Weak Electricity Prices and Rising Fuel Costs Weigh on AGL Energy’s Outlook

AGL Energy is one of Australia's largest integrated energy companies. We believe it has a narrow economic moat, underpinned by its low-cost generation fleet, concentrated markets, and cost-advantages from vertical integration. Key attractions for shareholders include relatively defensive earnings, solid dividends, and conservative gearing. Earnings are dominated by energy generation (wholesale markets), with energy retailing about half the size. Strategy is heavily influenced by government energy policy, such as the renewable energy target.