The AGL Energy Ltd (ASX: AGL) share price is under the spotlight today after announcing its decision on a 500MW battery project.
AGL is one of the largest energy retailers in Australia, as well as one of the biggest energy generators.
AGL’s battery decision
The energy business announced it has reached a final investment decision (FID) on a 500MW, four-hour duration grid-scale battery which will be built in the Hunter region of NSW.
Construction of this battery is expected to begin in late 2025, with the start of operations targeted for late 2027. The expected asset life of this battery is 20 years.
The total construction cost of this “grid forming” battery project is estimated to be approximately $800 million. AGL has chosen Fluence to be the engineering, procurement and construction provider.
AGL also noted that the 250MW Torrens Island and 50MW Broken Hill batteries have delivered “strong performance” since they commenced operations.
AGL is aiming to accelerate the development of its grid-scale battery portfolio and “grow its fleet of flexible assets”.
How will AGL fund this investment?
AGL said that the new NSW 500MW battery will be funded by its balance sheet.
The company will utilise its operating cashflows and existing debt facilities, including green capital expenditure loans.
Management comments
The AGL Managing Director and CEO Damien Nicks said:
The Final Investment Decision on the Tomago battery project marks yet another significant milestone in AGL’s delivery of its strategy and the transition and decarbonisation of its energy portfolio.
In addition, we have a clear pathway to FID for a further 900 MW of grid scale battery projects, as we aim to accelerate the development of our grid scale battery portfolio and grow our fleet of flexible assets. We will continue to leverage our innovative, in-house capabilities to optimise the performance of our grid-scale battery assets.
Final thoughts on the AGL share price
The business is making the right moves to remain a key contributor to the Australian economy in the coming years. Batteries are key for Australia to decarbonise during night time hours.
With how the AGL share price has fallen close to 20% since February, this could be a good time to consider an investment, depending on what happens with electricity prices.
There are other ASX dividend shares I’d choose first though, where there’s less of a complex future.
