Agl Energy Limited · ASX:AGL
Agl Energy — 1H FY2024 Earnings Presentation
49 slides from Agl Energy's earnings presentation, Feb 8, 2024
Slide 1: ASX & Media Release: 2024 Half-Year Results Presentation
AGL Energy Limited Locked Bag 3013 Level 24, 200 George St T: +61 2 9921 2999 ABN: 74 115 061 375 Australia Square NSW 1215 Sydney NSW 2000 F: +61 2 9921 2552 Australia Australia www.agl.com.au ASX & Media Release 2024 Half-Year Results Presentation 8 February 2024 Attached is AGL Energy Limited’s H
Slide 2: FY24 Half-Year Results
FY24 Half-Year Results 8 February 2024 1
Slide 3: Agenda
1 Results highlights and business update Damien Nicks – Managing Director and CEO 4 Outlook Damien Nicks – Managing Director and CEO 2 Strategy execution and market transition Damien Nicks – Managing Director and CEO 5 Q&A 3 Financial and operational overview Gary Brown – Chief Financial Officer [DA
Slide 4: Results summary
• Strong earnings result for the half: RESULTS • Significantly improved generation availability and portfolio flexibility, including new Torrens Island battery SUMMARY • Higher wholesale electricity pricing from prior periods reflected in overall pricing outcomes • Strong Customer performance, deliv
Slide 5: Results summary and guidance
• Underlying EBITDA up 78% to $1,074 million; Underlying NPAT up 359% to $399 million – Increased plant availability and benefits of portfolio flexibility, more stable market conditions compared to 1H23, along with the impact of higher wholesale electricity pricing from prior periods reflected in pr
Slide 6: Safety, customer and people metrics
Safety Customers People Total Injury Frequency Strategic NPS2 Employee engagement Rate (TIFR)1 (per million (Net Promoter Score) score hours worked) +7 71%3 3.7 62% 67% +6 57% 2.8 +5 +5 2.3 2.1 FY21 FY22 FY23 1H24 Jun-21 Jun-22 Jun-23 Dec-23 FY21 FY22 FY23 FY24 Q4 Q4 Q4 Q2 1) For employees and contr
Slide 7: Safety improvement initiatives and ESG
Safety improvement initiatives Embracing ESG Safety continues to be the number one priority for AGL, and Driving long term value for our stakeholders – highlights from we have taken the following actions: the half: Increasing safety presence at sites, including the number of $35m delivered of a
Slide 8: Customer Support Package
DIRECT FINANCIAL SUPPORT $35m $20m proactive bill $13m in debt relief for customers under in HY24 credits for Centrepay our hardship program and affected by customers Family Domestic Violence (FDV) $35m PROACTIVE CUSTOMER ENGAGEMENT Commenced proactive 115k customers proactively 2,400 government gra
Slide 9: Strategy execution and market transition
Strategy execution and market transition Damien Nicks – Managing Director and CEO Torrens Island battery, South Australia [DAMIEN NICKS] I’ll now spend a few minutes to talking to the transition of AGL and how we’re executing on our business strategies, before handing over to Gary. 8
Slide 10: Our purpose - Powering Australian Life
Our purpose - Powering Australian Life Connecting our customers Transitioning our to a sustainable future energy portfolio Helping our customers Ambition to add 12 GW of new renewable decarbonise the way they generation and firming by the end of 2035, live, move and work while running safely and del
Slide 11: Our purpose - Powering Australian Life: progress metrics
Our purpose - Powering Powering Australian Australian Life Life Customer NPS Digital only Speed to market Green revenue Cumulative customer leadership customers improved expanded assets installed +20 60% by 80%1 85%+ +300 MW3 (Strategic NPS) Increase in green behind the meter revenue from FY192 1H24
Slide 12: Momentum across strategic priorities: live, move, work
LIVE MOVE WORK RESIDENTIAL SOLUTIONS DRIVING E-MOBILITY COMMERCIAL DECARBONISATION AT SCALE 480k carbon neutral services Expansion of BP Pulse partnership #1 market share in commercial solar 1 +14% vs 1H23 Peak Energy Rewards 657 GWh contracted C&I renewable Launch of EV Night Saver Energy expanded
