AGL buoyed by acquisition on back of disappointing FY14 results

AGL Energy has finally concluded an agreement with the New South Wales government to acquire Macquarie Generation assets for $1.5 billion.
AGL buoyed by acquisition on back of disappointing FY14 results AGL buoyed by acquisition on back of disappointing FY14 results AGL buoyed by acquisition on back of disappointing FY14 results AGL buoyed by acquisition on back of disappointing FY14 results AGL buoyed by acquisition on back of disappointing FY14 results

AGL managing director Michael Fraser

Andrew Snelling

The agreement will give AGL ownership of the lowest cost, largest scale baseload generators in the state and increase its registered generation capacity by approximately 82% to more than 10,400 megawatts.

The acquisition proposal ran into hurdles in March when the Australian Competition and Consumer Commission denied the bid on the grounds that it would limit the competition in the NSW commercial electricity market.

The ACCC noted that the deal would make AGL the largest generator in NSW, Victoria and South Australia.

However, the Australian Competition Tribunal trumped the ACCC decision in July, concluding that the proposed acquisition would result in such public benefit that it should be allowed to occur.

The company has now announced a fully underwritten one-for-five pro rata accelerated renounceable entitlement offer to help fund the acquisition.

The rights issue is expected to raise $1.2 billion from the offer price of $11 per share.

The balance of the consideration for MacGen will be funded by the company’s bank debt.

The news came as AGL announced its 2014 financial year results in which it recorded a drop in revenue and underlying profit.

Revenue came to $9.5 million for the year, down 1.8% on the previous financial year, while underlying profit fell 3.9% to $562 million.

The company’s underlying operating cash flow before interest and tax was down $30 million to $1.15 million.

“The result reflects the difficult operating environment faced by all the major energy companies,” AGL managing director Michael Fraser said.

“As well as the record warm winter weather conditions experienced this year we saw a further drop in customer demand for energy.”

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