AGL Energy has upgraded its profit forecasts as it prepares to slug customers with bill increases of up to 30 per cent, igniting the share price.
Shares in Australia's largest electricity generator soared 14.3 per cent or $1.38 to $11.04 in morning trade on Friday.
Announcing the brighter outlook for shareholders this year and next, AGL chief executive Damien Nicks said the business is highly leveraged to wholesale prices, which have increased significantly in recent years.
"We are acutely aware of the impact to our customers in this inflationary period," Mr Nicks told AAP.
"It's a tough period for everyone."
Amid rising energy poverty, Mr Nicks encouraged customers to switch to monthly from quarterly bills to help manage cost of living pressures.
Price hikes take effect from July 1 and the company is expecting an increase in customer debt despite taxpayer-funded bill relief hitting accounts nationwide.
"We'll be working with customers to help them as best as we possibly can," he said.
Mr Nicks said AGL would be "vigorously defending" allegations the energy giant took advantage of its market power and intentionally increased the price of wholesale electricity by gaming the market.
The class action filed in the NSW Federal Court seeks to compensate customers for "significant losses" caused by AGL's alleged manipulation of the electricity market which affected downstream prices charged to homes and businesses.
Piper Alderman, the law firm behind the lawsuit, alleges contraventions were a cause of the prices set by regulators under default market offers, which meant prices and power bills were higher than they would have been.
AGL narrowed its underlying earnings ranges for FY23 to $1.33 billion and $1.375b (previous guidance $1.25b to $1.375b) in a statement released to the ASX.
The company also expects a higher underlying profit after tax of $255 million to $285m (previously $200m to $280m).
The upgrades reflect increased generation due to improved plant availability, a reduction in forced outages and a higher customer margin.
This is partly offset by higher operating costs on increased maintenance costs, bad debt expenses and the impact of inflation.
In FY24, underlying earnings are forecast to surge to $1.875b and $2.175b for an underlying profit after tax of $580m to $780m.
AGL also announced a change to dividend policy from FY24, reducing the payout to 50 to 75 per cent of underlying profit after tax from the previous longstanding guidance of 75 per cent.
"That will allow us to fund the transition and also allows us to provide the appropriate returns to shareholders," Mr Nicks said.
As Australia's largest emitter, the company is spending up to $10 billion over the next eight to 12 years on shutting down ageing coal-fired power stations and replacing them with renewable energy sources and fast-start gas units.
AGL continues to target a complete exit from coal-fired generation by the end of FY35.
