AGL benefits as power prices rise

Andrew Stanley

Ralton Asset Management Limited

A rise in electricity prices has been the main driver of AGL's share price with the 'forward curve' for electricity prices rising 30% or more in recent months for most Australian states. This has been driven by expectations of a tight market for electricity as Hazelwood power station is closed.

The sharp rise in power prices over the past couple of years is a result of communities' decisions to increase the level of renewable energy in the system, but politicians failing to get the policy settings right over the last decade to implement a strategic plan for the industry to undertake the transition.

This means AGL is generating a form of super profits given its large, low-cost, baseload power generation capability.

This was a predictable outcome, however the solutions for the problems in the system are going to take many years to resolve. As these price increases start to get passed through to the customer, there is a risk of a political backlash.

While the fundamentals for the stock look very strong, the potential for an irrational regulatory response means we need to keep the holding size in our Ralton Australian Shares portfolio in check (despite our optimism). (VIEW LINK)

Andrew Stanley
Andrew Stanley
Head of Australian Equities
Ralton Asset Management Limited

Andrew has been with Ralton since its inception in 2006 and leads the investment management of Ralton’s managed accounts. He brings over 25 years of funds management and investment banking experience having held senior positions with major...


No areas of expertise

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Please sign in to comment on this wire.

trending on livewire
Get the best of Livewire by signing up to our popular daily newsletter