AGL Energy Limited has reported a massive $2.058 billion loss in the 2021 financial year, amidst a rapidly transitioning energy market.
AGL Energy Managing Director and CEO, Graeme Hunt, said the result reflects a challenging year for AGL Energy, with the impact of lower wholesale electricity prices, reduced electricity generation output at peak periods, and the roll-off of legacy supply contracts in Wholesale Gas.
“Although wholesale electricity prices have rallied in recent months, our result reflected the impact over the past two years of increasing generation supply and lower demand arising from the COVID-19 pandemic and milder weather,” he said.
The result is also due to costs associated with the restructuring and cessation of the company’s Crib Point project. Mr Hunt said while the Crib Point project will not go ahead, AGL has taken action to mitigate the impacts of maturing low-cost legacy supply contracts, by signing competitive gas supply contracts.
“AGL Energy’s gas demand requirements will vary year on year, however these new contracts ensure AGL Energy’s customer load is fully contracted from FY22 to FY24.”
Mr Hunt said as the role of thermal assets is changing from base load to more flexible generation, AGL Energy is making its thermal generation assets more responsive to market demands.
“The focus is aimed at maximising availability during times of peak demand. Throughout FY21 this focus has resulted in actions such as, lowering the minimum generation of Bayswater, the planned installation of a digital twin at Bayswater and Loy Yang to optimise investment and running profiles and the mothballing of one unit at Torrens B in October.”
On 30 June 2021, AGL confirmed its intention to undertake a demerger to create two energy businesses, Accel Energy and AGL Australia, with separate listings on the Australian Securities Exchange. The plan is to implement the demerger towards the end of 2022.
“We believe that the proposed demerger will create two new entities each with clarity of purpose and strong foundations, which will position them well to lead the energy transition, while protecting and delivering value to shareholders,” said Mr Hunt.
Accel Energy will focus on the transition of existing electricity generation assets and investment in the long-term rejuvenation of operating sites as low-carbon industrial energy hubs, as well as new clean energy projects. AGL Australia, on the other hand, will focus on the multi-product energy retailing business, investing in flexible energy trading, storage and supply and decentralised energy services.
AGL Energy Chairman, Peter Botten, said the impact of recent challenging market conditions on the company’s financial performance emphasises that AGL Energy is now at an inflection point, “as the transition of the energy sector accelerates, driven by the rapid evolution in renewables and decentralised energy technology, customer needs and community expectations”.
AGL’s participation in PowAR’s acquisition of Tilt Renewables, through its 20 per cent equity ownership, provides AGL with access to PowAR’s renewable energy portfolio, which will support the company’s transition away from coal-fired power.
Meanwhile, AGL has reached a final investment decision on the Torrens Island battery and progressed both the Loy Yang and Liddell battery planning approvals.
“The progress in these battery projects put us well on the way to achieving our target of 850 megawatts of battery energy storage by FY24.”
Some key FY21 result highlights include:
- Statutory Loss after tax: $2.058 billion, including $2.9 billion of impairment losses, onerous contracts and costs associated with acquisitions, restructuring and cessation of the Crib Point project;
- Underlying EBITDA: $1.6 billion million, down 18 per cent on FY20;
- Underlying Profit after tax: $537 million, down 34 per cent, including approximately $90 million of insurance receipts relating to the Loy Yang Unit 2 outage in 2019;
- Total AGL services customers: 4.5 million , up 254,000 services (includes approximately 300,000 services of ActewAGL, in which AGL Australia will own a 50 per cent shareholding in the retail operations);
- Total generation volumes: 41,137 GWh, down 6 per cent, reflecting the impact of planned and unplanned outages and reduced grid demand.
- Completed acquisitions of Click Energy, Solgen, Epho and Tilt (via PowAR).