Loss-making AGL founds renewable fund

HAVING announced its move out of upstream oil and gas oil last week, which has generated a big pre-tax writedown of $795 million, AGL Energy was on the front foot this morning, keen to point to its 24% underlying profit growth despite an after tax loss of $449 million.

Haydn Black

Reporter

The loss was $757 million below the profit posted in the final six months of 2015, and was largely comprised of $656 million after tax of significant items associated with the exit of gas exploration and production assets, and restructuring costs, and changes in the fair value of certain electricity derivatives of $168 million.

Of the writedowns, $375 million is attributed to the underperforming Moranbah CSG field in Queensland and it will wear $166 million for its decision to abandon Gloucester in NSW.

There was also an increase in rehabilitation provisions for its New South Wales CSG assets to the tune of $50 million.

But managing director Andy Vesey was keen to brush aside the utility's loss, and point out that the utility, which started out life as the Australian Gas Light Company in 1837, was embarking on a new era.

It focus is purely as an energy generator for the modern era, one that is on a path to abandon the most polluting fossil fuels - after all it is Australia's worst polluter - and is embracing renewable energy over the next three decades.

The big solar concern said its underlying profit was $375 million, and Vesey said the company is on target to post a full year 2015-16 underlying profit of $650-720 million when it tallies its figures at the end of June, although its headline figure will almost certainly be a loss.

Breaking down the numbers, revenue was up 8.1% to $5.6 billion, but its underlying operating cash flow before interest and tax was $866 million, down $13 million.

The company is on track to achieve $170 million in operational savings this year, and is on target to complete $1 billion of asset sales, with around half of that from the sale of the Macarthur wind farm.

Despite the tough period, and the ongoing restructuring, which saw an entirely new management structure put in place last year, AGL has tried to appease shareholders with a an interim dividend of 32c/share fully franked, up two cents per share on the prior corresponding period.

Vesey said the company's core business was performing strongly, is well positioned to capitalise on the evolution occurring in the energy sector

"Part of that evolution is supporting Australia's transition to a lower carbon generation portfolio and our launch today of the Powering Australian Renewables Fund demonstrates AGL's commitment," he said.

The renewables fund is designed to be an "innovative renewable investment funding vehicle" to develop new large-scale renewable generation projects.

AGL proposes to seed the new fund with its solar projects at Nyngan and Broken Hill, which generate 155 megawatts, and will become a cornerstone investor spending $200 million.

The fund will seek partners and banking syndicates to work with it, and aims to tap the shortfall in the Renewable Energy Target, which requires 5000MW by 2020.

The fund aims to spend around $2-3 billion developing over 1000MW of capacity over time.

The company has also invested $28 million in its home battery storage partner, Sunverge Energy, one of a number of steps taken to enhance the company's digital capabilities so that we can meet customers' rapidly changing needs and expectations.

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