- AGL Energy to shut down its coal-fired power station – Loy Yang A, up to ten years ahead of the scheduled date.
- The company expects that earlier closure of the plant would have no material impact on FY23’s underlying profit after tax.
- The energy company intends to decarbonise its asset portfolio with new firming and renewable capacity.
Energy and telecommunication services provider, AGL Energy Limited (ASX:AGL) on Thursday (29 September 2022) shared that it targets accelerating its transition to a low carbon energy leader by closing its coal-fired power station ahead of the planned schedule.
In addition to this, the company has also shared earnings guidance for the financial year 2023 (FY2023) today.
AGL shares were spotted trading 0.76% up at AU$6.65 apiece at 10:56 AM AEST with a market capitalisation of AU$4.44 billion.
AGL intends to lead in Australia’s energy transition
The company is targeting to close Loy Yang A power station by FY35 - up to ten years earlier than previous targets.
After the coal closure, the company expects to reduce greenhouse gas emissions from 40 million tonnes to net zero in a year. Also, the closure would support achieving Scope 1 and 2 net zero emission targets.
The comment of Damien Nicks, incoming interim CEO, AGL, highlighted that earlier closure of the power station would avoid around 200 million tonnes of greenhouse gas emissions compared to the previous closing date.
AGL also mentioned about its motive to decarbonise its asset portfolio with new firming and renewable capacity. This also includes supplying its customer demand with 12 GW of new firming capacity. Reportedly, decarbonising the asset portfolio would require a total investment of AU$20 billion. To arrange the funds, the company would assess multiple funding sources such as its balance sheet, partnerships and offtakes.
The interim target of AGL is to have up to 5 GW of new firming and renewable capacity by 2030.
Financial impact of an earlier closure of coal-fired plant
The earlier closure brings in the non-cash impairment charge of around AU$700 million. The impairment charge will be identified against the carrying value of equipment, plant and property and reflects the power station’s shortened life.
The company expects the new closure date to have no material impact on FY23’s underlying profit after tax.
Financial guidance for FY23
In FY23, the company expects to report underlying EBITDA of AU$1,250 to AU$1,450 million. Compared to FY22, the expected range represents an AU$100 million increase. Loy Yang A unit 2 outage, unplanned outages and market volatility significantly impacted the operations of FY22. Also, three Liddell units were closed in April 2023.
In FY23, the underlying earnings are expected to be affected by burdensome contract provision adjustments in FY22. AGL added that these impacts would be partly offset by the August and September performance as other units are operational.