Big Three Energy Shares On Different Paths – New Lows And Tests of Resistance

The Australian energy sector presents a mixed picture, particularly when evaluating the big three. Here we are taking a look at the very different paths that two of the big three find themselves on, AGL Energy (ASX: AGL) and Origin Energy (ASX: ORG).

Both companies are navigating a challenging transition away from traditional fossil fuels while grappling with market volatility, regulatory pressures, and evolving consumer demands. Whilst one has seen gains of 82% over the past 5 years, the other has seen it’s share price fall 42%.

AGL Energy: Fresh Lows

AGL Energy’s share price recently made a new 52-week low at A$9.78, a reflection of the headwinds it faces. Over the past year, AGL’s stock has declined by 8.3%, significantly lagging the broader market. This downturn is attributable to a range of factors, including declining wholesale electricity prices, the costs associated with decommissioning coal-fired power plants, and regulatory uncertainty surrounding its transition to renewable energy sources.

Over the past five years, AGL shares have fallen 42%, yet had been staging somewhat of a rally off 2021 lows. Firm resistance was found in the A$11, and A$12 levels, only for shares to retreat to their current price below A$10. The question now is where support may step in.

Historically, AGL’s profitability has been heavily reliant on its coal-fired generation assets. However, with the growing emphasis on decarbonization and the increasing competitiveness of renewable energy, the company is under immense pressure to adapt its business model. This transition requires significant capital expenditure, as evidenced by the recent surge to A$667 million focused on clean energy investments, including the Liddell battery project, and the planned development of 1.4 gigawatts of grid-scale battery storage over the next year, announced back in February this year.

Despite these investments, AGL’s dividend payouts have been reduced compared to historical norms, and the company has guided for flat to slightly lower earnings in FY25, reflecting the ongoing challenges. The company boasts a market capitalization of roughly AUD 6.61 billion, and a dividend yield of ~ 5.9%. Despite a 6.5% drop in half-year net profit to A$373 million, CEO Damien Nicks highlighted strong financial performance driven by the flexibility of their generation fleet and earnings from their battery portfolio.

AGL aims to finalise investment decisions for battery projects to support renewable energy sources over the next 12-18 months, with substantial support from banks for green investments despite resistance to ESG initiatives by U.S. and Australian politicians. This strategic shift, though necessary, carries significant execution risk and requires careful management of stakeholder expectations.

Origin Energy: Outperformance over longer time frames

In contrast, Origin Energy’s shares have shown more resilience in the face of similar market pressures. Trading at A$10.84, Origin’s shares have fallen 1% over the past year, outperforming AGL, yet still underperforming the broader market. Over the past five years, ORG has seen shares add 82%, which alongside a healthy dividend, is a significant upside vs broader markets (ASX 200 has gained 44.43% over the same period). This relative strength vs AGL can be attributed to its diversified portfolio, which includes an integrated gas business, including LNG exports, providing a buffer against the volatility of the domestic electricity market.

The $11, and $11.50 levels have proved tough nuts to crack for Origin Energy, with major support having previously been found around A$10, and some friction around A$10.50. Bulls will be looking for the upside targets to be challenged if upcoming financials can support the move.

Looking back at previous reports however, Origin is not immune to the challenges facing the energy sector. In August 2024, the company reported a record annual profit, with statutory profit for the full year ending June 30, 2024, at A$1,397 million. Underlying profit rose to A$1,183 million, primarily driven by higher earnings in the Energy Markets and Integrated Gas businesses. Despite this, shares fell over 10% following a warning that the performance of its energy business would decline due to increased coal costs and decreased revenue from households and businesses.

CEO Frank Calabria noted that electricity profits are expected to decrease as tariffs reprice to reflect lower wholesale costs and retail margins, and on higher coal procurement costs. The decline in revenue is anticipated to be driven by Origin’s coal-fired generator Eraring, which was a significant contributor to the 2024 profits, highlighting the inherent volatility of relying on traditional energy sources. Origin boasts a market capitalization of approximately $A18.6 billion, and a dividend yield of ~5.3%.

Don’t Buy Just Yet

You will want to see this before you make any decisions.

Before you decide which shares to add to your portfolio you might want to take a look at this special report we recently published.

Our experts picked out The 5 best ASX shares to buy in 2025.

We’re giving away this valuable research for FREE.

Click below to secure your copy