AGL - AGL Energy

[qldfrog]

Mr @Dark1975 , i am afraid i just see the screen shot with no link to the interview.
what is the YouTube link if you could?

Got it

 

[Dark1975]

Got it

Thank you Mr Frog ?

 

[sptrawler]

AGL - 7.22 p/e ,Dividends - 8.15 (80 % franked)
With well over 4 million customers, Strong R.O.I !
Whats' s not to like here ?

Buy cheap when there's pain. Reap rewards when there's gain.

Usually it works better than waiting until stocks have recovered from any short term hiccups and realised a higher growth forecast.

This appears to be a fairly balanced article on AGL and Origin, worth a read if you are interested in either company and seems to say what we on here are saying.

Neither AGL nor Origin have convinced investors they have a future

AGL and Origin have failed to really embrace decarbonisation as opportunity. They have chosen to ignore the low cost of wind and solar for the supply of bulk energy.

reneweconomy.com.au

 

[qldfrog]

This appears to be a fairly balanced article on AGL and Origin, worth a read if you are interested in either company and seems to say what we on here are saying.

Neither AGL nor Origin have convinced investors they have a future

AGL and Origin have failed to really embrace decarbonisation as opportunity. They have chosen to ignore the low cost of wind and solar for the supply of bulk energy.

reneweconomy.com.au

I think this is the BS woke arguments
The reason AGL is taking a couple of billion of asset losses this year is :
Drum rounds
Wind farms.
.Shareholders can only pray agl had NOT invested in green energy as much, they eould be a couple billions better off.
this is clear for anyone even browsing the summary report..but hey when narrative is king, who cares anout facts then i noticed the newspaper origin...
and i actually subscribed to Renew...

 

[sptrawler]

I think this is the BS woke arguments
The reason AGL is taking a couple of billion of asset losses this year is :
Drum rounds
Wind farms.
.Shareholders can only pray agl had NOT invested in green energy as much, they eould be a couple billions better off.
this is clear for anyone even browsing the summary report..but hey when narrative is king, who cares anout facts then i noticed the newspaper origin...
and i actually subscribed to Renew...

Whether the push toward renewables, is right or wrong doesn't seem to come into it anymore, most have just given in so it will happen regardless. IMO
Unless Origin and AGL spend big into alternatives, IMO they will just lose more and more market share.
Like I've said before, all these renewable generators should be made to install complimentary storage at the design stage, at the moment it isn't a level playing field .
Just my opinion.

 

[Ferret]

I think the market is looking after the installation of storage. AGL are certainly investing in it already, as are Origin and others.

My simple take on it is that storage is going to be the high margin end of the electricity supply business.

Coal generation runs 24/7 so sells at high and low wholesale prices.

Solar and wind run according to the weather. As they grow to be the dominant sources of energy, they will see most of there production sold when supply is high and price is low. Ignoring spikes in demand, price will only be high when solar and wind production is low.

Gas generation can reap the benefits of high prices when wind and solar production are low, but its production costs are high.

Storage is the winner as it saves the energy when it is cheap and then sells it when the price is high. I'm ignoring the capital cost of storage, but certainly batteries are falling fast.

 

[Smurf1976]

I think the market is looking after the installation of storage. AGL are certainly investing in it already, as are Origin and others.

My simple take on it is that storage is going to be the high margin end of the electricity supply business.

Coal generation runs 24/7 so sells at high and low wholesale prices.

Solar and wind run according to the weather. As they grow to be the dominant sources of energy, they will see most of there production sold when supply is high and price is low. Ignoring spikes in demand, price will only be high when solar and wind production is low.

Gas generation can reap the benefits of high prices when wind and solar production are low, but its production costs are high.

Storage is the winner as it saves the energy when it is cheap and then sells it when the price is high. I'm ignoring the capital cost of storage, but certainly batteries are falling fast.

Agreed with all you've said, just expanding on a couple of points...

Coal runs constantly but it's more flexible than the general public seems to grasp. It depends on the facility in question but short answer is plant in the NEM has a lower limit that's between 30% and 70% of capacity. Detail varies between facilities. That's the point it can come down to easily and on a routine basis if required. Can go lower with difficulty.

Solar and wind already have the issue of flooding the market and depressing price, it's happening now and in Vic and SA in particular not unusual to see the price go negative. Data for the entire system (excl WA and NT) as follows.

