May 11, 2022

Why is AGL share price falling?

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Written by: Lucien Paulemil

For some time now, AGL's share price has been falling further and further. Although it can always gain a few percentage points, the trend, on the other hand, is clearly downward.

The AGL share has been coming under increasing pressure for some time now. In the last year alone, the value has reduced by more than 40%. There are of course several reasons why AGL share sinks more and more. In fact, it is at its lowest level since the major financial crisis, which had a global impact.

But why is AGL share price falling further and further for some time now? In this article, you will find out what the reasons are. We will also tell you whether there are still opportunities for a rapid rise in the share price and whether it is still worthwhile for investors to buy AGL shares.

The coal phase-out

The Australian energy company AGL owns various power plants that run on fossil fuels. At first glance, this may seem like an advantage to outsiders to own the power plants. But since the power plants are mainly coal-fired, this will be AGL's undoing as an energy company.

The planned phase-out of coal-fired power in particular is causing AGL to fall further and further out of favour. After all, more and more CO2 emissions are to be saved in the future. And coal-fired power plants in particular are one of the main sources of carbon dioxide.

Unfortunately, AGL also doesn't have a clear roadmap for how it will make the move over to power plants powered by renewable energy. This in particular is one of the reasons why AGL share price is falling for months already.

The other shareholders of AGL

In addition to the unclear coal phase-out for the Australian energy company, previous investors are also a reason why AGL share is falling. This is because many of the investors knew at the time of their investment that they were investing in a company that mainly generates its revenue by operating coal-fired power plants.

However, this is also a security for the investors. Especially, the financial risk of switching to renewable energies is too high for many investors. So AGL remains somewhat dependent on its old investors, but cannot attract new investors to its side because of its non-sustainable energy sources.

So, it depends on the decisions in the AGL management how the future development of the share price will be.

Low price for electricity from coal energy

The price that comes for coal energy is also a reason why AGL share is falling. This is because the low price of energy also ensures that the profit margin is also extremely low. It is this low margin that also ensures that many new investors are rather negative about coal energy. If only for the reason that they cannot expect too high dividends.

Are there still chances for AGL share to rise?

While the AGL share price continues to fall, many investors are rightly asking themselves whether this investment is worthwhile at all. And the answer is: of course!

Because AGL is one of the three largest energy companies in Australia. As a result, the company already enjoys a certain level of trust. Furthermore, the energy company is also willing to put the switch to renewable energies into practice. This is proven above all by the investments in wind farms, which AGL has already made, pointing to an orientation without coal. In addition to these wind farms, AGL has also already invested a lot of money in the operation of a hydroelectric power plant. This is located in Victoria's High Country.

Fossil fuels like coal are one of the reasons why ABL stock keeps falling. But the investments in renewable energies can also ensure that a reversal of the falling share price is imminent in the future. Accordingly, it is worthwhile to continue to keep this energy company under observation on the stock exchange. 

Tips for investors

Before you decide to buy shares of AGL, you should pay attention to the trend yourself. Dividend payouts, in particular, are an excellent indication of whether a stock is worth buying.  Accordingly, when the half-year results are announced, you will also find out how high the company's profits have turned out to be.

However, it is better to wait a little longer. After all, AGL is still in the process of managing its move away from coal power. But the investments in renewable energy power plants prove the group's willingness to search for alternatives.

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