Reports related to this article:
Project(s): View 5 related projects in PECWeb
Plant(s): View 3 related plants in PECWeb
Released August 27, 2012 | SUGAR LAND
en
Researched by Industrial Info Resources (Sugar Land, Texas)--AGL Energy Limited (AGL) (Sydney, New South Wales), which is an integrated energy company that owns, operates and develops renewable energy assets, experienced an eventful year from June 2011 to June 2012. Michael Fraser, managing director and chief executive officer, and Stephen Mikkelsen, chief financial officer, provided a detailed summary of the company's financial results in a conference call on August 22, 2012. The executives were pleased to inform audience participants that the company was on the verge of celebrating its 175th birthday.
Both Mikkelsen and Fraser discussed aspects of the Loy Yang A acquisition. "Clearly, the Loy Yang acquisition has been a transforming transaction," Mikkelsen said. According to Fraser, the transaction went as planned. The acquisition of the 2,210-megawatt (MW) power station and an adjacent adjacent coal mine with 2.5 billion tons of coal reserves was completed on June 29, 2012. Pre-existing equity interest in Loy Yang A was revalued, resulting in a $126.2 million (AUD$120.7 million) loss for AGL. The acquisition was funded by $944 million (AUD$900 million) in equity and $682.1 million (AUD$650 million) subordinate notes that were issued.
Other Projects
In the conference call, Mikkelsen discussed many of the projects in which AGL is involved. Industrial Info is currently tracking AGL's solar photovoltaic projects at the Nyngan (which will produce 106 MW of electricity) and Broken Hill (which will produce 53 MW of electricity) solar farms. This particular project is part of the Common Flagship Program. Mikkelsen noted that "large-scale solar projects add to AGL's renewable portfolio." Construction for this project will start mid-2014. According to Industrial Info's database, the Broken Hill solar farm has a total investment value of $156 million and the Nyngan solar farm is worth $300 million.
AGL acquired the Silverton windfarm earlier this year. For both phases of this project, the total investment value is about $3 billion. Construction is expected to start in October 2013.
According to Mikkelsen, AGL's Macarthur windfarm is progressing well. Macarthur is the largest windfarm in the southern hemisphere and it has a 420-MW capacity. Mikkelsen also spoke about the Diamanina power station, which will be fully operational in 2014.
Another one of AGL's significant projects that Industrial Info is tracking is the Torrens Island Power Station. It is a natural gas-fired plant expansion project, which has a total investment value of $834.7 million. Construction is projected to start in February 2014.
AGL's Full-Year Performance
Overall, the executives sounded pleased with AGL's full-year performance. They saw strong growth in customer numbers, which increased by 180,000. Revenue and gross margins went up significantly. Increased electricity transmission and distribution pass-through charges were a primary driver of the revenue growth. Revenue was $7.6 billion (AUD$7.45 billion) for the full year. It was up 5.4% from 2011. Gross margin, which was $732 million, rose 9.4% from full-year 2011 to full-year 2012.
The executives mentioned that the improved profit reflected the strong merchant and retail energy business results. The company's retail energy business continued to perform well across all boards. For the retail energy business, operating costs were $356.9 million (AUD$340.1 million) for the full year. This was a 6.3% increase since full-year 2011. The merchant energy business delivered strong results because of AGL Energy's improved portfolio management and the sale of the Hallett 5 windfarm.
Operating cash flow before interest and tax was up $37 million (AUD$35.4 million) for the year up to June 30, 2012. AGL's cash flow in 2012 was up from 2011, despite the company's increased working capital requirements; however, for the full year, a statutory net profit after tax was down 79.4% to $120 million (AUD$114.9 million), reflecting significant items primarily associated with the acquisition of the Loy Yang A power station, and changes in the fair value of certain electricity derivatives.
When it comes to AGL's debt structure, Mikkelsen said that he was very comfortable with the company's debt position and maturity profile. He mentioned that the balance sheet was in a strong position, and that the company repaid nearly $1.04 billion (AUD $1 billion) in debt that it got from the Loy Yang acquisition.
Mikkelsen also commented on AGL's upstream gas exploration assets. "After reviewing the carrying values at the year-end, we have decided to ride off $23.1 million (AUD$22 million) for unsuccessful oil wells in the Cooper Basin and $41.9 million (AUD$40 million) for geothermal exploration," Mikkelsen said. "I don't anticipate any future expenditure on these activities in the next few years."
Although AGL experienced a high-growth year, the chief executive officer believed that the company's safety performance could have been better. "Our safety performance was clearly not everything that we hoped it would be," Fraser said. He stated that the total injury frequency rate increased. With the purchase of the Loy Yang A acquisition, the company increased its risk portfolio in that area. Fraser said that the company will continue to focus on addressing safety.
Looking Forward
Executives from AGL reported that they expect to see further earnings per share growth throughout 2013. They specifically expect to see growth in merchant energy business, reflecting and incremental earnings per share growth contribution from the Loy Yang acquisition. The chief executive officer also mentioned that he thinks that AGL's hydro assets will continue to benefit from high inflows. Some of the growth in 2013 is expected to be slightly offset by the absence of windfarm development fees and continued soft demand.
