Energy generator and retailer AGL has reported a massive bottom-line loss and says the outlook for the rest of this financial year looks challenging.
The net loss was $2.3 billion for the six months ended December, compared to a profit of $323 million in the previous corresponding half year.
Most of the loss was driven by AGL’s earlier decision to book impairments for “onerous” legacy contracts related to wind farm off-take agreements.
Those contracts, which were stuck between 2006 and 2012 to support renewable energy sector development, ended up costing AGL more than they are worth today.
After excluding one-off charges, AGL underlying earnings were a bit rosier.
Underlying profit was $317 million, albeit down 26.6 per cent.
This reflected a sharp decline in wholesale prices and margins for energy, including electricity, gas and renewables, and the cost of supporting vulnerable customers during the coronavirus pandemic.
“The outlook remains challenging,” CEO Brett Redman said in a briefing on Thursday.
AGL continues to forecast an underlying net profit between $500 million and $580 million for 2020/21. This compares to $816 million the year before.
“This range reflects pre-existing headwinds, as well as the continues deterioration in wholesale electricity market conditions,” Mr Redman said.
It also reflects the impact of the current outage of the Liddell coal-fired power station in Muswellbrook in NSW.
Mr Redman noted cooler or milder weather across most of the country this summer had reduced power demand.
AGL will pay a first-half dividend off 41 cents per share.