The AGL Energy Limited (ASX: AGL) share price has bounced more than 10% since the start of this month. Despite the strong performance, shares in the electricity operator are still down more than 25% for the year.
Read on to find out what’s been shaping the AGL share price.
AGL share price at multi-decade low
The AGL share price has been in a world of hurt the past few years. The energy operator has had to fight numerous battles. These include a struggling national electricity market, unstable electricity prices and declining value of its energy generation assets.
Recently, the AGL share price has had to battle numerous headwinds. In addition to macro challenges, the company has had to deal with the sudden exit of its CEO. The company also lost a high-profile Federal Court case against Greenpeace Australia Pacific.
Why is the AGL share price trading higher in June?
Since the company has not released any price-sensitive news, the recent spike in the AGL share price could be attributed to multiple factors.
Investors could be jumping the gun early as they await a line-up of CEO’s. Following the departure of Brett Redman in late April, AGL had promised to update the market by June 30 on likely CEO’s who would take up the position.
In addition, investors could be jumping on AGL’s planned restructuring which the company announced back in March. According to AGL, the company plans to create 2 leading energy businesses via a structural split.
Under the proposed separation, the company will split into ‘New AGL’ and PrimeCo. New AGL will be focused on multi-product energy and will control the retail assets. On the other hand, PrimeCo is earmarked to be Australia’s largest electricity generator housing the company’s coal electricity-generating assets.
What is the outlook for AGL?
Earlier this year, AGL reaffirmed full-year guidance of $500 to $580 million. In addition, the company issued guidance for 2021 underlying earnings of between $1.585 billion and $1.845 billion.
Analysts and investors have had their premonitions on what the outlook is for AGL. The sudden departure of the company’s CEO has raised concerns about the company’s proposed strategy and the likely success of the separation.
In addition, there have been lingering doubts on how AGL can distribute $2.8 billion of debt in the restructure, whilst retaining investment-grade credit ratings for both.
Despite the headwinds, AGL expects the structural separation to be completed by the end of 2021.
The post The AGL (ASX:AGL) share price has bounced 10% this month appeared first on The Motley Fool Australia.
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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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.
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