AGL share price
A new gas sale agreement
One of AGL’s suppliers, Cooper Energy Limited (ASX: COE) has agreed to enter into a new Gas Sales Agreement (GSA) where the original contracted quality will be cut from 12 petajoules (PJ) to 6PJ of gas per year and the term extended by two years to 31 December 2030.
What’s a petajoule?
It’s the standard unit of energy in general scientific applications. So, one joule is the equivalent of one watt of power radiated or dissipated for one second.
However, the revisions will include an option to increase the quantity by up to 6PG/year with the total incremental volume for AGL limited at 30PJ.
AGL still remains Cooper’s biggest customer as illustrated below.
Loss of a key person
The former head of technology and commercial strategy, Simeon Baker-Finch has left for a Sydney-based solar start-up called 5B.
Baker-Finch spent 4.5 years with AGL and has developed a strong solar pedigree, including previous positions at First Solar, Australian National University and PV Lighthouse.
Such news should be no surprise as the company announced a demerger in June.
My take on AGL
Any major demerger requires a significant amount of time and cost. It’s an essential pivot given the shift towards renewables, similar to a big ship trying to turn around in shallow water.
AGL evidently wants to move to deeper depths but it will be challenging due to the weak outlook for wholesale electricity prices.
Also, losing key personnel and replacing them with new staff will require enormous effort.
Whilst AGL may appear cheap on a valuation basis, a number of factors need to work in its favour over the long run.
I prefer businesses already riding industry tailwinds without the distractions AGL faces. So, it’s not sitting on my watchlist for now.
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