Beleaguered electricity customers could be in for another price rise after AGL Energy said it wanted to bolster margins.
Chief financial officer Stephen Mikkelsen said the energy distributor had endured poor margins and unreasonable risks for customers that don’t pay their bills.
The company, Australia’s largest gas and electricity retailer, increased underlying profit by half a per cent to $431.1 million for the full year on Thursday. Mr Mikkelsen said gross margins of about $183 per customer were not high enough when the costs of carrying the risk of non payment were included.
“Those costs are passed through to our customers and need to be collected, I don’t believe we are adequately being rewarded for these risks,” Mr Mikkelsen said.
The underlying profit excluded significant items such as the $13.1 million after tax it spent on its aborted bid for privatised power assets in NSW, as well as changes in the value of financial instruments. Including those items, net profit rose to $558.7 million for the 12 months to June 30 from $356.1 million a year earlier.
Shares in AGL gained 35 cents, or 2.5 per cent, to close at $14.50, the highest in almost seven weeks.
AGL had a mixed year in which weak demand and oversupply affected its wholesale energy business, with earnings before interest and tax (EBIT) down 50.4 per cent. EBIT declined two per cent in its merchant energy and investments businesses.
Retail energy EBIT rose 17 per cent to $373 million, on the back of the 75 per cent increase in the number of new NSW customers.
AGL said it had signed up 96,000 newly privatised NSW electricity customers this year and had another 2.7 million to chase.
Managing director Michael Fraser said he expected a continued soft outlook for wholesale electricity prices.
“Typically for our merchant business, that is a good thing … we expect continued solid growth out of our retail business, which did very well in this result,” he told AAP.
Mr Fraser said AGL was ramping up marketing efforts in NSW, which involved poaching customers from Origin and TRUenergy. Those two companies paid $5.3 billion for the formerly state-owned power distribution networks in NSW after AGL withdrew.
Origin now owns Country Energy and Integral, while TRUenergy is the owner of EnergyAustralia.
There were another 2.7 million customers in NSW, with AGL wanting to increase its current base of 468,000 to between 800,000 and 900,000 within three years, he said. The company’s upstream gas activities, which include the controversial exploration for coal seam gas, improved earnings to $13.6 million, from $5.5 million a year earlier.
The company was formally warned by the NSW government this month after a leak at one of its coal seam gas wells in southwest Sydney.
“The bottom line is that once you get out post-2016, no gas is contracted to come into NSW and it needs new sources of supply,” Mr Fraser said.
AGL will pay a final dividend of 31 cents per share, fully franked.
