AGL share price lifts amid Microsoft news

Here's why the energy giant is being energised today.

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The AGL Energy Ltd (ASX: AGL) share price is up around 0.5% amid news the ASX energy share has signed an agreement with Microsoft.

AGL was pleased to announce the news because the company said it was another example of how AGL "is participating in the transition to renewable energy".

Renewable energy certificate

The energy business announced it has signed a 15-year renewable energy certificate agreement with Microsoft.

This agreement will provide Microsoft with renewable energy certificates from the Rye Park wind farm project in NSW, under AGL's recent power purchase agreement with Tilt Renewables. The 15-year agreement with Tilt Renewables will see AGL take 45% of the output of Rye Park, with that share being approximately 513 GWh per year.

AGL explained that registered owners of renewable energy certificates, such as 'large-scale generation certificates' (LGCs) can choose to on-sell them. They can also surrender them to the Clean Energy Regulator to "acquit their mandatory liability under renewable energy legislation or voluntarily reduce or offset their existing carbon emissions".

The AGL chief operating officer Markus Brokhof said:

Supply agreements for renewable energy certificates can help to increase the viability of new renewable energy projects by providing the projects with an additional revenue stream.

In the announcement of the news, AGL also included comments from Microsoft ANZ managing director Steven Worrall:

We really appreciate the strong collaboration with AGL to increase our procurement of renewable energy certificates in Australia.  Beyond this contract, we will continue to look for new opportunities to support the transition of the electricity grid in Australia to renewable energy sources and reduce the emissions associated with our operations.

What are AGL's renewable energy plans?

This agreement is a nice development though it's not AGL's own energy generation.

The energy business has a climate transition action plan where the company aims to add around 12GW of energy generation and firming by the end of 2035. This will include around 6.3GW of renewables and around 5.9GW of firming.

Both the 250MW Torrens Island battery and the 50MW Broken Hill battery are expected to start operations this year

AGL also recently enacted a partnership with BP pulse, the company's electric vehicle charging initiative. It aims to get customers an "affordable rate to charge their electric vehicle at home or when they're on the road".

Outlook for AGL shares

AGL is expecting to benefit from higher electricity prices during FY24, as well as improved power plant availability. Due to this, the business is expecting to report an underlying net profit after tax (NPAT) of between $580 million to $780 million, which implies that net profit could at least double in FY24.

Investors usually like to see a company's profit is growing, which could bode well for the AGL share price.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Microsoft. 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 Scott Phillips.

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