AGL jumps after earnings boost from coal power and new big battery

Australia’s biggest generator of coal-fired power AGL Energy has enjoyed a bump in its share price after revealing a big jump in its expected earnings for the financial year.

The profit upgrade is the second announced by the company in the past three months. It announced an underlying pre tax (Ebitda) profit of $1.07 billion and a net profit of $399 million for the first six months in late February, and bumped up its full year forecasts at the same time.

AL now expects full year Ebitda to come in between $2.12 billion and $2.2 billion – up from the previous forecast of $2.025 billion and $2.175 billion, and an earlier bottom end guide of $1.85 billion.

It now expects a net profit of between $760 million and $810 million, up from $680 million and $810 million, and an earlier bottom end forecast of $580 million).

AGL cited a “continued strong operational and financial performance” for the uplift, which at the bottom end represents a boost of $230 million at the Ebitda level and $180 million at the net profit level.

It said the higher forecasts reflected “improved plant availability, flexibility and generation, higher consumer demand over the summer period in New South Wales and Queensland, and continued strong customer markets performance.”

It didn’t break down the exact source of the earnings boost, but given more than 80 per cent of its power output – either owned or contracted – comes from the huge Loy Yang A brown coal generator in Victoria and the Bayswater black coal generator in NSW, they are likely to be the major source.

A recent quarterly market report noted that the addition of the Torrens Island battery in August last year helped a doubling in total South Australian battery earnings to $20 million in the March quarter, so that could also have played a part in the AGL earnings upgrade.

AGL’s portfolio of renewables is slowly growing, and it is also adding more big batteries, including the newly commissioned Torrens Island facility, the nearly complete Broken Hill battery in NSW and the big battery to be built at the site of the shuttered Liddell coal fired power plants.

It also operates the Wandoan battery in Queensland and the Dalrymple North battery in South Australia on contract.

But with neither Bayswater nor Loy Yang A expected to shut before 2032, coal fired power generation will remain the dominant part of the company’s portfolio, and its revenues, orrenseven as it seeks to reposition its consumer products with more solar, battery and electric vehicle offerings.

AGL said the higher profit forecasts reflected “improved plant availability, flexibility and generation, higher consumer demand over the summer period in New South Wales and Queensland, and continued strong customer markets performance.”

It made no mention of the outage at the Loy Yang A brown coal generator in Victoria, which occurred in the midst of a storm and the loss of a major transmission line that resulted in widespread load shedding across the state, and a huge spike in wholesale power prices over three hours that lifted the state’s quarterly average price by nearly one third.

AGL said the profit forecasts are subject to any impacts arising from regulatory and government intervention, variability in trading conditions and plant availability. Its share price jumped 59 cents, or 6.3 per cent, to $9.91 in response to the news in morning trade, its highest price since November.