Average spot price value of output. All figures in $ per megawatt hour:

Rooftop solar = $31.98
Wind = $34.30
Large scale solar = $35.51
Biomass = $38.84

Coal = $44.78
Battery discharging = $51.77
Hydro = $52.79
Gas = $54.90
Oil = $198.37

Energy used for battery charging = $12.52

Note those are market spot prices and are not directly linked to actual production costs. That said, wind is pretty cheap and diesel's pretty expensive yes but still, that's market pricing not cost of production I'm quoting.

So yes, plant which operates when the weather is suitable or which must run to dispose of the biomass waste achieves a lower value in the market than more flexible forms of generation.

AGL has a presence in all of the above except rooftop solar which by its nature is owned by households etc. That said, many of those would be AGL customers anyway.

Above figures are 12 months to Sunday 14 February 2021 and are for the entire National Electricity Market treated as a whole - adding up the totals and averaging the prices across multiple states.

Further to the above, I'll note that AGL does own and operate physical infrastructure that's critical in three states with all that entails. If the company ever did run into real trouble financially, ultimately multiple state governments of both persuasions and the federal government can't afford it to fail.

 

[qldfrog]

Whether the push toward renewables, is right or wrong doesn't seem to come into it anymore, most have just given in so it will happen regardless. IMO
Unless Origin and AGL spend big into alternatives, IMO they will just lose more and more market share.
Like I've said before, all these renewable generators should be made to install complimentary storage at the design stage, at the moment it isn't a level playing field .
Just my opinion.

generating green energy is a loss making business, as per agl and all these sun farms producing negative price energy.
Mr Smurf gave us plenty of knowledge there, Yes green energy is here and is hurting the AGL Origin etc of this world, no denial, and yes it is here to stay and THIS IS GOOD!
Where I am ranting on is the dumb and dummer article : "they should invest in green energy ", this part is a money pit.AGL billions of losses this year is due to the fact they invested in wind farms FFS.
Build turbines and solar panels if you can be competitive with China and India ROL but the business of installing these and trying to make a living wo subsidies is a lost war at the current stage in Australia.No surprice infigen was sold BTW...I owned IFN.

 

[Clansman]

Agreed with all you've said, just expanding on a couple of points...

Coal runs constantly but it's more flexible than the general public seems to grasp. It depends on the facility in question but short answer is plant in the NEM has a lower limit that's between 30% and 70% of capacity. Detail varies between facilities. That's the point it can come down to easily and on a routine basis if required. Can go lower with difficulty.

Solar and wind already have the issue of flooding the market and depressing price, it's happening now and in Vic and SA in particular not unusual to see the price go negative. Data for the entire system (excl WA and NT) as follows.

Average spot price value of output. All figures in $ per megawatt hour:

Rooftop solar = $31.98
Wind = $34.30
Large scale solar = $35.51
Biomass = $38.84

Coal = $44.78
Battery discharging = $51.77
Hydro = $52.79
Gas = $54.90
Oil = $198.37

Energy used for battery charging = $12.52

Note those are market spot prices and are not directly linked to actual production costs. That said, wind is pretty cheap and diesel's pretty expensive yes but still, that's market pricing not cost of production I'm quoting.

So yes, plant which operates when the weather is suitable or which must run to dispose of the biomass waste achieves a lower value in the market than more flexible forms of generation.

AGL has a presence in all of the above except rooftop solar which by its nature is owned by households etc. That said, many of those would be AGL customers anyway.

Above figures are 12 months to Sunday 14 February 2021 and are for the entire National Electricity Market treated as a whole - adding up the totals and averaging the prices across multiple states.

Further to the above, I'll note that AGL does own and operate physical infrastructure that's critical in three states with all that entails. If the company ever did run into real trouble financially, ultimately multiple state governments of both persuasions and the federal government can't afford it to fail.

Your last sentence isn't correct. Ultimately multiple state governments of both persuasions and the federal government can afford it to fail, in its current form. Therein lies the problem, the greater market believes that there is greater certainty in AGL not surviving in its current form and doesn't want to be exposed to the uncertainty of that outcome.

 

[sptrawler]

Your last sentence isn't correct. Ultimately multiple state governments of both persuasions and the federal government can afford it to fail, in its current form. Therein lies the problem, the greater market believes that there is greater certainty in AGL not surviving in its current form and doesn't want to be exposed to the uncertainty of that outcome.

I personally think the situation with AGL, is a similar situation to that, which the car industry finds itself in.
The car manufacturers have to continue making and servicing ICE vehicles as a public service and to make money, while also developing a BEV product, the BEV manufacturers are at an advantage because they only have to supply the one product and are only affected by uptake and production ramp up.

