Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AGL Energy Ltd (AGLNF, Financial) reported a strong financial performance with an underlying profit after tax of $812 million, a 189% increase from the previous year.
- The company declared a final ordinary dividend of $0.35 per share, bringing the total dividend for the 2024 financial year to $0.61 per share.
- AGL Energy Ltd (AGLNF) made significant progress in its energy transition, expanding its development pipeline to 6.2 gigawatts, almost double since September 2022.
- The company recorded a strong performance in its Customer Markets business, with significant growth in customer services across energy, telecommunications, and Netflix services.
- AGL Energy Ltd (AGLNF) maintained a favorable churn spread to the overall market at just over 5-percentage-point, indicating strong customer retention.
Negative Points
- The total injury frequency rate remains elevated at 3.5 per million hours worked, up from 2.8 in FY23, indicating ongoing safety concerns.
- Operating costs increased by approximately $40 million higher than forecasted, driven by non-recurring inventory provisions and higher spend on plant availability.
- The company expects a reduction in earnings for FY25 due to lower historic wholesale electricity prices resetting through contract positions and consumer margin compression.
- AGL Energy Ltd (AGLNF) faces challenges in maintaining its thermal fleet, with significant capital expenditure required for planned outages and sustaining capital spend.
- The company’s gas sales volumes dropped by 30 petajoules, which may impact future profitability if not addressed.
Q & A Highlights
Q: Can you provide more detail on the capital demands in the business over the next two to three years, particularly given the recent acquisition?
A: (Damien Nicks, CEO) The acquisition provides great flexibility and optionality in our portfolio. We will assess how it fits within our state-by-state development pipeline. (Gary Brown, CFO) We are committed to maintaining our investment-grade credit rating and have significant headroom to absorb additional debt, especially as new assets start generating profits and cash flow.
Q: Is the $400 million to $500 million investment in thermal availability and reliability the peak level of investment needed?
A: (Damien Nicks, CEO) We expect to spend $400 million to $500 million annually on our thermal plants. Next year will see a slight increase due to two major planned outages. Our target is to bring total portfolio availability up to 88%, with a focus on both availability and flexibility.
Q: How are you thinking about interest costs going through FY25?
A: (Gary Brown, CFO) Interest costs will remain relatively consistent. While base rates have increased, our overall debt has reduced, and there are non-cash items such as provision unwinds and lease expenses that impact interest costs.
Q: Can you provide more color on FY25 guidance, particularly regarding generation and battery earnings?
A: (Damien Nicks, CEO) Lower wholesale electricity prices and consumer margin compression are key drivers. The two major outages are accounted for in our guidance. (Markus Brokhof, COO) Our thermal fleet's improved availability and flexibility have been a result of long-term investments.
Q: What is the expected timeline for the Liddell battery's commercial operation date?
A: (Markus Brokhof, COO) The Liddell battery will have a two-stage commercial operation date: 250 megawatts in December 2025 and another 250 megawatts in April 2026. (Gary Brown, CFO) We expect firming assets to deliver post-tax IRRs in the range of 7% to 11%.
Q: How should we think about the $93 per megawatt hour received from wholesale customers?
A: (Markus Brokhof, COO) Part of this is due to recontracting with long-dated customers, and part is due to customers choosing more spot exposure. (Damien Nicks, CEO) We offer a product that allows customers to choose how they want to contract, contributing to profitability.
Q: Can you provide an update on the outlook for gas volumes and margins?
A: (Damien Nicks, CEO) We have contracted sufficient gas for our customer load out to 2027-2028. (Markus Brokhof, COO) Despite a drop in sales volume, our portfolio is well set up for the next few years, with flexibility in storage and haulage contracts.
Q: What is the timing of the benefits from the Kaluza investment?
A: (Jo Egan, Chief Customer Officer) The full run rate of benefits is expected from FY29, with incremental benefits over the next few years from existing investments in our transformation deployment.
Q: Any updates on the MacGen coal contract expiry?
A: (Markus Brokhof, COO) Our contract with Peabody runs out in 2028. We are in the market to contract and are screening for the best outcomes for Bayswater. (Damien Nicks, CEO) Bayswater can take lower quality coal, providing flexibility in sourcing.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
