas,” he says.

“In this environment, we recognise that many Australian households are facing cost-of-living pressures because of the higher energy bills that have resulted from higher market prices.

“For that reason, we are investing to create new supply in the market.”

At the close, AGL shares were down 4% to $21.11.

Vesey announced today a package to help vulnerable customers, including $50 million of hardship debt relief and the extension to all states of automatic loyalty discounts to electricity customers who have been with AGL for at least two years.

AGL declared a final dividend of 63 cents a share, 80% franked, bringing the total payout to 117 cents a share, up 29%.

The company expects underlying profit after tax in the 2019 financial year to be between $970 million and $1.07 billion. This guidance includes the benefit of a $120 million cut in operating costs, which will mitigate the impact of increased competition.

Consumer watchdog the ACCC last month released a plan for change in the power industry aimed at cutting power bills.

The Retail Electricity Pricing Inquiry report identifies the root causes of high electricity prices across Australia and makes 56 recommendations to fix the National Electricity Market.

AGL says it supports the adoption of National Energy Guarantee, a Federal Government plan to bring down household power bills.

“If the National Energy Guarantee is settled, we anticipate being able to make further progress on new electricity generation projects – including potentially additional gas-fired generation and pumped hydro generation, as well as battery storage projects in the longer term,” says Vesey.

State and territory energy ministers will meet in Canberra tomorrow to discuss the scheme.

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