AGL share price on watch following major strategic and earnings update

Big news from the energy giant.

| More on:
A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.

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

Key points

  • AGL is set to exit all coal operations by FY35 
  • The company announced this and a suite of other measures as part of its strategic review 
  • The AGL share price is up 12% in the last 12 months 

Energy giant AGL Energy Limited (ASX: AGL) will close its Loy Yang A Power Station by the end of FY2035 – up to 10 years earlier than previously announced.

In a statement today, AGL says that it intends to accelerate its transition to an "integrated low carbon energy leader".

The AGL share price is on heavy watch this morning following the announcement, and pre-market trading activity is already ramping up according to Refinitiv Eikon data.

AGL to exit coal by FY35

After the release of its strategic review, the energy company says that its annual scope 1 and 2 greenhouse emissions are estimated to reduce from 40 million tonnes to "net zero" with the targeted closure.

The company will also gradually decarbonise its asset portfolio by substituting new renewable energy capacity.

It has intentions of supplying its customer demand with "up to 12GW of new generation and firming capacity, requiring a total investment of up to $20 billion, in place before 2036".

There doesn't seem to be any expected changes to this year's forecasted numbers for AGL.

It provided guidance of underlying EBITDA of between $1.25 billion and $1.45 billion, coupled with underlying net profit after tax (NPAT) between $200 million–$320 million.

AGL Chair, Patricia McKenzie, said the decision represents "a new direction for AGL".

Our decarbonisation and energy investment strategy sets a clear pathway for the company's future and its leading role in Australia's energy transition. We have listened to our stakeholders – in particular, our shareholders, as well as government and energy regulatory authorities. Their views were an important consideration as we reviewed the company's strategic direction after withdrawing the demerger proposal.

Today's announcement recognises the increasing ESG pressure from investors and consumers that has been affecting our business and we expect to be able access a wider pool of capital and attract new investors, which will ultimately result in a lower cost of capital and a more sustainable business.

AGL also published its inaugural climate transaction action plan along with its strategic review. Shareholders can vote on this at AGL's annual general meeting held on November 15 2022.

There is also a $700 million non-cash impairment charge that AGL will recognise against the carrying value of the tangible assets at Loy Yang A.

AGL finished with the following:

Overall, AGL believes FY23 earnings will remain resilient amidst the current challenging energy industry and market conditions and is well positioned from FY24 to benefit from sustained higher wholesale electricity pricing as historical hedge positions progressively roll-off.

Investors eagerly await the fallout this morning.

Motley Fool contributor Zach Bristow 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

Happy coal miner.
Share Gainers

Up 75% this week, why is this ASX All Ords stock rocketing again today?

Investors are piling into this ASX 300 stock on Wednesday. But why?

Read more »

Man pointing at a blue rising share price graph.
Share Gainers

Guess which ASX 300 stock just rocketed 43% on big news!

Investors are piling into this ASX 300 stock on Wednesday. But why?

Read more »

A male oil and gas mechanic wearing a white hardhat walks along a steel platform above a series of gas pipes in a gas plant
Energy Shares

4 reasons to buy Santos shares right now

A leading expert forecasts Santos shares and dividends are set to grow. But why?

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX 200 stock has rocketed 86% since April?

This sky rocketing ASX 200 stock continues to defy short sellers. But how?

Read more »

A miner in visibility gear and hard hat looks seriously at an iPad device in a field where oil mining equipment is visible in the background.
Energy Shares

4 ASX 200 energy shares making big moves today as OPEC's oil production set to surge

ASX energy shares, including Woodside and Santos, are making big moves today. But not all in the same direction.

Read more »

Worker on a laptop at an oil and gas pipeline.
Energy Shares

Woodside share price charging higher on North West Shelf approval

Woodside has been working more than six years to gain an extension for its North West Shelf gas project.

Read more »

Gas and oil plant with a inspector in the background.
Energy Shares

Does Macquarie rate Origin Energy shares a buy, hold or sell?

The broker has given its verdict on the energy giant. Let's see what it is saying.

Read more »

An oil worker in front of a pumpjack using a tablet PC.
Energy Shares

Ord Minnett tips Woodside shares to rise 15%+

Market-beating returns could be on offer from this energy giant.

Read more »