AU/NZ
Andy Vesey MD & CEO of AGL Energy

Andy Vesey

MD & CEO

Andy Vesey

MD & CEO

AGL Energy (ASX:AGL)

Market Cap (AUD)
14.98B
Last Trade (AUD)
Sector
Utilities
Market
ASX
  • 1. About

    AGL is one of Australia's leading integrated energy companies and largest ASX listed owner, operator and developer of renewable energy generation in the country. AGL’s diverse power generation portfolio includes base, peaking and intermediate generation plants, spread across traditional thermal generation as well as renewable sources including hydro, wind, landfill gas, solar and biomass. AGL also invests in and operates natural gas exploration, development and production tenements, and operates natural gas storage facilities.[1]

    2. Business model

    The Company operates in following divisions:[2]

     

    Divisions

    Revenue ($M)

    % of Revenue

    % of Profit (before Int, Tax, Depn & Amort)

    Sales and distribution

    model

    Profit drivers[3]

    Energy Markets

    $12,194

    96.9%

    135.4%

    Through wholesale, retail  and distribution channels of large commercial, industrial customers and vendors

    Energy Markets Underlying EBIT of $2,413 M was $139 M or 6.1% higher than the prior year due to higher Wholesale Markets gross margin and ongoing discipline in the management of customer pricing and net operating costs. Gross margin performance was driven by growth in Wholesale Electricity  

    Group Operations

    $389

    3.1%

    (24.9%)

    Group Operations Underlying EBIT of ($825 M) was $17 M higher largely attributed to driving value through a sustained productivity and cost management program. The decrease in Thermal Underlying EBIT was largely attributed to higher depreciation of $35 M driven by a higher asset base

    Investments

    N/A

    N/A

    0.9%

    ActewAGL Retail partnership contributed an equity share of profits of $24 M for the year compared with $30 M in the prior year. The decrease was due to lower electricity gross margins resulting from higher wholesale prices. New Energy investments include Sunverge Energy Inc and Solar Analytics Pty Limited. The operating losses of these investments were consistent with expectations for early stage technology investments

    Others

    $1  

    N/A

    (11.4%)

    N/A

    3. Strategy

    AGL believes it has two strategic imperatives: to prosper in a carbon-constrained future as energy markets respond to community expectations in relation to climate change; and to build customer advocacy as changes in distributed energy and mobile technology alter customer expectations.[4]

     

    Consistent with these imperatives, AGL is currently pursuing four key objectives that drive its strategy and decision making:

     

    • To move from being a mass-market retailer to offering customers a more personalised experience. AGL’s flagship initiative in this space is the $300 million Customer Experience Transformation program
    • To move from being an owner and operator of large assets to being an orchestrator of both large and small assets. AGL’s flagship initiative in this space is the $20 million Virtual Power Plant project in South Australia
    • To move from reliance on high emissions technology to much lower emissions alternatives. AGL’s flagship initiative in this space is the Powering Australian Renewables Fund  
    • To move from leveraging business platforms in existing markets to leveraging those platforms in new geographies as well. AGL’s expansion into the Western Australian gas retail market is consistent with this objective. In addition AGL is exploring opportunities to operate in competitive retail energy markets in certain select markets overseas

    4. Markets

    The Company operates in markets including:[5]

     

    Industry (Australia)

    Industry Revenue

    Growth Rate

    Electricity Retailing

    $46 billion (2016)

    0.6% (Annual 12-17)

    Hydro-Electricity Generation

    $1 billion (2017)

    10.2% (Annual 13-18)

    Wind and Other Electricity Generation

    $2 billion (2017)

    13.1% (Annual 13-18)  

    5. Competition

    Major competitors Include:[6]

     

    • Duke Energy Corp (NYSE:DUK
    • International Power Ltd
    • Origin Energy Ltd (ASX:ORG)

    6. History

    1837[7]

    The Australian Gas Light Company was created with 'An Act for Lighting with Gas the Town of Sydney"

     

    1841   

    The Australian Gas Light Company lit the first gas lamp in Australia. Within two years there were 165 gas lamps in the city of Sydney

     

    1850   

    Gas lighting allowed for late night shopping in department stores

     

    1857   

    AGL introduced gas purification in Australia allowing for gas to be used in private residences

     

    1873   

    For a sum of £4, AGL imported the first gas-cooking stove and installed it in its Darling Harbour store

     

    1890   

    Gas stoves were advertised in cookery books and could be rented or bought from AGL for easier and more efficient home cooking

     

    1936   

    Around 59,000 housewives had taken gas-cooking classes provided by AGL to better understand the benefits this new home energy resource provided

     

    1976   

    AGL introduced natural gas to Sydney which involved installing the longest pipeline in the country (from South Australia to Sydney)

     

    1988   

    AGL pioneered the new nylon pipe technology, Goldline, to reduce gas leakage from the old NSW network.Goldline was fed through existing pipes, removing the need to overhaul the entire pipeline network. The result was a reduction of carbon dioxide equivalent emissions by 13 million tonnes

     

    1998   

    The solar generator located at Wilpena Pound in the Central Flinders Ranges in South Australia was commissioned.This station has 1,250 solar cells, each with a capacity of 80 W, and cover more than 2,000 square meters

     

    2006   

    The Australian Gas Light Company (AGL) and Alinta Limited shareholders approved the merger of AGL's infrastructure assets with Alinta and the subsequent separation of AGL Energy. AGL Energy began trading on the Australian Stock Exchange on 12 October 2006

     

