Owners of AGL shares need to know how much electricity demand could grow by 2050

This tailwind could be electric for this ASX energy stock.

| More on:
A male electricity worker in hard hat and high visibility vest stands underneath large electricity generation towers as he holds a laptop computer and gazes up at the high voltage wires overhead.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors who own AGL Energy Limited (ASX: AGL) shares, or are interested in buying them, should get to grips with how much electricity demand might change in the coming decades.

While 2050 is a while away, being aware of electricity demand forecasts could certainly be beneficial for long-term investors.

AGL is both an energy generator and a retailer of energy. The company's chief financial officer Gary Brown was talking at the Australian Financial Review's CFO Live event, now underway.

Changing energy environment for AGL shares

Brown commented that the ASX energy share's decarbonisation plan was guided by predictions that Australia's electricity demand will double by 2050.

According to reporting by the Australian Financial Review, AGL's strategy wasn't positioned to cut fossil fuels in line with the Paris climate agreement, struck in 2016.

Brown noted AGL needed to shut its coal-fired power plants by the late 2020s to meet the Paris Agreement's bid to limit global heating by 1.5C. He said this was tricky because AGL is Australia's largest coal plant owner.

According to AGL, the uptake of electric vehicles will be a large driver of increasing electricity demand, leading to a 30% increase in home electricity consumption. Perhaps this will be a tailwind for AGL shares.

Brown said:

It was pretty clear that [closing the coal plants] was going to be very, very difficult to achieve.

So we pretty quickly came to the point that 1.5 degrees was going to be very, very difficult to achieve.

We worked our way back from that. We started off with what ultimately our customers are going to want access to in the future. We're expecting there will be a doubling of demand in electricity between now and 2050.

Forecasts for the ASX energy share

The broker UBS is expecting the ASX energy share to deliver earnings per share (EPS) and dividend per share growth each year to FY27. Of course, FY27 is only a few years away, whereas FY50 is decades away, but broker analysts only forecast so far into the future.

By FY27, UBS is expecting AGL EPS to reach $1.35 and the dividend per share to hit 84 cents per share. At the current AGL share price, that would put the company at seven times FY27's estimated earnings with a dividend yield of 8.5%, excluding the effect of any franking credits.

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 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 Scott Phillips.

More on Energy Shares

Accountant woman counting an Australian money and using calculator for calculating dividend yield.
Energy Shares

Is the 11.3% dividend yield on Woodside shares for real?

Are investors really in line for an 11.3% yield from this oil stock?

Read more »

a close up of a man with wide open eyes and wide open mouth holding his head and reacting in shock and surprise to some share market ews.
Energy Shares

Why is the Strike Energy share price crashing 31% today?

This energy stock has lost half of its value in a month.

Read more »

A smiling woman with a cute dog flings her arm out of the window of a car
Dividend Investing

On the hunt for passive income? Here's what you need to know about the record Ampol dividend

Following today’s record declaration, Ampol shares trade on a juicy 7.2% dividend yield.

Read more »

a man sits on a rocket propelled office chair and flies high above a city
Earnings Results

ASX 200 energy stock Ampol charging higher on record 2023 sales

ASX 200 investors are bidding up the Ampol share price on Monday.

Read more »

two workers in hard hats and high visibility gear give celebratory fist pumps while checking paperwork at a processing site with equipment in the background.
Energy Shares

2 'low risk plays' amid surging ASX uranium shares

Fund manager Monash Investors recommends two particular ASX uranium stocks.

Read more »

an oil refinery worker checks her laptop computer in front of a backdrop of oil refinery infrastructure. The woman has a serious look on her face.
Energy Shares

Woodside share price dips to two-month low upon late news announcement

The oil and gas giant has revealed a major impairment cost for FY23.

Read more »

Coal Miner in the tunnels pushing a cart with tools
Earnings Results

Whitehaven share price crumbles on plunging half-year revenue

ASX 200 investors are bidding down the Whitehaven share price on Thursday.

Read more »

Happy man standing in front of an oil rig.
Energy Shares

How are Woodside shares avoiding the market selloff today?

This energy giant's shares aren't sinking like the market today. But why?

Read more »