The AGL Energy Ltd (ASX: AGL) share price is edging lower today following a broader market decline on the S&P/ASX 200 Index (ASX: XJO).
At the time of writing, the energy company's shares are down 1.02% to $7.30. In comparison, the benchmark index is down 0.04% to 7,117.2 points.
Is a capital raise on the cards for AGL?
According to JPMorgan analysts, a capital raise could be looming for AGL given its recent share price rise and planned demerger.
The Australian Financial Review reiterated the energy giant will be splitting into two separate businesses by June 2022. This will comprise of bulk power generator, AGL Australia, and a carbon-neutral energy retailer, Accel Energy.
However, investors will be tuned in to the CEO's comments this Thursday when the company releases its FY22 half-year results.
The AGL share price has accelerated by more than 44% after hitting an all-time low of $5.10 in November. That slump came on the back of the shock exit of its former CEO and a detailed release on the upcoming demerger.
Nonetheless, JPMorgan analysts put out a note last Friday, saying:
…given the recent strength in the stock price and continued focus on the balance sheet post-demerger, the company may take the opportunity to raise equity.
If a $500 million capital raise is undertaken at Friday's share price, this would be 1% dilutive. If the company seeks to raise $1 billion, this would dilute shareholder value by about 3%.
In May, UBS indicated that a $500 million capital raise might be launched following tough trading conditions for AGL.
A sharp decline in wholesale prices for electricity and renewable energy certificates affected its financial performance. AGL regarded the 2021 financial year as one of the most difficult energy markets on record.
However, fast-forward to today, JPMorgan suggested that AGL could upgrade its FY22 net profit after tax guidance of $220 million to $340 million. This is due to higher electricity prices which have risen 36% since August 2021.
The broker stated that with every A$10/MWh change in the electricity price, this impacts pre-tax earnings by $400 million to $450 million.
AGL share price summary
Over the past 12 months, the AGL share price has plummeted by around 36% in value for investors. The company's shares reached an all-time low of $5.10 in November before bargain hunters swooped in.
Based on valuation grounds, AGL presides a market capitalisation of approximately $4.82 billion, with approximately 658 million shares outstanding.
