AGL makes money by generating electricity and selling it to households and businesses through its retail arm. It earns revenue both from wholesale power sales, via its coal, gas, hydro and renewable assets, and from retail margins on electricity and gas supplied to customers. In simple terms, AGL is vertically integrated, producing energy and selling it directly to end users.
Rising DC loads increase wholesale electricity demand, can support higher utilisation of AGL’s generation fleet and firing capacity, particularly during peak periods. As a vertically integrated player, AGL can benefit from both wholesale price strength and increased retail volumes, especially if it secures supply agreements with large commercial customers. However, Australia’s AI-driven demand growth remains modest relative to the US, with any earnings uplift contingent on the composition of energy sources, regulatory dynamics and the pace of incremental capacity entering the market.
AGL recently delivered a strong result, which saw the stock pop more than 10%, we covered Here. Overall, AGL continues to reposition as a more dependable, cash-generative energy major with increasing exposure to batteries and portfolio optimisation. Strong free cash flow, steady earnings and a higher interim dividend underscore the shift from volatility-driven outcomes toward more operationally anchored returns – it’s forecast to yield 4.8% fully franked over the next 12-months.
- We can see AGL retesting $12 in the coming years while paying a healthy yield along the way; we own AGL Energy Ltd in our Active Income Portfolio.
MM is long and bullish AGL
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