Thanks to surging electricity and gas prices, energy retailer AGL is making record profits, with gross profit a customer topping $200 a year for the first time.
AGL has pushed hard to lift its customer numbers in NSW in particular over the past few years, following its failure in buying any of the three power retailers sold by the NSW government.
At the end of June it had 3.5 million customers across the national electricity market, which will top 3.85 million if its acquisition of troubled discounter Australian Power and Gas is allowed to proceed.
AGL disclosed on Wednesday the gross margin a customer reached $200.47 in the year to June, up from $194.03 a year earlier. The rise of 3.3 per cent is well above the rate of inflation, which has been running at about 2.5 per cent a year over the past few years.
AGL's net profit was $388.7 million, up from $114.9 million a year earlier. Underlying profit reached $598.7 million, up from $482 million.
Celebrating the result, AGL lifted the final dividend to 33¢ from 32¢, giving a 63¢-a-share annual payout.
Retail-sector earnings suffered in the South Australian and Queensland markets due to price controls, while in NSW it anticipates the government will support full deregulation once a review is completed next month.
"There is a certain inevitability that NSW will deregulate the market," AGL chief executive Michael Fraser said.
Rising electricity prices in recent years had slowed demand growth, although AGL said the slowdown in price rises over the next few years could see demand revive.
But gas prices could begin to move higher, with wholesale prices rising to $9-$10 a gigajoule in Queensland in recent dealings, AGL said. This could flow to NSW as long-term supply contracts expired over the next few years.
AGL said it had been forced to slash the value of its gas reserves in NSW by $343 million due to changes in government policy, with close to half its reserves near Camden, south-west of Sydney, nearly a quarter of the reserves it holds in Gloucester, and all of its reserves in the Hunter Valley now "sterilised".
In total, as much as 17 years of prospective gas supply in NSW has been locked up due to community opposition to tapping gas near houses and areas such as vineyards in the Hunter Valley, it said.
AGL's customer numbers in NSW are set to reach 800,000 following the purchase of Australian Power and Gas, hitting its earlier target. "I would expect us to continue to grow [in NSW] but at a lower rate," Mr Fraser said.
The large customer base will push AGL to look closely at acquiring power stations that are being sold by the NSW government so that it can supply customers from its own power stations.
Speculation is focused on it acquiring either the Bayswater or Liddell power stations in the Hunter Valley. Any purchase would require a heavy equity issue, since it is keen to retain its BBB credit rating, it said. If AGL spent $1 billion acquiring an asset, then it would seek to raise $700 million from shareholders via a share issue, and the balance by borrowings, it told analysts on Wednesday.