AGL Energy (ASX:AGL) - Managing Director & CEO, Brett Redman
Managing Director & CEO, Brett Redman
Source: Financial Review
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  • AGL Energy (AGL) has unveiled a shocking $2.69 billion write-down to its FY20 figures as tumbling energy prices continue to hit its gas and wind operations
  • AGL attributed the charges to an “accelerated deterioration to long-term wholesale energy market forecasts in recent months”
  • The new price outlook has hit the company’s investment into the wind energy sector hardest of all, with now-onerous legacy offtake agreements racking up $1.92 billion in charges
  • AGL’s coal and gas assets also tallied up $532 million in impairments, and environmental restoration provisions have set it back a further $1.1 billion
  • These collectively amount to well over $3.5 billion in charges but have been somewhat offset by an expected $878 million in tax gains
  • AGL Energy is down 5.91 per cent and trading at $11.14 per share

AGL Energy (AGL) has unveiled a shocking $2.69 billion write-down to its FY20 figures as tumbling energy prices continue to hit its gas and wind operations.

The news follows a report by the Australian Energy Market Commission back in December, which forecast energy prices to fall dramatically over the next three years. The report attributed much of the fall to an influx of new, cheap renewable energy, as well as lower gas prices and the impact of the COVID-19 pandemic on demand.

As a result, AGL has noted a “accelerated deterioration to long-term wholesale energy market forecasts in recent months,” which is pulling prices down and shrinking the company’s expected margins.

The new price outlook has hit the company’s wind energy investments hardest, with now-onerous legacy offtake agreements racking up $1.92 billion in charges.

AGL’s coal and gas assets also tallied up $532 million in impairments, and environmental restoration provisions have set it back a further $1.1 billion.

These collectively amount to well over $3.5 billion in charges but have been somewhat offset by an expected $878 million in tax gains.

“As Australia’s largest energy retailer and the largest generator of electricity, we continue to see material opportunities for AGL to participate in the energy transition as customer needs, community expectations and technology evolve,” said AGL’s Managing Director and CEO, Brett Redman.

“Notwithstanding these charges, our broad and diverse portfolio of electricity generation assets will continue to have a vital role to play in enabling the transition of the energy system,” he added.

Despite the substantial markdown, AGL does not expect the charges to impact its full-year underlying profit after tax, which remains in the $500 million to $580 million range.

Nevertheless, the reaffirmed profit guidance hasn’t stopped some investors from selling off at market open this morning.

After opening more than 7 per cent in the red, AGL Energy is down 5.91 per cent and trading at $11.14 per share at 12:05 pm AEDT.

AGL by the numbers
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