The executives are also expecting to see solid growth in the retail energy business, despite softer demand and the recent Queensland regulatory price decision. They believe that AGL will continue to gain more customers. They also expect competition to be at elevated levels and regulatory risks to rise after larger price increases. Lastly, the company expects to benefit from carbon uplift for renewable portfolio and transitional carbon assistance.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Both Mikkelsen and Fraser discussed aspects of the Loy Yang A acquisition. "Clearly, the Loy Yang acquisition has been a transforming transaction," Mikkelsen said. According to Fraser, the transaction went as planned. The acquisition of the 2,210-megawatt (MW) power station and an adjacent adjacent coal mine with 2.5 billion tons of coal reserves was completed on June 29, 2012. Pre-existing equity interest in Loy Yang A was revalued, resulting in a $126.2 million (AUD$120.7 million) loss for AGL. The acquisition was funded by $944 million (AUD$900 million) in equity and $682.1 million (AUD$650 million) subordinate notes that were issued.
Other Projects
In the conference call, Mikkelsen discussed many of the projects in which AGL is involved. Industrial Info is currently tracking AGL's solar photovoltaic projects at the Nyngan (which will produce 106 MW of electricity) and Broken Hill (which will produce 53 MW of electricity) solar farms. This particular project is part of the Common Flagship Program. Mikkelsen noted that "large-scale solar projects add to AGL's renewable portfolio." Construction for this project will start mid-2014. According to Industrial Info's database, the Broken Hill solar farm has a total investment value of $156 million and the Nyngan solar farm is worth $300 million.
AGL acquired the Silverton windfarm earlier this year. For both phases of this project, the total investment value is about $3 billion. Construction is expected to start in October 2013.
According to Mikkelsen, AGL's Macarthur windfarm is progressing well. Macarthur is the largest windfarm in the southern hemisphere and it has a 420-MW capacity. Mikkelsen also spoke about the Diamanina power station, which will be fully operational in 2014.
Another one of AGL's significant projects that Industrial Info is tracking is the Torrens Island Power Station. It is a natural gas-fired plant expansion project, which has a total investment value of $834.7 million. Construction is projected to start in February 2014.
AGL's Full-Year Performance
Overall, the executives sounded pleased with AGL's full-year performance. They saw strong growth in customer numbers, which increased by 180,000. Revenue and gross margins went up significantly. Increased electricity transmission and distribution pass-through charges were a primary driver of the revenue growth. Revenue was $7.6 billion (AUD$7.45 billion) for the full year. It was up 5.4% from 2011. Gross margin, which was $732 million, rose 9.4% from full-year 2011 to full-year 2012.
The executives mentioned that the improved profit reflected the strong merchant and retail energy business results. The company's retail energy business continued to perform well across all boards. For the retail energy business, operating costs were $356.9 million (AUD$340.1 million) for the full year. This was a 6.3% increase since full-year 2011. The merchant energy business delivered strong results because of AGL Energy's improved portfolio management and the sale of the Hallett 5 windfarm.
Operating cash flow before interest and tax was up $37 million (AUD$35.4 million) for the year up to June 30, 2012. AGL's cash flow in 2012 was up from 2011, despite the company's increased working capital requirements; however, for the full year, a statutory net profit after tax was down 79.4% to $120 million (AUD$114.9 million), reflecting significant items primarily associated with the acquisition of the Loy Yang A power station, and changes in the fair value of certain electricity derivatives.
When it comes to AGL's debt structure, Mikkelsen said that he was very comfortable with the company's debt position and maturity profile. He mentioned that the balance sheet was in a strong position, and that the company repaid nearly $1.04 billion (AUD $1 billion) in debt that it got from the Loy Yang acquisition.
Mikkelsen also commented on AGL's upstream gas exploration assets. "After reviewing the carrying values at the year-end, we have decided to ride off $23.1 million (AUD$22 million) for unsuccessful oil wells in the Cooper Basin and $41.9 million (AUD$40 million) for geothermal exploration," Mikkelsen said. "I don't anticipate any future expenditure on these activities in the next few years."
Although AGL experienced a high-growth year, the chief executive officer believed that the company's safety performance could have been better. "Our safety performance was clearly not everything that we hoped it would be," Fraser said. He stated that the total injury frequency rate increased. With the purchase of the Loy Yang A acquisition, the company increased its risk portfolio in that area. Fraser said that the company will continue to focus on addressing safety.
Looking Forward
Executives from AGL reported that they expect to see further earnings per share growth throughout 2013. They specifically expect to see growth in merchant energy business, reflecting and incremental earnings per share growth contribution from the Loy Yang acquisition. The chief executive officer also mentioned that he thinks that AGL's hydro assets will continue to benefit from high inflows. Some of the growth in 2013 is expected to be slightly offset by the absence of windfarm development fees and continued soft demand.
The executives are also expecting to see solid growth in the retail energy business, despite softer demand and the recent Queensland regulatory price decision. They believe that AGL will continue to gain more customers. They also expect competition to be at elevated levels and regulatory risks to rise after larger price increases. Lastly, the company expects to benefit from carbon uplift for renewable portfolio and transitional carbon assistance.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
