Energy giant AGL Energy Limited (ASX: AGL) will close its Loy Yang A Power Station by the end of FY2035 – up to 10 years earlier than previously announced.
In a statement today, AGL says that it intends to accelerate its transition to an "integrated low carbon energy leader".
The AGL share price is on heavy watch this morning following the announcement, and pre-market trading activity is already ramping up according to Refinitiv Eikon data.
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AGL to exit coal by FY35
After the release of its strategic review, the energy company says that its annual scope 1 and 2 greenhouse emissions are estimated to reduce from 40 million tonnes to "net zero" with the targeted closure.
The company will also gradually decarbonise its asset portfolio by substituting new renewable energy capacity.
It has intentions of supplying its customer demand with "up to 12GW of new generation and firming capacity, requiring a total investment of up to $20 billion, in place before 2036".
There doesn't seem to be any expected changes to this year's forecasted numbers for AGL.
It provided guidance of underlying EBITDA of between $1.25 billion and $1.45 billion, coupled with underlying net profit after tax (NPAT) between $200 million–$320 million.
AGL Chair, Patricia McKenzie, said the decision represents "a new direction for AGL".
Our decarbonisation and energy investment strategy sets a clear pathway for the company's future and its leading role in Australia's energy transition. We have listened to our stakeholders – in particular, our shareholders, as well as government and energy regulatory authorities. Their views were an important consideration as we reviewed the company's strategic direction after withdrawing the demerger proposal.
Today's announcement recognises the increasing ESG pressure from investors and consumers that has been affecting our business and we expect to be able access a wider pool of capital and attract new investors, which will ultimately result in a lower cost of capital and a more sustainable business.
AGL also published its inaugural climate transaction action plan along with its strategic review. Shareholders can vote on this at AGL's annual general meeting held on November 15 2022.
There is also a $700 million non-cash impairment charge that AGL will recognise against the carrying value of the tangible assets at Loy Yang A.
AGL finished with the following:
Overall, AGL believes FY23 earnings will remain resilient amidst the current challenging energy industry and market conditions and is well positioned from FY24 to benefit from sustained higher wholesale electricity pricing as historical hedge positions progressively roll-off.
Investors eagerly await the fallout this morning.
