AGL's carbon scheming

Carbon tax expected to provide a positive gain

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published August 22, 2012 2:45 pm AEST

AGL Energy (ASX: AGK) has today reported a 12% rise in full year underlying net profit to $482m. Revenues rose 5% to $7.5 billion, and the company has declared a 32 cent final dividend, bringing the total for the year to 61 cents, fully franked.

Reported profit fell 79% to $115m due to $155m of significant items associated with the company's purchase of the remainder of the Loy Yang A coal power station that it didn't already own, and a $212m fall in the fair value of derivatives.

Retail electricity revenue climbed 21% to $3 billion, due to a 4% increase in customer numbers to 3.4 million, and an increase in prices. Gas revenues were flat at $1.1 billion, while business customers increased by 11%, as wholesale electricity revenues increased by 3% to $1.9 billion.

The company has an ambitious plan to add up to 500,000 customers in NSW alone, enticing them away from its rivals Origin Energy (ASX: ORG) and TRUenergy. Origin and TRUenergy received customers when NSW privatised its energy retailing business in 2010. During the year, the company added a net 152,000 customers from that state.

To offset direct emissions costs of around $650m and a total cost uplift of near $1 billion as a result of the Carbon Tax, AGL has raised prices and invested heavily in renewable energy generation – solar, dams and wind farms. Additionally, the company will receive government transitional tax assistance and expects the carbon tax to be earnings positive in the 2013 financial year.

The company has provided a rosy outlook for the year ahead, made up by increased earnings from Loy Yang A as well as continued growth in retail customer numbers. Wet weather is also expected to benefit the company's hydro power generation. AGL has highlighted that competition from rivals – such as TRUenergy, Origin, Australian Power and Gas Company (ASX: APK) and ERM Power Ltd (ASX: EPW) is expected to rise over the next year.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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