AGL share price dips as $20b price tag flagged for coal exit

AGL is exiting coal fired generation earlier than planned…

| More on:
A woman looks sideways at a graphic near her head reading CO2 with a downward arrow.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The AGL Energy Limited (ASX: AGL) share price is trading lower on Thursday.

In morning trade, the energy company's shares are down 0.6% to $6.56.

This compares to a stunning gain of 1.9% by the S&P/ASX 200 Index (ASX: XJO).

Why is the AGL share price underperforming?

The AGL share price is underperforming on Thursday after investors gave a lukewarm response to the company's strategic review update.

That update revealed that AGL is aiming for an accelerated exit from all coal fired generation.

This will see the company look to close the Loy Yang A Power Station up to 10 years earlier than previously announced.

Management expects this and others actions to reduce its greenhouse gas emissions from 40 million tonnes to net zero.

However, this will come at significant cost, which appears to have spooked investors today.

To achieve its goals, AGL advised that it will progressively decarbonise its asset portfolio with new renewable and firming capacity. This will require a total investment of up to $20 billion by 2036. This is expected to be funded from a combination of assets on AGL's balance sheet, offtakes, and partnerships.

Are AGL's shares a buy?

One broker that sees a lot of value in the AGL share price at present is Morgans.

Its analysts currently have an add rating and $8.63 price target on the company's shares. This implies potential upside of 30% over the next 12 months.

However, it is worth noting that the broker has not yet responded to today's update and will no doubt be busy assessing how these plans impact its earnings estimates and valuation.

So, investors may want to sit tight and keep their powder dry until Morgans has reassessed the company.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

Coal miner standing in a coal mine.
Energy Shares

Up 62% since April, what's happening with Whitehaven shares today?

Whitehaven shares have enjoyed a strong rally since April despite weak coal prices.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Energy Shares

Why Macquarie sees Paladin Energy shares as a buy in the dip opportunity

This uranium stock could be a buy according to the broker.

Read more »

Happy man working on his laptop.
Energy Shares

Opportunity knocks: 2 ASX stocks ready to surge

Analysts expect big things from these shares.

Read more »

Two businesspeople walk in opposite directions on a staircase with arrows under their arms, one pointing up and one pointing down.
Energy Shares

3 largest ASX uranium shares move in different directions amid fresh developments

Here's what is happening with Paladin Energy, Deep Yellow, and Boss Energy shares on Thursday.

Read more »

Bored man sitting at his desk with his laptop.
Energy Shares

Guess which ASX 200 share is sinking 6% on shock CEO exit

Investors are reacting negatively to this surprise news.

Read more »

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
Energy Shares

Should you buy Paladin Energy shares after the selloff?

Let's see what Bell Potter is saying about the uranium stock.

Read more »

A smiling woman puts fuel into her car at a petrol pump.
Energy Shares

Guess which ASX 200 energy stock is leaping higher on earnings growth

Investors are sending the ASX 200 energy stock sharply higher on Wednesday.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Energy Shares

Up 93% since April, why is this ASX 200 uranium stock crashing today?

The resurgent ASX 200 uranium stock is falling hard today. But why?

Read more »