AGL Energy (ASX:AGL) reported its FY2026 half-year results with management pointing to improved operational performance across its generation fleet, customer growth, and increasing contributions from batteries, even as the National Electricity Market (NEM) experienced unusually low volatility during the period.
Half-year performance and dividend
Managing Director and CEO Damien Nicks said the first-half outcome reflected “strong operational and financial momentum” driven by improved reliability and flexibility in the generation portfolio, growth in customer services, and higher margins. He noted that the half was marked by milder weather and lower transmission constraints, resulting in lower-than-normal market volatility, but said AGL’s stronger fleet availability, flexibility, and battery performance helped offset that backdrop.
The company declared a fully franked interim ordinary dividend of AUD 0.24 per share, in line with its policy targeting a 50%–75% payout ratio of underlying NPAT for the full FY2026 dividend. Brown also said AGL currently expects to pay a fully franked dividend for the full year.
Customer markets: services growth, satisfaction gains, and margin improvement
AGL highlighted growth in customer services and improvements in customer metrics during the half. Nicks said total services to customers increased by 108,000, led by energy services growth that included the acquisition and integration of Ampol’s energy customer base (about 45,000 services). He added that telecommunications and Netflix services were also higher.
Customer satisfaction increased to 83.8, while strategic Net Promoter Score remained positive at +4. AGL reported a favorable “spread-to-market churn” of 5.3 percentage points, which management described as evidence of loyalty in a competitive market.
Management also pointed to improving consumer margin, with Nicks citing a 10% improvement from the prior half as margins returned to what he called more sustainable levels. Brown said customer markets earnings benefited from margin expansion across electricity and gas portfolios, driven by customer growth and “disciplined customer value management,” along with margin initiatives and higher gas volumes associated with colder weather.
Generation availability, flexibility, and battery contributions
On the supply side, AGL said improved commercial availability and plant flexibility helped it generate during more favorable market conditions. Nicks said the company’s flexible asset fleet delivered a 20% premium to the time-weighted average price for the half, which he noted was 7 percentage points above FY2025.
AGL attributed improved fleet performance largely to higher wind and hydro availability, and it cited completed major planned outages with complex work intended to lift reliability. The company highlighted investments including a low-pressure heater replacement at Bayswater, low-pressure turbine replacement at Loy Yang, and an updated critical spares program.
Battery performance was a major focus. Nicks said AGL’s operated battery portfolio contributed AUD 35 million in EBITDA, AUD 10 million higher than the prior half, despite the lower-volatility environment. Brown said the improved result reflected a full six months of operation from the Broken Hill battery and stronger performance from the Torrens battery. He also noted that AGL’s 300 MW operational battery fleet delivered a 99% equivalent availability factor (EAF), and that Torrens Island has generated an annualized yield of 24% over 30 months (calculated as annualized EBITDA divided by total project capex of AUD 189 million).
Brown reiterated confidence in targeting the upper end of AGL’s 7%–11% IRR range for grid-scale battery projects (ungeared, post-tax, asset-level returns).
Transition pipeline, portfolio actions, and major partnerships
AGL said it continues to progress the transition of its asset base, with its development pipeline growing to 11.3 GW from 9.6 GW at the FY2025 full-year update. During the half, AGL signed two long-term power purchase agreements with Tilt Renewables for the Palmer Wind Farm (South Australia) and Waddi Wind Farm (Western Australia). AGL said the PPAs support its target to add 6 GW of renewable and firming capacity by 2030.
The company provided several project updates:
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Construction began on the 500 MW Tomago battery in New South Wales.
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The 500 MW Liddell battery is expected to commence full operations in Q4 FY2026, with the first 250 MW targeted for progressive operation in the current quarter and commissioning targeted for Q3.
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AGL was awarded a CIS contract for the proposed 600 MW Hexham Wind Farm in Victoria.
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AEMO allocated 176 MW of peak capacity credits to the proposed Kwinana Gas 2 project in Western Australia.
AGL also announced it is no longer pursuing the Gippsland Skies offshore wind project.
In portfolio actions, management discussed an agreement (announced in early November) to divest 19.9% of its 20% interest in Tilt Renewables for AUD 750 million, expected to complete in the third quarter. AGL said proceeds are expected to be redeployed toward flexible, dispatchable capacity and balance sheet flexibility.
Separately, AGL announced the divestment of its telecommunications business and a long-term strategic partnership with Aussie Broadband. Under the deal, about 400,000 customer services are expected to be acquired by Aussie Broadband in June 2026. AGL expects about AUD 115 million in proceeds in Aussie Broadband shares and said customers will continue receiving telco services under the AGL brand, with a planned migration over FY2027.
AGL also highlighted momentum at Kaluza, including the signing of a third major customer, ENGIE, which management said marks Kaluza’s largest deployment to date and more than doubles contracted meters.
Costs, capital investment, funding, and guidance themes
Management emphasized cost discipline and outlined a productivity initiative. Nicks said AGL is implementing a cost and productivity improvement program targeting AUD 50 million per annum in sustainable net operating cost reductions, with full benefits expected from FY2027 onwards. Brown said AGL is now forecasting just under a 2% increase in FY2026 operating costs (down from a previously indicated 3%), with inflation expected to be more than offset by productivity initiatives.
On capital allocation, Brown said AGL expects about AUD 760 million of growth capex in FY2026, with about AUD 650 million focused on firming projects. This includes remaining costs for the Liddell battery, spending on the Tomago battery, and expenditure on Kwinana turbines. He also cited an approximately AUD 80 million acquisition of South Australia’s virtual power plant from Tesla as part of investment outflows contributing to higher net debt.
AGL said it maintained its Baa2 investment-grade credit rating and reported a liquidity position of nearly AUD 1.2 billion in cash and undrawn committed facilities. Brown also pointed to a AUD 500 million issuance in September across seven- and 10-year tenors that he said was more than 10 times oversubscribed, and noted there are no major debt maturities until FY2027.
In the Q&A, management repeatedly stressed that the first half reflected unusually low volatility and said it expects volatility to normalize over time as the NEM continues transitioning, with demand trends—including electrification and data centres—seen as supportive. Management also discussed ongoing trials at Bayswater aimed at operational flexibility, including “two-shifting” pilots, and reiterated that AGL has not provided guidance for FY2027.
Nicks said FY2026 earnings are expected to remain skewed to the first half due to seasonal demand and the gradual roll-off of lower-price legacy gas contracts, while noting AGL narrowed FY2026 guidance ranges based on the strong first-half performance and updated depreciation expectations tied to rehabilitation assumptions at Loy Yang.
About AGL Energy (ASX:AGL)
AGL Energy Limited supplies energy and other essential services to residential, small and large businesses, and wholesale customers in Australia. It operates through three segments: Customer Markets, Integrated Energy, and Investments. The company engages in retailing of electricity, gas, broadband, mobile, voice, solar, and energy products and services; and operates power generation portfolio and other assets including coal, gas and renewable generation, natural gas storage and production, and development projects.