In AGL's situation, they still have to supply dispatchable power and keep the fossil fueled generation going as a public service and to make money, while at the same time transitioning toward renewables.
The companies supplying the renewable generation, are only limited by the price they get for their generation which if they install storage overcomes that issue and puts further pressure on AGL's equipment and bottom line.
I can see many car manufacturers either merging or going out of business, the same applies to power generation companies IMO.
But as Smurf has already mentioned the major fossil fueled generators are a quasi public service, until an adequate reliable amount of renewables and storage is installed, to allow the fossil fueled generators to be retired.
Whether AGL can make bumper profits in that environment, is where the questions are being asked.
Just my opinion.

 

[qldfrog]

I personally think the situation with AGL, is a similar situation to that, which the car industry finds itself in.
The car manufacturers have to continue making and servicing ICE vehicles as a public service and to make money, while also developing a BEV product, the BEV manufacturers are at an advantage because they only have to supply the one product and are only affected by uptake and production ramp up.

In AGL's situation, they still have to supply dispatchable power and keep the fossil fueled generation going as a public service and to make money, while at the same time transitioning toward renewables.
The companies supplying the renewable generation, are only limited by the price they get for their generation which if they install storage overcomes that issue and puts further pressure on AGL's equipment and bottom line.
I can see many car manufacturers either merging or going out of business, the same applies to power generation companies IMO.
But as Smurf has already mentioned the major fossil fueled generators are a quasi public service, until an adequate reliable amount of renewables and storage is installed, to allow the fossil fueled generators to be retired.
Whether AGL can make bumper profits in that environment, is where the questions are being asked.
Just my opinion.

I think also that the missing point is that even if profit is reduced, the PE is important.
People are ok to pay PE which make no sense because tomorrow someone else will pay even more .that is a bubble definition.
With agl, it is the same in reverse.
Who cares about dividends if doom and gloom slash 10pc of the SP except that the dividend cheque will be real vs imagined for the tesla.
As i already said, cigarette makers shares did a killing in a dying, litigation prone world because the narrative went too far 20y or so ago
I suspect that will be the same for the agl, GM and Fords of this world.like everything, it is a timing issue

 

[qldfrog]

I think also that the missing point is that even if profit is reduced, the PE is important.
People are ok to pay PE which make no sense because tomorrow someone else will pay even more .that is a bubble definition.
With agl, it is the same in reverse.
Who cares about dividends if doom and gloom slash 10pc of the SP except that the dividend cheque will be real vs imagined for the tesla.
As i already said, cigarette makers shares did a killing in a dying, litigation prone world because the narrative went too far 20y or so ago
I suspect that will be the same for the agl, GM and Fords of this world.like everything, it is a timing issue

And maybe timing should be: wait for the next big power outage..ooohh but i then can not trade lol

 

[Smurf1976]

Your last sentence isn't correct. Ultimately multiple state governments of both persuasions and the federal government can afford it to fail, in its current form

They can afford the company to fail as such but they can’t afford its physical operations to cease even briefly since in some cases there's simply no alternative option.

What that means for the company financially and investors I'll leave others to speculate upon but in the medium term at least the company owns assets that are critical to keeping the lights on. One way or another that's going to remain in operation and has tangible value.

Same goes for some of the others by the way. There's quite a few entities that own critical things that society and government can't afford to not have in constant operation. Of listed companies, APA and BHP both come immediately to mind but they're not the only ones.

 

[sptrawler]

And maybe timing should be: wait for the next big power outage..ooohh but i then can not trade lol

As you say timing is of the essence, I personally can't see AGL not being there in 30 years time, they earn enough to replace obsolete plant.

I don't hold, but am watching.

 

[Clansman]

They can afford the company to fail as such but they can’t afford its physical operations to cease even briefly since in some cases there's simply no alternative option.

What that means for the company financially and investors I'll leave others to speculate upon but in the medium term at least the company owns assets that are critical to keeping the lights on. One way or another that's going to remain in operation and has tangible value.

Same goes for some of the others by the way. There's quite a few entities that own critical things that society and government can't afford to not have in constant operation. Of listed companies, APA and BHP both come immediately to mind but they're not the only ones.

The company is what we are talking about, not the assets. The company in its current form can fail long before the assets do.

APA and BHP are both far different beasts to AGL. APA has never not been well run in its format since listing more than 20 years ago.. BHP is now being run better than it ever has.

 

[Smurf1976]

The company is what we are talking about, not the assets. The company in its current form can fail long before the assets do.

Agreed it can.

I'll tell you what though - give me some assets that a few million people literally depend on and I'll find a way to charge for their use.

