Energy shares are becoming increasingly popular among Australian investors, especially those driving renewable energy generation.
Two such ASX-listed companies are Origin Energy Ltd (ASX: ORG) and AGL Energy Ltd (ASX: AGL).
Origin Energy is investing significantly in renewable energy storage while AGL is actively transitioning towards cleaner energy sources and aims to achieve net-zero emissions by 2035.
Origin Energy shares closed 0.64% higher on Tuesday, at $12.58 a piece. Over the past 6 months, the share price has jumped 18.9% higher and is 31.73% higher than this time last year.
AGL Energy shares paint a different picture. At close of the ASX on Tuesday, AGL Energy shares were 0.23% higher at $8.61 a piece. Over the past 6 months the share price has dropped 18.93% and it is down 24.41% over the year.
Both shares have experienced entirely different price trajectories over the past 12 months. But what can we expect next? Here's what Macquarie Group Ltd (ASX: MQG) thinks.
Origin energy vs AGL shares
In a recent note to investors, the broker confirmed its neutral rating on Origin Energy shares. It also confirmed its $11.34 target price on the stock. At the time of writing that represents a potential downside of 9.8% for investors over the next 12 months.
Macquarie also recently confirmed its outperform rating on AGL Energy shares and raised its target price to $11.00, up from $10.91 previously. This represents a potential upside of 27.8% for investors over the next 12 months, according to the share price at the time of writing.
What did Macquarie have to say?
The broker explained that even though a colder winter drove more demand, better generation performance meant there was lower overall volatility. This lower volatility is likely to influence earnings growth.
"The cold winter (August) delivered better demand for the sector, but the broader generation fleet performed better than FY25…Over the first two months it appears a more moderate earnings start in electricity, but gas volumes in NSW, SA and WA were up 6-7%. Vic gas was more moderate at 1%," Macquarie said in its note.
The broker also noted that wind power purchase agreements (PPAs), a long-term contract for a buyer to purchase electricity at a fixed price, is pricing closer to $120 per MWh (megawatt-hour). According to Macquarie, this suggests an electricity price of $150 per MWh, or higher, will be needed by 2030.
With NSW wind averaging a ~20% discount to the NSW NEM price, as we see these and other WF projects move to FID (final investment decision), it is a strong signal NSW electricity pricing is moving to $130-140/MWh ie $10-20/MWh above our expectation. AGL is particularly leveraged to this scenario with the coal fleet still having 2-5years of service left.
