We own AGL, and it is a trade that has gone from zero to hero and back to merely pretty good.
Now perhaps we should look at a broader range of prices, but the sell-off in context of weaker prices looks somewhat overdone. Generic baseload, September futures, these aren’t meaningfully lower post the last result.
Perhaps NSW is, but some states ahead, some behind.
Gas prices are about where they started, even as the path has been quite volatile.
AGL is a hedge for us: a) we think the pool price for electricity likely needs to be reasonably high to help fund the energy transmission (renewables might have a zero marginal cost, but someone still needs a return to build ’em, including the storage costs that come with intermittent power supply, and that return comes from charging a price that isn’t zero), and, b) if some wildly hot string of days/weeks overwhelms supply the possibility of enormous pricing is there. That’s the hedge bit.
Perhaps earnings are at risk, and we are simply looking at the wrong prices/futures curve, or perhaps the economics works in a way that we don’t appreciate (that one is entirely possible, no analyst in the market fully understands the flow of dollars from generation to retail and back again with hedges and working capital all in the mix).
But I don’t think so.
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