The AGL Energy Ltd (ASX: AGL) share price is in focus after the company announced it was exiting its coal-powered generation sooner, and also gave FY23 profit guidance.
Coal exit
AGL revealed that it was targeting a complete exit from coal-fired generation by the end of FY35, with a targeted earlier closure date for the Loy Yang A Power Station, up to 10 years earlier than previously announced.
By doing this, its annual greenhouse gas emissions are expected to reduce from 40 million tonnes to net zero on achieving targeted closure, supporting the transition to a lower carbon world aligned with the Paris agreement goals and achieving net zero for operated scope 1 and 2 emissions after coal closures.
AGL said it aims to progressively decarbonise its asset portfolio with new renewable and firming capacity, with an ambition to supply 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, funded from a combination of assets on AGL’s balance sheet, offtakes and via partnerships.
AGL will recognise a (non-cash) impairment charge of approximately $700 million (after tax).
Leadership comments
AGL Chair, Patricia McKenzie, said:
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.
AGL is committing to an ambitious but achievable strategy to deliver a responsible and accelerated low carbon future. We are aiming to reshape our energy portfolio into a cleaner and more flexible one, transitioning away from coal and focusing on new renewable and firming capacity.
AGL will work with its broad stakeholder group to deliver these ambitious outcomes. It is particularly important that we support our people who maintain and operate our coal-fired power stations. We will work with our people, their representatives, and government to help develop the skills and capabilities required for new and existing industries as we progress to ensure the transitioning energy sector is supported by a skilled workforce.
FY23 guidance
Underlying EBITDA (EBITDA explained) for FY23 is expected to be between $1.25 billion to $1.45 billion.
Underlying net profit after tax (NPAT) is predicted to be between $200 million and $320 million.
The company believes its FY23 earnings will remain resilient despite the challenging conditions. It believes it’s well positioned to benefit from sustained higher wholesale electricity prices in FY24 as historical hedge positions roll off.
Final thoughts on the AGL share price
From an environmental side of things, it’s good to see that AGL is going to go net zero quicker. The pressure from Mike Cannon-Brookes has worked. It will be interesting to see if another takeover bid is launched, or whether Cannon-Brookes decides not to because AGL has announced this coal closure.
Is it a buy? I don’t know. It could be cheap if another takeover offer came in.
