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Archive for August, 2011

AGL reports flat underlying profit

Thursday, August 25th, 2011

AGL Energy today reported a flat Underlying Profit of $431.1 million for the year ended 30 June 2011, up only by half a per cent over the previous financial year.

AGL said that the result was flat due to extreme hot weather events in eastern and southern Australia in February, which effectively reduced profit by $30-$35 million, as well as softer demand for electricity from its Loy Yang A power station in Victoria’s LaTrobe Valley.

AGL’s Retail Energy business seemed to perform strongly with a 17 per cent increase in EBIT to $373 million, due mainly to improvements in gross margin on mass market customers resulting from a combination of electricity and gas price (tariff) increases in all states and a net increase in customer numbers of 52,000. AGL’s total customer accounts increased by 1.6 per cent to 3.29 million.

AGL, having lost out to Origin Energy and TRUenergy in the purchase of retail energy assets as part of the NSW electricity privatisation process that completed in March this year, has had to rely on an organic growth strategy in New South Wales to grow its customer base. AGL seemed content with the start it had made in NSW adding 96,000 new electricity customers in the six months to 30 June 2011.

AGL also noted the high degree of competition in energy retail markets and that the introduction of the new Australian Consumer Law on 1 January 2011 that limited the hours of operation of door-to-door sales had appeared to have had no impact on the level of door knocking activity.

AGL claimed its churn rate of 19 per cent is below the industry average, reflecting improvements made in customer service. Origin also reported yesterday a very similar level of customer churn.

You can read AGL’s full earnings release on their website.

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Origin Energy reports 15% profit growth

Wednesday, August 24th, 2011

Origin Energy yesterday announced a 15 per cent increase in its underlying profit to $673 million and a 32 per cent increase in underlying EBITDA to $1,782 million for the year ended 30 June 2011.

The increase in underlying profit was primarily due to the inclusion of results from Origin’s newly acquired NSW energy retail businesses (Integral Energy and Country Energy), higher commodity prices and increased production in Origin’s Exploration and Production businesses and an increase in Origin’s owned and contracted generation capacity from 1,710 MW to 5,310 MW.

Origin’s retail business performed well increasing underlying EBITDA by 38 per cent to $785 million. Origin picked up 1.585 million new customers following its NSW acquisitions but seemed to suffer from significant customer churn, losing 607,000 retail customers over the year. Fortunately, Origin was able to acquire 567,000 new customers resulting in an overall net loss of 37,000 customers. Origin says that its customer churn rate has “remained stable at 18.5% despite market churn increasing from 19.1% to 20.2%”.

Origin notes that churn in the NSW market has increased from an average of 12% in the eight months prior to completion of its NSW acquisitions on 1 March 2011, to 14% in the four months post-acquisitions. The company anticipates that market churn will continue to increase to levels experienced in other competitive markets, such as Victoria and Queensland. However, Origin believes that their “incumbent position” in NSW offers them a major advantage in defending their market position.

Also of interest is Origin’s claim that it has installed 47,000 solar systems since 2009, probably making the company Australia’s largest installer of solar photo-voltaic (PV) systems.

You can read Origin Energy’s full ASX release on their website.

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TRUenergy says it is holding its own in NSW

Wednesday, August 17th, 2011

Announcing its first-half financial results in Hong Kong on Monday, CLP Holdings, the owner of Australia’s third largest energy supplier TRUenergy, reportedly said that contrary to speculation it had gained rather than lost customers in its recently acquired New South Wales energy retailing business, Energy Australia.

According to The Australian newspaper, Andrew Brandler, CEO of CLP, said that Energy Australia had withstood AGL’s attempts to poach its customers in the greater Sydney metropolitan area. AGL earlier this year announced its intention to aggressively acquire customers in NSW following its failure to acquire at a reasonable price one of the three NSW electricity suppliers privatised by the NSW Government late last year.

We have heard reports of very aggressive door-to-door sales activity in NSW over the last six months by several electricity providers, despite a slight reduction in the permitted door-knocking hours following the introduction of the new Australian Consumer Law earlier this year.  The real question is whether Energy Australia’s success in “retaining” customers is due to aggressive discounting to “save” customers poached by other retailers such as AGL or whether Energy Australia has itself been aggressively door-knocking to acquire new customers to replace the ones it lost to other retailers.

As discussed in our post earlier this week, Australian Power & Gas, Dodo Power & Gas and Red Energy have all launched very attractive new electricity offers in New South Wales over the last few months. It will be exciting to watch what transpires over the coming year in NSW.

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