CEO, Mr Brett Redman, answered this question in the February 11th Half Year result conferenceQuote:
Originally Posted by Snoopy
(p3 of transcript)
"I’d now like to look in more detail at market conditions. Spot and forward electricity prices have decreased rapidly to levels unseen since 2015. On the one hand, supply has increased as a result of new grid-scale and rooftop renewable generation combined with the deferral of major planned outages at thermal plant as a result of COVID-19. On the other hand, demand has fallen due to mild weather and COVID-19. La Nina has created an unusually cool summer, particularly in December."
The above comment strikes me as odd. It implies the thermal generation plant that was due for maintenance could not be turned off in times of excess supply.
(p3 of transcript continues)
"We expect a sustained impact to long-term wholesale energy prices reflecting policy measures to underwrite new build of electricity generation and lower technology costs, leading to expectations of increased supply.
This lower price environment will put pressure on existing generation in the market, while new generation build will increasingly rely on government contracts. Amid these conditions, in the near term we expect to see further margin compression as our historic hedge positions roll off."
It sounds like individual rooftop solar installations on a large scale are making a real difference to electricity supply. Of course solar power generation makes more sense in Australia than NZ, as production and consumption are better aligned. It is curious though, that construction of renewable power stations seems to to be driven by government, not the power industry.
(p12 of transcript)
"I want to conclude by looking at the historic relationship between EBITDA and Wholesale Electricity prices, to help put more context about our outlook beyond this year. Wholesale Electricity prices are the biggest driver of AGL’s profitability – and you can see from the chart to the right that there is a strong correlation between the price trend (both up and down) and AGL earnings. The steady rise that occurred from FY15 to FY18 translated into record profits in FY19, and the decline we’ve seen since is now translating to much lower earnings this year and into the next couple of years. Markus (Brokhof, Chief Operating Officer) has taken you through our hedge book in more detail, from which you can see that our progressive hedging approach smooths our earnings outcomes, both downside and upside."
"The chart here shows that wholesale prices are at levels last seen in 2015, hence it is likely earnings will follow."
(p21 of transcript).
"One last reflection too, on the impairments that we took around the wind contracts. An acid test is always, if you could go back in a time machine, would you have entered into those transactions. And the answer is yes. If you look at the whole of life economic outcomes that we achieve through that wind development, the results and the profits that we made in the earlier parts, the last few years where green prices and black prices have been a lot higher, in some respects what we’re seeing is a little bit of disconnect to the phasing of when costs and profits are booked versus the actual economic outcomes of projects. So do I, on behalf of the company, regret those wind projects from a decade ago? No. I think they did what they set out to do. They established a renewables and wind industry in Australia. They did provide good returns over the years to our shareholders. And I think for the whole of life, they’re not absolute knock it out of the park returns by any means, but they are respectable on the way through, so the impairment is not good, but the whole of life economic decisions there are not bad."
The question that wasn't answered, and is not company specific, is why did the Wholesale Power price collapse post 2018? The hint is that new generation is being underwritten, regardless of market price indicators.
The lesson here is, could the same fate befall Genesis Energy on the NZX, which like AGL, is primarily a fossil fuelled company with rent-a-green generation assets and concomitant contracted power pricing? The answer is, because wholesale power prices do go up and down, this is exactly what will happen to GNE. It is merely a matter of 'when'.
SNOOPY
discl: do not hold AGL or GNE
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26-02-2021, 08:33 AMSnoopy
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12-08-2021, 09:13 PMDavexl
Here's a bigger battery being built by AGL in Aust.
https://www.smh.com.au/business/mark...=p52nhq#p52nhq
AGL taps Finnish firm to build battery ‘about the size of the Adelaide Oval’ By Nick Toscano
AGL, the nation’s largest greenhouse gas emitter, has selected Finland’s Wärtsilä to kickstart the roll-out of several big batteries around the country with the construction of a 250-megawatt battery at the Torrens gas plant in Adelaide.
The ASX-listed power and gas supplier on Monday said the grid-scale battery, expected to be around the size of Adelaide Oval, would initially have one hour of storage (250 megawatt-hours) but could expand to up to four hours (1000 megawatt-hours).
Construction of the battery is scheduled to begin later this year.“Torrens Island has played an important role in the state’s energy generation for many decades,” AGL chief operating officer Markus Brokhof said.
“Our plans ensure the site’s legacy continues with smart and sustainable technologies.”
AGL last month announced it was preparing to mothball one of four units at the Torrens gas-fired generator due to “challenging conditions” caused by the state’s accelerating uptake of renewable energy continuing to price fossil fuels out of the power market.
