For a company that depends on coal-fired generation as the single biggest contributor to its revenue and profits, it seems that AGL Energy doesn’t like to advertise the fact.
The company on Wednesday announced a big lift in profits for 2014/15, underpinned by $490 million in new earnings from the huge Bayswater and Liddell coal-fired generators that it bought last September, adding to the big earnings it already gets from the Loy Yang A brown coal generator in Victoria.
Not that AGL is keen to advertise its connection, and dependence on coal.
Take, for instance, this little excerpt on “About AGL”, which appears at the bottom of its email correspondence and announcements to the public and stock exchange. In describing the company, it talks of solar, wind, hydro, landfill gas and biomass, even gas. But not a single mention of coal, just “thermal generation”.
Coal is AGL Energy’s inconvenient truth. Having spent nearly $4 billion buying coal-fired generators in the last few years, it is heavily dependent on its revenues. But new CEO Andrew Vesey also understands that change is afoot, and that consumers want clean energy.
Hence the gentailer’s new focus on emerging technologies, such as solar and battery storage, and a big marketing campaign. AGL has also promised to phase out coal-fired generation by 2050, but in doing it is not accelerating the exit of any of its plants. In fact, it is pretty much business as usual.
This is not the image that AGL Energy wants to project. It says it wants to be at the forefront of the transition to a low-carbon economy, as Vesey said on Wednesday.
The problem is that right now its earnings, profits and business model is weighted so heavily in favour of fossil fuels – which have delivered well for shareholders this past year, considering the bonus AGL has gotten from its coal-fired generators and soaring gas prices.
The coal returns have been boosted by the closures and announced closures of smaller coal-fired generators, such as the Northern Power Station (Alinta), Anglesea (Alcoa) and Wallerawang in NSW, which “have provided further strength to the market.”
Indeed, the company’s operating earnings before interest and tax (EBIT) from its wholesale market division, which includes coal and gas generation, was just over $2 billion.
Its new energy division – which includes solar, battery storage, electric vehicles, and smart meters – reported earnings of just $2 million in the latest year. It hopes to boost that to $20 million by 2018, but that explains where its short-term strategy lies.