If the business fails then that'll be due to management not because they ended up with no market for their product. They're more like a bank than, say, a chain of video rental shops.

Banks = the means of doing business has almost completely changed over the past 40 years and has shifted from a paper based model revolving around cash, cheques and having customers fill out paper forms to one which does most things electronically. The underlying business of taking deposits and providing loans hasn't gone away though, indeed the average consumer puts far more transactions through banks these days than they ever did using paper.

Video rentals = the entire concept has ceased to be relevant. No amount of technical evolution could retain a viable market for the idea of physical shopfronts renting out movies to consumers. The concept, itself a key symbol of technology and modernity within living memory, simply became obsolete and has now almost completely disappeared.

Electricity is more like banks - the methods of producing and using it are changing but the product itself is still as relevant as ever. For AGL to fail to adapt to that would be in the same category as if any of the major banks had failed to adapt to electronic banking. The failure would be due to management failing to adapt to new methods not because the underlying product ceased to be used.

 

[Clansman]

Agreed it can.

I'll tell you what though - give me some assets that a few million people literally depend on and I'll find a way to charge for their use.

If the business fails then that'll be due to management not because they ended up with no market for their product. They're more like a bank than, say, a chain of video rental shops.

Banks = the means of doing business has almost completely changed over the past 40 years and has shifted from a paper based model revolving around cash, cheques and having customers fill out paper forms to one which does most things electronically. The underlying business of taking deposits and providing loans hasn't gone away though, indeed the average consumer puts far more transactions through banks these days than they ever did using paper.

Video rentals = the entire concept has ceased to be relevant. No amount of technical evolution could retain a viable market for the idea of physical shopfronts renting out movies to consumers. The concept, itself a key symbol of technology and modernity within living memory, simply became obsolete and has now almost completely disappeared.

Electricity is more like banks - the methods of producing and using it are changing but the product itself is still as relevant as ever. For AGL to fail to adapt to that would be in the same category as if any of the major banks had failed to adapt to electronic banking. The failure would be due to management failing to adapt to new methods not because the underlying product ceased to be used.

Your comparison between AGL and the banking industry was about as accurate as comparing AGL to BHP or APA. Not accurate at all. Equally I could say that AGL's business model is more like that of AMP, ironically both these dinosaurs were founded around the same era.
If you have a product like electricity with a few million customers demanding less and less supply with a narrow moat and the same or greater costs of doing business, then its the same as any business in that situation, not just rental video stores.
It's a big call to say electricity is more like banks and another that is incorrect.. Which banks have lost more than + 60% of their share price in the past 4-5 years despite their own challenges?
You don't seem to understand the investment aspect. The assets don't matter at all. If the company is broken up which I believe it will be, then shareholders will be burnt. That perception and overall risk is reflected in the decline of the SP even prior to Covid. This is now a high risk play. Do you think AMP has sophisticated shareholders sitting around telling themselves " we still have assets"?

 

[Clansman]

Timberrrrrrrrrrrrr.

 

[joeno]

Your comparison between AGL and the banking industry was about as accurate as comparing AGL to BHP or APA. Not accurate at all. Equally I could say that AGL's business model is more like that of AMP, ironically both these dinosaurs were founded around the same era.
If you have a product like electricity with a few million customers demanding less and less supply with a narrow moat and the same or greater costs of doing business, then its the same as any business in that situation, not just rental video stores.
It's a big call to say electricity is more like banks and another that is incorrect.. Which banks have lost more than + 60% of their share price in the past 4-5 years despite their own challenges?
You don't seem to understand the investment aspect. The assets don't matter at all. If the company is broken up which I believe it will be, then shareholders will be burnt. That perception and overall risk is reflected in the decline of the SP even prior to Covid. This is now a high risk play. Do you think AMP has sophisticated shareholders sitting around telling themselves " we still have assets"?

AMP is a worse company in almost every single way. Employees hated working there (glassdoor reviews). It's got no moat. Who even used / heard or someone buying an AMP product? Whereas everyone uses either AGL or Energy Australia. Totally different sector.

 

[Clansman]

AMP is a worse company in almost every single way. Employees hated working there (glassdoor reviews). It's got no moat. Who even used / heard or someone buying an AMP product? Whereas everyone uses either AGL or Energy Australia. Totally different sector.

I never said it wasn't a totally different sector. AGL has far more in common with AMP than it does BHP or APA.
An increasingly narrowing moat, poor management and last but not least, the long term decline in share price which is the hallmark of all capital killers.