AGL
AGL, the utility company, held their AGM, and pleasingly reiterated guidance for the year ahead.
We own AGL mainly as a hedge against spikes/outages in the local energy market (brownouts, price spikes, gas shortages, oil and gas prices rocketing again due to geopolitical risks).
Australian summers are hot, and the frequency of outages is high, and so ownership of AGL provides a very particular kind of portfolio protection. In those instances, pretty much every stock on the exchange is “short energy”, and the wholesale electricity price can rise by an order of magnitude quite quickly.
The headline multiple is not especially high (~11x forward PE) and being able to control the energy transition (timing of decommissioning of coal-powered stations, the ability to flex those plants up or down depending on pricing, ownership of battery plants, and the ability to arbitrage peak pricing, alongside the ongoing development and likely sale of renewable power) is appealing to us.
This snippet from mgmt’s introductory remarks is illustrative of the scale ahead, with the 250MW TI battery being rather enormous.
In short, we have strong population growth, and, over time, are going to need a lot more electricity. We will also need a fairly material overhaul in how all that comes together, everything from heat pumps to rooftop solar to induction cooking to battery chargers for electric vehicles, and smart meters / services that bind them all together.
AGL has a strong starting position to lead and drive that role, and thus should be able to produce attractive monetisation streams over time.
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