Slide 13: OVO Australia growth on Kaluza platform
MIGRATION AND GROWTH PRODUCT INNOVATION & SPEED TO MARKET NET PROMOTOR SCORE OVO Australia successfully migrated 100% Kaluza platform has enabled: Maintained an excellent NPS score of its customer base to the Kaluza platform throughout migration to a new and has since scaled to 70k+ accounts • Rapid
Slide 14: Key milestones and executing on the transition
Key milestones achieved in the first half Expanding options and executing on the transition Development pipeline advanced from 5.3 to 5.8 GW1,2 • AGL aims to source its energy as efficiently as possible via a combination of: owned and controlled assets, joint ventures and Tilt partnership, off-tak
Slide 15: Sourcing energy and capacity efficiently
As mentioned last June, we continue to source energy and capacity as efficiently as possible via a combination of owned and controlled assets, joint ventures and partnerships, including our investment in Tilt Renewables, as well as via offtakes and decentralised energy. Importantly, our 5.4 gigawatt
Slide 16: 5.8 GW development pipeline
PROJECT TYPE STATUS CAPACITY / DURATION FID TARGET IN OPERATION Expected post-tax returns for future investments, based on observable Torrens Island Battery (SA) Firming In operation 250 MW / 1 hr N/A peer projects2 TOTAL 250 MW DEVELOPMENT PIPELINE Broken Hill Battery (NSW) Firming In testing 50 MW
Slide 17: Energy transition changing the NEM
The energy transition is changing the NEM… …creating price signals for where investment is most needed AGL NSW mass market (net) demand (MW) AGL is making significant investment to capture value in the following areas Hourly demand (by customer) 0 2 4 6 8 10 12 14 16 18 20 22 24 1. 1.5 GW of grid sc
Slide 18: Torrens Island battery performance
1.5 GW of grid 1. scale batteries by FY27 TORRENS ISLAND BATTERY SOURCES OF REVENUE Commenced Practical Total construction FCAS AGL will optimise 5-10% operations: completion: cost of $189m - within dispatch strategy August 2023 September 2023 budget 10-30% Arbitrage to maximise returns from the ass
Slide 19: Liddell battery 500 MW project
1.5 GW of grid 1. scale batteries by FY27 500 MW / 1,000 MWh Grid-forming battery project Fluence is the EPC provider Estimated construction cost of ~$750m1 To be funded on AGL’s balance sheet utilising operating cash flow, existing debt facilities and green capex loans Will be supported by $35m ARE
Slide 20: Liddell battery customer load management and price spread
1.5 GW of grid 1. scale batteries by FY27 Customer load management and ability to meet peak demand in NSW • Liddell Battery is expected to provide valuable capacity in NSW following Liddell Power Station’s closure in April 2023 and Bayswater Power Station’s targeted retirement between 2030 and 2033
Slide 21: Role of distributed energy resources
Grow DER 2. assets to 1.6 GW by FY27 Illustrative AGL South Australian load profile improvement Support increasing renewables in grid • Reward customers for enabling dynamic rooftop solar curtailment (Solar Grid Saver) • Charge batteries at low daytime prices, and discharge at evening peak • Provide
Slide 22: Thermal unit flexibility
Thermal 3. unit flexibility Flexibility upgrades at Bayswater and Loy Yang A have • Thermal coal fleet flexibility is strategically important to mitigate the delivered ~$12 million of portfolio benefits combined in impacts of lower customer demand / negative pool pricing during daytime periods of pe
Slide 23: Financial and operational overview
Financial and operational overview Gary Brown – Chief Financial Officer [GARY BROWN] Thank you, Damien and good morning, everyone. 21
Slide 24: Financial results summary
