AGL Energy Ltd has bought the Australian wind farm interests of Allco Finance Group Ltd for $12.5 million to help meet compulsory renewable energy targets.

Shares in both companies rose after Australia's largest gas and electricity supplier said today it will acquire investment firm Allco's seven development projects in Queensland, New South Wales and South Australia.

AGL managing director Michael Fraser said the transaction was consistent with the company's strategy of developing a diverse pipeline of renewable projects and this will help meet its long-term obligations under the government's Mandatory Renewable Energy Target (MRET) scheme.

"The development portfolio we have acquired from Allco effectively represents an early entry option for us over potential future wind sites which should become increasingly valuable as the expanded MRET is deployed over time," he said in the statement.

Allco global head of infrastructure Nick Bain said the transaction followed the sale of the company's US and European wind assets. The company sold its Tehachapi wind assets in California for $US325 million ($A335 million) earlier this month and the sale of the European assets helped repay $31.2 million of debt in June.

This "will contribute further liquidity and profitability for the business, as Allco implements its business restructure plan," Mr Bain said.

By 11.11am Allco shares rose 1.5 cents, or 2.97 per cent, to 52 cents, having earlier reached 55 cents.

The stock has still fallen 92 per cent this year.

AGL shares added 25 cents, or 1.83 per cent, to $13.92.

Allco's shares have tumbled this year as surging credit rates prompted investors to dump companies that have large amounts of debt and forced the Sydney-based firm to sell assets to meet repayment obligations.

The company said in May it expects to post a loss of at least $1.5 billion in fiscal 2008 after writing off much of its estimated goodwill.

Still, the shares have recovered somewhat from the all-time low 21 cents they reached in March as Allco successfully refinanced its senior debt with creditors.

AGL announced an investment in Torrens Energy Ltd earlier this month as well as the development of its geothermal exploration licences through a $37 million investment in a coal seam gas production pilot testing and exploration program in Queensland with Galilee Energy Ltd.

"The Federal government has confirmed its commitment to a 45,000 GWh target by 2020 and AGL's portfolio of current renewable generation and potential development opportunities positions us well under the expanded MRET scheme," Mr Fraser said.

AGL, which is Australia's largest private owner and operator of renewable energy assets, is looking to further expand this position by exploring a suite of low emission and renewable energy generation development opportunities.