AGL (ASX: AGL) share price has sunk 5.7% after the energy giant announced a downgrade to its earnings guidance for FY21.
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This follows the company’s transformer incident at its Liddell Power Station in New South Wales last week. At the time of writing, the AGL share price has fallen 5.75% to $12.46.
What did AGL announce today
AGL announced that it now expects underlying profit after tax (NPAT) for FY21 to be between $500 million and $580 million, down from the previous guidance range of $560 million to $660 million.
The company acknowledged this was a direct result of last Thursday’s transformer incident at Liddell Unit 3, which seriously injured one of its workers.
AGL expects the Liddell unit will not return to service until early March 2021.
The company has estimated the financial impact of this outage – including direct trading impacts on the day of the event, trading impacts, and the direct cost of replacing the transformer – to be $25 million. It also notes the expected loss is not recoverable via insurance in future years.
Today’s FY21 guidance update reflects this impact, as well as increasing earnings pressure from continued deterioration in wholesale electricity operating conditions.
The company says it anticipates a further material step-down in wholesale electricity earnings in FY22. This, as hedging positions established when wholesale prices were higher progressively roll off, and are re-contracted at lower levels that reflect the deterioration in wholesale prices.
What happened at Liddell
On Thursday, 17 December, a fire occurred in the generator transformer of Liddell Unit 3 during a change of an oil cooler filter, damaging the transformer and shutting down the unit.
The AGL employee, who was seriously injured as a result of the incident, is now recovering following medical treatment.
An investigation into the incident is underway. AGL advised it is working with the relevant authorities and providing support to the injured worker and his family.
How has the AGL share price performed in 2020?
The AGL share price has had a disappointing performance in FY20, losing 37% in value. The company reported an underlying profit after tax of $816 million for FY20.
The current FY21 guidance of $500 million and $580 million is much lower than last year’s figure.
At the current price, the company commands a market cap of $7.7 billion.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.