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AGL and other shares highly dependent on Govt policy

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    AGL and other shares highly dependent on Govt policy

    AGL, like others in the renewable energy space, are highly dependent on Govt policy settings, subsidies , quotas and such $/volume support mechanisms. Does this make AGL even more vulnerable to cost and profit pressure. (Their strategies and profits are very highly correlated to Govt policies which are always subject to significant immediate changes). This question pertains to AGL & energy considering your MM report today. However it can cover other segments just as easily strongly impacted by Govt. (Health, aged care, education etc) Perhaps you could examine this element of investing in your morning reports sometime. Many thanks for your sage & forthright comments. Glenn

    Answer

    Hi Glenn,

    We’ll take this on notice and as you suggest, dedicate a morning note to it in the coming weeks – it’s a huge topic with multiple angles.

    At a high level, essential services will have greater involvement from Government given the public interest/necessity of the services they provide. This cuts both ways. When a product or service is essential, that in itself provides a level of certainty or predictability around earnings , which is a positive. We also must think about how important the particular company is to helping Government achieve their ambitions. In the case of AGL, the Govt needs AGL to move towards renewables so they can meet their sustainability targets. Govt  involvement is across all sectors, from Banks, Insurers, Healthcare providers, Supermarkets, Miners, Technology companies (i.e. Google overnight) and so on. The common denominator being size i.e. larger systemically important companies will have more exposure to Government.

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    AGL Energy Ltd (AGL)
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