Australia’s energy giant just made a big bet on Western Australia’s power future. The AGL Energy and Siemens Energy AB deal worth A$185 million, has sent ripples through the market, pushing the AGL share price up 1.2% in morning trade on Friday.
The deal marks a significant step for AGL as it builds its first major power station in Western Australia. Investors took notice.
Four New Turbines Heading to Kwinana
AGL has signed an agreement with Siemens Energy AB to purchase four new gas turbines. The equipment will power the Kwinana Swift Gas 2 project, located 40 kilometres south of Perth.
The facility has been assigned 176 megawatts of Peak Certified Reserve Capacity by the Australian Energy Market Operator. Operations are scheduled to commence on 1st October 2027.
Key project details include:
- Total capacity: 176 MW of peaking power
- Location: Kwinana, Western Australia
- Timeline: Operational from October 2027
- Purpose: Backup power for renewable energy integration
- Cost: A$185 million for four turbines
The investment represents AGL’s strategy to provide firming capacity as Australia’s energy transition accelerates.
AGL’s Kwinana Swift Power Station will add 176 MW of capacity by 2027
Share Price Response Shows Market Confidence
Markets reacted positively to the announcement. AGL shares closed Thursday at A$9.14 before climbing to A$9.25 in Friday morning trade.
The 1.2% gain outpaced the broader ASX 200 index, which rose just 0.6% during the same period.
Macquarie Group maintains an outperform rating on AGL shares with a price target of A$11.00. That represents a potential 19% upside from current levels, excluding dividends.
The broker noted AGL’s valuation looks increasingly attractive. The forward price-to-earnings ratio sits at 9.3 times, roughly 2 standard deviations below the long-term average.
AGL currently offers a fully franked dividend yield of approximately 5.2%.
Supporting Western Australia’s Coal Exit
The Kwinana Swift Gas 2 project aligns with the Western Australian government’s commitment. The state plans to retire all state-owned coal-fired power plants by 2030.
Gas peaking plants like Kwinana provide essential backup during periods of high electricity demand. They also maintain grid stability as more renewable energy sources connect to the network.
AGL recognises the need for new firming capacity, including:
- Battery storage systems
- Gas peaking plants
- Pumped hydro projects
While gas-fired generation remains controversial among climate advocates, AGL positions the project as supporting the transition away from coal.
The company has stated its intention to develop new gas power generation capabilities across all Australian states. This follows its strategy to provide backup capacity for renewable energy as coal plants close.
What Makes This Deal Strategic
AGL enters the Western Australian power market at a critical time. The state faces growing electricity demand while transitioning away from coal.
The Kwinana project offers several strategic advantages:
- Infrastructure Access: The site already hosts AGL’s existing 120 MW Kwinana Swift Power Station. Adding new capacity leverages existing connections to the South West Interconnected System grid.
- Government Support: State and federal backing for the energy transition creates favourable conditions. Western Australia invested A$2.8 billion in renewable energy infrastructure in 2023.
- Supply Security: Gas turbine shortages globally have driven up costs and extended delivery times. Securing equipment now ensures AGL meets its 2027 deadline.
- Market Position: The project strengthens AGL’s portfolio in Western Australia, where competition for power generation assets intensifies.
Construction is expected to begin once all approvals are finalised. AGL maintains the project remains subject to a Final Investment Decision.
Siemens Energy’s Role in Australia’s Grid
Siemens Energy brings decades of experience to the partnership. The German technology company supplies equipment for power generation across multiple continents.
Siemens Energy is a global leader in energy technology
Siemens turbines already power several Australian facilities. The company previously supplied equipment for the Diamantina Power Station, a joint venture between APA Group and AGL Energy in Queensland.
The Kwinana turbines will be capable of reaching full load from standstill within minutes. This rapid response time proves crucial for managing peak demand periods.
Broader Industry Context
AGL’s move reflects wider trends in Australia’s energy sector. Major generators are racing to replace retiring coal capacity with a mix of renewables and gas.
The company announced in August 2024 that it would acquire Firm Power and Terrain Solar for A$250 million. Those acquisitions added grid-scale battery and renewable project development capabilities to AGL’s portfolio.
During the fiscal year ending June 2025, AGL deployed approximately A$900 million toward battery energy storage systems and renewables. The Liddell Battery project in New South Wales received substantial investment.
AGL now has a clear pathway to final investment decision for 900 MW of grid-scale battery storage projects. The company targets 12 gigawatts of renewable and firming capacity by 2035.
Industry analysts note electricity prices have risen steadily over the past two years. AGL raised electricity prices by up to 13.5% in some states from July 2025.
The federal government extended energy bill relief, providing eligible households with A$75 quarterly payments through the end of 2025.
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Looking Ahead
The Kwinana Swift Gas 2 project represents one piece of AGL’s broader transformation strategy. The 188-year-old company, Australia’s oldest ASX-listed entity, aims to transition from the nation’s largest carbon emitter to a renewable energy leader.
AGL closed the Liddell Power Station in 2023. Plans call for closing Bayswater Power Station in 2033 and Loy Yang A Power Station in 2035.
The company services approximately 4.6 million customers across electricity, gas, telecommunications, and other services. Revenue for the trailing twelve months reached A$8.96 billion.
As Australia works toward net-zero emissions by 2050, companies like AGL face pressure to balance reliability, affordability, and sustainability. The Kwinana project attempts to address all three.
Whether the A$185 million investment proves prescient or premature may not become clear for years. For now, investors have signalled approval through the share price response.
