In an announcement to the ASX on Tuesday, AGL Energy (ASX:AGL) outlined a “strategic roadmap” to improve return on funds employed (ROFE) and to maintain sustainable earnings growth. The energy company cited the changing energy business and lower commodity prices as the reason for the significant structural change. “[AGL] recognises that an organisational transformation will be required, including the creation of an anticipatory culture and a commitment to an orderly transition to a carbon constrained future,” the report said.
AGL also cited the change in social awareness in the broader public surrounding energy consumption. As competition in the energy industry increases, consumers are becoming more aware of their own energy consumption. Digital technologies are also increasing the amount of transparency and control energy companies must exude. The strategic roadmap listed a number of ways the company intends to remain competitive, including: transformational operating models, creating an anticipatory culture, driving production levels, and improved capital allocation. All of these factors will “unlock growth” for its shareholders.
The report also noted that AGL must “exploit” new technology in order to remain flexible in the face of a changing industry. The company intends to create one million “smart” connections to its customers and businesses by 2020 by scaling to become on of the key providers of metering services, rooftop solar panels, commercial energy services, energy storage and electric vehicle services. The company also noted that it is “conducting a thorough review of its asset portfolio” by targeting about $1bn in non-strategic and underperforming asset divestments by the end of FY2017. Shares of AGL have jumped 92.5c, or 5.98 per cent, to $16.41 per share around 1:08pm on Tuesday. AGL has advanced 9.50 per cent in the last 12 months and 22.83 per cent so far this year.
Author: Imran Valibhoy
May 26, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.