AGL share price slides amid $450 million tech cash splash

ASX 200 investors are bidding down the AGL share price today.

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The AGL Energy Ltd (ASX: AGL) share price is taking a tumble today.

Shares in the S&P/ASX 200 Index (ASX: XJO) energy provider closed on Friday trading for $10.49. During lunch hour trading, shares are swapping hands for $10.39 apiece, down 0.95%.

However, for some context, the ASX 200 is also struggling today, down 1.46% at this same time.

Here's what AGL investors are mulling over today.

AGL share price slides amid tech costs

The AGL share price is in the red today after the company reported it has entered into an agreement with Kaluza, a United Kingdom-based technology platform that digitises and simplifies energy billing. Kaluza currently services more than six million meters at OVO Energy in the UK.

The agreement is part of AGL's ongoing Retail Transformation Program.

AGL expects to realise significant cost reduction, noting the platform also enables faster product innovation to facilitate the energy transition. The ASX 200 utility will transfer its four million consumer electricity and gas customer services onto the Kaluza platform over the next three years.

The company's Retail Transformation Program aims to cut operating costs and capital expenditure. Net benefits are expected to commence in FY 2028 with pre-tax cash savings of approximately $70 million to $90 million a year from FY 2029.

But the AGL share price could be under some pressure with management estimating $300 million in costs over four years (commencing in FY 2024) to cover the residential and small business customer solution component of its Retail Transformation Program.

AGL also said it will invest around $150 million in the form of preference shares in Kaluza to fund the next phase of its growth. This will see AGL holding a 20% interest directly in Kaluza.

What did management say?

Commenting on the agreement that's yet to boost the AGL share price, CEO Damien Nicks said, "This represents a significant milestone in our transformation journey to connect more customers to a sustainable future."

Nicks added:

The technology market is changing materially with the emergence of new core utility platforms offering greater flexibility and speed, which makes it imperative to partner with industry leaders, and is why we have chosen Kaluza.

Kaluza is owned by OVO Energy. AGL acquired a majority stake in OVO's Australian business in 2021.

On that front, Nick said:

OVO Energy Australia has experienced strong customer growth, with all customers migrated to Kaluza in 2023 while achieving a Net Promoter Score (NPS) of 40+.

As a result of the OVO Energy Australia investment and our proposed 20% equity interest in Kaluza, AGL has strengthened its relationship with the OVO Group which will enable us to accelerate our strategic ambition to support customers as they decarbonise and electrify.

The AGL share price is up by around 7% so far in 2024.

Motley Fool contributor Bernd Struben 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.

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