AGL Energy's half year net profit has fallen 27.1 per cent to $261 million. Source: AAP
THE Abbott government's repeal of the carbon tax and a bump in energy prices is set to benefit AGL Energy more than its utility rivals.
Australia's second largest energy retailer posted weaker first half net profit on Wednesday, falling 27.1 per cent to $261 million.
However the company's chief executive Michael Fraser declared the fierce competition of late that led to discounting of utilities and a fight for customers largely over.
The combination of gas prices soaring, due to the looming start of Australian gas exports, plus the federal government's planned repeal of the carbon tax and review of renewable energy targets makes coal-fire electricity more economic again and wind and solar power less so.
AGL has more invested in coal power than rival Origin Energy, through owning the Loy Yang brown coal power station in Victoria and has made a $1.5 billion bid for the NSW state-owned coal power giant Macquarie Generation.
The Australian Competition and Consumer Commission is due to decide on the takeover this week but it has serious competition concerns about the deal, which some say would send prices rising further.
Mr Fraser said he was confident AGL had addressed any concerns by offering to sell supplies to competitors, pointing to the fact the market was over-supplied with electricity.
"There is no fact base to support those concerns," he told AAP.
He is predicting an improved financial performance in the second half of this financial year and next year, including a full six month contribution from recently acquired rival APG.
The company has also struck a deal to more than triple its wholesale gas sales into Queensland next year at far higher export parity pricing and margins of $3.40 a gigajoule.
He acknowledged that would add to the difficulties for high-gas user businesses at a time when struggling manufacturers are shutting and demanding prices and gas supplies be kept lower for locals.
"I think the good news is the big increases in electricity prices are over," Mr Fraser told AAP.
"You can't undo the fact that this country has approved three huge LNG (export) projects ... you can always look at what you might do in the future with respect to new gas resources coming on."
AGL's full year guidance for underlying profit this year of $560 million to $610 million compares to $598 million last year.
The reasons it cited for the weaker profit on Wednesday included the nation experiencing its warmest winter on record, the discounting and businesses and households becoming more energy efficient.
Mr Fraser predicted that renewable forms of energy would increasingly reduce demand - something that has already adversely affected utility companies in Europe - but that would be offset by population growth and the deregulation of power pricing in NSW and Queensland.
Morningstar analyst Gareth James said AGL's 2012 purchase of Australia's lowest cost electricity plant Loy Yang was looking shrewd as it was made at a time when the previous government were trying to shut coal plants.
The company's shares closed 3.0 cents lower at $15.95.
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