    2007   

    AGL listed as a member of the Dow Jones Sustainability World Index, the leading global ranking of sustainability - the only Australian energy retailer to achieve this status

     

    2008   

    AGL committed to new ways of sourcing sustainable energy with the Hallet wind farm in South Australia

     

    2009   

    AGL's Bogong Power Station opened in Victoria - the largest hydroelectric asset to be built on the Australian mainland for 25 years

    AGL became proud sponsors of the AGL Action Rescue Helicopter service in south east Queensland to help keep this vital service operating

    AGL restored and has continued to provide power to the iconic Skipping Girl sign in Victoria - maintaining an important part of Victorian history

     

    2010   

    AGL sponsored the Adelaide Zoo Pandas, Wang Wang and Funi by providing their exhibit with solar power to help them reduce their carbon paw print

     

    2011   

    AGL Energy Online was launched. An online energy management tool to help save customers time and hassle

    AGL launched the Smarter Living Store to help customers reduce their energy usage by purchasing energy saving products online

     

    2012   

    AGL gives the gift of solar power to the iconic Skipping girl sign in Victoria for her 75th birthday to keep her skipping on sunshine.

    AGL celebrates its 175th anniversary

    AGL acquired 2,210 MW Loy Yang A Power Station and the adjacent Loy Yang Coal Mine

     

    2013   

    The Macarthur Wind Farm opens and is the largest wind farm in the Southern Hemisphere and represents an investment of approximately $1b

    AGL hands over naming rights sponsorship of the Sunshine Coast Rescue Service to RACQ in July to allow the Service to secure a vital $1.5 million boost to funding. AGL continues its support of the Service as a major sponsor

     

    2014   

    AGL acquired Macquarie Generation, comprising the 2,640 MW Bayswater Power Station, the 2,000 MW Liddell Power Station, the 50 MW Hunter Valley Gas Turbines and the Liddell Solar Thermal Project

    AGL regains 'AGL' ASX ticker code

     

    2015   

    First gas arrives at AGL’s Newcastle Gas Storage Facility

    AGL released its new Greenhouse Gas Policy, providing a pathway for the gradual decarbonisation of AGL’s generation portfolio by 2050

    AGL announced it is launching a battery storage device into the Australian market, making it the first Australian energy retailer to do so

    AGL's Nyngan and Broken Hill solar plants achieve full generation, sending 155 MW of renewable energy into the National Electricity Market

     

    2016   

    AGL launched the Powering Australian Renewables Fund, an innovative new financing initiative designed to unlock investment and open up more opportunities to develop approximately 1,000 MW of renewable energy generation

    AGL announced the launch of the world’s largest virtual power plant, ultimately involving 1,000 connected batteries installed in homes and businesses in South Australia, providing 5 MW of peaking capacity and offering customers the opportunity to save on their energy bills

     

    2017   

    AGL announced development of $295 million power station in South Australia

    AGL agreed to sell North Queensland gas assets

    7. Team

    Board of Directors[8]

     

    Jeremy Maycock – Non-Executive Director and Chairman ( Will be retiring on 27 September 2017)[9]
    Andrew Vesey – Managing Director and Chief Executive Officer
    Peter Botten – Non-Executive Director
    Jacqueline Hey – Non-Executive Director
    Leslie Hosking – Non-Executive Director
    Graeme Hunt – Non-Executive Director (Appointed as a Chairman, effective from 27 September 2017[10] 
    Belinda Hutchinson – Non-Executive Director
    Diane Smith–Gander – Non-Executive Director
    John Stanhope – Non-Executive Director

     

    Management Team

     

    Andrew Vesey – Managing Director and Chief Executive Officer
    Brett Redman – Chief Financial Officer 
    Elisabeth Brinton – Executive General Manager, New Energy
    Dan Cram – Executive General Manager People & Culture
    John Fitzgerald – General Counsel and Company Secretary
    Lisa Harrington – Executive General Manager Stakeholder Relations
    Doug Jackson – Executive General Manager Group Operations
    Simon Moorfield – Executive General Manager Information Systems and Technology
    Alistair Preston – Executive General Manager Organisational Transformation
    Melissa Reynolds – Chief Customer Officer
    Richard Wrightson – Executive General Manager Wholesale Markets


    read more

    8. Financials

    Financial Year 2016/17 (ended 30 June):[11]

     

    Divisions

    Revenue ($M)

    % Change

    Profit (before Int, Tax, Depn & Amort) ($M)

    % Change

    Energy Markets

    $12,194

    11.3%

    $2,508

    5.6%

    Group Operations

    $389

    101.6%

    ($462)

    6.5%

    Investments

    N/A

    N/A

    $17

    (32.0%)

    Others

    $1  

    N/A

    ($211)

    2.3%

    Total

    $12,584

    12.9%

    $1,852

    9.7%

    9. Risk

    Major risks include:[12]

     

    Material Business Risks

    AGL’s enterprise wide risk program is aligned with the principles and requirements of ISO 31000, the international standard for risk management. This program is supported by AGL’s Risk Management Policy and Risk Management Standard. Consistent with this, AGL’s risk management process identifies factors critical to the successful delivery of its business strategies and future prospects. As at the date of this Report, there were 10 factors identified, as follows:

     

    • Anticipatory culture and human capital;
    • Strong and appropriate governance;
    • Resilience capability;
    • Asset safety and reliability;
    • Optimisation of wholesale energy markets;
    • Stakeholder advocacy;
    • Financial management and value proposition;
    • Transition to low emissions technology;
    • Data and IT security management; and
    • Becoming a customer-led, digital-first retailer
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