AGL Energy inks $115m deal to take stake in Aussie Broadband and sell off telco arm

AGL Energy will slice off its fledgling telco arm in a $115 million deal that will give the power company an equity stake in Aussie Broadband.

Sydney-based AGL reported profit down 42 per cent to $94m for the six months to December thanks partly to contract writedowns and restructuring costs.

Yet shares were up almost 7 per cent in morning trade to $6.89 after beating underlying profit forecasts in a performance broadly welcomed by analysts.

About 400,000 AGL Telco customers — with NBN and mobile plans — will shift to Aussie Broadband by mid-year.

The deal will be paid in shares and give AGL about an 8 per cent stake in Aussie Broadband. The power generator will be a long-term sales channel for the broadband business.

“This move also establishes a long-term partnership, where Aussie Broadband will deliver telco services under the AGL brand,” AGL chief Damien Nicks said.

“We’ll also have the opportunity to increase our equity interest in Aussie Broadband through incentives that reward telco growth under the AGL brand.”

Aussie Broadband shares were up more than 12 per cent to $5.10.

Mr Nicks touted the deal as a way to simplify operations.

It follows AGL’s sale of its 19.9 per cent stake in Tilt Renewables in November, which is expected to be finalised later this year.

The cash will be used to fund investment into flexible battery capacity with construction under way on a battery at Tomago and further potential projects in New South Wales.

A joint venture to fund up to 2 gigawatts of new wind farms across the country will also be considered, with AGL searching for a partner with “low capital costs”.

AGL has already moved to close down coal plants after investor pressure and intends to shut down its final generator within a decade.

“Our first half results reflect strong operational and financial momentum across the business, on the back of improved reliability and flexibility of our generation portfolio, growth in customer services, and higher margins, as well as the continued delivery of the transition of our asset base,” Mr Nicks said.

He warned to expect plenty of volatility in the power market as the energy transition gains momentum.

That will incentivise investment into batteries and storage.

“Although the market experienced unusually less volatility in the half compared to historical averages, the longer-term forecasts for energy demand as well as our expectations for volatility remain strong,” Mr Nicks said.

“Our stronger fleet availability and flexibility, coupled with excellent battery performance, helped mitigate the impacts of lower market volatility, driven by milder weather and lower transmission constraints.”