Australian billionaire Mike Cannon-Brookes may have had his takeover plan of energy giant AGL dashed earlier this year, but as the company’s main protagonist, he has succeeded in his ambition for the company to abandon its high-profile demerger.
Australia’s biggest electricity generator this week scrapped its plans to split off its coal-based business from its retail arm, and will now face greater pressure to close it’s coal-fired power plants even earlier than planned.
In the fallout from the scuppered demerger plans, four directors have left the company, including chief executive Graeme Hunt and chairman Peter Botten. With these directors now gone, AGL is expected to bring forward the retirement of its coal plants as early as 2035 – if not sooner – as per Cannon-Brooke’s plans in his original takeover drive.
Independent directors Diane Smith-Gander and Jacqueline Hey also exited the AGL board, and now the remaining board directors are set to conduct a strategic review into the future of the 180-year-old company.
Cannon-Brookes has long argued that splitting the company into smaller entities would make it less able to fund the accelerated closure of its NSW and Victorian coal plants – including Loy Yang A, pictured above – and now that the tech entrepreneur has an 11.3 per cent interest in AGL, he is pushing for two seats on the company’s board. He also plans on having input into AGL’s forthcoming strategic review, to be headed by directors Graham Cockroft and Vanessa Sullivan.
AGL’s failed demerger has cost it around $160 million, but now the company that accounts for eight per cent of Australia’s greenhouse gas emissions has an opportunity to reset with greener, renewables-focused initiatives that align with Australia’s net-zero target.
Professor Ariel Liebman, director of the Monash Energy Institute at Monash University says the abandonment of the demerger is a great outcome for AGL shareholders and energy consumers.
“This bodes well for consumers as it will accelerate the move away from ageing and unreliable fossil assets that are increasingly resulting in higher wholesale prices,” he says.
“Failing coal-powered generators owned and managed by energy companies are one of the drivers of recent electricity price hikes as the price of electricity generation increases due to the reduction in electricity supply while such fossil stations are being repaired.
“If the demerger had gone ahead, the so called ‘new AGL’ [AGL Australia] would have been unable to invest in large renewable energy generation projects, and conversely the standalone and mostly generation-heavy entity, Accel Energy, would have had an incentive to keep its coal and gas generators operational to maximise shareholder value.
“Additionally, it would have been difficult for Accel Energy to raise investment for renewable energy projects from brand sensitive investors who would see their profile as a fossil-heavy generator as a public relations risk.
“AGL Energy, in its current state, can manage an accelerated retirement of its coal and gas fleet in a much more orderly manner. This is made possible due to a long-lived asset-based balance sheet allowing it to raise capital easily to build large-scale wind and solar generation and storage.
“The company is currently best placed for investment in transition to renewable energy sources from an investment and risk-management perspective.”