Morningstar | Government Action to Reduce Utility Bills Will Weigh on AGL Energy
The Australian electricity sector is a mature market, dominated by Origin Energy, Energy Australia, and AGL Energy. It is extremely difficult to build a sustainable competitive advantage in the electricity and gas retailing sector. Barriers to entry are low, and participants pay the same wholesale market price for the electricity they sell. However, low-cost electricity generators and gas producers can achieve an economic moat via low-cost production, as AGL has via its low-cost coal-fired generation plants. The start of liquefied natural gas, or LNG, exports has pushed up the gas price and made gas-fired electricity generation more expensive, thereby improving the competitive position of AGL's coal-fired plants. Increasing government scrutiny will make it hard to continue increasing earnings.AGL Energy is a renewable energy company, serving customers throughout eastern Australia. Co. has four segments: Energy Market, which sells electricity, natural gas, and energy related products and services to consumer market, business and wholesale customers, servicing approximately 3.7 million customer accounts as of June 30 2016; Group Operations, a diverse power generation portfolio; New Energy, which focuses on taking new and distributed technologies to market in Australia, including AGL Solar, and Distributed Energy Services such as Active Stream, its digital meter installation and data provider business; and Investment, which include investments in various energy related business.
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