STATUTORY NET PROFIT AFTER TAX: Underlying profit driven by increased plant availability and portfolio flexibility, more stable market conditions, UNDERLYING PROFIT AFTER TAX: $576m and higher wholesale electricity pricing from prior periods reflected in overall pricing outcomes DIVIDENDS $399m up 3
Slide 25: Core operational cash flow performance
performance to ensure the core operational business generates strong cash flows to support future investment in growth. 22
Slide 26: Group Underlying Profit movements
Customer Markets Integrated Energy Non- $48m higher $295m higher Group-wide recurring (EBITDA) (EBITDA) *Not adjusted for tax AGL Energy FY24 Half-Year Results | 8 February 2024 23 [GARY BROWN] Let me first take you through group Underlying Profit in more detail. Starting on the left-hand side – you
Slide 27: Underlying profit drivers
wholesale electricity pricing realised in earnings. The improvement in gas margin reflected the lagged reset of customer tariffs coupled with gains from short-term market trading strategies. Whilst initially a modest contribution in the half, we are pleased that the Torrens Island battery contribute
Slide 28: Operating cost increase drivers
Forecast operating cost increase driven by: Market activity and Business Thermal Non- recurring customer support transformation generation • CPI impact on input and employee fleet costs • Variable customer costs relating to revenue uplift and heightened market activity: • Larger customer support pro
Slide 29: Operating costs commentary
business systems. The risk, compliance and regulatory bar reflects higher insurance, risk and compliance costs, largely within Integrated Energy. Overall, whilst operating costs are an increase on FY23, it is important to note that customer revenue and associated rates are higher which led to increa
Slide 30: Customer Markets performance
Stable customer services Sustained churn spread vs rest of market Increased net operating costs Customer services (‘000) Churn (%) Consumer net operating costs3 22.1% 59 70 4,271 4,284 51 49 4,208 4,215 19.5% 46 60 18.9% 300 18.0% 250 50 196 246 292 318 40 208 204 195 30 200 59 20 16.2% 17.0% 51 38
Slide 31: Integrated Energy performance
Marginally lower generation volumes Positive outcomes from increased Stronger volatility capture driven by (normalised for Liddell Power Station investment in thermal fleet higher thermal fleet availability closure in April 2023) THERMAL FLEET COMMERCIAL AVAILABILITY1 VOLATILITY CAPTURED2 GENERATION
Slide 32: Historic and forecast capital expenditure
Historic and forecast capital expenditure ($m) • Step up in growth capital 700 spend on energy transition assets, with near-term focus 600 Primarily on grid scale battery projects attributable to 500 Liddell battery • Medium-term thermal (~$200m); 400 investment of $400 - $500 million per annum to 3
Slide 33: Cash flow generation
$m 1H24 1H23 Change Underlying EBITDA 1,074 604 470 Equity accounted income (6) (9) 3 • Underlying operating cash flow $735 Accounting for onerous contracts 1 (43) 44 million higher, driven by improved Other assets/liabilities and non-cash items 5 (41) 46 underlying EBITDA, lower margin calls, Rehab
Slide 34: Debt maturity profile and facilities update
Debt maturity profile as of 31 December 2023 ($m) 1,000 800 600 400 200 0 $193M DECREASE Amortising Debt Bond Debt Drawn bank debt Drawn green and sustainability linked debt Undrawn bank debt Undrawn green and sustainability linked debt Facilities update Rating and headroom metrics • A significant d
Slide 35: Market conditions and forward prices
New South Wales Swap Prices ($/MWh) Victoria Swap Prices ($/MWh) 250 250 200 200 150 150 100 FY 2024 100 FY 2023 FY 2025 FY 2023 FY 2024 FY 2025 50 50 0 0 Source: ASX Curves, Feb 2024 LEGEND: Traded Forward Curve1 Volume Weighted Average Price2 Electricity market conditions have moderated into FY25
Slide 36: Outlook
Outlook Damien Nicks – Managing Director and CEO Hallett Wind Farms, South Australia [DAMIEN NICKS] Thanks Gary. 31
