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

An oil refinery worker stands in front of an oil rig with his arms crossed and a smile on his face as the Woodside share price climbs today
Energy Shares

ASX energy shares: What does 2025 hold in store?

Energy stocks have had a tough year, but one expert sees a change coming.

Read more »

Worker inspecting oil and gas pipeline.
Energy Shares

Did the Woodside share price finally turn the corner in November?

Woodside shares shook off their losing streak to finish November in the green.

Read more »

A miner stands in front oh an excavator at a mine site
Share Market News

An 'undervalued' ASX 200 uranium stock to buy now

A leading fundie sees big potential from this undervalued ASX 200 uranium producer.

Read more »

Female oil worker in front of a pumpjack.
Energy Shares

Buy this ASX 300 energy stock now for a 40% return

Bell Potter has good things to say about this gas explorer and developer.

Read more »

Cropped shot of a mature businessman brainstorming and setting financial goals with notes on a glass wall.
Energy Shares

Is it time to sell this ASX 200 uranium share amid 'ongoing challenges'?

The ASX 200 uranium producer’s latest production update is a red flag for this fundie.

Read more »

A female broker in a red jacket whispers in the ear of a man who has a surprised look on his face as she explains which two ASX 200 shares should do well in today's volatile climate
Energy Shares

Guess which ASX uranium stock just scored a buy rating from a leading broker

Bell Potter has good things to say about this uranium developer and its high-grade project.

Read more »

An oil worker in front of a pumpjack using a tablet PC.
Energy Shares

Are Woodside shares the number one pick in the energy sector?

One leading broker thinks that the energy giant is the best option for investors right now.

Read more »

A young woman carefully adds a rock to the top of a pile of balanced river rocks.
Share Market News

Here's how the ASX 200 market sectors stacked up last week

Energy and utilities stocks led the way last week with 4%-plus gains.

Read more »