Energy generator and retailer AGL has reported a near trebling of full year profit, a result supported by higher power prices and favourable hedging contracts.

Key points: AGL profit surges 194pc on higher prices and a big gain on loss making hedging contracts

AGL profit surges 194pc on higher prices and a big gain on loss making hedging contracts Shares tumble on a flat outlook and loss of earning momentum

Shares tumble on a flat outlook and loss of earning momentum AGL CEO Andy Vesey urges support for NEG to boost investment in new generation to keep prices down

AGL's 2018 net profit of $1.6 billion rose 194 per cent from the previous year of $539 million.

Its underlying profit, which excludes one-off items and changes in value in investments and hedging positions, rose 28 per cent to $1.02 billion, at the upper end of the company's guidance.

"This increase in prices in the broader electricity market has mostly been a result of the abrupt closure of non-AGL power stations such as Hazelwood in 2017 and Northern in 2016 and higher input costs from coal and gas," AGL chief executive Andy Vesey said.

"In this environment, we recognise that many Australian households are facing cost-of-living pressures because of the higher energy bills that have resulted from higher market prices."

$2bn investment

Mr Vesey said AGL would invest more than $2 billion to boost generation capacity.

The projects include Australia's largest wind farm at Coopers Gap in Queensland, a dual-fire power plant at Barker Inlet in South Australia and boosting capacity at the Bayswater coal fired power station.

A final investment decision on a gas import hub in Victoria's Westernport bay would be made in the next 12 months.

Mr Vesey said the company supported the Federal Government's National Energy Guarantee for further investment in new generation projects across a range of technologies including gas, pumped hydro and battery storage.

"While wholesale electricity prices have already begun to fall over the past 12 months, policy certainty is key to encouraging the additional generation supply that will place further downward pressure on prices and benefit consumers over time," he said.

Shares tumble on flat outlook

A large part of the profit increase came from a $562 million gain on electricity hedging contracts which had lost $263 million the year before.

However, AGL's standout division was wholesale power generation which reported a more than 30 per cent increase in margins on the back of higher prices.

Sales revenue from retail consumers rose 9 per cent to $4.1bn, reflecting higher prices which more than offset lower volumes.

Sales to business rose 4 per cent to $1.6bn despite the loss of two big industrial customers.

Gas sales fell 4 per cent with higher prices being outweighed by a sharp decline in volumes contracted to industry.

While the result beat most analysts' forecasts, a downbeat forward guidance weighed heavily on AGL's share price.

"Earnings momentum is now slowing," Mr Vesey said.

AGL's guidance for 2019 was flat-to-soft, with profit forecast in the range of $970 million to $1.07 billion.

A 29 per cent increase in full year dividend to $1.17 per share failed to placate investors with shares tumbling 4 per cent in early trade (10:45am AEDT) to $21.11.