Slide 37: Recap of the past six months
Strong operational and financial performance • 4.3 million customer services; Strategic NPS at +7; healthy spread to market churn • Significantly higher availability achieved across the generation fleet • Stronger cash generation and de-risked debt book with headroom for green capex growth Helping o
Slide 38: FY24 guidance
FY24 guidance ranges narrowed towards the upper end: • Underlying EBITDA between $2,025 million and $2,175 million (previously between $1,875 million and $2,175 million) • Underlying NPAT between $680 million and $780 million (previously between $580 million and $780 million) Narrowing of FY24 guida
Slide 39: Appendix
APPENDIX 34
Slide 40: Key financial metrics
Statutory NPAT $576 m Underlying EBITDA $1,074 m 78 % Underlying NPAT $399 m 359 % Operating free cash flow $526 m $573 m Dividends 26 cps 225 % Return on Equity 11.1 % 9.2 pp Return on Capital Invested 10.1 % 6.7 pp AGL Energy FY24 Half-Year Results | 8 February 2024 35 35
Slide 41: Statutory to Underlying NPAT reconciliation
$m 1H24 1H23 Change Statutory NPAT 576 (1,075) 1,651 Adjust for following post-tax items: Movement in onerous contracts 136 (131) 267 Moranbah Gas Project divestment (49) - (49) Impairments 33 706 (673) Movement in rehabilitation provision - (30) 30 Separation and re-integration costs - 7 (7) Wellin
Slide 42: Underlying NPAT drivers (post-tax)
Market / External Operational / Structural $m (post-tax) AGL Energy FY24 Half-Year Results | 8 February 2024 37 37
Slide 43: Generation volumes by asset
GWh 1H24 1H23 Change Asset Bayswater 6,186 6,411 (4)% AGL Loy Yang 6,700 6,095 10% Liddell - 2,897 (100)% Torrens Island Power Station 216 458 (53)% Barker Inlet 87 181 (52)% Kwinana Swift 56 70 (20)% Other gas 19 91 (79)% QLD wind 608 687 (11)% SA wind 511 608 (16)% VIC wind 481 355 35% NSW wind 24
Slide 44: Customer services by product and state
(‘000) 31 December 2023 30 June 2023 Change Consumer Electricity 2,414 2,439 (1)% New South Wales 866 890 (3)% Victoria 770 758 2% South Australia 352 356 (1)% Queensland 426 435 (2)% Consumer Gas 1,537 1,524 1% New South Wales 601 606 (1)% Victoria 604 592 2% South Australia 141 139 1% Queensland 8
Slide 45: Electricity sales volumes
GWh 1H24 1H23 Change Consumer New South Wales 2,605 2,932 (11)% Victoria 2,074 2,206 (6)% South Australia 805 927 (13)% Queensland 1,245 1,317 (5)% Consumer total 6,729 7,382 (9)% Large Business New South Wales 2,125 2,293 (7)% Victoria 913 973 (6)% South Australia 250 617 (59)% Queensland 763 681 1
Slide 46: Gas sales volumes
PJ 1H24 1H23 Change Consumer New South Wales 7.3 8.7 (16)% Victoria 14.4 18.6 (23)% South Australia 1.3 1.6 (19)% Queensland 1.1 1.3 (15)% Western Australia 0.8 0.8 - Consumer total 24.9 31.0 (20)% Large Business New South Wales 0.3 1.0 (70)% Victoria 1.5 2.4 (38)% South Australia 0.1 0.2 (50)% Quee
Slide 47: Generation assets and carbon intensity
Carbon intensity 1HFY24 sent out Asset State Type Status Capacity* (MW) (tCO2e/MWh) volume (GWh) Bayswater NSW Black coal Owned 2,715 0.95 6,305 AGL Loy Yang VIC Brown coal Owned 2,210 1.30 6,845 Total coal-fired 4,925 13,151 Torrens Island Power Station SA Gas steam turbine Owned 800 0.68 222 Barke
Slide 48: Customer load and pricing exposure
Historical customer load (TWh)1 FY25 forward curve for wholesale electricity pricing swaps (NSW and Victoria) ($/MWh) 40.0 200 31 December 2023 150 35.0 14.4 100 30.0 14.5 50 25.0 NSW VIC 0 Jun 21 Sep 21 Dec 21 Dec 22 Dec 23 Mar 22 Jun 22 Sep 22 Mar 23 Jun 23 Sep 23 20.0 10.5 10.3 15.0 Indicative du
Slide 49: Important notice and disclaimer
• The material in this presentation is general information about AGL’s activities as at the date of this presentation. It is provided in summary form and does not purport to be complete. It should be read in conjunction with AGL’s periodic reporting and other announcements lodged with the Australian