(Also caused by rapidly increasing maintenance cost as the coal fired plant ages eg Huntly)
Average wholesale power prices in South Australia fell sharply last year, from $122 per megawatt hour in 2019 to $51, according to the Australian Energy Regulator, which attributed the fall to high levels of rooftop solar generation and mild summer conditions.
In the first three months of the year, the average cost of power per megawatt-hour fell below $0 between 10am and 3.30pm, when rooftop solar is a major contributor to the grid.
In Australia and worldwide, battery technology is emerging as key to supporting the greater uptake of renewables by overcoming the problem of intermittency when it is not sunny or windy.
Big batteries capture and store excess power created during times when conditions for renewable energy are most optimal, and then release it when it’s needed during peak-usage periods such as during heatwaves (In Aust) or freezing winters (in NZ)
AGL’s Torrens battery will be the first of a planned 850 megawatts of batteries the company has vowed to roll out across the nation.
Rival power giant Origin Energy has also unveiled a plan to build a 700-megawatt battery at its Eraring coal-fired power station in NSW, which will be the country’s largest. -
16-08-2021, 08:00 PMFerg
Where is the bottom for AGL? Whilst the historic yield is tempting, they have just announced a dividend cut. Whilst I don't like these robo-generated articles, this one talks about the dividend cut and lower dividends in future: https://nz.finance.yahoo.com/news/re...152646053.html
I see a hard road ahead for AGL. A high yield is not worth as much as a falling EV and/or SP. -
16-08-2021, 09:57 PMNorwest
The erosion of AGL shareholder value over the last 18months is outrageous. To put it into perspective it is now down over 75% compared to the ASX200 in just one year.
Still on a massive downtrend which I've been watching for a reversal which just doesn't want to happen. The volumes on down days is a telling story in and of itself.
The market has zero faith in the board and in my opinion rightly so. -
20-08-2021, 11:11 AMWaikaka
Happy to start accumulating from here
Plenty of headwinds for the next few years but I expect higher gas and coal prices as well as planned thermal plant closures to eventually flow through to higher wholesale electricity prices.
AGL has a decent moat with their own mines or long term cheap coal contracts.
Figure by 2025 things will have stabilised and happy to clip the dividend ticket on the way through -
20-08-2021, 12:27 PMJBmurcYes going off my ANZ invest platform -AGL will pay 34c ex date AUG24th unfranked which is fine for us kiwis that couldn't claim the tax credits anyway >>Quote:
Originally Posted by Waikaka
Very tempting load up as EV auto and and the other electronics we know use ....all need more and more Energy supplies ...AGL will turn around ..and like you say saok up the fat Yield in the meantime -
20-08-2021, 12:56 PMAaronBiggest CO2 emitter in Australia. Pressure on wholesale electricity prices (I think) and coal fired power stations, Long term share price down trend that does not seem to be abating. CEO resigned just prior to a big split into two companies, generation and retail.Quote:
Originally Posted by JBmurc
Currently not quite half of Morningstars valuation and one of their few buy recommendations. Yield trap or great entry point, I do not understand the Aussie electricity market enough to know but currently generating good cashflows and nice dividend, just not sure how long it will last.
That is all I know from a quick skim read a while back. I was going to look at buying when the trend changed.
Is it too late to buy today with an ex date of the 24 August? -
20-08-2021, 01:52 PMWaikakaI am no expert but didn't it used to be T+3?Quote:
Originally Posted by Aaron
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20-08-2021, 02:07 PMJBmurcFrom my understanding as long as BUY in before the 24th you should be fine ... on ANZ invest it tells you when its trading ex-date ..Quote:
Originally Posted by Aaron
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20-08-2021, 03:18 PMAaron
Just rang ASB Securities they said as far as dividend ex dates go as long as you buy them before the 24th you will be OK.
The trade goes through two days later. I was thinking T + 3 but maybe not.
Looks a bit like another dividend trap for me to fall into. Probably better than Junior gold miners/explorers though.
Aurizon was another company. Railway lines seem a bit like a monopoly situation good dividend (in the current interest rate environment). Outlook might change if iron ore has peaked. Don't really know enough about the company customers and the freight so procrastinated.
AZJ share price has increased since I first looked at it whereas AGL has continued on down. A 34cent dividend next week on a say $7.25 share price is 4.7%. Obviously share price hasn't recovered after going ex-dividend for a few years. I should really listen to Phadraeus on this one.