AGL, the nation’s largest power supplier, has reported a not unexpected loss of $2.06 billion loss for the year to June ahead of its split into a good company and a bad company.
The result was driven by massive impairments revealed earlier this year which saw the company report an interim loss of $2.3 billion.
Revenue fell 10% to $10.9 billion for the year to June.
Underlying profits fell 33.5% to just over $537 million which will allow the company room to pay a final dividend of 34 cents a share.
That takes the full year payment to 75 cents a share, down 23.5% from the 98 cents paid in 2019-20.
The reason for the impairments and the weak performance was the rapid rise of renewable energy which continues to drive electricity prices lower, undermining the finances of its coal-fuelled power stations.
The continuing expansion of new wind and solar power capacity is driving down wholesale electricity prices across the country.
In a touch of understatement, AGL described the past financial year as “extremely challenging” and warned of further pain to come.
Some analysts would describe the situation as company-shattering because that was what has happened to AGL.
It was this unrelenting downward pressure on power prices (because of rising efficiency and capacity of renewables like solar and wind) that saw AGL decide to split itself into two companies – one with the renewables and customer facing distribution businesses, the other the fossil fuel base power stations and associated assets.
AGL Australia will hold the to hold its renewable power, gas, electricity and telecommunications and retailing divisions; and Accel Energy, which will own the emissions-intense coal and gas-fired power stations.
Further dividends will come from AGL Australia while it is doubtful the Accel Energy segment will be able to be pay consistent returns to shareholders such is the glum outlook for power prices and market growth.
Accel Energy will in fact be an investment pariah, as many big investors won’t invest because of its carbon emissions.
AGL’s bottom-line profit suffered a $3 billion turnaround – from $1 billion in 2020 to $2.06 billion in the year to June.
“There has been continued uncertainty regarding energy policy and an acceleration of the market forces that determine our strategy,” AGL chairman Peter Botten said in Thursday’s statement.
“This has included increasing pressure for energy companies and society as a whole to take accelerated action on climate change.”
AGL shares fell more than 5.5% to $7.18. One way or another part of this company is dying and the only way to save the good part is to split it and cut the coal-fired power stations adrift.
