Why AGL’s $900M Battery Bet Matters Amid FY25 Earnings Dip

FY25 Financial Performance in Line with Expectations

AGL Energy Limited reported its full-year results for FY25, delivering an underlying EBITDA of $2.01 billion and an underlying net profit after tax (NPAT) of $640 million. Both figures represent declines of 9% and 21% respectively compared to the prior year, but importantly, they were in line with company guidance. The results reflect a challenging market environment marked by lower wholesale electricity prices and consumer margin compression, as AGL balanced pricing decisions to support customer affordability amid inflationary pressures.

Strategic Investment in Battery Storage and Flexibility

Central to AGL’s FY25 narrative is its significant capital deployment, with approximately $900 million invested in battery developments and strategic acquisitions. This includes the acquisition of South Australia’s Virtual Power Plant from Tesla and a strategic equity investment in Kaluza, a technology partner advancing AGL’s retail transformation. The company’s grid-scale battery portfolio is expanding rapidly, with operational assets like the Torrens Island and Broken Hill batteries delivering strong performance, and major projects such as the 500 MW Liddell Battery on track to commence operations in early 2026.

Thermal Fleet Challenges Offset by Portfolio Flexibility

AGL’s thermal fleet availability declined by 6.7 percentage points to 79.1% due to an additional planned major outage and unplanned downtime in the second half of FY25. Despite this, the company’s diverse and growing flexible asset fleet, including batteries and demand-side management programs, helped mitigate the earnings impact. Volatility captured through trading increased by nearly two percentage points, underscoring the value of AGL’s flexible generation and storage assets in a volatile energy market.

Customer Growth and Community Initiatives

AGL reported growth in customer services across energy, telecommunications, and Netflix offerings, with total customer services increasing by 78,000. Customer satisfaction remains robust at 81.6%, with strategic net promoter scores doubling to +8. The company also launched AGL Community Power, aimed at extending the benefits of the energy transition to customers who may not have direct access to solar or battery technologies. Investments in First Nations businesses and community programs further highlight AGL’s commitment to social responsibility.

Outlook and FY26 Guidance

Looking ahead, AGL’s FY26 guidance projects underlying EBITDA between $1.92 billion and $2.22 billion, reflecting expected improvements in plant availability and customer market earnings. However, underlying NPAT is forecast to range between $500 million and $700 million, impacted by higher depreciation and finance costs associated with ongoing investments, including the Liddell Battery’s commencement. The company aims to offset earnings impacts from coal and gas recontracting through its flexible asset investments and strategic execution.

AGL maintains a strong balance sheet with a Baa2 investment grade credit rating and nearly $1.3 billion in available liquidity. The board declared a fully franked final dividend of 25 cents per share, bringing the total FY25 dividend to 48 cents per share, consistent with a 50% payout ratio of underlying NPAT.