08/02/2018 - 12:43

AGL secures foothold in domgas market

08/02/2018 - 12:43

Bookmark

Upgrade your subscription to use this feature.

Sydney-based energy supplier AGL Energy has secured 7,000 customers in Western Australia since its July 2017 local launch, according to the company’s half-yearly report.

AGL secures foothold in domgas market
Part of AGL's marketing strategy was a marketing deal with the West Coast Eagles.

Sydney-based energy supplier AGL Energy has secured 7,000 customers in Western Australia since its July 2017 local launch, according to the company’s half-yearly report.

AGL became the third business to enter the consumer gas retailing market in Perth and surrounds last year, after long time stalwart Alinta Energy was joined by Wesfarmers subsidiary Kleenheat in 2013.

Business News revealed in December 2016 that Origin Energy would also enter the market, which it did in the second half of 2017.

To put AGL’s 7,000 customers in perspective, there are about 720,000 customers in the domestic gas market.

AGL has previously announced it is targeting a 10 per cent slice of the market by 2019, with a marketing budget of $100 million.

Notably, however, in an investor presentation in December, AGL said the acquisition of WA customers was ahead of schedule.

By comparison, Kleenheat has more than 190,000 customers.

The increase in competition in gas retailing has led to a significant battle in price discounting.

AGL, for example, offered discounts of up to 26 per cent off the standard rate, while Origin, which launched in October, promised price cuts of up to 35 per cent.

AGL gave a broad indication of the acquisition costs in its report.

“Labour and contractor services costs increased by $7 million, or 9 per cent, as a result of ensuring customer facing staff levels were sufficient in a time of high market activity, entering the Western Australian gas market and restructuring the energy markets business to form customer markets,” the report said

“Campaigns and advertising costs increased by $23 million, or 47 per cent due to increased sales and retention costs driven by intense marketing activity with sales and retentions increasing 28.8 per cent, costs associated with entering the Western Australian gas market and brand transformation activities.

“Cost to grow per account increased $8 (to $90) due to marketing campaign activity associated with AGL entering the WA gas market, brand transformation activity and increased costs associated with acquisition and retention activity.”

The last number is effectively the cost of customer acquisition and retention across the number of customers acquired or retained.

Results

AGL reported a profit for the first half of 2017 of $622 million, about double the previous corresponding period, partly driven by a $127 million change in fair value of financial instruments.

Revenue of $6.5 billion was up from about $6 billion.

Customer numbers were slightly up nationally, AGL said, while retentions had improved markedly.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options