Why the AGL share price has rebounded today

Posted: 22 September 2021 12:44 pm
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Shares in electricity giant AGL Energy are down 60% in the last 12 months.

Electricity giant AGL Energy is among the most traded stocks on the ASX on Thursday. Shares in the company, which have been losing ground heavily since July, rose as much as 4.5% to $5.77 in early trading.

Why is the AGL stock price bouncing back?

Investor sentiment in the AGL Energy stock has turned positive after the company said it would avoid a second strike on remuneration at its annual general meeting on Wednesday.

A "strike" ​​occurs when a company’s remuneration report, which outlines each director’s individual salary and bonus, receives a "no" vote of 25% or more by shareholders at the AGM.

AGL experienced a first strike at last year’s AGM with 46.5% of shareholders voting against its remuneration report.

However, major proxy advisers recommended in favour of AGL’s remuneration report this year after it made some changes but still flagged several areas of concern.

"I am pleased to say that the resolution to be put to the meeting in relation to the 2021 Remuneration Report has received sufficient support to avoid the company receiving a second strike," AGL Chairman Peter Botten said in a speech to shareholders ahead of the vote.

Demerger ahead

Investors have been worried for weeks that a second strike at the AGM could have led to a board split and threatened the planned demerger of Australia’s biggest energy retailer.

Under the plan, AGL Energy will split into a new company AGL Australia under Christine Corbett, while former chairman Graeme Hunt will lead a new coal-focused generator, Accel Energy. Accel will retain a 15-20% stake in AGL Australia.

The company has been under pressure to remodel itself amid the challenges of lower power prices and an accelerating transition to renewables. Its shares have plunged more than 50% so far this year as low wholesale electricity prices slash its profitability and raised concerns over its earnings outlook.

The company, which posted a massive $2 billion full year loss in FY21, reiterated its underlying profit forecast range of $220 million-$340 million for FY2022. It also apologised to investors for its plummeting share price.

“Your Board understands that shareholders are very unhappy with where the AGL share price is today and we acknowledge that the financial performance of the company over the past 12 months is not acceptable,” Mr Botten said.

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