AGL ups profit outlook ahead of its big price hit on households

AGL Energy has upgraded its profit forecasts as it prepares to slug east coast customers with bill increases of up to 30 per cent.

Announcing a brighter outlook for shareholders this year and next, AGL chief executive Damien Nicks said the business was highly leveraged to wholesale prices, which had increased significantly in recent years.

“We are acutely aware of the impact to our customers in this inflationary period,” he said on Friday.

“It’s a tough period for everyone.”

Mr Nicks encouraged customers to switch to monthly from quarterly bills to help manage cost of living pressures.

Price changes take effect from July 1 and the company is expecting an increase in customer debt despite taxpayer-funded bill relief hitting accounts.

“We’ll be working with customers to help them as best as we possibly can,” he said.

Mr Nicks said AGL would be “vigorously defending” allegations the energy giant took advantage of its market power and intentionally increased the price of wholesale electricity by gaming the market.

The class action filed in the NSW Federal Court seeks to compensate customers for “significant losses” caused by AGL’s alleged manipulation of the electricity market which affected downstream prices charged to homes and businesses.

Piper Alderman, the law firm behind the suit, alleges contraventions were a cause of the prices set by regulators under default market offers, which meant prices and power bills were higher than they would have been.

AGL narrowed its underlying earnings ranges for this financial to between $1.33 billion and $1.375b. Previous guidance between $1.25b and $1.375b.

The company also expects a higher underlying profit after tax of $255 million to $285m — previously $200m to $280m).

The upgrades reflect increased generation due to improved plant availability, a reduction in forced outages and a higher customer margin.

This is partly offset by higher operating costs on increased maintenance costs, bad debt expenses and the impact of inflation.

In FY24, underlying earnings are forecast to surge to between $1.875b and $2.175b for an underlying profit after tax of $580m to $780m.

AGL also announced a change to dividend policy from next financial year, reducing the payout to 50 to 75 per cent of underlying profit after tax from the previous longstanding guidance of 75 per cent.

“That will allow us to fund the transition and also allows us to provide the appropriate returns to shareholders,” Mr Nicks said.

As Australia’s largest emitter, the company is spending up to $10b over the next eight to 12 years on shutting down ageing coal-fired power stations and replacing them with renewable energy sources and fast-start gas units.

AGL continues to target a complete exit from coal-fired generation by the end of FY35.