Company result

AGL’s share price has been decimated. The general story is quite straightforward – renewable technologies are proving cheaper than traditional fossil fuels in generating electricity, and that’s before taking into account the negative externality that is pollution, a cost not fully born by the polluter.

Much of the production base remains coal-fired, and the fear of stranded assets, and costly rehabilitation, overhangs the share price.

However, a curiosity is the COVID and weather related impact of wholesale electricity prices. The fall in price over 2020 makes perfect sense (less demand) and as such matches the commentary of gentailer management in explaining the reduced EBITDA of the energy markets business over that time.


However, whilst they may not be at the average of 2015-2019, prices have recovered quite appreciably, and yet the outlook moving forwards for the energy markets businesses of the two largest gentraders is abysmal;, with material falls expected over FY22 and FY23.

That’s…difficult to understand. A bit like the AMP result, too many moving parts, too much complexity. Value may well be there, but so to it is in other names, where the probability distributions (and drivers) are clearer, to our minds.

Not one for us.

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