Australia's AGL skids to H1 loss, lowers outlook; shares fall most since 2007

  • Shares slide 12%, face worst intraday fall since 2007
  • H1 underlying profit down 55%, misses market consensus
  • Lowers full-year underlying profit forecast range
  • Interim dividend halved to A$0.08 per share

Feb 9 (Reuters) - Top Australian power producer AGL Energy Ltd (AGL.AX) on Thursday posted its second-biggest six-month net loss due to plant outages and soaring supply costs, and cut full-year profit guidance, sending its shares tumbling the most in 15 years.

The gas and electricity supplier to one-sixth of all Australians said a horror stretch of power plant failures and volatile wholesale markets squeezed underlying profit in the first half ended Dec. 31 by 55% to just A$87 million ($60.45 million) - little more than half of what analysts had forecast.

A previously disclosed writedown due to a sped-up closure of a coal-fired power station brought a net loss of A$1.08 billion. Compounding the gloom, AGL lowered the top of its full-year underlying profit forecast range by one-eighth.

Shares in AGL tumbled 12% by mid-session on Thursday, against a 0.4% decline in the broader market (.AXJO), their biggest one-day drop since 2007, as investors questioned the ability of a company facing severe disruption on multiple fronts to grow profit amid soaring costs and inflation.

Since Russia's February 2022 invasion of Ukraine supercharged energy wholesale markets, the Australian government has imposed a cap on gas and coal prices.

Meanwhile AGL, Australia's biggest carbon emitter, must prioritise an exit from fossil fuel under pressure from its biggest shareholder, activist tech billionaire Mike Cannon-Brookes, who has four directors on its board. Last September the company said it would bring forward closure of its coal-fired Loy Yang A power station by a decade to 2035.

UBS analysts called the trading update "a soft result with slower than expected pass-through of rising electricity prices". Jefferies analysts called the results announcement "a very weak set of numbers".

Chief Executive Damien Nicks, only in his post since last month, lashed the federal government's decision to impose wholesale price caps from December which had forced down retail prices for coal-powered electricity, limiting benefits to AGL from owning the mine that supplies much of its coal.

AGL buys in its gas, but the benefit of the price cap - A$12 per gigajoule - was limited by suppliers withdrawing from negotiations to seek better prices elsewhere, Nicks said in an interview with Reuters.

The company had enough contracted gas supply for current residential needs, but AGL had to buy gas for about 40 commercial customers on the spot market at about A$40 per gigajoule then pay the customers rebates, Nicks added.

"That is not a long-term solution," he said by phone. "A long-term solution is ... some of those negotiations with the big gas producers coming back into play so that we can bring gas back into the market."

($1 = 1.4388 Australian dollars)

Reporting by Byron Kaye in Sydney and Sameer Manekar and Navya Mittal in Bengaluru; Editing by Krishna Chandra Eluri, Subhranshu Sahu and Kenneth Maxwell

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