The AGL (AGL) share price hit multi-decade lows last week. What's next?

Can the company's shares stage a comeback?

The AGL Energy Limited (ASX: AGL) share price is continuing to be hit by investors dumping their shares. The company's shares sunk to new multi-decade lows last week. This comes after Australia's largest electricity provider released its full-year results for the 2021 financial year.

At the time of writing, AGL shares are adding to their losses, down another 1.09% to $5.46.

Man in shirt and tie falls face first down stairs.

Image source: Getty Images

What's weighing down the AGL share price?

AGL previously noted it has been struggling with current conditions of the national electricity market along with unstable electricity prices.

A sharp decline in wholesale prices for electricity and renewable energy certificates weighed down the company's 2021 financial performance. The company regarded last year as one of the toughest energy markets on record.

The result ended in AGL reporting a 33.5% drop in profits to $537 million on the prior corresponding period. This is a stark contrast from when it registered a bottom-line figure of $1,040 million in FY19.

That's a mammoth fall of around 48% in underlying net profit in just 2 short years, before the emergence of COVID-19.

Furthermore, the soon-to-close Liddell coal-fired power station has put a financial strain on the company. AGL plans to transform the site with a hydro and solar energy facility after Liddell's shutdown in 2023.

The Australian Shareholders Association (ASA) announced its intention to vote in favour of the company introducing emissions targets. Currently, AGL does not have any decarbonisation targets in line with the Paris Agreement, however, the ASA hopes to change this.

AGL has recommended shareholders vote against the resolution which is being put to its annual general meeting on Wednesday.

What's next for the company?

AGL is planning to split into two separate energy businesses in the fourth quarter of FY22.

AGL Energy will become Accel Energy and demerge AGL as a separately listed entity via a capital reduction.

Accel Energy is set to become Australia's largest electricity generator, focused on supplying 20% of the national electricity market. In addition, the spin-off will redevelop its sites as low-carbon industrial energy hubs.

On the other hand, AGL will be Australia's largest multi-product retailer, providing flexible electricity generation and storage needs.

Year-to-date, the AGL share price has plummeted in value, losing more than 53%. When factoring in the past 12 months, its losses are more than 61%.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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